Bogleheads® Speaker Series

00:00:00.000 | of the John C. Bogle Center for Financial Literacy.

00:00:03.080 | The Bogle Center is a 501(c)(3) nonprofit.

00:00:06.640 | organization created in 2012.

00:00:10.000 | by the founders of the Bogleheads organization with.

00:00:13.040 | the assistance of Jack Bogle. The center's mission.

00:00:16.120 | is to further financial education worldwide, promote.

00:00:19.600 | low fees and financial well-being and to foster.

00:00:22.880 | a sense of community among our all volunteer.

00:00:26.320 | membership. Your tax deductible contributions.

00:00:29.480 | to this cause are greatly appreciated.

00:00:32.200 | Please visit boglecenter.net.

00:00:36.200 | Today is our inaugural Boglehead speaker.

00:00:39.920 | series live video event. The idea.

00:00:43.200 | for a live online event came about.

00:00:46.240 | after COVID-19 led to the cancellation of.

00:00:49.400 | the 2020 Bogleheads conference, which.

00:00:52.840 | would have been held in October.

00:00:54.880 | As a matter of record, the board is.

00:00:58.840 | talking about resuming the conference in.

00:01:02.200 | 2022.

00:01:04.080 | In the meantime, we bring you this live speaker.

00:01:07.920 | series. I wish to thank all the board members.

00:01:11.080 | for the hard work they have put into making today's event possible.

00:01:14.600 | and particularly Mike Nolan.

00:01:17.440 | who is Jack Bogle's former assistant.

00:01:20.600 | and a Bogle board member for all his hard.

00:01:23.640 | work and the work his committee has done to bring this event to.

00:01:26.680 | you. A special thanks goes out to Vanguard.

00:01:29.960 | for donating the time and resources to make today's.

00:01:33.000 | presentation possible.

00:01:34.280 | Our first guest is Carl Richards. Carl.

00:01:38.160 | is a certified financial planner, creator of.

00:01:41.160 | the sketch guy column that has appeared in the New York Times.

00:01:44.360 | since 2010 and a dynamic.

00:01:47.200 | speaker. Today's interview is being conducted.

00:01:50.520 | by Christine Benz, Morningstar director of personal.

00:01:53.800 | finance, a long time Bogle head and a Bogle.

00:01:56.960 | Center board member. We just we wish to thank.

00:02:00.200 | all of you who submitted questions on.

00:02:03.240 | the board to call.

00:02:04.960 | We hope you enjoy this presentation and tell others about it.

00:02:08.320 | Today's event is being recorded. The video.

00:02:11.600 | will be available on boglecenter.net and.

00:02:14.800 | a post will be made at bogles bogleheads.org.

00:02:17.880 | When it is available for viewing, thanks again.

00:02:21.240 | and take it over Christine.

00:02:23.120 | Thank you so much for the introduction Rick and thanks to all.

00:02:26.160 | of you for taking time out of your weekends to join us for.

00:02:29.680 | our inaugural event for the Boglehead speaker series. I.

00:02:32.720 | could not be more excited to introduce Carl Richards. He's.

00:02:35.840 | joining us from London where he lives. It's already Saturday night.

00:02:39.040 | there. Carl specializes in conveying.

00:02:42.080 | sophisticated financial concepts in an.

00:02:45.120 | easy to understand way, specifically using a Sharpie.

00:02:48.360 | He is a certified financial planner and he's creator.

00:02:51.400 | of the sketch guy column in the New York Times. He's also author.

00:02:54.680 | of a couple of books, the one page financial plan.

00:02:57.960 | a simple way to be smart about your money in the behavior.

00:03:01.120 | gap. Simple ways to stop doing dumb things with money.

00:03:04.480 | He also did the wonderful sketches for a book that just came out.

00:03:07.720 | that I've made a contribution to called how I invest my.

00:03:10.760 | money. Carl, welcome to the Boglehead speaker.

00:03:13.880 | series. We're excited to have you here and I'm even more excited.

00:03:16.960 | because I found out that you may be able to sketch a little bit.

00:03:20.000 | for us today.

00:03:20.960 | Christine, it's an honor to be here and Rick and the whole board.

00:03:24.960 | thank you for giving me the opportunity with just a pleasure.

00:03:27.960 | I've always thought really highly of this group.

00:03:30.960 | of people, so excited to be here. Well, thanks for donating.

00:03:34.240 | your time. Wanted to start by asking about your particular.

00:03:37.760 | focus for people who might not be familiar. You're.

00:03:40.840 | a CFP, a certified financial planner, so you're certainly.

00:03:43.840 | very knowledgeable about matters of asset allocation and tax.

00:03:46.960 | planning. But over the past decade or so, you've gotten more.

00:03:50.000 | interested in what we might call sort of financial.

00:03:53.320 | life planning. And let's talk about what.

00:03:56.400 | that is. What why you're so enthused?

00:03:59.440 | about this idea of helping people align their financial plans?

00:04:03.000 | with their bigger life goals. What kind of?

00:04:06.040 | set you on this journey?

00:04:07.240 | Yeah, I so.

00:04:10.040 | I think it was just repeated so.

00:04:15.440 | 20 whatever 2223 years ago when I started.

00:04:18.600 | in this sort of financial industry speaking.

00:04:21.640 | broadly.

00:04:22.480 | I got into the.

00:04:25.480 | Industry quite by accident, sort.

00:04:29.960 | of. I applied to be a security guard thinking.

00:04:33.680 | that the ad said I didn't realize the ad said securities.

00:04:37.200 | instead of security and I didn't know the difference at.

00:04:40.480 | the time. This is right during when I was at university and.

00:04:44.400 | it was in the late 90s, right? And there's a lot of exciting.

00:04:47.880 | things going on in the late 90s and so.

00:04:51.280 | after I got over the fact that I wasn't a security guard I.

00:04:54.600 | was on the phone at a big call center.

00:04:57.760 | actually at Fidelity Investments, one of their big call centers at the.

00:05:00.920 | time it was their national call center in Salt Lake and.

00:05:04.000 | answering phones.

00:05:05.320 | And.

00:05:06.720 | I just remember being struck for that. I mean.

00:05:10.520 | it was years. I remember just being sort of like unmoored.

00:05:13.720 | a bit about this.

00:05:16.560 | sense of it wasn't about spreadsheets.

00:05:19.880 | and calculators, right? I couldn't put words to it, but I was like.

00:05:22.920 | I didn't expect it to be so emotional. I didn't expect. I was like, wait, this is.

00:05:25.800 | spreadsheets and calculators, isn't it? And it turns out it's not.

00:05:29.040 | And then I spent a.

00:05:32.240 | decade and a half sort of working with individual clients.

00:05:35.400 | and seeing this repeated pattern.

00:05:38.400 | of what we think our job.

00:05:41.920 | is as investors.

00:05:45.000 | and then even if you want to take it one step further.

00:05:48.000 | that we think what the industry thinks his job is.

00:05:51.040 | to provide products.

00:05:52.360 | And I just saw this repeated.

00:05:56.280 | focus on maybe the best comparison is whether.

00:05:59.320 | I should take a plane arguing and researching about whether I should take.

00:06:02.440 | a plane, a train, or an automobile on a trip.

00:06:05.000 | Before we had decided where we were going to go.

00:06:09.480 | And this idea of deciding where you want to go right like.

00:06:12.680 | that to me, we can build the best asset allocation.

00:06:16.200 | ever created by the mind of man smartest the.

00:06:19.680 | most research back the most evidence based the most.

00:06:22.920 | inexpensive. We can do all of those things, but.

00:06:26.400 | if it doesn't get us where we want to go, what's the point? And.

00:06:29.520 | as this group knows really well, like one behavioral mistake will blow.

00:06:32.440 | the whole thing up anyway, so we can't get the behavior right.

00:06:35.880 | and we can't get the underlying sort of I'll.

00:06:38.960 | use the term goals very loosely, but if we can't get the underlying.

00:06:42.040 | goals right, we sort of wake up and we're seeing this all.

00:06:45.280 | over the world. People are waking up and saying.

00:06:47.360 | What was it all for?

00:06:49.360 | You know what? Is this really what I wanted and?

00:06:53.000 | so I think.

00:06:54.400 | The idea of spending some time getting clear about why.

00:06:58.240 | we're doing it in the first place has become.

00:07:01.600 | to me, everything else feels like hacking at the branches.

00:07:04.760 | that we can make marginal improvements. But until we.

00:07:07.800 | get that right, or at least until we start guessing.

00:07:10.960 | at that, we're never going to get it right, but until we start guessing.

00:07:13.880 | at that, the rest sort of.

00:07:17.280 | loses its importance. That's really how I started focusing.

00:07:20.680 | on that, so let's talk about this. I think.

