Ep. 10: Making Cent$ of our Irrational Financial Decisions

all right folks well hold on now don’t hold on we’re we’re already here I’m Dan

seawald and we’re getting ready for our next deliberate way podcast and we got a

great one here I think you’re gonna love it you know personally as a former

accountant CPA from long long ago I love numbers and you know as a person who

doesn’t mind money I also like talking about money and decision making so we got a great setup here for today we’re

going to be talking about decision making we’re gonna be talking about money two of the favorite topics of most

people and I’m joined by one of the most sought after speakers and thinkers in

this space Mr Jeff Chrysler so Jeff thanks for being here today thank you

for having me and uh for immediately triggering my imposter syndrome that was a very nice introduction

well you’re there’s no impostering here that’s not a word is it well it is

we’re going to do something which usually makes people uncomfortable uh well there are multiple things that make people uncomfortable but I’m gonna tell

you about you so stand by you can correct me if you don’t like anything I say but you know Jeff you are the head

of Behavioral Sciences at jpmorgan’s private banking business I believe that to be true and you came into this field

from somewhat of an unexpected place you were a lawyer a stand-up comedian is

that right I think that is yes that is correct

parents our parents didn’t get proud until the end of the journey the lawyer it’s a comedian was a dead period there

well I I think there there’s definitely some good graces there but uh listen who’s getting the last laugh now all

right bad joke um Jeff you’re a two-time best-selling internationally published author your

work’s been praised by the Journal The Wall Street Journal CNBC Business Insider CNN and quite a few others and

you kind of got some pretty good Acclaim from your collaboration and work with uh

the famous behavioral Economist Dan arieli and uh you know a whole lot more it’s it’s great to have you here and uh

you know we’re going to be tapping into your Behavioral Science expertise particularly when it comes to financial

decision making so stand by for that um before we jump in though I want to

just note that today we are going to try out a bit experiment so the first part

of the podcast Jeff and I we’re gonna chat a bit we’re going to take some of your questions right in the middle so

you have questions get those in LinkedIn live shoot them in we’re going to bring them I bet you’re probably going to have

a lot of them and then um right after we’re going to try out the experimental part we’re going to

have some live questions some challenges for you as our audience and Jeff as well

to try to solve these are some pretty cool questions that tap into Behavioral

Science and behavioral economics and to see what would you do kind of like that uh that TV show on on ABC I don’t know

if it’s on anymore but we’re gonna have a chance to see what would you do and then Jeff I’m going to ask you to share

a little bit of background about why would or wouldn’t somebody do it so that’s what’s in store for you and you

know Jeff the first thing I’m going to do is I’m going to just kind of put the ball in your court by going into the

deep end of this Behavioral Science pool it just so happens yesterday I put out a polling question on LinkedIn

and I asked people a number of years ago a group of researchers were studying

happiness of lottery winners and they compared lottery winners to the people who kind of every day never won a

lottery which is probably most of us and we give them three options one were the

winners of the lottery happier than most non-winners were they less happy than

non-winners or was there no difference at all now the last I checked most

people thought that people who win lotteries are generally are happy or are happier than the average person but

before I reveal the answer because I promised I would what do you think the result is or what what’s Your Gut feel

on that uh my gut feeling on that is that people who win lotteries could be happier if

they are intentional with the decisions if they have a healthy relationship with money and money what it means to them and what it can provide but the truth is

most of us are not so I would probably Venture that people end up pretty much even there’s obviously going to be a

peak of pleasure and satisfaction but uh there’s I don’t know how in the weeds

you want me here but there’s a thing called the attorney who you talk to the hedonic treadmill or um lifestyle creep

or basically like you get money and then but your life doesn’t necessarily change you have shining your toys you have a

bigger place but who you are and what you’re about and what your your identity is doesn’t necessarily change so we

settle back in so that’s my long-winded way of saying I think it’s going to be more likely every winners and

non-winners in the long run are the same it’s almost like you saw the answer key to this question you are a hundred

percent correct I I actually thought it would have been that there would have been more are happy I mean how could

they not be but the way you explained it that actually makes a lot of sense so thank you for that and um I’m gonna just

ask you another question about lotteries just to go with the lottery themed here a lot of people play Powerball or

whatever other lotteries are happening in their area is it a bad idea to play the lottery I don’t want to burst a lot

of people’s bubbles but my whole group of college friends said why don’t you play the lottery see well like how could

you not and I I don’t love playing the lottery and I thought I was in the minority but is it a good idea to do the

lottery what do you think I’ll give you the the textbook answer and my answer the textbook like economic rationality

is no it’s some people call it uh attacks on the depending on who your dog

attacks on the stupid or the financially illiterate wait hold on a second I’m

yeah I don’t want to offend anybody um that’s what somebody me I say yes

play the lottery but Again Play it intentionally like don’t say okay the

lottery is 800 million dollars so I’m gonna buy lottery tickets or I can buy 20 tickets versus when it’s only 10

million dollars I can buy one or don’t don’t start to treat it like it’s an investment

play the lottery like you might go see a movie or you might watch a funny YouTube

clip it’s it’s the playing of I get to spend a dollar or two dollars and and it

allows me five minutes of daydreaming it allows me that pleasure of thinking about it

um if you’re playing the lottery because you want to win and you think you’re going to win then you are being taxed by as a fool

um if if you get it and you’re so into but if you can treat it and name it I

this is sort of how I do it as like here here’s the thing like what do we spend two dollars on ever that provides us the

pleasure of five minutes of daydreaming and in your day-to-day life right you buy the you’re going home from work it’s

been a long day you’re late for your dinner with your kids if you can stop by a kiosk and grab yourself five minutes

of daydreaming that’s probably worth two dollars I I love that a day on it don’t

right yeah you know it’s funny I I you know there’s I remember there was like

uh what was the old headline for like a dollar in a dream or something like that

um they must have hit on that notion I think a lot of people do think it’s a an investment and they buy 15 or 20 tickets

thinking they’re improving their statistical odds but there can’t be any way it’s really improving their odds is

there no I mean statistically no I I suppose if she bought a billion tickets you probably I don’t know what the

number is if the rods are one in a billion but that’s a lot of work and you probably wouldn’t get it any time that’s a lot of work you might as well invest

in something else well let me um kind of Turn the Page just a little bit

um there was a quote that I came across um from quite a few years ago that you wrote an article you said something to

the effect of a wise man knows himself to be a fool but a foolish man opens his

wallet and removes all doubt it kind of reminded me of Mark Wayne and uh and I love Mark Twain’s quotes what did you

mean by this tell me a little bit more how does this connect to kind of the work that you do in the field of

