Where I don’t go for investment advice

posted: May 1, 2021

tl;dr: I avoid paying too much attention to advice from people without skin in the game...

The information contained in this post is not intended as, and shall not be understood or construed as, financial advice. I am not a financial advisor, accountant, or attorney, nor am I holding myself out to be. The information I present is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation, which is different from my own. You should seek the advice of a financial professional who is capable of understanding your own personal situation, your goals and aspirations, and making recommendations suited to you.

Having already posted Where I go for investment knowledge, I thought I’d describe the opposite scenario: the categories of people offering views on investments and economics that I take only with a large grain of salt.

The primary reason I’m skeptical of the views of the people in these categories is that they lack skin in the game that I am playing, as I figure out how to put my hard-earned savings to work. Often they are playing a completely different game, yet the game they are playing can influence my game. It can be useful to know what these people are saying, because they can set and/or influence policy. They also affect what other investors believe, which impacts the markets as a whole and the prices of individual assets. I also appreciate hearing contrarian opinions, to challenge my own thinking. But I tend to steer clear of the recommendations of most of the people in these categories.

Economics professors

Economics professors, and other academic economists, are playing the publish-or-perish game in a highly politicized work environment; they’re not playing the investment game. Strangely, they can be repeatedly wrong and still keep their cushy academic positions, once they’ve earned tenure. Nobel Prize winner Paul Krugman may be the poster child for this phenomenon: he infamously predicted that the Internet’s impact on the economy would be no greater than the fax machine’s; advised Enron, which blew up in an accounting scandal not long after; and advocated for a housing bubble, which also blew up. So when Paul Krugman predicts a Biden boom, I start pondering what could possibly go wrong.

Most academic economists don’t participate in the investment world. They are more focused on pushing their pet economic theories and engaging in debates with other academic economists, often over minor differences. I find it entertaining to watch Krugman and MMT economists such as Stephanie Kelton publicly insult each other when they actually are in full agreement with what the current presidential administration and the Federal Reserve are doing these days.

At any given U.S. university, there’s usually a huge difference between the professors in the economics department and those in the business school. The economics professors often spend their days dreaming up grand theories about how the world should work. The business school professors, by contrast, teach students how to go out into the world as it exists today and figure out how to run things better and make money. Two business school professors whose advice I do pay attention to are Jeremy Siegel of Wharton, who wrote Stocks for the Long Run, and my finance professor at Harvard Business School, Tom Piper.


Politicians are playing the game of winning votes to stay in office, which is definitely not the investment game I’m playing. In today’s polarized political environment, they offer little more than highly partisan assessments of the current state of the economy and disparaging views of ideas from the opposition, even if there is not much actual variation in position. Is there really a meaningful difference between a top U.S. federal tax bracket of 37% and one of 39.6%? It’s important to know where the politicians in control want to steer the economy, but their pronouncements and predictions of wonderful times ahead should always be viewed with skepticism.


Most bankers, including those at the central bank, the Federal Reserve, are playing a game they cannot lose. That’s because, unlike you and me, they cannot go bankrupt. A primary job of the Federal Reserve is to prevent bank failures, and they take extraordinary measures to do so, both for individual banks which are “too large to fail” and for the banking system as a whole. Because they benefit from this system as it exists today, bankers tend to be huge advocates for the status quo and for printing as much money as needed to keep the banking system afloat. That said, it’s important to know what the Federal Reserve is doing so that, as an investor, you “don’t fight the Fed”.

Business CEOs

CEOs are paid to be advocates for the businesses they run, and for hawking their own company’s prospects and investment vehicles. These days, as we just saw with the government’s response to the COVID-19 pandemic, many large businesses (airlines, to cite one example) also can expect bailouts when economic times get tough. Even if they are not being bailed out by the government, their businesses are regulated and impacted by the government, so CEOs need to align themselves with the politicians in power in Washington. As a result, most CEOs are not in a position to speak freely. CEOs can, however, occasionally offer some insightful comments on the economic pressures their companies are experiencing.


Buy-and-hold investors don’t need a 24-hour television network focused on the world of finance. Day traders, however, are much more interested in the latest financial news flow as well as what other traders are thinking. Since I’m not a trader, I skip CNBC and other financial TV networks.

Venture capitalists

Unlike the prior categories, at least venture capitalists (VCs) are investors by trade and hence have skin in the game. Yet they are investing very differently than most of the investing public. VCs get into small private companies in their formative stages, years before the general public has an opportunity to invest directly in them. By the time the most successful of these startups are preparing to go public, the VCs are ready to start cashing out by selling their stock to the general public. Thus, VCs often do pump-and-dumps, because they exit their startups and dump them onto a less knowledgeable public. The VCs don’t need their companies to survive long term. In fact, once the VCs have exited their position, they may benefit most from the company declining, as VCs will often help create new companies in the same marketspace.

I have a healthy degree of skepticism for all of these categories of people offering opinions on the economy and investments. Instead, I seek out like-minded investors whose position in life more closely resembles my own.

Related post: Where I go for investment knowledge