Mm-hmm

... tends to mean revert in the medium term.

So- You could be, you could do that on the basis of recency bias and, and hold the bag pretty hard or, you know, be caught without a chair when the music stops.

So y- I think you're seeing a lot of that recency bias.

Similarly, you're seeing, um, I mean, this year has been a little different, um, because the US has sort of shot itself in the foot in a few different ways.

But for a very, very long time, international diversification hasn't helped a lot.

Even though if we look on a long enough timeline, you know, owning the world, being invested in different asset classes around the globe has been a positive thing for investors.

So, so as we wind this down, can you give us three rules from the book that will work for an ordinary investor as they are migrating, whether they're a beginner, a seasoned investor, worried about longevity, any of those things, three rules that they should tattoo on their forearm so that they remember when it's time to act, th- think about these first.

Go a little bit deeper into this, into the risk capacity, tolerance and composure, because I feel like it relates to this theme.

It does.

So again, there's three dimensions of risk.

We tend as an industry to, uh, conflate and confound them all.

We tend to speak broadly of risk tolerance and conflate it with risk taking behavior, right? There's actually three different dimensions to risk and we need to be attending to and measuring them all.

So risk tolerance is someone's long term and relatively unchanging willingness to make risk reward tradeoffs.

So I think if you ask most people is risk tolerance dynamic, they would say, yeah, because sometimes my clients are greedy and sometimes they're fearful.

Why use concentrated systematic approach like this? Why does that appeal to you?

What do you think about the use of AI tools by advisors? Is it a way of helping to make more rational investment decisions and kind of lessening the use of emotional or non-objective factors? Or can they be misused? And what are your thoughts about that? Yeah, I

think there's just like with, you know, just about any technology, there's a great deal of upside and there's a great deal of downside.

We offer, you know, reporting.

And so one of the things that we are using AI to do is to personalize reporting.

And when you look at client behavior, kind of like with the pictures and the names, you know, one of the best predictors of whether or not someone's going to stick with this advice is how salient it is to their life, how personalized it is.

So, yeah, certainly you can use AI for, you know, call it a righteous purpose like personalization and helping people make prudent decisions.

I think I have a couple of fears about AI as applied to our world.

And I'm curious to know, can you say a little bit more about how you advise that people identify the opportunities to depart from the herd and to how they find the opportunities to deviate from passive investment strategies?

What should I know about my brain now that is going to be really, really relevant to me when I'm 70 or 75?

Yeah, so this is, I think, especially after years of good markets, I think this is the question I get the most and where I'm finding almost the most psychological pain now is that people have done really well.

So to back this up a little bit, a couple of years ago, and this included Canada, it was about half Canada, half U.S., which is a little bit of an anomaly for someone based here like me.

But I interviewed 425 couples and I asked them what they fight about when they fight about money.

And the number one thing that couples fought about when they fought about money was whether money was best used to have fun today.

or to secure an unknown tomorrow, right? And if you think about these things, it was nearly 50-50.

And if you think about these things, Bruce, they're both important, right? They're both critical.

And then I have people like you who are like this poor consumer, this poor individual is trying to walk, you know, find their way through the world with so much pressure on them.

people,

you know, Nat King Cole, right? The greatest thing you'll ever learn is just to love and be loved in return.

Like we have to be giving love.

We have to be receiving love.

This is the one that is the most predictive of all is the quality of your relationships dramatically impacts the quality of the meaning of your life.

And then the last one, the coming, we're made to progress.

You can, you know, this going back to the rich folks I surveyed and studied when writing The Soul of Wealth, sometimes when you get to the top of the proverbial mountain, the reason that you're sad is like, where do you go from here? You know, when you sell your company for, whatever, nine, 10 figures, and you have ascended the mountaintop that the rest of us are trying to get to the top of, it's like, who do you become now? Who do you become now? So those are the three things we need.

How does that relate to meaning? Because in your work of how to find meaning in life, I mean, if you're stuck in emotional graying, that seems like a really difficult place from which to find meaning.

What should I know about my brain now that is going to be really, really relevant to me when I'm 70 or 75?

Yeah, so this is, I think, especially after years of good markets, I think this is the question I get the most and where I'm finding almost the most psychological pain now is that people have done really well.

So to back this up a little bit, a couple of years ago, and this included Canada, it was about half Canada, half U.S., which is a little bit of an anomaly for someone based here like me.

But I interviewed 425 couples and I asked them what they fight about when they fight about money.

And the number one thing that couples fought about when they fought about money was whether money was best used to have fun today or to secure an unknown tomorrow, right? And if you think about these things, it was nearly 50-50.

