Three genuinely sharp financial minds sit down today and, one by one, admit to the same kind of dumb money moves everyone else makes. Not because they didn’t know better. Because knowing better and doing better turn out to be two completely different skills, and your brain is very good at making bad ideas feel reasonable in the moment. This episode isn’t about learning new investment tactics. It’s about learning to recognize the exact moment your own mind starts working against you, and what to do about it before it costs you.
What You’ll Walk Away With
- The three specific flavors of overconfidence that combine into what one expert calls “a recipe for disaster”
- Why “I’ll wait until it comes back” is one of the most dangerous sentences an investor can say to themselves, and when it’s actually true
- The surprising reason financially literate people still make emotional money mistakes, according to research on an unrelated profession
- A simple writing exercise that makes you far more likely to stick to your own financial plan
- Why betting on what’s familiar, your employer’s stock, your home country’s market, is quietly one of the riskiest things you can do
- A martial-arts-inspired mental trick for turning your own biases into tools instead of traps
- The real reason “this time is different” almost always feels true and is almost always the wrong conclusion to act on
Why This Matters Now
In your 40s, you’ve likely made enough financial decisions to have a track record, some smart, some you’d rather not revisit. The goal isn’t to eliminate emotion from money; that’s not realistic, and it’s not even the point. It’s to recognize the specific moments your gut is about to overrule your plan, and to have something in place, a rule, a person, a system, that catches you before it does. Confidence with money doesn’t come from never being tempted to make a bad call. It comes from knowing exactly what you’ll do when you are.
From the Basement
The crew’s year-long trivia championship takes a wild turn with a Spanish treasure fleet question that somehow ends in someone getting bonus points for pure luck, which is a fittingly ironic way to close an episode all about how bad we are at judging our own luck.
Resources Mentioned
Personal Finance for Long-Term Investors podcast — Jesse Cramer’s show
The Behavioral Investor by Daniel Crosby — second edition available for preorder
Afford Anything podcast — Paula Pant’s show
Our Topic:
The mind game that investors can’t stop playing (Wall Street Journal)
During our conversation, you’ll hear us mention:
- Behavioral investing
- Investor mind games
- Bitcoin ETF timing
- Performance chasing
- Emotional investing
- Overconfidence bias
- Delayed-start panic
- Excessive risk-taking
- Optimism bias
- Forecasting confidence
- Individual stock mistakes
- Cryptocurrency mistakes
- Housing overreach
- Credit-score damage
- House-poor consequences
- Loss aversion
- Familiarity bias
- Home-country bias
- Concentrated investment risk
- This time’s different
- AI investment hype
- Market history
- Investor policy statements
- Investing code of conduct
- Advisor accountability
- Commitment consistency
- Investment automation
- Goal-based bucketing
- Safety buckets
- Anxiety-adjusted returns
Our Contributors
A big thanks to our contributors! You can check out more links for our guests below.
Dr. Daniel Crosby
Another thanks to Dr. Daniel Crosby for joining our contributors this week! Learn more about Dr. Crosby by visiting Daniel Crosby | Orion
Check out his newly released book The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions.
Jesse Cramer
Another thanks to Jesse Cramer for joining our contributors this week! Hear more from Jesse on his show, Personal Finance for Long-Term Investors – The Best Interest, on Spotify.
Learn how you can work with Jesse by visiting The Best Interest – Invest in Knowledge.
Paula Pant
Check out Paula’s site and amazing podcast at AffordAnything.com
Follow Paula on Twitter: @AffordAnything
Doug’s Game Show Trivia
- How many ships were in the legendary 1715 Spanish treasure fleet when it left Havana?
Mentioned in today’s show
- Influence: The Psychology of Persuasion, Revised Edition
- This Is Water: Some Thoughts, Delivered on a Significant Occasion, about Living a Compassionate Life
Join Us on Monday!
Tune in on Monday when we jump into your “just past midyear tax checkup.” What should YOU toggle to get the best tax treatment on your money?
Miss our last show? Check it out here: Why Your Homeowners Insurance Bill Keeps Going Up — And What to Do About It (SB1876) | Stacking Benjamins.
Written by: Kevin Bailey
Episode transcript
[00:00:00] opener: This is hot, Ray
[00:00:01] Jesse: Symmetrical book stacking, just like the Philadelphia mass turbulence of 1947
[00:00:07] opener: You’re right. No human being would stack books like this
[00:00:11] Jesse: Listen. You smell something?
[00:00:19] Doug: Live from the basement of the YouTube headquarters, it’s The Stacking Benjamins Show
[00:00:34] Doug: Joe’s mom’s neighbor, Doug. And you know the maybe I should games you play with your investments? Maybe I should invest more aggressively, less aggressively, with more tax efficiency. Today, what are the biggest mind games we play, and how do we better solve the investing puzzle? We’ll tackle a ton of them, but that’s not all we’ll tackle.
[00:00:55] Doug: We’ll see which of our contributors to this discussion can best answer my trivia question and come one step closer to winning our year-long trivia challenge. And now, a guy who says his biggest mind games revolve around which board game to play this weekend, it’s Joe Saul-Sehy.
[00:01:17] Joe: Hey there, Stackers. And it is a hard game. It’s such a hard game to decide which game to play this weekend, ’cause there’s always so many choices. Hey, everybody. Welcome to Friday. Let me be the first one to welcome you to the Stacking Benjamins show. I am Joe Saul-Sehy. And man, do we got a great show for you.
[00:01:34] Joe: Well, we’re gonna start off with this guy. How are you, Doug?
[00:01:37] Doug: Doing great, Joe. Doing great. I feel like today I finally got all my ducks in a row, but it also feels like the ducks are crossing an eight-lane freeway in Atlanta.
[00:01:47] Joe: That is a ba- That’s a bad Friday.
[00:01:49] Doug: Yeah.
[00:01:50] Joe: Maybe just a little bit
[00:01:51] Doug: go- You think you got it all together, you just hope nobody runs you over
[00:01:53] Joe: maybe just a little bit going on in Doug’s world. Well, the good news is OG’s not running us over today because, uh, he’s not here. But we have some other people to run you over instead, Doug. I don’t know if that’s the right segue. Might not be. But the first person hopefully won’t run you over. Comes to us from Manhattan, where in her, uh, luxurious high-rise apartment, Paula Pant from Afford Anything is here.
[00:02:15] Joe: How are you?
[00:02:16] Paula: I am doing great. How are you, Joe?
