WEBVTT - You Are Unhappy Because You Aren't Taking Enough Risk 0:00:02.720 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.440 --> 0:00:20.960 Welcome to Merton Talk to Money, the podcast amos people 0:00:21.000 --> 0:00:24.279 who know the markets explain the markets. I'm joined Stevick, 0:00:24.360 --> 0:00:26.400 senior reporter of the Bloomberg News and the author of 0:00:26.440 --> 0:00:29.400 the Money Distilled newsletter. I'm filling in for Merton this 0:00:29.480 --> 0:00:31.720 week is she's still in Holdy, So this week I'm 0:00:31.720 --> 0:00:34.960 speaking with Alison Schrager, who's a Bloomberg opinion columnist and 0:00:35.040 --> 0:00:39.400 senior fellow at the Manhattan Institute. Alison wrote a book 0:00:39.440 --> 0:00:42.880 called and Economist Walks into a Broadle and Other Unexpected 0:00:42.880 --> 0:00:45.760 Places to Understand Risk, and now she's get a new 0:00:45.760 --> 0:00:48.280 book coming out which is called Worth the Risk, The 0:00:48.320 --> 0:00:50.800 Seven myths that keep us from taking the chances we 0:00:50.880 --> 0:00:54.000 need to take. I wanted to speak to Alison because 0:00:54.080 --> 0:00:57.960 I'm a fan of her columns. She kind of covers 0:00:58.080 --> 0:01:00.920 similar things to me and the she's trying about personal 0:01:00.920 --> 0:01:04.120 finance and investment, but she's writing about it from the 0:01:04.360 --> 0:01:07.160 US perspective. And one of the things I've find fascinating 0:01:07.200 --> 0:01:10.480 is there's actually a massive overlap despite the fact that 0:01:10.520 --> 0:01:13.160 we tend to think of the UK is having very 0:01:13.160 --> 0:01:15.920 different issues to the US. So This is one reason 0:01:15.959 --> 0:01:18.360 I wanted to get her on, and so in today's show, 0:01:18.400 --> 0:01:21.320 we talk about her new book. We talk about her 0:01:21.440 --> 0:01:24.280 view that it's actually a lack of risk taking that's 0:01:24.360 --> 0:01:28.080 leading to the anger that we see in societies, and 0:01:28.120 --> 0:01:33.479 that's manifesting itself by frustration over inequality, etc. And actually 0:01:33.480 --> 0:01:35.440 what we need to do is be taking more risks. 0:01:36.360 --> 0:01:39.440 We talk about which country's got the best pension system, 0:01:40.120 --> 0:01:43.920 and we also talk about the US housing market and 0:01:44.000 --> 0:01:48.440 the different views on whether a house is an asset 0:01:48.480 --> 0:01:50.440 you should be putting all your money into it, or 0:01:50.440 --> 0:01:52.600 whether the stock market is actually a better place for 0:01:52.640 --> 0:01:55.520 your money. Alison, Welcome to Merton Talks Money. 0:01:55.800 --> 0:01:58.080 Thanks so much for having me, is said, I'm a 0:01:58.120 --> 0:02:00.320 longtime fan, so. 0:02:00.480 --> 0:02:02.640 Well see here. I've been looking forward to interviewing you 0:02:02.720 --> 0:02:04.480 for a while, so thanks very much for making the 0:02:04.520 --> 0:02:08.160 time now. I only just found out that your new 0:02:08.200 --> 0:02:10.000 book is coming out, and so i'n't have the chance 0:02:10.040 --> 0:02:12.560 to read it, but I did read the introduction they 0:02:12.720 --> 0:02:16.120 very kindly sent to me, and it really sounds fascinating, 0:02:16.840 --> 0:02:18.720 and it also sounds that it may explain some of 0:02:18.760 --> 0:02:23.440 the dissatisfaction that's been widespread across well, basically across the 0:02:23.440 --> 0:02:26.120 world since the two thousand and eight crisis. Can you 0:02:26.240 --> 0:02:29.080 just talk us through your thesis. What's the book about. 0:02:29.680 --> 0:02:33.040 Well, it's all about our changing relationship with risk, which 0:02:33.120 --> 0:02:35.720 happens over time. But I sort of make I guess 0:02:35.720 --> 0:02:38.800 it was a counterintuitive argument. Is that people keep saying 0:02:38.800 --> 0:02:41.360 that the reason where we're so unhappy is that we 0:02:41.440 --> 0:02:44.520 face all these sort of massive risks we can't control, 0:02:44.680 --> 0:02:46.720 and I think it's actually the opposite, is that we've 0:02:46.760 --> 0:02:49.840 taken great pains to remove risk from our life, and 0:02:49.840 --> 0:02:52.160 that also sort of removes upside in the chance for 0:02:52.200 --> 0:02:55.240 possibility and sort of is a big part of our motivation. 