BIO: David Siegel is an entrepreneur who has started more than a dozen companies. He has written five books on technology and business, given more than 200 professional speeches worldwide, and was once a candidate to be the dean of Stanford business school.
STORY: David joins the podcast again, this time around discussing climate change.
LEARNING: It’s wrong to reduce climate change to a score. We need a better alternative to the UN’s Environment, Social, and Governance (ESG) movement.
“You don’t have to do anything the way anybody tells you to. Go learn in the most irreverent way possible.”
David Siegel is an entrepreneur who has started more than a dozen companies. He has written five books on technology and business, has given more than 200 professional speeches around the world, and was once a candidate to be the dean of Stanford business school. He is a fintech leader, a leader of the open Metaverse movement, a business strategy coach, and an advocate for the scientific method. He writes and makes videos about climate change at www.climatecurious.com.
Worst investment ever
David is a previous guest who joined us on Ep98: Start-ups Should Start with Selling. In today’s episode, he tells us more about his research on climate change.
David’s penchant for climate change
David has been conducting research on climate change since 1988. He wrote his first book on climate in 1991. So David is not one of those instant climate experts. In 2015, he decided to really dig into the subject and spent an entire year doing nothing but climate research. During this extensive research, David realized that many scientists don’t understand climate change fully and that many people take it at its face value. He believes people need to understand climate change on its own merits and not as an overarching cause and effect. For this reason, David digs deep into research to present raw data and help people make up their minds.
In comes the UN’s ESG movement
The rigorous talks on climate change have metastasized into the global Environment, Social, and Governance (ESG) movement that has been forced on us by the World Economic Forum and the UN. ESG is a UN program strongly endorsed by the World Economic Forum and has been going on for 20 years. The point of ESG is to give every company a detailed scorecard of their carbon footprint, water use, energy, pollution, and other practices that affect climate change.
Every public company in the United States pays $2 billion yearly for compliance, which could go to $8 billion. David believes this money is spent so the companies can get a high score regardless of their efficiency.
Transparency is good; it’s just being done the wrong way
David believes that while we must have transparency where climate change is concerned, it’s not okay to reduce it to a score given by some consultants. He thinks the ESG scoring system simplifies a complex subject into a single set of numbers that don’t represent reality.
Moreover, ESG scoring is done arbitrarily, based on political assumptions and a set of unclear rules by anointed consultants selling indulgences. According to David, coming up with one score on something is full of problems and creates terrible incentives. In this case, companies won’t be efficient with the goal of fighting climate change but simply get a good score. And with the amount of money companies are paying, it really comes down to paying for the ratings. So there’s a lot of conflict of interest in the ESG scoring process.
The scoring will soon get personal
Currently, every US state and city must get an ESG ranking. David believes this will go further down to a personal ESG score. Soon, everyone will need to have a unique social credit score. This personal ESG score will be used to deny you access to financial services, rent, loans, how far and when you can travel, etc.
Let’s build a better alternative
David believes that the idea behind creating ESG is good. Still, we need to build a better alternative that’s more objective and efficient. He also insists that people should use independent thinking to combat climate change at an individual level. David’s advice is to participate where it makes sense and know when to go with the herd and when to go against it.
No.1 goal for the next 12 months
David’s number one goal for the next 12 months is to build his Cutting Through The Noise platform.
“Develop yourself and learn all you can. Podcasts like Andrew’s are really valuable. Don’t take anything from other people; find your own way. Look at the data, learn to interpret it, and ask difficult, irritating questions.”
Andrew Stotz 00:02
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning. In our community we know that to win an investing you must take risk but to win big, you've got to reduce it ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives. To join me go to my worst investment ever.com right now and sign up for our free weekly become a better investor newsletter where I share how to reduce risk and create grow and protect your wealth. Fellow risk takers this is your worst podcast Oh Is Andrew Stotz from a Stotz Academy, and I'm here with featured guest, David Siegel. David, are you ready to rejoin the mission? Let's do it. Well, I want to introduce you to the audience. And for those long term listeners, you will recognize David he was episode 98. That was back in 2019, where he talked about startups should start with selling and that's a little bit about bootstrapping, versus raising funds and selling and all that it was a great conversation. And let me just introduce you to David for those that have not met him. David Siegel is an entrepreneur who has started more than a dozen companies. He has written five books on technology and business has given more than 200 Professional speeches around the world and was once a candidate to be the dean of Stanford Business School. He is a FinTech leader, a leader of the open Metaverse movement, a business strategy Coach and an advocate for the scientific method. He writes and makes videos about climate change at WWW dot climate curious.com. David, tell us take a minute and tell us about the unique value that you're bringing to this world.
