Listen to someone you disagree with, and it might make you rich
John Maynard Keynes is one of the most influential and controversial figures of the 20th Century, and he impacts your day to day life more than you know. After all, people who are busy trying to raise children, start a career, bolster retirement savings, care for aging parents, etc., have little time (or patience) for nuanced arguments about macroeconomics. But what if I told you that someone has dug into Keynes personal life and figured out how to make him relevant to you today -- right now -- whether you are opening your first savings account or trying to figure out when to buy a house?
Personal finance author John Wasik has done just that with Keynes's Way to Wealth, a new book that takes a fascinating tack. It's a cliche that "experts" often fail personally at the thing they do publicly: doctors who live unhealthy lives, marriage therapists getting divorced, holy men with secret affairs, and "brilliant" economists who live in relative poverty.
Wasik puts Keynes personal handling of money to the test, with fascinating results that amuse and inform. Keynes repeatedly made and lost entire fortunes -- so, obviously, he wasn't perfect. But by the end of this life, he had come up with consistent, repeatable ideas about handling his own money that led him to enjoy a very comfortable "second act." Read Wasik's book, and you can, too.
Wasik will be speaking on his book at the Museum of American Finance on Thursday in New York City. Information on the event is here.
You can buy Keynes's Way to Wealth at Amazon, or other book stores.
Below is a Q&A between Wasik and I, completed on Monday.
Q: Keynes obviously generates very emotional reactions. How have you handled that while try to explain the message he offers on personal investing?
Well, I knew Keynes was going to be one, tall lightning rod going into the book. He certainly arouses strong emotions and has cost me some reviews among libertarian/conservative investment periodicals. But the more I got into Keynes -- I read the core of his collected works of 30+ volumes and five bios -- I discovered a multi-faceted man. He was good at several things, but most of the world (particularly those in economics and money management) didn't know what a great investor he was. If they can open their minds and get beyond his politics, which are actually quite complicated, they will see a brilliant, innovative investor who has shaped the careers of Warren Buffett, Jack Bogle and many other legendary investors. He was truly a groundbreaking investor after he lost lots of money. That's the message that resonates with me. Most intelligent, informed investors should be thanking Keynes instead of cursing him.
Q: Why did you write this book?
JM Keynes is largely known as an economist, but few know the extent of his investment activities. There are several bios on Keynes. Why is it that none of his biographers detail what he actually invested in? I think that his economic theories and other activities generate such interest and passion that even his critics were not interested in what a great investor he was. I wanted to show how he pioneered a lot of what we take for granted these days that qualifies as prudent investing.
Q: What surprises did you learn in researching this book?
When I went to Cambridge University to examine what he owned, I was flabbergasted at the amount of trading he did in commodities prior to the 1929 crash. He was not only unable to see the severity of the crash in advance, he got absolutely creamed in his long commodities position. After that -- the second time in a decade he had lost a fortune -- he started looking at stocks as long-term investments. This thinking really influenced all of today's greatest investors from Warren Buffett to Jeremy Grantham. I was even more surprised to learn how much Keynes influenced Jack Bogle, the father of the index fund.
Q: What can average investors learn from this book?
The fine print in Wall Street's advertising is that you can beat the market. You really can't. If you do, it's luck and you won't be consistent. Even the greatest minds in finance and economics can't do it over time, so why try? Stick to index funds or solid portfolios of dividend-paying stocks. Don't try to time the market or play a hunch.
Q: Why Is Keynes still relevant today?
Because he failed at investing no less than three times, got back on his feet and kept investing based on what he learned. He looked for value in companies and stopped doing short-term trades. He was in it for the long haul and made a mint. When he died, he was not only one of the richest economists in history, he laid the intellectual framework for efficient market theory, behavioral economics and passive index investing
(PS - John Wasik is a friend. And a really good personal finance writer.)