hi, everyone. welcome to "on the money." i'm becky quick. does throwing darts at a dart board help you make smarter money decisions? do you need us to tell you the friendly skies aren't so friendly these days. why airline profit is your loss. the nba experience. how nba students are going global to do good and do well. and millennial investing. what 20 and 30-somethings can keep you about money. >> we're both optimistic and realistic as well. >> "on the money" starts right now.

here's a look at what's making news as we head into a new week "on the money." tensions are spiking in the middle east and oil prices are rising along with that. radical groups are seizing control of areas in the northern part of iraq make being the oil market extremely nervous. crude oil closed more than $107 a barrel, up more than 2% at the end of the week. that helped send the markets down as well. the dow falling triple digits for the second day in a row and sporting a two-day losing streak by thursday's close. the s&p 500 had its worst day in a month and suffered its first three-day losing streak in more than two months. the markets recovered and rose on friday. disappointing retail sales in may rose for the fourth straight month but economists expected an increase of more than the .3% we actually got. consumers make up more than two-thirds of the u.s. economy so it tells us a little bit about demand overall. electric automaker tesla has

nothing to hide. to prove it, the company is making all of its patents freely available. the ceo elon musk says that the move is to help advance electric vehicle technology. electric cars with zero emissions right now make up less than 1% of global auto sales. he is the co-author of the best selling book ""freakonomics," an unconventional approach to the world that could have big implications for your money. now he's co-authored the new book, "think like a freak." and the author joins us right now. it is great to see you. steven, you've said that monkeys throwing darts at a newspaper could have the same or better results than most stock pickers. people at home may wonder what retail investors should do. >> probably hiring monkeys rather than hiring stock pickers -- no, this is just dumb. i'm not saying anything that anybody really knows the literature doesn't already know.

that even the even average active manager doesn't beat the market. that says that we're not very good at predicting the future. surprise of surprises. and that for the average retail investor, we know -- look. it is hard to predict the future. it is hard enough to understand the past well. one thing we do understand the past from the past about individual investing is that dollar/cost averaging and allocation are generally pretty good, much better than the alternative which is speculation and trying to time the market and so on. >> you're not saying don't invest in stocks. you say do something like invest in an s&p index where you have much lower costs -- >> oh, absolutely. i'm totally pro-market. i'm just anti-stupidity. and it's very easy to get caught up in the belief that we can all be better than the market generally, or that the people that i happen to know or that my uncle told me about happens to be better. >> i agree with you 100%. by the way, a lot of people who are doing this themselves are doing this as a second job, not as their first job.

let's talk a little bit about oil prices. they spiked this week. a lot of tensions rising in iraq. i know it is hard to figure out what's going on with geopolitical issues, what that means. is this something long-term investors should be worried about though? >> let me take a page from our new book "think like a freak" where one chapter is called the three hardest words in the english language which we declare are "i don't know." we have a really hard time saying "i don't know," especially someone like me coming on to an appearance like this -- but i don't know. let me tell you why i done know. geopolitics and commodities prices are two of the most unpredictable realms in our society. we've seen that very well through good academic research on this. >> let's talk more about your new book, steven, "think like a freak." i love that title but what does it mean? >> basically we just peeled back the layers of then ona little bit to see how do we make the decisions we do, what are the causes of our various behaviors, and can we all think a bit more

productively, a little bit more rationally and a little bit more creatively. we came up with a kind of very practical toolkit. so this book "think like a freak" is still full of stories but they're stories that illustrate a series of principles that we think can help anybody in any setting, whether it is personal or business. so things like acknowledge right off the bat what you don't know. don't be afraid of that. be willing to think like a child. children have a set of observations that are very different from ours. many of them not that useful but some of them are. we advocate that people appreciate the up side of quitting, that they learn to appreciate the downside of what's called the sunk cost thinking and appreciate the upside of opportunity cost. so appreciate the upside of quitting, whether it is in a strategy, a job, a project, maybe even a relationship. >> that's part of the failure that you say is so important. that's one of my favorite parts of the book, failure can be a really good thing. >> failure can be a good thing, but if we stigmatize failure, if

