Episode Transcript
[00:00:00] Speaker A: Hi, everyone, and welcome to the 240th episode of the Atlas Society Asks. I'm Jag. I'm the CEO of the Atlas Society, and I am super excited to have Dr. Daniel Crosby join us to talk about his latest book, the Soul of Wealth 50 Reflections on Meaning and Money. And as you will see, I've even dressed for the interview by wearing my money pin. So, Daniel, thank you for joining us.
[00:00:34] Speaker B: Jag, it's great to be with you. Thanks for having me.
[00:00:37] Speaker A: So, Daniel, we've got two things in common right off the bat. First is our shared love of Victor Frankl's man's search for meaning. And second is our Diet Coke habit. You, your pinned twin tweet on X analysis that you gave up the latter with no discernible health impact and a significant loss of personal happiness. Have you been able to stick with it?
[00:01:04] Speaker B: Definitely not. That Tweet was from 2022, and I am afraid I am deep in the throes of my addiction to this day. But the good thing is I've lost 60 pounds since I tweeted that. So big part of that is just using Diet Coke to keep me full. So we're more committed to Diet Coke than ever.
[00:01:26] Speaker A: Well, let's make America drink Diet Coke again. That's what I say.
[00:01:30] Speaker B: That's right.
[00:01:32] Speaker A: Now, I liked in your book how you told readers, and I think it's good advice, if they hadn't read Viktor Frankl, you said, immediately close the book, drop this sucker, I think were the precise words, and go read the great psychologist. In that spirit, I would say to the same of our viewers in Ayn Rand, perhaps starting with her money speech as articulated by Francisco d'anconia. And of course, I know you've read Atlas Shrugged as well. My favorite quote from that passage is, quote, wealth is the product of man's capacity to think. So how does that square with your thinking about wealth?
[00:02:22] Speaker B: So I, I like a quote that's, you know, I've heard attributed to various folks, but that. That wealth is a reward for solving problems. And I think that that squares nicely with. With Brand's thinking on this. The way that I write about it in the, in the soul of wealth, though, I think it's. It's more about wealth being riches applied to human flourishing. Like, you can be rich if you have sufficient, you know, numbers, sufficient commas, sufficient numbers in the bank. But I think wealth and riches are different things. You know, when this country was founded, 85% of the world was living in poverty, but due to the merits of capitalism. We've now brought that number under 9% of folks are living in poverty today. So over the last 250 years, just an incredible, an incredible blooming and growth of democracy and prosperity around the world.
And yet over that same time, we see in the west in particular, this crisis of loneliness, substance abuse, depression, disconnection. And so I want to, I want to live in a world where we're able to take that abundance and deploy it in a way that leads to human flourishing. We don't do that. We haven't always deployed that wealth in, in the best way possible.
[00:03:47] Speaker A: Interesting. So before diving into your books, one thing I came across in my research about you was your interest in baseball card collecting. How did that come about and what can collecting teach us about finance?
[00:04:03] Speaker B: Yeah, so, I mean, I think like many of my generation, I grew up in what collectors refer to as the junk wax era. It was sort of the, the peak bubble of baseball card collecting. I'm in my mid-40s. And so, you know, growing up in the, in the late 80s and 90s, this was the absolute peak of the baseball card craze. Now what's fascinating is if you were a, you know, a buy and hold investor in baseball cards, many of those cards are worth less today than they were, you know, 30 or 35 years ago. And that's sort of a big behavioral finance lesson. I mean, we've seen that it took Japan decades. We reached a point where the presidential palace in Japan was worth more than the entire borough of Manhattan. And Japanese real estate and the Japanese equity market reached such a bubble that it only recently surpassed its highs from the 80s. It took the NASDAQ 15 years to recover after the tech bubble of the 2000s. So I think being a baseball card collector and learning about this in my youth was my first lesson in human irrationality. The ability of markets to form bubbles and how you have to be a valuation informed investor, you have to be thoughtful about the price you're paying.
[00:05:35] Speaker A: Well, let's do kind of a level set. And I know your first book was Personal Benchmark Integrating Behavioral Finance and Investment Management. So could you first start us off with an understanding of behavioral finance and also what is an example of how people's behavioral issues can lead to mistakes when it comes to investing?
[00:06:02] Speaker B: Yeah. So economics, you know, traditional econometrics has accounted for humans as being utility maximizers. So basically they had to simplify human nature to fit in their mathematical models. And they, so they said, look, human beings will, will always do the best thing with their money, they won't be wasteful or frivolous or irrational or blow up market bubbles. While, you know, anyone who has spent money can tell you they don't always optimize their, their saving, spending and investing decisions. So behavioral finance is just the branch of finance that accounts for the messiness of human nature and realizes that we don't always act in our own rational self interest. Now, you know, Randians are big on objectivism, and so it's, it's interesting in particular to think about the ways in which money can make us lack objectivity.
