RAJI KHABBAZ | From Learn Wall Street

· Podcast Episodes
From pocket money to portfolios - teaching money matters. Raji Khabbaz from Learn Wall Street

Raji Khabbaz is the founder of Learn Wall Street, a program aimed at teaching financial literacy to grade 7-12 students. Raji is empowering the next generation to make informed financial decisions and secure a brighter future by equipping young minds with financial knowledge and the art of wise money management.

People agree of the value of teaching money and finance and savings to kids. Nobody says, oh, that's a bad idea. And yet it's woefully under taught and it's such an interesting reason and, and we've spent probably the last two years looking at it. And I think it comes down to just, there's sort of institutional limits in the schools. I mean, if you think about it, traditionally K through 12 is very focused on subjects like maths, science, history, languages. And while finance and accounting is essential, it hasn't been deemed important enough for them to allocate resources to it separately.

Learn Wall Street is offering a finance and investing after-school educational program for students in 7th through 12th grade. A strong introduction to the principles of business and investing will have a profoundly positive impact on long-term financial well being. The development of critical thinking and decision-making skills greatly improves cognitive development.

My favorite story was we had a 16 year old girl. She attends the same actually school as my son. Very energetic, outgoing girl. We did the course for her and a number of classes for her, and she went to her dad and she said, instead of my birthday present, dad, can you put the money in an index fund for me? And he was shocked. Like for her, her birthday, she'd spend all year thinking about which bag she wanted, a vacation, a piece of comp, You know technology. But he is like, no, no, put it in the thing. And he couldn't believe it. He's like, I've been telling her the importance of saving and telling somebody it's important to save. Does not that effect if telling them that money they spent could be worth 40 times that amount, 20 years, and they could be super rich and maybe they don't need it that badly, it changes the way they think about it.

  • Traditionally, K-12 education has focused on core subjects like math, science, history, and language. Finance and accounting, while important, have not be been considered essential for younger students.
  • School curriculums have limited time and resources, which means that certain subjects must be prioritized, especially those subjects that align with standardized testing requirements.
  • Many K-12 educators may not have the necessary background or training to teach accounting, finance, and investment theory.
  • While there is a growing recognition of the importance of financial education for young people, there still remains a large gap in the traditional school curriculums.
  • The purpose of the program is not specifically targeted to only those with an interest in pursuing Wall Street careers. The knowledge and analytical skills learned are essential for anyone interested in entrepreneurship, business management, or being a successful steward of one’s own capital.

Raji Khabbaz began his career as an investment banking and merchant banking analyst at Morgan Stanley and Gleacher & Co. After graduating from the Harvard Business School, he embarked on a two and half decade long career as a CEO, CIO, and portfolio manager at a number of hedge fund companies:

  • Co-founder and Co-manager of Highline Capital.
  • Co-founder and CIO of Pierce Street Capital.
  • Co-founder and CIO of Silver Arrow Investment Management.
  • Senior portfolio manager at Ivory Capital Management, a long/short equity hedge fund company.

He graduated from the University of California, Berkeley with a BA in Economics with Honors and the Harvard Business School with a MBA..


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Chloe (1s):

Stocks for Beginners, Phil Muscatello and Fin Pods are authorized reps of Money Sherpa The information in this podcast is general in nature and doesn't take into account your personal situation.

Raji (12s):

My favorite story was we had a 16 year old girl. She attends the same actually school as my son. Very energetic, outgoing girl. We did the course for her and a number of classes for her, and she went to her dad and she said, instead of my birthday present, dad, can you put the money in an index fund for me? And he was shocked. Like for her, her birthday, she'd spend all year thinking about which bag she wanted, a vacation, a piece of comp, You know technology. But he is like, no, no, put it in the thing. And he couldn't believe it. He's like, I've been telling her the importance of saving and telling somebody it's important to save. Does not that effect if telling them that money they spent could be worth 40 times that amount, 20 years, and they could be super rich and maybe they don't need it that badly, it changes the way they think about it.

Raji (54s):

All of a sudden, You know, I don't really need this. It attaches a different cost to that decision making process for these kids.

Phil (60s):

Hi, and welcome back to Stocks for Beginners. I'm Phil Muscatello. When I look back to survey the wreckage of my own financial experiences, I wonder how I might have benefited from basic financial literacy in school. Today I'm speaking with someone who's taking the Wall Street Bull by the educational horns to help students understand some key concepts of finance and investing. Hello, Raji.

Raji (1m 23s):

Hi Phil. How are you? So glad to be on

Phil (1m 25s):

Raji Khabbaz began his career in investment in merchant banking. He has an honors BA in economics from the University of California and an MBA from Harvard Business School. His career has spanned roles as a C E O, C I O and portfolio manager at several hedge fund companies. And he's now the founder of Learn, Wall St, an afterschool education program aimed at students from grade seven to 12. So, let's start by talking about your background. What led you to be interested in finances and investments when you were a young chap?

