And if you could explain it in a way that a, a nine-year-old English literature student would understand, that would be very kind and compassionate of you.

So decisions are choices.

You know, that when we're making a decision, we're making a choice between different alternatives, and we need to be able to rank those alternatives in a sensible way.

So we need to have some kind of an objective function, some kind of a criterion that allows us to rank different outcomes relative to each other.

Now, in financial decisions, you know, we're normally thinking about uncertainty of outcomes, gambles we could call them.

And the question is, you know, how should we rank different gambles against each other? You know, what's a better gamble? What's a worse gamble? You know, sometimes it's really obvious.

You know, one gamble can look better than another gamble.

Hmm

Tell us about "Who Killed the Random Walk?" What is the random walk? What is the work that you've been doing that shines new light on it, and why does it matter?

Oh, thanks for asking that, Jack.

This is, uh, something I haven't-- I don't think I've talked on any, uh, really publicly about this, except we've been talking at a number of seminars about this paper.

It's a piece of research that we've been working on for three or four years, and it just got accepted into the Journal of Investment Management.

It's available as a working draft on SSRN.

And, and, and basically, the starting point is that everybody who follows the stock market, uh, sees a lot of behavior in the stock market that is hard to reconcile with the idea of everybody is a, uh, rational, fully informed agent making, uh, long-term investment decisions based on expected cash flows of the stock market, which is the classical f- financial economics description of the stock market and asset pricing theory to begin with at least.

And, uh, on the other hand, we have behavioral economics that, that came up relatively recently.

Tell, tell me about the dynamic index investing you do and what conclusions you are drawing for your clients in terms of allocation to foreign equities to relative to the US.

Talk about how an expected utility framework could help you look at such things as a safe withdrawal rate.

So, uh, back in the late 1960s, a couple of MIT economists, uh, Paul Samuelson and his student Robert Merton, tried to, uh, solve what, uh, economists called the lifetime consumption and portfolio choice problem.

And what...

And basically this is, uh, all tied up with how do we take our wealth, whether it be our financial wealth or our human capital that we're converting into financial wealth, and, uh, how do we invest it? And then how do we decumulate and spend it and invest it, uh, you know, later in our lives? And, uh, and so the framing of the problem, uh, that they solved was basically saying, "Okay, what I'm interested in is maximizing the lifetime utility," which is the utility that I get, let's say, break it down year by year.

The utility I get each year in spending my money, right? So we have this, this relationship between spending and how much utility I'm getting, how much happiness I'm getting from that spending, and the more we spend, the more, uh, happiness we get, but at a decreasing rate.

And so the problem was set up as I want to find my policy choices between s- spending.

I have a spending choice to make and an investing choice to make, and my investing choice is how much to put into stocks and how much to have in safe assets.

Is this something an individual can model out on their own?

It, it wasn't all just for fun.

I think we kind of felt guilty about it at the time.

Uh, but it was like giving an outlet to risk-taking so that if you kind of like to take risk, it was good to take the risk here and be very risk-averse [laughs] uh, in what we were doing for the firm.

So it was a, an interesting and fun example of risk-taking and risk not taking.

[laughs]

Then they have to figure out why those discrepancies might exist.

You had to explain it.

Like, okay, what, why is this the case? And then you had to decide whether the reasons that were causing it were going to get stronger and make it go further apart or whether they were going to dissipate over time and whether there would be a convergence.