And if you think about these things, Bruce, they're both important, right? They're both critical.

We have to have that future orientation that you and I share, right? But we also have to have a sense that, hey, like it's worth having fun today.

And I have people like you who are like this poor consumer, this poor individual is trying to walk, you know, find their way through the world with so much pressure on them.

you have a sweater too?

No sweater vest, but it was like a tweed.

It was like a tweed blazer and a bow tie and tortoise shell.

I mean, I was like full on.

You put it with my hair and everything and it's a lot.

So I'm on this and the producer is in my ear and she's counting me down.

You know, we're starting in five, four, three, two, one.

And these all shape all of our decisions, right? It's not just financial decisions, but they shape all of our, I mean, give us the rundown on these.

So the first one is ask yourself, do you have a reason to believe the accuracy of this information? Question one.

Okay.

So the real quick aside, the, the whole, this whole concept came to me when I was, I started my career before I sold my soul to wall street.

I started my career.

I started my career as a clinician and the first place I ever worked was in the eating disorder treatment center and And the very first thing they taught these mostly young women who came into this eating disorder treatment center wasn't about nutrition, wasn't about therapy, wasn't any of these things.

The first thing that they taught them to do was to be an informed consumer of of the marketing messages that they were receiving every day and the way that airbrushing worked and starvation diets worked and all these things worked so that marketers could sell you a vision that you weren't enough or that you were flawed or that you needed to buy their lipstick or their clothes or whatever it was to feel better about yourself.

And I felt like that was such an empowering thing.

I think that's the filter you're trying to express here, I think.

What's going on there?

Yeah, there's actually a couple of specific flavors of overconfidence, and I think when you hear about them together, you see why it becomes such a disastrous cocktail.

So the first is the thing that you and Paula are talking about, thinking that we're smarter, better, faster, stronger than the next person.

Uh, the second is thinking that we are luckier than average.

So people consistently overrate the likelihood of good things happen to them and underrate the likelihood of divorce, cancer, losing money in the stock market.

So we think we're smarter than average, we think we're luckier than average, and then the third one is we think we are more prescient about the future than we actually are.

So if you look at this cocktail, right, and you go, "Okay, we think we're better than other folks, we think we're luckier than other folks, [laughs] and we think we know what's coming," that is a recipe for disaster.

[laughs]

So when we talk about preparing for retirement, a lot of people treat it like a portfolio event.

It's much bigger than that.

It's a meaning event.

And I don't know what Nathan meant by like preparing and getting it right.

But for many people, preparation looks like financial preparation.

And we see that the people who are happiest in retirement are have prepared along five dimensions.

Do we know how long the happiness boost tends to last for different kinds of spending? Is there a better way to spend in retirement so enjoyment doesn't wear off so fast? One thought that crossed my mind was maybe taking several smaller trips throughout the year instead of one big one, but I'm curious to hear your thoughts.

Yeah, so this is a fantastic question.

Please say hello to Atlanta for me.

I miss it.

I miss it very much.

So the term here is adaptation, right? And like many things in behavioral economics, behavioral finance.

It's a real positive thing that sometimes gets misapplied and becomes a negative when it comes to money.

Is there research that actually compares different things I could spend my money on in terms of how much happiness they tend to produce? I know it's probably not a clean ranking, but does the data give us anything concrete to go on for someone in their early 60s?

Why, why is wealth not about the numbers? You've kind of already alluded to it.

Yeah.

So that first chapter, the, the anecdote is about Alexander the Great, and Alexander the Great's wealth was just staggering.

You know, I mean, he's richer... arguably the second richest person ever to have lived, only to Genghis Khan.

Um, you know, 10 times as rich as Jeff Bezos or Elon Musk.

I mean, just, you know, like an unfathomable amount of money, and powerful to boot, you know, a great warrior of course.

And yet his life is completely undone and his life begins to fall apart when he loses his best friend in a battle.

Yeah.

Yeah

... a process of withdrawing and allocating funds, rather than trying to make the good decision every two weeks when you get paid from now until eternity.

It is so much easier.

And the thing that I love about it, Dave, is you're taking a human tendency, which is this tendency to be forgetful, and status quo prone, and lazy, and fearful, and you're making it work for you.

The same mechanism that has led me to forget about my HBO account for two years and then, then I, like, you know, I remember it and I'm, "God, I'm paying for this." You can do that with your retirement savings, and it's so powerful.

Environment also includes things like your media diet.

A lot of people, we all have the same goals.

What about our minds draws us in at the wrong time?