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In this gripping interview with Jeff Desjardins of visualcapitalist.com, Dave and Andrew ask Jeff about some of the biggest secular developments that investors need to consider in the decades to come. The discussion includes:

• How there’s more data out there today than stars in the universe
• What the massive indebtedness in the world today means for economies
• How to find the right signal from all of the noise
• What’s the big deal about 5G, and its potential to revolutionize the world

Be sure to check out Jeff’s latest book called Signals, and also be sure to subscribe to our free email list for more great tips and insights, at stockmarketpdf.com.

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TRANSCRIPT

Announcer (00:02):

I love this podcast because it crushes your dreams of getting rich quick. They actually got me into reading stats for anything you’re tuned in to the Investing for Beginners podcast led by Andrew Sather and Dave Ahern. Step-By-Step premium investing guide for beginners, your path to financial freedom starts now.

Dave (00:33):

All right, folks, we’ll welcome you to the Investing for Beginners podcast. This is episode 179. Tonight, we have a special guest with us. We have Jeff Desjardins from Visual Capitalist, founder and editor in chief of this fantastic visual magazine slash website slash book that he just put out, and it’s got all kinds of great information infographics. I mean, it is fantastic. I’ve been lucky enough to be a subscriber to his stuff for over two years now, and I enjoy it. So, Jeff, thank you very much for coming on. We appreciate you taking the time to talk to us tonight.

Jeff (01:09):

Absolutely. Thank you. I didn’t know that you have been following us for a couple of years. That’s fantastic to hear.

Dave (01:15):

Oh yes. Yep. I came across your stuff from Preston Pysh from the Investors Podcast. He recommended at one of his shows a while back and, I looked it up immediately, and I was like, wow, this is awesome. So yeah. That’s great stuff.

Jeff (01:29):

Yeah. Preston’s awesome. Yeah. I like his stuff; his podcast is fantastic.

Dave (01:34):

Oh yeah, absolutely. Absolutely. So we have some questions here we’d like to ask you, and then we’re just going to have our conversation. So I guess maybe I’ll ask them the first question here if that’s all right. Where did you get the idea of linking all of this data into a visual resource? How did you develop this idea in terms of the book or terms of the website as a whole book, yeah? And the website, I guess, kind of how they all fit together?

Jeff (02:04):

Yeah. So from our perspective, our reason for being is that there’s just massive amounts of data that exists in the world, and it’s, it’s growing at unprecedented rates. So for us, we’re trying to make sense of that and to simplify a really complex world and get people to get a better understanding of, of this, you know, this crazy world that we live in.

Jeff (02:30):

And so over time, you know, we, we started taking concepts within markets and investing and, and kind of boiling down to these, these visual elements. And then as time went on and as we did more, you know, we really found a niche and an audience that that really got what we were doing. And yeah, the book I would say is the combination of this, which is, you know, we live in uncertain times, you know, it’s a, it’s a cliche, but I think it’s by the amount of information that’s out there and it makes it hard to know what’s actually happening in this world. And so we thought, you know, we have this great, we have great experience in dealing with these complex topics. So let’s boil it down to the, you know, the things that are the most fundamental and most foundational to give people a starting point, like a place where they can go and say, okay, well, what is true about the business world going forward? What is true about markets going forward? And we show the trends that I think are pretty hard to debate against, you know, things like rising debt or, you know, some of the trends around ESG, for example, like these are things that are speeding up and they’re not going anywhere. And if you’re going to have a fundamental understanding of markets, as people listening to this podcast are looking to have, you know, this is going to be a good starting place for that.

Andrew (03:59):

That’s, that’s super cool. So thanks for joining us here today. Jeff, I had a question for you. The book was great, and you know, your visuals both on your website, that visual capitalist, and through the different infographics you guys send, I think it’s, it all looks really well. It’s very aesthetically pleasing, and I guess that’s hard to encompass on an audio platform, so people can’t see it for themselves, but I think it’s worth checking out. And your book too, that you guys most recently did, it’s called signals. And one of the things that stuck out to me about the book immediately is something that I’ve been observing more. And I think more investors need to key in on because it’s, it’s part of a massive change. And I think we see in the business world, and you kind of alluded to it a little bit. So in the book, you mentioned that there are 40 times more bytes of data in existence than stars in the universe. Just extraordinary to me. So can you explain that and how does it affect business and investors?