David Siegel 01:50
Critical thinking right, I mean, it's hard. You know, I've, I've been studying Bayesian reasoning and critical thinking for 10 years, I would say before that when I was in my 40s, I was totally at it. I had some good successes, but I didn't understand the role of luck in business, and cause and effect is too easy for people to put together in their minds to build a mental model. That is wrong. Right. And that's why you want to study failure, which, you know, thankfully, you know, few smart people do because that's where you, that's where the learning is not in success. You know, don't don't take business advice from Elon Musk, he's been hit really hard by the money truck too many times. Right. So those of us who've been in the trenches and seen a lot of things not work. You know, we don't we want to reduce risk at the same time, you want to have an impact. Right. And so I have been on this thing for climate since 1988, I wrote my first book on climate in 1991. So I'm not one of these everybody's instantly a climate expert thing. I've been doing it for more than 30 years. And I believe, like out or that co2 was bad and co2 was causing climate change and you know, birds to fly backwards and hurricanes to turn the wrong way, and all that stuff. And, and, and I really dug into it in 2015, and spent practically a full year doing nothing but climate research, and realized that if you study climate for 10 hours or 20 hours, you're just gonna get the standard line. But the deeper you go, the worse it gets. And the more the data is doctored, the more the journals are in on the game, they are biased, and the more or less the money, and the institutions and the educational institutions. I've had a PhD student emailed me and said, tell me he got let go from a climate PhD program because he was asking too many questions. It has become a religion. And so I present the data so people can make up their own mind because it's hard. When interpreting data. There's a lot of bad data out there. There's a lot of noise. There's a lot of people trying to convince you that the Earth isn't that the world is ending. You know, stubbornly. Despite the headlines, the world global average temperature doesn't continue to go up much at all. And the money is in the scare. The money is in the sounding the alarm, and it's now a $2 trillion industry.
Andrew Stotz 04:36
It seems like it's almost unstoppable at this point. I mean, who would not? You know, yeah, I mean, you can hear people talk about climate change is the cause of almost everything. And so, it's and then if you think about young people, and you hear that every single day, I mean, how would you have either the mental capacity, or the emotional or mental strength to overcome that, it seems like it would be very difficult at this point.
David Siegel 05:13
And it's hardcore dogma, it's in all the textbooks, the teachers have no idea. They just teach what's in the textbook, plenty of scientists don't understand, you know, thermal equilibrium and meridional heat distribution, you know, it's, there's a lot of parts to it. And just look from a kind of a bird's eye view, you'll say, Oh, well, co2 is up and temperatures are up, I guess a bit. So okay, so I guess one must cause the other but as we know, causation is hard because ality is very difficult. But now, the reason we're talking today, Andrew, is that it has metastasized into this global ESG movement that has been forced on us by the World Economic Forum and the UN
Andrew Stotz 06:03
certifying what is ESG just for the listeners that don't know,
David Siegel 06:07
I want to just quickly disclaimer, I'm not a conservative, I'm not a liberal, I believe you should take every issue at its face value and understand each issue, each vaccine, each tornado, you know, each, each event, everything has to have be on its own merits and not this kind of overall overarching cause and effect. So, so ESG has been going on for 20 years. Now, it's pretty much a un program that's strongly endorsed by the World Economic Forum, which is happening right now in Davos. And it stands for environment, social justice, and governance ESG, it's got a bunch of predecessors, all of which are all basically the same people who've been making money, scaring people for the last 30 years, because they've found that it works. And so this, this point of ESG, is to give every, and this is amazing, every company a score, especially every public company, a very detailed scorecard, it's it's worse than a financial audit of their carbon footprint of their use of water, or energy, or materials or pollution and stuff. So there are some good problems to dig into. But everything is so highly, rigorously well rigorous is wrong. I would call it rigorous nonsense score so that you come out with a single score. And then you're, you know, you get let in and out of various indexes based on that score. And these indexes are run by giant asset managers like BlackRock and State Street, and many others. And they put you on the list, according to your score. And the score also includes a bunch of fake virtue signaling for diversity. And it's really fake diversity, you have to have a diversity officer now. And you have to tick a lot of boxes and show that you've got the diverse board and diverse executive team. And it doesn't mean that your any company is any good at what it does. It means that you're signaling to the market that you're obeying these edicts. And then the last one is governance. And do you have a bunch of checks and balances in control of control? And you know, what if and risk management that honestly, we had a lot of that before the Great Recession in 2020 22,008 2009, and it all imploded? Because people don't know much about risk management. I'm sure you've read the failure of risk management by Doug Hubbard. Yep. Yep. Yeah. So he just shows the nuts and bolts of it's just all signaling and it's not really people understanding what they're doing.