Raji (1m 57s):

That's a great question. It was an unusual path for me. I, I come from a family of doctors and engineers and going into finance was a bit of a step down in their view. I made the mistake of interning the, the San Francisco Stock Exchange when I was undergraduate at Berkeley and was just hooked on it completely.

Phil (2m 17s):

What was it? It was, I, I guess it was, it felt exciting, You know and just watching what was going and was Was that in the old days of open outcry

Raji (2m 24s):

That would Yeah, it was people in the pit coming hand signals. There were trons, so there weren't a whole lot of the, there's no Bloombergs. You had to write tickets down feverously to make sure you didn't mess up trades. I just never experienced anything like it. It was a combination of math and science and psychology and You know. It was terribly fascinating and a different exposure, anything I had seen before. So yeah, I became the black sheep.

Phil (2m 52s):

Let's go to Learn Wall Street. And you've been sending over some fantastic information about it and the curriculum that you're offering to students. What inspired you to start it?

Raji (3m 2s):

I'll tell you, it it, it was an evolutionary process. My son had gone interested in finance a couple of years ago. We were traveling Italy, were in Sicily and Ferrari, who was very smart, rented a demonstration booth where you could rent the car for an hour. And I, I thought, wow, what a great dad. I'll rent the Ferrari for an hour. A day later, my son came to me and, and suggested we rent buy two Airbnbs and rent them so we could always have a Ferrari. And it evolved his interest in money and I was surprised at the his age, he's my first and only born the interest level, so I thought it'd be nice to come up with a little course for him. And that's how it started. And then it kind of spread to other classmates of his, we started doing smaller classes and then the curriculum, which you've seen evolved to a whole different level, And, we thought, wow, You know, it's, it's such a great idea.

Raji (3m 53s):

We want to roll it out to a broader audience. And that's kind of where we are. We've gone from kind of a, a personal project for my son to smaller classes with our community to now You know rolling out more broad based across New York City. And

Phil (4m 6s):

It's pretty amazing, isn't it. When you consider the how crowded the curriculum is for young people in school. Is it difficult to kind of shoehorn this in?

Raji (4m 18s):

I I I You know. That's such a great question. You know because I think broadly based people agree of the value of teaching money and finance and savings to kids. Nobody says, oh, that's a bad idea. And yet it's woefully under taught and it's such an interesting reason and, and You know, we've spent a number of You know probably the last two years looking at it. And I think it comes down to just, there's sort of institutional limits in the schools. I mean, if you think about it, traditionally K through 12 is very focused on subjects like maths, science, history, languages. And while finance and accounting is essential, it hasn't been deemed important enough for them to allocate resources to it separately.

Raji (5m 2s):

I think You know it's becoming less so these days, but the curriculums were heavily designed towards subjects covered in standardized testing, You know and, and different school programs. So the what are considered the traditional core curriculum topics like again, math, science, English. And then finally when you think about investing in finance, it's, it's unusual. It's not, you can't go to school to get teaching credentials for it if you really want to teach it. You have to have been on Wall Street, you have to have been in the colosseum, you have to have seen battle and otherwise it's just sort of an exposure course. So there's a challenge of getting people to teach it later in their careers because it's not something where you can go get your master's in math or languages and then become a teacher.

Raji (5m 44s):

You need to have that wisdom component. And I, I think for the traditional schools, that's hard to fill that role. And then finally, I would say sometimes people mistakenly think of this education as very Wall Street geared. I I think you'd agree You know in math and science, one plus one is always two. We teach our kids that we fly spaceships around the solar system based on that logic. You know business and investing is a very different way of looking at things. One plus one isn't always two, depends on conditions, on outcomes. It's more probabilities and statistics and in that way it's more applicable. And not just financial decisions, but do you think about life decisions? You know, should I fly here or should I go there? What's the danger? More enjoyment.

Raji (6m 24s):

So it's a different intellectual framework for kids to be exposed to and You know. As a father, you see the benefits of exposing your children to different intellectual frameworks. You know studying music helps math, You know, studying math helps art and You know there's all these cross disciplines that are synergistic.

Phil (6m 42s):

So Learn Wall Street is not specifically aimed at people who want a career in Wall Street. Then it's for all kinds of kids. Who else can benefit from this

Raji (6m 50s):

You know, it's interesting, we've received a lot of interest from adults, people kind of afraid to ask or successful professionals in careers. You know when we reach out to parents of students, a lot of their parents in New York are professors and there's been interest there. People wanna understand money, they wanna understand investing and if you don't work You know people on Wall Street take all these concepts and knowledge for granted. But to the outside world, it's this dark insurmountable mountain and it's very daunting and, and people are very intimidated by the, the concepts of money and investing.