[00:02:19] Joe: I am fantastic, now that we’re gonna talk… You know, last week we talked about AI. Mm-hmm. But this week, Paula, we’re gonna talk about something bigger than AI, which is our brain. Our, our-
[00:02:28] Paula: So artificial intelligence, naturally dumb.
[00:02:32] Joe: Exactly. Debatable. Right. You’re like, “How did I come up with that?
[00:02:35] Joe: Oh, I wrecked that plan all by myself.”
[00:02:37] Paula: Yeah, exactly.
[00:02:39] Joe: I’ve done that before. I don’t know if you’ve ever wrecked a plan on your own. Oh, I, I, I
[00:02:41] Paula: take a sledgehammer to my plan constantly.
[00:02:44] Joe: A guy, Paula, who’s constantly wrecking plans in upstate New York is our good friend from the Personal Finance for Long-Term Investors podcast, Jesse Cramer’s here.
[00:02:52] Jesse: Uh, that was a, that’s a good segue. That’s a good segue. It’s, uh, very on brand for me You know, I just take something that’s pleasant and straightforward and throw some chaos in there. Agent of chaos show, that’s what I try to be here on the show.
[00:03:04] Joe: Excellent. You ever find yourself talking to yourself about what type of chaos you’re gonna create?
[00:03:09] Joe: Are you actively teaching those young children of yours how to create more chaos?
[00:03:12] Jesse: Well, that’s the thing. I mean, part of being a chaotic planner is that you never plan your chaos in advance. It just, it’s right off the top of your head, right? It just, it just flows out. It’s like when Doug is doing his announcing here.
[00:03:23] Jesse: It just flows off the tongue. It’s natural. Correct, Doug?
[00:03:26] Doug: Absolutely.
[00:03:27] Joe: It’s a part of being Doug. It’s an eight-lane freeway in Atlanta. Right, Doug? Yes. And th- there are two reasons why I wa- well, there’s three reasons I wanna talk about this. Number one was last week we talked about AI and what’s happening with AI, and we’re all worried about AI.
[00:03:41] Joe: Maybe we’re over-worried. We talked about that last week. Maybe we’re not worried enough about our brain, what our brain does to sabotage our own plan. That’s number one. Number two is Jason Zweig, and I always pronounce Jason’s last name wrong. Paula, how do you pronounce that?
[00:03:55] Paula: Zweg. I, I mean, I don’t know if that’s right.
[00:03:57] Paula: That’s just how I say it.
[00:03:58] Joe: I don’t know. Every time I pronounce it, though, I get letters from people going, “Yeah, no.” Hmm. But, uh, we’re gonna keep trying. So, uh, Jason Zweg wrote about this in Wall Street Journal, the games that we’re playing, but the biggest reason is because our special guest today, sitting in for OG, is this is what he’s all about, is the behavior game and trying to help our thinking with our thinking.
[00:04:19] Joe: Dr. Daniel Crosby’s here. How are you, man?
[00:04:21] Dr. Daniel: I’m good, man. Just left the eight-lane freeway in Atlanta myself, and so coming at you from Utah.
[00:04:27] Joe: Where it’s mostly two lanes. I’ve been through a lot of Utah, and there’s a lot of two lanes there.
[00:04:31] Dr. Daniel: There’s a lot of two lanes here. It’s true.
[00:04:33] Joe: It’s kind of the way I, I appreciate life, is when I’m in little two-lane land.
[00:04:38] Joe: But when it comes to our brain, I think probably trying to control two lanes, Daniel, is easier than controlling all eight.
[00:04:43] Dr. Daniel: Yeah. It’s true. Even the two gets tricky. Let’s be real.
[00:04:47] Joe: Okay, so you not only talk about this all the time, you’ve got a brand-new book coming out in the fall on this topic. Tell us what’s on the burner.
[00:04:55] Dr. Daniel: Listen, man, I’ve got a book coming out this fall. It’s, I timed it with my birthday, so October 16th, so I’d have something to celebrate besides more gray hair. But yeah, I’ve got a book called The Behavioral Investor. It’s a second edition coming out, uh, that talks all about your money, your brain, your decision-making, and all the biases that get in the way.
[00:05:16] Joe: And we might have a couple of those today, Daniel.
[00:05:19] Dr. Daniel: You’re too good to me. I love it.
[00:05:20] Joe: We might. So you can see we’ve got the perfect people on to talk about your brain, your money, and you. How do we mess it up, and how do we stop messing it up? We’re gonna talk about that today, but first, we got a couple sponsors who help us keep on keeping on.
[00:05:33] Joe: We are going to hear from them, and then Dr. Daniel Crosby, the Paula Pant, and Mr. Jesse Cramer, we’re gonna chat about how do we maybe keep, uh, the devil, AKA our brain, at bay.
[00:05:56] Joe: All right, as I mentioned before the break, our inspiration for today’s piece comes to us from The Wall Street Journal, Mr. Jason Daniel, is it Zweig, Zweig, Zweig, Zweig? I’m,
[00:06:06] Dr. Daniel: I’m Team Zweig.
[00:06:07] Joe: Zweig.
[00:06:07] Dr. Daniel: That’s me.
[00:06:08] Joe: And, and Jesse gives that one the thumbs up.
[00:06:10] Dr. Daniel: I’m Team Zweig, yep.
[00:06:12] Joe: Okay, Jason Zweig. I get emails every ti- It’s gonna be Zweig by the end of the episode anyway.
[00:06:17] Joe: It doesn’t matter what I call our buddy Jason. We use so much of Jason’s stuff. But what he talked about was this, and this was the first piece of inspiration I had, guys. You know, we’ve had these Bitcoin ETFs that have opened up all over the place, and he went and did some research into what actually happened inside these Bitcoin ETFs.
[00:06:36] Joe: And not surprisingly, these ETFs have made a lot of money, but the average investor, every time the ETF sank, people took money out. Every time it reached new highs, people flooded money in. And it turns out that the problem wasn’t the investment. The problem, when it came to this Bitcoin ETF, is us. Even when I was a financial planner, I saw this.
[00:06:55] Joe: This isn’t just new to Bitcoin ETFs. We do this all the time. But I wanna prove that we’re human, so let’s talk to our panel. Jesse, do you mind going first with maybe a little self-deprecating humor here?
[00:07:08] Jesse: Sure.
[00:07:08] Joe: What is a time when y- your brain actually got in the way and maybe wrecked a good plan?
[00:07:15] Jesse: Yeah, like 8:45 last night when I found myself eating ice cream.
[00:07:19] Jesse: Is that what you mean?
