BB: I’ve wanted to ask you about something. There were some real heavyweight professors at NYU Stern, and that wasn’t something I knew until I took your course. Do you feel that our students are aware of Stern’s impressive intellectual pedigree? People like your grandfather Joseph Juran, Drucker…DJ: And Deming. They promote professors, because we all know who won the Nobel and who was quoted in The Wall Street Journal. I guess part of this is that the school is known for finance and I would say Deming, Juran, and Drucker are more known for management and operations. So maybe because the school isn’t famous for that, it’s not what we promote. The truth is you have as blue chip a pedigree in my field at Stern as any university in the world. Nobody else has Drucker, Juran, and Deming. I suspect, maybe the saddest one is Drucker because he was the most general of the three. He’s talking about things that every business person should think about and we don’t talk about him enough. I’m going to mention him tomorrow; I have these people coming in from Liquidnet. It’s an alternative way to trade stocks. They have a partnership with Stern where we are creating a customized MBA. We give them everything they can fit into 48 hours.
BB: It’s funny you bring that up, because I remember loving your lecture on how you invest.DJ: The Lazy Portfolio?
BB: Yeah, it hit home for me repeatedly during my education how much of a waste of time it is for even most MBAs to think they can consistently beat the market.DJ: Most people investing don’t trust themselves so they hire an investor because they don’t really have confidence in their own thinking. That’s a problem for most people. Stern students tend to have the opposite problem, where they have too much confidence in their own thinking. There’s nothing to say that the average trader isn’t as smart as the average Stern MBA. So what can you do that these people can’t? They spend all day doing it and you can be as good but you’re busy, and the next best thing is to be participating. I can do my own analysis of betas and correlations and run solver. I don’t think I’m smarter than the market, I don’t think I ever will be, I don’t try to be. So what of yourself do you trust? People who know [about personal investing], and I’m not one of them, say that using different index funds is what you should do. Ride the market, don’t try to beat it.