 People accuse Austrian economics of being overly theoretical, but our guest this weekend, John O'Donnell, proves them wrong. He's applied Austrian economics consistently over his long career as both a successful investment banker and as the CEO of several large public companies. Now he teaches investment strategies online and speaks at conferences around the world as the head of the online trading academy. John met Murray Rothbard in the 1970s and everything changed for him. He became a thorough Rothbardian and a dedicated libertarian, not to mention a close friend of hard-money stalwarts like Doug Casey and Harry Brown. You'll enjoy hearing John's memories of how Murray owned a room, how Murray's incredible sense of humor was matched only by his sheer late-night endurance, how measuring investment returns in fiat currency is nonsensical, and how Wharton, Harvard, and the London School of Economics produce so many clueless Keynesian MBAs. Stay tuned. Hello John, and thank you so much for joining us. Thank you very much for inviting me on the show. John, for starters, is it safe to say you are roughly in the age group known as the Baby Boomers? Oh, absolutely. You know, we're the class, I believe, between 1946 and 1963. I was born in 46, I got up a high school in 64, so I'm in the sweets one. I'm part of the first class marching through the pipeline. So coming of age, as you did in the 1960s and 1970s, were you ever on the left or on the right politically? Well, I grew up in a small farming community, but 90 miles around the state was. My father was a died-in-the-wall. My father was born in 1910, he loved Roosevelt because he was convinced that Roosevelt got us out of the Great Depression. And he used to tell me, he said, son, if you want to live like a Republican, you got to vote like a Democrat. And I guess that's what I believed. I mean, I believe that was the politics across the dinner table at night. He was a small town farmer in Hannibal, Missouri, who literally at the bottom of the Great Depression in 1930 was swapping pharmaceuticals for food. So he went through the Great Depression, and he was convinced that Roosevelt got us out of the Great Depression. And that's all I really knew. I was fortunate as a kid to handle a lot of coinage, had a paper round to get paid in dimes, quarters and halves, you know, pre-1964, 900 fine silver. As a kid, I had as a hobbyist, I was a coin collector. So I was very sensitive to, and of course I handled a lot of coinage in my dad's pharmacy, so I was really sensitive to a little bit about the history of money from a coin, from a youth coin collector's perspective. And then later on in life, I had the opportunity, I guess it was the late, it's probably the late 60s. I think Murray Rothbard's book was first published around 1964. What has government done to our money? But that was really a great introduction for me. And it gave me a grounding and a foundation and a perspective of the world as a young college student, I didn't go to college for 1968, with a totally different perspective. And you know, when I first read through it, and I was just kind of recently looking back at the table of contents, the whole concept of money being the denominator in a free society, the fact that why does the government have a monopoly on money? And my father and I had long conversations because after reading Murray's book, what has government done to that money, it really caused me to start asking some very serious questions about the common denominator of all of our lives, which is the money unit. Tell us more about your experiences reading Rothbard and what impact his work has had on you. Well, the first book that really had a big impact on my life was, what has government done to our money? There were really three books, of course, that led me to the likes of Henry Haslitz's book, Economics and One Easy Lesson. That ultimately, believe it or not, led me to other readings. And by Harry Brown, the former libertarian president, Harry wrote a book around 1970, published by Arlington House, that very well could have been about the time Lou Rockwell was there. I think Lou Rockwell came out of the Arlington House environment, didn't he? And that being said, he wrote a wonderful bestselling book called How to Profit from the Coming Devaluation. I didn't know what it really a devaluation was. I never heard of anything like that before. But what happened to me as I was teaching school after I got out of college, in December of 1971, I didn't have anything to do, so I started a coin brokerage business off my kitchen table. And I would call up people and I said, look, I think Nixon's going to devalue the dollar only because I had read that in a paragraph in Harry Brown's book. And people would buy gold and silver coins from me. And of course, in August of 1971, Nixon did devalue the dollar. And everybody thought I was kind of an economic genius. Or some people thought I was clairvoyant. How did you know this? And I was embarrassed to tell them, well, all I did was read this book and it gave me a heads up. But it really was a