[00:07:20] Joe: That’s 100% what I mean.
[00:07:22] Jesse: Like, I had this plan- I think for me it was M&Ms … to lose weight. Yeah, right. Yeah. I, I mean, all the time. A- and that’s, my mind… I mean, I know we’re here to talk about finance, and I, I’ve got some good financial anecdotes, but the most common one day-to-day would be like, oh, I had a plan to work out and eat healthy, and instead I was too tired to work out, or that’s the excuse I tell myself, and I didn’t work out and I ate poorly.
[00:07:42] Jesse: Or a- another one is, like, you know what? I, I, I wanna go into this conversation, and I just wanna ask really good questions. I just wanna… I’m curious about this person. I… And then what do I find myself doing midway through the conversation? I’m, I’m going on some tangent about some stupid story, and it’s like, wait, I, I told myself I’d…
[00:07:57] Jesse: So to me, it happens all the time. Not necessarily every day with money, but just all these other mundane day-to-day things.
[00:08:04] Joe: Do you got a money one? I
[00:08:05] Jesse: mean, yeah. Uh, you mentioned Bitcoin in your intro, and I’ve kind of, um, uh, what, what’s the right word? See-sawed. I’ve kind of gone back and forth on the Bitcoin thing, and put some money in, and then took it out, and then put a little more in and took a little more out, just a, a little bit.
[00:08:18] Jesse: But still, it’s like, uh, sometimes the dollar amount doesn’t matter. It’s the thought process behind the dollar amount, and my thought processes there have been inconsistent, irrational. And yeah, I think any good investor or any rational investor when they zoom out on my decision-making would be like, “That was pretty poor.”
[00:08:34] Jesse: So yeah, Bit- Bitcoin cryptocurrency- Wait, what? … would be one of mine.
[00:08:37] Joe: Paula, surely you’ve never let your brain- Oh … get in the way.
[00:08:40] Paula: So many times. So many times. Um, I would say the worst of it was probably during the pandemic because I was just chronically online, and so that exposed me to a lot of garbage ideas.
[00:08:51] Paula: So I’d, I’d bought a bunch of, like, individual stocks that, uh, even though I know better- Bought a bunch of individual stocks that performed very, very poorly. I put too much money into cryptocurrency. I held crypto in the wrong places. Man, all of the above.
[00:09:10] Joe: Okay, you wanna hear the dumb individual stock one I did, Paula?
[00:09:12] Paula: Yeah.
[00:09:13] Joe: I did. This is, this is … Number one, I don’t buy individual stocks, but I saw that Travis Kelce was part of a man- look at, look at Daniel already. Travis Kelce was part of a group that was buying a ton of shares of Six Flags, just a ton of, of, of shares. And nobody likes regional theme parks better than I do.
[00:09:38] Joe: I will challenge anybody to like them more. This is a company with so much debt that has been staving off bankruptcy for so long, that has nothing good happening, and yet I’m like, Pa- I do zero research. I’m like, well, if Travis Kelce’s getting married to Taylor Swift, he must know a good thing. I bought some.
[00:09:57] Joe: I bought some. Ask me, Paula Pant, how much money that’s made me.
[00:10:02] Paula: How’s it doing, Joe?
[00:10:03] Joe: How’s it- Let’s not talk about it, Paula. Let’s not talk about it. It’s gonna come up.
[00:10:07] Paula: The rollercoaster metaphor is apt.
[00:10:09] Joe: Yeah, yes. Yes, but this one’s more down than up. I mean, it is… But, or is it more down or more dumb than up?
[00:10:15] Joe: I don’t know. Daniel, you’re a guy that, you know, writes about this, talks about this on stages for a living. Surely your brain has never gotten in the way.
[00:10:24] Dr. Daniel: Well, I’ve never made a decision based on being a Swiftie like you- … but I’ve done plenty of dumb stuff. You know, one thing I wanna point out is that even positive trades can be remarkably stupid.
[00:10:36] Dr. Daniel: You know, when Paula was talking about some of the things that she did during COVID, I did some, some of many of the same dumb things that she did during COVID, but some of them came out in a dollars and cents way very well. But I think it’s easy to forget how stupid those trades were because they, they ended the way we wanted to.
[00:10:57] Dr. Daniel: So you can be right and still be a moron when it comes to these things. Uh, but when it comes to the single thing that has cost me the most money, it was absolutely a poor housing decision that we made years ago. Um, we bit off a really big house, an expensive house, and when we were going to pay for the house, I realized that my credit score was in the garbage because I had forgotten to pay a phone bill when I moved offices years and years in the past.
[00:11:30] Dr. Daniel: So, you know- This is amazing … yeah, a guy who’s never missed a credit card payment ever, I had some T-Mobile bill from, you know, 10 years previous that had gotten sent to collections. And so we had to put down about a 55% down payment on this house, which is of course way more than we were expecting. So we were house poor.
[00:11:52] Dr. Daniel: We were, uh, you know, very heavy in on this house, and that process disrupted my plan for years. And I’m not kidding you, it has cost me at least a million dollars over time because it made me so risk-averse. I was so heav- Oh … I was so heavy into this house, it disrupted the flow of this good sort of saving and investing path that I was on.
[00:12:20] Dr. Daniel: And I was so cash poor and house poor for so many years, and just it got me off my game So even though I made, you know, I doubled my money on the house and, and all this stuff, it still was absolutely the worst decision I’ve ever made because of the way it kind of got me off my game and, and broke my concentration.
[00:12:44] Joe: Well, it’s incredible how it breaks your confidence, right?
[00:12:47] Dr. Daniel: Yeah.
[00:12:47] Joe: I mean, it makes you a lot less confidence. And by the way, when I said it’s amazing, I did not mean it’s amazing that a guy like you would have that happen. I meant it’s amazing- Mm-hmm … that, uh… That’s not even credit. Like, why something like a utility bill or a phone bill- Mm-hmm
[00:13:03] Joe: has such a prominent place in a big credit decision? Just drives me crazy how flawed some of the ways that we calculate credit and things are. Well, you can see that we’ve all made mistakes, so, uh, even the smartest among us isn’t able to always make the right move. Let’s play some of the games, guys. I wrote to a few people off our newsletter, The 201, and I did a little survey, and these were the top games that, that these people came up with.
[00:13:33] Joe: The number one with a bullet game was I’m smarter than average. I think, you know, everybody says, Paula, “Don’t invest in anything but index funds- Mm-hmm … because of the fact that, you know, uh, you’re not gonna beat the, the average.” So many people beat the average, but yet the average person goes, “Well, you know what?
