Peter Thornhill – 10 Lessons

[00:00:04] Duff Watkins: Hello, welcome to the podcast and the lessons. It took me 50 years to learn. We dispense wisdom for a career in life. That’s wisdom, not just information for your career and your life.

My name is Duff Watkins, and I am your host. Our guest today is Peter Thornhill, a 40-year veteran of the financial services industry. He’s an author. He is a lecturer presenter. He is a former merchant banker in London. He consults with the banks in Australia and, uh, really, he’s an entertainer. He consults with the major banks runs numerous seminars. He is a financial commentator on the media frequently. And my favourite quotation about you, Peter, is he assaults popular wisdom. And that’s why you’re on the show. Thanks for joining us, Peter.

[00:00:48] Peter Thornhill: My pleasure Duff.

[00:00:50] Duff Watkins: I’ll say to this started 33 years ago, a mate of mine dragged me along to a seminar where you’re presenting and I was looking for some information about how to start investing, because I didn’t know anything. And in Australia as you know, it’s property, property, property, you’ve got to invest in property, property, property.

And my mate said, no, I own property stuff. You know first, you can lose money in property. Secondly, you know, nothing about it. You’re just, you need to learn more about the stock market. So, we went along to your motivated money seminar, and it was very first, it was very entertaining. Secondly, it was very enlightening.

So let me say right now I bought your book “Motivated Money”. I recommend people to do so we’ll talk more about, you also have a website motivated money.com.au, because it’s in Australia and I have subscribed to your newsletter for 30 years, and it’s called “My Say”, always entertaining, sometimes infuriating, but always good value, not spam.

And what I love about it, Peter is it’s regular, but infrequent. So, when it comes out, there’s always something good to say in it.

[00:01:59] Peter Thornhill: And the reason I do it infrequently Duff is, in the past my experience with writing to a timetable, I wrote rubbish. I need to write only when I have something to say, not because I have to say something. So

[00:02:17] Duff Watkins: Well, I am grateful. Peter, how did you get into this? I mean, you were, you’re in finance, financial industry, very senior roles, but how did you make the transition to financial educator? If I can call you that?

[00:02:34] Peter Thornhill: Um, by accident Duff, when my wife and I got married back in 69, shortly after we got married, we saved up a little bit of money and we decided we’d go on a working holiday.

And so, we had, bought one-way tickets, believe it or not, we spent six months in the U S then we’re going to, it was going to be an 18-month working. So, we’ve had six months in the U S and when we’re going to London for six months, Europe for six months, and then coming home, the interesting thing was we did not come back for 18 years. And it was that apprenticeship in England, which totally altered the outcomes of our lives for the better. And so it was that apprenticeship in England where I was nurtured by far wiser heads and. Eventually, I was headhunted to come back to Australia. And when I came back to Australia, preaching what I had learned in England, I was told not you’re wrong.

You don’t know what you’re talking about, et cetera, et cetera. So, I was forced to re-examine everything I had taken for granted in England. I discovered I was right. And that is what turned me into the monster that I am today. And if someone had said to me that I was going to earn my living through public speaking, I would have said, you’re crazy.

I was as reluctant as most people; however, practice makes perfect. And, uh, as you say, you have to be an entertainer to be a good public speaker. And so, I fell into it by accident and discovered at 53 years of age that my true vocation was public speaking. Odd, but a lot of fun.

[00:04:24] Duff Watkins: And I want to point out to you talk about investment and how can I say this in an elegant way?

You are a successful investor. I want to underscore that for our listeners and viewers. you’re somebody that walks the talk, you practice, what you preach. You make a point of without being ostentatious about it, that your lifestyle is basically funded by your investment strategy. So, you kind of remind me of John Maynard Keynes.

He would spend half an hour in bed every morning with his personal investments and got very, very wealthy by didn’t spend it. Didn’t overthink it. Didn’t spend a lot of time with it just half an hour a day. And, um, it paid off for him and it paid off for you and it’s paid off for me to come to think of it.

[00:05:06] Peter Thornhill: Yeah. Well, it’s, it’s one of those things, you know, we had very modest beginnings. I was one of four children. my father was TPI totally permanently incapacitated after the war. So, my mother raised four children. There was no money. My wife is one of 10 children that immigrant family that came to this country after the war, they had very little money.

You had the father, the sole bread winner working on the Victorian railways, supporting 10 children. And, uh, but I mean, there’s, there’s a whole lot associated with that as well. In those 10 points you asked me about choose your partner carefully. I was very lucky.

My experience with all the public speaking, thousands of people that I have met over the years in those forums. And one things you learn over 50 years, two savers, Nirvana, two spenders spender saver disaster, because you’re going to have one white anting, all the efforts of the other. So, it doesn’t matter whether it’s male or female, you know, the guy’s got to have a new four-wheel drive.

You’ve got to have a bigger boat, blah, blah, blah. The wife has to have a trophy home. So, one spender a one saver. I can almost pick them. In conversation with them, which way round it is. I was lucky two savers and that’s what transformed our lives. Plus, that apprenticeship in the UK.

[00:06:31] Lesson 1

[00:06:31] Duff Watkins: Well, then let’s get to the 10 lessons that it took you 50 years to learn lesson number one, you can succeed despite your education.

[00:06:40] Peter Thornhill: Okay. I failed my last year at high school, so I finished high school in 1964. I failed my last year or my grades in all the subjects were below the class average. I left school and, um, it was a bit of a loose end. Anyway, my father got me a job as a sewing machine mechanic in a factory where they embroidered sheets and pillowcases.