Behavioral Science sure so I believe the quote is a wise man knows herself to be

a fool a foolish man opens his mind or excuse me opens his mouth and removes all doubt

um and I’m also a big Mark Twain fan um essentially like it was about the

challenges of financial decision making um and that what we tend to do is we we

think uh in the abstract in sort of um a cool state if you will or system

one thinking or system two depending on your your term of choice when we’re being thoughtful and high level that

where we make wise decisions but then when we open our wallet or open our mouth to speak or when we make the

choice We tend to be reacting emotionally we tend to often make irrational choices and so we are all

foolish like you know I I now work in a in a Place full of financial advice experts most of whom have their own

financial advisor because they know when they’re making their own choices their rationality the emotion the personal

aspect comes in and that’s just a way of saying it’s it’s normal I want to normalize the fact that we all make poor

financial decisions sometimes we can get better well let’s start by eliminating shame um and then recognize okay let’s put in

systems to improve it but but the truth is is the first chunk is that is that the wise man knows that he or she the

wise person knows that he or she uh is prone to making poor choices

um and so doesn’t always make the choices quickly and rationally um whereas the the person who doesn’t

realize that they make poor choices just barrels ahead believe in themselves right and opens their wallet and YouTube

you’re just a kind of backtrack a little bit your work during the day is that JP

Morgan the Private Client side and uh Behavioral Science and financial

institutions it kind of makes sense theoretically to me but what does that mean well why do they need Behavioral

Sciences how do they use Behavioral Sciences um in this space so so broadly speaking

um you know my my role is both to to share with our clients and and the people that deal with us as well as

internally like what are some of the challenges people have making financial decisions um it’s not like a secret sauce behind

the door or whatever the expression for secret sauces um it’s just saying look yes Finance is

numbers and data and research and charging graphs and and all of that is important but at the end of the day our

financial choice is small or big you know daily latte from Susie Orman or where we go to college and how big our

mortgages all of those choices are emotional um and that emotion

um it can often lead us to make choices that are contrary to our goals

um and so the the perspective here and and I work in the part of the bank that deals with um sort of financial planning

uh wealth strategy advice for long-term Investments not not the commercial or not the like the retail Banks

um and we are here to basically understand what our clients goal is I

want to retire I want to be a philanthropic I want to support my daughter’s business whatever it is and

then help them achieve that goal where I come in is recognizing that from a moment of goal setting on day one to

achieving that goal which can be a year it could be 20 years it’s gonna be on your lifetime a lot can happen and along

the way whether it’s volatility or changes or whatever it is like we as people can be impacted emotionally and

our goals the long term can be frustrated by the short term and so it’s just like look it’s it’s your money you

get to do what you want our job is to make sure you’re aligned with your goals or if your goals have changed great let’s change things and it’s essentially

to say look we we we’ve built literally buildings because we create great advice

but we also recognize that for each person that advice is very personal and is very emotional and that’s not pretend

it’s not let’s Embrace that and and see how we can sprinkle that emotion on top of the great research and resources that

we have so that everyone walks away feeling good about their Financial Health and their financial future so

without embarrassing any particular person and this could be somebody in your life or folks that you’ve come

across what are some of the most common sort of sort of irrationalities that you

come across and you know Dan arieli kind of coined that you know predictably irrational

um statement it gets used all the time and it really fits well but what are some of the predictable or rationalities

that you come across kind of in your in your day job um I would say without uh attributing it

directly to my day job so I mean there are a ton um and I think that one is the challenge

of again thinking about the future right when we’re making financial decisions big or small it’s about planning for the

future um but it’s hard to really connect to the Future there’s a there’s a principle

called present bias um a man you probably know Hal hirschfeld recently put out a book

called your future self and it’s all about the fact that the emotions and temptations of the present what we feel

right now greatly outweigh the emotions Temptations and feelings of the future so when I’m making a choice whether it’s

2 A.M am I going to have a cold slice of pizza should I get up and exercise in the morning or what should I do with this money to invest

what we feel right now or or might feel is going to outweigh the impact later

um in fact studies show that Jeff today thinks of Jeff in 10 years 20 years 40 years as a totally different person I

literally don’t care about him not only that between me and Jeff in 40 years as Jeff in two weeks we’ll work out Jeff in

a month we’ll eat better Jeff in a year we’ll call his mom now and then like there’s all these reasons why I should

act based upon what I feel right now and that feeling can be like I want to eat this piece of pizza it feels good and I

don’t care about my help I’ll do it later or it could be you know I I need to put an estate plan and a will

together but I don’t want to deal with thinking about which of my kids gets the house and which gets the business and

that’s like hard and emotional and it’s okay again it’s normal um but the biggest challenge we have and

and it comes out in all different contexts exercise and estate planning being just two is how hard it is to

think about that future that that thing that we want in the distance it’s why so

many any of the like the various apps that the people in the companies have designed are sort of these savings app

to help you save I want to go on a vacation next June so help me save some money and it does it automatically

because because day to day it’s hard to think about the future it’s hard to think about that stuff

um and you know the the challenge for all of us individually or as people

in a family or as advisors to others um is to help sort of lift our eyes to

the Future and not be so obsessed on on the emotions of the president sometimes it matters right like where am I going

to dinner tonight like that’s a present I feel like like am I going to be able to retire in 20 years that is something

where you can’t go out to a nice dinner every night every day of the week if you want to get there

um and so like I know I’m sort of being a bit high level Theory but this is this

challenge of connecting decisions today to impacts and outcomes later is is at

the core of all the challenges Financial in other words that I’ve seen throughout the years so I I have to ask you when

you think about the the future Jeff how do you reconcile the future Jeff the

present Jeff and even the past Jeff like when I think about you know the Dan from

