Why Wall Street Doesn't Want You to Understand Money

Episode Overview

• Financial educator Keith Smith shares his unconventional journey into investing, which began with cryptocurrency and led him to study foundational monetary history and economics.
• The conversation debunks common investing myths, particularly the idea that one needs a large amount of capital to start, and highlights the accessibility of modern tools like micro-investing apps.
• A central theme is that investing is driven more by psychology and understanding historical patterns than by complex mathematics, emphasizing the importance of a long-term mindset.
• The discussion concludes with a philosophical perspective on wealth, framing it as a responsibility to be used for solving problems and benefiting society.

Key Concepts

• Unconventional Financial Education: The guest's "backwards" journey, starting with an interest in blockchain and crypto, which served as a gateway to understanding traditional finance, monetary history, and the end of the Bretton Woods system.
• Investments vs. Income: A critical distinction learned from a personal financial mistake; having a stable, separate income is crucial to avoid being forced to sell long-term investments to cover living expenses.
• The Psychology of Investing: The concept that successful investing is primarily a mental game governed by psychology and an understanding of history, rather than complex math or science.
• Accessible Investing: The debunking of the myth that you need significant capital to start investing, highlighted by the availability of micro-investing apps, fractional shares, and cryptocurrencies that allow entry with as little as $5.
• Real Rate of Return: The idea that a true measure of an investment's performance must account for both consumer price inflation (CPI) and the expansion of the money supply, with Bitcoin cited as an asset that has historically outpaced the latter.
• The Philosophy of Wealth: Drawing on Andrew Carnegie's "The Gospel of Wealth," this concept frames surplus wealth as a "sacred trust" for the holder to use for the betterment of society, with wealth creation fundamentally tied to solving problems.

Quotes

• At 2:11 - "Which sent me down the rabbit hole of trying to study a little bit of monetary history, looking at the economics of why inflation is such a big problem..." - Keith Smith describes how his initial curiosity about cryptocurrency led him to explore foundational economic principles.
• At 4:22 - "What is fiat currency backed by? It's backed by nothing, is it?" - Phil Muscatello reflects on a key argument for Bitcoin, questioning the inherent backing of traditional government-issued currencies.
• At 11:36 - "The real big lesson that I really took away from this was the difference between having investments and having income. Okay, because there is a very, very big difference there." - Keith Smith shares the crucial insight he gained after being forced to sell his investments at a loss to cover living expenses.
• At 18:40 - "This is a game of psychology and history more than it is math and science. And I think that's one of the biggest misconceptions." - Keith D. Smith Jr. emphasizing that understanding human behavior and historical cycles is more crucial for investing than complex calculations.
• At 23:22 - "Bitcoin is the only asset so far that has actually continuously outpaced the increase in the supply of money... over the past decade and a half." - Keith D. Smith Jr. explaining Bitcoin's unique value proposition as a hedge against monetary inflation.
• At 26:22 - "The surplus wealth is a sacred trust upon which it is bestowed upon the holder to distribute throughout their lifetime." - Keith D. Smith Jr. quoting the core idea from Andrew Carnegie's "The Gospel of Wealth" about the responsibility of the wealthy.
• At 33:53 - "If I have 100 Bitcoin, I'm going to get three Bitcoin at the end of the year. And that is extremely powerful." - Keith D. Smith Jr. explaining the concept of earning "native yield" in DeFi, which compounds the asset itself.

Takeaways

• Start investing with any amount you can afford; modern tools like micro-investing apps and fractional shares have eliminated the need for large initial capital.
• Prioritize building a stable income stream separate from your investments to protect your long-term financial strategy from being derailed by short-term cash needs.
• Focus on understanding market psychology and historical patterns over complex financial calculations, as human behavior is a primary driver of market movements.
• Evaluate your investments by their "real rate of return," which accounts for both consumer price inflation and the expansion of the money supply, to ensure you are actually growing your wealth.