0:02:55.840 --> 0:02:58.160 And I think that's honestly, what's keeping us down is 0:02:58.200 --> 0:03:01.040 the sort of lack of possibility, lack of upside and 0:03:01.040 --> 0:03:02.959 the ability and a lack of ability to take the 0:03:03.040 --> 0:03:05.239 risks that are meaningful or important to us. 0:03:05.919 --> 0:03:09.560 As it basically there's the risk of not taking enough risk. 0:03:10.520 --> 0:03:12.840 Yeah, I guess they say you make zero shots you 0:03:12.880 --> 0:03:16.200 don't take And you know, there are obviously good reasons 0:03:16.200 --> 0:03:18.720 to remove risks from people's lives, like our social safety net. 0:03:18.720 --> 0:03:20.840 It's a great example of that. But the thing is, 0:03:20.840 --> 0:03:23.400 if you take away risk entirely. You also take again 0:03:23.480 --> 0:03:26.560 the possibility of upside, of earning more, of feeling like 0:03:26.600 --> 0:03:29.799 you tested yourself, which is also super important to well 0:03:29.840 --> 0:03:33.080 being and also very important to moving the economy forward. 0:03:33.520 --> 0:03:36.080 I think we're seeing this a lot in Europe. People 0:03:36.240 --> 0:03:37.960 like keep saying, well, we need to remove all these 0:03:38.000 --> 0:03:41.000 regulations or we need to integrate better, and you know, 0:03:41.120 --> 0:03:43.720 but the regulations are there for a reason. I mean, 0:03:43.720 --> 0:03:46.720 their feature, not a bug, and that particularly Continental Europe 0:03:46.800 --> 0:03:49.640 is much less comfortable with risk. They've made They've built 0:03:49.640 --> 0:03:51.760 a very large welfare state, they have a lot of 0:03:51.760 --> 0:03:54.680 restrictions on firing people. This is all to reduce risk, 0:03:54.800 --> 0:03:57.840 but the downside of that is that you're going to 0:03:57.880 --> 0:04:00.960 have less growth. I'm an efficient market tonymists, so I 0:04:01.040 --> 0:04:03.880 tend to think that you know, no risk, no reward. 0:04:04.320 --> 0:04:06.480 So the same is true not only in financial markets, 0:04:06.520 --> 0:04:10.320 but also economic growth in general. So if you construct 0:04:10.320 --> 0:04:13.640 an economy where it's really hard to experience any downside risk, 0:04:13.720 --> 0:04:15.440 you also are going to get up with less growth 0:04:15.480 --> 0:04:16.440 and less upside risk. 0:04:16.800 --> 0:04:21.040 It's really interesting because you talk about Europe is more 0:04:21.120 --> 0:04:24.240 risk averse, and I think that's perfectly that's very reasonable 0:04:24.760 --> 0:04:27.200 why do we have this level of anger? Because you 0:04:27.240 --> 0:04:30.880 recently wrote a piece about asking what Americans are better off? 0:04:31.080 --> 0:04:33.880 But they're they're very angry, kind of like talking about 0:04:34.320 --> 0:04:38.000 people feeling frustrated. Where do you think that this is 0:04:38.000 --> 0:04:42.200 coming from? This sense that everyone feels somewhat hard done by? 0:04:42.760 --> 0:04:45.640 Well, again, I think part of it is they don't 0:04:45.680 --> 0:04:47.880 have that possibility of upside. They don't have that possibility 0:04:47.880 --> 0:04:51.120 of advancing like they used to, particularly when we're in 0:04:51.120 --> 0:04:55.520 a big economic transition which introduces uncertainty into our lives 0:04:55.680 --> 0:04:58.240 and you know, not being able to fully participate in that, 0:04:58.320 --> 0:05:01.359 but just sort of feeling like you deal with the stagnation. 