So, I was an apprentice, sewing machine mechanic. I lasted there for probably six or seven months and decided I could cross that off my bucket list

when I answered a newspaper advertisement. So, I ended up getting as a job as a Clarke with an insurance company. One of the leading insurance companies here in Australia, and the progress from there met married changed jobs briefly to work for a General Motors dealership car dealership to make. I doubled my income from $2,500 a year to $4,200 a year saved up, took off on the working holiday.

I got a job in London as a clerk with the insurance company I’d worked for in Australia then went to an employment agency, got a job with the merchant bank, Antony Gibbs & Sons in London as a clerk. And that was the last time in 1972 that I have ever applied for a job. Every other job has come looking for me.

[00:08:22] Duff Watkins: So, about the education. so, you transcended your, limited education, I guess is what I’m hearing.

[00:08:29] Peter Thornhill: Yep. Yeah. So, I actually, when I started work, I went back to night school, and I ended up polishing off another three subjects. so, I got the qualification and that was basically it never set foot in the university but took off and worked hard. And as I say, a clerk worked hard got headhunted to go to another company, got headhunted to go to another company, got head hunted to change jobs, got headhunted to move to Sydney. Etc and it just went on and on and on.

[00:09:05] Lesson 2

[00:09:05] Duff Watkins: Well, that takes us to lesson number two. And a lot of people will disagree with this, by the way, lesson number two, whatever you do, if you do it to the best of your ability, you will be noticed.

Now, a lot of people out there would say, well, you know, I’m working pretty hard and ain’t nobody noticing.

[00:09:22] Peter Thornhill: Well, they have to examine themselves it’s interesting Duff you know, over the years, working in large organizations, the number of employees who hate their jobs, they’re not paid enough, they’re boss is a monster.

They don’t like blah, blah, blah. You have to transcend all of that, and you have to stand out. Be absolutely brilliant at one thing in your life. I mean, if you look around the virtuoso performance in music, literature, art, science, medicine is all famous. The majority of us are not virtuoso performance in anything where Jack of all trades master of none.

So, you have to become very good at one thing.

And that’s working hard, progressing positive.

It will work for you. If a company is looking for a new employee, they often go to an employment agency, give them the brief. So, the employment agency will say, well, for example, with me, I was working in London, and I was approached by a funds management company, Henderson unit trust management to join them.

And the way that it comes about is the employment agency goes to the users of whatever the product or institution is and says. Um, can you think of people who work in this industry in this particular role that are good? So, the employment agency harvests the names that are recognized by the industry. So, you get mentioned in dispatches, you then become a candidate that they put up, and that was how all those job changes by invitation occurred.

You become very good.

[00:11:20] Duff Watkins: And what was it that you were doing well, Peter, that got you noticed because it’s especially difficult for, I mean, I’m an executive search consultant, so I consult a senior level recruitment and a lot of people it’s difficult to get noticed because, okay. Let’s say when you’re in your situation, I’m imagining there are a lot of people doing what you’re doing.

How did you manage to stand out doing this stuff? but what means did you stand out?

[00:11:46] Peter Thornhill: Okay, well, the breakthrough came when I was headhunted from Antony Gibbs & Sons the merchant bank to join Henderson unit trust management as one of their regional sales managers. So, they moved me from London, where we lived to the Midlands of England office in Birmingham and Lincolnshire coast all the way to north Wales that was my patch.

And I must have been a good salesman Duff because I wander into this patch where nobody knows me from Adam. I speak to the advisors. I promote our products. I give them in, well, not incentives. I was doing with them, what I was doing at the presentations here saying, look, you know, this, this is what we’re doing.

This is why we’re doing it, how we’re doing it, blah, blah, blah. And it seemed to work because the sales in the Midlands of England shot up. Henderson said, hey, this is fantastic. We want you to come back to central London, take over London and the Southeast. So, in doing that, I was approached by SG Warburg.

They wanted me to become an ex-pat back in my home country, Australia. Because they had become involved with a stockbroking firm who had some rather moribund unit trusts. They wanted to lift that. So, they wanted me to come back to Australia as the national sales manager. Um’d and Ah’d, thought, what the hell?

So, I moved back here. And so, it was the same thing again. Success with that role setting up regional offices in all the capitals in Australia went very, very well. And so, all of a sudden, I get approached by another company who would like me to leave and come and do work from so for what was called Potter Warburg.

[00:13:51] Duff Watkins: Yeah, I remember.

[00:13:52] Peter Thornhill: Yeah. I was approached by Perpetual Trustees who were taking their industrial share fund, which had been a trustee common fund into the public arena as a public offer fund. I moved over, turned it from a $300 million fund to a $4 billion fund. I then got approached by another company to go and work for them and do the same thing there.

So, it was just one step after another. So, I guess it was the sales side that worked with really well.

[00:14:23] Duff Watkins: I was just about to say in my career, I’ve seen many times, one of the fastest way to the upper echelons of senior management is by sales, through sales, being successful at sales. Because if you can do that, I mean, you’ll always be popular with somebody if you can sell effectively.

[00:14:38] Peter Thornhill: But Duff, this is the secret of success in your life?

We’re all salespeople. It doesn’t matter what it is, whether you are selling yourself, whether you were selling a product it’s, you have to get up there and be out there. Being able to pitch.

[00:14:54] Duff Watkins: Even now our producer is nodding because he is a veteran sales guy. And he’s been saying this for years and it’s so true.

Uh, what, well, I, I think I’ve learned that myself.