[00:13:51] Joe: If Travis Kelce did it, I bet this is this is a super smart thing for me to do ’cause I’m smarter than the average.”
[00:13:58] Paula: Mm, yeah, isn’t there some stat about how, like, 80% of drivers think that they’re above average, which, you know- … mathematically speaking, is impossible?
[00:14:06] Joe: What is that other stat, Paula? The, the thing Americans lead most in is isn’t all these other things, it’s confidence.
[00:14:12] Joe: Mm. Like, we lead in confidence.
[00:14:15] Paula: Well, I think there are a couple of things going on. Number one is when people get a delayed start, they often want to take excessive risk in order to compensate for a late start or, like, not enough contributions, and so I think that’s part of it. I would guess, I don’t have any stats to back this up, but I would guess that if you start investing when you’re 22, and especially if you are a high-income earner at a relatively young age, if you end up being a high-income earner in your 20s and you’re investing regularly during that time, you probably feel less pressure.
[00:14:46] Paula: But I think there are people who reach their late 30s, 40s, and they’re, like, looking around and they’re going, “Oh, I haven’t really saved anything for retirement yet,” and then that panic makes them say, “All right, well, m- market returns are not gonna be good enough. How do I, how do I make 20% returns?”
[00:15:03] Joe: Right.
[00:15:04] Paula: Yeah.
[00:15:04] Joe: But s- so that is gambler and overconfidence mixed together?
[00:15:08] Paula: Yeah, I think so. I think so, and I think a lot of it is just born of, like, panic.
[00:15:12] Joe: Sure. You’ve studied this, Daniel, overconfidence. I mean, most of us are feeling like we’re in the, you know, top 20%. What’s going on there?
[00:15:21] Dr. Daniel: Yeah, there’s actually a couple of specific flavors of overconfidence, and I think when you hear about them together, you see why it becomes such a disastrous cocktail.
[00:15:30] Dr. Daniel: So the first is the thing that you and Paula are talking about, thinking that we’re smarter, better, faster, stronger than the next person. Uh, the second is thinking that we are luckier than average. So people consistently overrate the likelihood of good things happen to them and underrate the likelihood of divorce, cancer, losing money in the stock market.
[00:15:53] Dr. Daniel: So we think we’re smarter than average, we think we’re luckier than average, and then the third one is we think we are more prescient about the future than we actually are. So if you look at this cocktail, right, and you go, “Okay, we think we’re better than other folks, we think we’re luckier than other folks , and we think we know what’s coming-” That is a recipe for disaster.
[00:16:14] Dr. Daniel: And Joe, the tricky thing about this, and most of the biases that we’ll talk about today, is that they actually serve us really well in other facets of our life, right? I mean, if, if we weren’t overconfident, I never would’ve approached my wife in, you know, in, in that class we were in together. No one would ever start a restaurant.
[00:16:35] Dr. Daniel: Like, all these things, right? There’s, there’s places where thinking you’re different or thinking that you’re special lead us to do really, really special, important, positive things. It helps us get out of the, out, out of bed in the morning ’cause we don’t realize how, how ugly and stupid we are. And yet you see how disastrous it can be when it gets applied to investing
[00:16:58] Joe: I’m just envisioning the train wreck, Jesse, when you meet with some people and how overconfidence.
[00:17:03] Joe: How do you help people pump the brakes on, “You know what? Maybe this area that serves you well in other areas of your life isn’t gonna serve you as well with your investments”?
[00:17:13] Jesse: I feel like you just missed a golden opportunity there, Joe. I mean, Daniel talked about how people are uglier and stupider than they think they are.
[00:17:19] Jesse: I, I mean, come on. Y- y- I wasn’t
[00:17:21] Joe: gonna do that to you …
[00:17:22] Jesse: come on. Y- you’re s- you’re setting up. Are you
[00:17:23] Joe: saying I am?
[00:17:24] Jesse: No,
[00:17:24] Joe: no, maybe. Am I uglier and stupider?
[00:17:26] Jesse: No. Oh,
[00:17:27] Joe: wait a minute.
[00:17:28] Jesse: Well, it is. It, it is really hard ’cause it’s like sometimes when I’m… when you’re talking to someone and, and you recognize an, you recognize some of these, you know, f- logical fallacies, say, or some of these, these ways that they see the world th- that you know probably just aren’t true, sometimes it can be really hard because, you know, we are, um, we’re ignorant of our own ignorance, or we’re blind to that which we’re blind to.
[00:17:51] Jesse: You know, you can’t see the picture if you’re standing inside the frame. It’s, it’s like how do you explain to somebody that, um… what’s the David Foster Wallace story? This Is Water. You know the story about the fish are swimming in water, and they don’t even know what water is?
[00:18:03] Joe: I don’t. Daniel’s nodding his head.
[00:18:04] Joe: Paula, you know it, too? Am I the only guy that doesn’t know
[00:18:08] Paula: this? I, I don’t know the story precisely, but I, I’ve heard the, a fish doesn’t know it’s swimming in water. It’s, this is just the environment.
[00:18:13] Jesse: It’s correct. That’s the only world that the fish knows. And so I think there is something similar sometimes where it’s like, hey, I, um, w- Danny Kahneman, and I think, Daniel, you probably know this quote better than us, and, uh, Joe, maybe even you referenced it, like, last week on the show, I feel like, where Danny Kahneman is famous for saying despite all of his research about these fallacies and biases and ways in which our own brain tricks ourselves, he’s, like, the most well-researched guy on the topic, and yet he would say his brain was just as fallible to those biases as anyone else’s.
[00:18:45] Jesse: Mm. And so if Danny Kahneman is still falling prey to these biases, how’s the average person off the street, not the average Joe, ’cause we all know Joe’s are above average. Yeah. Uh- But how’s the average person supposed to… So it, it, it can be really hard, and I think sometimes it’s just a matter of repetition and time and education and explaining and, and hoping i- in the long run that we all realize that we, we fall prey to them, and maybe we need to design systems in order to ov- overcome, overcome these biases.
[00:19:14] Joe: And I love the foreshadowing ’cause we’re gonna talk about some of those systems in the second half of today’s show. Let’s go to the second most popular game, Jesse. I’m just gonna wait till it comes back. I can’t tell you the number of times back when I was a financial planner… Well, and I, and I just remember one.