So there was research that I quoted in a, in a previous book where I looked at brain scans of people who were hooked up to fmris and then exposed to a variety of different stimuli. So, you know, sexual images, images of death, you know, sex, death, religion, politics, all the good stuff, you know, that you can't, that you can't talk about at, in polite company.
And the thing they measured, the excitatory power in the brain and the thing that had the most excitatory power was money. More than sex, more than death, more than any of these things. Money tends to really sort of make us emotional. And that emotion, that emotionality, can lead to a lack of objectivity and can lead to some poor decisions. So, you know, I think a lot of economists had supposed that money was so high stakes that we would always do the most rational thing with it, but that we find both experimentally and anecdotally, that's, that's not the case, that money can make us quite crazy.
[00:08:16] Speaker A: Well, I'm seeing some of our regulars already diving in and I want to thank you guys for your patience. I was really rather relieved because I know we had issues with restream last week, so we're kind of going low tech. But this is, I think Daniel has already done three podcasts today and can report that every single one of them. So this is like the fourth that he's had to do where it's gotten switched last minute back to, to zoom, whatever it is we're doing. So I, I've forgotten about it. So anyway, maybe there is something more systematic going on now. So. But I do see candace Morena from YouTube asking, has behavioral finance changed or been influenced by events over the years? Is there something different now than in the past?
[00:09:16] Speaker B: Yeah, so it's, it's, it's an interesting question. So I think that human behavior is, is always changing and we're always sort of rewriting the rules. Social media certainly would, would be a Candidate. You know, I think that we've learned new things with, we've learned new things with crypto. You know, I think crypto is, is a lot of the things that I talk about on steroids in many ways. Because if you think about something like, you know, if you think about money, money is underpinned only by the faith we have in it. Right? I mean, green, green paper isn't inherently useful outside of the value that we ascribe to it. And that's certainly true of crypto. So I think crypto is sort of rewriting the rules of behavioral finance. Social media is rewriting the rules of behavioral finance. And perhaps more than rewriting the rules, it's cranking up the intensity in markets. We're seeing quicker crashes, quicker, harder crashes, and quicker, faster retrieval. Covid is a perfect example of this, how the market just, you know, the fastest bear market in history, a deep 33% drawdown, and then an almost instantaneous back to new highs. So I think that technology has really changed the game and the flow of information has changed the game greatly.
[00:10:45] Speaker A: Well, that might make your next bit of advice that I'm going to turn to a little more challenging as everything is kind of getting turned turbocharged. You have said that if you're excited about investing, you're doing it wrong. It's usually better for investing to be boring. So can you unpack that for us?
[00:11:05] Speaker B: Yeah. So one great trader talked to us, you know, again, back to this objectivism, talked about the best adv, the best investor being, quote, unquote, a functional sociopath. Like, you know, effectively someone who is just divorcing emotion from this whole process. And what we see, there's actually fascinating research that looks at people who have the part of their brain associated with creating emotion damaged. So these people are unable to form strong emotions. And what we find is they actually have a really hard time making decisions, you know, whether to wear the red dress or the blue dress, you know, whether vanilla or chocolate ice cream. It's very difficult for them because even low stakes decisions like that have a strong emotional substrate. There's some sort of emotional tug there. But they're quite good at investing, they're quite good at math, and they're quite good at gambling. And so if we can sort of divorce, you know, if we can, if we can make it boring, if we can divorce sort of the emotion from it, then we're a lot better.
The psychological term for this is the affect heuristic. When we get, when we have an affective response, an emotional response. If it's a positive response, we tend not to see what risks might be involved. And if it's a negative or a fear based response, we tend to see risks everywhere. So sort of the ideal, the ideal emotional state in which to make say an investment decision is one where you're in, you know, this sort of level state, emotionally elevated emotion or negative emotion tends to lead us to a miscalibration of risk.
[00:13:00] Speaker A: So that's like kind of the complete opposite that we saw with GameStop and with the gamification of trading and people constantly, you know, on a daily basis checking their portfolio. Any, any thoughts on those kinds of apps and whether there are upsides to using them or is it really better to set it and forget it?
[00:13:25] Speaker B: Yeah, so it's, it's interesting. There's. Anytime there's new technology, I think there's, there's profound upsides and downsides. I think the upsides of technology.
We can do things now where you can auto withdraw and auto escalate your saving and investing program. And that's a tech enabled process. And that's fantastic.
That actually lets us use one of our human tendencies. We have this human tendency to be kind of lazy and forgetful and status quo prone. And it's the same reason you sign up for HBO or whatever and you don't watch it, but you just let it run for two years or you sign up for the gym membership that you, you don't use and you just let it run.