00:07:24.400 | you probably know this group of bogal heads. We've got a group of.

00:07:27.440 | people who are really good at the spreadsheet.

00:07:30.600 | and calculator piece and how about?

00:07:33.880 | how can we talk about how we get better at the?

00:07:37.400 | other piece of it at articulating our goals and our?

00:07:40.480 | vision for our lives? What are the questions that we should be asking?

00:07:43.560 | ourselves?

00:07:44.200 | Yeah, that's a really good question. I mean, I think the first thing we need to do is sort of realize.

00:07:48.240 | like there's this sort of movement that I guess.

00:07:51.440 | people call life planning and I've never really never resonated.

00:07:54.720 | a lot with me simply because life.

00:07:58.160 | planning to me feels and goal based planning feels.

00:08:01.480 | like oxygen based breathing.

00:08:04.480 | Right, like of course you should have goals for what.

00:08:07.640 | you're doing right? So I think the.

00:08:10.960 | first thing is just to say look, this isn't about crying on the couch.

00:08:14.360 | It's not about therapy. It's not about.

00:08:17.400 | getting becoming one with yourself. It's just simply.

00:08:20.800 | about saying look the purpose.

00:08:23.000 | Of financial planning and I'm using that.

00:08:26.960 | term broadly is to align.

00:08:30.160 | your use of capital with what's important.

00:08:33.840 | to you.

00:08:34.520 | OK, and obviously as you mentioned this group.

00:08:38.400 | understands once like once.

00:08:41.680 | we need to deploy capital, we understand at least the.

00:08:44.720 | process of figuring out how to do it in a sophisticated.

00:08:48.360 | way.

00:08:48.880 | So the question becomes how do we align that?

00:08:54.480 | What we're so good at.

00:08:56.320 | With what's important to us and it starts.

00:09:00.160 | by. I mean, I just didn't. I didn't realize I don't.

00:09:03.240 | know why I didn't realize how hard that is for us.

00:09:06.280 | to get clear about what's important to us.

00:09:09.280 | We're not used to thinking about it. We're not used.

00:09:13.320 | to having an idea of like look.

00:09:15.400 | And part of the reason is mimetic were so.

00:09:19.680 | caught up in mimetic desire, right? Like looking we don't.

00:09:22.720 | know how we don't even know how to know what we want.

00:09:25.600 | What we know is to look at what other.

00:09:29.160 | people do.

00:09:30.760 | Right, and take our clues from them, and this is only gotten harder with.

00:09:33.920 | sort of the Instagram lives. So many of us are trying.

00:09:37.080 | to keep up with. It's really hard to get clear, and so I.

00:09:40.160 | think the way to think through this is.

00:09:43.160 | just to take the time like where do you?

00:09:46.200 | want to go?

00:09:47.240 | What's important to you? I love the idea of.

00:09:50.840 | the calendar and the checkbook never lie.

00:09:54.000 | Right, so I don't. I don't really care what.

00:09:57.880 | you say is important to you. Christine, show me your calendar.

00:10:00.920 | in your checkbook and I'll tell you what's important.

00:10:03.960 | to you.

00:10:04.360 | So this idea if I were to draw.

00:10:08.080 | it and maybe we should have our first experiment.

00:10:11.120 | here. If I were.

00:10:14.640 | let me just connect this real quick. I'll.

00:10:17.560 | connect my iPad to the screen.

00:10:20.360 | There we go now. Let me share it if I were to.

00:10:26.320 | Here we go. Tell me Christine, can you see that?

00:10:29.400 | I yes, I can.

00:10:33.680 | see it. OK, I assume our audience can as well perfect.

00:10:37.360 | Well, I'll just I'll look for it 'cause I can see you.

00:10:40.560 | So if you give me some clue that it's not working, I'll stop.

00:10:43.880 | So let's just think about.

00:10:46.920 | let's just use a word like values.

00:10:49.240 | I think you could substitute a lot of words like what's.

00:10:54.880 | important to me values. I love purpose.

00:10:58.440 | I love the idea of purpose and.

00:11:01.680 | if we.

00:11:02.440 | But if we had a set of values and then we.

00:11:06.040 | looked at and we'll talk if it's OK, we can talk.

00:11:09.080 | for a minute about how do we even get clear about this, but if we.

00:11:12.160 | then looked at how we.

00:11:14.920 | use our money and our time.

00:11:17.480 | And we'll just call those actions. Often there's a gap.

00:11:21.880 | here and that gap is called.

00:11:25.160 | being a human.

00:11:25.960 | Right, like and it's really it's really.

00:11:30.080 | this gap here is.

00:11:32.200 | Is really painful, actually.

00:11:35.440 | Right when you wake up and say gosh, I spent all that time.

00:11:39.320 | At the office, I could have spent more time with the kids or I.

00:11:43.120 | we've got plenty of money, but we never.

00:11:46.360 | enjoyed it or you hear these things constantly.

00:11:49.760 | like I can't remember the name of the book, but it was the.

00:11:52.800 | palliative care nurse, the nurse at the end of life nurse.

00:11:56.000 | that took care of so many people, and she wrote that book about what their.

00:11:58.880 | common regrets were, and it was always like.

00:12:01.960 | it was always the things they hadn't done. There was very few.

00:12:05.040 | regrets about stuff they had. People didn't really remember the mistakes.

00:12:08.480 | they'd made. They remembered the things they hadn't done, and so there's this.

00:12:11.520 | often this gap between what we say is important to us and what.

00:12:14.560 | we're actually doing with our time and money and.

00:12:17.680 | so I just am hopeful that we can.

00:12:20.760 | that we can somehow get that those.

00:12:24.000 | circles just can.

00:12:26.800 | we start.

00:12:27.680 | To see some of this overlap and wouldn't it be amazing.

00:12:31.840 | if that was a Venn diagram?

00:12:33.480 | Right where there was perfect overlap. I mean, I had that once Christmas.

00:12:37.440 | Eve. I remember right the kids.

00:12:40.640 | sitting on the couch. The snow is falling. The dog was there doing.

00:12:43.720 | the thing and then the next morning. Of course we woke up.

00:12:46.800 | and all the presence and I was like who bought all these presents and what happened.

00:12:49.640 | with the budget like so we just serve. We just.

00:12:52.760 | end up circling back and forth between these ideas.

00:12:55.840 | like OK, we get some overlap and then we end.

00:12:59.000 | up back here where there's a gap. So how do we?

00:13:02.040 | get clear?

00:13:03.200 | About the values piece, I'm going to stop this share for second.

00:13:07.160 | How do we get clear?

00:13:10.240 | about the values piece?

00:13:13.600 | Have I stopped my share?

00:13:16.520 | Yes, no, I'm still seeing it, but you're still.

00:13:19.560 | saying OK, alright here. I think I just did this. There we go.

00:13:22.880 | And that's just.

00:13:26.120 | a function of taking time to ask ourselves.

00:13:29.360 | and to start noticing right? What?

00:13:32.520 | are the things that really? And there's so much research around.

00:13:36.080 | and hopefully this group is familiar with it around what?

00:13:39.400 | really brings happiness as it relates to our use of money.

00:13:42.280 | Right? That experiences with people we love.

00:13:45.440 | And even there we know that the anticipation of the experience.

00:13:49.440 | is somewhere between 40 and 60% of the.

00:13:52.480 | enjoyment we get out of the experience. So there's so much we.

00:13:55.520 | can do. What was her Elizabeth? It's not Elizabeth.

00:13:58.760 | Gilbert. Maybe it's not Elizabeth Gilbert. Elizabeth done Elizabeth Dunn's.

00:14:01.720 | book on it. She says if you don't think money.

00:14:04.800 | can buy happiness, it's 'cause you don't know how to spend it.

00:14:07.080 | Right, and so just getting a little more clear about the things that.

00:14:11.360 | bring us.

00:14:12.200 | I assume the goal of money.

00:14:15.320 | Beyond freedom stability, I assume the goal of money is let's.

00:14:20.160 | call this thing happiness.

00:14:21.520 | Well, we know a little bit about how we.

00:14:25.320 | can use that and often how we.

00:14:28.240 | can use money to bring happiness and often it relates.

00:14:31.200 | to fulfilling our values and Simon cynics work on start.

00:14:34.400 | with why so that's to me. That's a really long winded answer.

00:14:37.720 | to your question of how do we get clear? We start thinking about it.

00:14:40.600 | We start thinking about it, right? And I think right.

00:14:43.640 | now.

00:14:44.240 | Right, this is like 2008 and 2009. I remember.

00:14:48.560 | people having conversations that they I just had never.

00:14:51.680 | heard before. I remember hearing him at the coffee shop.

00:14:54.680 | overhearing people talk about what's important to them.

