Do Not Invest Your Money Until You Listen to This Interview with Dr. Daniel Crosby
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You should never make a decision if you are H-A-L-T, which stands for hungry, angry, lonely, or tired. So whenever you find yourself in sort of an emotional extreme or a physiological extreme, it's a good time to not make a big, important decision.

Welcome to the Stay Wealthy Podcast. Today on the show, we have a really, really special guest for you. His name is Dr. Daniel Crosby. He is a New York Times bestselling author, a psychologist, and most importantly, a behavioral finance expert. In other words, this guy knows a lot. He's really smart, really sharp, and he's got a lot of great things to say.

You've heard us talk at length about how difficult it is to manage your emotions and behaviors around money and investments. And we brought him here to really expand on that and teach us how we might be able to get more control over these emotions and ultimately make better financial decisions.

He's also got a new book out called The Behavioral Investor. So if this topic interests you, I highly, highly recommend checking it out. He's also written a book called The Laws of Wealth, which is kind of an intro into this topic. So if you want to start there, that could be a good place to start as well. With that introduction, here is our conversation with Dr. Daniel Crosby.

Daniel Crosby, welcome to the show. Thank you. Great to be here. So I want to kind of dive right into this. For the last 30 years, the US stock market has returned a little over 8% per year, but the average investors only realize a return of about 4%. So I want you to just start off by talking to us about why that is and what most investors are doing wrong.

So the primary reason why that is, is because the truths of Wall Street are almost inverse from the truths of every day. So I mean, if you look at things that you want to do elsewhere in life, if you want to get stronger, you lift more weights. If you want to get healthier, you run more miles. If you want to get smarter, you read more books. But then you take it to Wall Street and the best thing that you can do is nothing. Right.

And so, you know, across 19 different countries, we've found that the more someone does, the more they fiddle with their account or trade or try and be active, the worse they do. And that's held true in every country where it's been studied. And they do less well to the tune of about the 4% that you talked about. So there's all sorts of things about the stock market that just don't conform to the rules of every day. You know, that's just one example of

But I think that's why the truths of what to do to make more money aren't very intuitive and they don't really gel with truths of other parts of your life. And you made this comment in another interview saying that a lot of people think investment success is tied to picking the best mutual funds or knowing where interest rates might be headed, but that couldn't be further from the truth. So

if that's not the truth and people are struggling to keep up with just the general stock market indexes, what should people be focusing on? Well, so in my last book, I wrote the first two chapters. The first one was you control what matters most. So we're talking today, next to last day of October in what has been a wild month, one of the wildest on record.

And a lot of times when the markets get choppy like this, I get a lot of questions. I'm sure you do too. What's Trump going to do? What's the Fed going to do? What's happening in geopolitics? And everyone starts to look for these externalities as a way to try and gain control over the situation. Well, the truth is that over long periods of time, the only real control you can have is your own choices, your own decisions.

And a few decisions like, you know, choosing to automate your savings, choosing to escalate those savings when you get a raise, you know, choosing to work with a professional. These are the most highly predictive of whether or not you're going to cross the financial finish line, far more predictive than whether you keep your finger on the pulse of geopolitics and Fed moves, right?

Daniel, going back to the idea that

for clients to be successful in investing. They need to do less. What do you say to your own clients? How do you get them to be at peace with doing less in order to succeed? Well, I think there's a couple of things you can do. I think first of all, you can get them, you know, I'm a psychologist and I would focus on what's called a substitute behavior. Try and get them to focus on more important things.

You know, I often say to folks that one of the best things about working with a financial professional is that they can worry about these things and you can focus on things that matter more than money, which is in truth, just about everything. Like, I mean, just about everything matters more than money. Your life, your family, your intellectual pursuits, all of these things are more important and more stimulating than

than worrying about the stock market. And so one thing is to, you know, to find replacement behaviors. Second thing is, this sounds a little new agey to some folks, but I think there's important truths that I talk about in my new book, The Behavioral Investor,

Things like meditating. Now, I talk a lot in that book about how connected the mind and the body are. So there's things like getting enough exercise, getting enough sleep, avoiding excessive caffeine consumption, not drinking too much.

praying or meditating. All of these things are in service of being a great behavioral investor. And it's nothing that I think most people would think about like, wow, I should really hit the gym today so I can make good choices with my money. But that is indeed, there's a pretty strong tie there. You mentioned we're towards the end of October here. It's definitely been a pretty volatile month, which is something new. It's been pretty calm for the last couple of years. We've had a really good run in the markets and

And you had made this comment, and maybe it's somebody else who made the comment initially, but proactively reaching out to clients during volatile markets can actually cause them to behave worse. And I'd like to hear you kind of expand on this and maybe explain why and maybe how us as financial planners can approach this in a better way and a more constructive way.