10 years ago I’m like yeah I remember that jerk I don’t what was he doing and it’s they they do feel like they’re

separate entities but you have to be able to kind of have one non-sort of bipolar or or multiple personality sort

of that they’re lurking out there how do you reconcile those so that it’s one rational person that’s making compromise

and sacrifice for the good and I and I’ll just couches with one thing just just coming back from Japan uh just a

couple weeks ago or a week ago for that matter I noticed that people soccer advice for the future of others they’re

much more willing to do that whereas maybe in the United States there’s a slightly different sense of of sacrifice

for the future of others um so maybe it’s not in our DNA or or it’s maybe it’s a little harder for us

uh in the U.S but your thoughts about that of reconciling the two and how culture plays into that you hit on a lot

of points so please you know ring a bell or whatever you need me to start okay hold on there you go I’m done uh before

you’re ready um that was unplanned the Bell was ready for you Jeff but yeah do tell so first

sort of starting on your last Point um context matters uh you know we often

say everybody’s the same but everybody’s different I believe that like the the behavioral biases psychological

influences whatever your term of our like exists for all of us but our context matters our contact can be how

we grow up with the culture we grew up with how much money we had what is our funny story what are our personal goals and experiences Etc

um but you know like uh with with risk aversion as an example right like a you

know I if you if you ask me to gamble like I’m a risk-averse I don’t want to lose a thousand dollars a billionaire

probably doesn’t care as much about losing a thousand dollars but there’s a number that that billionaire cares about

right and that’s just an example like that that is his or her context there’s also the context you mentioned

culturally the cultures that are more connected to the elderly and what it’s like to be a great grandparent are

probably and and there are some research here they’re more connected to the need to plan for that so so a context matters

um that leads to sort of to get from that high level to a slightly less high level um the importance of thinking about that

future in a very concrete specific Visual and emotional way

um you know imagine you’re on a boat at Sea and it’s rough season and you stare down at the whole of the boat while the

the waves are rocking it you’re gonna get seasick but if you lift your eyes eyes to the Horizon your stomach calms

and you’re more likely to reach your destination if you put that Horizon in Focus so again it’s still high level but

like we do see that when you are specific and visual and personal about those long-term goals it’s not I want to

retire in 40 years it’s I want to retire on September 28 2063 and we’ve seen these studies so

that little specificity increases the amount not even I want to retire but I want to um have a three-bedroom house

where my grandkids can stay and I want to be able to support my my niece’s music career like just that the more

detail the more in Focus that future is long medium or short term the more we’re

connected it to it the more we are um the more difficult it is to break our

pursuit of that goal to break so that’s that’s sort of getting on there and then there are um sort of more uh sort of specific

techniques to to to get there one is just you know naming your goals in ways

that aren’t retirement and college savings you put your kids names or your own names on it little things like that

that can bring that that future into Focus um you can set up things to to make your

goals that long-term automatic so you’re not faced with having to do this heavy thinking like um one of the options

options or like on the 401K right yeah those would not be um American audience

I don’t know if you have foreigners but like when you start a job you go to your HR department and they say hey do you

want to save for retirement of course you’re like yeah of course that’s a great long-term goal about seven percent of every paycheck we put in a 401k super

do it and every paycheck comes and you kind of forget about it it just happens automatically don’t think about

it and you get there or you get along the road now imagine the different outcome if instead of that every

paycheck HR came up to you and said here’s a here’s a thousand dollars do you want to give me 350. do you want to

do you want to give me some money this week for your retirement like on the one hand we know on our head we should but

no I want that money like it’s it’s what I want well you got to pay for the dinner you’re going altitude for tonight

the dinner the shoes the cake um I use I use pizza today I think not cake

um but if we make it automatic if we another sort of system to create is the

extent that we can um instead of trying to change who we are one of my big philosophies is we

can’t change who we are um but we can sort of understand who we are and then create a framework and

assist them around us to get to the outcomes we want um and so whether that’s financial

planning or for instance and I’ll then I’ll pause I tell more ideas I could talk forever I’m sorry

um like exercise we all know and I know that I should wake up and work out every day but the alarm goes off and even if I

said it early I’m like oh it’s gonna be a pain to clear the laundry off my pellets on bike and I gotta find my shoes and like all this crap

um I can say crap you’re right uh what won’t work to change me is if I try

to treat myself like a marine and I go be a better person have more self-control you’re worthless you’re we

like get out there that doesn’t work right you might scare me once into working out If instead I recognize okay this is the

excuse I make this is why I fail this is my flaw what can I do about that and so the

night before when I think I’m gonna work out in the morning I clear off the bike and I put my sneakers and my shorts next

to my bed the alarm goes off and I see this visual reminder of the promise I made I’ve eliminated an excuse for

myself it doesn’t guarantee I’m gonna do the right thing but it’s like a little nudge I’m sure your listeners hurt term

nudge in relation to the field of Behavioral Science it just it tips the scales a little bit towards what I

myself have identified as the goal um and away from what in that present moment I might do to defeat defeat

myself in pursuit of that goal well you know it kind of reminds me of uh the uh there’s an alarm clock out if you’ve

seen this before the alarm clock one runs away from you it physically moves

away as you because the the one of the the big issues is that getting out of bed like shutting in the snooze and if

you take that away and you get out of bed it’s momentum so I mean that might be a bit of an extreme example but just

physically getting the first arms moving legs moving apply that to every other sort of uh example that that has an

impact small it’s a lot of things it is and before we move on just because you you um have a great way of bringing up

ideas I’ve haven’t thought about in a while but you mentioned looking back on yourself 10 years ago was I don’t think