[00:19:27] Joe: I’ve told this story a couple times. I had this gentleman that I was meeting with, and he had this Ford stock that was maybe worth a third of what it had been w- over the years, about a third of his cost basis. I was telling him that the, the competent thing would be to… He still had enough money to track retirement.
[00:19:46] Joe: He just needed to turn that into a broadly diversified portfolio to get there, and he said, “I will do that once it comes back.” And we did everything. We did everything, Jesse. I’m sure you’ve seen this too. I’ll just wait till it comes back. What do you think is going on in your brain when you’re thinking that?
[00:20:03] Jesse: Sometimes I think it’s simply a confusion between the behavior that seems to govern the market as a whole versus the behavior that governs, in this case, like individual stocks. Now, what do I mean by that? Well, so far, at least in, in US history, the stock market as a whole always has come back, right? Stay the course.
[00:20:24] Jesse: John Bogle. Eventually the market comes back. You might have to deal with some pain in the interim, but eventually it comes back, so just stay the course. And that so far has been true for the market as a whole. But that is not true, and never has been true, on an individual stock-by-stock basis. There are plenty of stocks…
[00:20:40] Jesse: You know, there’s this funny saying about, like, how does a stock lose 90%? And the answer is, it loses 80% and then it gets cut in half again, ’cause if you do the math, that’s how you get down to 90. Point being, like, it dropped 80% and someone out there was thinking, “Oh, it’s gonna rebound,” and it doesn’t.
[00:20:55] Joe: Still gonna go.
[00:20:55] Jesse: It still… Sometimes it still goes down. Now, sometimes it does rebound, but with an individual stock, there’s no such guarantee that it always comes back. And, and so I think some of that is, is people get confused by, you know, maybe just taking the, the behavior that governs the whole and thinking that behavior must also govern all of the constituent parts, and that’s just not the case.
[00:21:16] Joe: Daniel, I agree with Jesse, but I also think there’s something to be said for hope, right? This gentleman worked for Ford, so he hopes it’s gonna come back. There’s also something to be said for maybe I’m too close to it, so I know all the good stuff and I wanna discount, count the downsides. What’s going on, do you think, when we say, “I’m gonna wait till it comes back”?
[00:21:35] Dr. Daniel: Yeah. So in the case of this gentleman, if he worked for it, we see that very, very consistently we over-invest in the things that we know, right? This happens at a national level. Americans are over-indexed to American stocks. I lived in Canada for a season. Canada represents 4% of the world economy, and like a very specific 4%, commodity-heavy, things like that.
[00:22:01] Dr. Daniel: The a- Natural
[00:22:01] Joe: resources. Yeah.
[00:22:02] Dr. Daniel: Yeah, exactly. The average Canadian investor, 4% of the world economy, 80% allocation to Canadian stocks. And we see this all over the world. Our brain is 2 to 3% of our body weight, but 20 to 25% of our caloric expenditure in a given day. And so one of the things that we do- Wait
[00:22:25] Joe: a minute.
[00:22:25] Joe: Are you saying… I wanna go back to the first question, which was overconfidence. Is your brain like, “No, I’m way more important than everything else”? Right. So your brain’s telling the rest of the body, “No, I think I deserve it.”
[00:22:36] Dr. Daniel: Yeah, exactly. So we’re always looking for ways to slip that brain into energy saver mode, and one of the things that we do is that we bet on the familiar, right?
[00:22:47] Dr. Daniel: Whether it’s stocks that are easier to pronounce have been shown to be over-invested in, you know, brands that we recognize, the country that we live in. And what’s actually crazy is we end up stacking our risks, because if you work for Ford and then you’re betting on Ford, right? Like, you live in Detroit, you work for Ford, you’re, you’re betting on Ford for your retirement.
[00:23:10] Dr. Daniel: What could
[00:23:10] Joe: possibly go wrong?
[00:23:10] Dr. Daniel: Yeah. It’s like, you know, your real estate, your investments, your employment, all those eggs are in one basket. So, uh, going with what we know is one of the ways that we try and seek safety a- and try and put that brain in energy saver mode, and it’s one of the riskiest things you can do.
[00:23:29] Joe: Does this come back to, Paula, you know, you mentioned on the I’m smarter than average, the overconfidence, that that puts us in betting mode. Do you think I’ll just wait till it comes back because I’m more… because I’m smarter than the average person, and I’m luckier? Like Daniel said earlier, we all think that we’re luckier.
[00:23:45] Joe: Is this- does that play a part in it, too? ‘Cause it’s gonna come back tomorrow if I just leave it alone.
[00:23:49] Paula: I think the I’m luckier than the average person probably plays a role in it, but I think also, uh, loss aversion plays a big role in it. Mm. Because if hypothetically you had not owned that stock, that stock previously had reached some kind of a high, then it had fallen, and then you got into it at its current share price, you wouldn’t necessarily be waiting for its previous peak.
[00:24:15] Paula: You would simply be benchmarking everything to the price at which you got in. But because you previously, or your portfolio previously reflected that high, you feel the pain of that loss.
[00:24:27] Joe: Oh, yeah, yeah. Paula, let’s stick with you ’cause the third one, third and final one, and you’ve heard this one. Uh, we’ve talked about this one over and over, not just on Stacking Benjamins, but on Afford Anything.
[00:24:37] Joe: This time, Paula, is different. You don’t understand. All those other times, those you could go back in history and see how that would mess up, but this time’s not like those.
[00:24:45] Paula: Yeah. You know what’s insidious about this is that any given episode in history is in some way different. You know, it’s, it’s not gonna be a carbon copy- So they’re not
[00:24:55] Joe: wrong
[00:24:56] Paula: of the last time. So I think the, the expression here is history doesn’t, what is it? It doesn’t repeat, it rhymes.
[00:25:03] Joe: Mm.
[00:25:04] Paula: Just because the details of something are different, and it can be very easy to overemphasize, like, well, well, this time it’s a pandemic, and we, you know, we haven’t had a pandemic since 1917, and so…
[00:25:15] Paula: and then we certainly have… You know, like, the details are different absolutely, but the rhyming pattern is still the same.
[00:25:23] Joe: Is that what gets us, Daniel, is that, uh, we get messed up in the details? And so it is different, so I shouldn’t do the thing that was the right thing the last 27 times in a row.
[00:25:33] Dr. Daniel: Yeah.
