Alex Edmans

Hello and welcome to the Modern Investor Podcast.

I'm Carl Haisley, CEO at Finamize, and today my guest is Alex Edmans, Professor of Finance at the London Business School.

Alex has spent his entire career narrowing the gap between academic research and the general public through his lectures and his new book, The Madness of Markets, proving time and time again that you don't have to dumb down finance in order to make it accessible.

Alex, thank you so much for joining me today.

Before I do let you go, please tell everyone where they can find out more about you and where they can pick up a copy of Madness of Markets.

Sure.

So my name is Alex Edmans, E-D-M-A-N-S.

So my website is alexedmans.com.

And I'm Cameron Passmore, chief executive officer at PWL Capital.

Today we are joined by Alex Edmans, professor of finance at London Business School, who has previously appeared on this podcast in episodes 192 and 361.

And in addition to being such a great guest, Alex is also the author of the books Grow the Pie, May Contain Lies, and his new book, The Madness of Markets, came out last month.

And in this conversation we talk about why a football loss can sink a nation's stock market, why identical assets can trade at different prices, and the habits that help investors avoid the common mistakes that many of us make.

Stick around to the end to hear our thoughts on the conversation, but for now, let's go ahead to our talk with Alex.

[upbeat music] Alex Edmans, welcome back to the Rational Reminder Podcast.

Thanks so much, Ben.

It's great to be back.

My name is Kevin Coldiron and I'm host of the Ideas Lab series where we talk with authors of new books that help us understand and navigate the global economy.

Our guest today is is Alex Edmans.

He's a professor of finance at London Business School and a leading expert on market psychology.

You may have read about his research in the FT or the Wall Street Journal, or you may have read one of his books.

This is episode 50, The Madness of Markets.

Alex Edmans is Professor of Finance at London Business School.

Alex has a PhD from MIT as a Fulbright Scholar, and was previously tenured as a professor at Wharton and an investment banker at Morgan Stanley.

Alex has spoken at the World Economic Forum in Davos, testified in the UK Parliament, testified, I believe, in the Canadian Parliament as well, and given multiple TED and TEDx talks, um, linked to his research and work, uh, with a combined 3 million views.

But even if the P- PE goes from 25 to, to 40, this is not as clearly in bubble territory as we've seen in the past.

So that's why I think it's sort of mildly overvalued, but I'm not gonna go out there and tell everybody to dump all of their AI stocks.

My final question for you, Alex Edmans, is on Monday morning, people are listening to this podcast, uh, many are interested in sustainability and some of these broader topics that we've been discussing.

On Monday morning, if you are somebody who wants to think differently about, uh, some of the topics we've discussed, so one of the things that I've noticed about your LinkedIn, for example, is that- Well, you do what you say, which is to try to cut through polarization to take an honest look at particular topics, like you did with the end of ESG, and then the sister paper, end of D&I.

And entire markets can apparently be influenced by things that have absolutely nothing to do with money, including the weather and whether a country's soccer team wins or loses.

So why do otherwise rational people lose their minds when money is involved? And more importantly, can understanding that help you make better decisions with your own money? Alex Edmans is a professor of finance at London Business School and a leading expert on behavioral finance.

He's the author of a book called The Madness of Markets: Why Smart Investors Make Crazy Decisions and How to Exploit Them.

And he says markets are driven by human psychology more than we may realize, which creates both dangerous traps and some interesting opportunities.

Well, you know, I always enjoy talking to you because y- you make finance not dry.

It's very interesting the way you explain your insights into it, and I appreciate that.

I've been talking with Alex Edmans.

He is a professor of finance at London Business School and a leading expert on behavioral finance.

When you define your value by your utility, you are volunteering for your own obsolescence.

Alex Edmans spent twenty-eight years documenting how financial markets fall into this exact trap.

Wall Street consistently bids up loud headlines and short-term hype.

Slap AI into a press release and watch the stock jump five hundred and eighty-two percent while systematically ignoring the quiet compounding power of employee trust, human dignity, and culture.

What connects yesterday's football match, today's weather, and how business leaders sign documents? The answer is that they may all be linked to the price of shares.

Alex Edmans, Professor of Finance at London Business School, is the author of a new book, The Madness of Markets.

Alex Edmans, welcome to Social Science Bites.

Thanks so much, David.

It's great to be back.

The fact that stocks over any reasonable time period do much better than cash, and so while you might not become a millionaire overnight, in the long term, you'll be able to safeguard your and your family's future.

Well, it's an excellent book, so I hope the royalties alone will enable you to buy a private island.

Alex Edmans, thanks very much indeed.