[00:15:04] Lesson 3

[00:15:04] Duff Watkins: Now, let me go on to lesson number three, because I’ve heard this before and you’ve been discussing it. don’t stay in jobs you don’t like now a lot of people don’t know that there are free to leave jobs. They don’t like.

[00:15:19] Peter Thornhill: That’s right. And it’s, as I say, this comes back to my earlier comment about the number of people in large organizations who don’t like their jobs.

They go home disappointed every day. They complain, et cetera, et cetera. They’re never going to ever reach their true potential because they’ve put a lid on themselves effectively. You have to sell yourself. So, everyone, everyone is a salesman. Ultimately.

[00:15:52] Duff Watkins: Tell me how you’re using the word sales, because I want to be clear about this for people.

So, a lot of people don’t feel they have the product to sell in themselves. For one thing, I think that’s a handicap. the word sales is used liberally. So, can you specify what you mean by that? Peter, when you talk about selling yourself?

[00:16:12] Peter Thornhill: You have to present yourself in the best possible way.

You know, you go into a shop looking for clothing and the guy behind the counter is, ah, well, you know, we’ve got the, you’re going to walk out. So, you have to present yourself in the best possible way, positive, effective. And it doesn’t matter what level you are at, there. I was a clerk sitting at a desk shuffling paper, somehow, I was weaving magic and I got noticed, and I got moved on and moved on and moved on.

So, it’s, it is a sales process. You have to think of yourself as, um, it sounds crass. I know, but as a product and the way you present yourself is going to have a huge impact on your potential career.

[00:17:01] Duff Watkins: Well, it’s, it’s not crass it at all. I think it may cause it takes a long time for some people to learn that if you don’t pay some attention, not all, but some attention to the way people perceive you.

They are not in a position to be able to support your personal or professional endeavours. Now I’m not saying you need to be obsessed by it, but at least pay that healthy amount. And that sounds like that’s what you’ve done.

And so, you really pretty much worked your way up from the bottom. It sounds like. And I know that you’re very streetwise about, about finance and we’re and we’re going to come to that right now. Now first I want to talk about when I read your book, when I hear your presentations, we, the news list, your blog.

One of the things that comes across loud and clear is that the share market, the stock market, which everybody knows about some people are invested in the share market is guided not by cause and effect. But by fear and greed, in other words, very human emotions. I’ll just stop there. What’s your reaction to that is how did you learn that?

[00:18:05] Peter Thornhill: The yeah, Fear is based on ignorance. The reason people are concerned or worried or frightened by this share market is through ignorance. Knowledge is power and the share market, unfortunately, because of its extraordinary liquidity I can buy and sell the shares in say one company 50 times in a day, that is how liquid the share market is.

The problem is human behaviour takes over and the share market becomes a barometer on a daily basis of the fear, the greed, the day traders, the short sellers, their hedge funds nano trading et cetera. And did it mirrors that on an hour-by-hour basis, which feeds. The media and I mean, I, well, you’ve may remember when I’m prime minister, I’m going to shut the stock exchange and only open it one day a year.

You can all come in, trade your pants off, then bugger off. And I will see you in 12 months’ time remove the liquidity. There is no volatility, but unfortunately, it’s that volatility that everybody’s focused on. And it’s seen as some sort of casino, you place your bets, and you hope you win or lose. And that is not what it’s all about.

[00:19:34] Duff Watkins: That’s really, that’s really true. I mean, you know, cause in Sydney you go on Bond Street, and you stand, you look at the ticker. You can stand on the street and see the stock market change. And there will be a crowd of people literally gathered around watching. And it’s like, they’re watching entertainment, and these are companies trading and selling.

[00:19:51] Peter Thornhill: But the hard part is that no one’s encouraged to take the long-term view. And the majority of the attention is focused on them, movement in share prices, which drives me nuts. The, as you are probably aware, the main thing for me is having the income to enable Frieda and I to do what the hell we like with our lives.

[00:20:21] Duff Watkins: Dividends

[00:20:21] Peter Thornhill: dividends from these companies and these businesses are there and they are the engine room of the world.

All these businesses all over the world are the dynamo that drives the human race. Businesses are there to satisfy our ever-varying needs. There’s no, no risk associated with it. I mean, businesses come and go, but by and large, you invest in good businesses, which generate profits and pay dividends. And so, this whole wonderful process rolls on.

Over and over and over again. And as their profits grow, they pay part of it to us as a dividend, they retained profits to invest in new technology, new product, et cetera, et cetera. And the reinvestment produces higher profits. They pay a higher dividend, they retain some to increase the business, et cetera, et cetera.

And so, this process rolls on and, uh, as I raised in one of the other points, make money, your slave for so many people, they are slaves to their money. And you were saying, you know, they’re watching, they’re looking, they’re reading they’re in, on, in front of their screens. They’re on their pads, et cetera.

They’re nuts. I’ve got better things to do my stage in life. Um, I’m semi-retired. I have a beautiful wife. I have five gorgeous, gorgeous granddaughters. The last thing I have to do is sit in front of a flipping screen.

[00:21:55] Duff Watkins: And get anxious about it. And by the way, I wanted to say, I, you just reminded me. I came back in January, January 20, I guess I was overseas.

And I checked my portfolio and I hit the magic number that I had set for my, from my retirement fund. It was just a number that I had chosen year, many years ago. And, and it, I hit it and it was a big number and I was quite happy for about eight days, because then COVID came in, everything drops. And to my I’m proud to say, Peter, I didn’t give a shit because quite frankly, I have learned the lesson that it goes up.