So we can actually use that laziness to our advantage in a tech enabled way. The gamification element though, I think leads a lot of people to bad places. You know, it, it for instance, on Robinhood, you know, they'll, they'll show you what other people are doing and that's in some ways the, the last thing you should care about what other people are doing. You should be taking responsibility and forging your own path and going in a way that's consistent with your goals. And you know, you get the little, the champagne popping and the confetti shower and it makes it feel more like a video game than actual dollars and cents on the line and fractional ownership of a business, which is what, you know what buying a stock is. So I think, you know, technology giveth and taketh away for sure.
[00:15:02] Speaker A: All right, so boring. Investing. Good. Too exciting. Not so good. You also wrote in the Laws of Wealth that diversification means never having to say you're sorry. And yet that is often a good thing. So can you unpack that for Us.
[00:15:21] Speaker B: Yeah. So the idea that diversification means always having to say you're sorry is just basically, if you're in a truly diversified portfolio, something's always going to be underperforming, and people find that frustrating. But, you know, I'm sure, I'm sure we'll talk about overconfidence at some point today. And overconfidence is sort of the, the granddaddy of all cognitive distortions and all diversification is, is lived humility. It's effectively saying, I don't know what's going to happen with the markets, but whatever happens, I'm going to own a piece of it and we're going to just go from there. Right. And so something's always going to be underperforming. That's inherently disappointing. But the flip side is you're always going to own something that's outperforming as well. And it is. The truest way to sort of embody humility is to spread that wealth around.
[00:16:24] Speaker A: All right, kingfisher21 on YouTube asks, what is the most often abused or broken law of wealth?
[00:16:33] Speaker B: That's a great one. So I'm going to say I'll stick with my previous comment about overconfidence.
So a lot of these behavioral biases are things that serve us well in other facets of our life that serve us poorly with respect to our wealth. So if you look at something like overconfidence, people who are overconfident are attractive to the opposite sex. You know, they're likely to get voted for in a political setting. They're more likely to be successful entrepreneurs. Like, there are some upsides.
They're happier. You know, this idea that you're, that you're a little better than you actually are. I mean, it's a nice, it's a nice way to move through the world.
And men are sort of notoriously overconfident. There was one study of 700 men that I cited where 94% of them thought they were better looking than average, 95% of them thought they were funnier than average, and 100% of them thought that they were friendlier than average, which is profoundly not how averages work. So it's.
Yeah, but it's.
I was about to say you may, you may have come across some of these guys in the, in, in the course of your life. So it's, it feels good and it serves us in other places, but when we apply it to our wealth, it leads us to take excessive risk, to think we know more about the future than we actually do to over trade, to not appropriately vet an investment opportunity, sort of on and on and on, Right. And so things related to this idea of overconfidence, I think, are the biggest violations behaviorally of making good financial decisions.
[00:18:29] Speaker A: Getting back to Ayn Rand, I think one of my favorite and recently rediscovered passages was how she talked about wealth and finance. That people tend to think of the wealthy as just, you know, like that cartoon of the duck skating down, you know, a mountain of gold coins.
And they tend to think that the wealthy spend a lot more money than they actually do, enjoying their wealth or on luxuries or on yachts or what have you, but that the vast amount of capital that wealthy people are able to accumulate, they pour into investment. They use money to make more money. And so it also was a good reminder for me, you know, we all know that in Atlas Shrugged that the people that are going on strike call their refuge Galts Gulch. But if you go back and you ask, what did John Galt call the valley? He called it Mulligan's Valley. Right? And that's because of Midas Mulligan and the role of finance, the role of investment, that Mulligan was there. He was an early investor in Hank Reardon's steel mills. So it's really less of this frivolous thing that we think of as luxury and more of as the seed corn that drives all innovation, that drives all progress. Which ties into. I got a really great question by Lock, Stock and barrel on YouTube, and he asks, why do you think there is a negative stigma towards investment firms, investors in general, banking? So on one hand, can we look at it and say, well, it's sort of negative thoughts about capitalism. We don't really have capitalism right now. We have kind of a mixed economy, unfortunately. Is it envy against people that have created or managed to have great financial success, or are there valid criticisms about some of how these firms operate? What's your take, Daniel?