life-changing experience for me. Then I started going to monetary seminars. Jim Blanchard hosted his first monetary seminar in New Orleans, the Gold Conference. He started something called the National Committee for Monetary Perform, which was really focused on legalizing gold. And I met Murray Rothbard there. And I happened to meet Murray. I had read his book, of course, but I was a young businessman. I hadn't studied formal Austrian economics other than those three books that I had read. But I really didn't really appreciate who Murray was at that time. Later on, I would go on and meet Murray at other seminars sponsored out in Los Angeles in the late 70s, early 80s on three different occasions by a gentleman you may know. I know Lou Ruff, well, knows him, named Ken Gervino. He had at least were monetary seminars. There were three or four of these hosted across the United States. And they were really my foundation to break bread and meet the likes of Doug Casey, Murray Rothbard, Harry Brown, and I became rather close friends. And it gave me the platform to start my reading and really helped me in my career and my business dramatically. And I've gone on to become finalist in the year, contest twice in Orange County. And now one of them considered one of the founding principles of online trading academy. And we're the largest trading education school in the world with 35 campuses spread over seven countries. And all of that's grounded in the power of education should be in the private sector. We take no government funding whatsoever. And we're really grounded in what I would call me see in Rothbardian principles. So you're clearly a veteran of the hard money scene going back to the 70s. What were your impressions of Murray as a person or as a man? Did you get to know him personally at all? I thought he was the most humorous, jovial, life-hearted person I'd ever met in my life when I would meet him at a cocktail party. Occasionally I had the opportunity to have him see a panel and I would introduce him. And then later in the evening, you know, most of the speakers would be invited to a cocktail party, a social hour. And I was just stunned and amazed at his humor, his, everybody loved him. When Murray walked in a room, he owned the room. The room lit up. I mean, he was like a magnet. And, you know, I never have met anyone in my life. I was a young man in the early 1970s. I've never met anyone in my life that had the endurance of Murray Rothbard. That guy could go and go and go until the wee hours of the morning. And he would just own the room wherever he went. It was like a shining light walked in the room. And again, in those early days, I didn't fully appreciate who he was, only as later in life as I started to become more aware of his, of his power, his position in what I call the full libertarian movement that I truly appreciated. See, in my mind, I believe the greatest economist ever lived was Ludwig Weimises. But I really also believe in my heart of hearts, the greatest U.S. economist that the U.S. ever produced on American soil was Murray Rothbard. And I mean that sincerely. Well, after meeting Murray, how did you begin to morph into both the business person who's been the CEO of several public companies and also an investment guru? And did Austrian economics shape your career in both those areas? Yes, it did. It gave me a grounding in principles. I've always felt when we look at investments as an example, I've always felt that when you do accounting, you measure your rates of return in a fiat currency world. It is delusional because the currency purchasing power parity, roll or two a basket of peers who's usually measured by the dollar index, is an illusion. So the fact that I was a coin collector, the fact that Murray's book turned me on to the benefits of hard money, that money should be a denominator, it's a measuring unit. And I have always followed a website here recently where I have priced goods and services in grams of gold or in grams of silver. And for instance, one of the simplest, easiest ways to do that is to use the U.S. silver coins. Dines quarters has been in pre-1964 because each one dollar of face value, i.e. four quarters, has .72 ounces of silver. And so if you know the spot price of silver in any given moment of time, it's a very simple calculation to figure out how many quarters with one dollar face value does it take to buy a gallon of gasoline and how many fiat dollars does it take to buy a gallon of gasoline. And very clearly, if you do your accounting that way and use hard money as your denominator, it causes you to look at the world, measure risk, measure reward from a totally different perspective. For instance, everybody talks today about 18,000 Dow. But yet in 2000, when the Dow was at 15,000, I should be 11,700, it took about 44 ounces of gold to buy one unit of the Dow. Today, it takes about 15 units of gold or 15 ounces of gold to buy one unit of the Dow. Now, the Dow earnings capacity in fiat money has risen over the last 14 years, but its purchasing power parity in hard money, i.e. gold, has dramatically