Phil (7m 26s):

It is incredible how intimidating it is for most people. And I think sometimes Wall Street and the whole finance industry does try and make it that way so that they feel like they're You know a special cult That that only they can deal in these issues.

Raji (7m 40s):

Yeah, that's probably true. I mean, I think to some extent it's also a a tough place You know, it's, it's not a place that is geared or designed to be kind of You know user-friendly.

Phil (7m 54s):

So if even if students aren't interested in Wall Street, basic financial literacy and just things like compounding for example are just I mean. They're concepts that anyone can benefit from, aren't they?

Raji (8m 5s):

Yeah. You know it's interesting, it's it investing in con You know things like compounding. It's one of the few topics that's worth more the younger you learn it You know if you're 60 and you learn about compounding and being smart with your money and index funds and whatever diversified portfolios, You know your timeframe to invest is a lot shorter than if you're a 12 year old. I mean the math is really impressive, right? I kind of measure You know we do these smaller lessons as well as the big lessons and it's You know I judge the effectiveness at the classes by a scale that measures wide eyes and sort of drop Jaws You know. And where we get those sort of reactions, And, we kind of talk to kids about the power of compounding You know it blows them away.

Raji (8m 47s):

I mean You know these are teenagers in 40 years they'll be mid fifties based on life expectancy. You know halfway through their lives and you tell them a thousand dollars invested 15% for 40 years is $267,000 and you get a lot of wide eyes and drop jaws. You say, oh wait, if you put a thousand in every year, now you're looking at 2 million You know. And I think when they underst You know the knowledge is so powerful and it's so obvious and it's so logical and there's a increased value in teaching it early that it does, it's not, it's not a hard sell and it has an impact on them immediately. And, we see that from a behavioral perspective.

Phil (9m 23s):

So let's talk about some of the key concepts running through the curriculum then. So the time value of money, that's one of the first things that you cover, isn't it? And what does a pair of Nike shoes really cost you?

Raji (9m 35s):

The thing is You know telling teenagers, Hey, you made 4000% on your money, doesn't have the impact it would have on people on Wall Street, right? Oh, you generated 24% annual returns for 12 years with a You know sharp ratio of X and a 13 ratio of Y. And it doesn't have the same theatrical impact on them. So we try to not just show them the numbers for what the money could be, but to actually put it in in You know perspective, real world. You're buying a pair of Nike shoes, You know that's $200 You know at 10% You know that's an average blue chip fund over the last 10, 20 years. That's $9,000 in 40 years. And that You know, we hope starts to get them to think differently about money and about consumption.

Raji (10m 17s):

And so the time value of money to some extent is trying to connect the, the cost to making decisions about consumption early and to start thinking about savings differently. And

Phil (10m 29s):

You also speak in this section about hyperinflation and the role of hyperinflation. You give the example of Zimbabwe. Tell us about that.

Raji (10m 36s):

We wanted to teach the kids in each lesson a major concept and what, what, what is important and, and the semester weaves together. So it's a building block, right? You can't really dive into price earnings ratios until you understand the income statement. There's no point talking about valuation and discounting if you don't understand time value of money. So you're kind of weaving this mosaic of knowledge and at the end it's, it's a full tapestry to understand how to invest. So the time value of money was understanding the importance of inflation. That it's, it just sitting in cash is an investment decision. And historically given the You know way, fiat currencies have depreciated not a particularly smart one.

Raji (11m 16s):

So Zimbabwe was to show them an extreme case because kids are interesting. You know you wanna engage their interest and they always wanna know extremes. If you tell my son that's a fast car, he'll wanna know what's the fastest car if you, this is the tallest tall building, what's the tallest building? Oh, inflation, what's the worst inflation? And it's such a great question on their part, right? Because we always take for granted stable inflation regimes. And, and you look back at the last year at, at what we've seen with transient inflation, not so transient inflation or transitory, sorry. So You know this was to to frame what You know inflation seems like a boring thing. We, in the first part of the lesson we showed 2- 3% can really wipe out the purchasing power of your money over a long period of time.

Raji (11m 57s):

In Zambawe can do it overnight. And that if you're investing, you can't just be focused on Stocks. You have to appreciate the environment you're investing in, appreciate the country you're investing in, appreciate the monetary policy of the country you're investing in because things can get very unstable and normal rules of finance don't work during those periods. And, we used to talk about wheelbarrows of money and I had to put pictures in cuz nobody believed me.

Phil (12m 27s):

There are some people who are so gung-ho about investing, they just want to go and risk everything in the market. But then on the other side, you have people who are so conservative, they just wanna leave their money in cash. And that is a real danger as well, just putting your money and just leaving in cash because of this inflationary pressure.

