Exclusive Interview with Ivy League Professors Ibbotson and Goetzmann at Yale University

September 20, 2023

Abe Ashton:
This is Abe Ashton. I’m here with Professor Ibbotson and Goetzmann, right here at Yale University. So happy. And thank you very much, gentlemen, for taking the time to chat with me. This is going on the radio in southern Utah, St George, Utah area, very southwest corner of the state, as well as a podcast that we do for our retail retirement investing company. And I’ve just had the pleasure of listening to the two of you. You’re both obviously way smarter than I am. So, coming up with questions to ask two geniuses in the world of finance is not easy, but I’m dealing with people that every day are thinking about having their money last the rest of their lives, making sure that they don’t run out and maybe they have something to pass along to their kids and we just spoke about the history of annuities. Professor Goetzmann, some with you as well as some of the current effects of the global economy and national economy on retirement. So a couple of questions I want to talk to both of you about is as you look at the world we’re in today, because you’ve both been serving in academia for decades. Right. I won’t go into how many decades, but decades nonetheless.

This is a question for each of you….what would you say is the biggest surprise if you if you had the time machine and you can go back to your younger self, maybe 20 or 30 years ago and say you’re not going to believe what’s going to happen in the financial sector or in in the world of the economy.

What has happened that you think would you’d be the most surprised about if you were telling yourself 30 years ago, as you’re younger self, in the world of finance and academia?

Roger Ibbotson:
I just I will say that, you know, the whole world used to be just stocks and bonds, stocks and bonds and cash. And of course, now we have all these other different products being developed as well.

Tell you, these are not new products, but they’re they’re really being much more inserted into the system here. There are so many different ways of investing here and and so much so many more ways of looking at products and so forth. So, the financial industry has really changed tremendously over the last 50 years.

The menu, the variety of what’s out there, even for the retail investor, the retail saver, you’re saying that you would have been surprised to see that there’s so many options out there compared to what there was 20 or 30 years ago even?


How about you, Professor Goetzmann?

William Goetzmann:
I would focus on the world financial crash, the global financial crisis and the huge shocks that we’ve seen. When I was in graduate school, the crash of ‘87 was something that happened, and that was the biggest one-day crash that happened in the history of the U.S. capital market. And so, these big shocks are something that I’ve come to understand, that they’re more common than I thought they were, if we go back several decades.

But, you know, COVID was an extraordinary shock, even though people are you know, scientists have been telling us that it was coming for, you know, 15 years, 20 years before it happened. So, these really have taught us that we should be prepared. We should build portfolios that are robust to major shifts in in technological change, in the global environment.

You know, we have to tune our portfolios to be able to withstand major shifts. So even though it’s likely that the 21st century is going to look a lot like the 20th century in terms of wars and troubles and so forth, we also have some additional longer term concerns that we have to confront. And because we’re talking about the future, we’re talking about our economic future.

And so we’re talking about our financial future. So that’s a big deal.

It is a big deal. And I think one of the things that most of the people I see are, I wouldn’t say the new thing, but something that’s been a train coming down the tracks is the Social Security Administration saying that, hey, by the year 2034, under its current plan, the trust fund will no longer support benefits.

And the Social Security Administration anticipates reducing benefits by up to about 20% if someone doesn’t do something to change it. And there are no politicians, at least that I’ve seen, that have been able to get elected recently, or really in the last decade or two, on the premise of campaigning on Social Security reform. That’s not a sexy topic in the world of politics yet this default, or this shortfall of funds, in the Social Security nest egg is something, or the trust fund, is coming faster than I think people realize, you know, now just ten or 11 years from now.

Do you do you feel that it is going to be widely, widely left to the individual retiree to solve for that problem? Or do you think the government will come up for kind of a last ditch effort solution for the Social Security issue? Any thoughts on that?

Well, I think the government will come up with some sort of a solution, but it will be tougher and tougher to have Social Security be the bulk of our retirement because we’re getting a smaller base of people to support the bigger base of retired people, so it’ll become harder and harder over time. There’s no way to avoid that, even though we could increase the amount taken out of our wages and so forth. You can’t really rid of the problem.

But I actually think that to me, the more serious problem is actually in the medical side, because the Medicare…and the different kinds all the medical costs are getting higher and higher as well. And of course as overpopulation and the impact on medical care is going to be, I think, just as huge.

I think we’ve done a disservice….we’ve created an incredible moral hazard. Right? From a private sector, even with the Silicon Valley Bank, as we talked earlier, if once the government starts to establish, we will always step in and save you.