0:05:02.080 --> 0:05:04.840 And I think the stagnation is largely a big part 0:05:04.880 --> 0:05:07.000 of the anger. I mean, it's also I think the 0:05:07.040 --> 0:05:10.200 anger in the if you look at almost every metric, 0:05:10.880 --> 0:05:14.240 you know, you know, liberalism worked. I mean, we are 0:05:14.440 --> 0:05:17.640 more prosperous, and that is true across the income distribution, 0:05:17.720 --> 0:05:21.120 even if the income distribution widened. But the question is 0:05:21.200 --> 0:05:23.640 why do people feel like the economy is broken and 0:05:23.760 --> 0:05:26.200 that it's not working for them when it actually delivered 0:05:26.200 --> 0:05:28.000 what it said it would and the goal has always 0:05:28.040 --> 0:05:31.320 been increasing prosperity and I think if you look at 0:05:31.440 --> 0:05:35.240 different income groups, you have different answers. You know, particularly 0:05:35.320 --> 0:05:38.320 lower middle income people are really being hammered by inflation. 0:05:38.480 --> 0:05:40.640 So when they say I am more soft than I was, 0:05:40.720 --> 0:05:44.440 say five seven years ago, they're not wrong. So I 0:05:44.600 --> 0:05:46.960 argue in my book, this is a population's particularly been 0:05:47.000 --> 0:05:49.800 cut out of meaningful risk taking. You know, we're putting 0:05:49.839 --> 0:05:51.760 more and more like they need to be protected, and 0:05:51.800 --> 0:05:54.320 they do. There's certainly said a case for a welfare state, 0:05:54.480 --> 0:05:57.880 but they also we've also like shut out upside for them, 0:05:57.960 --> 0:06:01.159 which you know is obviously you know, keeps them poor. 0:06:01.880 --> 0:06:04.200 And then you have the upper middle class, which is 0:06:04.279 --> 0:06:08.080 doing well but also is more locked in a genuine 0:06:08.200 --> 0:06:11.360 zero sum game with super rich people. And I think 0:06:11.360 --> 0:06:13.160 to them, they feel like the economy isn't working for 0:06:13.240 --> 0:06:16.320 them because they did say everything right as we say. 0:06:17.400 --> 0:06:19.359 You know, they went to the right schools, they studied 0:06:19.360 --> 0:06:22.720 something that sounded fancy, they moved to the cities, and 0:06:23.360 --> 0:06:25.520 it didn't work. You know, things have worked out for 0:06:25.560 --> 0:06:28.480 them by any sort of economic metric, but they still 0:06:28.480 --> 0:06:30.479 feel like they should be somewhere different. Or they see 0:06:30.520 --> 0:06:33.080 people who they went to school with who are getting 0:06:33.120 --> 0:06:35.640 ahead faster than they are. Part of that is that 0:06:35.680 --> 0:06:38.839 they're looking for these positional goods lots of private schools, 0:06:39.160 --> 0:06:42.080 sort of desirable housing in big cities that is in 0:06:42.160 --> 0:06:45.440 finite supply. But also I think they've also been sold 0:06:45.560 --> 0:06:47.760 something wrong, which is if anyone who says I did 0:06:47.800 --> 0:06:50.680 everything right, I should have gotten something kind of is 0:06:50.720 --> 0:06:53.159 giving the game away of like, well, if you do 0:06:53.200 --> 0:06:55.200 everything right, you also didn't take any risks. You didn't 0:06:55.200 --> 0:06:57.520 take meaningful risks, you didn't check in and say, well, 0:06:57.560 --> 0:06:59.920 what's meaningful to me in terms of moving my life 0:07:00.120 --> 0:07:04.360 or both economically, socially whatever, And if you just sort 0:07:04.360 --> 0:07:06.279 of follow the rule book, you're not going to sort of, 0:07:06.320 --> 0:07:08.040 I think, ultimately get that satisfaction. 0:07:09.040 --> 0:07:14.160 Yeah, that's really interesting because obviously people highlight inequality as 0:07:14.200 --> 0:07:19.000 a driver of this frustration. But where you mentioned incomeing, 0:07:19.040 --> 0:07:23.040 equality in the US had expanded, and that's the incoming 0:07:23.040 --> 0:07:26.600 equality here is actually gone down. You know, they kind 0:07:26.600 --> 0:07:29.040 of they're certainly on the wage side and the earl 0:07:29.160 --> 0:07:33.040 inside there's been massive compression between the lowest percent on 0:07:33.080 --> 0:07:37.080 the highest percentile. So it's really interesting. So what you're 0:07:37.160 --> 0:07:41.240 basically saying is nothing to do with that. It's mostly 0:07:41.280 --> 0:07:45.440 about the people particularly further down not being able to 0:07:45.520 --> 0:07:47.360 kind of take the risks and not being able to 0:07:48.240 --> 0:07:50.720 or not necessarily not being able to do it, but 0:07:50.720 --> 0:07:53.960 but not participating presumably in the stock market. Is that 0:07:53.960 --> 0:07:56.160 what you're talking about, Well, they're different things. 