Raji (12m 45s):

People make decisions without knowing they're making decisions with money. It's such, it's, it's worth so much more now than it would be later trying to understand the concept. So You know the first step to understanding why you have to invest is if you're in cash, you're, you are investing and negatively historically You know we show them interesting exhibits like what a car cost in the thirties, You know You know what You know Harvard tuition was 800 or $400 a year in 1930. That has an impact on them because they, they kind of see what happens to money. If you had set aside $4,000 to buy a house in the 1930s, put that in cash instead of the house and 40 years later you're gonna retire and use that money for a house. You know in New York buys you one month's rent in a one bedroom apartment, right?

Raji (13m 27s):

It has an impact on them. But the challenge for the kids is you don't want to give them just exposure. You want to give them wisdom, right? Like a lot of programs are heavy on the knowledge part theory. What is a pe, what is a stock And? we wanna teach that together with here's a life lesson, here's a case study. Why get bloodied in battle right away like we all had to do? When you can learn from other people's failures and successes, they say the wall, wall Street is the colosseum, You know gladiators practice with wooden swords before they go fight. And these case studies are aren't a way of practice for them. Understand in real terms what this means. And I think when they relate to that, it stays with them longer and it makes them want to take the other lessons. Every lesson, if you think about it, leads to the next lesson, which starts altogether solves pieces of the question of how to be a smart steward of your own capital.

Raji (14m 16s):

Imagine we're trying to teach a lesson on tail risk and catastrophic li risk. That's sort of a part of the risk reward le lesson. So in the risk reward lesson, we talk about what risk is risk and reward expected payoff. We give stock market examples from a sector asset class perspective on what were good risk reward investments like SPACs in 2021, not so good, what were good risk reward, maybe energy in 2020 at the bottom of covid, that kind of stuff. But we wanna talk about catastrophic risk. We wanted to deal show them in a way they could understand. So here's the way you teach catastrophic risk with m and ms. Imagine there's three M and ms one is green, one is blue and one is red.

Raji (14m 57s):

If you pick a green m and m, something really good happens to you. If you pick a blue m and m, nothing happens to you. Not good nor bad. If you pick a red m and m, something really bad happens to you. Then in class we have a jar with different proportions of m and ms. In the first case, two big jars of blue and green m and ms in a tiny jar of red m and ms, the second case, a giant jar of red m and ms and very small jars of blue and green m and they get to decide, would you pick now? Would you not pick? Now obviously blindfolded, but they get a sense of, okay, if there's proportionally more red m and ms, that's not good. And if there's not that many, that's less risk.

Raji (15m 38s):

And that's kind of a way to get them to think about that.

Phil (15m 40s):

Making this podcast, something's really become clear to me that the idea of risk in the finance industry is different to what a normal person's idea of risk is. A normal person's idea of risk is they don't wanna lose all their money, but in finance it's more related to volatility. Is is that the case?

Raji (16m 0s):

There's a fair bit of the curriculum where we highlight the fact that markets crash. You know for people who've never been in the stock market, the perception of Stocks just move in a straight line or they move up every year. And, we look at case studies where some of the best performing Stocks didn't do anything for long periods of time or, or didn't perform, perform poorly over substantial periods of time. You know it's absolutely true. We also take it for granted, people's level of comfort with things like volatility. The first time you experience volatility, it's scary. And You know, while investing is very unique, you would get a score that's objectively measured to the penny You know you can look in today and see how you're doing.

Raji (16m 40s):

It takes practice to be able to look at a screen and see you're down all this red and not have it affect you. And I think when people come into the market, they're, they're the most vulnerable to that kind of emotional reaction, which gets in the way of what you're, what you're right, being rational and smart about investing. I think when they understand it's not that unusual, you can point out one every once every seven years you get a correction. Once every x years you get this much of a correction. The normal return to break even in the market is typically this period after it. And then you see in the chart, okay, this is normal You know and you, you try and highlight lessons, like I said, like the gladiators with the wooden swords. Understand you have volatility. We go through the major last three crashes, internet bubble in 2000, the mortgage crisis in 08, 09, COVID 2020.

Raji (17m 28s):

And you can see each time situations where the headlines where the world is ending and what happens and it, I I hopefully it gives them a frame of mind to understand that volatility and flat periods are very normal and it's just the best thing is to ignore it. We also highlight, it's not necessarily a bad thing too. We use an example. Let's say you buy a house and the next day somebody comes in and offers you 50% less. Would you panic? No, you don't have to sell the house two years. If somebody comes and offers you four times your house, you can take it And. we try and get them to understand with Stocks, as long as they're not levered And, we deal with margin, the evils of margin. They shouldn't care where the stock is tomorrow, the next day they should care where it is in 20 years or 30 years when they retire.