you said jerk that might have been how I interpret it um I hope we have a relationship that I can say that

um that is an important exercise to look back on your past self and and remember

that in 10 years you’re going to look back on your current self similarly like you might not you know

the the growth the growth from 20 to 30 is not the same as from 30 to 40 whatever your number but nonetheless

like recognizing that 10 years ago you were present bias I didn’t think about

how you feel now and that can be a helpful perspective when realizing okay what I what I’m all about right now

isn’t necessarily what I’m going to be all about in 10 years so as best I can like what might matter

to me right you got to make like the best decision you can in the moment um you’re not going to make perfect

decisions but like as much as you can try to think about all that outcome and all how do you how do you get somebody

in the moment and I this is maybe what great financial planners and sort of advisors do but you know you’re you have

three kids or you have a busy schedule going to sports and working a job and your parents are aging and you can’t

imagine what life will be like when you’re not working anymore or maybe not

working by choice but or by by force but maybe by choice

um it’s hard to put people in that that mindset that context how do successful people kind of reframe things so that

they can make those choices and be in that context um there are a couple thoughts one is

that this is an area where again I’ll mention how Hershel there’s a lot of work figuring out like he did a great experiment where basically he had people

interact with with a virtual reality version of themselves aged right I think they put on goggles or maybe it was like

a screen they had a conversation older Jeff and then they made Financial choices and they were more future-minded

and they’re interacting with their future selves yeah like like a like an avatar of that now it

scalable right but but trying to find ways to basically make bring the future present right you can do stuff where you

lock it in like the audit 401k or you can do stuff or just started like have conversations we’re talking about big

decisions again not the five dollar lattes but the like when am I going to retire am I gonna buy this out like take

the time to think about that now that’s a challenge um but it’s I believe worth doing for

the big choices um the other technique that I that I have found useful

um and there’s a lot of context for this where I’ve seen it play out it’s not again nothing here is a guarantee this is all

ideas um is something I call advise yourself which is when you have a challenge

you’re stuck maybe you know the right thing to do I know I should exercise um or or you just sort of don’t know

what to do imagine instead of it being you with this problem it’s like your best friend comes to the same thing like

so instead of Jeff being like hey I have this big I can’t I’m just shy I don’t know what to do what if Dan came to me

how would I advise Dan first of all we’re all pretty smart we all like when we’re facing choices we kind of have a

lot of the information or we can get a lot of the information we give better advice to other people than we give to ourselves more

importantly we are kinder to other people than we are to ourselves when I face a choice that’s like about

it’s now and it’s for the future I spend most of my energy beating myself up over the past and why am I not here and it’s

unfair and this is that’s a pretty pervasive tendency isn’t it’s not just you this is every time so when we when

we give advice to other people like we just look at what we know about them like this is what I know about Dan what

he wants this is what I know about the choices the opportunities you you almost look at it like it’s just on paper and

then sometimes the act of like then saying the advice words of someone else again it’s not magic it’s not a

guarantee but it might tip the scales a little to hear you’re like I know I should save more for return Dan you

should save more for retirement that’s kind of me telling myself I should save more for retirement

um and it’s just a way to like recognize like thinking about the future thinking about like these big what’s

your legacy what do you want in life what matters to you what do you want your kids to say about you like that

stuff’s important and if you can think about it and make choices with that in mind people make better choices they’re happier with but that’s really hard like

that’s like who does who goes to like Starbucks and is like do I want another shot in here or is it going to ruin my

legacy well

that it’s a great question these the little and it is little things I’m a big believer in in small changes but

all those books yeah Atomic habits and they’re they’re they’re well you know they’re they’re interesting stories and

and they do work but it is hard to put into context I I want to ask you I want to Quick pivot for you

um get get a little more personal if you will you you when you think about the

past you and I think it’s such an interesting story The you were a Princeton grad you went to law school

and then you did stand-up comedy maybe not in that order um how did you make your way into

Behavioral Science and because it’s such an interesting place and then I I gotta ask you like how did you hook up with

Dan arieli who if folks don’t know Dan ariela you have to check them out in fact I I don’t remember if I had

mentioned this to you I’m flipping through the TV and there’s a new show called irrational um and say it’s a great show but they

base it on Dan ariely um yeah he must yeah because it’s sort of

his story how did you get into how did you make that transition look at your past self how did you move into

Behavioral Science Why did you do it um so a few things unpacked there but tell me a little bit more and then I’ll

just let the folks know time for you to put some questions in as we go along but I listen to Jeff he’s got a great story

here so I’ll give you the short version but with the caveat that I hope no one is listening for in terms of career advice

because I had a lot of luck and Fortune and privilege in my in my way but basically

um I went to college studied economics politics Russian studies uh then went to law school because I wanted to be

Thurgood Marshall and Thomas Jefferson um those jobs were not taken so law school I love school but didn’t stick

with me and I did become a comedian um and now with the benefit of hindsight I see a through line

of accommodated Behavioral Science comedian goes hey you ever notice people do stupid things and the behavioral

scientist says yeah this is why they’re both sort of observe human nature and behavior and talk about it

um even law there’s there’s a relation like lawyers Comedians and behavioral scientists they’ll look at a situation

break it down into elements then retell a story of what happened for their own means right a lawyer to get his or her

clients position across comedian for a laugh and a Behavioral Science to hopefully explain what’s going on so

there’s a through line there that the benefit of hindsight but the non-hindsight path was comedy got an

opportunity right for Jim Cramer’s Financial website thestreet.com I wrote a weekly humor column

um that gave me an opportunity then to write my first book uh which I want to be very clear was a satire it was satire

not real advice it was called get rich cheating it was about how to be Enron and Bernie Madoff and steroids and all

this stuff and it was like an informal study of of why people are misled

um I had never to the stage heard of Behavioral economics but Dan ariely got a copy of my book invited me to his

class at Duke graduate business school um and I gave a talk in character right

it was like hey you guys should cheat make money don’t worry about it um side note disturbingly large number