00:14:58.080 | Who do they trust? Right now we've been given.

00:15:01.120 | permission in no way that I can ever remember.

00:15:04.160 | to really be questioning those things. I mean.

00:15:07.320 | assuming we have a little bit of stability to have.

00:15:10.000 | those conversations and granted lots of us don't.

00:15:13.120 | right, but if we do a number of us have been giving permission.

00:15:16.480 | to ask those questions like who do we trust? What's?

00:15:19.600 | important to us? How do I really want to be spending our time in a way?

00:15:22.640 | that we've never had before?

00:15:23.920 | So yeah, so hopefully that helps it.

00:15:27.760 | does. It does. I want to ask about the pandemic because you're.

00:15:30.960 | right. I think many of us are thinking big picture.

00:15:34.120 | thoughts about our lives and the trajectory of our lives and what we're.

00:15:37.160 | doing. I guess the question is, is this a good?

00:15:40.600 | time to be making big life altering decisions?

00:15:44.080 | I mean, there are some things about what we're going through that are a little bit.

00:15:47.280 | traumatic. I just wonder, you always hear like.

00:15:50.320 | after the death of someone not to make any.

00:15:53.360 | big changes. How about right now? Is this a good time?

00:15:56.400 | to decide to relocate or change jobs or whatever?

00:15:59.520 | it might be?

00:16:00.200 | Yeah, that might be slightly beyond my.

00:16:03.840 | pay grade, but my sense is.

00:16:07.040 | that now is a really good time to be noticing.

00:16:10.080 | Right, taking note recording.

00:16:13.840 | thinking, journaling, right? Like understanding now.

00:16:17.040 | and I also sense is that it made it obviously.

00:16:20.200 | totally varies by your situation.

00:16:21.920 | Right, if you there are some of us that have been massively.

00:16:26.240 | impacted by this.

00:16:27.320 | Right, and there's others that financially.

00:16:30.920 | or whatever their situation allows them a little bit. If you've got the freedom.

00:16:34.160 | and flexibility to be making some of those decisions, right?

00:16:37.520 | but my sense is right now is a really good time to be noticing.

00:16:40.880 | And asking questions and deciding like.

00:16:45.360 | what do I really want and then aligning?

00:16:48.480 | Your portfolio and your.

00:16:51.960 | use of capital with what you said.

00:16:55.520 | what you notice, right?

00:16:57.520 | Wanted to read you a question from one of our attendees he.

00:17:03.120 | wrote. He or she wrote in your book, the behavior.

00:17:06.200 | gap. You said that financial decisions are about getting happy and.

00:17:09.640 | if there is a secret to getting happy, it's this be true to yourself.

00:17:13.280 | So that's great advice, but one must.

00:17:16.680 | first know oneself. How would you advise investors to go?

00:17:20.080 | about knowing themselves?

00:17:21.480 | Yeah, this is the huge problem I thought.

00:17:26.160 | I didn't realize I was opening such a huge can of worms.

00:17:29.280 | for myself 15 years ago when I started thinking about this stuff.

00:17:32.360 | 'cause like it's really challenging like.

00:17:35.400 | when we say align your use of capital with what?

00:17:38.440 | is important to us.

00:17:40.080 | Getting clear about what's important to you is really.

00:17:43.800 | really hard. I mean, we know a little bit about happiness and money.

00:17:47.000 | right? Like we talked about a minute ago. We know that spending money on experiences.

00:17:50.720 | with people you love is far more enduring.

00:17:54.480 | than buying stuff.

00:17:56.200 | Right, we know that above a certain income.

00:18:00.320 | level and not more income doesn't necessarily add.

00:18:03.760 | exponentially, certainly not to our happiness.

00:18:07.000 | So we know a few of those things, but what we don't know is.

00:18:10.520 | do you enjoy spending time?

00:18:13.720 | at the museum and I enjoy spending time.

00:18:16.760 | on a river.

00:18:17.840 | Right, and so understanding and let me give you an example.

00:18:21.880 | We used to go to movies with friends.

00:18:25.040 | It seemed like the thing you do.

00:18:28.760 | You would meet, maybe have a quick dinner.

00:18:31.880 | and then go to a movie and.

00:18:34.920 | the purpose of the evening.

00:18:38.520 | together was to spend time together.

00:18:40.560 | And then we'd go to a movie where we spent no time together. I mean.

00:18:44.360 | we were sitting next to each other, but we said and so one time we noticed.

00:18:47.560 | we were like, well, wait, what if we?

00:18:50.840 | What if we invited a couple over to our?

00:18:54.640 | house and we're not cooks? We have no.

00:18:57.680 | I mean, we barely know how to cook anything, but what if we invited?

00:19:00.720 | a couple over? We made a simple meal together.

00:19:03.120 | Like we made it together, we spent two or three hours.

00:19:07.120 | doing that.

00:19:08.600 | Rather than going to the movie, well.

00:19:12.800 | every time we did that, it brought I don't know what the.

00:19:16.080 | right multiple would be, but it's at least two.

00:19:19.440 | maybe 10 times more enjoyment than going to the movie.

00:19:22.640 | Let me give you one more example. I had a friend. His name was Rob.

00:19:26.640 | And so here's the process we used to take people through so.

00:19:30.480 | we would just say, look, track your spending.

00:19:33.880 | And everybody loves this. Tracking their spending is everybody's favorite thing, but actually.

00:19:37.880 | this group might actually do it. Track your spending.

00:19:41.080 | but just add one thing.

00:19:42.840 | So I would just go through every transaction and say.

00:19:46.600 | is this aligned with what I said was.

00:19:49.400 | important to me or not?

00:19:50.440 | And you get a gimme on all utilities, right? You don't.

00:19:54.160 | have to think through as the power bill aligned right.

00:19:57.520 | but all discretionary spending at the very.

00:20:00.840 | least discretionary spending at least is it aligned or not if.

00:20:04.280 | it's aligned.

00:20:05.400 | We used to just make a note of what was the value that it.

00:20:09.280 | was aligned with, and so my friend Rob did this.

00:20:12.480 | and he noticed that he had a friend that he met every.

00:20:15.680 | month for lunch and he would pay for lunch.

00:20:18.800 | And this let's just say it was $35.

00:20:22.960 | or something.

00:20:24.560 | Rob noticed OK, what's the value? The value is friendship.

00:20:28.920 | Well, this friend had been going through a couple of years of really.

00:20:32.280 | tough times, didn't have a lot of other people to talk to, and.

00:20:35.320 | so Rob was like that's aligned completely aligned.

00:20:38.440 | But then the next step was is.

00:20:41.600 | there another way?

00:20:42.720 | Right, would there be another way to align that align?

00:20:47.360 | my use of time and money with that value of friendship?

00:20:50.840 | And Rob was like, well, geez, we both really like to walk.

00:20:53.880 | or hike and we both work at.

00:20:56.920 | a specific university that's right at the foothills.

00:21:00.160 | of a bunch of really amazing mountains.

00:21:01.760 | So he said, look, what if we just met the next month?

00:21:05.520 | He suggested let's just meet and go for a walk.

00:21:07.680 | And Rob called me so excited 'cause he was like look.

00:21:11.680 | and what Rob did every month with that money he would use.

00:21:14.800 | so he took that $35 and he automatically upped his auto.

00:21:18.120 | investment into the S&P 500 index fund and I'm.

00:21:21.200 | not making that story up just because of the audience, but it's actually.

00:21:23.960 | what he did. So every month. So now he was like, look, I've got $35.

00:21:27.440 | more going in towards a.

00:21:30.720 | vehicle that's going to express some other value.

00:21:33.200 | And I'm spending more time with my friend.

00:21:37.360 | And so those are those like yes and yes.

00:21:41.440 | Decisions where we can get granular on just noticing.

00:21:45.520 | like turns out I don't enjoy that one last.

00:21:48.520 | one. A friend of mine who was just beating.

00:21:51.680 | himself up, beating himself up for eating out so often.

00:21:54.240 | And the most ironic part about this is this friend of mine.

00:21:58.120 | wrote one of the most popular.

00:22:01.320 | in New York Times bestselling food books.

00:22:04.240 | of the last 10 years and I pointed out to him like wait.

00:22:07.240 | You love eating out.

00:22:09.280 | It was like, well, yeah, but I shouldn't. I'm like who says you shouldn't.

00:22:14.560 | So the idea of looking for all the way.

00:22:17.640 | down to the budgetary level, like the spending level and.

00:22:20.840 | then we can talk if we want to about how aligning that use in our investments.

00:22:24.400 | but looking for ways to be cut ruthlessly.

00:22:27.800 | on things that don't bring us value and.

00:22:30.960 | spend extravagantly on things that do and the only way.