Andrew Stotz 09:15
And one question is, can you, would you, would it make sense to separate the E and the S from the G or is there because if I look at the governance concepts, you know, I can understand that as an individual investor in a company. I want to know that there's some structures in place that are going to prevent the majority shareholders taking advantage of me, and I presume that's what the original intent of governance was from, you know, I went back and looked at kind of When did governance really started to come around I can see like the mid 70s was the beginning of a lot of governance stuff, but what is your perception on governance relative to the E and the S aspect?
David Siegel 10:00
I am saying there are problems here for sure when I'm saying the cure is worse than the disease. So the way to do it is not to have Deloitte give your company a score. Deloitte was also the lawyer for Enron, or the consulting company for Enron. All these guys are the same people who played a big role in the 2008 financial crisis, they are all on board for the money. They, there's no critical thinking. In fact, a peer reviewed study came out a couple of months ago showing that the scores or ESG scores are so arbitrary, that they're pretty much the main person who's doing the scores, concept of overall concept of the company and just turned into a score. They're not there's no requirements, really, it's just is this very not non rigorous, it's not a scorecard. It's not objective at all. And it's, and it really comes down to do we think these are good guys, and we're gonna charge them a bunch for the ratings. So there's a lot of conflict of interest. Right. And, and the government's thing, just like the environment, just like social, it's important. It's just we're doing it the wrong way. Right? Or get people get sorted according to the score, and that's very bad.
Andrew Stotz 11:29
Okay. So that's, first of all, if you can find that research, I'll include that one in the show notes so that people can look on my website.
David Siegel 11:35
Yep. Got blog. I have a blog on the website. Yep. And there's a peer reviewed paper there from Harvard.
Andrew Stotz 11:43
We'll go through that. I'll include that on the, on the, on the show notes. Now, let's, let's talk about what is the problem that ESG? You know, let's just step back. Because, yeah, the world's got a lot of problems. Yeah. And we want to try to solve them. And this is one of the reasons why I think people feel like, I've got to join ESG, because otherwise, I'm not doing something to solve the problems that we face in this life in this world. So what are the problems that we are facing or that ESG type of thing is trying to solve?
David Siegel 12:22
So there's a wide range, many of them are just made up. Okay, the climate thing, and the, the carbon footprint stuff is completely made up. Their whole thing is that you can buy carbon offsets, there'll be carbon trading, and you know, you'll, you're gonna get a carbon score, not only for you, but all your suppliers and their suppliers. And it's called scope three, which, let me just take a minute to say, Andrew, that right now, in the United States, every public company is paying on average $2 billion a year for compliance. Right now. Every public company in the United States is paying $2 billion $2 billion a year for compliance. And the SEC Commissioner, has recently said that with full scope three ESG compliance that will go to $8 billion. Her company, her company, so four times, so $6 billion per company times the number of companies on the exchanges, is going to get thrown at consultants and highly paid diversity officers to check boxes. This is not is there. This does not help CEOs run their companies or or make their industries more efficient.
Andrew Stotz 13:43
Is there any research that you've seen that could help us understand that costs just so that we can verify it? You know, obviously, scientific method? And also,
David Siegel 13:54
it's an SEC statement? So I've got it actually on the blog. Yep. And you can trace, I have no idea how that Chairman of the SEC came up with this. I'm sure he's got some resources. Okay.
Andrew Stotz 14:04
Okay. Well, we'll look at that. And we'll include that in our show notes, because I want our show notes to be some resources that people can go to. So I've asked you, what are the problems? And one of the things you said is that the problems some of them are made up? Yeah, right. And some of the readmissions to them are, you know, that's a separate thing. We you talked about carbon credits and offsets and stuff, which you could argue is a solution. But let's just talk about like real versus, you know, made up. Yeah. What are these problems that we're trying to solve?
