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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: We all have a complicated relationship with money. We think

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Speaker 2: we understand what it is and why we want it,

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Speaker 2: but very often we have little idea about what money

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Speaker 2: truly represents. This can lead to disappointment when we think

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Speaker 2: about how much money we need to be happy. Capital

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Speaker 2: is a tool, and if we want to get the

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Speaker 2: most out of it, we need to understand what it

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Speaker 2: can and cannot do for us. I'm Barry Riddhelts and

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Speaker 2: on today's edition of At the Money, we're going to

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Speaker 2: discuss how to improve our relationship with money, how to

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Speaker 2: have better outcomes when it comes to earning, investing, and

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Speaker 2: spending our cash. To help us unpack all of this

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Speaker 2: and what it means for your portfolio, let's bring in

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Speaker 2: doctor Daniel Crosby. He is the chief Behavioral Officer at Orion,

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Speaker 2: where he develops tools, training, and technology to help financial

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Speaker 2: advisors apply behavioral science in their practice. His new book,

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Speaker 2: The Soul of Wealth Fifty Reflections on Money and Meaning,

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Speaker 2: is out this month. It challenges readers to think about

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Speaker 2: money in new ways and to develop a better relationship

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Speaker 2: with their finance. So Daniel, let's start with a simple question,

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Speaker 2: what is true wealth? How should we consider things like friends, family, health,

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Speaker 2: time in terms of our overall wealth versus simply financial success.

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Speaker 3: Well, very great to be here. When we look at

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Speaker 3: what true wealth is and what it isn't, it's what

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Speaker 3: it is is a little harder to answer. What it

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Speaker 3: isn't is just a number. And if we look at

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Speaker 3: the positive psychology literature that came out beginning in the

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Speaker 3: mid nineties, it's really like five things that are the

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Speaker 3: staples of a life well lived. Martin Seligman did this

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Speaker 3: seminal research. But it's it's positive experiences. So this is

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Speaker 3: sort of leisure, like are you having enough fun? It's engagement,

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Speaker 3: which is deep, meaningful work that helps you sort of

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Speaker 3: lose track of time. It's relationships. This is the thing

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Speaker 3: that's most predictive of true wealth. It's meaning working for

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Speaker 3: something bigger than you, bigger than your net worth. And

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Speaker 3: its advancement, which is getting better, you know, being better

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Speaker 3: today than you were yesterday, growing, learning, changing. And when

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Speaker 3: most of us think about and talk about wealth, we

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Speaker 3: do it in a very one dimensional way. And even

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Speaker 3: when you look at you know, how people prepare for

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Speaker 3: something like retirement, mostly we're trying to hit a number

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Speaker 3: that would help us have lots of that leisure, right,

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Speaker 3: we're going to spend it at the shore or at

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Speaker 3: the golf course, but we don't always account for the

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Speaker 3: relational piece, or the meaning, or the advancement or the

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Speaker 3: growth or the work, and all of these are very

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Speaker 3: much a part of human flourishing. So, you know, soulful

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Speaker 3: wealth encompasses far more than just numbers on a spreadsheet.

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Speaker 2: So in the book, you address four common behavioral erarors

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Speaker 2: that are endemic to finance Ego, emotion, attention, and conservatism.

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Speaker 2: Explain those if you would.

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Speaker 3: Yeah, absolutely, So you know, there's well over two hundred

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Speaker 3: different psychological biases now that impact our money. But in

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Speaker 3: my research I really said, look, they're not all equally meaningful,

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Speaker 3: and a couple of them are sort of these meta biases.

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Speaker 3: Ego is the different flavors of over confidence, thinking we're

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Speaker 3: better than we are, luckier, better, smarter, more knowledgeable about

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Speaker 3: the future. Emotion is exactly what it sounds like, sort

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Speaker 3: of confusing the heart with the head, which is easy

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Speaker 3: to do with something as visceral as much any Attention

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Speaker 3: is where the media comes in. You know, the media

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Speaker 3: diet that we have ourselves on. It's confusing things that

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Speaker 3: are loud in the media with things that are likely

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Speaker 3: or high probability. And conservatism is the various ways in

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Speaker 3: which we're sort of small minded in provincial we're risk averse,

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Speaker 3: we're status quo prone, we confuse things that we know

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Speaker 3: with things that are good, and all of these things

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Speaker 3: can kind of land us in trouble.