[00:21:03] Speaker B: So one of, one of my chapters in the Soul of Wealth tries to get at the heart of this because I have seen the backlash, you know, to prosperity, to investing, and, and I think investing is so powerful. And again, go back to my earlier comments about how much of the world has been lifted out of poverty, you know, on, on the merits of. Of investing. And so I try to break it down in one of these chapters and I say, look, investing is fundamentally a belief in a brighter tomorrow. When you put dollars to work, what you are saying is, you know, the future will be better than the present. And it is a vote for human progress. It is a vote for growth and prosperity. And the idea that the, you know, that the arc of moral, you know, the arc of the moral universe will bend toward justice and greater productivity and greater equality. And that, to me, is what we need to keep in mind when we're talking about investing. Now, usually we talk about it in the most reductionistic manner possible, where it's just, you know, rich people playing a casino. And I travel a lot for work, and, you know, when I'm meeting someone on a plane and I tell them what I do, I can't tell you how many people have said to me, like, oh, I don't, you know, I don't invest because that's. It's like gambling and it's prudent. Investing is the furthest thing from gambling, and the odds are very different than gambling. And so I want people to start to reconceptualize it in terms of this vote for a brighter tomorrow.
The other thing that I talk a lot about in the book is how you can use your money as a vote to shape the kind of world you want to live in.
We all voted last year, and that was a big deal, and it's good to exercise that right. But every day we vote with the dollars that we spend. We vote for more of or less of certain types of behavior. Certain, you know, we vote for the world we want to live in. I think we cannot disconnect money from the good and bad that it does in the world. And we have to see that as a solemn responsibility to spend, save, and invest it in ways that bring about that brighter tomorrow. In terms of why it's gotten this bad reputation, I think people see it as profiting off the labor of other people, and I think they see it as a form of laziness or unearned advantage. But I think that misunderstands critically what it is and how much good it does.
[00:23:46] Speaker A: Right. Well, and then of course, there is Marxism speaking of lazy and unthinking. And that has even despite the fact that socialism and communism have so spectacularly failed and not contributed to this, as you say, the increase in wealth and also decrease in the most crushing forms of poverty, but that it continues to kind of live on in these narratives of victimhood, of resentment, of envy. And that is why we do what we do at the Atlas Society. I love this question by Candice Morena on YouTube. She asks, when should people learn about learn and practice investments? Is it an age knowledge maturity metric?
[00:24:40] Speaker B: Yeah, it's A great question. I'll tell you. So I have, I have three children. I have an 8 year old, an 11 year old and a 15 year old. So I'm in the thick of. I'm in the thick of this question.
And so I'll tell you, what I do with my kids is I look for organic opportunities to teach them about money and investing and wealth. And the great part about it is, is that money touches every part of our lives. I mean, it is. If you look at the top stressors in the lives of Americans, the number one stressor is money, Number two is work, number three is the economy. I mean, it's like money, money and money. If you look at the reason people get divorced, right? I mean, the number one cause of contention in marriages is disagreements around money. I mean, money is not this sterile thing that's just off over here. There's always an opportunity to talk to young people about money. And so I don't think you even need a formal program, per se, right? Because it's interesting, the research people hate to hear this, but the data is the data. If you look at sort of formal education in classrooms about financial literacy, it's just woefully ineffective because, I mean, I took four years of French in high school, and when I go to Paris, I'm useless because, you know, you have to. It has to be contextualized, it has to be personalized, it has to be applicable. So I think the most powerful thing you can do is to contextualize money with young people in the moment in a way that's germane to them in their lives. And look for those organic teaching experiences. I've. I've set up my kids with Green light as well, so that they can, you know, that they can invest in companies that they use and help them understand how to vet a stock, how to appraise a stock. And to say, look, you know, you liking Nike, right? Like you liking Nike or Amazon is a good start to pique your interest. Now, let's talk about vetting this in a more, in a more systematic way to see if it's a good investment.
[00:26:58] Speaker A: What is Green Light, by the way? That sounds pretty cool.
[00:27:01] Speaker B: So it's a, it's an investing app for kids. It's an investing app for kids. Yeah, it's cool.
[00:27:07] Speaker A: All right. You have an essay in the Soul of Wealth entitled the Time Will Never Be Right. Now, we've talked a little bit about overconfidence being the bane of rational investing. What about, you know, the opposite? Being overly fearful how does procrastinating out of fear of loss, let's say in a turbulent market, end up working against us over the long term?
[00:27:37] Speaker B: Yeah, this is, you know, this is deeply rooted in some of Frankel's philosophy, which I, which I know you're a fan of. You know, this idea. Kierkegaard, who deeply influenced Frankl, said that anxiety is the dizziness of freedom. Right. We can, we can go all of these ways. There's all these life paths we can pursue, these, all these decisions we can make and all of that can feel like a lot. And so sometimes we can shirk that personal responsibility. And one of the ways that we do that is to just passively and sit on our hands, fail to act, and fail to realize that a failure to act is a decision unto itself.