David Siegel 14:37
I don't have a long list, but I'll give you a really good example. Human trafficking is bad, right? Yeah, I think we can all agree that we don't want companies using slave labor, or forcing people to work for them. There are many examples of this. Right? There are many examples of US companies using contractors in other countries where they have suicide nets. At the bottom of buildings, because people jump out their windows where they have looked the other way to, to, you know, take advantage of cheap labor in camps, that you don't want a film crew to go see. And on and on. And this is bad, right? So we that, that it's very important that this come out. And it's very important that we have transparency, what's not okay is to reduce it to a score that some consultant gives you. This is just like an IQ score. It's a very multi dimensional problem, and it needs multi dimensional, you know, investigative reporting.
Andrew Stotz 15:38
Okay, so let's, let's, let's talk about that for a second. So it sounds like, after listening to what you're talking about, it sounds like you're one of your biggest points that you're making. Is that the use of a score, maybe for anything? You know, I guess you could also say, you know, the only way we look at children is their GPA.
David Siegel 16:01
That's insane. Right? Okay. So like, Mike, go to a school where there are no grades and no tests. That's very much on purpose. That's insane. For sure.
Andrew Stotz 16:13
Okay, so let's just talk about GPA for a second, because that's a score. And let's talk about why using GPA. I mean, because that's an accepted thing. Everybody follows it, everybody does it. Why would what would be the downside of using a score? That's a pretty comprehensive score, you don't have any other scores out of the university really
David Siegel 16:37
cater, it's an indicator of obedience. Sure, so in the factory era, that was a really good indicator of success. Because you do what your superiors said. And that's what, that's what the whole institution was about. Now, you've probably noticed AI is going to take the repetitive work away, right? So over the next 50 years, AI will replace all repetitive jobs, right? So we need people who are independent thinkers who are creative, who are going to spend 99%, of the learning outside of school. So this concept of schooling people up for four years and then unleashing them and then that they're good for the next 60 years. That was over a long time ago. So it has been failing for a long time. Okay,
Andrew Stotz 17:25
so let's, let's just, let's, let's go to this for just a second. Because I agree that when we think about GPA, there are some people, young people, teachers, parents that obsessively focus on that GPA, and they become almost robots. And as I've oftentimes said, to my university students that sometimes the highest grade people end up having the hardest time in the real world. So I definitely can understand that an obsession with it is bad. But you know, there's plenty of normal people that have, you know, got some independent thinking from school, and still got high GPA and all that, why let's talk a little bit more about the damage that it's doing is the damage that GPA does. so significant that it offsets, the good that GPA does, because I feel like that's also what's happening with ESG. Like, come on this, you know, this is good.
David Siegel 18:25
So let's just
Andrew Stotz 18:27
because everybody understands that as a sec, for a second.
David Siegel 18:31
I've done a really thorough tear down of education, especially secondary education, which is four years that you're never going to get back. And that is really not going to serve you in the 21st century, not sure that it did anything for anybody in the 20th century is just a signal. It's really just a signal to employers, right? Employers can say, oh, high GPA from Harvard, no problem. You know, that's, that's an easy one. Right? So it's just outsourcing their hiring decisions. But if you didn't go for four years, and you just went into the job pool and started working, how far would you be in four years? And how in debt would you be? I would say, No, we never get to see the counterfactual. You know, we see oh, well, he went and got good grades. And then he got a big job at some big consulting firm or, you know, went to some and it's been fantastic for him. Yeah. But could he have done or should he have done better with four years of real world experience getting paid not going into debt and not paying attention to fake signaling but actually getting real getting kicked in the pants in the business world? You know, instead because in school, you know, okay, I got to see an ad Alright, whatever I'm moving on. If that doesn't happen in the real world, there are no grades. In the real world. Nobody gets a great you get like you get your head handed to you. If you screw up, or you have a bad boss, or things have When, and you move on to the next thing, but you carry it with you the whole way.
Andrew Stotz 20:04
Okay, so some of the argument here is that life is complex, the problems we face are complex, humans are complex, and narrowed down to one indicator as in GPA. Just you know, it may have some good points, it may have some, you know, benefits for some people. But the overall point is, is that it misses the full development of a human or it misses the opportunity to have a passion for learning or creating an environment that's, you know, bringing out the best potential in people are what?