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Speaker 2: Money can indeed buy happiness if spent on meaningful experiences

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Speaker 2: and values. Let's discuss that because it flies so counter

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Speaker 2: to what we're so often told.

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Speaker 3: Yeah, so you know, the money and happiness literature has

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Speaker 3: changed even in the last ten to fifteen years, and

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Speaker 3: there's just like a few things that we know. First

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Speaker 3: is that it matters how you measure happyess right, some

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Speaker 3: ways to measure happiness sort of moment to moment. Right,

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Speaker 3: they have a beeper and they you know, they beep

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Speaker 3: you at various points in the day and they say, hey,

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Speaker 3: how are you doing when you're measuring sort of like

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Speaker 3: how are you doing? Moment to moment? Happy? Happiness plateaus

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Speaker 3: rather quickly with respect to money. But when you ask

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Speaker 3: people about their self appraisal of their life, like Hey, Barry,

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Speaker 3: how you live in man? Like? How are things? Greater

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Speaker 3: wealth tends to correspond with greater sort of qualitative descriptors

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Speaker 3: of being self satisfied and happy, up to even like

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Speaker 3: half a million dollars a year. So there are we're

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Speaker 3: introducing some more nuance into the money and happiness conversation.

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Speaker 3: The other thing we're finding is that certain ways of

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Speaker 3: spending money really do buy happiness, like getting out of

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Speaker 3: stuff you hate buys happiness. I will never mow my

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Speaker 3: yard again because I hate I live in the Deep South.

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Speaker 3: It's too nasty, there's too many bugs. I hate it.

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Speaker 3: And the money that I spend to let some high

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Speaker 3: school kid cut my yard is some of the best

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Speaker 3: money I ever spend.

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Speaker 2: Let's talk about the flip side of spending and instead

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Speaker 2: focus on the importance of delaying gratification as a form

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Speaker 2: of wealth building. To discuss why sometimes we should not

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Speaker 2: engage in immediate gratification.

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Speaker 3: Well, this is you know, this is one of those

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Speaker 3: things that's just kind of a lesson for life. You know,

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Speaker 3: delayed gratification will get you far across a variety of contexts.

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Speaker 3: If you look at the ways that people screw up

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Speaker 3: their lives, whether it's you know, whether it's an affair

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Speaker 3: or an addiction or whatever, it usually has immediate gratification

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Speaker 3: at its core. And if you look at the way

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Speaker 3: that people get the bank, the bank account, or the

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Speaker 3: body or whatever that they want, it usually has delayed

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Speaker 3: gratification at its core. And so we are wired profoundly

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Speaker 3: for the here and now. And so I think one

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Speaker 3: of the ways that we have to really work for

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Speaker 3: this is by casting a vivid, visceral vision of the

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Speaker 3: future and that future enjoyment in that future state. That's

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Speaker 3: why I harp on purpose so much and meaning because

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Speaker 3: without that, without that thing to look forward to, the

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Speaker 3: pull of the here and now just becomes far too powerful.

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Speaker 2: Does this relationship to immediate gratification change as we age?

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Speaker 2: How does this evolve as we all get older?

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Speaker 3: Yeah, we get a lot nicer as we get older.

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Speaker 3: So a lot of the rough psychological edges tend to

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Speaker 3: be sanded off through much of adulthood. It's really kind

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Speaker 3: of fun to watch the sharp edges get sanded off.

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Speaker 3: People get better at delaying gratification, they get kind or

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Speaker 3: to get better with people. And then, of course in

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Speaker 3: later age we start to deteriorate. But you know, I

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Speaker 3: think that is an underdiscussed and underappreciated benefit of middle age.

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Speaker 3: Easy for two middle aged dudes to say, but you know,

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Speaker 3: I think that is an underappreciated privilege of middle age.

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Speaker 3: Is that you just tend to calm down a little bit,

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Speaker 3: and it's quite nice. And I'm living it, Barry, I'm

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Speaker 3: living it and I'm loving it.

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Speaker 2: You know. One of the interesting things we've discovered in

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Speaker 2: the office is that getting people to pivot from being

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Speaker 2: savers and investors when they hit a certain age to

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Speaker 2: being spenders and donators. It's a very challenging psychological turn

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Speaker 2: to make a lot of people, Hey, you spend twenty

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Speaker 2: thirty forty years working and saving and working in investing,

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Speaker 2: to tell people, hey, you have a ton of money,

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Speaker 2: go on that trip by that beach house, spend time

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Speaker 2: with your grandkids. There are a lot of psychological obstacles

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Speaker 2: to effectively embracing that. Discuss that if you would.