dropped. And the reason I like to use gold as a measuring rod for wealth fluctuation is simply because no central bank can print gold. And it's the elegance of gold in measuring the value of something and that gold fluctuates like everything, but everything fluctuates in purchasing power parity. But I needed a denominator that I could hang my head on that gave me good value. And it helped me discover, for instance, when Murray would talk about what is money. Money is, inflation is an increase in the money supply and credit relative to available goods and services. But I am in that definition a little bit and I call inflation an increase in the money supply and credit mark-to-market chasing a relatively fixed amount of goods and services. And when you look at the money denominator from that perspective, it allows you to get on top of the credit card cycles that we went through in real estate and in the stock market. And a lot of people don't understand between 2007 and 2010 the average net worth in fiat money of the average American home dropped over 40%. And we haven't seen numbers like that since the 1930s. So if you look at the credit component of the money supply, it allows you to do better economic decision making and forecasting about when one of these credit card cycles might come along. Well, John, isn't it interesting to know how clueless most investors are about inflation because you'll hear average investors, average Joe say, well, the return I care about is my return net of taxes or net of fees or net of mutual fund loads, et cetera. But you don't hear people saying, well, what's my return net of inflation? Absolutely. And I had a discussion, I have a 20-year-old son that was winding the other day about minimum wage. And I said, son, well, you know, why is it that you believe your employer is only offering you $7 an hour for your wage or for your labor? And, you know, he mumbled something about how he was probably getting ripped off. And I said, no, I mean, very candidly, maybe you're only giving that employer $7 an hour of output. But I said, when I was your age, son, my minimum wage was $1.25 an hour. He said, oh, dad, you were really getting ripped off. I said, well, wait a minute, I was paid five quarters, 25 cents, for one hour of my labor. Now, you're a lot smarter than I am, son. You've got better tools than I had when I was 20 years old. But I said, my dollar and a quarter of 900 fine silver coins today have substantial amount of silver in them. And I can go purchase with a dollar and a quarter of silver coins about three gallons of gasoline. How many gallons of gasoline can you purchase with $7? He said, well, I'm, you know, this was a bit ago, maybe four months, six months ago. He said, I can bag barely two gallons of gasoline. So I said, what change? Did the value of the labor change? Did the value of the gasoline change? Or did the value of the money change? And he scratched his head there for a moment and tried to think that through. It's the money's purchasing power that changes. The denominator changes. And unless you keep your finger on the pulse of the denominator and what has government done to the denominator, you can never really figure this out. And unfortunately, this is not taught in our university systems. They're not teaching these principles at Wharton. They're not teaching these principles at the London School of Economics. The only place you're gonna get it are organizations like the Mises Institute, perhaps FEE, and a couple of other organizations. That's about it. That's where you're gonna get this information. You're gonna get it in the private sector. You're certainly not gonna get it at Harvard or Stanford. John, you've been both the CEO of publicly traded companies and you've been an investment banker. So tell us, does the average corporate officer or Wall Street banker have any real understanding of money, the Fed, or business cycle theory, or are they all just thorough Keynesians by default? Well, first of all, the basic foundation in which we think there's need for the goods and services that we produce is that Wall Street has told the little guy, his whole life, that you can't learn to tie in the market, that you're not smart enough, you don't have all the information, you're not willing to put in the work, and that therefore Wall Street's message has always been their solution is just turn your money over to Wall Street and they'll do it for you and you go about your life. Our message and online training academy's different. Our message is you can learn to tie in the market. You gotta put some energy and work into it, but it is a skill that you can acquire. If you're properly coached and you have a methodology that has been vetted with high probability of success, no guarantees, you can learn to tie in the market with remarkable accuracy if you're willing to take responsibility for your own financial affairs and become what we call self-directed to the market. And the online brokerage industry allows you through the use of ETFs and direct access trading in stocks and pictures contracts and