And so when I was a therapist, I saw, I worked with sort of the. Before my life on Wall street, my PhD is in clinical psychology, so I spent some years as a clinician and I worked with what's called the worried well. So I mean, these would be like, you know, upper middle class suburbanites without serious mental illness, but who were just having a hard time. And what I found to be sort of the defining illness of that crew was what I called emotional graying. Basically sitting on the sidelines of life, waiting for life to happen to you, failing to get in the game and kind of always waiting for that safe moment, that opportune moment.
But the problem is, you know, when we fail to take risks, when we fail to take responsibility, when we fail to get in the game, yes, we cut ourselves off from some downside, but we cut ourselves off from upside in even greater measure. Right? Like you don't, you don't have to date. Right. Like if you don't date, you'll never get your heart broken, but you'll ever know, never know the heights of love. Right. If you don't start that business, yes, you'll never go bankrupt, perhaps, but you'll never know the joys of taking your company public. And so you know that that essay in the Soul of Wealth is really about the financial aspects of just sort of waiting for the right time. And there just never will be a right time. I shared something earlier today, and it was, you know, we have a new president, there's talk of tariffs, you know, taxes are high, inflation's high, and it was a comment from the fed chair in 1981. I mean, just history sort of rhymes. And there's always something to worry about. There's always bad news, you know, there's always a war somewhere. There's always bad news. There's always a reason to sit this one out. But we really cut ourselves off from a lot of richness when we do.
[00:30:29] Speaker A: That, in a literal sense as well as a figurative one. I think the other thing that we cut ourselves off from any sphere of life when we sit on the sidelines is the opportunity to earn resilience. Right? The. The. All of the wonderful things that failure and loss bring with them is the ability to learn how to overcome them and to develop those skills so that you get really good at overcoming things. I was talking, obviously, I live in Malibu, not there right now, I'm in Florida.
So everybody's asking me about, did my house survive the fires? Well, this time it did, but if you live in Malibu, your house will burn down, and my house burned down in 2007. And there's very, very, very little positive about having that kind of thing happen to you. But the one positive thing is that you do get practice with loss and all of the other things that you'll be losing as you move through life and the mortal coil. But you also get practiced as at resilience and learning how to not, you know, fall completely apart when something terrible happens. And so I think, you know, yes, you might make some investments, some of them may go bad, but at the same time, you're learning along the way. And I think, you know, going back to Frankel, that and what we've both taken away from it. You reminded me when you were talking about responsibility before, that Frankel used to say that while we had a Statue of Liberty on the east coast, he wanted to see a Statue of Responsibility on the.
The West Coast. And I, I remember, you know, as an Objectivist, sometimes I'm like, you know what? We're good with one statue. No, thank you very much. But what it helped me to think about is why so many people are sometimes resistant to freedom because they loathe the responsibility of responsibility. Right. They want to hand the responsibility for thinking, for earning, for doing all of that on to someone else. What do you think?
[00:32:53] Speaker B: Oh, I mean, that's. I mean, I consider myself an existentialist, big, big Kierkegaard and Frankel fan. And that's sort of the defining. The defining conceit of existentialism is that freedom is this power, powerful enabler of human progress, but it is also this powerful crippler if we fail to accept it. Right. And I think when. When you accept. When you accept freedom, which we all would purport to want, as I think especially in America, we, we love to talk about freedom. But, but the flip side of freedom, like you said beautifully, there is responsibility. And so if you look at your life and, and it's not where you want it to be, then you know, that's, that's on you. And people, you know, people, people that, that is, that is simultaneously empowering that, you know, the fact that it's on you means you can do something about it and you can better yourself. But the fact that it's on you also means you probably screwed up a bit and you have to reckon with that. And you know, I love this concept. There's a concept I, that was reminded of this when you were talking about your home burning down. We're all familiar with the concept of post traumatic stress, but there's this, that has enormous cachet and is frequently discussed in our society. But there's this also this, this concept of post traumatic growth where, you know, a percentage of people who go through a horrible thing come out the other side markedly better. You know, there's a, there's a, there's a group of people who are harmed by a trauma, but there's another group, often of equal size, who come out of that refined and improved and increased by that. And a lot of time it's about our approach to responsibility and freedom and our desire to learn from negativity rather than be, than be negatively shaped by it.
[00:34:58] Speaker A: Well, when you think of that, and again, the people that are transformed into something even stronger by a terrible event like losing one's house or some other horrible trauma, I would imagine that those who come out stronger also tend to have more of an internal locus of control as opposed to those who have an external locus of control. And so, you know, I wonder if you could talk a little bit about that sense of agency and how it can show up in different ways when it comes to investing. If you have sort of an internal locus or an external locus.
