At the Money: Compounding Health and Wealth
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We all understand how money compounds over time, but can you compound your health as well? There are surprising parallels between wealth management and health management. We have limited money and we have limited time and we want to generate the greatest return on our resources.

I'm Barry Ritholtz, and on today's edition of At The Money, we're going to discuss how improving your personal health might even help your investments. To help us understand all of this and its implications for your portfolio, let's bring in Phil Perlman. Previously, he served as executive editor at StockTwits, and he was the chief behavioral officer at Bank of the Ozarks.

Today, he runs the Pearl Institute, focusing on personal health and the process of making effective changes. All right, so parallels between wealth management and health management, what are they? You know, if we take the first 50 years of behavioral economics, we go back and we say 1974, Kahneman and Tversky publish Heuristics and Biases.

And we take that as sort of the spiritual beginning of the science. And we think about what is the primary, what is the one big takeaway so far from behavioral economics? And it would be this, in my opinion, that humans...

do not always act in their own best interest, that they sometimes make very poor decisions and that those decisions have ramifications for them in the present and over the long term. And so you're asking me about the parallel between health and wealth management. And I would say this, that in health management, personal health management, how we take care of ourselves, that the exact same thing is true.

that very often we make decisions that are not in our own best interest when it comes to our health. And if you look at the obesity rates and the metabolic health rates among adults in the US today, we can see that obesity is on the rise, diabetes is on the rise, high blood pressure is on the rise.

And so we're doing the same thing. And so this idea that health and wealth management are really just two sides of the same coin. First of all, they or second of all, they both affect our future selves. And so we want to take care of ourselves for the long term. And we know that we don't always make the best decisions. And so how do we counteract that? What do we do now?

One of the things always surprises clients when I show them the impact of compounding returns over time, you get some really giant numbers if you let capital compound uninterrupted for decades. So as long as we're talking parallels, how does health compound over time? Well, these two are so similar, health and wealth, personal management.

that you get a very similar effect. If you're talking about compounding wealth, compounding interest over time, the curve

of that slope increases over time. So at first, gains are very small. You invest $1,000 in the market, and even if the market goes up 15% that year, you make 150 bucks. Okay, not bad, but not much. But over time, as you continue to invest and you continue to compound,

That curve increases. You begin to make more and more money. Well, the same exact thing happens in personal health management. We begin taking care of ourselves. Let's say it's January, which it is, and you're listening to this, and it's a great time for us to have this program, and you decide that you're going to start getting healthier in 2025, and

And what you do is you start slow. Maybe you start walking. Maybe you start jogging. Maybe you cut out desserts after eight o'clock at night. Maybe you stop eating so much pizza. Maybe you start doing a few small things that are moving you in the right direction. Well, the gains at first will be very small.

But if you continue to progress, and that word is important, this is a progressive enterprise, just like compounding wealth, compounding interest is progressive. If you continue to progress over months and years, your health will get better and better at an accelerating rate. And this goes, by the way, this is important, even in your 50s, even in your 60s.

So let's start with the fundamentals. What are the areas anybody, but investors in particular, need to think about in order to become healthier? You know, I'm glad you're using the term investors because here's the thing.

If you are an investor and you are saving money and you are being diligent and you are, you know, spending less than you earn and investing wisely, you are really thinking about your future self. You're really thinking about yourself 10 or 15 or 20 years from now.

And the same is true with your health. If you begin to act in a wise manner towards your health. So where do you begin? Well, for me, I like to really simplify it. And I like to think about it in terms of elements of health, the same way the Greeks and the Egyptians thought about four elements of the physical universe, earth,

wind, fire, water. I think I say there's four elements of good health. And those four elements are nutrition, what we put into our bodies,

Body movement. We were bipeds. We were born to move. Sleep and rest. How we allow ourselves to recover over time. And fourth, the surprising one, is love and social relationships. Really interesting. So let's take a look at a few of those. How important is exercise and moving your body? Exercise is crazy important.

Because it affects all of these. These four elements are like the corners of a square. And when you are prioritizing these consistently over time, they all affect each other. You change one angle of a square, all the other angles are affected. And so our body movement affects our metabolic health.

And that affects how we feel, how we perform, our stamina, our ability to bounce back when we have setbacks, whether those are physical or emotional. And really there's three areas. There is our breathing and how efficient we are at taking in oxygen. That's aerobic health. And then there's anaerobic, which really relates to our muscles, our

and our bone density. And we know for a fact

that as our breathing efficiency and our muscle mass and our bone density increase and improve, we have a tendency as humans to live longer. Our all-cause mortality, which is really just a fancy term for what the probability is for how soon we're going to die, that all-cause mortality decreases. So we stand a chance, a better chance of living longer and staying healthier longer than

as we improve those three areas, how good we, how well we breathe, our bone density and our muscles. So, you know, I'm a car guy. There are certain fuels I will only use for certain cars. I want the highest octane. I want the highest quality to put in. How important is our fuel? How important is our fuel for what we put in our bodies?