Well, I think the original research on this was done by Dan Egan, who is a fellow behavioral finance enthusiast. And he's the head of behavioral finance at a digital advisor called Betterment. And so Betterment has the benefit of being a technology so they can get data that I think it's hard for you to get otherwise. But they were originally in the habit of sending out these messages that were sort of like

you know, Hey, don't panic sort of messages, uh,

And what they found was, you know, a good subset of their user base was not panicked until they got the don't panic message, right? So they weren't even watching. They were doing what they had been taught to do, which is to, you know, to ignore the markets and go about their business and just keep saving and working until they got these messages. And so I think that sometimes as financial professionals, we are so in the weeds with these things. We

We are so wed to every zig and zag of the market that we can think other people worry as much as we do. And I think Dan and Betterment's research just goes to show that

you know, there are some people that are worried and we need to have good answers for when they call. We need to be prepared with tools and resources to help talk them off the ledge. But there's also some subset of folks who have learned the lessons that we've taught them, which is to not worry about it, to worry about bigger things and to go about your business. And we don't want to plant seeds of worry where there are none. Yeah, I guess in the back of my head, you know, I hear my mentor and I mean, mentors in my life have always said, you know, if you don't

tell clients what you think is going on and why things are going on, somebody else will. And so it might as well be you. And I'm not sure quite how to approach that or think about that. Do you have any ideas? It's interesting. Some of the research I talk about in my new book, it talks about why do people listen to financial experts? And one of the things that we found is

is that when you hook someone up to an fMRI machine, so like measuring their brain activity, and they watch a financial expert or someone they perceive to be a financial expert on on TV, the parts of their brain associated with critical thinking and decision making actually go dormant, they actually go to sleep, which is a nice thing for them, because your brain is, you know, only about two to 3% of your body weight. But

but it accounts for about 25% of all the calories that you spend in a given day. And so you're always looking for ways to think less or worry less. And one of the ways that we can do that is by listening to someone we perceive as a financial expert. So your mentor is right. Like people are going to seek out this expertise somewhere. And I think the way that you get them to seek it out from you and not some talking head,

on CNBC or Bloomberg is that you have a great relationship with them. You have this established relationship, you have elements of trust in place so that you are their go-to, you are the highest authority in their mind and not someone external to you. I know that you've got

financial advisory practice. And I know that as a behavioral expert, you're an advocate for hiring a financial advisor and putting somebody in between you and your money. But if I can just play devil's advocate for a second and represent those do-it-yourself investors out there...

I'm just curious, do you think it's possible to be successful as a do-it-yourself investor? Somebody who's maybe studied a lot of the research and work that you've done and Dan Egan has done and they understand all of this and they just figured out a way to manage their wealth on their own and they don't feel like they need a financial advisor. Is that possible? And if so...

What characteristics would you look for or what traits do you think someone would need in order to be successful managing their own financial plan? So the paradox of being a self-directed investor is the more confident you are in your ability to be able to direct your own investments, the worse you are likely to be. So

Wow. That's amazing. So I think there are definitely people who can be self-directed investors. They're absolutely out there. And I would just guess that it's like 10% of the population are

can do this. But the tricky part is the people who are so cocksure about their ability to do it are going to fall prey to the sort of overconfidence and hubris that's going to lead them down a bad path. And so the funny thing that you begin to understand when you really study this world is what makes a great self-directed investor is not knowledge per se, because knowledge is cheap. I mean, you could read

You could read five or six books about investing and know, you know, basically everything you ever needed to know. It's not that hard. It's not that hard on the knowledge front. The same way that diet and exercise are not hard theoretically, right?