Raji (18m 9s):

And You know we use examples of Stocks like You know it's interesting. The second best performing stock I believe in the s and p 500 in the last 20 years was UnitedHealthcare group. Apple was first. You would've thought more at tech, but UnitedHealthcare group, if you don't UnitedHealthcare group over the last 10 years in every single year you would've suffered a major drawdown. It's just the nature of the business. And I I think by highlighting how normal it is and how frequent it happens, it it helps them get from a place of pure fear on their way towards a place where not so much fear.

Phil (18m 39s):

Well I guess this is a great jumping off point to talk about the madness of crowds. What do you teach about the madness of crowds?

Raji (18m 46s):

You know you've read the book Popular delusions and madness of crowds. Everybody who's ever studied Ponzi, it's a classic. I thought it's a great time to cover that You know a lot of courses, again, overly focused on what's a pe what's an income state? Let's talk about what's going on You know these kids today because they're on social media, are exposed to so much snake oil salesman nonsense. It's unbelievable. Crypto, this n f t that by a dancing ballerina gorilla for this. And then the flashes of wealth, right? It's people with cars and money, they have exposure to this stuff in a way they wouldn't have had You know you would never have thought your kids would be You know getting the Nigerian prince help me phone call at seven or the internet version of it, right?

Raji (19m 28s):

But that's what happens when they're on the internet and when they're on social media, they're exposed to money and they're exposed to cons. And, we hadn't seen it done by any other class. We devoted a whole lesson on it. Behavioral psychology, Ponzi schemes, Madoff, what is a Ponzi scheme? Asset bubbles You know what creates them, what do they look like? We went go through historical stuff, some historical like Tulip Mania, that's a famous one. We talk about the internet bubbles, but then we get You know more like mem Stocks and things. Examples, You know, favorite one we use as Hertz. They went bankrupt and then people started trading the stock. You know you get these crazy outcomes and I think it's important now because they are much more exposed to financial fraud and shenanigans than we in our generation ever was through social media.

Phil (20m 12s):

And it's also the desire to get rich quick. I mean it's such a temptation, isn't it? They, they

Raji (20m 16s):

Say the effect on young girls on social media is they wanna lose weight and the unrealistic perceptions of their body. Well, social media also gives people unrealistic perceptions of how easy wealth is to create and how You know what's the smart way of creating money. You know, long term You know index tax E at You know you don't need to be a gun slinger with all your money, but they're on there and their friends are making You know all this money in 30 seconds and they don't have the ability to process that and know how much nonsense and danger that is. And, we devote a whole class to that. And I think it's also interesting because it, it highlights the importance that finance and business has a very strong psychology component that you don't see in things like math and physics and astronomy.

Phil (20m 59s):

And it's, it's really good to underline the point that a return of say 12% per annum for 20, 30, 40 years is actually fantastic because unbelievable. It is, it's unbelievable. If you can get that You

Raji (21m 12s):

Know is a superpower because of that, you don't need to do You know 25%, they 50 years, they're 50, they can invest for 70, 80 years. And it's unbelievable what compounding looks like. I mean. I wish I I would've paid millions if somebody told me this when I was seven, eight years old. All that Lego gone into an s and p index fund.

Phil (21m 33s):

That's right. But people aren't exposed who aren't exposed to it. They hear 12% and they go, oh, that's not very much. Isn't, they just don't un have that understanding.

Raji (21m 41s):

Well, You know. It's one of the challenges of compounding. If you look at the mathematical graph of compounding, it doesn't look like it's doing anything for a long time. It gets bigger and it, and at the rate at which it gets bigger gets bigger because your your capital, your profits are reinvested and then those profits are reinvest. So there's that dynamic. And then there's the other challenges, which is panic emotions. You know it's easy to get shaken out and knowledge. I I I think You know people tell somebody like, inflation, I tell people inflation 2 3%, like what do I care? Well, 20 years, half your money's gone. I mean my my wife has friends who had money 40 years ago and they don't trust the marketer banks and they put in a safety deposit box and it was a lot of money back then and now it's not a lot of money.

Raji (22m 22s):

And it's, it's kind of sad. And

Phil (22m 24s):

And how have they reacted to that when they realized what, what had gone on? Well, until

Raji (22m 28s):

They meet me, they don't know they did anything wrong. I mean nobody's telling them, look, You know. That's the shock. I I tell you with adults, it's funny with kids, the the thing is, oh my God, I wanna change what I'm doing when I show this stuff. Or we do like discussion groups with adults, the reaction's very different. The reaction is, oh my God, I was so stupid when I was 20. Oh my God, I can't believe I spent this money on this coat. Oh my God, if I just took one less trip or I didn't go to this restaurant so much, or Oh, I spent 10,000 going out at the restaurant. If I put that You know it's this regret. It's kind of a different reaction. But it's, it's, it's equally impactful.