Jeff (05:09):

So the easiest way to think, to wrap your head around this, is when we’re talking about the size of the observable universe. If you think about how many stars are in the Milky Way, which is, you know, just one galaxy, I think there are a hundred to 400 billion stars in the Milky Way. And then you realize that there are billions or trillions of galaxies, and that’s, that’s all of those have massive amounts of stars. And then, so this is, you’re getting to an extraordinary number and the amount of data that we have that exist today in bites is actually it’s 40 times that amount. So it’s this huge amount of information to process, and like the universe, it’s also expanding. It continues every year. So to me, this is the more impressive statistic, which is that the different organizations that try and figure out how much data there is in the world.

Jeff (06:06):

There’s, you know, there’s a few of them, but what they’ve found is that in the next three years between, so between now and the end of 2023, there’s going to be more data created than in all of human history combined prior to that point. So, you know, every three years, essentially, data is doubling, right form, from the point before. And so from an investing standpoint, the challenge there is how do you know, well, how can you know that, that you really know what’s going on in the world? And a lot of these different data sources are going to conflict with one another. Sometimes there’s going to be information paralysis or analysis paralysis, where you have so much information on a particular topic that you can’t make a decision on it because there’s so much evidence pointing you in different directions that you just, you know, you can’t decide.

Jeff (07:03):

There are also tons of data that gets, gets taken by media outlets or financial outlets. And then they’re putting their own bias or spin on it, which creates a situation where you have to have an additional layer in your mental processing to filter that. And that requires that additional effort. So you combine all these things together, and it’s just, it’s really a tough environment for someone that’s getting started and trying to understand the basic principles of how the business world works. And so our goal is to, to find, to create some sanity in that entire environment and to, to create a starting point where people can get some basic trends and principles down so that they can eventually become more sophisticated.

Andrew (07:53):

Yep. It makes sense. And I, I, I get exactly what you’re saying on the one hand, from what I gather, from what you’re saying, it sounds like it’s only going to get worse as time goes on, but we also have other great resources online to help us filter that. And I think what you guys are doing is a good example of that.

Jeff (08:12):

Yeah. That’s going to be more of a trend going forward as well. Like not just us, but other groups such as yourselves are, people are going to be relying on, on, on people that can synthesize and process data to come out with the insights out of the end of it. Right. And that’s why companies are willing to pay so much for artificial intelligence and, and being able to process these massive, massive data that they’re building because at the end of the day, having all this information is completely useless if you can’t create some insights out of it. So that’s, that’s the business that a lot of us are all going to be in over the next or over the coming years, which is how do you make sense out of all this data and how do you synthesize the sources that are meaningful? And as our book title says, how do you find the signal in the noise?

Andrew (09:04):

Yeah, that actually leads me to, I think what would be a very good question. So how do you guys put that through your process? Cause I’m sure you’re, you guys are probably sifting through billions of more bytes of data than the normal person. So how do you approach that?

Jeff (09:21):

That’s a really great question. So for us, there are a few components to it. One of the, one of the components that, that we stick to is we’re usually looking at things from a very macro perspective. So we’re looking at what are the changes, the technologies, the new developments that are affecting society as a whole and markets as a whole. So these tend to be really large picture things like demographics or new technological changes or things that are happening in vast markets. So we’re looking at things from that really high-level perspective, so that right away narrows down some of the noise because a lot of the noise is going to be dealing with more micro or constrained topics that to us are interesting, but not relevant for what we do. The second thing that, that we do is we really try to use sources of data that we feel are not biased in a particular sense.

Jeff (10:24):

There, they’re really legitimate sources that most people can agree on. So that’s a lot of international organizations. So whether it’s the IMF world bank or United nations, or what have you, or it’s key think tanks or governmental sources or looking at things from investment banks or even top consulting companies like the PWCs and those of the world. So, we try and take information from various specific sources that deal with these macro topics. And then I think the third thing that we’re looking for from our perspective is because we’re so data-focused, where we really are looking for something that is when you take that data, it shows you something. So there are data points that you can use that are disparate or that are not linked together that can tell a story.

Jeff (11:24):

But what we’re trying to do, especially in the book, is we’re trying to say, okay, well, what is a data source that when you visualize it, when you look at it, it’s very clear what’s happening. And there’s not really a lot of gray areas. So as an example of this, one of the datasets that we to open the book, and I think it’s one of the more powerful examples of a signal in the book, is we look at median global age. So that’s just the average age of the global population. And it’s such a clear signal, a data perspective that it’s really hard to argue about because, since 1970, the median age has increased every single year up until now, and going forward until the year 2100, the global median age is expected by a bunch of different sources to continue to increase all the way up to the end of this century.