of people agreed with me usually like around 10 students uh but anyway that was my light bulb moment when I

discovered this field this field of Behavioral Science that basically doesn’t throw away the economics textbook and the law textbooks and stuff

that I felt like throwing away because I know how people should behave but that’s not what they’re doing in my visual I

said yeah on the mass we behave this way but individually and in small groups we we are irrational there’s a psychology

aspect and I was just like holy cow this is it and it just clicked um Dan and I did some more projects

together uh he asked me if I want to work on a book with him um I did uh that process is basically he

said here’s everything I’ve written in researched on the topic of financial decision making Bill read it and come back to me and we’ll talk about it

um and then that came out in 2017 um and it is uh in 22 countries and has

done very well um and I am not shy to admit it’s 99.9 because Dan ariely’s

name is on the book um well deserved uh I will say side note and I don’t want to get too derailed but

on the the US version of it it says big letters Dan arielli and Jeff Chrysler and while I wasn’t going to ever say my

name should be as big or bigger than Dan’s I did say listen could my name be bigger than the word and

that was my ego Victory now what’s your name is your name the same size in other countries or is just the US every place

is different I love seeing different um covers but I think it understands the headliner uh fast forwarding the book

came out from that I wanted to continue advocating for Behavioral Science not as a silver bullet but like a tool people

shot in a tool belt for family community organization personal finance all these decisions I was like this perspective is

useful ran a website called people science which you and I collaborated on some um it’s sadly been hijacked it’ll re-emerge

soon uh that was having this conversation about this new field the Behavioral Science has been researching

TED talks and NPR and books at Newfield now moving into practice so between the

researchers and the practitioners and people trying to make it work um and the challenges they’re in uh then

I also did a lot of speaking and Consulting and we find a lot of financial firms given the nature of the

book um and then in uh about three years ago JP Morgan reached out um and I to their

credit they were looking to sort of lean into the need for Behavioral Science

um I think also to my benefit they recognized that the particular place I sit

um is a culture where my skills of communication despite this rambling

answer um and and sort of being able to to speak to people from a bar full of drunks telling jokes in West Virginia to

an academic gathering in CERN um was a benefit to explain this and

then at some point in some point soon then they’d hire the PHD the data scientist to sort of like lean in but

right now it’s a very sort of communication education based situation and it’s been it’s been great like I I

I shied away from the practice of Law and earlier even going to finance initially because I had this

like perception of it of not not being I want to say not unethical but honestly

being like for the betterment of things and I’ve been happy here that we are

working towards like what client what’s your goal and how can we help you get there right it’s not client wouldn’t you

like to get in this used car or wouldn’t you like to be addicted to cigarettes or getting credit card debt it’s like you

know but being transparent um and serving the interests of our clients which hopefully you know I feel

like if I can improve people’s financial decision or lower their stress by like

point one percent right that is a massive impact so that that is driven by delusion I’ll tell you what so you’ve

triggered a number of questions a few people have sent me direct questions um a couple came before and they and

actually a couple of come during and I’ll invite for people to continue to kind of put their questions comments in

and Linkedin live and share that there but in the meanwhile so Dan uh Dan Jeff

playing the role of Dan um one of the things that that’s come up is the question of sort of the

irrationalities and specifically um somebody asked ahead of time what are

the the biggest sort of irrational decisions that you have to contend with um particularly when it comes to

financial decision making what are the things that that really that um most commonly come up that you have to to

deal with or combat or um I mentioned this challenge of the

present bias another big one is something called law subversion loss aversion

um just somewhat related risk aversion but more specifically it’s this principle that we feel the pain of a

loss much more strongly than the we feel the equivalent uh pleasure of a game so

if you lose ten dollars that pain is only made up by winning twenty dollars now this manifests itself is that for

most people again they’re always exceptions like we’re going to be more when we’re making a decision we’re going to focus more on the potential loss of

the choices than on the potential gain or you know in a caricature when the Market’s going down five percent you get

more calls to sell and when it’s going up five percent you get to buy and this can just sort of skew our choices in a

lot of context because we don’t give ourselves the opportunity to really um weigh the different options on equal

footing we’re overweighting the thing that the law sticks out um and there’s it was a great study that

I think is is so informative for like if this is a big challenge what do you do about it um and I I I’m going to shorthand the

study but basically they asked a group of people they said in retirement could you live on 80 of

your current income in about three quarters said yes then they ask a similar group in retirement could you live on 20 less

than your current income about three quarters said no same question just

frame differently essentially it’s not the right term but like essentially triggering loss aversion so for me like

that’s a challenge but okay let’s let’s try to find a way to spin that for our own benefit and the way I believe you can do that is

if you’re facing a choice right like I have I have a chunk of money something just had I sold some stock I got a Bonus

and I want to invest in the market but but the Market’s volatile and stressful and I don’t want to lose my money fine

that’s it’s your money it’s your choice I understand of course you’re going to be concerned about losing it but let’s think about what you might lose if you

don’t invest right you’re going to lose purchasing power right ten thousand dollars today with inflation everything

else is nine thousand dollars in a year right the numbers say the same but the impact lessons You’re Gonna Lose return

gains how we historically see over long term that the market is up and down but historically no guarantee past

performance not a guarantee Etc um You’re Gonna Lose pursuit of your goals right you want to be philanthropic or pay for college or retired you might

have to put that off a little longer so you you don’t necessarily it doesn’t necessarily make you do the other thing

but it gives yourself the benefit of saying okay I’m looking at this one option in terms of what I might lose

instead of changing my human nature I mean look at the other option in terms of what I might lose and at least they’re on equal footing so that loss

aversion I see manifests itself a lot of times um particularly because when people are

sort of hesitant to get into investing I don’t want to sit here and say you must invest but like a lot of it is because

we have a thing already and we’re afraid of putting in something we don’t necessarily understand right like we’ve

we’ve made this by being you know the best widget maker in Wichita Kansas and now instead of widgets it’s going to

turn into stocks and bonds at the hand of some other advisor so that is that’s a big barrier for people to to make good