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Speaker 3: So, first of all, I'll just commiserate. I recently, for

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Speaker 3: a project we were doing at Orion, I interviewed over

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Speaker 3: four hundred couples and we basically ask them what they

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Speaker 3: fight about when they fight about money as a way

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Speaker 3: to sort of ascertain what are some of these fundamental

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Speaker 3: personality dimensions of the way that people view wealth. And

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Speaker 3: the number one source of disagreement was whether money is

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Speaker 3: better used to enjoy today or to secure tomorrow. And

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Speaker 3: there are two very pronounced camps there, the Yolo camp

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Speaker 3: and the like save for Tomorrow camp. And like never

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Speaker 3: the twain shall meet. Like they they are very in

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Speaker 3: the they're deeply embedded. Like the people who see themselves

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Speaker 3: in the best use of cash as fun and seizing

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Speaker 3: the day have a, you know, a very high opinion

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Speaker 3: of themselves. And the same is true of people who

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Speaker 3: are are so diligent at saving and putting off for tomorrow.

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Speaker 3: So I don't know that there's a trickier problem in

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Speaker 3: all of finance than than the one you're talking about.

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Speaker 3: The only thing that I have seen work again is purpose.

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Speaker 3: You know Covey talks about in his book you have

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Speaker 3: to I'll butcher it. But basically you have to have

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Speaker 3: a yes burning inside of you that's bigger than the no. Right,

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Speaker 3: So there's there's this no like no, I don't want

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Speaker 3: to see the number go down, or like no, I've

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Speaker 3: been in saver mode for decades, and like, I don't

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Speaker 3: want to see that number go down. I think the

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Speaker 3: only way that we overcome that very fundamental psychological tendency

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Speaker 3: is to introduce a love or a passion or a

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Speaker 3: purpose that is bigger than that fear. Maybe that's the grandkids,

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Speaker 3: Maybe that's the philanthropic gift of choice. Maybe that's time

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Speaker 3: with the family in at a time when time is

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Speaker 3: increasingly short. I think that's the only weapon we have

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Speaker 3: in that fight though.

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Speaker 2: And our final question, how important is a good financial plan?

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Speaker 2: And what are the key elements that go into creating one?

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Speaker 3: Well, you know, one of like the blocking and tackling

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Speaker 3: of a financial plan. You know, there's all the usual suspects,

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Speaker 3: but I'll talk about one of the things that again

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Speaker 3: I think we get wrong the most. And Carl, who

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Speaker 3: was previously mentioned, has done really interesting work with Michael

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Speaker 3: Kitsis on this. We're really prone to mimesis, right, Like,

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Speaker 3: as a human family, we're really prone to imitation and

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Speaker 3: doing what other people do. And people are both highly

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Speaker 3: mimetic and don't have a great sense of what they want,

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Speaker 3: and they can tend to kind of just want what

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Speaker 3: their neighbor has you know, like, you know, what's your

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Speaker 3: financial goal like well, to have a boat like my neighbor,

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Speaker 3: to have a house like my brother in law. And

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Speaker 3: so getting it right in a financial plan means going

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Speaker 3: a lot deeper with someone on what they value and

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Speaker 3: their vision of the good life and their vision of

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Speaker 3: a dream existence. It means going a lot deeper than

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Speaker 3: we usually do. I think we typically as a profession

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Speaker 3: ask very shallow questions and get very shallow answers and

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Speaker 3: then come up with financial plans that are lack some

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Speaker 3: efficacy because they're serving a very a very sort of

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Speaker 3: weak sauce copy of a copy of someone's dream. So

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Speaker 3: I think the first step is getting laser focused on

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Speaker 3: that vision for the future, that purpose, that why, and

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Speaker 3: until we have something that's emotionally laden and visceral and powerful,

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Speaker 3: I don't think any of the black and tackling in

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Speaker 3: the Monte Carlo simulations matters much at all, and it's

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Speaker 3: always going to kind of fall flat.

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Speaker 2: So to wrap up, yes, we have a complicated relationship

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Speaker 2: with money, and we often fail to understand what it

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Speaker 2: can and cannot do for us. But if we're thoughtful

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Speaker 2: in our spending and try and create memories and experiences

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Speaker 2: and use our money in a way that's purposeful. It

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Speaker 2: leads to very good outcomes. I'm Barry Riddholts and you're

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Speaker 2: listening to boombones at the Money