Jeff (12:12):

So median age is going up, and that has certain implications, right? So that’s going to affect governments is going to affect how a business works are going to affect the composition of societies and, and how we work together. So, you know, this is a very, it’s a starting point for a conversation. It’s, it’s not the whole thing, but it is something that I think is a very clear signal that you can look at and say, yeah, this is happening. And we have to, you know, as an investor or as a decision-maker, I have to make decisions that are going to be based on this data that is going to be taking this into consideration.

Andrew (12:50):

Yeah, that’s a really cool data point, and something that could, I’m sure, have countless effects throughout the business world and, and throughout investments, maybe to take a flip side of that example where a data point that seems to have a lot of noise, particularly lately has been the GDP numbers that get quoted in the news and due to the way that numbers reported, it made it look a lot worse and then a lot better than it really was. So is that like a fair example of noise where we should have context and signal instead?

Jeff (13:27):

Yeah. I mean, the lack of nuance around GDP numbers, I mean, it’s pretty astonishing. You have, on the one hand, you have people that will be saying that, Oh, you know, this is a 20 or 30% drop it’s the worst thing ever. And then you look at the next quarter, and now it’s a 20 or 30% rise because, you know, things have bounced back, but without the context that, okay, this is not, these are annualized numbers. And it’s, it’s a drop before a big increase that kind of corrects everything back to zero more or less know people don’t really think about this stuff and our media, even financial media, doesn’t do a great job of giving that context to people so that they understand what exactly is happening.

Andrew (14:12):

Yeah. Which, which, you know, obviously highlights how important it is, what you guys are done. Either. The GDP numbers, I think, are fascinating too. And I guess along with those lines, something that’s always kind of fascinated me is, is debt and how that’s treated. And one of the signals that you guys talk about is, is the debt loads and, and the rising levels of those around the world. So what do you think that that has an impact going forward? Not only in the United States but the rest of the world?

Jeff (14:43):

Yeah. So debt is a thing that people have been rightfully talking about for a long time. And it’s one of those tricky things that it can keep on building up in the background. And it only manifests itself in particularly bad ways when, when something specific triggers that. And we haven’t seen that trigger yet. So we’re very lucky, but in the background, debt is currently sitting at about 258 trillion globally. That includes government debt. That includes corporate debt. That also includes consumer debt, but it’s about you know, it’s over 300% of global GDP, and it’s been steadily rising, and this, this number is from pre-COVID. So this is not including the different stimulus that’s going into the governments or our spending. It’s not including the extra lending that people might be doing as a result of the current environment.

Jeff (15:38):

So yeah, debt is a really fascinating topic. And then, of course, you also have the flip side of that, which are interest rates, which have been decreasing for 700 years. And, you know, in that sense, we can afford to have this debt currently, but it’s painting a situation where it seems almost unfathomable for interest rates to increase. And if they do, then what is going to happen with that debt, right? Because if you have, so imagine a situation where eventually you have some sort of inflation, and you have to reign that in, you know, one of the only ways that you can do that is by increasing interest rates. And then you have all these people that have accumulated so much debt, and now they’re, you know, the interest costs are going up way higher than they are now. I mean, interest rates are near zero right now, so if those go to 5% or 7%, or, or what have you now, you’re talking about a very fragile situation.

Dave (16:35):

Yeah, I agree. And I think the thing that’s fascinating to me about that is the comment you made about it, the interest rates falling for over 700 years. And I think people don’t realize that. I think a lot of times we look to short term, and we don’t think about how that does impact everything, not just from a global standpoint, but also from a personal standpoint and the debt that we have via credit card or bank loan or mortgage or anything of that nature. If those interest rates do go up, then, you know, it’s, it’s going to hurt. It’s going to hurt a lot. And I, I worry for my daughter at some point, you know how this is all going to affect people, you know, maybe not necessarily in my lifetime, but I think farther down the road, that’s something to be concerned about.

Jeff (17:18):

Yeah. And it’s, it’s a kicking the can down the road syndrome for sure. Right. Which is political decision-makers are only thinking about the next couple of years. They’re not thinking about ten years from now or 20 years from now. And based on the system that we have, I mean, it’s, it’s kind of hard to blame them, right. There, they’re trying to appease people now, but it really is hard to say, okay, well, let’s make decisions that are going to make people 30 years down the road, make them better off. Right. And you have the same problem around a bunch of different things, like obvious change and things like that fit in that same box, which is like, how do you make decisions to benefit people way down the road, but debt is certainly in that camp.