00:22:34.240 | to sort through that. Unfortunately, there's no rule of thumb. There's.

00:22:37.600 | no app for it, right? And it's the only way to sort.

00:22:40.840 | through that is to make a small bet.

00:22:43.400 | Hey, let's try this. I think I like going to the museum.

00:22:46.440 | Oh, I didn't enjoy that as much as I thought I would. Let's try.

00:22:49.480 | make small bets and notice where tailwind shows up and.

00:22:53.240 | keep track, right? So that's.

00:22:56.000 | Only way to do it. Unfortunately, there's no shortcut.

00:22:58.720 | You really live this experience that you urge people to go through the process.

00:23:04.320 | of pushing themselves to try out new ideas.

00:23:07.480 | or take small bets as you put it and.

00:23:10.520 | try out experiences that they think might contribute to a fuller.

00:23:14.160 | and more fully realized life. Can you talk a little bit about?

00:23:17.240 | your personal experience? You're in London, as we said at the outset.

00:23:20.600 | but it's not been a straight trajectory. You were in Utah.

00:23:24.040 | You were in Australia, I believe. So can you talk about?

00:23:27.200 | how you kind of pushed yourself in the direction that?

00:23:30.240 | in on the path that you're on now?

00:23:32.360 | Yeah, and I should tell you I'm not sure this is.

00:23:35.920 | a good idea for anybody, right?

00:23:38.760 | And this is part of the problem is we all are looking.

00:23:41.520 | for models on how to do things.

00:23:44.600 | or templates, but.

00:23:47.240 | we were thrilled living.

00:23:50.520 | in Park City, Utah, which is sort of where I was.

00:23:53.840 | I lived there when I was younger until I was about 8, so it's sort of home.

00:23:57.160 | to me. The Wasatch Mountains, right? Even the smell.

00:24:00.520 | of the Wasatch. I can feel it now, right? Like I love the place.

00:24:03.560 | Happily there and then we.

00:24:07.240 | but we had always talked about living overseas and.

00:24:10.600 | my wife particularly always wanted the experience and an.

00:24:13.840 | opportunity came up and by opportunity came up. I just mean a window.

00:24:17.240 | opened. There was no like job opportunity there were like we.

00:24:20.280 | had to make this happen.

00:24:21.640 | And it's a very long story, but I'll cut it short to go to New Zealand.

00:24:25.880 | like somebody. See all that happened with somebody suggested.

00:24:29.160 | it to my wife at yoga and we make all of our major.

00:24:32.280 | financial decisions based on my wife's experience at yoga, right?

00:24:35.600 | So somebody suggested and we had a little window. It was.

00:24:38.640 | because we needed to move from one house to another. That was the.

00:24:41.760 | window was like, hey, we're moving anyway, why not?

00:24:45.160 | move to New Zealand? So we went.

00:24:48.160 | to New Zealand for a year and stayed for three.

00:24:51.200 | and a half because it was just it was amazing.

00:24:54.520 | Now I'm we've got we.

00:24:57.880 | have the flexibility because my work is location.

00:25:01.360 | independent.

00:25:02.920 | But we didn't do this. I just want to be.

00:25:05.960 | clear, right? Like 'cause I get this question all the time like wouldn't.

00:25:09.000 | it be nice we this was that we.

00:25:12.920 | decided to value experiences.

00:25:15.960 | with our kids over security.

00:25:18.160 | And it was uncomfortable financially.

00:25:22.600 | like I are we really doing this? Are we really sure we should do?

00:25:25.680 | this? Because it wasn't the stable.

00:25:29.160 | thing to do, so we went to New Zealand and.

00:25:32.320 | it was worth every cent like I wouldn't.

00:25:35.640 | I mean, it costs way more than we thought it was going to cost because things.

00:25:38.720 | come up.

00:25:39.400 | He says and all these things that you don't expect.

00:25:44.120 | But it was worth it.

00:25:45.720 | I would do it over again 100. I would do it over again.

00:25:49.440 | 100 out of 100 chances, right? And then we're in New Zealand.

00:25:52.640 | And.

00:25:54.280 | Enjoying it and my wife had.

00:25:58.080 | always wanted to go to interior design school.

00:26:01.000 | And she had spent 24.

00:26:04.400 | years at that point, sort of delaying.

00:26:07.640 | all the things she wanted to do to be heavily involved.

00:26:10.960 | in the massive amount of work of running a household with 4.

00:26:14.040 | kids.

00:26:14.600 | And so we were sort of like, hey, you should apply to this school and she.

00:26:18.560 | found this school in London and we sort of didn't think.

00:26:21.680 | it would happen immediately. She applied.

00:26:24.960 | in June, I believe.

00:26:27.720 | Got accepted and school started in September, so she.

00:26:30.880 | was like, well, I'll delay for a year.

00:26:32.720 | And the family sort of looked at her and said, no, you've been delaying.

00:26:36.920 | for a long time for the rest of us. Like let's go.

00:26:40.240 | so that's we moved. We moved to London, got here. She came in September.

00:26:43.320 | We got here in January, just in time to really want to be.

00:26:46.360 | back in New Zealand, but it's been.

00:26:49.440 | amazing. So yeah, that's what's happened here and we don't know.

00:26:52.800 | and this is interesting to me and I think might be.

00:26:55.840 | useful to all of you.

00:26:57.920 | I think one of the big lessons of the last 11.

00:27:02.480 | months, 10 months has been that.

00:27:05.600 | Uncertainty is reality.

00:27:08.240 | Right, it always has been.

00:27:10.880 | We just have gotten sort of a stark reminder.

00:27:14.480 | Of it, and so these plans we make.

00:27:18.360 | our guesses and it's OK.

00:27:21.600 | right? Like, but life never goes if you.

00:27:24.640 | think life goes according to plan, just go.

00:27:27.680 | back and look at your goals that you wrote out in January of.

00:27:30.640 | 2020.

00:27:31.880 | And tell me if any of them went the way you thought.

00:27:36.080 | I mean, none of us saw this coming, and so.

00:27:39.440 | I think making plans is good.

00:27:42.680 | In fact, I know it is making plans is good because.

00:27:46.000 | it gives us a baseline. It's a little bit like a flight plan in a.

00:27:49.040 | plane, right? Every good pilot.

00:27:52.240 | makes a detailed flight plan, but if you ask.

00:27:55.760 | every pilot I've ever asked, how often does the.

00:27:58.960 | plan go? How often does the flight go according to plan? They'll tell you.

00:28:02.040 | the honest truth, which is never right. It's always slightly.

00:28:05.080 | different, so I think we've gotten a real reminder of.

00:28:08.120 | that and I think that's I.

00:28:11.240 | think that's it's really unsettling, but it's true.

00:28:14.680 | Right that life is uncertain markets.

00:28:18.720 | are uncertain. The biggest risk is the one.

00:28:21.840 | we've never thought about and can't.

00:28:24.720 | Think about right and so planning.

00:28:28.640 | in that environment forces us to accept this.

00:28:31.720 | reality that things are temperate. Sorry things.

00:28:34.840 | are temporary. There is no permanence and then.

00:28:37.880 | once we accept that.

00:28:39.480 | Right, things get a little easier to navigate 'cause.

00:28:43.320 | we're not attached.

00:28:44.480 | To this idea of what we've stored up in the barn being.

00:28:48.640 | there exactly the place we put it when we go back, right?

00:28:52.160 | One concept that you've talked about, you talk about quite a bit.

00:28:57.760 | and you've got a great sketch on this topic is the idea of enough.

00:29:01.360 | and Jack Bobo wrote a book called enough where he.

00:29:04.520 | explored that idea as well. Can you?

00:29:07.800 | take us through that exercise? How we can all figure out our?

00:29:10.960 | own personal sense of what's enough?

00:29:13.120 | Yeah.

00:29:14.320 | Yeah, again, excuse me again. Such a good question.

00:29:17.920 | This, by the way, is why I said yes to this.

00:29:21.000 | opportunity is because I get to chat with you and you're always.

00:29:24.040 | so thoughtful. So thank you.

00:29:26.680 | I don't know I don't I don't.

00:29:30.960 | know how to figure this out.

00:29:34.160 | In fact, it's funny. I literally I do a lot of my work.

00:29:37.520 | while walking and just thinking.

00:29:40.600 | about things and then calling a short list.

00:29:43.720 | of people way smarter than I mean, there's a lot of people way.

00:29:46.840 | smarter than me. I just happen to have the phone numbers are very short list and.

00:29:50.520 | last week I was having this conversation with Morgan Housel. I called him.

00:29:53.560 | specifically and said, hey, how do you think about enough and another?

00:29:56.920 | friend of mine, Greg Davies, who's a real finance.

00:30:00.560 | guy here in London.

