Currently reading I Will Teach You To Be Rich by Ramit Sethi. I know the title sounds gimmicky, like it was written by a used car salesman, but Ramit is LEGIT. I haven’t been so excited while reading a book in a long time. Ramit’s book is based on his blog of the same name, where he teaches 20-somethings about personal finance. His money automation and investment strategies line up with my own, and I’ll write more on these later.
This post will focus on a topic that both Ramit and others like Tim Ferriss talk about: the myth of the expert. America loves experts, we want someone to trust, someone to explain things to us so we don’t have to think for ourselves. But many experts are full of bull and Ramit has a great story to illustrate:
In 2001, Frederich Brochet, a researcher at the University of Bordeaux, ran a study that sent shock waves through the wine industry. Determined to understand how wine drinkers decided which wines they liked, he invited fifty-seven recognized experts to evaluate two wines, one red, one white.
After tasting the two wines, the experts described the red wine as intense, deep, and spicy—words commonly used to describe red wines. The white was described in equally standard terms: lively, fresh, and floral. But what none of these experts picked up on was that the two wines were exactly the same wine. Even more damning, the wines were actually both white wine—the “red wine” had been colored with food coloring.
Wow, I don’t know anything about wine, but if a self-professed expert can’t deliver results, then he/she loses my respect. And that’s what being an expert comes down to: delivering expert-level results. Ramit says that financial experts have not been delivering results in America. His targets for derision are the “talking heads” in the financial media and investment fund managers:
The media feeds off every little market fluctuation. On one day, the pundits are spreading gloom and doom about a multi-hundred-point loss in the market. Then, three days later, the front page is filled with images of hope and unicorns as the market climbs 500 points. It’s riveting to watch, but step back and ask yourself, “Am I learning anything from this?”
[Fund] managers chase the latest hot stock, confident in their abilities to spot something that millions of others have not. What’s more, they also demand extraordinary compensation. Get this: In 2006, the average Goldman Sachs employee made $622,000. That’s not a typo—it’s the average amount Goldman employees made with a salary and bonuses. Despite this astronomical compensation, fund managers from all companies still fail to beat the market 75 percent of the time.
Ramit showed me that I don’t need these experts to invest my money for me. Put simply, fund managers cannot consistently beat the market. So, you can invest with a managed fund, get a decent return, and lose any advantage over an index fund with the 1-2% (or higher) expense ratio. Or, choose the less sexy road, invest in a non-managed index fund, get a decent return, and keep your money with lower expense ratios. I choose to avoid the self-proclaimed experts and be master of my own fate.
Get Ramit’s book because he’s an expert that delivers results; he’ll show you how to become financially secure.
Bonus: How to Become an Expert
I have already written about Tim Ferriss’s productivity and time-management tactics; another big idea in his book is how to become a (perceived) expert in your field very quickly. Here are a few of his tips:
- Read 3 top selling books on your topic (Then record what you’ve learned, maybe in a blog?)
- Join 2 or 3 related trade organizations (Search online for your field + organization, club, or group.)
- Give one free 3 hour seminar at the closest well-known university (Record it, you could use it later.)
- Give 2 free seminars at branches of two well-known big companies such as AT&T or IBM (Reference your seminar at the university to get your foot in the door.)
- Offer to write 1 or 2 articles for trade organizations (Maybe by re-purposing material from step 2.)
So, in conclusion, Americans love experts, but some are frauds. Ignore the fakes and become one that delivers results.