Dave (17:59):

Yeah, it absolutely is. And as it keeps it, as it keeps going up, it just it’s, sometimes it gets scarier and scarier. And as a value investor, sometimes we get a little bit too doom and gloom. So it will, you see some of these rising debt levels, it’s easy to get scared, but on the flip side, you, you understand that it’s not just to that particular company you’re seeing it’s also happening throughout the world. So how, I guess, kind of to back up a little bit. So I w we haven’t really talked about you and how you kind of got started as an investor. I’d be curious to see kind of how you went from there to here.

Jeff (18:35):

So that’s a really interesting question. And so, my background in the investment industry is mainly from the perspective of working with public companies. Like originally, it’s working with public companies from the investor relations and, and like their side of, of how their image in capital markets. So that’s how I initially got into the industry probably 15 years ago. And then from then, you know, working with a variety of public companies on that capital market side I became an investor myself, and of course, I’ve been more and more immersed in the, in the markets, but really that tells you the story of, of where my fascination is, which is it’s actually the link between capital markets and investing and communication, which I found when I started that communication was really bad in the investment industry. And in markets in general, you know, people would point to their candlestick charts of, you know, here’s what’s happening, but most people are like, I don’t have a clue what’s going on.

Jeff (19:40):

Right. So from my perspective, I was like, no, this is a gap that really can be bridged. And we can take the, and there are so many cool stories in the history of markets and so much knowledge to be discussed. As you say, like we have a full series around, around value investing and, and Warren buffet from his story as a kid to learning through, you know, through Benjamin Graham and all that kind of stuff. And like, these are, there are so many stories to tell, to give people the context around what is a super fascinating and interesting industry. But I feel like people haven’t done a great job of telling those stories maybe more so recently, they’ve done a better job, but certainly when, when I got involved in this space, I felt like in the digital realm, that there was a lot of work to be done. And I’m really lucky that in my story, this is all dovetailed together into two areas that I’m very fascinated about, which allows us to work and explain what’s happening in the markets so that other people are able to understand as well.

Dave (20:45):

And that’s one of them that is great, and I, a hundred percent agree with you on the not communicating and not explaining things and telling the stories, because I think when people start to hear the stories and understand the stories, I think it makes it a little more personal for people, and it makes it a lot more interesting. And some of the stories that we’re above it has a bank gram and some of those other people; they’re just fascinating. And I agree with you about communication, and that’s one of the things that I really love about your site. And what I loved about the book as there’s so much great information in there, but the visualization also helps, I guess, illustrated and highlighted. And also the retention of it. You, you, you put that visual with the information, and it just, it makes it come that much more alive.

Dave (21:30):

And I know Andrew is, is really dying to talk about this. But one of the things that really helped me personally was the whole 5g thing. I’ll be blunt. I’m not a tech; I’m not a technical person. I love math, but some of that aspect of it, of the 5g and the connected cities and some of those things I find fascinating, but I don’t understand the ins and outs of it. And after reading through some of the book and some of those different signals and the subsets of those, it really came alive to me. So I guess I’d love to hear more of your thoughts on that. I’m sure Andrew would as well.

Jeff (22:07):

Yeah. So, so 5g is one of these topics that is a buzzword that people hear about all the time. And one thing we want to make sure when we were addressing this topic is we didn’t want to go down that same route of hitting on a buzzword; people look at the thing, and they say, okay, so how does this affect me? Or like, how does this actually impact my portfolio? Or how does this impact markets? And so what we wanted to do with 5g is we want to make sure that we were putting it into context so that people really understood the base technology in a way that you can make the link between that, like what you currently have today, which is, you know, we have wifi, and we have, you know, you have a 4g, LTE connections with your, your phone and that kind of thing.

Jeff (22:57):

So take that. And what is the link between that and the future of 5g? What, what changes once you flip the switch how does the, how does society change? And so I think the first, for me, the first point in being able to understand that is you have to look at the advancement, that the advancements that 5g will bring from a, you know, very basic technical standpoint, and then apply those new advantages that you have to, how you could do things differently in the world. So a couple of really simple points to highlight 5g is going to be a hundred times faster than LT. It’s going to allow for a hundred times more connections; it’s going to be more reliable. And so when you look at these increases in terms of what is possible, you start to realize that everything from how cities connect together to how a smart factory might imagine, how it’s inventory tracking and fleet management works to be able to to do things with computations and in real-time across all kinds of networks and everything happening so fast, you really start to see the different areas where this can make an impact, and it creates a business case for what is actually going to change.

Andrew (24:22):

Can you give us a little more color on some of those and cases? I don’t have the book right in front of me. I remember there was a list. But just maybe like an example or two, you kind of touched on automation. Maybe you can explain that a little bit better so we can maybe visualize.