we treat failure like pure loss, then we avoid it and we don't face up to it and even if we think we're failing at something we'll stick it out because morally almost we feel that not quitting is the right thing to do. and there may be cases where that's so. it's hard to say. there's no perfect algorithm for telling you when you should quit, when you should give up. >> i like when you say about learning things from kids. i have a 2-year-old at home. what's something that you might learn from a child? >> there are many things. first of all, their brains are just more plastic and faster and their perception is better than ours. if you look at the human brain, it is at its peak powers from 14 to 24. for the rest of us we're on a long, slow decline and we know that. but we can harness some of what makes those brains so powerful. one of that is not being afraid to come up with observations that are maybe obvious or not sophisticated. that's one thing that kids do that we kind of stop doing.

just being willing to be excited about what really excites you. because it is hard to solve a problem if you march in to it with that kind of dutiful demeanor like, this is a big, serious thing and we have to come up with some things that are kind of in line with what everybody else has come up with. be wild. be creative. be child like in your idea generation. then put on your adult hat where you can profit from your experience and your wisdom and i hate to say it, your ability to bs. that's one thing that adults do very well. >> kids are much better at calling out the emperor when he's wearing no clothes. >> that's exactly right. >> steven, these are great words to live by. thank you so much for joining us. the book is called "think like a freak." we are "on the money." while the airlines are flying high, travelers are experiencing some turbulence in the friendly skies. from higher fares to fewer rewards, does industry profit mean traveler loss? and later the business school class that took the show on the road. students and start-ups going global.

right now as we head to a break, take a look at how the stock market ended the week.

first it was delta. now united airlines announcing that next year members of its mileage-plus program will earn reward miles based on the price of their ticket, rather than how far they fly. does this mean frequent flyers are getting more or less out of their royalty programs? joining us right now to explain it all, aviation expert and the boyd group chairman, michael boyd. michael, thank you for joining us today. >> my pleasure. >> so i've heard about some of these upgrades coming from these guys. to me, it sounds like you are losing out if you're a traveler. what do you think? >> well, frequent flyer programs are obsolete. they were originally put into

effect to keep people on the airline, to keep you on united so you didn't fly continental or piedmont or ozark. all of them are gone. the whole idea of a frequent flyer program was to give away free seats is obsolete. the airplanes are all full. they're going to be ratcheting these programs up where only the top flyers are going to get -- i wouldn't say perks. they're just going to get relief from a lot of inconveniences. >> when you start doing it based on cost instead of mileage, i notice recently that when i fly i have to fly to houston in order to go back to omaha or fly to south carolina to get somewhere north. if it is not a major hub, you have to fly twice as far as you used to. >> air transportation does not work. the economics don't work for small community and point to point service. but as far as frequent flyer programs go, i look at them as almost being a union card you have to earn to not get non-perks. if you earn the right union card you're going to be able to board early. if you don't, you're in 26e

boarding last between two people that don't bathe. airlines want you to show your loyalty or otherwise you're not going to be very happy. >> but it is not about perks anymore. it is about not getting demerits. >> that's exactly what it is. don't try to book that free seat to hawaii. you're going to make 14 stops through omaha and portland to get there. the real issue is the frequent flyer program is there for the business traveler so he can at least get on early and maybe have some overhead space. >> you say the economics of the airline industry doesn't work. i know that's been the case for a lot of years but we've been watching what's happened over the last couple of years. airline stocks have taken off and that's been as there's been more consolidation, less competition and they've finally been able to raise some prices and get the seats filled. my question is, it is good news for shareholders but does it all come at the expense of travelers? >> well, i think it is just a basic economics of air transportation. airlines aren't chasing volume anymore. they're chasing revenue. they'll give up turf if they