It goes down, it goes up, it goes down some more. And it’s actually fortuitous. We’re having this conversation this week, this week. I hit that magic number again, and I’m not overly excited. I’m happy, but I’m not overly excited because it’ll probably go down again before I call upon it and being able to handle that success or that up and down that failure, that success.

That’s one thing that I think I’ve learned from your book, your work, uh, others as well, you know, just don’t get sort of overly excited because there is a business process that work over, which we have four fifths of bugger all influence from what I can tell.

[00:23:18] Peter Thornhill: Correct. And do you remember the global financial crisis

[00:23:22] Duff Watkins: vividly.

[00:23:23] Peter Thornhill: Vividly?

I was interviewed after the global financial crisis. And there were four of us on a podcast. Three of them were stockbrokers and I was the odd man out. Quite why they had me on, I don’t know. But anyway, the, uh, the interviewer asks started off with asking each of each of the, uh, participants.

Uh, so what do you think the reserve bank will do with interest rates on Thursday? And I thought, oh my God, how the hell would I know anyway, we stumbled through this process. And anyway, we got to the end and the guy then said, uh, to each of the stockbrokers. Okay. So, what are your hot stock picks for this this week?

No, anyway, luckily, he had sort of got my flavour and he got to me, and he said, so Peter what’s on your wish list for next week. And I said, ah, another global financial crisis, please. There was stunned silence. He recovered. And he said, Peter, why do you want another global financial crisis? And I said, well, I’d like to buy some more Commonwealth bank shares, which had fallen from $64 to $26.

I would like to buy some more west farmer shares whose price had fallen from 42 to 13, because I didn’t go hard enough the first time round. I love it. When share markets crash.

[00:24:55] Duff Watkins: Did you say, or did, did you write somewhere there there’s no such things as panics, no such things as crises, no such things as crashes did, I read that

[00:25:04] Peter Thornhill: there are periods where we have a perfectly rational correction following a period of irrational behaviour. History’s my guide, I can foretell the future Duff. History is my guide. And we have had throughout history periods of utter madness, followed by a perfectly rational correction.

We then build up from that to another period of irrational, exuberance, whatever it might be, Bitcoin, whatever. we then have a perfectly rational correction to remind everybody of what the fundamentals are. And so, it goes on throughout history, up, down, up, down, up, down utter madness, but human endeavour will never cease.

[00:25:48] Lesson 4

[00:25:48] Duff Watkins: Point number four, you say, financial independence is easy to attain. I always thought there had to be a lot of suffering involved.

[00:25:59] Peter Thornhill: Well, it depends on one’s perception Duff. I would have to say looking back through my, my life, you know, the 50, 60 odd years of work, it was relatively simple.

I did what I did. I did it well, and I kept on doing whatever I was doing and doing it well, I married a saver. So, between the two of us, there was a perfect match. We never spent all we earned. And so, it was simply a matter of carrying on doing the same dumb thing decade after decade after decade and investing wisely.

And I say, invest. And it’s important that we draw a distinction because one thing that drives me nuts at present is the media and the way they use the word investor investing in investment totally in the wrong context investing. And the best I’ve found is in one of the books on my shelf here, it’s the modern encyclopedia for children.

My parents bought it when we were kids invest the use of money productively so that a regular income is obtained, speculation, buying and selling in an attempt to benefit from a fluctuation in the price. Sometimes in an anti-social. Why just remember. Use of money productively. So that irregular income is obtained, buying and selling in an attempt to benefit from the fluctuation in the price.

And when they talk about investors in Bitcoin, honestly, I’m glad I’m not licensed to carry side arms because it’d be out there.

[00:27:48] Duff Watkins: I keep quoting Paul Krugman when he says he just doesn’t understand the attraction of the Bitcoin. One, it doesn’t do anything better that current cash and current financial products already do.

And secondly, there’s no need for it. It solves a problem that doesn’t exist, but what would he know? He’s just a Nobel prize winner.

[00:28:04] Peter Thornhill: It creates a problem. Duff. The amount of electricity that is used to produce Bitcoin is phenomenal. They’ve been building new.

Electricity generating plants to meet the demand.

[00:28:21] Duff Watkins: Huh? I did not know that.

Well, one of the things you described about, financial independence being easy, I mean, it sounds pretty unglamorous. It sounds pretty routine sounds pretty mundane and yeah, my personal experience, if I can just say that’s pretty much what it was. My mate, who took me along to your seminar.

He very wisely astutely observed that I was a lazy sod, and I wasn’t going to do, uh, too much, um, tinkering and monitoring. And so, I needed something that was really kind of idiot proof and, solid, steady investing seemed to work for me. I didn’t have to overthink anything.

[00:28:55] Peter Thornhill: Yeah, it’s as boring as watching paint dry, but people think you’ve got a bit on top of it all the time. Just, you know, as I say, in one of my points, make money, your slave. Don’t, you become a slave to your money, invested in good, make other people work for you, invested in other people’s businesses and get them to work for you so that you sit back and enjoy the fruits of their labour.

[00:29:27] Duff Watkins: And they enjoy the fruits of your investing in them so well. Okay.

[00:29:31] Lesson 5

[00:29:31] Duff Watkins: And that takes us one way to do that. Is lesson number five. I think spend less than you earn borrow less than you can afford. It seems pretty simple.

[00:29:41] Peter Thornhill: I would have thought so, but experience 50 years has taught me, no, sir, what is concerning me presently?