David Siegel 20:40
Couple things? First of all, is it relevant? Or is the MBA relevant? I argue it isn't. When I was a candidate to be the Dean of Business School, I said, let's get rid of business deans. And let's do it a different way. Because the NBA is just a single. First of all, let's just cover this. It's not the NBA, it's not the GPA that matters. It's the name of your school, period. That's 99% of it. The GPA is secondary. Oh, you went to Yale to a white? Gosh, do you know, Professor? What's his name? You know, it's really about did you go to an Ivy League school or a top 10% school? That matters much more than the degree? Second, people asked? Would you go to Harvard business school for two years, for free, no charge, take all the tests, get everything, get the great everything. The only thing you don't get at the end of those two years is the certificate. Or you can pay $80,000 a year for two years and get the certificate. No one has any interest in the education. No, nobody goes for that. It's available. You can audit any class at MIT you want. It's not going to stand in your way. You can take the course and you can get the knowledge, but you pay for the signal. And that's and that's really what's broken, is on the hiring side, that they think this is important. It is and Elon Musk has said so and a bunch of companies have come out and said we're not going to pay attention to that stuff anymore. That's nonsense.
Andrew Stotz 22:13
Right? And same
David Siegel 22:15
thing with so many other areas of life. Andrew, there's a score on a bottle of wine you've probably seen from Robert Parker. Right? Robert Parker can't even rescore the same bottle two years later, anywhere close to the name number he gave it two years earlier. He has no idea. It's arbitrary.
Andrew Stotz 22:35
Okay, so let's now move back to ESG. So what we've tried to do in this discussion is try to narrow down some of your arguments. And I think one of the arguments, which I think has some strong validity, is that coming up with one score on something or even scoring things, is full of problems full of bad incentives full of you know, subjectiveness possibly in the process full of obedience. And you know, all of that.
David Siegel 23:08
Fantastic moneymaker. Yep. And yeah, over. Yep. Okay. Industry.
Andrew Stotz 23:14
So now let's, let's go back to
David Siegel 23:18
one of the countries because countries are getting ESG scores, right? to countries with the highest ESG scores in the world are Sri Lanka. And Ghana, both of which recently, in the last year imploded financially, economically, much of it as a result of failed policies, ask hissing to get the ESG scores, so they could get the loans from the World Bank to develop according to ESG principles that don't work that drive energy prices through the roof that make unreliable, you know, power and energy, and that hurt the poor with energy poverty, like crazy. And so all the countries are now getting ESG scores. So countries are getting ranked cities and states in the United States are being ranked and governors are getting very upset. I've got several articles in my blog about Governor saying, you know, now my state is on a list that tells lenders what risk I have, because I'm an ESG risk, because I'm not at the top of the ESG rankings. And so I can't borrow I can't my state can't even lend to oil producers in my own state. You know, we can't even do bond issues and in conduct and finance programs, because no banks will lend to us because we're not we don't have the right score. Right.
Andrew Stotz 24:55
Okay, so let me ask you, let me ask you a question then about this. One is it, you know, there's a lot of people that just mindlessly kind of follow what they've learned. And you know, there's plenty of parents that say, I'm just going to focus on the GPA, you know, get your shit together, get your GPA up, right? Schools are focusing on it, people are focusing on it. So there's a certain amount of, I would say, acceptance, that we just don't have a better way. And therefore, let's just use this and we need to make progress. So let's focus on a score. And then there's other people who know who really truly understand the deviousness of the scoring system. And they are big thinkers, who can see the incentive systems as Charlie Munger said, Show me the incentive, and I'll show you the outcome. They're seeing that bigger picture of where this leads. So is the ESG movement, just a lot of followers following along and saying, Hey, look, this is the best that we can do. Right now. We don't have a replacement for G GPA. And therefore this is the best we can do. Let's do it. Or is it people that are nefariously, behind the scenes seeing that this is a fascinating way to get things to go a particular direction?
David Siegel 26:19
Yes, this is a snow job. That is become an industry and that people's, you know, livelihood depend on them not knowing that it's wrong. Right there dependent on mean, it's a $2 trillion industry, Andrew, it is. It is an it's the Enfranchised it's, it's going great. From their point of view, I got there completely uncontrolled, no one can dissent. No CEO of any public company can say, this is nonsense. The emperor has no clothes. So it's been adopted
Andrew Stotz 26:55
by every company, it's been adopted by states and cities and countries, it's being adopted by the regulator being forced, right? So so why are people that stupid, that everybody's gonna adopt it, and then you're saying that it's wrong, come on your
David Siegel 27:20
social signaling follow the money, follow the money, it's, it's a, it's driven by the, the ratings agencies, the companies that do the rating, so that and, and that it feeds in tandem with the asset allocators, the black rocks to say, we've got a net zero index. And if you don't conform, you're out of the index. And out of the index versus in the index probably is a difference of 10%. And your stock price. Right? So so
Andrew Stotz 27:54
consistent in Ras, you're out of the index,
David Siegel 27:57
you're just holding CEOs hostage.