00:30:02.400 | I think to me and I've spent it.

00:30:07.480 | I'm not exaggerating when I say I spent a decade thinking about enough.

00:30:11.320 | And I love that old. I believe.

00:30:15.360 | it was Kurt Vonnegut in that conversation that where.

00:30:18.600 | he said they're at a party that a hedge fund manager.

00:30:21.960 | through and somebody's Kurt said to somebody else.

00:30:24.960 | How does it feel to know that he makes more and camera?

00:30:28.880 | the details, but it's like how does it feel that he makes more in one day?

00:30:32.160 | than you'll make in your whole life and whoever it was that.

00:30:35.080 | Kurt Vonnegut was talking to you said, well, I have something he'll never have, which.

00:30:38.160 | is enough.

00:30:38.880 | And.

00:30:42.880 | To me, after thinking about a decade, the only.

00:30:46.040 | answer I have is we just have to think about it right like we.

00:30:49.320 | just I think.

00:30:51.360 | The real answers to all.

00:30:55.880 | of these questions, personal finance questions, budgeting questions.

00:30:59.240 | even investing questions. Really, we need to.

00:31:02.360 | get more in tune with awareness.

00:31:05.480 | Right, then we do a spreadsheet.

00:31:09.640 | And all those spreadsheet tools are really valuable.

00:31:12.880 | and there may be. There's probably some way to spend some time around.

00:31:16.160 | the budget and you're spending to sort of sort out what enough might.

00:31:19.440 | be in, but I think.

00:31:22.160 | Those those represent the messy middle to me.

00:31:26.400 | right? Like looking at the spreadsheet calculating.

00:31:29.680 | seeing how much we spend seeing how much we need projecting it out at a 4% withdrawal.

00:31:33.520 | rate and using some Monte Carlo tool like that to me represents the messy.

00:31:36.720 | middle really important looking at other people's examples. It's a little bit.

00:31:40.000 | like reading reviews of a pair of tennis shoes on Amazon.

00:31:43.600 | If you go read 50 reviews of the shoes you're thinking of buying.

00:31:47.680 | you don't leave with more clarity you leave.

00:31:50.760 | more confused, right? But maybe it's supposed to be.

00:31:53.920 | that way that represents the messy middle considering the nuance.

00:31:57.320 | the edge cases. This is what I do with the sketches, right? I go into.

00:32:00.520 | a problem like enough and I have conversations for 10.

00:32:03.560 | years and at some point hopefully I'll pop.

00:32:06.440 | out the other side. Jack. So Bogle said.

00:32:09.600 | sometimes to get to simplicity, you've got to cut through the SWAT.

00:32:12.760 | the huge. I think he used the word cut through huge swaths.

00:32:15.720 | of complexity.

00:32:16.600 | And I think it's the same thing with this idea of enough like just.

00:32:20.800 | pay attention. Notice that I thought.

00:32:24.480 | that car would be really valuable to me.

00:32:27.600 | or I thought that vacation or I thought that house.

00:32:30.760 | or I thought once I had a $1,000,000 in my.

00:32:33.800 | beautifully elegantly designed passive portfolio I.

00:32:36.920 | would feel something. Well, it turns out I didn't.

00:32:40.000 | or I did and there's no right or wrong.

00:32:43.080 | answer to it. So to me it all comes down.

00:32:46.200 | to just can we just start having this conversation?

00:32:49.920 | And not feeling like it's too California or.

00:32:54.440 | too new age or some fuzzy thing like can we just?

00:32:57.480 | start noticing and.

00:33:00.960 | I think this is where we've gone off track with money is nobody.

00:33:04.200 | taught us to talk about it in the first place and if they did.

00:33:07.360 | teach us to talk about it, they taught us in that it was a math.

00:33:10.520 | problem.

00:33:11.080 | And then when we go to touch it.

00:33:13.720 | Every time we go to touch it, it reminds me of a electric.

00:33:17.920 | fence that you don't know is electric. I mean, if you've ever.

00:33:21.040 | had that experience, I actually have and I've got my wife was recording.

00:33:24.280 | it. I was I was. We're in we're in France.

00:33:28.080 | and we're on a mountain bike ride and there was this wire and I'd never.

00:33:31.320 | seen it. I mean, I'm from the West. We have barbed.

00:33:34.480 | wire. We don't have and I brushed my leg.

00:33:37.680 | up against it was like cool. Well, that was weird and I thought is that an electric fence?

00:33:40.920 | while recording? I reached out and grabbed it.

00:33:42.840 | But that's what it reminds me when we talk about or we touch these topics.

00:33:48.600 | around money.

00:33:49.280 | Is oh, I didn't expect that to be emotional.

00:33:53.280 | I thought this fit in a spreadsheet.

00:33:54.960 | That's all I was ever taught and you're like wow turns.

00:33:59.000 | out this isn't about well, it is also about spreadsheets.

00:34:02.280 | but it turns out this is really about fear and.

00:34:05.560 | worry. It's the stuff that keeps us up at night. The stuff sometimes it.

00:34:08.600 | wakes us up in the morning and so the answer.

00:34:11.760 | to the question around enough is can we just give ourselves?

00:34:15.000 | permission to have this conversation?

00:34:17.120 | Can we just?

00:34:21.200 | Pay attention a little bit.

00:34:22.800 | We just think about it like that's where this will all start.

00:34:26.280 | I want to talk about this behavior gap concept and.

00:34:31.680 | I suspect a lot of people watching will be familiar with the most.

00:34:34.960 | common behavior gap that investors think about.

00:34:38.000 | which is that you've got this well laid investment.

00:34:41.320 | plan that you completely up in during times of market.

00:34:44.400 | turbulence. Do you think that that is?

00:34:47.440 | maybe over discussed at the expense of other behavioral?

00:34:50.880 | gaps that might go on in our lives?

00:34:52.760 | That's a such a good question. Over discussed I.

00:34:58.960 | know that I for a maybe year.

00:35:02.080 | or two. I sort of got frustrated with the amount.

00:35:05.600 | of times people wanted to talk about that one and.

00:35:08.760 | really, it's investment return compared to investor.

00:35:12.200 | return and this audience will be totally familiar with.

00:35:15.360 | it and particularly the work even done at Morningstar.

00:35:18.440 | where you've got for the same fund right?

00:35:21.320 | The investment and we could just use time weighted rates.

00:35:24.320 | of return versus dollar weighted rates of return for this audience, right?

00:35:27.240 | That was where the behavior app originally.

00:35:30.520 | was sort of named.

00:35:31.760 | And it's what people often.

00:35:36.040 | want to talk about because investments are what we talk about.

00:35:39.080 | So I got a little sort of I don't know, tired of it.

00:35:42.960 | and then I realized it's actually just kind of.

00:35:45.960 | a righteous trick, right? It's just it's a Trojan horse.

00:35:49.000 | It's an opportunity to get into a conversation that's more.

00:35:52.000 | important. So yeah, I think it's over discussed, but.

00:35:55.040 | I also think at least we're talking about it, right?

00:35:58.080 | At least we're starting to understand the importance of behavior.

00:36:01.440 | and at least we're having these conversations.

00:36:03.480 | 20 years on now, at least we're talking about it a lot.

00:36:07.520 | What are some of the other behavior gaps that you've observed?

00:36:12.320 | Yeah, so.

00:36:15.200 | So you could go through all the behavioral finance.

00:36:18.240 | stuff and notice things like I think.

00:36:21.240 | I think clearly we've already talked about the other one that I'm most interested.

00:36:25.800 | in, which is just when we're not aligning.

00:36:27.640 | I have made a habit.

00:36:31.800 | of asking people when they find out what I do.

00:36:35.480 | it gives me permission to ask questions. So like on a plane.

00:36:38.800 | or whatever, right?

00:36:39.720 | To ask people why is your money invested the way?

00:36:44.280 | it is? So I don't know how many times I've asked that.

00:36:47.320 | question, but I know it's hundreds, if not thousands of times now and.

00:36:50.920 | the most common question I get, I'm sorry, the most common.

00:36:53.960 | answer I get. I mean, let me tell you, I've never gotten.

00:36:57.280 | What I consider to be the only right answer, which is.

00:37:01.280 | this port. I built this portfolio because it gives.

00:37:04.320 | me the greatest likelihood of meeting my goals. I've never had anybody actually.

00:37:07.480 | say that out loud and this audience that might just be like, come on seriously.

00:37:10.560 | you've never right. What I often get is I read.

00:37:13.680 | about it in the newspaper and I saw it in the news.

00:37:17.680 | My buddy at my buddy at the club told me about like that's.

00:37:20.800 | how and the really smart people whisper carefully.

00:37:24.000 | they say I read about it in The Economist, right like.

00:37:27.040 | the super smart ones. So that's a big.