What's hard is the consistent execution and not falling prey to a handful of behavioral errors over your lifetime. And so if you were going to do it, it would be the characteristics I look for were sort of some humility, some self-doubt, and a very even-keeled temperament. And sort of definitionally, those people are the least likely to want to try and do it. So it's a funny paradox. Recently, you made the comment that I love in that

You yourself, you know that Cinnabon is bad for you. So you have that knowledge and that knowledge doesn't really do you any good. What you need is someone to slap it out of your hand. And I just, I love that. The more you learn about human nature, like 44% of people over a lifetime cheat on their spouses. And I mean, you know, effectively 0% of them think it's a great idea, right? But 44% of them don't.

do it anyway. And you know, whatever, I think a third of Americans are obese right now. And it's by and large, not because we don't know which foods are good for us and which foods are bad for us. I mean, we've got labels everywhere.

all over our food telling us just what's inside. But all of that kind of falls flat when you've had a long week and you're in the airport and you start to smell the Cinnabon, right? So knowing the right thing to do is cheap. Almost everyone knows the right thing to do with their money, with their weight, with their relationships, right?

And all these things still continue to bedevil us because knowing and doing are such wildly different things. So obviously you're a big advocate of folks working with a financial advisor. We are too, but of course we're biased.

With respect to someone trying to figure out if they need a financial advisor or not, how do they gauge if they have those characteristics such as humility? Is it someone who's going to the gym regularly that you mentioned? How does someone know that they do have the discipline where they don't need an independent third party?

third party? I think becoming a great behavioral investor is all about playing the odds. I talk a lot about being probability based. And so probabilistically speaking, you do need an advisor. So I mean, the safest assumption is

if 10% of people can do it on their own, I think sort of 10% of people are hopeless idiots who are going to want to day trade and just act a fool. No one can tell them anything. Think about 10% of people are just really disciplined and really sensible and can do it on their own. But most everyone else in the middle, they need an advisor and odds are that's who you are.

So I wouldn't look for reasons to try and disprove the rule. I would just assume that you probably need that help.

Because the research shows that people who work with an advisor consistently outperform those who don't. And it's not because advisors candidly are like great stock pickers or even all that knowledgeable about finance by and large. It's just because they keep them in their seat. They have a selfish interest in having them do the best thing because the way those incentives align, what's best for the advisor tends to be best for the client and vice versa.

And so advisors have a real reason, personal and financial, to help their clients do the right thing with their money. And it ends up being good news for everyone involved over the long term on average. Well, that makes sense. It's look at the odds, right? It's the same reason that as an investment nerd, I love index funds, right? The odds are you're going to do better with it. So Daniel, you're out with a new book, The Behavioral Investor, and we definitely want to dive into some of the details there. And we've already touched on a few of them, but...

I want to touch on one more thing really quick. John and I have this kind of never-ending internal debate about home ownership. And I know you've spoken publicly about some of this. I'd love to hear you expand a little bit, talk about one of your financial decisions that you've made around home ownership that maybe wasn't the smartest move in your opinion. And maybe we can dissect a little bit of that.

Home ownership is a personal good and it is an investment bad by and large. So, you know, Robert Shiller looked at residential homes as an investment in the U.S. over the past century and found that on average they appreciate a bout with inflation. So they rise at about, you know, two and a half, three percent a year. But he also found that the average person expects them to rise double digits closer to like 13 percent a year.

So first of all, people who are buying a home have to get their minds right about the sort of returns that they can expect for their home. I mean, it's a decent place to force yourself to save money. There's tax benefits to owning a home. There's other benefits like that. But it's not, again, playing the odds, going to be this killer investment.

And what I find is that people think that it's a killer investment because candidly, they fail to account for opportunity costs and they fail to account for inflation. So they'll see that their grandma bought a house for $200,000, whatever, 25 years ago.

and sold it for $500,000. And they go, oh my gosh, you know, grandma killed it on her house. You know, she more than doubled her money. But what we don't see is, you know, what would grandma have done if she had taken that 200,000 bucks and put it in an S&P index fund or, you know, done other things with it? You know, mostly we fail to account for

things like painting a house, keeping it updated, and we don't account for inflation. So a home can be a source of joy. It can be a source of tax alpha and forced savings.

but it's not a great investment. And I think what you're referring to is I've been pretty public about my decision to buy a big house and just saying it was a stupid idea. One of the reasons why I've said that is from a psychological perspective, people expect a home to bring them a lot more joy than it actually does. Because from a happiness perspective, a home very, very quickly...