[00:35:49] Speaker B: Yeah, I'm going to forget the exact numbers, but there's data on locus of control as a predictor of business outcomes. They would interview CEOs and talk to them about their locus of control. And CEOs with an internal locus of control were just enormously more successful than those with an external locus of control in terms of cultivating this, because it's not totally a you've got it or you don't thing. I think one of the first things that we have to do is teach people to control the controllables. A lot of times People lose track of what is in their power and it's more than they think, you know, bringing it back to, bringing it back to wealth for a moment. When people find out that I work in finance, the questions I get are almost inevitably external, locus of control questions. You know, what's the Fed going to do? What's the President going to do? You know, what's the market going to do? Whatever nobody knows. Like, you know, is the, is the first answer to that question, and then the second one is it doesn't matter and it's out of your hands. Right. So the best predictors of people's wealth creating is maximizing their talent, maximizing their education, maximizing their skill level, and maximizing that engine of their wealth. So if you want to get rich, instead of trying to crystal ball predict what Jerome Powell is going to do, the best thing you can do is to be the best version of yourself that you can be. But again, that requires something of us not just guessing, you know, what, what Powell's going to do. So control the controllables is the first thing. The second thing, going back to the House thing, there's a chapter in the book where I talk about failure as a teacher. And they compared venture capitalists and early stage companies who went on to be successful versus those who failed.
And the early failure rates were very equivalent. Sort of the early bumps in the road phase for, for both the winners and the losers were very equivalent. The defining difference was that the eventual winners were able to reframe challenges as opportunities and see that as an opportunity for growth and refinement rather than as a crippling setback. So control everything that you can. Realize that you have more power than you think. Reframe challenges as potentials for growth and then take responsibility. You know, back to the responsibility. Take responsibility and realize that you're the one with the wheel.
[00:38:35] Speaker A: Yes. As one of our trustees and donors and a mentor to myself told me something that has stuck with me to this day. And it's a motto. If it's to be, it's up to me. And if you will just internalize that, I guarantee you'll get a lot more done in your life. Okay, now we got some viewers who are getting down to brass tacks here in terms of their questions. Laurel Creek on YouTube has a criticism to to share. She says shareholder elections are something of a farce. Only one candidate per seat and propositions would require hours to research to vote intelligently.
Daniel, do you have any comments on that or thoughts?
[00:39:27] Speaker B: So talking about voting your Equity shares. I mean, I, I don't if that's what she's talking about. I don't disagree that it's kind of farcical and, and, and out of touch sometimes. I think that's okay.
[00:39:40] Speaker A: Well, we can let her clarify if we're getting it wrong, but looks like he agrees with you. Okay. I like numbers on YouTube. Again, ask the practical question. If a money manager is mainly there to keep us disciplined, should they charge a, should they be charging a flat fee instead of a percentage of assets under management?
[00:40:03] Speaker B: That's very practical. That's a very practical question. So let me get into the research on financial advisors. Right.
So financial people who work with financial advisors tend to do better than those who don't.
And it's not for the reasons that people think.
When, when you look at why most people would assume that's because the advisor has access to some sort of esoteric vehicles or some special knowledge of the markets, and that's by and large not true. What we do see, though, is people who work with an advisor, people who work with an advisor tend to do better than those who don't because that advisor saves them from a handful of behavioral mistakes over their course of their investing lifetime. When you wanted to go to cash in March of 2020, your advisor keeps you in your seat. When you wanted to invest in your son in law's stupid startup, you, you know, they talked you out of it, whatever. And so that is true. The biggest value add the research would suggest of a financial advisor is decisional guidance and behavior. Excuse me. Behavioral coaching now.
[00:41:19] Speaker A: All right.
[00:41:20] Speaker B: Well, yeah.
[00:41:21] Speaker A: Did I interrupt?
[00:41:22] Speaker B: No, no, it's fine. So in terms of the flat fee versus a percentage fee, your mileage may vary. It's going to depend on your level of wealth. It's going to depend on what you need. But understand what you're getting when you work with an advisor that primarily it's a behavioral consideration. So you can take it from there. Yeah.
[00:41:40] Speaker A: All right. Now you, as a father of three children, including a teenager, you write about how different parenting styles impact attitudes about money as they grow up. So how so? And maybe even ways in which you try to make sure that your parenting style is going to be in sync with setting your kids up for financial success in the future.