And I’m going to sound like an old retard. Now there is a generation that expect to have everything today that it took my wife and I, a lifetime to achieve. And in this headlong rush, the risks that they take and the price that they pay is phenomenal. Spend less than you are in borrow less than you’re going afford doesn’t work for most people.

[00:30:18] Duff Watkins: Yeah. There is a magical thinking is what it’s called in psychology. And my observation and I got to say, I certainly see it a lot in Australia. Everyone’s looking for the short cut. The shortcut to wealth or fame or, fill in the blank and the shortcut. And, you know, maybe there is one for some people, but they are statistical outliers or more to the point sometimes, you know, you’ve heard of those overnight successes after 10 years of hard, solid, decent work.

That’s usually how it happens. I don’t see too many shortcuts, so I don’t see too many genuine, overnight successes. And, the financial process, I mean, with the stock market, correct me if I’m wrong, Peter, but basically, you’re taking advantage of compounding interest, which needs time to, to take affect and compounding interest is, you know, one of the mysteries of the world even Einstein was, intrigued by it.

[00:31:12] Peter Thornhill: Yes. This is the difficulty. People don’t seem to understand that time will do the hard work for you through compounding, but everyone thinks they have to do lots of this, that, and the other you don’t. All you have to do is invested in good businesses. Other people’s businesses have been working for you.

You get on with your life becoming absolutely brilliant at one thing, making damn sure your family is rock solid and looking after all your close friends, that’s all you do.

[00:31:48] Duff Watkins: And the rest is window dressing. It seems well.

[00:31:50] Lesson 6

[00:31:50] Duff Watkins: Okay. Lesson, number six, you’ve mentioned this a few times. Make money your slave. Now, can you elaborate on that please?

[00:31:58] Peter Thornhill: The number of people rushing around in ever decreasing circles, trying to make more money. Your career. Okay. You get paid and you’re rewarded for your work but becoming a slave to making more and more and more money is in many respects. Counterproductive money is my slave. It does all the hard work for me.

I sit back and enjoy the fruits of the labour. That money is, is doing that those other people are doing for me, paying me. I am not a slave to my money. I enjoy the benefits it provides, and I love it because we can enjoy things that Frieda and I would never in our wildest imagination, if I have considered, we have that at our fingertips.

Because money is our slave. I have made my slave work as efficiently and as effectively as possible. And Hey Presto.

[00:32:58] Duff Watkins: Okay. So, money is your servant and it’s serving you now. People are going to want to know, okay, Peter, how do I do that? How do I make my money, my servant, so that it actually serves me? And I’m not fretting about it and anxious about it and running around on those diminishing circles.

[00:33:15] Peter Thornhill: The thing that is sort of been uppermost in my mind in the last sort of decade or two is I have been buying shares ever since we got back to Australia in 1988. And over the time I have. Had built up quite a number of individual shareholdings, winding all those individual shareholdings back with the assistance of my financial advisor.

I’m winding those back and I’m putting it into listed investment companies. That means, you know, without being morbid about it, if anything happens to me, my wife will inherit maybe five or six shareholdings in these beautiful, listed investment companies. And these companies, their business is not running a supermarket or making washing machines, their business as a company is to own shares in other companies.

So, it’s like a managed fund.

[00:34:17] Duff Watkins: Yeah. Yeah.

[00:34:19] Peter Thornhill: So, I get exposure to 120 companies by buying shares in this one company. I don’t have to think or worry. And I’m winding back all those individual shareholdings. I don’t have to look at the share market ever. Ignore it totally.

[00:34:35] Duff Watkins: Because they’re doing it for you. I mean, you pay a fee for this, but they’re doing all that fretting and running around and anxiety and Doost activity.

They’re doing it. You’re paying for it, but they need to succeed or else.

[00:34:49] Peter Thornhill: Yeah. But again, the fees associated with the old fashioned and I’m talking about old fashioned Duff. My apprenticeship in England, when I left and came back to Australia, I was not sure that I wanted to leave my home. So, I left my pension fund in the UK.

Anyway, we ended up staying in Australia. And, when the time came, I converted that into a pension fund, and it has four shareholdings four listed investment companies. And the, the one I like most of all has only been going for 161 years has just celebrated its 55th consecutive year of dividend increase.

Do I care less?

So that is what I want. And I’m going to have here as well. Is these old-fashioned listed investment companies. And I mean, one of the ones I use here in Australia, the management expense to me is 0.14%.

[00:36:04] Duff Watkins: I mean, that that’s exceptionally low in my experience. I mean, that’s lower than an index fund.

[00:36:12] Peter Thornhill: Yep.

But this is the beauty of the listed investment company, because unlike most managed funds, they don’t charge a management fee. The listed investment company is a board of directors, a small team of analysts. So, the management company or the management of the company, is it whereas ETFs, for example, they have a manager.

And they’re charging a fee based on the value of the assets. These guys, aren’t, all you’ve got to do is pay the salaries of the analysts and the board running that company. It’s not a percentage of the assets under management. So, the larger the listed investment company in size. The amortization of the costs of running that company over a vast asset base, the cost comes plummeting down.

[00:37:08] Duff Watkins: And what you’re describing, you mentioned an ETF, that’s an electronic traded fund and this in case people don’t know, but what you’re describing is, I mean, People may not know the terminology, but none of this is rocket science and I read your book, but I also read many more and I reckon, and I’d heard this before and I think it’s true.

For our listeners and viewers out there, if you read five books on investment, just five, any five, you’ll probably know more than 80% of the people on the planet. And you’ll have more than enough to start making sound decisions. It really isn’t that complicated. It may be a little foreign because you’re learning about things you were ignorant about, what I’m trying to say.

