Dr. Phil DeMuth believes grad students should act more like CEOs. To get through the “enterprise” known as graduate school more efficiently, he says, students should demonstrate executive leadership and outsource the tasks that aren’t “mission critical.”
DeMuth wishes he had operated in this manner when he was a grad student at UCSB in the 1970s, but it doesn’t seem to have hindered him. The UCSB valedictorian – who holds two degrees from the campus (BA, Communication, 1972; MA, Communication, 1973) and a Ph.D. in Clinical Psychology (1977) from the Fielding Institute – today is a successful investment advisor to high-net-worth individuals; a co-author of 10 books with actor-commentator-investor Ben Stein; and a frequent guest on radio and TV shows speaking on financial topics.
Phil DeMuth was a guitarist and singer in the 1960s rock 'n' roll band Lenny & the White Knights.Stocks and The Street were not at the top of Phil’s mind in his teens and twenties. During high school in the 1960s, he was busy playing guitar in a rock 'n’ roll band that once opened for Herman’s Hermits. In his Commencement address at UCSB in 1972, he spoke about bears, but not the economic kind – they were the roller-skating circus species.
During the many years he worked as a psychologist specializing in behavioral medicine, DeMuth longed to be an author. A flood of rejection letters drowned this dream, that is until his brother introduced him to economist Ben Stein. The obsession Stein and DeMuth shared for the stock market led to a successful book writing partnership. It was a natural progression for DeMuth to parlay the investment books into a business. Today he is Managing Director of the Los Angeles-based investment advisory practice, Conservative Wealth Management LLC.
Phil DeMuthDeMuth suggests that grad students view their college education as an investment, and that when they enter the job market, “they should be aware that by far the most valuable asset they possess is their human capital.” That’s why he thinks it’s important for graduate students to “manage” their education and “always keep your eye on the goal.”
In this interview, DeMuth tells the GradPost which UCSB course was most valuable to him; why he was called into the Dean’s office a week before Commencement; how his psychology background assists him in his financial advising work; why he always liked to hang out with the smartest students he could find at UCSB; and more. Read on. …
Phil DeMuth, left, with his mentors, colleagues, and friends Warren Buffett and Ben Stein.
Where did you grow up?
I grew up on the North Shore of Chicago and came to UCSB from an East Coast boarding school, Lawrenceville. It was the 1960s and it felt like being let out of a straitjacket.
Where do you and your family reside today?
I am married to Julia and have two children, Olivia, 13, and Rani, 37 (Rani is from a previous marriage), and I live in the Hollywood Hills in Los Angeles.
Phil DeMuth spoke about bears, but not the Wall Street kind, in his UCSB Commencement speech as valedictorian in 1972.
What was it like to be valedictorian of your graduating class at UCSB?
It was interesting to be in a cap and gown and address a stadium full of people. However, my high school rock and roll band opened for Herman’s Hermits in 1969 at the Steel Pier in New Jersey so I had been in front of a big venue before. I remember telling a story about a roller-skating bear that had escaped from a circus. People were advised that they should not assume the bear was friendly just because it was on roller skates.
Phil DeMuth played guitar in the high school rock 'n' roll band Lenny & the White Knights, which opened for Herman's Hermits in 1969.
What was your band’s name and did you pursue music beyond high school?
It was called Lenny & the White Knights. Lenny was a soul singer from Bedford-Stuyvesant. He was killed in a knife fight outside a bar defending a girl's honor. I sang and played lead guitar. No music since.
What kind of student were you while you were at UCSB? You must have been very studious if you were named valedictorian.
I was called into the Dean’s office the week before and told that I had put the school in an untenable position: I was a Commencement speaker but I wasn’t going to graduate because even though I had a boatload of credits, they didn’t actually fulfill the requirements of any particular major. A horse-trading session followed, where I explained how my Greek Drama class actually could be seen as fulfilling the American History requirement, etc. We worked it out and I was able to graduate.
What was graduate school at UCSB like for you?
I was interested in studying with a particular professor, S. John Macksoud, who had independently discovered deconstructionism in parallel with Jacques Derrida. Macksoud left in the middle of the year so I soldiered on alone. His book from 1973, “Other Illusions,” has just been published by Purdue University Press, 40 years after he wrote it and eight years after his death.