Andrew Stotz 28:03
So is your resume as kissing. So your argument would then be that there's people behind the scenes that are running this type of stuff that really see how the incentive system works? Because maybe they feel like Right, like this is? This is our way of achieving our climate goals or our environment goals or our social goals? So this is a good right thing? Or do they really have some crafty ideas behind it?
David Siegel 28:34
I think it's Al Gore is a kind of a good analogy. You know, it just works for him. Right? Why would he, you know, what they've done very well is they've come up with a slew of names to call the people that they disagree with. They never engage in any debate or discussion. And the UN has already said there is no debate. There's no reason for any debate on this. It's done. The science is settled, and we own the science. So there's no talking about it. Anybody who disagrees with us is wrong. And how many times have you seen that if you're a student of failure, from, you know, Ignite Semmelweis and the germ theory to a eugenics to McCarthyism. I mean, it just, it goes on and on, it never stops. And if you don't have critical thinkers and independent people and open markets, you can make their own decisions, then everything just falls into groupthink, and nobody has to think anymore. Okay, so how do you want to leave profitable how much money has Al Gore he's monetized his scare story into getting a Nobel Prize building a media company, I mean, it's hundreds of millions of dollars and as Deloitte, I've given speeches to some of these big, you know, consulting Big Four consulting firms, and they can't, this is where this is bread and butter you can eat. This is no I can't talk. You can't talk about it.
Andrew Stotz 30:02
That's yeah, definitely. So I can definitely see that it's very difficult for people to go against this or to question,
David Siegel 30:12
fascism. That is the sign of fascism. I was kicked out of LinkedIn two weeks ago, because I launched my site, I want you know, you'll, you'll tell people, but it's cutting through the noise.net. And I'm, I'm telling me where I'm wrong, I'll fix it. But my message is, things are pretty fucked up. And LinkedIn messages you're out. We don't want you on the platform.
Andrew Stotz 30:37
So I think I would like to wrap this up by going to the let's, let's make a vision of hope for the young person who does have a critical mind. Yep, go ahead. And I need
David Siegel 30:51
to do one more thing before I need to take us down into the hole. Guns go one more level, because it's going to go from state and city level to personal ESG score. And if you think I'm not kidding, fall asleep for 10 years and wake up, it's going to be it's going to be right here. Front and center is going to be your personal social credit score, just like we have in China, you're gonna get ID everywhere your footprint, how many miles you've traveled, how many carbon, you know, grams of carbon, how much air travel, all this stuff is going to determine your breaded your ability to whether you can travel again, if you forgot something at the golf club, can you drive back across town to get it or not? That's all going to be determined by an app that is going to be watching you 24/7 And your insurance rates and your credit will all be determined. I really hate that sounds just like insane, right? But it's just, it's just a slippery slope. And I'm Yeah, sure I'm a bit of an anarchist. But I also think there's rules. There's a reasonable role for government. But this is the direction we're going. And I would say, you know, I liken it to, to when they say we have nine years left to save the planet, you know, which everybody says right, I think we have about nine years left. Until this ESG fascism just takes over completely simply by virtue of the fact that it's not okay to talk about it silence is their weapon. So that
Andrew Stotz 32:36
would be a bad sign. If you were a psychologist and you were talking doing family therapy with a family. And people describe that it's not okay to question dad as an example.
David Siegel 32:51
Then we would say you book behind you on your shelf by Hans Rosling called Fact. fulness. Yes. You're familiar with the book. Yep. Amazing book. I want everybody to read thankfulness. But there's one chapter on climate change. That is absolute statistical nonsense. That practically was dictated by Al Gore. Just it's not true. Right. So if it's gonna be that hard, that Hans Rosling Rest in peace, we love Hans Rosling moment of silence. If you know for guys like Rose Ling, and for critical thinkers not to dive in deep enough to really understand it, what chances do we have for the rest of the world? You know, no, no, there's, like Alex Epstein said there's, there's 6 billion people on the earth who can't afford energy very well right now. And things are getting much worse for them. And they're getting hurt. And they're dying, because they can't afford the energy they need because of failed policies in the last 20 years.