00:37:30.280 | gap is not.

00:37:33.080 | thinking through. I did a bunch of institutional consulting and.

00:37:36.600 | even in the institutional consulting space like huge university.

00:37:40.040 | endowments where we'd have this conversation.

00:37:43.000 | and in a university endowment setting the right.

00:37:46.080 | answer to why is the money invested the way it is should.

00:37:49.280 | be because this portfolio gives us the greatest likelihood of.

00:37:52.320 | meeting our spending policy.

00:37:53.640 | Right, it never was. It was always.

00:37:57.680 | like, well, we got a two inch thick book from XYZ.

00:38:01.080 | firm telling us what some super smart person.

00:38:04.080 | came in and bought a steak dinners and talk to us about this. It's always.

00:38:07.120 | these crazy things, so I think that's another gap is not aligning.

00:38:10.440 | our portfolio with the.

00:38:13.520 | goals and like one last one last.

00:38:16.760 | story about this. A friend of mine named Jeff, a retired.

00:38:20.160 | investment banker, had a big pool of money when he retired.

00:38:23.560 | enough that he could get him to see the best financial.

00:38:26.840 | quote unquote financial people in the world.

00:38:29.760 | He had met with five different firms, all of which you would recognize.

00:38:33.200 | This was this is actually the New Year's Eve party.

00:38:36.280 | He pulled me aside like I've got to talk to you. He tells me he's like I've met.

00:38:39.360 | with five different firms and not one of them yet.

00:38:42.680 | Not one of them has aligned the portfolio they're suggesting.

00:38:47.400 | To my goals and I was like what are you talking?

00:38:51.560 | about? Like, what are they aligning to? And they're like, well, they're aligning it to their.

00:38:54.720 | tactical asset allocation model or their forecast.

00:38:58.240 | of what's going to come or their chief investment strategist.

00:39:01.480 | and that's all great.

00:39:04.040 | Except that that's not the reason we invest the money.

00:39:08.160 | right? So that's another big gap. I'm not one more.

00:39:11.680 | well spending. We've already talked a little bit about one.

00:39:15.080 | of the big big mistakes I see and I.

00:39:18.280 | think I'm going to be if I can't. I'll just be a little.

00:39:21.320 | direct because I think this group.

00:39:23.080 | Probably is prone to this mistake.

00:39:26.080 | Is over confidence and here's the reason.

00:39:29.960 | I think you're prone to it over confidence.

00:39:33.000 | is a problem of experts.

00:39:36.600 | Right over confidence is what you get when.

00:39:39.680 | experts behave exactly the way you would expect.

00:39:42.800 | experts to behave.

00:39:43.920 | That's why it's so tricky. I don't have a solution other.

00:39:48.240 | than well. Here's a little exercise anytime.

00:39:52.400 | you're thinking and the reason I think and hopefully.

00:39:55.520 | the fact that you're prone to this comes across as a compliment.

00:39:59.040 | right? Like you're experts.

00:40:00.920 | And over confidence is what we get when experts.

00:40:04.680 | behave exactly like experts are supposed to behave.

00:40:06.800 | So here's a little exercise before.

00:40:10.680 | the next the next.

00:40:13.320 | Before you go to make any change to the portfolio.

00:40:17.480 | because you're convinced something is going to change or whatever.

00:40:20.520 | that is, you read something on the interwebs and.

00:40:23.800 | you've decided that there's some change you need to make. There's.

00:40:27.000 | a conversation that I like to go through with myself and.

00:40:29.880 | other people called the over confidence conversation and you.

00:40:32.920 | just simply ask what.

00:40:34.760 | If you're right and you make this change, how.

00:40:38.800 | would your life be different? So there's three questions. If you're right and.

00:40:42.120 | you make this change, how would your life be different? Normally the answer.

00:40:45.400 | to that question is sort of marginally, right? Like it's.

00:40:48.440 | around the edges. I might take an extra vacation. Maybe I could retire a year earlier.

00:40:51.280 | like even if it's like a big bet, it's.

00:40:54.920 | not like I'm suddenly going to have an airplane normally 'cause.

00:40:57.960 | we're not talking massive bets. So if you were right, how would your life?

00:41:01.040 | be different? Question number two, if you're wrong.

00:41:04.280 | You do this thing and you're wrong. How would you like to be different? Often the.

00:41:08.840 | answer to that question is like, oh geez, I mean, you know.

00:41:11.800 | what I mean? Like I might be in trouble at home. I.

00:41:15.240 | also might have to work five more years.

00:41:18.320 | like it normally and part of that's playing into this.

00:41:21.200 | idea that we feel the pain of loss far.

00:41:24.400 | greater than we do the pleasure of gain. But so and.

00:41:27.600 | then the third question is and this is hard to ask people.

00:41:30.800 | but have you ever been wrong before?

00:41:32.520 | Right, and so if you can just get yourself in the mindset.

00:41:36.640 | of like well.

00:41:37.440 | That's the only the only hint I have for dealing with overconfidence.

00:41:42.880 | is to just.

00:41:44.880 | Remind yourself of times when you were.

00:41:48.920 | so sure before.

00:41:50.600 | And you turned out to be wrong and we reason.

00:41:54.480 | is so hard is we're so good at weaving.

00:41:57.920 | narratives.

00:41:59.600 | About.

00:42:00.400 | Our skill when maybe it.

00:42:04.200 | was luck or about our bad.

00:42:07.440 | luck when maybe it was a poor decision right?

00:42:10.880 | to suit our own story and if we again.

00:42:13.840 | it all comes back to awareness, we can just be honest and clear.

00:42:17.000 | eyed about the decisions we've made.

00:42:18.880 | Would you say extended bull markets like the one we've had?

00:42:23.600 | tend to give rise to more overconfidence? Does it?

00:42:26.640 | relate it to what's happened in the market? Yeah, I think.

00:42:29.840 | I mean, that's another. If we can do.

00:42:33.200 | this real quick, I'll just.

00:42:36.280 | see how quick this goes. I think if I just.

00:42:39.280 | hit share, it might still be there.

00:42:42.400 | So can you see that now?

00:42:45.760 | Just about, yep, yeah, so the.

00:42:52.480 | there's another challenge when we have extended markets either.

00:42:55.680 | direction and this recency bias problem is.

00:42:58.720 | a big deal, right? And so whenever this.

00:43:01.800 | is going on.

00:43:03.040 | What we expect?

00:43:06.720 | So recency bias is just taking the recent past.

00:43:10.720 | and projecting it indefinitely into the future, right?

00:43:14.040 | So what we expect is this to happen.

00:43:16.160 | And even if it's not on the same trajectory, we're expecting.

00:43:21.160 | something like this to happen.

00:43:24.040 | And often what does happen is right like expectations.

00:43:28.040 | versus reality and so.

00:43:31.920 | yes, I think what happens in extended.

00:43:35.640 | extended pull markets or we just get.

00:43:38.760 | we start to forget what.

00:43:42.040 | it means, what risk means.

00:43:44.920 | We stay say things like.

00:43:48.200 | Risk, what risk?

00:43:52.120 | And we I.

00:43:55.240 | can't tell you the and we do the same thing in a bear market.

00:43:58.520 | right? Obviously, and the challenge we have these days is.

00:44:02.040 | our definition of the recent past has.

00:44:05.360 | shortened, it used to be. Maybe we.

00:44:08.360 | would talk in years. Now we're often talking.

00:44:11.560 | in days. I once made a chart of.

00:44:14.360 | All the apocalypse du jour's that we went.

00:44:18.080 | through. I think it was in 2016. I can't remember which what it was.

00:44:21.320 | but it was just like every day and then it was.

00:44:24.320 | gone, right? Like in the news all day long for.

00:44:27.440 | like three days and then gone like not a mention of.

00:44:30.440 | it. And so when things are going.

00:44:33.680 | up, we tend to forget risk is.

00:44:36.720 | so easy to forget, right? It's an arbitrary concept.

00:44:39.920 | until you experience it and all the lifeboat.

00:44:43.440 | drills like talking about getting punched in the face is different than.

00:44:46.680 | getting punched in the face.

00:44:48.720 | And so when we when we've forgotten.

00:44:52.120 | you know, bull market, bull market, bull market, we start to say things like.

00:44:55.280 | yeah, I think I'd be comfortable with that 6040.

00:44:58.400 | portfolio moving into 8020.

00:45:00.040 | You know what I've heard of people that are 100% equity.

00:45:04.440 | What's wrong, right? We're not making those most.

00:45:07.920 | of us. Now this group may be different. I'm hoping this group is different, right?

00:45:11.120 | But most of us are not wired to make a decision.

00:45:14.480 | to go deeper, increase our equity.

00:45:17.560 | allocation when things are scary.