0:07:56.200 --> 0:07:58.640 I think in America there is this sort of winding 0:07:58.640 --> 0:08:01.400 inequality and this of anyway, it's not true feeling that 0:08:01.440 --> 0:08:04.080 the economy is your sum. But people are getting richer 0:08:04.080 --> 0:08:07.680 in America, so as opposed to the UK and Europe, 0:08:07.880 --> 0:08:10.800 there is much more stagnation. And I try to explain 0:08:10.800 --> 0:08:12.920 to people in America if you think like a widening 0:08:12.960 --> 0:08:16.160 inequality but a growing economy is bad, wait till you 0:08:16.160 --> 0:08:18.920 have the alternative, which is the compression, which is the stagnation. 0:08:19.160 --> 0:08:21.600 People are a lot more unhappy when that happens. But 0:08:21.800 --> 0:08:23.840 the thing is in both cases you do have this 0:08:23.960 --> 0:08:26.720 sort of more people being shut out of risk, you know, 0:08:26.760 --> 0:08:29.800 particularly you know in your very high tax rates, which 0:08:29.840 --> 0:08:33.320 take away upside. That's another reason why sort of wealth 0:08:33.440 --> 0:08:35.880 tends to be in your much more generational. What you 0:08:35.960 --> 0:08:38.800 do is you see this persistence of their wealthiest family 0:08:38.840 --> 0:08:42.240 being the same generation after generation, and that is largely 0:08:42.280 --> 0:08:44.800 because you have such high income taxes, such high consumption taxes, 0:08:44.800 --> 0:08:47.000 which makes it much harder to accumulate a fortune. And 0:08:47.000 --> 0:08:50.240 they said, get all that upside, and it sort of 0:08:50.280 --> 0:08:54.200 again becomes perversely more unequal because the families that have 0:08:54.280 --> 0:08:56.319 generational wealth are the ones that stay wealthy. 0:08:56.920 --> 0:09:01.240 Yeah, it's difficult. Does a campaign. He had Gardy Stevenson, 0:09:01.280 --> 0:09:03.360 who I don't know, you me or me not have heard. 0:09:03.400 --> 0:09:06.720 Once, did a debate with him like six years ago. 0:09:07.679 --> 0:09:10.600 And that's what I tail was more I completely, but 0:09:10.640 --> 0:09:12.560 it was like during COVID when like everyone in their 0:09:12.559 --> 0:09:14.680 grandmother was doing like a lot of online content and 0:09:14.720 --> 0:09:17.600 I had no idea who he was, and some British 0:09:17.600 --> 0:09:19.520 person had me do this debate with him, and I 0:09:20.040 --> 0:09:23.160 honestly like barely remember. I remember looking at him in advance. 0:09:23.200 --> 0:09:25.160 I'm like, God, reckon, this is gonna be difficult. But 0:09:25.160 --> 0:09:27.719 it actually found it quite pleasant. And I do think 0:09:27.760 --> 0:09:30.280 we found some areas of commonality, if I recall, and 0:09:30.280 --> 0:09:31.360 I found him quite nice. 0:09:31.840 --> 0:09:35.679 And going back to your book, so the supaid, there's 0:09:35.679 --> 0:09:37.880 the seven myths that keep us from taking the chances 0:09:37.880 --> 0:09:40.000 we need to take. Ously I'm not going to ask 0:09:40.000 --> 0:09:41.440 you to go through them all, because you know people 0:09:41.520 --> 0:09:43.640 need to read the book. But is there one of 0:09:43.679 --> 0:09:48.520 these myths that stands out to you as being particularly counterintuitive. 0:09:49.320 --> 0:09:51.280 Well, one of them is that I hear a lot, 0:09:51.360 --> 0:09:53.960 which is you can't take risks until you're ready or 0:09:54.000 --> 0:09:57.360 in a secure place. And you know, first of all, 0:09:57.440 --> 0:09:59.800 I mean, first of all, most people don't have that luxury. 