Andrew Stotz 33:53
So let's now focus on. Yep. And I can see, there's all kinds of reasons why a credit score makes sense to businesses, and they want they want this and governments are going to go along with it. Because, you know, they see a lot of benefit in having all that information. The only person that's going to be boxed in is the individual. But you know, individual doesn't matter that much. Probably too many of these guys, they want the bigger picture. So my question is, for an independent thinker, which you've already told us, like Hans, as you mentioned, and other really strong independent thinkers, it's been amazing, particularly during the pandemic time to watch independent thinkers, minds explode, like they really, they can think independently about a particular thing. But when it goes to something else, that somehow they have an emotional attachment. It's very difficult for them to change their thinking and it's difficult for me, you know, and I want you to help myself MIT listeners and viewers to, to what are the steps to independent thinking so that we can combat this in at an individual level, and participate where it makes sense and not participate where it doesn't make sense. So tell us about critical thinking a little bit and how we can become better at it.
David Siegel 35:19
So I, my kids go to the school and I'm not on the board, but I'm an advisor, it's called. So the Socratic experience, Socratic experience.com, I want or dot edge notes.com I want people to see it because there are no grades at that school. And there are no tests. And they just want people to become critical thinkers. And I say the goal of, of all of this is to know when to go with the herd and when to go against. And, and if you think about things like conspiracy theory, there are no conspiracy theories. Conspiracy Theory is a word that tries to lump people together, who think that they're all of them think that nobody ever walked on the moon and the earth is flat, and there's COVID Is it you know, the, the that Bill Gates wants to put a chip and you know, all this stuff, that's just, that's ridiculous. You have to take everything one thing at a time on its own. So I've written a big essay on this. It's called, in reality dot show. In reality dot show. It's a huge essay, 1010 100,000 people read it. And it's just one thing at a time, what do we know? What are the papers? What's the research? What are the what's the balance, right? And these are the muscles, you have to develop and have a list of books for being able to do that. This is basically called Bayesian reasoning. I have videos on this on YouTube type in David Siegel, Bayesian, you'll find a bunch of videos on this. They're phenomenal people, I have a book list at my consulting site, which is infinite game of life.com. And there I have videos and books and how decision science, you got to learn this stuff. So you were asking before about an 18 year old? What would I recommend an 18 year old do? Stop listening to your parents, you know, if you got into MIT, and your goal is to get a PhD? Okay, fine, you're in the 0.0001%. And you're gonna get an MIT and a PhD in astrophysics. Great. All right, everybody else, don't do it. You know, do not go to some second or third tier college, it isn't going to help. Do not go for the grades, get out into the working world, because you're going to spend 99% of all your learning is going to happen after education, you're going to have to learn to work and learn your entire life. In case you haven't noticed, AI and crude oil, you're
Andrew Stotz 37:47
screwed because this is just too much work. It's too much work for the average person
David Siegel 37:52
to do it. No, this is awesome. We can do it. It's just that we're not going to do the repetitive work machines are going to do the repetitive work, which is what I'm seeing
Andrew Stotz 38:00
what I'm seeing. I mean, one of the biggest challenges that I face in you know, the mental and emotional energy in questioning your own reasoning. Like this morning, I was listening to a podcast of a guy that had an absolutely opposite opinion. And I tried to listen to podcast it's hard. It's hard. It's I mean, I have some political podcasts I listened to for the purpose of listening to it, but it's hard.
David Siegel 38:32
Yeah. Really good book, The Art of insubordination by Todd cash down phenomenal book, another book called cascades by Greg set tell there's several books on and then and then how clean what's his name? phenomenal book on how to change people's minds by it's phenomenal. And it's really about tactical empathy, about listening about not, not separating yourself, you know, making bonds with people not being antagonistic, and getting group momentum and doing it more from within. And this is stuff we all have to learn. So I'm getting a group of people to destroy the ESGs and we're just not going to deal with confrontation. We're going to do it through you know, clear, principled, open eyed arguments and understanding. So where people are coming from and try to try to move them one step at a time it's the only way anybody's gonna do anything.