00:45:20.160 | Right, and there's all those reasons like we are wired as herd animals.

00:45:24.920 | were looking around. Stay safe, everybody else is doing it.

00:45:28.080 | It feels safe staying in the herd, right?

00:45:31.240 | We equate leaving the herd to being killed, you.

00:45:34.480 | know. So I think recency bias is a huge problem.

00:45:37.760 | and the only way I know to solve recency bias is again to.

00:45:40.800 | expand your definition of the recent past to.

00:45:44.080 | look back. The good news about investing is it leaves a breadcrumb.

00:45:47.520 | trail.

00:45:48.040 | Investing behavior, right? How did you behave?

00:45:51.920 | in 2008 nine?

00:45:53.560 | You know if you can go back, what were you doing in 99 2000?

00:45:57.680 | 2001?

00:45:58.600 | Notice the behavior and like I've noticed for.

00:46:03.080 | myself, I'm terrible at it.

00:46:04.680 | Terrible, which is why I have a great financial planner that I.

00:46:08.600 | literally don't want to know anything about it. I just want to throw the money.

00:46:11.600 | over the wall. Do not talk to me about it. I'm really.

00:46:14.800 | good at giving other people advice terrible.

00:46:18.440 | at taking my own.

00:46:19.640 | And so I think we need to understand that some.

00:46:23.440 | of us are hardwired that way, right? So yeah, the reason recent past is.

00:46:26.520 | a challenge.

00:46:27.120 | Speaking of thinking back to how we thought.

00:46:31.720 | during bad market environments like 2008.

00:46:35.240 | we're all 12 years older, so I guess the question.

00:46:38.840 | is even if we might have been really placid.

00:46:42.040 | during that period, are we going to feel?

00:46:45.520 | the same now that we're 12 years closer.

00:46:48.800 | to retirement?

00:46:49.920 | Yeah, yeah, no, I think so. There's a couple of things.

00:46:54.480 | that go on. Number one, every time.

00:46:57.800 | there's a scary market.

00:46:59.720 | Every time there's a scary market, it's.

00:47:03.440 | We have these words like I don't know who said.

00:47:07.480 | the famous quote. The last four words of any great investor.

00:47:10.720 | this time it's different.

00:47:11.760 | Right, but the reality is it is different.

00:47:16.520 | It's always different, like the cause of.

00:47:19.720 | the scary market is always different enough to trick us.

00:47:22.880 | into believing that the outcome will be different.

00:47:26.120 | and I think that quote is pointing to the outcome, not the.

00:47:29.200 | cause, right? The outcome as far.

00:47:32.200 | as far as the way the evidence of history shows.

00:47:35.360 | us is we get through these things when they're scary.

00:47:37.880 | But we don't know that when it's happening.

00:47:41.800 | And there is some truth to the fact that we you.

00:47:45.320 | don't know for sure.

00:47:46.800 | Right, that's why it's called risk.

00:47:49.480 | Risk isn't just volatility risk is.

00:47:53.320 | the total of the.

00:47:56.200 | idea that like look are the equity markets going to always work the way.

00:47:59.240 | they always have worked. No, we don't know what's the.

00:48:02.280 | best bet we can make.

00:48:04.520 | The way the evidence of history right like it's.

00:48:07.600 | the only it's the only way I want to live anyway, but.

00:48:10.640 | it's also only the only reasonable bet to make.

00:48:13.120 | But the event itself is different enough.

00:48:16.720 | our lives are different enough that those two.

00:48:20.160 | combined to help us make all sorts of crazy decisions.

00:48:23.360 | In scary markets and greedy markets.

00:48:26.040 | Right, and so I think it's just.

00:48:29.800 | really smart for us to say, wait, wait, wait, let's get out of.

00:48:32.920 | these branches here.

00:48:34.520 | Like these way out on the branches, we all know what it feels like to be way out.

00:48:37.560 | in the branches. I mean, look at a branch next time in the windstorm, right?

00:48:40.680 | like those things move a lot.

00:48:42.120 | Then look at the trunk of the tree. It's not moving much the.

00:48:45.680 | trunk of the tree. These products that we use the investment.

00:48:48.720 | performance. Those are the branches at the trunk.

00:48:51.760 | of the tree. Are you your life and your goals?

00:48:54.840 | If you haven't taken the time to clarify that.

00:48:58.120 | you got no touchstone to.

00:49:01.400 | grab when you're scared or greedy, one of the.

00:49:04.440 | two, and so I think we can spend.

00:49:07.560 | all of our time. It's in fact, it's sometimes it's even a useful exercise.

00:49:10.960 | Some of us find it entertaining, right? Spend all the time.

00:49:14.080 | with the financial pornography network. Understand all that stuff.

00:49:17.160 | All that stuff out in the branches, but then we have to come back.

00:49:20.400 | and go wait, wait, wait, wait. Why am I doing like for?

00:49:23.520 | me? That's time with my family, mainly outside.

00:49:27.120 | and serving in the community.

00:49:29.720 | Above that is a layer of goals like in order to meet that.

00:49:32.920 | why time with my family, mainly outside serving the community is a set of.

00:49:36.040 | goals. If I come back to those that.

00:49:39.280 | I can say, are these goals all the same still?

00:49:41.560 | Well, maybe a few of them have changed. We don't need that much money.

00:49:45.520 | We'd like to move to the country, whatever, but.

00:49:48.640 | mostly those haven't changed. The value almost never changes.

00:49:52.160 | time with my family, mainly outside serving the community. I've been saying that for 12.

00:49:55.280 | years at least the goals. If I say.

00:49:58.440 | to myself, the goals haven't changed, then I go.

00:50:01.480 | great. So the purpose.

00:50:04.760 | goals and then right above that I should be drawing.

00:50:07.840 | this right purpose goals and then right above that I would be.

00:50:10.880 | thinking process and that's investment process.

00:50:14.120 | OK, and we all know the investment process predominantly here, right?

00:50:18.080 | We've got whatever the portfolio of passive.

00:50:21.640 | funds that make sense. That's low cost and diversified.

00:50:24.760 | whether it's the three portfolio fund or the four of the seven.

00:50:28.000 | portfolio fund or whatever it is all mixed together.

00:50:31.040 | in an allocation that matches the goals.

00:50:33.400 | Then above the process sits product.

00:50:37.440 | Least important part, but it's the part we all spend all.

00:50:41.400 | of our time talking about product would be a set of mutual.

00:50:44.960 | funds or ETFs that populate.

00:50:48.640 | the product so we can go from.

00:50:51.400 | wait, that's right. This is crazy or.

00:50:54.720 | my is my purpose still the same or my goal is still the same.

00:50:57.880 | Is the process still valid? OK, did I pick the right products?

00:51:00.920 | to validate to populate the process? The products are.

00:51:03.960 | just things to populate the plan.

00:51:05.680 | And if that all still yes, we can go OK, I.

00:51:09.440 | guess I don't have to do anything today.

00:51:10.720 | I want to take another audience question, Carl. It's.

00:51:15.960 | a good one. What are three nudges you would recommend to improve?

00:51:19.240 | your finances?

00:51:20.360 | Uhm?

00:51:23.280 | So.

00:51:27.520 | Yeah, I think I would probably start with I mean.

00:51:30.560 | depending on where you are in this journey that.

00:51:33.640 | look, we all know that one of the most important parts of this process.

00:51:36.680 | is a great portfolio is amazing.

00:51:39.320 | But if you don't have any money to put into it, it doesn't do any good.

00:51:42.600 | So I think the idea of getting.

00:51:46.480 | aligned with spending is always the place.

00:51:49.480 | to start and one easy way to do this. I just think of it as.

00:51:52.560 | finding.

00:51:54.080 | Finding free money.

00:51:56.920 | Right, so you track your spending.

00:51:59.960 | And I wouldn't track my spending as a tool.

00:52:04.240 | to beat yourself up with. So I'm going to have a little.

00:52:07.320 | I'm the self declared king of permission granting. I have a little.

00:52:10.400 | staff and this is my staff. It's actually the Apple Pencil.

00:52:13.480 | but it's my staff and my staff. I'm going to grant you.

00:52:16.520 | all permission to stop budgeting.

00:52:20.040 | To beat yourself up.

00:52:23.240 | Right, we're going to use budgeting as a tool.

00:52:25.520 | A tool to help us meet goals. It's fun.

00:52:30.400 | It's a game. I know I'm totally lying about the fun.

00:52:33.440 | part, but I'm just trying to convince you like stop. It's not a.

00:52:36.480 | tool for inflicting pain. It's a tool for awareness.

00:52:39.640 | So I'm going to grant you permission to do that. So once you do that, you track.

00:52:42.720 | and then you just look. Are there places where?