Jeff (24:43):

Yeah, sure. So, okay. So one area that I think is really useful to think about is AR and VR. So augmented reality and virtual reality when you, when you look at these things, the big problem that they have is latency, right? But with 5g connectivity all around the world, you could, in theory, be I could be performing an operation from like a medical operation as a surgeon from, I could be in China, and I could be doing a procedure on someone in Europe, which is not possible right now. There’s too much latency. There’s too much. You, you can’t make precise movements, right. But with 5g, it’s actually going to be possible to be doing things like this. It’s going to be possible to, as you say, if you think about automation in a factory, you’re going to have all these different connections within a factory, being able to talk to each other in real-time, being able to optimize how they’re working together, you’re going to be able to sync up, you know, all these different facets of production that currently, we’re not able to really do.

Jeff (25:48):

And then when you, you add in the robots and the ability to automate that stuff really, the decision-making can be fast, precise, and it’s going to lead to all kinds of efficiencies that we can’t even imagine today.

Andrew (26:04):

I think one, and I, I, I, I, I, I don’t know enough about what, what the feature’s going to hold for this that I wish I knew, I guess what another example would be. You know, we have some automakers who are pushing towards making cars, basically drive themselves. If you had a network where these cars could connect and communicate with each other instantaneously, then you could have this network of cars that with all drive themselves and be able to react to each other. And so I guess you could take that model, and then you apply that to home delivery or drone delivery or a factory. Is that somewhere in the ballpark?

Jeff (26:53):

Yeah. And the other thing to remember about cars, in general, is the modern car generates a crazy amount of data each day, even on a short drive. And so being able to, to be able to harness that in any way, you need to be able to have the abilities of 5g or something like that, right? Because with current technology, you can’t be taking terabytes of data and doing anything with it in any sort of nimble fashion, right. But as you say, with cars, being able to talk to each other and to be able to process all that data, basically in real-time, and to make these decisions that, that are virtually impossible today, that’s, that’s really where this is going as, as you say, and yeah, you can use that same idea, and you can apply it to a bunch of different areas to really expedite different areas of business and in ways that you can’t even

Andrew (27:47):

Imagine what one last question on this 5g stuff. So how do you think COVID and everything we’ve seen with, with the lockdowns, how does that affect this or play into this?

New Speaker (27:59):

So for 5g, I see it mostly as a, I see it mostly as being unaffected by COVID in that people are going to, we’re going to be moving to this technology. And, and, you know, now we have people using their phones and using the internet and connecting with each other just as much as they, or, or more than they were pre COVID, I think where the real differences in, in the supply chain, right, which is maybe there are some delays in implementing it from a supply chain perspective, because we can’t, we can’t be going to different countries and installing this in the way that you would be able to normally the big providers of 5g are based in countries like China and US, and they’re going to, they’re going to all of the countries around the globe and, and basically implementing that technology and building the infrastructure for this technology.

Jeff (28:56):

And so in a lot of places that we’re planning 5g implementation, I can imagine that, that the pandemic is, is setting them back a little bit. But that said, in the countries where you’re full steam ahead, you know, especially advanced Western countries, I figured that they’re probably unaffected by it. The inventory, like the way that inventory systems works, is really like the supply chain in general, because of COVID is really an interesting area as a complete aside, because previously you had these just in time systems, all around the world, and now with borders closed in so many places and the need for a much more, I guess, robust supply chains where you, you know, you can get access to something, you know, that’s going to be something that all of these companies will be considered as well.

Announcer (29:50):

What’s the best way to get started in the market, download Andrews ebook for free at stockmarketpdf.com, I guess, as an investor, then

Jeff (30:01):

They sound like pretty significant trends. And it sounds like, I mean, just taking 5g alone and ignoring the other things we talked about, like the debt. And so, do you think that changes how an investor would look at the market? Then let’s say 20 years ago when we didn’t have this prevalence of data, and now the network that’s going to support the connections of this data to become instantaneous. Do you see that may be in your own personal portfolio or just how you think about it in general? I think that because we know that data is taking a bigger and bigger role in our lives, we have to think about how the firms that are able to use that data to their advantage. And so 5g is obviously a component of this, but we have another chapter called data as a moat, which I think is a really interesting proposition as well, which is that data is a moat looks at things from the perspective of Warren Buffett’s economic modes, except saying that unlike traditional modes that we’re used to that, you know, big blue-chip businesses used to have to be able to defend themselves.