It isn’t complex and it isn’t complicated.

[00:37:53] Peter Thornhill: No. No there are loads of books. That problem is finding which ones actually you may remember in my book, I’ve got the recommended reading list. And there are a handful of books that I have read over the years that I have found a value but underlying it all is that apprenticeship in England.

[00:38:16] Duff Watkins: Also, those books, pictures of them on your website, https://motivatedmoney.com.au/.

[00:38:19] Lesson 7

[00:38:19] Duff Watkins: Now, let me go to point number seven, because I’m very interested in this one. Lesson number seven, rent your lifestyle. I thought I was supposed to own everything.

[00:38:30] Peter Thornhill: This is the problem. This is where a generation is going to get a very nasty shock. my current car or our current car is a 2005 Toyota Corolla. And it gets me from point a to point B and we pick up grandchildren from time to time and they come and stay with us, and we have a lot of fun. However, I’m a petrol head and I love, cars.

So, the, a couple of years ago, we went back to England to visit family and friends there. I rented a 66, 4 0.2 British racing green type Jaguar. We spent a week touring the gardens of Devon and Cornwall in that gorgeous E type JAG. I handed the keys back. Thank you very much. We were in France two years ago and I rented a brand spanking new.

Turbocharged four-wheel drive Alfa Romeo. I managed to limit my speeding fines to just one. And, uh, again, had a hell of a lot of fun and had the keys back. There’s a club of Ferrari owners here that will rent their cars out for a weekend. I think it’s about $850 a day. I can rent a Ferrari F350 take my wife up the central coast for the weekend.

Burn the pants off it. Come back on Monday, hand the keys back. I don’t want to own any of this. I can afford it. And it’s the same when we travel. I love fabulous chateaus in France, et cetera. I don’t want to. You know, people buy holiday homes. I think what the hell are you doing? I holiday in fabulous homes all over the world.

So, you rent the lifestyle, you don’t own it.

[00:40:29] Duff Watkins: Okay. So, with a car is easy, but how about other aspects of lifestyle? And I do appreciate the bit about Chateaus. I’m just coming to me. We were in Europe a couple of years ago. My wife had a staying in castles. Castles. What’s wrong with the Marriott, but it was fantastic. And I never would have thought about that, and I don’t even know how expensive it was, but it was worth it.

Okay. But what about you? You got your, your normal person, you got your daily mundane life.

How do I rent my lifestyle? Just, you know, without being exotic and just on a day-by-day basis.

[00:41:04] Peter Thornhill: Our lifestyle probably hasn’t changed from when we were kids. In terms of we eat three meals a day, however, we dine out fine dining, love it, enjoy fine wines, et cetera. Very good food. the real pleasure of us now is that Frieda and I had three sons, two of them are married, and there are five granddaughters.

So, there’s 12 of us. Now, our lifestyle is taking the entire family to Santa’s village on the Arctic circle in Lapland for Christmas.

Watching princesses playing in the snow, riding in a sleigh drawn by Santa’s reindeer, having snowball fights with Santa’s Elves and taking them to a holiday in Hawaii. That’s the lifestyle, you know, the day-to-day bid hasn’t changed. We still, shower still wear jeans. T-shirts, you know, the fundamentals haven’t changed, but it’s all the wonderful bits of life that you can rent.

[00:42:14] Duff Watkins: Those experiences you’re talking about.

And you, you remind me of a book. I know you’re familiar with this. It’s the millionaire next door by, Tom Gordon, I read a couple of those books and basically, he did his

doctorate studying millionaires and he found out pretty much. They’re like the people next door, you know, they, they’re not ostentatious. They’re not showy you don’t know that they’re millionaire multi-millionaires they just show up for work.

[00:42:37] Peter Thornhill: Warren buffet drives old, old, basic automobiles does not run around in a bloody Rolls Royce or a Bentley or anything like that.

Yes.

[00:42:46] Duff Watkins: And lives in the same house he grew up in, in Omaha, Nebraska.

[00:42:49] Peter Thornhill: So, we live in a modest apartment, but when we travel, we’re out there in the outside world, boy, do we live like royalty, but we don’t need a massive bloody mansion here to show people how wealthy. We are. We don’t need to drive flashy cars.

Yeah. The millionaire next door.

[00:43:11] Duff Watkins: Well, underlying this goes back to a point that you’ve made a few times is,

[00:43:15] Lesson 8

[00:43:15] Duff Watkins: Lesson number eight, choose your partner carefully now, other than choosing your parents carefully, that that’s an equally important task. When somebody is getting married how do they choose their partner carefully on a financial money-based perspective?

[00:43:33] Peter Thornhill: clearly, I was not aware of that. This is one of the lessons I’ve learned over the 50 years.

And it was something I took for granted Frieda and I we’re both savers. It didn’t matter how little we earned, we always saved. And so, it’s a matter of your, courting. You get serious, you must have some inkling of the personality of the person you are, potentially married and maybe it’s a topic for discussion. I don’t know.

[00:44:06] Duff Watkins: It’s very much a topic for discussion. I used to do a lot of premarital counselling in my previous career, and I think he says something that’s quite significant in the, see if I can remember correctly. If you got two spenders, getting married may be okay if you got to savers, no problem. But if you got a saver and a spender, those are two different financial perspectives.

And that creates friction. Maybe not in compatibility. Is that correct? Is that your observation?