This one is so important. And that analogy is so perfect. The better the fuel that we put into the only body we are ever issued on this earth, whether you believe in God, whether you don't believe in God, whether you believe in evolution, whatever your reasoning is, only body we ever get,

the better you fuel it with, the better quality of foods and beverages that you put into your body, the better your body will function. And that goes for the energy component

which is what that analogy is with the octane of gasoline. And it also goes for the building blocks or the protein component. So higher quality protein, higher quality fats and carbohydrates.

So let's talk a little bit about emotions and stress and psychological outlook. What does this, these various health benefits do to help us not get ground down by the regular ups and downs of the market? How can we maintain a healthy outlook and a stable perspective on what's going on around us?

Well, our level of metabolic health affects our experience in the world and our experience on the world. So we know for a fact that the healthier that we get, the better we function socially and emotionally. And from an emotional point of view, the greater stress tolerance we have.

So the more we're able to contain, the more emotional control and regulation. So we all feel things, but our ability to take whatever we're feeling and sort of maintain control over that and not have it affect us as much. You know, you take a baby, right? That would be like the ultimate example. One little thing happens and they begin to cry. And the next minute they're laughing and smiling. What?

the less healthy we are, the more we get like that, the more emotional volatility we have. By improving our metabolic health, the greater control that we have over the behavioral experience related to whatever emotions we're experiencing at the time. And by the way, the healthier we get, the more contentment we tend to experience. So as an aside,

We become happier people. We are less depressed. We know for a fact, we know from years of research that healthier people tend to be less depressed.

So many of our listeners are probably familiar with the Harvard study of adult development. I think they've been doing that for 85 years, tracking all these people across their lifespan. And one of the things they discuss as a benefit of a healthier lifestyle is improved cognitive functioning. Talk a little bit about about that and what it means for people's decision making.

You know, I'm one of those guys, Barry, who believes that there's no separation between body and mind. In fact, no separation between body, mind and spirit. You could write body, mind, spirit, all as one word, all the letters together. The fancy philosophical term for it is a monist as opposed to a dualist or a pluralist.

Mind and body and spirit are all one. And so the Harvard study is a fantastic example because what we find is that the healthier we get and the more that we exercise, the better our brain gets.

And that's really a monist way. That's really a mind-body-is-all-one way of looking at the world, that we take one area of our mind-body-spirit and improve it over here. We just start exercising more, and we get a little bit more, you know, we sweat more times a week, and our brain actually improves.

Our brain is part of our physical body, just like our bicep is a part of our physical body. So it makes perfect sense. And by the way, that study, we were talking a little bit earlier about how surprisingly our social relations and love

is also an incredibly important factor in our health and well-being and in our longevity and in our health span, how healthy we stay over a longer period of time. Those guys, Waterger et al.,

really emphasized that. They found that as well as the exercise affecting our cognitive functioning, they found that our social relations and love affected our health span, how long we stayed healthy. So our last question, when is it too late to think about getting healthy?

It's almost never too late. And so you can be in your 60s or 70s. The earlier, the better. You know, it's just like going back to the compound interest and the compounding wealth. The earlier you start investing, the earlier you start dollar cost averaging every month for the rest of your life, the better.

However, if you're 50 or 55 or 60 or 65, it is absolutely not too late. As a matter of fact, I really didn't start getting healthy until I was in my late 40s, early 50s. And now here I am at 57 and I could run a half marathon faster today than I could five years ago.

And so it's never too late to begin. And I would only add one last point to that. And that is you can start anywhere and you could start small. You don't have to say, Hey, I'm going to go run a half marathon or, Hey, I'm going to cut out every bad food that I've ever eaten. You could just say, Hey, I'm going to start with a walk or I'm going to start by cutting out, uh,

you know, one, you know, maybe cutting down on the drinking or one thing. And that becomes a gateway drug. Once you start feeling a little bit better from a behavioral point of view, that's a reward. And you're like, hey, I want a little bit more of this. I want more rewards. I want to feel even better. And so you could compound your health over many, many years well into your later years. Thanks, Phil. So to wrap up,

Wealth management and health management are kind of parallel. The advantages of making little improvements over time add up and ultimately lead to much better results and in a way that leaves you much happier. I'm Barry Ritholtz, and you're listening to Bloomberg's At The Money.

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