00:52:46.080 | Everybody have taken this through taken through this.

00:52:49.880 | workshop around is.

00:52:52.520 | Can I decree these are non discretionary?

00:52:56.080 | spending?

00:52:56.760 | That I don't really care about.

00:52:59.040 | Like, can I get a better deal on the cable?

00:53:02.840 | Not asking to cancel it. I'm just asking you to make a phone call or.

00:53:06.720 | two. Everybody that's gone through that is found a couple hundred.

00:53:09.920 | dollars, right? Like my utility bills double checking.

00:53:12.960 | that I'm paying the right tax rate on property taxes just.

00:53:16.160 | take a month 45 days to look for free money.

00:53:20.680 | When you find it automatically increase.

00:53:23.720 | your contribution, well, assuming there's no credit.

00:53:26.760 | card debt around right automatically increase your contribution.

00:53:30.160 | into your S&P 500 fund.

00:53:31.840 | Then the next level of that would be find.

00:53:36.280 | more line spending. Is there money that you're?

00:53:39.320 | spending that you don't really care about?

00:53:40.720 | There are 100 bucks a month going out the door to.

00:53:45.080 | Netflix that you never use or whatever, right? So.

00:53:48.280 | that's the first thing I would do is just go on a treasure.

00:53:51.320 | hunt.

00:53:51.840 | To find free money.

00:53:55.680 | Redirect it towards a more useful.

00:53:59.480 | cause that cause might be paying down credit card debt. It might.

00:54:02.520 | be spent taking your spouse on a date that you've.

00:54:05.640 | been neglecting and it might be investing so.

00:54:08.720 | that's I think maybe just one giant nudge is.

00:54:11.760 | I would just understand I would look at spending more in the form.

00:54:15.200 | of getting aligned with happiness.

00:54:18.240 | not in the form of beating ourselves up. I think so much of our budgeting.

00:54:21.680 | personal finance stuff is all around inflicting pain.

00:54:24.000 | Right, make it painful. It should hurt. You should be deprived.

00:54:28.560 | like no, I don't know that sounds fun. No reason it doesn't work for.

00:54:31.600 | most people.

00:54:32.240 | But if instead we can be around getting aligned.

00:54:35.440 | And spending lavishly on the things that.

00:54:39.160 | we value, including investing.

00:54:43.040 | And cutting ruthlessly on stuff that we don't care about, it.

00:54:46.080 | could start to work.

00:54:46.840 | So I just want to mention the name of the.

00:54:51.600 | book that you mentioned Carl earlier on. You talked.

00:54:54.640 | about the nurse who wrote the book about.

00:54:57.920 | interviewing people as they were close to death. Mike.

00:55:01.200 | Nolan tells us the book is called the top 5 regrets of.

00:55:04.440 | the dying.

00:55:04.960 | Ronnie, where I want to end on a question.

00:55:09.960 | about Jack Bogle Carl where I want.

00:55:13.280 | to ask you to just talk about how Jack.

00:55:16.440 | affected impacted your career and.

00:55:19.760 | the way that you think about investing in financial planning.

00:55:22.320 | There's only.

00:55:25.040 | There's only one.

00:55:28.280 | I was trying to figure out who gave me.

00:55:32.880 | the other quote. Oh, Oliver Wendell Holmes.

00:55:36.120 | So here I'm going to draw this real quick.

00:55:39.080 | There's only one quote that's had more impact on me.

00:55:42.120 | than Jack's quote around simplicity.

00:55:45.880 | And it's the Oliver Wendell.

00:55:48.640 | Holmes quote. So here's how I my entire.

00:55:51.760 | career has been built off.

00:55:54.800 | of the idea that sometimes we have to cut through great.

00:55:57.960 | swaths of complexity to get to the simplicity.

00:56:00.840 | on the other side, and also the idea that.

00:56:03.880 | that take what was it?

00:56:07.040 | Your isn't it your?

00:56:09.240 | Yeah, take 100 minus your age and put that in equities.

00:56:13.680 | and then this and I don't really care about that part. What I care.

00:56:16.960 | about it was the next sentence, which was there.

00:56:20.280 | are plant there might be and I'm paraphrasing there might.

00:56:23.200 | be plans. There might be investment strategies better than this.

00:56:26.160 | But the number that is worse is infinite.

00:56:28.800 | Like that changed my life. It changed the way I dealt with clients.

00:56:33.320 | I used to have clients where we.

00:56:36.640 | would have the simplest portfolios on the planet with millions.

00:56:39.920 | of dollars and all my colleagues would be like what?

00:56:43.160 | And I used to always just say look if it's good.

00:56:46.520 | enough for Bogle, it's good enough for me, right?

00:56:49.840 | Like, let's just put our focus on behavior and so the way I think.

00:56:52.680 | but that simplicity quote that changed my life was really.

00:56:55.760 | this idea that we start we head into.

00:56:58.680 | a problem around money and everything's going fine.

00:57:01.920 | until we're like, oh, geez, what account should we put that in and where and.

00:57:04.920 | what's growth in income and emerging markets? I.

00:57:07.960 | don't know an expense ratio 12 be one fee.

00:57:11.000 | like we and the whole industry has been trained.

00:57:14.360 | sort of to drop us right there.

00:57:15.960 | Almost like a sales technique, right? Like dig a hole.

00:57:20.080 | throw a client into it and then look down.

00:57:23.120 | and go hey, I'm the only one with a rope and what.

00:57:25.400 | Bogle gave me permission to do was.

00:57:29.120 | to take them here.

00:57:30.160 | Right, like I can go through all this.

00:57:34.280 | Consider the edge cases, the nuance that all.

00:57:37.480 | of that stuff, but what clients what clients and.

00:57:40.680 | readers and friends and real people in the world.

00:57:44.000 | really want is they just want to be.

00:57:47.120 | taken here. Now I know some of our stereotypical.

00:57:50.120 | engineers want to do that, right? And that's.

00:57:53.120 | fine. That's a good day at the office for me. Somebody who cares.

00:57:56.200 | how smart I am, but most people.

00:57:59.480 | just want to know that and he gave.

00:58:02.480 | me permission to do that.

00:58:03.880 | 20 years ago and it changed completely.

00:58:07.680 | changed my entire career. I have been spending my.

00:58:10.680 | entire career since that time.

00:58:12.560 | Being warned.

00:58:16.880 | Warned about being too simple.

00:58:20.400 | Like it happens almost daily. I get an email like.

00:58:24.440 | are you worried about being and so about 10 years ago.

00:58:27.600 | based on that quote.

00:58:29.520 | I mean, that's always been my bedrock.

00:58:32.480 | Is like wait, if it works here, I think.

00:58:35.560 | it's OK for me too, but I was like wait, it sounds.

00:58:38.800 | like there's an exciting place called too simple with like scary.

00:58:42.080 | monsters that if you go there, you'll be eaten and your career will be.

00:58:45.040 | over and I was like I think I'm going to go see if I can find this.

00:58:47.960 | place. Like how simple can I get?

00:58:49.880 | And I never found the monsters, right? All I found.

00:58:53.960 | was this great quote from Bogle. So thanks for asking. That was.

00:58:57.040 | that was fun.

00:58:57.840 | Well, thank you Carl. Thanks so much for being here. This was just.

00:59:01.680 | as much fun as I hoped it would be. I hope the audience enjoyed it.

00:59:04.800 | and now I'm going to turn it over to Rick for some closing.

00:59:08.000 | remarks.

00:59:08.680 | Thank you, Christine. Thanks Rick.

00:59:10.760 | Thank you Carl and thank you Christine for the outstanding.

00:59:14.960 | interview.

00:59:15.760 | Thank you Carl. Thank you Christine for the outstanding interview. It's always interesting.

00:59:20.720 | to hear Carl's deep thinking views on money and life and.

00:59:23.760 | I always say simplicity is an alpha.

00:59:27.000 | that we talk about alpha all the time. Simplicity is one of the biggest.

00:59:30.040 | alphas that you'll find. This presentation.

00:59:33.080 | has been recorded and will be available soon on bogal center.

00:59:36.400 | net. Our next bogal head speaker.

00:59:39.920 | series event will be on March 5th featuring Dan.

00:59:43.000 | Early, professor of psychology and behavioral.

00:59:46.440 | economics at Duke University and author of New York Times.

00:59:49.600 | bestseller, Predictably Irrational.

00:59:52.160 | The discussion will be moderated by Alan Roth, a.

00:59:55.800 | financial planner, longtime bogal head and.

00:59:59.080 | a bogal center board member. Thanks.

01:00:01.840 | for joining us today. We hope that you and your family have a safe.

01:00:05.000 | and happy Thanksgiving and see you next time.

Bogleheads® Speaker Series – Carl Richards

Chapters