[00:44:35] Peter Thornhill: Absolutely Duff, the thousands of presentations I’ve done and talking to people, thousands of people afterwards over the 30, 40 years, the relationship is over, whether you accept it or not.

Because as I say, one is going to go on white anting the efforts of the other. So, you’re trying to climb the mountain and the other person keeps pulling you backwards, pulling you backwards, pulling you backwards. It must be, well, I think I can say categorically. It is demoralizing.

[00:45:13] Duff Watkins: Yeah. It creates that negative loop of we’re not getting ahead. We’re not getting anywhere. It’s, it’s, we’re stuck and then you don’t want to have the hard conversation about it.

[00:45:22] Peter Thornhill: No. No. So, it’s pushed under the mat and pushed under the mat.

[00:45:26] Lesson 9

[00:45:26] Duff Watkins: All right. Well, let’s go to lesson number nine, then fear is based on ignorance.

Don’t be frightened. Be smart.

[00:45:32] Peter Thornhill: Yeah, this comes back to knowledge is power. Fear is based on ignorance. The reason people are frightened at the share market, and this is abundantly clear after 50 years in this industry is because they don’t understand it. All they see are all the flashing images, prices everywhere, all over the shop and media commentary.

That is nothing short of disgraceful, you know, market plummets. You may or may not remember some of the headlines I’ve put in the book.

[00:46:03] Duff Watkins: Oh yeah. Yeah. only the dates change. As I recall the market plummets people, you know, it’s, it collapsed. And then it could be 1983 or 1793. It’s all the same. Really?

It’s just the clickbait is the modern phrase.

[00:46:18] Peter Thornhill: Yeah. And the fear is irrational. So, knowledge is power. Understand what it is, why these people are running these businesses for you and acknowledged that human endeavour is never going to stop so that, if people say so, what do you think the share market is going today?

Do I say, oh, the future direction of the share market’s upwards? What, when it doesn’t matter, if you look at any stock market graph of any country developed country in the world, it’s jagged and it’s all headed in one direction.

[00:46:52] Duff Watkins: Well, since inception, it’s 10, I believe this is, I believe the figure is correct.

It won’t be off by much. It’s 10.4% compounded interest since the beginning of the stock market to today, that’s over. I don’t know how many hundreds of years, but so, and it’s clear if you just, as an executive, just say, Peter, if you graph it, it’s on up, up, up, up, up and up with a lot of deviations in between.

[00:47:18] Peter Thornhill: And it’s the deviations that provide all the it’s that’s the clickbait, you know, why is it going down? Why is it going up? Or this, this, this, this, and everyone’s got their views. It doesn’t damn well matter because if the share market is as risky as people perceive it to be, you’re telling me that all human endeavour is going to grind to a halt and all businesses are going to collapse.

You’re going to grow your own food. You’re going to make your own clothes. You can make all your bricks so you can build a house. You’re going to go and chop down trees to make the wooden chairs and tables? Like hello human endeavour is the dynamo.

[00:48:00] Duff Watkins: And I think you illustrated with a point of the Commonwealth bank, which is, I believe it’s the largest bank in Australia. It’s international player, their share price plunges to use the press word. But the management team is the same. They’re the same yesterday as they are today, the business is the same.

It hasn’t changed in the last 24 hours. They’re still the biggest bank in Australia with international reach. Nothing’s really changed except that volatile share price, which is the perception. A lot of it’s perception driven is.

[00:48:37] Peter Thornhill: Perception is reality. Your perception is your reality. My perception is my reality.

This enables two people to look at the same thing and see two totally different points of view. As I say to people, this is where divorces and wars begin, same issue, different perception, Commonwealth bank, during the global financial crisis, went from $64 to 26. Are you telling me that in the space of, I don’t know, three- or four-months Commonwealth bank lost two thirds of its business?

[00:49:07] Duff Watkins: Impossible.

[00:49:07] Peter Thornhill: And please also understand what’s the famous quote. Most people know the price of everything and the value of nothing, nothing. And what is it? They follow prices because I have often invited people. I will give them the last annual report. For Cochlear, the company that manufactured the bionic ear, I would like them to go away and read that annual report and come back and tell me what the value of Cochlear is and I asked the audience to put their hands up if they would like to participate, no one ever puts their hand up because they don’t. Most of them wouldn’t have the expertise. Most of them would the hell they’re looking for anyway. So, what do they use as their guide? Share price.

What a waste of time and energy.

[00:50:04] Duff Watkins: The difference between price and value.

All right, let’s go to

lesson number 10 envy no one.

[00:50:07] Lesson 10

[00:50:11] Peter Thornhill: It’s a beautiful thing Frieda, and I cannot believe how beautiful our life is. We envy, no one. I watch people driving down our local high street in their turbocharge, Bentleys and their Ferrari’s and their Mercedes. I couldn’t care less. I parked my little Toyota Corolla in the same street. I shop in the same shops. I don’t envy any of them.

We have a life beyond our wildest dreams can’t ask for much more.

[00:50:49] Duff Watkins: So, the social comparison again, that’s what it’s called in psychology. Looking at somebody thinking they’ve got more, or they’ve got better, or they’ve got fill in the blank that creates that sense of. unsatisfaction. I think that’s what the Buddhist call, you know, uh, you’re, you’re no longer satisfied, whatever you have.

You’re now you’re unsatisfied because you’re comparing yourself to someone else which is ultimately a loser’s game, unless you move to the poorest neighbourhood in the country, and then you walk around feeling superior. If that’s the way you work, if that’s the way your mind works. But usually, it’s a loser’s game comparing yourself.