0:10:00.679 --> 0:10:03.080 Second of all, like often you know, the best risk 0:10:03.120 --> 0:10:06.920 takers are taking it sort of when they're down. And 0:10:07.320 --> 0:10:09.600 this idea that you have to like, have the job, 0:10:09.679 --> 0:10:11.079 you have to be married, you have to have all 0:10:11.080 --> 0:10:13.560 these things in place before you take risks only ensures 0:10:13.559 --> 0:10:16.160 you'll never get those things because it sort of keeps 0:10:16.200 --> 0:10:19.400 you from getting ahead. And I also mentioned they say 0:10:19.400 --> 0:10:21.600 in the field of motivation, like what gets us out 0:10:21.600 --> 0:10:24.720 of bed in the morning, this resolution of uncertainty is 0:10:24.800 --> 0:10:27.000 one of the biggest sources of motivation. So if you're 0:10:27.040 --> 0:10:28.760 just like I have to play by the rules, I 0:10:28.840 --> 0:10:31.640 have to do everything right, and then I can maybe 0:10:31.720 --> 0:10:34.600 start thinking about what's my dream? You know, how do 0:10:34.679 --> 0:10:36.760 I take risks in a meaningful way, You're just never 0:10:36.800 --> 0:10:37.440 going to get there. 0:10:37.760 --> 0:10:39.760 Yeah, And I suppose also if you can take more 0:10:39.800 --> 0:10:41.959 risks when you get less to lose as well, which 0:10:42.000 --> 0:10:45.720 is I think something that people often forget. But still 0:10:46.400 --> 0:10:48.920 moving on to the retirement pensions, you've described yourself as 0:10:48.920 --> 0:10:51.560 a retirement economist. That is that an official thing. 0:10:52.120 --> 0:10:59.560 No, it's not. I say it because you know, if 0:10:59.559 --> 0:11:01.840 you're in a economists, there's no other way to describe. 0:11:01.840 --> 0:11:04.679 I mean, there's like maybe fifteen other retirement economists who 0:11:04.679 --> 0:11:07.040 I identify that way. It's a made up field, to 0:11:07.040 --> 0:11:10.760 be fair, but I think it's accurate because in economics, 0:11:10.760 --> 0:11:13.840 you know, you could be a macroeconomist, microeconomist, financial economist, 0:11:13.880 --> 0:11:16.240 but if you're a retirement economist, you kind of are 0:11:16.280 --> 0:11:18.600 a lot of things. It's a macro question, it's a 0:11:18.600 --> 0:11:22.000 micro question, it's a finance question, it's a behavioral question, 0:11:22.120 --> 0:11:24.320 it's a labor question. So you kind of have to 0:11:24.360 --> 0:11:27.680 take things from all different fields. So I don't think, like, 0:11:27.960 --> 0:11:31.199 technically I'm a macro financial economist, because that would be 0:11:31.280 --> 0:11:34.400 my training. But I don't feel like that really is accurate. 0:11:34.720 --> 0:11:37.160 I suppose it does boil, don't they? And you've mentioned 0:11:37.200 --> 0:11:40.839 this yourself. It is the hardest problem in finance, certainly 0:11:40.880 --> 0:11:45.000 in personal finance, is managing your money so that you 0:11:45.080 --> 0:11:48.000 have enough so that it doesn't run out before you die, 0:11:49.360 --> 0:11:51.960 or that you don't have so much that you've wasted 0:11:51.960 --> 0:11:55.040 the early years of your life accumulating, only you know, 0:11:55.160 --> 0:11:56.760 find that you die before you've had the chance to 0:11:56.840 --> 0:11:59.880 enjoy it. But in those terms, what are the kind 0:11:59.920 --> 0:12:02.360 of the biggest mistakes that you see people making when 0:12:02.360 --> 0:12:05.520 they're thinking about the retirement and how to go about it. 0:12:06.360 --> 0:12:08.640 I think it's that they're thinking in terms of wealth 0:12:08.720 --> 0:12:10.880 then income. And I don't blame people for that. I 0:12:10.960 --> 0:12:15.720 blame the retirement industry. It happened like maybe like fifteen 0:12:15.760 --> 0:12:17.960 years before in America then the UK, is that we 0:12:18.080 --> 0:12:22.000 moved from these like traditional pensions to individual accounts like 0:12:22.000 --> 0:12:22.599 a forur own K. 0:12:22.920 --> 0:12:25.800 And this is so the traditional pensions where the defined 0:12:25.800 --> 0:12:28.400 benefit once yes, where you get a set income, and 0:12:28.440 --> 0:12:30.520 it was not in the in the US. I take 0:12:30.559 --> 0:12:34.720 it that was provided by the employer as well. Yes, yeah, 0:12:34.840 --> 0:12:36.760 why did that die out in the US. 0:12:37.440 --> 0:12:38.640 It's really expensive? 