Financial at least planning decisions so someone else asked the question of uh of

Behavioral signs gone wrong um are there examples of where Behavioral Science has been manipulated

to be able to kind of bring out the worst in people and any examples or practices they’ve seen and I don’t think

the questions being asked um in the sense that somebody’s looking to go out and Co-op this personally but

things where you feel like this probably was used in a more manipulative way

um yes uh one of the articles that I’m proud to publish on people Sciences about dark nudges

um or some people called sludging yeah dark notice and and you know you can

think of things from whether intentionally Behavioral Science or not you could think of things from

um cigarette marketing uh to Cambridge analytics using Facebook interaction as

you know I don’t I’m not going to have a political opinion here but of of having dark nudge uh impact

um you know my belief like I’m I’m Guided by uh you know Richard thaler um

one of the fathers of the field talked about the three pillar three ethical pillars of Behavioral Science and I

believe it not just to be good ethics but actually good design one is that um uh forgive me for paraphrasing if

you’re listening Richard um Mr Taylor uh nudges must be um transparent

uh they must be opt outable so like you don’t have to do it and they must be serving that person’s best interest so

if you’re designing something it must be selling cigarettes is not serving their best interests

automatic with retirement investment is um and I am firmly believe in and I’ve

seen it in practice at like it’s like you can trick anybody once right you can sell someone a used car

that stinks but if you want to have like a relationship and and deep satisfaction

that person’s not never coming back to you right if you want to have that person like you acting in other people’s

best interests is not just ethical it’s good business right and it’s also good for your soul

um so while there are a ton of of things where that’s happened um

and you know so much of like like the last 10 years of app design is

essentially designing and gamification so people stay on your app right get them hooked right get people so they

can’t they’re playing Candy Crush are I don’t want to accuse Candy Crush but they’re playing something some game or

some interaction they’re always on your app right and it’s designed to like trigger these emotions like I’m gonna

win a badge I’m gonna win a prize I’m gonna beat people on the scoreboard like that’s using Behavioral Science is it a

good thing is it a bad thing like you know I I would venture more addiction to anything is bad but it’s certainly

questionable any thoughts about it levels of addiction now with smartphones and Technology do you see I mean this is

sort of a little bit of a straight point but it’s tied right in with Behavioral Science how much more addiction it’s a

huge challenge like just distraction and the inability to sort of like complete thoughts or I don’t know how many people

are reading books anymore or if they’re on on Twitter it’s it’s also known as uh door stops yeah exactly paperweights

um there’s there are a handful of people doing some interesting work um Ashley willins a professor at Harvard

um a few others whose pardon forgive me for forgetting their names essentially like how to overcome this

um ironically there was a man uh there is a man named near ayal who you may know who wrote um he wrote a book called

hooked which was kind of like how to design stuff to get people like connected to your engage with your app

and then a few years later he wrote a book called indestructible which is like how to not be distracted by things but

I I like the second book better because it talks about the child there is a huge challenge of addiction and and side note

people often ask me generational differences um between particularly like the digital

NATO’s which are like the Millennials and otherwise and I’m torn because I feel like the digital natives they’re

gonna they’re gonna grown up in that and always being distracted and part of me feels like well they’ll actually have

learned how to overcome that like if they’ve achieved anything they’ve overcome more of that to achieve than

old folks like me who just in the last 10 years I was sort of set in my ways and now all of a sudden I have something hanging in my head so I remain

optimistic I appreciate that what quick thing

um and then we’re gonna do a quick another quick round of of scenarios for you where you get a chance to to have

your saying cast your your prediction um any books besides your own in Dan

arielies any books that you recommend like what are your top three if someone’s interested in Behavioral

Science what would you recommend for them to uh to peruse assuming people read books still today sure

um maybe they’ll listen to them but don’t read them right so um working backwards from very specific

to less so if you actually want to get deep in designing things there’s a book called engaged

um by a woman named Amy Butcher I always get her name b-u-c-h-e-r that talks about all the different

approaches to designing little fixes within things and like how it was done and it’s a great it has so many Rich

examples it’s very design specific um if you want to go like a higher level

which is more useful there is um you know I said not Dan’s but predictably irrational is a great intro

book that’s very accessible I think Dan’s success has come from his accessibility um Thinking Fast and Slow

um is sort of a foundational book it’s a little more academic um nudge is another one uh the work of

Adam Grant Adam Grant is prolific writer he writes some amazing stuff um Katie Milkman uh I believe recently

came out with a book um Ashley Williams also came out with a book uh there is

um influence and and books around influence Robert cialdini is sort of the the father of that

um and others uh and there’s a book right now it’s like this it’s right here in my mind I can’t quite crystallize

I’ll I’ll make the side note with saying I welcome people to through um appropriate channels to reach out and

I have I have a list and then behavioral scientists.org is a website that puts

out at least yearly if not biannual book lists and that’s okay that’s a great one to subscribe to and you know I know

we’re in the fire on that but I’m a regular reader of it it’s uh great stuff the one last thing I’m going to squeeze

in before we do this speed round Jeff um somebody asked how do you advise a

person who makes impulsive purchases and then deceives themselves to thinking that the purchase was necessary and I I

feel like maybe that was submitted by my 16 year old daughter but uh I there is

always an Impulse person purchase and I don’t know what to do about it but

um you know that one may be for for me my kids but um how what do you say to that there are

a couple things um both have to do with this concept of discretionary spending right we all have

a certain amount of discretionary spending the outside of our Necessities is our money to spend every week or month

um the first technique that can be useful is most people have a spend their money

through their credit card indirectly or not so let’s say get your credit card bill and every month with a disinterested person not your father not

your spouse but like someone else who you can talk to go through each person each purchase and explain why you did

that like what was the point of it and doing this again helps you articulate and you’re going to realize there’s no

wrong reason it’s just the only reason that’s wrong is not having a reason okay like I don’t know why about that I

bought that because I really like chocolate ice cream I bought that because I wanted to watch uh cable TV that’s fine it’s a reason but you go

through that and you’ll start to see patterns you’ll start to see moments like every Friday is payday and I go out

and spend way too much money because I’m flush or whatever the patterns that’s one thing is is to do that work

um and when you have to explain it to another person you just can’t just sort of lost it does change the game when you

have to explain you have to rationalize now the other thing you can do is you can kind of like create a system where

if you are like spending too much um most of us think of our discretionary spending as our our checking account

like what’s on our ATM or typically on the app so if you get paid you get a paycheck just like you put money into