 So, what’s the takeaway for people there. Envy no one and instead do what Peter?

[00:51:36] Peter Thornhill: Just make your life as beautiful as you can. And appreciate everything that you have. I mean, it sounds crazy Frieda, and I would never have believed that we would be in the position that we are today.

And here we are. And as I say, we, we, envy no one. We look back in the memories we’ve accumulated over the years, as one gets older, those memories are pure gold,

[00:52:04] Duff Watkins: I think what strikes me is you got this good luck with you and your wife Frieda the three boys, the grandkids, you got plans, you’ve done things. and, you know, I don’t, I don’t want to hear any, you know, oh, I bought Google when it was low, or I invested in Yahoo.

I struck it really, you know, I don’t wanna hear any of that basically.

You know, you’re buying banks and industrials is what I’m hearing.

[00:52:26] Peter Thornhill: Yep, absolutely. Yeah. I’m not, not interested in the mining companies. And therefore, I favour the listed investment companies. That are, predominantly industrial companies, because as you will remember from the charts in the book resources, are, way down the line, because digging stuff out of the ground has never created vast wealth.

It is manufacturing, technological, and intellectual inputs that produce the tremendous value add that, create things like the bionic ear. So, the value add comes from all the ad-ons human endeavour, et cetera, et cetera, not just going out and digging stuff out of the ground.

[00:53:13] Duff Watkins: And once you dig it up and you sell it to the Chinese, whether it’s gas or coal, you can’t do it again.

You know, that’s, it’s gone.

Alright, let me conclude with one last question. You’ve been, we’ve been talking about the things you’ve learned over the last 50 years. Peter, what is something that you have unlearned lately? And by that, I mean, something you absolutely positively knew to be true then, but now realize that’s not the case.

[00:53:37] Peter Thornhill: Up until the year 2000, I was part and parcel of the industry, and I was presenting, as you would remember, and I would talk about balanced funds and, reducing volatility, re the word risk there. The thing that I have unlearned is that volatility is not risk. Volatility is provided by the liquidity, the risk I see.

And the thing that I have unlearned, I don’t want a balanced portfolio, you know, people ask me, do, you just invest in shares. And I say, yes. Oh yes. And I say, that’s because I’m an ultra-conservative investor. And they look at me like I’m mad. But the thing is, if I add cash property, resources to my portfolio of industrial shares, it will halve my return over the longer term. And I’m not prepared to pay that price and what frustrates me. And the reason I ultimately left the industry in 2000 was because I could no longer stand in front of people and tell them to do what I was no longer prepared to do.

I don’t want loads of cash in my portfolio. I don’t want government bonds. I don’t want property. I want industrial companies, businesses. I want good businesses and get the lead out of the saddlebag. You mentioned the 10, 10%. Yeah. since I got back to Australia and started seriously, beginning to accumulate, wealth, in 2000 the performance of my portfolio has been 13 and a half percent per annum compound.

By simply getting the lead out of the saddle bag.

[00:55:32] Duff Watkins: Okay. So, volatility is not risk, but what about modern portfolio theory? I think somebody got a, got a Nobel prize for that, which says you’ve got to have these defensive assets. You’ve got to have cash, gotta have bonds, gotta have, you know, led basically, because when the market goes south, you need defensive assets to stabilize or something like that.

[00:55:56] Peter Thornhill: It was promulgated back in the forties and yes, you’re quite right. These, they got Nobel prizes for this piece of crap.

[00:56:04] Duff Watkins: Was that Eugene Fama? Am I just pull that name up?

[00:56:09] Peter Thornhill: No, I can’t remember the names of the guys, but this was designed purely to protect ignorant people from themselves. And the thing that frustrates me today is People now in Australia have compulsory superannuation. If they do not pay attention to where that’s invested, they end up in a default fund, which will be a balanced fund. People sell balanced funds on the basis of reduced volatility. Yes, the volatility will be reduced, but the problem is that no one ever tells them the opportunity costs.

They’re going to pay over their working lifetime having this led in there, saddlebag we’re talking in the millions of dollars that they won’t have because they’ve had this rubbish to smooth the return. I mean, for heaven’s sake, you’re there for 40 years, 30, 40 years in super, leave it alone and get into, so the asset that’s going to generate the greatest return over the long term.

So that by the time you hit retirement, you’re up here. Everyone else is down there and you leave it where it is, and you simply turn the tap on, and all those dividends now flow back to you as your pension.

So no, the unlearn was that volatility is not risk and modern portfolio theory is crap.

[00:57:36] Duff Watkins: Not only does he assault popular wisdom, he assaults Nobel prize winning economist as well. So that’s why you’ve been on this show. Peter, I’m pretty, pretty much appreciate it. We’ll close on rebellious contrarian note. Listeners, viewers. You’ve been listening to the podcast, 10 lessons. It took me 50 years to learn.

Our guest today has been financial commentator and educator, Peter Thornhill. If you would like to learn more about Peter’s book, please drop me an email. His book is Motivated Money, but even if you don’t know how to get it, email me it’s podcast@10lessonslearned.com  again, that’s podcast at 10, the number 1 0 10 lessons learned.com and I will find a way to get it to Peter has a website and https://motivatedmoney.com.au/ .

And I suggest I urge you to subscribe to his newsletter, called My Say, it will be worth it. This episode is produced by executive producer, Robert Hossary, and it’s supported as always by the Professional Development Forum. PDF. They provide newsletters, webinars, podcast, parties, anything you want, everything you need for young rising leaders, and it’s all free.

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