[00:42:10] Speaker B: Yeah. One, one of the things that we know about money and values around money is that, you know, a fish doesn't know that it's wet. The, the way that your children grow up with respect to money is going to be their homeostatic level. That's going to be their normal. And so any deviations from that are going to feel abnormal. So if you're growing, if you're raising kids in Malibu, right, That's, that's a different, that's a different world than most of the world. And I think you have to, you have to make adjustments to help them understand, like, look, this isn't, this isn't normal, right? Like, this isn't normal. This is what you're going to encounter out in the world. But the same thing, I mean, Malibu is an easy example, but the same thing is true of all of us in some context or another. So one of the things that I try to do is help normalize my kids experience and help them understand what it takes to live the way that they do. You know, I grew up with a lot less than my kids are growing up with. And so helping my kids understand that, okay, if you want to do the things that we do, here's what it takes. And like here, here's the level of wealth it requires. Here's the level of, you know, education and exertion and whatever. So I think anything you can do to contextualize is important. And then the other thing that I would say, you know, looking for those organic teaching moments like I talked about earlier. And the third thing that I talk about in the book is trying to avoid arguments I talk about in the book. People who grew up in homes where they're sort of privy to arguments between their parents about money have some really negative outcomes. So try and keep it civil, try and keep it behind closed doors and keep it clean for the kids.
[00:44:07] Speaker A: Okay, well, so you shared just a little bit there, but now I'm curious. Tell us a little bit about your circumstances growing up and your how perhaps your parents parenting style may have influenced your thinking about money and what kind of got you interested at an early, you know, age or later in taking this trajectory.
[00:44:33] Speaker B: Yeah, so when I grew, I grew up in Alabama. And so growing up in Alabama, when I was, when I was born, my parents were both in their early 20s. My dad was mowing lawns and my mom was working at McDonald's. And so that was, that was what I was born into. I have a brother who's 12 years younger than me. And by that time my dad was a very successful financial advisor. And so my brother and I are sort of an interesting, you know, an interesting test case for two people who grew up with the same parents in the same home, but completely, but completely opposite financial realities. In, in childhood, I Am much more money focused than my brother because he grew up with the assumption of abundance. I grew up with the assumption of scarcity.
My first, my first money memory is bringing home the free lunch form from school, having my parents fill it out and go, oh, like you can get free lunch?
And I never did that. I never got the free lunch. My parents kind of laughed about it because I didn't think they felt poor. But just know I had this realization like, oh, like I'm a free lunch kid like that, you know, like that's, that's how little, that's how little money we have. But then again, by the time my brother came around, things were very different.
And so, yeah, you know, we have very different attitudes with respect to debt. You know, my, my dad when I was a kid was in, in was hell bent on paying off the mortgage to the point where we never took vacations, we ate very basic food and things like that.
And debt was a four letter word. Debt was a four letter word that he literally would not let us utter. The same way he would not let us say a profanity. I mean he hated debt that much. Now as an adult, I did things like pay off my mortgage at a very young age that probably were financially disadvantageous. Like a better use of debt would have probably been, you know, for someone with a 2 1/2% mortgage, which seems like a dream at this point. You know, for, for someone with a 2 1/2% mortgage, I would have been better served to keep that debt on the books for a longer time and invest the, you know, invest that money and get market returns on it. So these are just ways in which like attitudes towards abundance, attitudes towards debt shaped my adult opinions. Even as someone who studies this for a living, it can be hard to sort of achieve exit velocity from those lessons you learned as a child. And I think it becomes very important to, to make those explicit. You know, Carl Jung talked about, until you, you know, until you make the unconscious, conscious it will control your life and you will call it fate. So you have to take those money attitudes that you've learned by osmosis from your parents and sort of make them, make them specific, bring them out into the light of day, examine them for how applicable they are or they aren't to your life today.
[00:48:08] Speaker A: So we've got about 12 minutes left of what is proving to be just a fascinating conversation about wealth, about money, about philosophy, about meaning and responsibility. And I definitely don't want to run out the clock without talking a little bit about some of the other things that you cover in your book, including gratitude and generosity. Now, gratitude is a theme that we focus on a lot at the Atlas Society as an antidote to perspective warping feelings of envy, resentment, victimhood. So I was really gratified that you spent so much time exploring gratitude and its relationship to financial well being and also delighted to learn a bit of history which I had never come across before. And that was the gratitude train or merci train in post war France. So please tell us a little bit about that.
[00:49:13] Speaker B: Yeah, so in the Soul of Wealth, it's 50 short essays about money and meaning. And I try to lead into each of them with a, with a story from history that sort of introduces the concept. So the gratitude chapter talks about this Marisi train, which in 1947, the, the US sent a bunch like 700 box cars of supplies over to France to help the people who were recovering from the war. And then a couple of years later, France returned the favor and sent a bunch of trains full of, you know, thank you letters and pictures and homemade dolls and wedding gowns and all these things back to America. Actually, one to each state. There were only 48 states at the time, but, you know, one to each state as just a thank you for, for the help that they had received. And it's just such a beautiful gesture. And if you look at the power of gratitude, it's when you look at financial contentment, the only thing that is a stronger predictor of financial contentment than actual level of wealth. Right. You know, the best predictor of your financial contentment is just how much money you have in the bank. But, but one a, you know, a very slightly, only slightly lower is the level of gratitude you express.