401K you can put some of that money into like a regular savings account so you kind of put less into your checking and

it’s almost like you trick yourself now that money the savings is still there for you but you’ve created a little

friction it’s like if you sit down to watch a movie with a big bag of potato chips you’re going to eat all the potato

chips but if you sit down to watch a movie with 10 small bags of potato chips each time you open one it’s a little bit

of like friction a little bit of like should I do this you might bleed them all but like you you at least cause that

for yourself so examining your spending to figure out what’s going on and then that is one example of a system that can

help you at least the many bags of potato chips is a very

extrapolatable example for many things um the second word extrapolatable I

don’t remember the other one was I love that I’ll throw a few more out to you well I’ve got I’ve got a a fun little

game and we’ll see um how our audience engages but we’re gonna put you to the task here Jeff so

I’m gonna share my screen here right now and you’re gonna notice that there is an

interactive tool up here mentee.com so I’m gonna encourage people right now the

build to join you go to mentee.com 2420-5971 so I’m gonna give folks just a

few minutes to uh to get themselves set up for this I have a handful of questions and we’ll get to the first one

which is up here in just a moment but um you know I’ll just say a big plug for interactive games it’s a great way to

get people to engage and uh it’s a fun way to get to challenge people and Jeff what we’re gonna do is I’m gonna present

this scenario to you and and then I’m going to ask for folks to be able to kind of give their answers but I’m going

to ask you directly tell me what you think and then I’ll reveal to you the answer but I’d love for you to kind of

give us an explanation or what you think might be the explanation why Behind These now I’ll just note I did not make

these up I’ve actually stolen them from your colleague Dan ariely and his team so there is a little bit of perhaps uh

you may have some some back context but maybe not these are these are new we haven’t rehearsed this so let’s get to

it you ready I’m ready right um first question as you can see up here

right now what happens to the neighbors of people who won Lottery prizes of up

to a hundred and fifty thousand dollars I’ll note that was done in Canada so it’s Canadian dollars so that’s like I

don’t know like like 500 maybe I don’t know like not sure the exact exchange the is it first is it lottery winners

neighbors save more money because of that did the lottery winners neighbors file more often for bankruptcy or did

the lottery winners neighbors leave the neighborhood now I saw this and I thought to myself come on I mean I I

don’t even know if any of these happen but but apparently something did much more commonly what do you think is the

most common thing that happened as a result of uh of their neighbor winning the lottery up to 150 000 dollars

so while people are voting I won’t give the answer but I’ll give sort of the context or how I yeah what do you think

imagine what it’s like to be in a neighborhood and like what when people

we don’t talk a lot about money in general we talk about what we spend or say like what do you see in terms of

people’s money Behavior do you ever see their saving for retirement do you ever see their investing do you ever see

um the the decisions that are sort of for the future about money you don’t

see is consumption is a new car uh you know um uh new clothes uh maybe they’re

going on vacation more often maybe they do some Renovations on the house you see the spending so that’s one context that

we’re gonna see spending we’re not going to see good decisions long term we’re going to see that that spending

um and the other thing is the the power of social proof that that we are persuaded to behave as we believe others

like us are behaving that we are influenced by our peers those in our community whether it’s a work group or

otherwise has a massive impact on us um so if we see people spending money on

our house it it sort of makes us feel like I want to keep up I want to hurt I want to keep up with the Joneses so like

I see where you’re leaning towards so what do you think it is so in that context like I’m I I don’t see all the

choices that that uh you know Mary Smith who won the money I see her spending I increase my spending and

I would go for that middle one um you know I like that that declaring bankruptcy is the term that I have

trouble with but like I think people overspend um because they see others around them spending more and it just sort of gets

them in this mindset of that’s what you do well let’s go to the board and see how you did on that one

you are correct I totally missed this one um I thought that people would end up

saving more that was my gut reaction um clearly I got it completely wrong

that that’s a that was a really astute answer that people more often I think overspend is probably fair but according

to the study it was done in Canada a number of years ago there was an increase in the rates of bankruptcy so

that great so what how do you express your how do you express your money someone gets 150 000 if they get that

and they go tell all their neighbors hey I got this money and I invested in all then people might say oh that’s a money

but that’s what you should do with money but instead they don’t really do have that conversation they just start buying stuff maybe they invest some of it

um so people are like oh I guess you I suppose that’s a money value is to buy stuff yeah a great great Insight behind

that all right well you’re you’re doing well and what we’re going to do is we’re going to now move forward and actually

see for the next question and we’ll give our our friends here a chance to be able to have their say which type of spending

do you think makes people happier um researchers gave money to for people

to spend on either themselves or other people so the three options were

um spending money on someone else made people happier spending money on themselves made people happier or

there’s no difference at all there’s quite a bit of research in this and I listened to a couple researchers talking

about this um what’s your your visceral reaction Jeff um people are spending money where are

they spending it makes them the happiest my visceral reaction is informed by the fact that I’ve like I know probably the

researchers are talking about I thought about this and talked about it in a lot of contexts and there’s a great book and

more books called happy money uh by Michael Norton and Elizabeth Dunn um and they’ve done a bunch of other

stuff and you know it’s just I will say this in considering like how the outcome is

here when you spend money the impact isn’t just on the thing that you get and the

money in or out like is there is there some is there another aspect and when you spend money on other people there’s a social aspect there’s a community

