Episode summary
Most Investors Will Never Beat The Market
The Meb Faber Show
· · Hosts: Meb Faber · Guests: Charles Ellis
Summary
Charles Ellis argues that one of the most important corporate-finance ideas of the last half-century was once radical: companies should borrow and repurchase stock when balance sheets are underleveraged. He says the idea spread because it was sensible, and because institutions like Goldman Sachs helped legitimize it, and he remains pleased to see buybacks become a normal tool of capital allocation.
He also makes a broad case for long-term, low-cost, indexed investing. Ellis says most investors overestimate their own skill, misunderstand risk, and lose money through taxes, fees, and trading mistakes. His answer for young investors is simple: save early, diversify, keep costs low, use tax shelters when possible, and do as little fiddling as possible.
The second half of the conversation centers on his book Great American Investments, which frames major U.S. public projects as the product of a few obsessed people. Ellis highlights Social Security, the Louisiana Purchase, Alaska, national parks, NASA, the internet, and possibly AI, arguing that America’s strengths come from volunteering, philanthropy, entrepreneurship, and a willingness to fund ambitious long-duration projects.
Key takeaways
- Ellis says share repurchases, once a radical idea, are now a normal and sensible part of corporate finance and have topped a trillion dollars a year.
- Ellis argues young investors should index, start early, minimize taxes and fees, and resist the urge to tinker with a portfolio.
- Ellis says behavioral economics explains why many investors overestimate their ability and make repeated mistakes.
- Ellis credits Social Security, the Louisiana Purchase, Alaska, NASA, and the internet to a few determined people and favorable institutional structures.
- Ellis thinks AI could be the next major American investment, but he fears its labor disruption may arrive faster than expected.
Notable quotes
“You really ought to borrow money and repurchase shares to get her back to the right balance, to get long-term returns for investors”
“The average investor in an average year loses 2% of their return”
“Avoid taxes by just hanging on. Don't buy and sell, just hang on”
“If you save money and invest it and let it compound, and compounding is, Charlie Munger and Warren Buffett and David Swensen and every other great investor would tell you, is the great magic of investing”
“One or two, maybe three people got excited about an idea, a dream that they sure believed could come true”
How the episode opens
Welcome to a special series of the Meb Faber Show on the past, present, and future of America. I'm sitting down with some of the most notable historians, thinkers, and investors in US financial history, all tied to my new coffee table book, Investing in America, The Rise of a 250-Year Bull Market, out July 4th.
Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria's funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
This episode is brought to you by Ivy Invest. You know I've talked a lot on the show about endowment-style investing, the Yale model, the Swensen playbook, public markets, private equity, private credit, real estate, all blended together into a portfolio built for the long game. The data on this approach is pretty compelling.
The problem has always been the same. It was basically impossible for regular investors to actually do it. Well, here's somebody who lived through that world from the inside.
Wendy Lee spent 18 years managing multi-billion-dollar endowment funds in New York, and at some point she had a pretty simple realization. This is exactly how she had wanted to invest her own money, but even she couldn't access it as an individual. So, she built the thing that didn't exist.
Ivy Invest is one of the first endowment-style funds designed for everyday investors. You get a single fund with exposure to private equity, real estate, private credit, and public markets. The whole mix starting at just a thousand bucks.
I actually had Wendy on the podcast. Go back and listen to that episode.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- stock buybacks
- behavioral economics
- long-term investing
- ai as next investment
- social security origins
Companies and tickers mentioned
- GS
- BRK-A
- BRK-B
- Goldman Sachs
- Berkshire Hathaway
- Yale
Watch the episode
Watch “Most Investors Will Never Beat The Market” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Meb Faber Show, this episode and its artwork belong to The Idea Farm. Octagon is not affiliated with the show; this page is an independent summary.