[00:25:33] Dr. Daniel: Well, and the thing is that humans are big on something called salience, right, which is how vivid or how experientially loud something is in the moment. Paula gives a great example. We can read about the Spanish flu 100 years ago and draw parallels to COVID, but that’s not the same as me being locked in my house with my kids screaming because they’re on Zoom calls all day, and, you know, my…
[00:25:58] Dr. Daniel: I have no toilet paper and whatever, right? Like that, or reading about the Spanish flu seems very remote compared to the viscerality of the thing that I’m going through. So I, I think that’s a, a, a big thing. I also think, you know, it’s a form of that ego, that, that overconfidence we talked about earlier.
[00:26:16] Dr. Daniel: You know, the rules don’t apply to me, or I see something that other people don’t see. People love sort of esoterica and, I mean, this is where conspiracy theories come from. I was
[00:26:29] Joe: just thinking that. Yeah. Yeah, we think we’ve got some information that the public doesn’t have.
[00:26:33] Dr. Daniel: Yeah, it’s like, “You sheep don’t see what I see, but I see something special here,” and, and that makes us feel good.
[00:26:41] Joe: Jesse, Daniel mentioned the toilet paper. I totally forgot that there was a toilet paper shortage back in the day. Were you stealing people’s toilet paper?
[00:26:48] Jesse: Now that is a good transition. See, that’s what the people come for, Joe. Yeah. That’s what they come for. That’s
[00:26:53] Joe: why they’re here. I wasn’t gonna call you ugly, but I would accuse you of stealing toilet paper.
[00:26:57] Jesse: Now, my, my funny… I mean, it’s neither here nor there, but my, my dad was a, a middle school biology teacher, so he has respect for, you know, the way diseases spread. So my dad emailed me, uh, a little after Valentine’s Day. It was, like, the third week of February 2020, and he’s like, “Hey, Jess, uh, the CDC doesn’t like the way that this virus is spreading, so you might wanna, you know, get some beans just in case.”
[00:27:20] Jesse: And I was like, “Okay.” And then sure enough, like, three weeks later, here in the US, things shut down. So I had some toilet paper, Joe. But- ‘Cause
[00:27:27] Joe: you had some beans.
[00:27:28] Jesse: And I had some beans. Um, one and the same. But, uh, anyway, what’s your real question, Joe? I know we’re not here to talk about beans- … and toilet paper.
[00:27:36] Joe: This time is different. This time is
[00:27:38] Jesse: different.
[00:27:39] Joe: Yeah.
[00:27:39] Jesse: Yeah. It is hard. Um, I mean, I, I sit here right now. You know, last week we did the AI episode, and I sit here, and I’m like, man, I, I know on the one hand I’m not supposed to sit here and say this time is different. And I was re-listening to the episode, and, and Paula, I really appreciated, especially upon second listening, some of your explanation about, like, yeah, people were saying the same thing when the internet came around.
[00:28:00] Jesse: Like, all we can say right now is that, sure, the economy will change, but there are changes you can’t even think about right now. Mm. And there are jobs and whole new classes of the economy that you can’t even think about the way they’d be, um, just ’cause that’s what the internet did to us.
[00:28:14] Joe: Mm.
[00:28:15] Jesse: And yet, part of my monkey brain is just sitting here going like, “I don’t know.
[00:28:19] Jesse: This one feels different.” So, um-
[00:28:20] Joe: I agree. I agree. It’s hard. It’s really hard. And, and, uh… and, and Daniel, you weren’t here for that episode, but as the behavior guy on the show, I mean, you know, we published our AI episode on Friday. We recorded it on Monday. Between Monday and Friday, OpenAI had this test agent locked in a room with no access.
[00:28:41] Joe: On its own, it found a security flaw. On its own, it figured out how to get itself on the internet. On its own, it went to a different company and found out the answer of what it was try- I mean, it did all this stuff. And then in the back of my head, Daniel, I, I’m, I’m thinking, “Maybe this time is different.”
[00:28:56] Joe: Maybe it is.
[00:28:57] Dr. Daniel: I think one of the best things that we can understand here is separating the idea that this time is different, which it may truly be, from what does that mean for my portfolio? When the internet came around, was this time different? Yes, my gosh. I mean, think about how many ways we all use the internet every day.
[00:29:18] Dr. Daniel: Does that mean pets.com was a good investment? It does not. You know, has air travel revolutionized our lives? Absolutely. Have airlines been a good investment over time? They have not been. I’m gonna sit here and say AI will be the most revolutionary invention in the history of humankind. I think it is absolutely different in one respect, and I could also safely say that 99.9% of the AI me too companies, uh, that are bandwagon companies jumping on a hot moment, are going to be, you know, obsolete in a few years, and that we will be absolutely neck-deep in AI, and that most of the investment vehicles that tried to take advantage of it will have sort of expired worthless.
[00:30:10] Joe: Look at the number of companies that now call themself AI companies.
[00:30:13] Dr. Daniel: Yeah.
[00:30:13] Joe: You know? Same number of companies that decided that they were going to, uh, call themself internet companies back in the day. Or when podcasting first took off and the number of people that all of a sudden had a podcast. Mm-hmm. You just see it with any of the booms.
[00:30:26] Joe: And by the way, one of my favorite quotes, Daniel, was from, I think from Warren Buffett, who was like, “If I ever tell you I wanna buy stock in an airline,” you know that one?
[00:30:33] Dr. Daniel: The idea.
[00:30:33] Joe: Like something like, “Have me take two aspirin and call me in the morning.”
[00:30:36] Dr. Daniel: Yeah, like, “Take me out back and shoot me,” I think- Right
[00:30:38] Dr. Daniel: was something like that, yeah.
[00:30:39] Joe: Just something- Yeah … crazy. Wait, hey, in the second half of today’s show, Jesse, you previewed this for everybody. We’re gonna talk about what to do about it. Because we all have these biases, we all have these things going on in our head. Mm-hmm. And I love, Daniel, what you said earlier, you know, just because it might be different- might not mean that we do something different with our money.
[00:30:56] Joe: So how do we create this fence between our emotions, that we’re never gonna stop, and the way we manage our financial decisions? We’re gonna talk about that. But in the middle of every episode, we take a break for our year-long trivia competition between our three frequent contributors, Paula Pant, Jesse Cramer, and OG.
[00:31:15] Joe: And, uh, Daniel, today you’re on Team OG, which means good news and bad news. Would you like the good news first or the bad news?
[00:31:22] Dr. Daniel: Al- always bad news first.
[00:31:24] Joe: Well, the bad news is that, and I hate this for our guest, is that you’re gonna have to guess first. But that brings up the good news, is because you’re winning, so you’re on the winning team, which is, of course, what we wanted for you, was to be a winner on the Stacking Benjamins show, duh.