Jeff (31:12):

Data seems to be the new mote that allows companies to be able to do things. And 5g is just one of these new technologies that are going to be able to be leveraged to make more sense of that data and, to get more insight out of that data. So, you know, data as a moat is not going to be changing anytime soon; you’re going to find that the biggest companies globally are going to be those that have these giant masses of data and are able to process it meaningfully in a way that other companies aren’t able to compete. So when you think of the Amazons or the Facebooks or any of these companies that are Google alphabet, obviously, you know, they, they’re standing on so much data, and they’re able to leverage it in ways that, that their competitors can’t compete in a meaningful way. 5G is just a technology that’s going to contribute to that.

Andrew (32:07):

Right. Oh, and you know, a perfect example of that because, you know, you mentioned the big tech, and I think we can all imagine what they’re doing with our data, but some of the companies that you would never think would use data. So I, rather than the wall street journal today, how GM is going to be offering auto insurance, using the data from their cars. And so that’s going to disrupt the insurance industry possibly because if GM’s getting real-time feedback on all of the vehicles They produce, they can set much more competitive rates and, you know, obviously manipulate profit margins way better than an insurance company who doesn’t have that data would be able to.

Jeff (32:52):

Yeah. And digital transformation is a buzzword, but when you think of companies like GM that are selling hundreds of thousands of vehicles each year, and the data that they could have access to, it’s pretty mind-blowing. It’s just a question of how they use it and how they implement business models around it before other people do. But certainly, there’s a bunch of companies, even more, legacy companies that could have mind-blowing and massive data.

Dave (33:20):

Yeah. That’s, that’s fascinating stuff, I guess, as, as an investor, how, how should we think about investing in these kinds of companies? Is it something that we should look at the big dogs or, or kind of looking maybe down the supply chain of, of how the technology is being produced and distributed and, you know, I guess assimilated is, are those things that as an investor, we can also think about as well.

Jeff (33:51):

So we have another chapter in the book called, called dwindling corporate longevity. And I think that that’s an interesting way to approach this question, which is that over the years, the amount of time that the average company that’s been on the S and P 500, that they’ve, that they, their average sort of age on that has dropped from about 33 years. And it’s expected to drop down to, I think, 12 years by 2027. So that means that you know, between 2018 and 2027. So just over this period of nine years, about half of the index is actually going to be turned over. So, you know, about 250 new companies will be on the S and P over that period of time. And some of these we’ve already seen come on, and some of them we’ve already seen drop off.

Jeff (34:44):

So you’ve had, you know, the Macy’s of the world and Harley Davidson, and some of these companies drop off. But I think through the lens of what you’re talking about, though, this is an interesting thing to consider, right? Because, and it combines with another trend that we have, which is stock market concentration. So there are some big companies that are going to keep getting bigger, which are the big tech companies that have been talking about. But then there’s also this massive opportunity to grow and take over or to overtake a company that is already existing on this major index. So there are small companies that are going to grow and become big. And they’re also big companies that are become bigger. I think the ones that you want to avoid are the ones that are, that are the so-called blue chips that are on, on the S and P 500, for example, that are not in this upskilling and innovation that they need to be competing because, at the end of the day, the barriers to entry are so low right now. And, the speed at which tech moves is so fast that I do think it is really possible to come in and, you know, basically steal the business away from these incumbents that have been there that aren’t fast-moving.

Andrew (36:02):

Yeah. Yeah. You mentioned the barriers to entry are so low, especially today, and that ties into everything we’ve been talking about in this whole episode; the low-interest rates play into that a lot, too, because when the capital’s cheap, those barriers are lower. So as you know, you mentioned stock market concentration, and that being a possible thing too, to develop, are you worried about data concentration too much of people’s day they’re getting concentrated into if you select individuals or companies or countries or anything like that?

Jeff (36:36):

Yeah, I would say I’m worried about that. I mean, I’m a little bit, I’m a little bit relieved, but also concerned that it seems to be a talking point of governments today. Right? I mean, I think that everyone is aware that, you know, big tech is under scrutiny from all kinds of governments around the world. So they obviously see that as being a problem. I think the question is just, you know, are they going to fix it or are they going to make it worse? This is kind of always the question with government, but yeah, I, I am concerned about it. I, I do think that there is, you know, especially in these, these big five companies that you have a lot of concentration there. But I also think that history has shown us that, that, that some of these companies are going to make blenders.

Jeff (37:22):

They are going to make mistakes. They are going to create opportunities for others too, coming in and, and, you know, take their lunch, but they have to, you have to run the perfect company not to give up those opportunities. And for someone like Facebook or Amazon, like you, you have to be really careful about how you’re perceived by governments and what they’re going to be doing to your business. As you continue to, in Amazon’s case, seemingly try to monopolize more and more spaces like most recently pharma, right?