have to. they don't really care about more people, they want to make money. that's why we won't see growth in traffic for the rest of this year because there's not going to be anymore seats. the real issue is a lot of applications where airlines used to make money aren't today. >> get over it, in other words. this is just the way it has to happen? >> oh, it is. it's been a field day for consultants ripping off little communities. we'll get the air service. it's over. tune up the pick-up truck and drive to charlotte and you'll be okay. >> gordon bethune used to say, you are only as smart as your dumbest competitors. >> i would maintain there are no dumb competitors. american has a whole new management. richard anderson at delta. right now today we don't have any fruitcakes out there starting airlines that would have any affect on anybody so it

is a stable industry. >> we've also talked about higher oil prices, risen to their highest level in months because of the turmoil in iraq. i wonder if that originally has an impact on the airlines and in turn the customers who are trying to board those planes? >> it certainly is going to jack things up. there is no airplane flying today when anyone thought oil to be at $50 a barrel, let alone $100. it is a different system. so as oil prices go up the transportation system has to adjust for that. that means there will be less flying to some smaller communities, mid-sized communities and the air transportation system will have less reach. it is just raw economics. >> michael, thank you so much. up next, we are "on the money." going to school means going global. we'll talk to the business school professor exporting entrepreneurialism. and are millennials taking the saying "a penny saved is a penny earned" a little bit too much to heart. what younger investors are doing right and what they are doing wrong with their money.

do you have the right job skills for living in a start-up world? a group of ivy league business school students took the classroom on the road recently to learn from and advise entrepreneurs. guys, thank you for being here. don, you're both an entrepreneur and a business school professor. i just wonder, what is it like going in to another culture,

taking a deep dive? what do you learn, and why do it? >> we pick up an awful lot of lessons in cape town, south africa, that were things that were different about african culture and entrepreneurship in africa. but also many things that -- many threads of starting and running a business that are the same regardless of where you are in the world. >> what's a common thread, something entrepreneurs everywhere have in common? >> passion. for one, focus, hopefully. perseverance. >> matt, you work on wall street but you said that this was a life changing experience. how so? >> it was interesting for me to see seeing how the start-up generation has been booming here in the u.s., how different it was to see people doing what i see here in new york in a place like south africa and what the challenges were that they face and how they were different for

the gentleman that we worked with. he is working to try and train new employees and he can't communicate with them in effective ways because some of them don't have regular access to e-mail and -- >> we think of infrastructure, all these things we take for granted. it just doesn't exist there. >> exactly. >> don, we talk about the bric countries, brazil, india, china. what's it like there for entrepreneurs starting a business? >> south africa is one of the bric countries and in fact, south africa's status is really quite questionable these days because it's been surpassed in africa by nigeria as the largest economy. and south africa's education system is really terrible. they're ranked 133rd out of 144 countries in the world. and you can't, as matt was really saying, you can't build a

business and have -- an entrepreneur can't build a business and have employees who can contribute if they haven't been educated. >> do they end up training them themselves? >> well, there are many programs that skirt the official government programs, because official government programs simply don't work. >> you see business students. you've been watching them for a long time, too. i wonder how their career decisions were affected by the great decision, what you see kids choosing now versus maybe before? >> oh, there's a definite change and when i started teaching entrepreneurship 6 or 17 years ago, very few people were number one, interested in entrepreneurship. columbia business school had a big corporate image. today working at ibm is perhaps riskier than being an entrepreneur. and so you have the make-up of

the school is very different. you have student body that's heavily oriented toward entrepreneurship. interested in entrepreneurship. you have a curriculum that started when i started one or two courses in entrepreneurship and now you have literally dozens. >> matt, what's your plan for when you graduate? >> well, i'm likely going to stay with what i'm doing for now but doing this trip with columbia really got me thinking about all the other opportunities that are out there. we actually -- one of our speakers had worked at my firm at one point as well at one time. he's since left and moved to south africa and is starting a business there. >> matt, don, thank you both very much for coming in. up next "on the money," a look at the news for the week ahead. and could a 20-something know more about saving than you do? lessons millennials learned from ten.reat recession.

