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Terrance Odean Podcast Feedback

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Dear Terry and Mike,

I just heard the interview the two of you did on Mike’s show, and I really enjoyed it. I’ve known Terry for many years not only because he was a guest on my show in 2011, but also because he was kind enough to endorse my recent book about chess and investing, Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing. And I know Mike because we had a great conversation a little while back on his show when he interviewed both me and my co-author, Susan Polgar.

I wanted to write to the two of you to say thanks not only because I enjoyed the interview, but because one of the stories that came up reminded me of something that happened to me when I was young and I thought you would get a kick out of it.

When I was in high school and my two older brothers were at Princeton, we decided during winter break that we would use our new Apple computer to write a program to predict the stock market. We thought we were pretty clever and we stayed up late at night programming, watching Star Trek, and going out for midnight runs. We didn’t know how to access data easily in those days, so we went to the library and looked up on microfiche a year’s worth of daily closing values of the Dow Jones Industrial Average.

For weeks and weeks we toiled over our project until finally we figured out an algorithm that if we invested in a certain way, based on our historical review, we would have winning trades about 55% of the time. We realized that advantage, especially if leveraged using margin, could lead to billion-dollar success. Thrilled with our brilliance, we went to bed and dreamed about our future success. Two of us did at least. My oldest brother David, now a professor of aeronautical engineering and the guy who originally planned the mission to crash a satellite on the moon to detect water, stayed up for a few more hours.

Crawling through every line of our code, he eventually realized that we were suffering from information leak, including the next day’s market close in our predictions. So much for prophetic algorithms!

I enjoyed hearing Terry tell his story because it made me think of what happened to my brothers and me 30 years ago. And I love the way that Mike does the interviews because he really asks excellent questions and helps his guests shine.

Finally, Terry, I should thank you (as thousands of investment advisers should) for all the work that you have done because it has helped me guide my clients to handle their portfolios responsibly. I tell them things like, “There’s this professor out in California who did some fantastic research and based on his studies, Mr. Client, I don’t think you should try to trade your own account.”

All the best,


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