And the findings around gratitude are so powerful. And I think the Atlas Society is right to emphasize it because we see that the power of journaling for five minutes a day, just something you're grateful for, has an impact on mood that's comparable to taking SSRIs, so taking Prozac or something like that. And another powerful thing that I talked about is thanking people in your life who may have gone unthanked. You know, someone who did a kindness, someone who opened a career door for you, etc. Who, who maybe didn't realize what a big deal it was to you. People who thanked someone in their life who had done them a solid, experienced a month of elevated mood. So I think it's a powerful thing. And in all of our focus on getting ahead and working hard and apparently acquiring wealth, I think gratitude is a beautiful companion to that.
[00:51:41] Speaker A: And that gratitude in the workplace can also boost productivity. How does that work?
[00:51:48] Speaker B: Yeah, yeah, absolutely. Well, people feel. People feel taken advantage of. People feel resentful when their work is not recognized.
People want to know that the work that they're doing is moving the ball forward. And I think gratitude is the means by which that work is made meaningful and that progress is made evident. So it, it really is a powerful motivator in the workplace.
[00:52:12] Speaker A: All right. In the soul of. Well, you had an interesting essay on the relationship between generosity and financial security. And you explore the paradox of how being more generous and more philanthropic. Philanthropic can actually increase one's wealth. And as somebody who runs a nonprofit, I am on stop 7 of 8 places in Florida where I'm going around and meeting with donors and prospective investors, you know, fundraising. For me, one of the biggest eye opening things was to learn how to distinguish between people who are givers, regardless of their net worth and those who are just not givers. It's just not in their tradition. And learn how to. Rather than, you know, just kind of continuing to go after people with high net worth. If they're not givers, I need to learn to leave them alone. So what influences people's attitudes towards philanthropy? Is it culture? Is it upbringing? Is it mindset?
[00:53:21] Speaker B: Yeah, the, the cop out. The cop out psychologist answer is always going to be that everything is biopsy social. Right. So it's a little bit of everything. I actually did research where I interviewed, where I interviewed 425 married couples and I asked them what they fight about when they fight about money. And there were five themes that emerged. And this was one of them. This was one where people were almost 50, 50, kind of decamped into the giver and not giver camps. And that's what you're running into in your, in your fundraising efforts. But the research is unequivocal that people who are more philanthropic are happier and they feel wealthier. One of the things that led me to research this was that basically every faith and wisdom tradition in the world has some version of like, hey, as you're more generous with others, your own wealth will be multiplied. You know, every sort of faith tradition and philosophy had some vision, excuse me, some version of this maxim. And while that is not objectively true, of course, right. I mean, if you give money away, you are objectively have less of it than you did the previous day. But people who are more generous feel wealthier because at some point, and it's, it's pretty quick, right? I mean, once you basically get your, get your basic needs met, wealth becomes more of a relative consideration. Once you get north of that, and so people who are more generous felt wealthier, which is all to say, please give money to the Atlas Society, you'll be happier.
[00:55:05] Speaker A: Absolutely. Well, and I didn't even pay him to say that. I mean, I think also part of it could be, you know, when people give money to the Atlas Society or people give money to other groups that are doing various specific things.
These are things that they would like to have done in the world that maybe they themselves would do if they weren't doing something else. So when you essentially outsource something that you'd like to see happen in the world, whether introducing young people to the ideas of Ayn Rand or, you know, helping to take care of animals, then and you're able to do it and you're able to see an impact, I think that you tend to feel more productive, you know, more of the sense of efficacy, of accomplishment, of achievement. And I think that also dovetails into a sense of well being, financial well being included. So we are right at the top of the hour. Daniel, is there anything that we didn't cover or any final thoughts that you want to leave with our audience?
[00:56:14] Speaker B: No, I mean, this is, this has been a joy. It's great to see people who are so convicted and so tied to a philosophy. I'm doing this big deep dive on meaning and purpose in life right now. Frankel again. And one of the things that we see is that people who achieve that have a strong identity around sort of a moral philosophy. So it's great to see folks like you doing good in the world. So thanks for what you're doing.
[00:56:38] Speaker A: Thank you, Daniel. And thanks to all of you for joining us today. If you enjoyed this video or any of the other work that we do at the Atlas Society. Yes, I'm going to second Daniel's appeal. Please consider making a tax deductible donation@theatlas society.org donate. Not only will you be helping us achieve our mission, but you'll feel richer too.
And also make sure to go out and buy the soul of wealth. It also has a wonderful audio version. I think you'll really enjoy it and you'll learn a lot. And then I hope you will join us again next week. I will be back home and I will be joined by speaking of money, co founder of Parkway Venture Capital, Greg Hill is going to join us to talk about the future of AI and emerging technology. We'll see you then.