Phil (23m 1s):

And I I assume this is the reason why the mafia doesn't like inflation. Yeah,

Raji (23m 4s):

We use a great example cuz if you're a gangster, you you can't deposit money in the bank. They wanna know where the money came from and you're dealing with large amounts of money. So there's always a joke. Gangsters bury the money in the backyard. And, we tell the students that'll protect your money. People might not find it, but doesn't protect the purchasing power of the money. And here's the hardest concept that we try and teach with that example, A dollar today is not worth a dollar tomorrow, even though it's still worth a dollar. Now I usually lose 75% of the class right there. But that's a good segue into understanding it, right? To just start thinking about things differently. What is a dollar? What is money? Money ultimately to purchase something You know it's a store of value or a medium of exchange.

Raji (23m 47s):

And You know historically dollars You know fail at that miserably. Yeah,

Phil (23m 51s):

That's right. I think Gary always points out that the US dollars lost 98% of its value. Something like that since inception. Yeah,

Raji (23m 58s):

It's since 1913, 97%. And I think every fiat currency, the numbers are so bad, it's amazing. Anybody accepts them anymore, right? I mean, but listen, they don't get that. So like they, and most people have a lot of money in cash somewhere. You know, sitting in a checking account or savings account making 0.5% maybe now they're starting to move it, it turned out 5% was the level you needed to spook people out of a low income, low yield accounts. But people are scared. They don't like we take it for granted, okay, you don't like the Stocks buy a bond or buy a money market even for them that is, oh my god, arcane world of Wall Street and I don't know what's going on. Okay, better not to get hurt. It's amazing what an obstacle, the lack of knowledge is here.

Raji (24m 39s):

And that's why I think these kind of programs have so much impact because there's this curiosity, there's this need, there's more value to knowing this than anything else. And once you break that ice wall, it's just a rush towards this because they You know and it's much simpler than they think You know. I tell people you don't need linear algebra and differential calculus for this. You need plus minus multiplication, division, throwing the plus sign equal sign You know you've got 60, 70% of it. I mean we're not doing option theory. It's basic math, basic multiplication. And it's not that daunting. And I think it helps to have a guide if you think of what we're doing, we're shepherding them through the 14 weeks and explaining how to get to it.

Raji (25m 21s):

So it's meant to be with the case studies a much more immersive experience than kind of an exposure program.

Phil (25m 26s):

No, it's interesting. I I was just coming to mind because another guest that I've had on a couple of times, he's a, an ex dancer and he's running workshops for creative people in finance as well in New York City. Oh, very nice. And it's amazing because You know these are people who are just not interested in money in the slightest, but as soon as the, the blinds fall away from their their eyes, they just get it and they just realize what they can do, especially in a gig economy like that where they've gotta go from feast to famine very quickly.

Raji (25m 57s):

Decisions these kids make now gives them opportunities and optionality in their forties and fifties to do anything, to be artists, to be philanthropists, to be entrepreneurs, to go into government. I mean it's You know. And it's, it's not a lot of work, right? It's behavioral, it's put a little bit of money in. Figure out how you want to be invested, understand what's smart, avoid all the snake oil salesman and then don't think about it except for once a year when you put more in, when you wake up in 50 years you'll thank me and You know it's, the knowledge is self-affirming. Once You know what the numbers are and that they're achievable and then you see what the results are, that's the astonishment inflection point.

Raji (26m 38s):

Right. And if you wait long enough, like you said is the outcomes are pretty astounding.

Phil (26m 43s):

So tell us about some individual students and when you've seen them and how the lights have switched on for them.

Raji (26m 50s):

My favorite story was we had a 16 year old girl, she attends the same actually school as my son. Very energetic, outgoing girl. We did the course for her and a number of classes for her and she went to her dad and she said, send to my birthday present dad, can you put the money in the index fund for me? And he was shocked, like for her, her birthday, she'd spend all your thinking about which bag she wanted a vacation, a piece of comp You know technology. But he is like, no, no, put it in the thing. And he couldn't believe it. He is like, I've been telling her the importance of saving and telling somebody it's important to save does not that effect if telling them that money they spent could be worth 40 times that amount, 20 years and they could be super rich and maybe they don't need it that badly, it changes the way they think about it.

Raji (27m 32s):

All of a sudden You know, I don't really need this. It attaches a different cost to that decision making process for these kids. So with this young young woman, it was really interesting to see because she wasn't like a finance walk, she wasn't a high school kid in the You know high school business school club. She had no interest in business or markets or any of that stuff. But the knowledge was impactful enough to have a a, a change in behavior. Right? I mean that's the goal. I mean this is a goal-oriented program. We want the kids at the end of one semester to be smart about their money. It's not meant to be a You know. Okay, now You know what Wall Street means. It's how to invest.