0:12:38.840 --> 0:12:40.880 Yeah, yeah, it's okay, it's the same as why it 0:12:40.920 --> 0:12:42.200 died out here, okay. 0:12:42.800 --> 0:12:45.640 Yeah. And it's not just like the income, the amount 0:12:45.640 --> 0:12:47.760 of contributions you have to put aside. It's a huge 0:12:47.800 --> 0:12:49.959 Like you're just talking about all the risk around outliving 0:12:50.000 --> 0:12:54.160 your assets, about managing asset risk. These are very expensive 0:12:54.240 --> 0:12:57.679 risks to manage, and it just became untenable, particularly as 0:12:57.679 --> 0:13:00.360 people were living longer, for employers to put this on secularly, 0:13:00.400 --> 0:13:02.120 as they were looking to grow and hire and make 0:13:02.160 --> 0:13:04.840 the economy more dynamic. So it's not bad that we 0:13:05.040 --> 0:13:08.679 moved to this new system because it means coverage increased 0:13:08.679 --> 0:13:10.400 a lot. You have like a lot more people with 0:13:10.480 --> 0:13:14.439 retirement accounts and retirement assets. But you know, I call 0:13:14.480 --> 0:13:17.480 it like the original sin of retirement of that you know, 0:13:17.880 --> 0:13:20.040 certainly in America, the four one K was meant to 0:13:20.080 --> 0:13:23.200 supplement the defined benefit plans, So we tend to sort 0:13:23.200 --> 0:13:25.880 of cast it as wealth, like you're supposed to accumulate 0:13:25.920 --> 0:13:28.880 a certain amount of money before you retire. But that 0:13:28.960 --> 0:13:31.160 sort of sets people up for failure because like, what 0:13:31.200 --> 0:13:32.959 do you do with this pile of money on day 0:13:33.000 --> 0:13:36.559 one of retirement? Like you said, it's the hardest problem. 0:13:36.640 --> 0:13:38.480 Bill Sharp has said that a lot of Nobel Prize 0:13:38.520 --> 0:13:42.600 winning financial economists. I mean, we minimize personal finance as 0:13:42.679 --> 0:13:45.280 being easy because everyone does it, but that doesn't mean 0:13:45.320 --> 0:13:47.480 it is. It's actually, I think much harder and a 0:13:47.520 --> 0:13:50.240 lot of various complex financial problems people are solving all 0:13:50.240 --> 0:13:54.000 the time. Of so how do you this slipping that 0:13:54.120 --> 0:13:56.240 switched to thinking about this pile of money and turning 0:13:56.280 --> 0:13:58.640 it into income. First of all, it doesn't really make 0:13:58.679 --> 0:14:02.120 sense because income is valid you differently than wealth. So 0:14:02.520 --> 0:14:04.520 you can't just slip this switch, at least not without 0:14:04.520 --> 0:14:07.960 exposing yourself to potentially big risks. And it also just 0:14:08.080 --> 0:14:12.120 I think mentally really sets people up to not know 0:14:12.160 --> 0:14:14.080 how to spend their money, or to feel inhibited from 0:14:14.120 --> 0:14:16.160 spending their money because they've spent their whole lives building 0:14:16.240 --> 0:14:19.080 up this nest egg. Like even my parents are in 0:14:19.080 --> 0:14:21.800 their seventies refuse to spend any of their retirement savings. 0:14:22.280 --> 0:14:24.520 And I'm like, you know, you worked hard, you know 0:14:24.600 --> 0:14:26.640 they're both working still, but I'm like, you could maybe 0:14:26.720 --> 0:14:28.760 work less and spend some of this money. This is 0:14:28.760 --> 0:14:30.920 what you should do, this is what you've worked so 0:14:31.000 --> 0:14:33.200 hard for. And they look at me like I'm crazy. 0:14:34.480 --> 0:14:37.400 I mean, I think that's a really good, good point. 