[00:31:40] Joe: And Doug, you’ve got the, uh, you’ve got the score so far. How much is Daniel winning by?
[00:31:46] Doug: Daniel/OG are winning by two points. So, uh, Team OG/Daniel have 10 points, Jesse has eight points, and Paula has five points.
[00:31:57] Joe: So it was within one last week, and Paula was on a tear. And I don’t know, Paula, the last couple weeks…
[00:32:04] Joe: Don’t end the streak, Paula.
[00:32:05] Paula: Reversion to the mean.
[00:32:07] Joe: Don’t, don’t end
[00:32:08] Paula: Reversion to the mean.
[00:32:08] Joe: Nope.
[00:32:09] Dr. Daniel: Joe, the reason- … I’m winning, having just joined, is because I’m smarter- … uh, luckier- … and more prescient about the future.
[00:32:16] Joe: And better looking. We’re about to see how that holds up. Jesse?
[00:32:19] Jesse: Two quick thoughts. First, uh, congratulations.
[00:32:21] Jesse: So OG has more points than the average American has windows in their house. That’s pretty cool. And then the second thought is, well, if we wanna be more cordial to Daniel, how about Daniel plays for Paula so he can go last? And Paula, you can play for me- … so you’ll go second. Oh. And I’ll play for OG, so I can go first.
[00:32:39] Joe: Oh, you’d never throw that one. You would never throw- I cannot allow
[00:32:43] Doug: it.
[00:32:44] Joe: What could go wrong there? Yes. It goes wrong enough already without that, Jesse. Doug, you’ve got the question. What are we talking about this week?
[00:32:51] Doug: Sure do. Hey there, Stackers. I’m Joe’s mom’s neighbor, Doug. On this date in 1715, a Spanish treasure fleet carrying gold, silver, jewels, and cases upon cases of bootleg DVDs sailed straight into a hurricane off the coast of what is now Florida.
[00:33:09] Doug: More than 300 years later, treasure hunters are still recovering coins and artifacts from those shipwrecks, much like Joe’s mom still recovering her sanity after that little ATM incident back in ’09. Oh, wait, but we- So any- Whoa,
[00:33:23] Joe: we don’t talk about that incident.
[00:33:25] Doug: Oh, man, you’re right. I’m… Yeah, you’re right.
[00:33:27] Doug: I’m s- I’m sorry, Joe. That really sets her off. So here is today’s Friday trivia challenge: How many ships were in the legendary Spanish treasure fleet when it left Havana? I’ll be back right after I help grab some cold compresses for Joe’s mom. I mean, she still starts shaking whenever that ATM incident’s brought up, and, and I’m hoping she really didn’t hear me.
[00:33:49] Doug: I mean, I hope she didn’t… I mean, I didn’t mean to talk about the ATM incident out loud again because she hates it when I say ATM in- Oh, my God, I can’t stop doing it. Oh, you know, I just, you know, with that thing, I keep talking ab- I’m sorry.
[00:34:03] Joe: I think you just gotta let it go, man. Let it go- … so Mom can let it go.
[00:34:06] Joe: All right, Daniel, we’ve got the, the Spanish treasure fleet leaving Havana, Georgia, on today’s… Uh, Havana, Georgia? Georgia? Eight
[00:34:16] Doug: lanes through Havana, Georgia.
[00:34:20] Joe: Wow. They raided
[00:34:20] Doug: the strip mall in
[00:34:24] Dr. Daniel: Havana, Georgia. Please deduct a point from Joe’s team for that.
[00:34:26] Joe: Yes. I’m already at negative 10. What do you think?
[00:34:29] Joe: How many?
[00:34:30] Dr. Daniel: Uh, this is light work, Joe. It’s three. The answer is three.
[00:34:33] Joe: The Nina, the Pinta and the Santa Maria. Yeah, the Nina, the Pinta and
[00:34:35] Dr. Daniel: the Santa Maria. Exactly. That’s exactly what it
[00:34:41] Joe: was. Uh, b- may be slightly different.
[00:34:44] Dr. Daniel: Yeah.
[00:34:44] Joe: Jesse, Dr. Daniel says three. Mm-hmm. What do you got?
[00:34:48] Jesse: Well, Dr. Daniel would be proud of me because the reason I snuck in that eight lanes through Havana, Georgia, was to anchor him to a lower number, eight.
[00:34:57] Jesse: No, I’m kidding. Um, that would be pretty funny though. I’m gonna guess higher ’cause somehow I’m just thinking of a fleet of boats. It’s gotta have more. I’m gonna go with, uh, lucky number 22. Lucky number
[00:35:10] Joe: 22. 22. Wow. We’re all over the map, Paula. We got three. We got, uh, 22.
[00:35:20] Paula: Hmm. Okay, so th- three also popped into my head first exactly because of the Nina, Pinta, Santa Maria. Uh, and then I was like, well, maybe it would be a few more than that, so then I was thinking five. But then I was like fleet. Fleet implies… And I was imagining, uh, Game of Thrones and, like, that scene where Khaleesi is crossing the ocean and she’s got all the ships.
[00:35:43] Paula: All
[00:35:43] Joe: those ships.
[00:35:44] Paula: Right? Yeah, exactly. And so then the number that popped into my head was 17. I might just go straight down the middle. 22 plus 3 divided by 2 is, like, 12.5, so, um-
[00:36:00] Joe: Somebody was stuck on a .5 ship. I didn’t wanna be that guy.
[00:36:04] Jesse: Dingy. One… I was gonna say, one, one
[00:36:07] Paula: canoe. So I guess I’ll go 12.
[00:36:13] Joe: We’ve got three, 22, and 12.
[00:36:16] Joe: We are all over the map, people. Is three a fleet? Is 22 nearly enough? Is… What happened to the people on the half of a ship that Paula just got rid of? We’ll find out in just a moment. We’ll be right back. All right, Daniel, you kicked us off with three, and both Paula and Jesse went, “Nay, nay, it’s gotta be more than that.”
[00:36:39] Joe: You feeling confident?
[00:36:41] Dr. Daniel: Um, yes, but only for the stupid reasons we’ve talked about earlier in the show.
[00:36:49] Dr. Daniel: None of it warranted. None of it’s warranted.
[00:36:50] Joe: Because you’re smarter and better looking- Right … and… Right. Yeah. Right. Yes. Jesse, you’re up there at the top at 22. If, if Paul is right and it is a packed harbor of ships, well, then, you know, you’ve got 100 on your side.