It doesn’t matter if they’re telling a big bank that or if they’re telling the individual family, “Count on us to come in and save you last minute for health care or for Social Security or even in the in the bigger business sector.” One of the things I’m trying to educate younger retirees, as well as some of our clients who are in the last decade or two of their life, is that you have got to have an independent, individualized plan because you cannot count on (1) your own kids, they’ll bury it for sure. But (2) counting on the government as well to be that bail out or that fail safe. Right? It’s not going to be there. I think that moral hazard has been so significant. Do you have thoughts on that, Professor Goetzmann?

Yeah, I’ve been interested in Social Security and the problem for a long time.

And one of the things that is striking is that the assets of the Social Security fund are in relatively low-yielding U.S. government securities. And so, there is no growth that you can imagine that those assets are exposed to. Now, a couple of ways of doing that. One is to say, well, the growth assets that a family should invest in can be done on in private accounts.

And so, if we relax the constraints on the amount that families can put into private accounts and have those grow tax-free, they can get closer to the kind of expected returns that are needed in the long-term to support families or they’re aware of, interested in, and willing to save. And then we really should have some further discussions about whether or not the government itself might be investing in things that have more of an opportunity to generate returns over the decades.

And so, you know, there are a number of countries that have sovereign wealth funds. We don’t really have a sovereign wealth fund. Is that a good idea? I think it should be on the table. But, you know, the issue that you brought up makes me realize that the bigger the issue and the bigger the problem, the less likely there’s going to be a political solution.

And so a lot of the important things facing us like Social Security, environment, and immigration and so forth, tend to result in no solutions, you know, which means that individuals have to make their own plans about this kind of stuff.

I couldn’t agree more and thank you for that. This issue of interest rate and, for Social Security, could be one of many issues increasing the amount through taxes of payroll taxes or increasing the age of when someone takes their full Social Security, as has been done in the past, or allowing individuals to invest their Social Security funds, there will likely be some sort of strategy.

But I think the best strategies for the individual, for the family to make sure they’ve got a plan for themselves. So, thank you very much, gentlemen. I sure appreciate you guys being willing to chat with me today. And thank you for all your research and sharing your information and knowledge with us and with me today in the discussion we just had.

Headshot of Roger Ibbotson


Roger G. Ibbotson (born May 27, 1943) is Professor Emeritus in Practice of Finance at the Yale School of Management. He is also chairman of Zebra Capital Management LLC. He has written extensively on capital market returns, cost of capital, and international investment. He is the founder, advisor, and former chairman of Ibbotson Associates, now a Morningstar Company. He has written numerous books and articles including Stocks, Bonds, Bills, and Inflation with Rex Sinquefield, which serves as a standard reference for information and capital market returns.

Professor Ibbotson conducts research on a broad range of financial topics, including popularity, liquidity, investment returns, mutual funds, international markets, portfolio management, and valuation. He has recently published Popularity: A Bridge between Classical and Behavioral Finance and Lifetime Financial Advice. He has also co-authored two books with Gary Brinson, Global Investing and Investment Markets. He is a regular contributor and editorial board member to both trade and academic journals.

Professor Ibbotson served on numerous boards and has recently retired as a director, Chairman of the Audit Committee and member of the Nominating Committee of the Dimensional Investment Group Inc. and DFA Investment Dimensions Group Inc., registered investment companies for which Dimensional Fund Advisors Inc. serves as investment adviser. He frequently speaks at universities, conferences, and other forums. He received his bachelor's degree in mathematics from Purdue University, his MBA from Indiana University, and his PhD from the University of Chicago, where he taught for 13 years, and served as executive director of the Center for Research in Security Prices.

Headshot of Michael Gottesman


William N. Goetzmann is the Edwin J. Beinecke Professor of Finance and Management Studies and Faculty Director of the International Center for Finance at the Yale School of Management. He is an expert on a diverse range of investments. His past work includes studies of stock market predictability, hedge funds and survival biases in performance measurement. His current research focuses on alternative investing, factor investing, behavioral finance and the art market.

Professor Goetzmann has written and co-authored a number of books, including Modern Portfolio Theory and Investment Analysis (Wiley, 2014), The Origins of Value: The Financial Innovations that Created Modern Capital Markets (Oxford, 2005), The Great Mirror of Folly: Finance, Culture and the Crash of 1720 (Yale, 2013) and most recently, Money Changes Everything: How Finance Made Civilization Possible (Princeton, 2016). He teaches portfolio management, alternative investments, real estate and financial history at the Yale School of Management.

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