0:14:37.480 --> 0:14:41.200 And I don't think people talking off about the psychological 0:14:41.320 --> 0:14:46.640 difficulties of actually spending your money like we do certainly 0:14:46.880 --> 0:14:51.240 in business and the pestal finance journalism business. The thing 0:14:51.280 --> 0:14:54.200 we worry about mostly is making sure that people have 0:14:54.400 --> 0:14:57.280 enough or that they're saving. And the pensions industry over 0:14:57.400 --> 0:14:59.000 here is always saying you should be saving the x 0:14:59.040 --> 0:15:03.240 amount of your every single month from the day you're born, basically, 0:15:03.760 --> 0:15:08.560 but this challenge of decumulation, how do you get over 0:15:08.840 --> 0:15:11.680 so just thinking about it as an income, but also 0:15:12.640 --> 0:15:15.520 how do you get over the huddle of saying, Okay, 0:15:15.640 --> 0:15:20.560 that's that's me. I'm going to step back gradually. If 0:15:20.600 --> 0:15:23.560 you get any thoughts or any strategies for thinking about that, 0:15:23.680 --> 0:15:25.440 say the retirement puzzle. 0:15:26.160 --> 0:15:28.240 Yeah, well, I mean it works pretty well in Chile 0:15:28.720 --> 0:15:32.360 because it's conditioned from day one that this is income 0:15:32.440 --> 0:15:34.520 and you're going to neudize this or are you going 0:15:34.560 --> 0:15:37.160 to take these phase withdrawals from the government. So I 0:15:37.200 --> 0:15:40.040 mean when people had to find benefit pensions, they weren't looking. 0:15:40.120 --> 0:15:41.840 You know. I think a lot of people don't realize, like, 0:15:41.880 --> 0:15:44.720 if you may get like whatever, thirty, forty, even sixty 0:15:44.760 --> 0:15:47.840 percent of your salary every year until you die, that's 0:15:47.880 --> 0:15:51.120 worth millions of dollars. But people don't think, oh, this 0:15:51.240 --> 0:15:53.600 asset is worth millions of dollars. They're thinking, I get 0:15:53.640 --> 0:15:56.680 sixty percent of my salary every year. So you have 0:15:56.720 --> 0:15:58.720 to condition people to think that way from day one, 0:15:58.800 --> 0:16:01.160 and Chili does that pretty well well. You know. In 0:16:01.200 --> 0:16:03.359 some ways I look at the UK as a disappointment 0:16:03.520 --> 0:16:07.360 because you used to require people to anutize part of 0:16:07.560 --> 0:16:10.640 your retirement in savings, but it was so unpopular they 0:16:10.640 --> 0:16:13.040 had to get rid of it. Now, that might be 0:16:13.040 --> 0:16:16.320 because interest rates were so low then annuities were super expensive, 0:16:16.440 --> 0:16:18.960 or it could have just been poor marketing, but. 0:16:19.120 --> 0:16:21.080 I think it was a sense that there was poor 0:16:21.160 --> 0:16:23.800 value and I think the thing it would be fair 0:16:23.840 --> 0:16:28.720 to say the annuities market was not as competitive as 0:16:28.760 --> 0:16:29.720 it should have been. 0:16:31.200 --> 0:16:32.040 Why do you think that is? 0:16:32.560 --> 0:16:34.360 What was I think at the time. I mean, because 0:16:34.400 --> 0:16:38.200 this all changed in two thousand and six. At first, 0:16:38.200 --> 0:16:39.800 thing it was two thousand and six, and then it 0:16:39.840 --> 0:16:43.040 became steadily easier to not innuitize as well, because at 0:16:43.080 --> 0:16:45.920 first it was you were allowed to not inutize as 0:16:45.960 --> 0:16:48.640 long as you're a certain amount of money, and then 0:16:49.000 --> 0:16:51.000 that was basically completely done away where I think it 0:16:51.040 --> 0:16:54.040 was about ten years ago under George Osborne. And you're right, 0:16:54.120 --> 0:16:56.840 during the Osborne you know, it was because interest rates 0:16:56.840 --> 0:17:01.160 were extremely low and so annuities looked like poor value. 0:17:01.720 --> 0:17:04.840 But I think before that it was basically just because 0:17:04.880 --> 0:17:11.920 the financial industry was much less competitive, fees were much higher, 0:17:12.440 --> 0:17:14.680 you know, there was a general it was, and also 0:17:14.720 --> 0:17:17.080 it was still quite hard to kind of comparison shop. 0:17:17.400 --> 0:17:20.520 I think that would be different now, and maybe you're right, 0:17:20.560 --> 0:17:23.919 maybe if we did still have compulsory and utization, the 0:17:24.040 --> 0:17:27.240 nuities market would be much better and better run. So 0:17:27.400 --> 0:17:28.720 that's an interesting one. 0:17:28.560 --> 0:17:31.480 Because you used to have that website that could comparison shop. 0:17:31.960 --> 0:17:34.840 It was around like twenty ten ish. I love that 0:17:34.840 --> 0:17:37.240 website because I'm just a nerd for a newity prices. 