you become used to it. You become acclimated to it very quickly. And so your home, like my home, which the first time I ever walked through it was just like, you know, unbelievable to me. And it, you know, it's a nice house. I thought it was so beautiful. I'd never seen anything this gorgeous. And, you know, now it's just where, you know, I throw my dirty socks and, you know, where my, where my kids sleep at night. It's just, it's just the backdrop to my life. So you're

So your home very, very quickly just becomes the backdrop to your life and doesn't give you that same sense of awe perhaps that you had the first time you walked through. I couldn't agree more with your investment bad analysis, but I even want to challenge you on the personal good part. I feel like at least for me, and maybe Taylor has some similar experiences, having a home is a lot of

of work. So not only do you have not the greatest investment opportunity, but then you have termites and you have weeds and you have surprises in the attic that the previous owners left in there for you, speaking personally, of course. And then I think you nailed it about the consumer purchase part. It's just like anything else we buy. The new pair of Nikes are pretty cool the day we buy them, but...

Six months later, they're old and ratty. Same thing for your BMW a couple of years down the line. Not as neat and shiny as it once was when you first bought it. There's no doubt I'm going to mess this number up because I'm not a real estate guy per se, but I think that you're supposed to count on about 3% a year in home repair costs. And for the average home, that's quite a chunk of money.

Right now, my house is like 15 or 16 years old, I think, but it's three years old to us. And we're in the process of having our home repainted the exterior. And I mean, it's 15 grand. It's very, very expensive. And there's all kinds of hidden costs. So you think for a $500,000 home, which is about double, I think, the national average, but pretty modest in some major cities...

I mean, you're looking at $15,000 a year in repair costs for an estimate, and that's quite a chunk of cash. And there's a big opportunity cost there. And you guys have mentioned some of the hidden costs in homeownership, but there's a lot of transparent costs to the F2 Factor and that nobody does. And I love your example. I use the same one all the time. Someone bought this house in San Diego for $100,000 and now it's worth $800,000 and look how much money they made. But

I mean, there's transparent costs like mortgage interest. Nobody tracks how much interest they paid on their loan over the lifetime of that house or property taxes paid or real estate commissions on the buy and the sell, mortgage origination fees. I mean, the list goes on and on. So there's a lot of hidden fees and unexpected costs, but there's a lot of transparent costs as well. I think... I mean, we could talk all day about this, but I think my conclusion is...

If you're buying a home, you shouldn't be buying that home because you think you're going to make money on it. There should be other reasons for buying that home other than it's a good investment. If it ends up being a good investment, maybe you got lucky, maybe you bought in this little pocket in San Diego or somewhere in the country and it ended up working out and maybe you've got that double digit return, thumbs up. But I don't think that should be the primary driver of that purchase. Okay.

Absolutely. I agree. I think the reason you buy a home is because you hate weekends and you want to spend your weekends pulling weeds out of your front lawn. I'll tell you this. My wife and I talk all the time. We spent the summer in Canada. We're in Georgia where homes are famously huge outside of Atlanta. But we spent the summer in Canada as part of a work engagement in a home that was one third the size of our normal home. And

And we had so much fun because there was no maintenance. It was a rental. There was no maintenance. Weekends were ours. There were no worries. If I had it all to do again, I would absolutely rent. Amen, brother. All right. Enough home ownership. Let's talk about this new book that you've written. There's been some tremendous feedback and reviews. Before we dive into some of the details, I'm just curious. You've written a few books.

What surprised you the most writing this most recent book? You're a really smart guy. You've done a ton of work and research in this area. But was there like one or two things that you discovered through the writing and research process that was just new to you and really fascinated you? I think one of the big takeaways from the book is that

Our bodies are simultaneously miraculous and very weak. So I went through and looked at a lot of the externalities that impinge on our ability to make good decisions. I looked at, you know, everything from sociology to neurology to physiology to talk about how, you know, how does society, how does your body, how does your brain impact the way that you think and act with money? And I looked at a lot of the externalities that impinge on our ability to make good decisions.