options and bond market, you can take responsibility for your own financial affairs including be responsible for your own pension resources in self-directed IRS and pension plans. So first of all, you have to have an appetite to wanna do that. Now, what we preach is markets are impacted by macroeconomic principles. Are the markets going through, is the economy going through a period of cheap liberal credit? Certain sectors in the given moment in time are credit challenged. Other sectors, the banking industry and other channels of credit are freely lending for growth and expansion. We wanna own those interest industries in those sectors that are doing that. Conversely, and a best example of that right now might be the energy industry. There might have been the real estate industry in 2006. We also know that there are macroeconomic periods of time where some of these sectors go through credit contraction that, and therefore those industries are gonna shrink. There's gonna be a reset in price and valuation in nominal terms, and we can only trade in nominal terms for all practical purposes because when you make settlement on a trade you get paid fiat money everywhere in the world. That being said, we know that one industry comes into favor because of the availability of cheap liberal credit and another industry might go out of favor because of cheap liberal credit conditions. So we first of all wanna look at the macro world we live in and in context, trade the short term price movement. Now, short term price movements may as be a little as one day, a price movement or one week or a couple of quarters of price movement. And we have developed a proprietary methodology which we reward a patent for around supply and demand identifying on a price chart, institutional order flow and imbalances between supply and demand of institutional order flow where there's about to be precipitated a price change. And we wanna trade that price change. If the signal tells us to buy the market we wanna buy the market because price is about to go higher using our patented strategy. Now, if the market is about to go lower and pivot in price we're not opposed to shorting the market. As a matter of fact, we like to sell unsustainable rallies in a bull market. So we have no dog in this fight as to which way price goes. We're not a permable, we're not a perma bear. We're a trainer. We either take liquidity from the market or we bring liquidity to the market. But we teach our adult learners in our 35 centers across the world that it's their responsibility to take charge of their financial assets. I don't think anybody who comes to us most of our clients are baby boomers. I don't think any of them want to be a war to the state or a burden on their children. So using sound Austrian economic principles it's certainly better than trying to use Keynesian principles to make an informed choice on when to buy or sell a capital asset. And I think we probably do more work in Austrian than apply Austrian economic principles to the trading and investing decision than probably any public or private institution out there. Well, it's interesting that you say that. And of course, your own background's a little unusual. In this sense, you've been a CEO of big publicly traded companies. So you've been a manager but you've also been an investment banker and most people who have been one of those two things have not been both. So let me ask you this. Does the average corporate officer or the average Wall Street banker have any real understanding of money, of the Fed, of business cycle theory or are they all just thorough Keynesians at least by default? They almost all are Keynesian by default because they come out of Keynesian University MBA models. If you have a Harvard MBA, if you went to MIT or Stanford MBA or the London School of Economics you have been watched and your whole academic experience drank the Keynesian Kool-Aid. Where are you going to get introduced to Austrian economic principles? It's not taught but at a few small universities there's a couple of exceptions to that but unless you came out of that environment you don't know what you don't know. And unfortunately, all the MBA programs or all the apprenticeship models in the investment banking community are saturated with Keynesian thought. And I don't think, I mean there's a handful of investment bankers that have overcome their Keynesian exposure and have become self-educated through studying MISI's work and FIAC's work and Rothbard's work and the MISI's Institute has been foundational in making all of that intellectual property available at remarkably affordable rates. And of course you now have your own online courses that are outrageously affordable for anyone who wants to learn these principles. So if you're looking for truth sooner or later you have to drift away from the Keynesian perspective to the Austrian perspective. John I couldn't agree with you more. Thanks so much for your time and for a fascinating interview. Ladies and gentlemen you can find out more about John O'Donnell at tradingacademy.com. Have a great weekend.