0:17:38.119 --> 0:17:40.080 But I guess it just didn't take off, maybe because 0:17:40.080 --> 0:17:41.520 you couldn't click through and buy in a new idea 0:17:41.560 --> 0:17:43.200 or to go back. Maybe it wasn't accurate, do you 0:17:43.280 --> 0:17:43.439 know what. 0:17:43.440 --> 0:17:45.320 The other reason was that a lot of people were 0:17:45.320 --> 0:17:48.000 tied to a provider, or they thought they were tied 0:17:48.040 --> 0:17:50.200 to a provider. It's basically it was basically just the 0:17:50.280 --> 0:17:55.040 usual sort of like financial industry comms thing where because 0:17:55.280 --> 0:17:59.520 partly because consumers were unsophisticated, if you like, they would 0:17:59.560 --> 0:18:01.679 just say do they get a letter from the pension 0:18:01.680 --> 0:18:05.239 provider saying this is the annuity we can offer you, 0:18:05.280 --> 0:18:07.080 and they would just tick the box and say, oh fine, 0:18:07.240 --> 0:18:09.239 and it would turn out that they'd got something that 0:18:09.320 --> 0:18:11.680 you know, was basically maybe could even be as much 0:18:11.680 --> 0:18:14.600 as a percentage point less than they would have got elsewhere. 0:18:15.520 --> 0:18:17.080 And then obviously there was a kind of bit of 0:18:17.119 --> 0:18:20.440 a campaign, certainly from writers like us, saying, look, make 0:18:20.480 --> 0:18:23.280 sure you shop her own, because if you're in l health, 0:18:23.960 --> 0:18:26.159 or even if you're in good health, you don't have 0:18:26.280 --> 0:18:28.960 to buy your annuity from your provider. Although it was 0:18:29.040 --> 0:18:32.440 basically a lack of knowledge and a lack of sophistication, 0:18:32.800 --> 0:18:35.800 and you're I think that could be overcome, especially now, 0:18:36.160 --> 0:18:39.720 I think consumers are a lot more savvy about financial 0:18:39.720 --> 0:18:43.240 products in general and kind of shopping around. So actually, yeah, 0:18:43.240 --> 0:18:44.480 maybe it would be different now. 0:18:45.280 --> 0:18:47.600 Yeah, and it's with the higher rates and also just 0:18:47.680 --> 0:18:51.000 more people retire. I mean, even like ten to fifteen 0:18:51.080 --> 0:18:54.520 years ago, you know, defind contribution plans were still relatively 0:18:54.520 --> 0:18:58.000 new here, let alone the UK, so people didn't have 0:18:58.200 --> 0:19:01.679 the same significant assets like I just saw Torston slock 0:19:03.600 --> 0:19:09.359 daily whatever. It was always wonderful showing that one of 0:19:09.359 --> 0:19:12.280 the big drivers for private credit is that the newty 0:19:12.359 --> 0:19:15.359 market is growing so fast, which was exciting news for me. 0:19:16.640 --> 0:19:18.680 So it could be as well now that we have boomers, 0:19:19.080 --> 0:19:22.000 you know, uh four one k's really took off, say 0:19:22.119 --> 0:19:24.440 late eighties, early nineties in America, a little later in 0:19:24.480 --> 0:19:28.200 the UK. So you have the first generation retiring significant 0:19:28.200 --> 0:19:31.200 assets in this who are also facing a higher rate environment. 0:19:31.600 --> 0:19:33.200 So maybe that's also spurring demand. 0:19:33.840 --> 0:19:38.000 That's interesting. So they are now utizing by choice basically 0:19:38.440 --> 0:19:43.280 of increasingly, Yeah, it's here, Yeah, it's when it's compulsory, 0:19:44.000 --> 0:19:47.000 it's does that sense that you're getting ripped off in 0:19:47.040 --> 0:19:49.600 some way? And I think a lot of people also that. 0:19:50.160 --> 0:19:52.640 You know, there's always an example of someone who innuitized 0:19:52.640 --> 0:19:55.119 and then they died the next day, and you know, 0:19:55.200 --> 0:19:58.800 their whole pension pot is gone or recently perceived as that. 0:19:58.880 --> 0:20:01.160 So I think that was the least the annuities kind 0:20:01.160 --> 0:20:03.919 of got a bad name over here to an extent. 0:20:04.560 --> 0:20:07.280