And your body, I walked away with like viewing humankind and the human body as just utterly miraculous and unbelievably sophisticated in many respects, but so crude and out of place when it comes to making financial decisions. So there's all of these parts in the book where we talk about how we've evolved over millions of years to just be these incredible creatures and then simultaneously just evolve

extra dumb with money. So, you know, humankind is a miracle that is just set up to do many, many wonderful things and manage money and be smart with money is just not one of them. Yeah. And you've broken the book out into different sections. And the first section is what you kind of just touched on some of these external factors that

that interfere with our ability to make good financial decisions. And those three things that you name are sociology, physiology, and neurology. I know we don't have time to go through each one of these, but I'd like to kind of zone in on the physiology, the body. And you mentioned that in the book that

people, we have to expand on this, people who needed to urinate made better financial decisions. Can you explain how in the world that came about? Yeah. So this is news you can use listeners. So this is...

This is one that really shocked me. So it's something called inhibitory spillover. So they found that people who are exercising restraint in one area of their lives tended to exercise restraint more broadly sort of in the moment. So someone who was holding their bladder could also hold their temper and sort of hold their risk when making financial decisions.

And so I thought that was fascinating and kind of counterintuitive to me. I thought people who were concentrating, holding their bladder would be sort of reckless and craven with their spending. But that wasn't the case. What they found was this inhibitory spillover. We also know that that sort of gets flipped on its head over a long time. Like we find that your inhibition gets used up, your willpower gets used up.

So, you know, you see studies on things like, you know, people who are on diets tend to be more likely to cheat on their spouses and things like this. So people who are exercising a lot of restraint in one area, a lack of restraint tends to emerge in other areas. So in the short term, willpower generalizes in the longer term, willpower in one area gets used up and we start to see some slippage elsewhere. So eat that Cinnabon and keep that marriage happy and healthy.

Hilarious. So one other comment that I heard you make was respect to a study that looked at decision making on an empty stomach. And the takeaway being that you should have a sack if you have some big financial decision in front of you. And it's just it's so simple. And it's sort of obvious in hindsight, but it's amazing how such a small thing can make such a big difference.

Well, that study was one of the most incredible that I cited. It was a study of Israeli judges that found that the number one predictor of their stringency or leniency when handing down sentences was how recently they had eaten. And it's pretty horrifying. So if any of your listeners are thinking of committing a crime, make sure you get seen right after breakfast or right after lunch if you want to get away with it.

Because it's kind of scary to think that something as important as our legal system could hinge so directly on sort of the physical well-being of the judges in question. But I go on to borrow a phrase from the addiction literature, and it's an acronym called HALT.

And so people in 12-step programs recovering from addiction say that you should never make a decision if you are H-A-L-T, which stands for hungry, angry, lonely, or tired. So whenever you find yourself in sort of an emotional extreme or a physiological extreme, it's a good time to not make a big, important decision. So you break down these external factors, society, body, and brain, and how they interfere with your ability to make

decisions, really, really interesting stuff. And then you go in to talk about the primary types of behavioral biases. And maybe we can just kind of touch on each of these and the four are ego, emotion, attention, and conservation. So can you just give us a summary of ego? And I know you think that ego is the one that causes the most harm. So maybe you can explain that a little bit too. Yeah. So ego is this tendency towards overconfidence that we have as a human race that

You know, in a theme that listeners are beginning to see a trend here, overconfidence or ego is something that serves us well elsewhere in life. You know, no one would ever start a financial planning practice or a restaurant or any kind of small business venture if

If they weren't a little overconfident because the odds are bad. I mean, the odds are that your restaurant will fail. Your small business will fail and pretty quickly and pretty spectacularly, but we all think that we're different. And so, you know, because people think they're different and because people think they're special, we have restaurants and we're, you know, we're, we're happy about that. We're happy that we have small businesses. We're happy that we have restaurants and,

We're happy that we're overconfident so that when we get dumped by our significant other, we get right back out there a couple of weeks later and keep, you know, keep trying. These are all good things, but,

But when we bring that overconfidence to investing is where we get in trouble. And so we have to, again, operate probabilistically. We have to operate understanding that we're not special. We're not different and that we're prone to all the same screw ups as the next person. And the second behavioral bias, emotion. This is one that I found really fascinating. And you mentioned emotion is necessary to make most decisions. It's table stakes in most situations. But every

Every study that you mentioned says that emotion is not very helpful when making investment decisions is actually really damaging. Well, it's interesting because the emotion chapters I wrote for myself because I felt like I was hearing a lot of misinformation at conferences. Because on the one hand, you're right. Like every decision that we make, even seemingly inconsequential decisions like what clothes to wear or what to have for breakfast,

All of these things have an emotional undercurrent to them. And people who have the emotional processing centers of their brains damaged have difficulty doing even really simple tasks like the ones I just mentioned. But then the funny thing is they're great at gambling and they're great at investing because they just play the numbers. They're just sort of cold and calculating things.