Phil (28m 9s):

Yeah. I I, for a couple of Christmases now I've been giving ETFs to my younger relatives. There's a service where you can just buy an ETF or you can even buy 'em shares in Ferrari for example. That

Raji (28m 20s):

That, yeah, yeah,

Phil (28m 21s):

That's good. And you give it to them and it's like this You know, here's Uncle Phil again. He's gonna explain ETFs to us all.

Raji (28m 28s):

I should do an exhibit like that. Hey, when your uncle gives you a hundred dollars gift or ticket, it's not really a hundred dollars gift, it's it's really $5,000. You just gotta wait for it. Yeah, yeah. But stuff like that, they get it. They relate to that and they remember it. And I think a lot of people try and figure out clever ways to teach present value formula. Right. Okay, I'll simplify it, break it down. And that has value. But there's a concept behind present value. And I think the mistake people make or is twofold, they think if I can't teach them the full formula, I shouldn't teach 'em. There's no value in the conceptual understanding of the principle behind the formula. That's completely wrong. And two people are not ambitious enough in terms of what these kids can learn. You know as a father in New York, my son is active in these programs.

Raji (29m 11s):

He does coding, he does math, karate, You know baseball. A lot of the programs are are not that ambitious in terms of how they teach the kids, right? It's a very diluted version. And I think what we've learned is they can handle a lot more learning than people think they can. And we're gonna try and push them to the limits. And You know we don't expect them to get a hundred percent of it, but if they get 70 or 80% of this, it's life changing. It will be for them.

Phil (29m 35s):

I was just talking to another guest this week and he was talking about the pygmalion effect where if you expect more from someone that you will get more back from them. And if you don't raise those expectations, there's nothing to reach for. And people do rise to the challenge.

Raji (29m 50s):

I play tennis, play with a better tennis player. You play better ski with a better skier, you ski better You know you put your students in better schools, they learn better. These kids can learn You know my son is in a, a language immersion program. Spanish immersion since kinder, since nursery school. You think, okay, I mean how effective can it be? I don't speak Spanish. So one day he just got up and started speaking Spanish with some Spanish friends and I was stunned. And they You know these kids, his, his age, that age and even older they, the capacity to learn is really quite astonishing. And, we shortchange them by I think simplifying things sometimes too much and constraining their exposure. But I understand why the schools can't really address this.

Raji (30m 31s):

That that's the whole role for people like us. You know the, the, the, you need people with senior experience to make this the most effective. It's not something that somebody outta grad school can do cuz they've got no trading experience and needs to be done in a way that convinces two decision agents of a friend who runs a gymnastics school in New York. One wonderful school. But the children are young and the parents are choosing which programs they think will help in the development of their children, whether physically or cognitively. When they get to the teenage level, they decide as well as their parents whether they wanna opt into something. So You know. That's the challenge. You know, everyone agrees this is an important knowledge. Everybody agrees. It's not taught, everybody agrees it's worth more knowing young, the math of that logic is, is is hard to fight.

Raji (31m 15s):

The challenge is how do you create content that take subjects that aren't necessarily eye grabbing and well suited to storytelling to engage them. And That that was what our focus was on was You know the major concepts are out there. We're not reinventing the wheel, we don't have a different view of time, value of money. We've tried to be very effective in how we teach it to them. So it stays with them.

Phil (31m 36s):

And so you're rolling this out across New York City at the moment. Is it just New York City?

Raji (31m 41s):

We're starting with our first full semester September on a limited basis. And then we'll keep rolling it out. Yeah, we've got the, the semester starting September 19th is our first semester. It's a 14 week, once a week program. One hour a week.

Phil (31m 54s):

And and what's the interaction like with schools?

Raji (31m 56s):

We are talking to a number of schools now. We have approached parents directly through the networks. I've been in New York 25 years with friends at different schools. We sent emails and that produced a pretty strong response. Actually we sold out our first class in like half a day. So now we're expanding the classes to offer more. It's a challenge. You know, reaching out to the schools. The schools You know, again, it's, it's, there's an institutional mentality here with the schools. It's a process. When you go directly to the parents, they make a decision. The school has to go through a vetting process. Is the right program or these the right people? What's their background? You know background searches, Are, they You know good people, Are they anything to worry about. Obviously they have to protect the children and they have to protect the integrity of their, their program and their reputation.

Raji (32m 40s):

It's a more evolved process. The other big opportunity we think there might be is in the corporate market, companies wanna sponsor these programs for their clients, for their employees, their employees. Families. You know they give yoga classes. Google gives you free meditation and app. You know it's, it's part of the culture to do this to HR now. And we've been talking to companies and You know that's actually been a surprisingly positive interaction. I think for us, for the next year, we, we want to run this through larger classes. We've been doing classes for the past year, probably four or five a week. But the class sizes are two to five students. And, we've done one adult class, which actually surprised me. We talked about that. But yeah, there's interest. And what we've learned is that evolves, the, the curriculums go through a huge amount of editing evolution from that.