Andrew (37:59):

Yeah. They, they, they do, they do need to be careful how many Hornet’s nest they stir up, you know, my, my opinion,

Jeff (38:07):

Which is the Uber problem, right? Uber, Uber did this. I mean, it was their culture that ultimately was an Achilles heel, but really they were stirring up as many hornet’s nests as they could, including a lot of local governments. And there’s a lot of those. So, you know, you have to, you have to be really you can’t be, you can’t move too fast and break things as a, as Mark Zuckerberg used to say you do have to think about, you’re going to be perceived in a world where people are becoming they’re scrutinizing tech and data more and more.

Dave (38:42):

Yeah. Good points, very good points. Jeff, was there anything else that you wanted to cover that we have not talked about yet?

Jeff (38:51):

I think one thing that I think is interesting, and we’ve alluded to it a couple of times in, the podcast is the falling interest rates. And I did want to talk a little bit about that dataset because I find it extremely fascinating. So we pulled this data set from the bank of England, and they have a visiting scholar there that put together this really amazing paper that if you’re a complete finance geek, you’ll love, but basically they’ve gone back all the way till the year. I think 13, 11 or 13, 17 back when the only data points would be things like municipal loans and Venice or Florence or Genoa, and then going from there all the way till you know, more modern datasets, like what you got from the fed and things like that. And they’ve amalgamated altogether to figure out real rates across the globe across developed economies over this, you know, 800 year period. And so the data is fascinating and has pretty consistently seen real rates falling by 1.6 basis points per year for over these eight centuries. So super fascinating to look at. And if you go in that paper itself, there are lots of really crazy loans made to Kings or to or from like the Medici bank or all of these things that we’ve all heard about. But you know, they actually went up and dug up all the data for all of this.

Dave (40:26):

Wow. Where did they find all that? Because I am that kind of finance geek that would like that stuff. I love, I love history, and I love that. So where did they find that and how, what did, what were the, I guess, to put it in the perspective of what was, do you know what the interest rates were in 13, 11 versus 2020? I mean, how high were they or how, I guess, how does that relate?

Jeff (40:52):

Yeah. So in, in real terms, they were, they’re all over the place, obviously at that time. So you had some loans and, and some bonds that would have been, you know, five to 10%, and you had some that were some rare ones that were above 20%. But if you look at the data set and you look at the scatter plot of where things have gone and, and how it’s changed over time, it is a very clear trend. And obviously, there are some upticks. And obviously, even in more recent years, there have been giant upticks in interest rates like in the seventies and eighties, but on a long-term scale, you can see that these are mere, you know, very quick divergences. And then it comes right back to the long-term trend. And they have a bunch of theories that they talked about in that paper of, of why this is the case.

Jeff (41:45):

And I, I’m not so astute that I can go into all those different theories. But I do think that for anyone that’s interested in this stuff, it does provide a really incredible perspective on where we are today as rates sit near zero and how things have changed over time. And it really makes you question, could rates go back up because it’s been such a consistent trend, or if they go up, maybe it’s just for a really short period of time. And then they crashed back down, and our rates are going to be negative over the next a hundred or 200 years. Like, how are public policy decision-makers going to, are they going to keep this trend going? Is it just like a natural thing that that is going to keep going or, or is that impossible? So we haven’t really seen the answer to that yet. And of course, there’s a bunch of different conventional wisdom out there, but I do think it’s a really interesting trend to consider.

Dave (42:39):

I totally agree. And I think that’s fascinating. So could you imagine being a banker at the bank of England and having it go to Henry Henry the eighth and ask him for his payment, that would have been fun off with your head? Yeah, exactly. I’m going to go out and women, guests, guests that he probably got favorable terms. Oh, that’s fascinating. So I guess how, how do you think that you know, since we’re talking about interest rates, I guess my last question for you is how do you think interest rates are going to go forward for here? Do you think they’re going to continue to drop? I mean, you here in the States, they’re obviously just about as low as they can go before they go negative. Do you think we’re going to go that route like a bank of Japan did?

Jeff (43:28):

Yeah. So we have a chapter in the book called central bank impotence basically, which is that they don’t have anything left in their toolkit, their conventional policy toolkit, to do anything. And they really are in between a rock and a hard place, which is that you know, their conventional policy options are not going to work anymore. And if they were to be playing with rates going up as we talked about before, it creates all kinds of problems, especially when the economy is the way it is, especially in the COVID recovery era. So, you know, they, they can’t really move rates up, what they can do and what they are doing is, is not current they’re keeping rates where they are, and they’re just buying lots of assets, which has its own challenges as well. I think we noted that in 2020 alone, so far they’ve bought about, or they’ve added about $3 trillion or more the M2 money supply in the US just mainly from buying assets as a part of QE and, and those types of programs.