And so there is sort of a simultaneous truth that we have to parse here, which is that every decision is emotional. So there's no way to sort of

rid any decision of its emotion, least of all the decision about money. But then we have to understand that emotional extremes tend to be the enemy of sound financial decision-making. So yeah, understanding that there's always an emotional undercurrent there, owning it, understanding it, naming it, but not being owned by it and not letting profound emotional moments get in the way of making good choices. And so how would investors do that? Acknowledge that

they have emotions, maybe it's fear, maybe it's panic, and then moving on and staying the course and doing the right thing anyway? Yeah. So I put forth a model in the book. It's not my model and I'm spacing on the name of the inventor of this model, but it's called RAIN and it stands for recognition, acceptance, investigation, and non-identification. So basically recognizing that the emotion is there, being cool with it,

trying to be inquisitive about its sources and its purposes. But then the N is for this non-identification. I think a lot of times we conflate emotion and action like, well, I'm angry, therefore I must scream. We see this on Twitter plenty, right? I disagree with you, therefore I must yell at you and treat you as a subhuman. And I think that what the non-identification piece allows us to do is say, well,

We can all experience emotions, but they don't have a cause and effect influence on us. We can experience an emotion that we do nothing about or that we even act in seeming contradiction to. So that RAIN model is discussed in the book, and I think it's a powerful one. That is a fascinating idea. So just because there's an emotion doesn't necessarily mean we have to act on that emotion. I love that. All right, talk to us about the last two, attention and conservation. So attention is our...

our tendency to conflate the scariness of a story with its likelihood. So, you know, a couple examples of this, there's one that I talk about in the book, post 9-11, people, we lost 3000 or so people in the World Trade Center, but we lost, I think, another 16, 1700 that year, and just what remained of that year, due to people's increased propensity to drive versus fly.

So driving is far more dangerous than flying. And yet people had this big, scary terrorist attack on an airplane that loomed very large in their minds. And so they said, well, I don't want to die in a terrorist attack. Therefore, I'll drive, which is probabilistically far more dangerous.

And so we do this in a million ways. If something is big or scary or dramatic, we tend to think that it's likely to happen and we ignore more everyday risks.

You see this in financial markets where people are always trying to avoid the next 30, 40% drawdown. And in so doing, you know, either fail to work with a professional or put themselves in crummy, expensive products that have guarantees, but have all kinds of drawbacks or

or stay in cash and miss a 400% run-up. There's all these ways that in trying to avoid big, scary events, we run into more likely, but less sexy problems. And that's what that chapter is all about. And conservation, talking about people avoiding the unknown, home bias is a big issue when it comes to investing. Fill us in a little bit here. Conservatism, conservation is our tendency to confuse what we know with what is safe.

And so this is, you know, like you talked about home bias. We see all over the country, not only do Americans tend to be overweight American stocks and, you know, same with any country you'd care to look at. I think the average Greek investor had over 90% of his holdings in Greek stocks during the Greek debt crisis, which is, you know, a much bigger problem if you're Greek than if you're American, just because the economy is not as large a piece of the world pie.

But you even see this within geographies within the US. People in the Northeast tend to be overweight financial stocks. People in the South and Midwest tend to be overweight agricultural stocks. And so we just all kind of buy what we know. And we think that because we've heard of it, that it's safer. And in fact, the very opposite tends to be the case because if you live in Kansas and you own a bunch of agriculture stocks,

well, you're sort of double overweight agriculture because your home price likely has a lot to do with the price of wheat and so on and so forth. So we tend to think that things that we know are safe when actually the reverse tends to be true.

And it's just one more example of how the rules of Wall Street and the rules of every day have very little in common. Sure. The takeaway then, part of investing 101, diversification, decrease your risk. People listening to this, this all makes sense. They understand that all these behavioral biases exist and external factors are influencing our decisions.

The big question, and I'm so glad that you address it in the book, is what do we do about all this? What do we actually do now that we know that all of this exists?