Is there anything you didn’t know then that you wish you had known before entering graduate school?
A grad student is the CEO of an enterprise that calls for executive leadership and brokering and outsourcing everything that is not mission critical. It is important to stay on good terms with your professors and manage the process, always keeping your eye on the goal, and not get lost in the weeds. I should have hired more outside help and not done everything myself.
Who are you referring to when you say you should have hired more outside help as a grad student?
Editor, typist, research assistant, research consultant, statistician, etc. I should have managed the important stuff (research design, implementation, writing), but outsourced everything else I could have. I don't see a problem with hiring someone to do a first pass through the review of the literature, for example. I think grad students often get lost along the way and need to think like managers instead of serfs.
Please tell us a little about your master’s thesis and your dissertation. What were they about?
Neither one has stood the test of time. The judgment of history in this case has been entirely correct.
"A grad student is the CEO of an enterprise that calls for executive leadership and brokering and outsourcing everything that is not mission critical. It is important to stay on good terms with your professors and manage the process, always keeping your eye on the goal, and not get lost in the weeds." – Phil DeMuth
Who has been and/or is a hero, mentor, role model, or inspiration to you?
Professor Macksoud taught me to have a relentlessly questioning attitude, and this has been a useful stance. My current gurus are Warren Buffett [investor, philanthropist, and Chairman and CEO of Berkshire Hathaway], who doesn’t seem to have made a bad decision in his entire life, and his partner Charlie Munger [Berkshire Hathaway Vice Chairman], who I think is the wisest person on the planet right now.
What was your first job out of graduate school and how did you get it?
I was hired as an administrative assistant at the Fielding Institute by Frederic Hudson and Halleck Hoffman. I got to know them in the course of my graduate studies and I guess they didn’t want me to starve.
How does someone with degrees in Psychology and Communication end up in investing?
I worked for many years as a psychologist in the area of behavioral medicine, but always had an itch to try my hand at writing. The publishing industry had other plans, and buried me in an avalanche of rejection letters.
Phil DeMuth and Ben Stein have had a successful book writing partnership, co-authoring 10 books on investment topics.
My brother worked with Herbert Stein (who was Chairman of the President’s Council of Economic Advisors) and introduced me to Herbert’s son, Ben Stein, economist and actor [“Ferris Bueller’s Day Off,” 1986]. We discovered that we shared an obsession with the stock market. One day Ben said that he thought our lunch conversations about the market were publishable. He sold our first book in five minutes with an email. He made it look easy.
Since I was investing myself and writing about investing, I realized that the book could be a marketing tool for an investment advisory practice [Conservative Wealth Management]. I hung out a shingle, the book sold well and led to nine more, and I became a full-time investment advisor and writer.
Please describe your current job and what it entails.
Being an investment advisor means getting to know people well enough to understand their financial goals and then designing and managing a portfolio that has the greatest likelihood of achieving them. It is a great honor to be trusted with managing someone’s money. The part I hate is any time when I underperform the benchmark indexes. This is inevitable but I always hate myself when it happens.
I have recently started writing a column for Forbes.com and this is a lot of fun because I can write something and not have to spend a year writing it and then waiting for the book to be published.
How does your psychology degree help you in your role as a financial advisor?
Phil DeMuth is a frequent guest on TV and radio shows. Credit: The Street TVBy far the most valuable course I took at UCSB, career-wise, was Statistics. That’s probably still true today for many students. It enabled me to look at the stock market not through the lens of Wall Street opinion, which is all marketing hype, and analyze the data. This saved me years of wandering in the desert.
Psychologists know how to listen. Everyone says they listen but almost no one does; they’re just waiting for the other person to inhale so they can jump in and hijack the conversation. Really knowing how to listen, especially for the underlying emotion, is useful. But in the end, clients want me for my portfolio expertise, not for hand-holding.
What is it like to work with Ben Stein?
Ben is brilliant and has benefitted me immeasurably. He has probably written 30 books and 5,000 articles. When I was at UCSB, I read Kurt Vonnegut Jr. and thought, “Gee – writing is easy. Just make it simple and funny.” What I didn’t realize is that there is nothing harder than writing simple and funny. Then, writing a hundred drafts of a Ph.D. dissertation, with its dry, descriptive tone and passive voice, drove a stake through my prose. It took me years to unlearn this. Ben has been a great model and editor, and helped me get my prose style back on its feet.