Jeff (44:42):

So they’re definitely going to keep doing that. I guess the question is, when will there even be an opportunity to raise rates? That is something that I’m not so sure about because it’s, you’re going to have to assume that we have at least a couple of years to recover and to get back to where we were pre-crisis. And at that point, are we, are we able to, to sustain having higher rates? It doesn’t seem to me like that’s the case. It seems like they’ve, they’ve kind of put themselves into a situation where they’re going to, they’re going to have to keep stimulating. They’re going to have to be they’re going to have to take the same steps as, as the bank of Japan. And, you know, that’s a really interesting route to go down is, is something that especially people in North America are not going to be too familiar with, but the bank of Japan owns 80% of all ETFs in Japan. And they own 8% of, of equities in domestic equities in Japan. So they keep buying assets, and they actually are buying their own corporate assets, which is what the fed has started doing here in, in, in much smaller quantities, obviously. But I don’t know, is that, is that the route that we’re going down is it seems like that may be their only option. So that would be my 2 cents on it.

Dave (46:01):

Yeah, I would agree with you. And I think it’s going to be very interesting to see how that all plays out over the next coming years. I think I don’t think it’s going to be anything that’s going to turn around right away for sure.

Jeff (46:11):

Yeah. And there might be an uptick at some point. Like if you look at the graph that the bank of England put for the 700-year history, there are periods of time that last for 40 or 50 years where rates are going higher. It’s just that they all tend to revert back down to that same line. So there, there is the potential for, you know, maybe if we’re adding all of this money to the system and eventually the from an inflation standpoint, that sort of like the people are spending at a fast enough pace such that inflation does start to creep up again. Maybe there will be a period in the future, probably the, you know, mid to more long-term future where rates are high again. But it would probably be terrain and inflation if that’s what they’re doing.

Dave (47:02):

Jeff, I got one last question for you here. So there was a great quote at the beginning of the book that I wanted to kind of get your thoughts on. So you said the quote in the book said we are drowning in information while starving for wisdom. How do you think your book or your business hope helps to solve that problem?

Jeff (47:19):

Yeah, I think that’s one of the most insightful things that we’ve seen around the type of work that we do. And I think that it really speaks to what we, we were at at the top of the podcast, which is simply that there’s a sea of information and, you know, people don’t want more information. They want more insight from that information and the people that are able to provide insight, the people that are able to offer useful ways of breaking down data and communicating it to people. I think that’s really where the future lies especially in, in world war II data is you know, doubling every few years. So yeah, that’s, that’s where we plan to be. And we plan to try to make this complex world a little bit easier to understand through visualizations and, and our book is definitely in that same vein.

Dave (48:14):

It definitely is. And you are definitely one of the leaders in that, and it it’s, I know it’s helped me a ton. So I appreciate that. And I guess, tell people a little bit about where we can find you and tell them a little bit more about the book.

Jeff (48:27):

Sure. Yeah. So our website is visual capitalist.com, and it’s free. People can go there. We have a mailing list where we send out an email every day with lots of visuals relating to money and markets. And then, of course, our book, which is called Signals, breaks down the 27 key data sets that we see as, as being pretty much indisputable in terms of the direction that the world is going. And we break those down in the book in a very visual way. There are lots of charts, lots of you know, lots of visualizations that people can follow and, and get insight from. And that can be bought from our store on our site, which is store.Visualcapitalist.com. I think it’s $29.

Dave (49:17):

Awesome. Awesome.  It is fantastic stuff. It really is worth your time. They have so, so much great information. And as you can see, Jeff is very passionate about this, and he definitely knows his stuff; and he and his team have done a fantastic job of disseminating all the data out there and putting it in, in forms that we can all use and utilize to help us become not only better investors, but also I guess, a little smarter people do. So it’s not a bad thing.

Jeff (49:44):

Absolutely. No, thank you so much.

Dave (49:47):

You’re welcome. All right, everyone that is going to wrap up our discussion for this evening. I wanted to thank Jeff. Desjardin from Visual Capitalist for taking the time to join us this evening. That was a lot of fun. And I know I learned a lot. Hopefully, you guys did too; please, by all means, check out his website, visual capitalist.com, and also the fantastic book that we discussed this evening signals. That is definitely worth your time. So without any further ado, I’m going to go on, sign us off. You guys, go out there and invest with a margin of safety emphasis on safety. Have a great week. We’ll talk to you all next week.

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