aspect there’s an expression of Grant there’s stuff that isn’t measured in dollars and cents

um but it’s measured in the stuff that really matters to us a sense of connectivity of community

um and so for me as I see it looks like most of our people are saying um you know that that yeah it’s great to like

get myself a toy and I have fun with it but um you know sharing and pro-social

giving um is really impactful now look I mean like if if I’m in 200 000 of student

loan debt and I skip 200 000 away like I mean I’m not gonna feel great about that

but you know there’s a measure it’s almost like if you if you spend money you get some money and I buy a video

game console that feels good but you know it feels even better is inviting my friends over to play yeah like enabling that social

aspect that connectivity that we often too often forget about I see where you’re leaning towards and I I’m gonna

say that I think that you are right the uh that and 63 of the group is spending

money on someone else that’s not I that made me feel really nice and warm in my heart when I saw that people truly are

in general happier when they share versus they take here so people can test it out

I’m gonna put that up right at the end all right well I’m interested there are a couple more that we have in the the

time that we’ve got left Jeff um this one’s a little this one fascinates me a daycare put up a sign

telling parents that late pickups will incur a fine how did that sign influence

the parents Behavior did it double the late pickups did it end late pickups

completely or did it decrease late pickups by just half what’s your your so

again this is a study I talk about all the time

I told you I love some of your questions this is this is one of them so thank you um I will I will give the again the

context that leads to what I I believe is the correct answer um you know there’s a difference

um between social and transactional costs and there and they care where

there are just people are coming late to pick up what is the what is the impact of that there’s no Financial impact

right but the impact is that the people providing daycare are then have to stay later and they’re late going to pick up their own kids that the people who are

on time start to resent the people that are late that even there are arguments that but perhaps like it accelerates and

the kids whose parents come on time don’t let their kids play with the kids who are late because they just think they’re jerks there’s a reputational

aspect of community fraying it’s sort of like an Unwritten rule that you should

be respectful of this daycare that’s caring for our kids when you make it uh transactional then

it’s just uh the consequences are just write a check you know I’m 25 minutes late I can afford my box and it’s just

like it doesn’t carry the same heft that connects to like the deeper part of ourselves yeah our reputation matters

there’s always a dollar you know they say Every Man Has a price there’s a dollar for which like I don’t care about

money give me a billion dollars I can take your reputational hit right but like my reputational hit is not worth

you know something else and so when it becomes just transactional and you eliminate that social aspect it’s easier

for people to engage in the bad behavior so we’re established who you are now it’s just a matter of price I guess

there’s that old joke goes it’s uh well I’m gonna I’m gonna say that you uh you

probably knew this one well already just seeing it that it doubled the late pickups which the first time I saw this

Jeff I thought how is that possible but this is sucked there’s such great Insight in here and I think you hit the

nail on the head it changes the transaction or changes the relationship it makes us more of a transaction I’ve

got one more for you and we’ve got just a handful of minutes um so I if I go back here for a moment

um there is a study that had people thinking about their income and the the

question was in which situation do you think people would be happiest making eighty thousand dollars when

their co-workers are making a hundred thousand making eighty thousand when your co-workers are making seventy five

thousand or making sixty thousand when your co-workers are making twenty thousand

dollars this one really I thought was so interesting because I I know what my visceral response would be

um maybe it’s right maybe it’s wrong what what do you think Jeff um I I think about like the real

challenge of financial decisions is how do you how do you assess the value of something

how do you assess like is this sweater worth a hundred dollars is this job worth 60 or 80 000 and we all take sort

of shortcuts or heuristics or little paths to figure out what that is sometimes it’s uh it’s on sale so it’s a

good jump saving money or sometimes it’s just what my parents did or sometimes it’s what we call relativity which is

just comparing things to other things um comparing in this case eighty

thousand to a hundred thousand eighty thousand seventy five sixty thousand to twenty and like in in which context does

it feel like I’m more valued right in in the absence of anything else you might say it’s just your salary people pay you

what you’re worth but in that last scenario 60 when others are making 20 you feel three times as

valuable as your co-workers exactly yeah I I would look at it and

say hey 20 000 more is 20 000 more but you’re right it’s all about do I make more than other people that that is the

relativism I know we are out of time but first of all well done you are a hundred

percent A Plus student on this Chef um but uh I I want to just just ask you

just kind of a closing thought if you are kind of everyday person thinking about how do I use some of these tools

and practices in my everyday um financial decision making or in my job well any kind of kind of last

suggestions thoughts that you would recommend to folks uh I Circle back to the advise yourself technique and I

would also say like have the perspective of of the difference between big and

small choices like so often Financial advice is about small things don’t have a five dollar latte

um but really matters to big ones and I don’t want people to be stressed about every choice all the time but it’s like

we’ll be doing a home renovation and a contractor will say you know for ten thousand dollars more out of a five

hundred thousand dollar bill you can get a marble countertop I’m gonna go get it fine I don’t care it’s like it’s overwhelming then you go to the

supermarket and stress out about 50 cents more per pound for organic Tomatoes it’s never going to add up so

like don’t ignore the organic Tomatoes or the lattes but like don’t obsess all the time obsess over the big things most

of us because we can control the little purchases more than we can control the big jumpy ones we do that and we obsess

over the little stuff and I would Adventure great advice again but obsess over the big ones I I love that don’t

sweat the small stuff that’s uh Hey somebody should write a book with that name

uh Jeff thank you so much for for all the wisdom your time and insight on this

uh if people have not seen your book uh or books for that matter I have read

your books they’re awesome there there’s great stuff in there um check out Jeff’s stuff and uh and

also when people science is back up I strongly recommend check out some of the articles there are a few good ones there

there are more than a few good ones there but Jeff thank you so much for for joining and uh and and being here today

I appreciate it thank you for having me awesome all right thank you Jeff and

thanks for everybody for tuning in for us that’s it for today but our next podcast episode is gonna be coming to

you soon in the next few weeks sign on for the next deliberate way thanks again everyone