What do you consider to be your biggest accomplishment or something you are the most proud of?
My children.
"At UCSB I was always interested in hanging out with the smartest kids and professors I could find. I do that to this day. It’s humbling, but it keeps me on my toes. As Warren Buffett said to Ben Stein and me, 'You want a job where you are smarter at the end of the day than you were at the beginning.'" – Phil DeMuth
Why is it important for graduate students to know about investing? What should they know and how can they get informed? Do you consider a college education a form of investment?
When I went to college a liberal education was considered a good education in and of itself and in 1972 I would have been sanctimoniously contemptuous of the idea of college as a preparation for a career in the real world. But this was a time when any college degree was by itself a ticket to a job and American middle-class life. Not so any more.
Today college should be viewed as an investment, and students should seek useful skills that will help them solve difficult problems for people in the real world. Unless you are independently wealthy, it is probably better to read Jane Austen on your own time rather than when you are in college.
As students enter the labor force, they should be aware that by far the most valuable asset they possess is their human capital. Spending a lot of attention managing a $5,000 stock portfolio is a poor use of their time, which should be lavished on their careers instead. They should set aside any money they can into long-term savings (401k plans, IRAs, HSA plans, etc.) and invest it 100% in a stock market index fund at as low an expense as possible. This will give it the power of long-term compounding and time diversification.
In what ways did UCSB prepare you for your career?
At UCSB I was always interested in hanging out with the smartest kids and professors I could find. I do that to this day. It’s humbling, but it keeps me on my toes. As Warren Buffett said to Ben Stein and me, “You want a job where you are smarter at the end of the day than you were at the beginning.”
Everyone wants to know the secret of success. Can you share some general qualities that are important to have in order to succeed, no matter what field a grad student enters?
People who acquire useful skills that solve important problems for people and who work hard applying them will succeed. Every employer I talk to says s/he can’t find qualified people. It’s hard to find a resume that doesn’t contain basic mistakes.
"Today college should be viewed as an investment, and students should seek useful skills that will help them solve difficult problems for people in the real world." – Phil DeMuth
Do you have any job search and/or job interview tips you’d like to share with our grad students? Anything you think will help a grad student stand out as a job seeker with potential employers?
I get email queries all the time from graduate student job seekers. Here is what I notice. The emails are about them. They are, I assume, mass emails. Unless you are the protégé of a Nobel Prize-winning scientist, there is not going to be anything unique about you as a new entrant to a field. What they should focus on instead is me (or any prospective employer). There is lots of public information about me and my firm, as well as about the challenges facing investment advisors. A personalized email suggesting that they were familiar with my philosophy, etc., would put them miles ahead of the pack. Make it about them, not about you.
How can universities do a better job of preparing graduate students for careers?
Market forces will make this happen. Mid-tier private colleges are about to go out of business thanks to online learning. The whole education model is going to be shaken up, and for the better. The best thing for education would be to get “educators” out of the way. All the issues with teaching and learning were solved by B.F. Skinner at Harvard in the 1950s. The core curriculum should be put into computerized modules based on operant behavioral principles and programmed learning. I see feints like Khan Academy, et al, and I am so disappointed that they don’t do it right. As I learned at UCSB when I read McLuhan, every new technology at first repackages the old technology. But we’ll get there, eventually.
Do you equate money with success? Or, put another way: Do you believe a person has to have a lot of money to be successful?
Absent the ability to look into someone's soul, I think there is a broad correlation between success and wealth, although obviously one with many exceptions and counter-examples. If you consider that most people had a subsistence living from ancient times up until the industrial revolution, and now ending poverty for everyone on Spaceship Earth seems possible within a few decades, economic progress has been a wonderful thing for humanity. I think the people who have helped pull this train forward are the most successful, and generally they have been financially rewarded for their labor. But in individual cases it completely breaks down. Note that Buffett and Munger are giving virtually all their billions to charity.
What is something that very few people know about you or that would surprise people about you?
My home office overlooks Charlize Theron’s swimming pool.
What do you do for fun and/or relaxation?
Look out the window. Actually, I am a workaholic and would rather work than just about anything.
What’s on your bucket list of things to do?
I won’t be happy until a golden statue of me has been erected atop Storke Tower.