I've been speaking and writing books for about a decade now. And as an academician, I mean, I went and got a PhD because lofty, abstract, philosophical concepts don't bother me a bit. But most people, when they hear about this stuff, they go, okay, that's cool. Now, so what? And so the whole third part of the book tries to answer this so what question and takes this universe of behavioral risk that we've just talked about these four things

and tries to give people solutions there. But in just sort of a radio soundbite, I think if people would work with a trusted professional and automate the thorniest parts of their financial lives, automate bill pay, automate saving, automate escalation when you get a raise,

If you just work with someone and you automate the trickiest parts of your financial life, you'll be halfway there. And then the other half is in part three of the book. And the fact that people make these major mistakes investing their money, things are influenced by fear and greed. I mean, it means that there's an opportunity for those of us that want to be smart investors. So in your mind, how can we maybe take advantage of the failures of other people?

Well, I think the failures of other people are to a large degree why financial markets work so nicely if you're disciplined. I mean, we sort of count on the failures of other people to provide us with the nice returns you talked about at the outset of the show. So if you can cultivate in yourself and in your clients a profound sense of schadenfreude, right? Like if you can be happy

When the market is crashing because you know that high quality brands are going on sale and because this is what it takes to shake out the weak hands, it takes you being a bit of a psychopath. I mean, I even talk about that in the book.

I mean, it takes you being a bit of a weirdo to be a good investor, but it can change the way you move through the world. I mean, it can change the way that you question long held truths. It can change the way that you look at world events. And I think that learning to think like a value investor, learning to think like a contrarian is not only good investing practice, it's also good life practice that'll make you

more deeply engaged with life and less gullible. Is that maybe a little bit of a chicken or the egg question there? Do we need to question investing truths to be able to question everything in life? Or do we question everything live? And from there, we're able to question the common investing myths. You're blowing my mind right now. But I think that wherever you start on that journey, you know, wherever you start on that journey, it's a positive place.

For me, there's so much to learn about this knowing-doing gap. When you realize, you know, I've written three books about financial behavior now, and I still work with an advisor because I know that, you know, three books on this stuff later, I'm still as dumb as the next person. And so when you realize how little knowing the right thing to do matters, right?

I think you put yourself in a position to make much better decisions and you realize things like working with outside help is powerful. You know, working with a personal trainer or a financial coach or a nutritionist is powerful. You realize that not relying on willpower, but surrounding yourself with the right kind of people and the right kind of environments is powerful. We dramatically overreact.

over emphasize trying to strong arm doing the right thing and under rely on just taking negative stimuli out of our environment. You know, I quit Facebook a couple of years ago and it was like an immediate 10% increase in happiness.

because you take a negative stimulus out of your life. So I think there's lessons that you learn in this game that serve you well as a human being for sure. So if somebody has really been focused on the nuts and bolts of investing and they're diving in all these investment central books and this is their first introduction to the behavioral side of things, I'd like to provide them some resources. Obviously, you've written a few books. And so my first question is,

Where do they begin in your series of books? What's the difference between, let's say, Laws of Wealth and your latest book, The Behavioral Investor? And then any other resources that you would suggest people look into to learn more about this side of investing and managing wealth? The Laws of Wealth was my last book, and I feel like it's a great introduction to

If you're just starting out, I think it's a great introduction. I think it's an easier read, I think, than the behavioral investor. So that's your college course in the behavioral investor is your graduate level course, perhaps. I have a whole list. I'm going to blank on the specific titles because there's about 25 or 30. But if you'll just Google Nocturne Capital reading list, I get asked this question so frequently that I just put together a list of

of some of my favorite books and I've broken it out by domain, but there's about 25 or 30 books that I'd really recommend. And what's fascinating is you could probably read five of them and be all set. Like, I mean, you could, you know, it's like I said earlier, um,

It's funny in our world, you could read four or five good books on saving and investing and be set for life. And then it would just be execution at that point. Great. Well, we will locate that reading list and definitely link to it in the show notes. We will also link to your books as well. We really, really appreciate you coming on the show and sharing your knowledge with us. I find this stuff extremely fascinating and I wish you luck with the book launch and I hope things are going well and I know we'll be staying in touch. So thank you. Thank you very much.

Thank you, Daniel. Yes. Thanks, guys. Great, great show. This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.