Andrew Stotz 39:43
So one of the things I do in my valuation masterclass boot camp where I train young people, how to value companies and in you know, ultimately invest and one of the beautiful things about the stock market is that it is punishing. It is ruthless. It is unforgiving. If You go into the stock market with no knowledge. And if we take out the factor of luck, some people are gonna go into stock market with no knowledge and they're gonna get rich through luck. But if we take out the factor of luck, you're basically going to get creamed. And, and as long as it now that's not ultimately, I think people want to destroy that even by the Fed and other ways that we can manipulate it so that we don't have to suffer the consequences. But for right now, I would say that generally, it forces truth to a certain extent. And so I try to teach the students that to understand the market and understand that, and then I tell them, believe nothing, believe no one demand evidence, and therefore, they're not going to invest in something that they haven't questioned. And my objective for them is to question the different theories on why a particular stock is a buy, and why a particular stock is a sell, and then use the tools that they've gotten through CFA, through my course through other places where they can get those tools and then apply them. But if you don't have independent thinking, and you're not questioning everything, then you run into the risk that you just follow along. So I'm doing my little part with a small group of students in the valuation masterclass boot camp. But I just think that my answer to the question that I asked you is, how do we help a young person I would say, question, everything.
David Siegel 41:32
You don't have to do anything the way anybody tells you to Richard Fineman says, Go learn in the most irreverent way possible wherever whatever you want, in the most irreverent way possible.
Andrew Stotz 41:46
All right, let's let I love you know, Richard Feynman was fantastic. And for those that don't know him, he was a famous physicist, I believe, started at Cornell and then went to, to Caltech,
David Siegel 42:00
started at MIT, then Cornell, then back to MIT, then he was at Princeton for a little while, and then the Manhattan Project, and then spent his rest of his years at Caltech. Yeah, you
Andrew Stotz 42:12
couldn't, you couldn't get it wrong by reading every book that he's written, watching every video of him. He's amazing guy read
David Siegel 42:18
everything. And I watch all the videos to my kids. And he said, he said, Be careful. You first must not fool yourself, because you are the easiest person to fool. If you think you can consistently beat the market. After reading everything Eugene Fama has written and taking into consideration that there are hedge fund guys who are trying to take your money every day, then, then you got to realize, you know, after reading Nassim Taleb that whenever you have a when there's a huge like component there, and it's very hard to beat the indexes. And so a smart portfolio of index like things is very difficult to be.
Andrew Stotz 43:01
So last question, what is your number one goal for the next 12 months?
David Siegel 43:07
No, I really would like to build this thing. It's cutting through the noise. dotnet. Here's my thesis. Look, if if companies are spending $2 billion on ESG compliance, and they're looking at $8 billion, this is real money. Why don't they give me $1 million each and give me the resources I need to not not kill the ESG just build a better alternative. So everyone can say, Look, we have a better thing than that. That's ridiculous. Let's go to this framework over here. That's what I would like to build. And I'd like to have that really in motion by the end of the year.
Andrew Stotz 43:43
Great, well, listeners that you haven't another discussion about losses about winning about thinking. Remember, I'm on a mission to help 1 million people to reduce risk in their lives. If you haven't yet, join the mission, just go to my worst investment ever.com right now and become a member, get my become a better investor newsletter to reduce risk in your life. As we conclude, David, I want to thank you again for rejoining our mission and our show. And on behalf of a Stotz Academy. I'm not going to award you status. I'm not going to award you alumni status because you already have it. But I'm going to thank you for joining the mission. Do you have any parting words for our audience?
David Siegel 44:32
Do I get a mug Do you Do you have a swag? No, no really. develop yourself and learn all you can and podcasts like this are really valuable. There's plenty of other good ones. Don't take anything from other people and find your own way. Look at the data learn to interpret data and learn to ask nasty difficult irritating questions.
Andrew Stotz 45:02
Right? And that's a wrap on another great episode and story to help us to create, grow and protect our well fellow risk takers. Let's celebrate that today. We added one more person down on our mission to help 1 million people reduce risk in their lives. This is your worst podcast hose Andrew Stotz saying. I'll see you on the upside.
Connect with David Siegel
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Further reading mentioned
- Hans Rosling (April 2018), Factfulness: Ten Reasons We’re Wrong About the World–and Why Things Are Better Than You Think
- Todd B. Kashdan (February 2022), The Art of Insubordination: How to Dissent and Defy Effectively
- Greg Satell (April 3, 2019), Cascades: How to Create a Movement that Drives Transformational Change