for more on our show and on our guests, go to otm.cnbc.com. follow us on twitte twitter @onthemoney. here are the stories that may impact your money this week. on money we'll find out how industrial production fared for may. tuesday, the two-day fomc meeting on monetary policy to find out about interest rates. the consumer price index is due and housing starts will be in for may. on wednesday, amazon has an event tech insiders believe may launch the e-tailors pea's first

smartphone. all you baby boomers out there step aside. for the first time in 67 years there are more members of another age group. according to the census bureau, it is the millennials. personal finance correspondent sharon epperson is here to tell us more about this generation and what others can learn from them. >> well, becky, generally speaking millennials are the children of boomers who range in age from 18 to 33 years old. there is a lot to learn about this generation. coming of age in a financially tumultuous time is key in defining the millennial generation's views on money and life. >> the 2008 and 2009 great recession really did have a key impact both on me an my generation as far as how we choose to save for our future retirement. indefinitely i would say that our parents played a role in that seeing what they went through. we don't want to duplicate that experience. >> the millennial generation's attitudes about money and risk have been shaped by market volatility and by an economic downturn that's constrained their jobs prospects and their

earnings capabilities. as well as their parents' real estate values, investment portfolios and retirement savings. so becky, they are juggling a lot here trying to figure out where they stand and where to go from here. >> i never really thought about it. these are people whose entire kind of financial understanding of life has seen some different times. >> millennials are between 22 and 33 generally but it is 292 year-olds that are really now taking over as the largest demographic group. >> what's this group doing right? >> one of the things they're doing right is setting financial goals. whether paying down credit card debt, paying off student loans or saving for retirement, they are really interested in having some goals and trying to work toward those goals. the issue is that because of what they saw their parents face they realize they need to start saving now and they're saving consistently. so that is another good thing that they are doing. other thing is they're not reckless. after all, they've seen this economic downturn. they're a bit more cautious and conservative with their investment strategy. >> being conservative can and

really good thing. unfortunately, sometimes it can work against you especially if you are at the time in your life where you are supposed to be a little riskier. >> at your 20s if you're overweighted in cash, which many millennials are, that's not a great thing. half of them according to one study are sitting in cash and only have one-third of their portfolios in equities. financial advisors will tell you, you need maybe almost the entire portfolio in stocks. >> this is the one time you can afford to be a little more reckless or be a long-term holder. >> here's the issue though -- they're getting their advice from their friends, family members who may not know a lot about investors or done that well. they aren't really seeking advice of a financial advisor. that's something that could maybe help them along the way if they got some professional advice. >> is there anything children of these baby boomers can teach the rest of us? >> i think a lot. number one is having plan. when you think withat's what yo need to do.

they're saving early for retirement? 25 starting to save for retirement? that's phenomenal. they're realistic about work and life. this is interesting. they're not trying to retire at 65. that's not an option. that's not even desirable. they want the type of job that will continue for years and years to come. retiring at 70, that's not weird to them. that's not a bad thing. that means they're doing work that they enjoy and getting paid for it. >> the right attitude, that's for sure. sharon, thank you so much. >> sure. my pleasure. that's the show for today. i'm becky quick. thank you so much for joining me. next week, a special look at the apollo theater in harlem, a cultural institution in business for 80 years now. each week keep it right here, we are "on the money." have a great one. i will see the next weekend. happy father's day. we needed 30 new hires for our call center. i'm spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast? go to ziprecruiter.com and post your job to over 30 of the web's leading job boards with a single click; then simply select the best candidates

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>> in 2011, the super rich spent more than $11 billion on art, more than $5 billion on wine. >> we sold a bottle of 1869 lafite for $235,000. >> the markets today are so volatile, so uncertain. the wealthy want a safe place to put their money, and increasingly, they are putting it into collectibles -- art, wine, jewelry. >> this house is like pop-art museum. >> but where there's big money, there's big opportunity to rob the rich. >> but this man that most people in the building had trusted is ripping everybody off. >> sometimes, it's organized crime. sometimes, it's the burglars. >> right now, it's about a $6 to $8 billion-a-year industry. that's a very robust black