Raji (33m 23s):

Like I said, You know where are the engagement points? What stock, what didn't work? You know where were the white eyes drop jaws. That's our metric. And I think now with the bigger class interactions, it'll develop further. And then I think we'll have content You know that we can think about how to best distribute I mean. Obviously the more people we can reach, the more positive impact we have. And That, that would be awesome.

Phil (33m 46s):

And and like you referred to before, it's, this is something that's perfect for adults as well. I mean, I looked at the curriculum and go You know this is, yeah, there is nothing there that wouldn't benefit most adults. Yeah,

Raji (33m 58s):

There's a huge demand for adults. Maybe even a much bigger market. You know, I was surprised because I would've thought the adult market would be better and more served through on You know now with the online courses, the online resources, and now AI bots and teachers. But what I realized is you can ask how do I invest in Stocks You know what's a PE ratio, but to put together the case history that teaches the lessons best or the most important lessons. The wisdom part. It's harder. You have to almost have somebody know You know why you don't buy Momentum Stocks or why Momentum Stocks. That's you're not gonna get the trading experience. The reality.

Raji (34m 38s):

I was trying to say that I would've thought the adults would be better served with the online stuff and resources. I use that for other things, but it's not the case as much as I would've thought. You know people still live in a world of ignorance and darkness when it comes to investing and make unbelievably stupid decisions for no reason that they lack a little bit of basic knowledge about it. I can't tell that I mean front with brokerage accounts and You know, they show them to me in the last 10 years. They're portfolio turnover 17 times a year and they've been made You know one and a half percent a year. And they don't even know, are you benchmarking? We'll have the You know. It's so sad. And, and so many adults are taking advantage in the same way. Kids don't get taken advantage of because they don't have brokerage accounts. They're not taking advantage of the opportunities they have as young people.

Raji (35m 20s):

But as you get older, you get taken advantage of and you don't know what to expect. And you think, oh, I mean one 2% a year. And You know, you realize You know you're up 10% in five years where you could have doubled your money in the s and p. Right? It's crazy what happened. It's crazy decisions people make because of lack of knowledge. Sorry, I hope, hope I'm not rambling too much.

Phil (35m 38s):

No, that's fantastic. It's really, it's fantastic in information. What I was No, no, no. What I was gonna, I was just gonna run on from that thought. You, you're referring to how much information there is online now and that there is so much education there, but I think there's an overload because of that and mixed in with that. You've got all the, the hucksters out there trying to sell their trading system or their margin loans or their leveraged ways of making money overnight. And it's really hard to pick out for someone a, a, a regular civilian to pick out what's really good value information.

Raji (36m 12s):

Here's the shocking part. We do the same class where I show them pictures of hucksters, fraudsters, You know Finit, TikTok, You know here are schemes of this stuff. And like to me or to you or me, you'd be like, oh my God, what a clown. This will never work. But to these guys, people that adults and kids, they don't, to them it looks like a Morgan Stanley advertisement or You know Goldman Sachs private wealth internal document. They, they can't tell, oh apr, what is that? They don't know. And more often than not, You know people will put $10,000 into these things and spend no time where if they were buying a car or applying a vacation, they'd spend six months research You know hotels That that they're so intimidated.

Raji (36m 53s):

They make these decisions. They'll part money 10 grand on a crypto nft blink of an eye cause a friend pulled them to, they'll take them six months to pick which hotel and airlines to fly on a trip to Hawaii. Right? It's a weird psychological thing, which I don't fully understand, but it's hard not to be You know bowled over by it when you experience it.

Phil (37m 13s):

So if listeners are interested in finding out more, how can they do? So?

Raji (37m 18s):

You can go to our website at learnwallstreet.org and it has a brief summary of the program and contact information and people wanna talk about the program or parts of the curriculum. We are very transparent. One of the things I've been frustrated with afterschool programs in New York is the inability to actually see what the curriculum is. So as I've shared with you, we, we are happy to talk about the curriculum and discuss individual class plans. Feel free to contact us.

Phil (37m 46s):

Raji Khabbaz, thank you very much for joining me today. It's been a great pleasure meeting you

Raji (37m 50s):

Phil. Thank you very much. Really appreciate the time.

Chloe (37m 53s):

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Stocks for Beginners is for information and educational purposes only. It isn’t financial advice, and you shouldn’t buy or sell any investments based on what you’ve heard here. Any opinion or commentary is the view of the speaker only not Stocks for Beginners. This podcast doesn’t replace professional advice regarding your personal financial needs, circumstances or current situation.