[00:37:04] Jesse: I’ve got the upside. I mean, how many thousands of ships were in the Spanish Armada?
[00:37:07] Jesse: I don’t know.
[00:37:08] Joe: Spanish treasure fleet. Paula, 12.
[00:37:13] Paula: I guess I’ve painted myself into kind of a narrow bucket, but, uh, I mean- You truly did … yeah. But you know what? A dozen is, uh, divisible by two and three and four and six, so, you know, I’ve got some stuff going for me.
[00:37:27] Joe: As I always say, Paula, you can’t be wrong 83 out of the 87 times you’ve tried.
[00:37:33] Joe: You can’t be. Doug, who’s gonna win this thing?
[00:37:40] Doug: Hey there, Stackers. I’m retired Spanish admiral and guy who’s not sure why he’s been told not to captain anything larger than a shopping cart, Joe’s mom’s neighbor, Doug. Before the break, I asked our contributors this question: How many ships made up the 1715 Spanish treasure fleet when it left Havana, Georgia?
[00:37:58] Doug: And here’s the amazing part. Almost all of the ships were driven ashore by a hurricane off Florida’s coast. Thousands of gold and silver coins, emeralds, and other treasures were scattered across the ocean floor, and more than 300 years later, treasure hunters are still finding artifacts from the wrecks, while Joe’s mom is still discovering new bank fees from that you-know-what adventure.
[00:38:21] Doug: Wink, wink. Some things just take a while. Anyway, how many ships were in that treasure armada? We got some pretty creative guesses, but the correct answer is Nine more than what Daniel guessed, 10 fewer than what Jesse guessed, and exactly zero more or less than what Paula guessed, because the answer is 12 ships.
[00:38:43] Doug: Paula gets like 100 points for being directly on the answer. And now speaking of people who know how to navigate life storms a little better than an 18th century Spanish captain, here’s Joe.
[00:38:55] Joe: Easy. Wow.
[00:38:57] Paula: Slightly better.
[00:38:58] Joe: Paula Pant, what are you
[00:39:00] Paula: doing? Insanity. Insanity. Who was Paula
[00:39:03] Jesse: playing for? Were you playing for yourself, Paula?
[00:39:08] Jesse: Did we settle that? Gosh. That’s gotta be worth five points.
[00:39:10] Paula: Well, I, you know, really the answer was wisdom of the crowds, ’cause I just took your two answers and averaged them.
[00:39:15] Joe: You know how, Daniel, an eclipse happens only once every s- Or better yet, like Haley’s Comet, only, like- … you gotta be outside on the right night and it has to be clear.
[00:39:25] Dr. Daniel: Yeah.
[00:39:26] Joe: You were here for that. Like Paula Pant won, and that
[00:39:28] Dr. Daniel: just- There’s behavioral lessons. Paula just named it, the wisdom of the crowds. We see that again and again, and we had some interesting anchoring. We had some representativeness heuristic. I was absolutely thinking of the Nina, Pinta, and the- … which I love that Joe called me on.
[00:39:48] Joe: I didn’t even see the, “Oh, God no.” Yeah. Look at your eye- Yeah … when I called that out. Well, that’s, that was a fun one, Doug. Thanks for the trivia. Let’s get back to this. Joe, I just- Yes, Doug.
[00:39:57] Doug: I, I need to go on record here before we continue on. I’ve just texted OG that we’re awarding Paula five extra points for getting it exactly right.
[00:40:06] Doug: So if you see me, like in a cloud of smoke, my phone has exploded- … because of OG in a rage texting me.
[00:40:16] Joe: Yeah. I was gonna… A- and I don’t even wanna see the basement Facebook Group on Monday- … if, if that happens. I mean, the discussion Jesse Kramer started with windows last week, oh, my goodness. I don’t know if you saw it, Paula, but we had about 187 people telling us how many windows they had in their house.
[00:40:32] Joe: Who
[00:40:32] Paula: would’ve guessed? Wow.
[00:40:34] Joe: Which Daniel is great. You know how we’re spreading, like, financial literacy all the, all the time? Mm-hmm. Never any discussions at Stacking Benjamins around that, but how many windows are in your house? That’s what our stackers really, uh, come to roost on. Let’s come to roost on this- If our brains are wired this way, are we doomed, right?
[00:40:53] Joe: Is there any fightback? And I’m hoping, Paula, the answer is no. So let’s talk about what we can do about it. If we know we’re fighting against our brain, Jesse mentioned some systems. What’s a, what’s a good system to get between you and your emotional, you know, dysfunction?
[00:41:09] Paula: Mm. Uh, there… So there are two things that I really like.
[00:41:12] Paula: One is having a pre-written set of rules, or like a… I know you call it an investor policy statement. I’ve, uh, recently I’ve started calling it a, a code of conduct. Having a pre-written code of conduct that says, “These are the parameters under which I actually make changes. These are the guardrails.” So that’s one thing.
[00:41:32] Paula: But then the other is having a threshold above which you need a financial advisor or a financial coach, or like some third party, somebody who is not your spouse or partner, some outside independent third party to sign off on that decision.
[00:41:48] Joe: How effective, Daniel, I’m sure you’ve studied this, you’ve studied all this stuff, is having that person that you bounce ideas off of?
[00:41:55] Joe: I- i- is that worth… You know, in, in these personal finance forums you see, “Get rid of the fees,” right? “Get rid of these people.” How effective are the people? Are they worth the fee?
[00:42:05] Dr. Daniel: Yeah, so there’s really three legs to this stool if you ask me, and I, I call it the three Es. The first is education, right? You need to know, uh, enough about this to be dangerous.
[00:42:17] Dr. Daniel: You need to listen to shows like this. Education is the first piece, but education is actually a really weak predictor of behavior. My favorite stat about this is that nurses smoke cigarettes at, like, double the rate of the general population. That’s
[00:42:31] Joe: incredible.
[00:42:33] Dr. Daniel: And, and you know, there’s not, there’s not a nurse you could talk to that would tell you that smoking cigarettes is good for your health, right?
[00:42:38] Dr. Daniel: They, they have the education, they lack the behavior. So education necessary, but not sufficient. The second one of these is environment, right? This is everything from the automation that Paula’s talking about to just having the right mix of assets to make sure the ride is one that you can take. And then the third is encouragement.
[00:42:57] Dr. Daniel: People who work with financial advisors do better on average in a very meaningful way. They’re more prepared for an emergency. They’re happier. They have better marriages on average. This is one of those things between price is what you pay and value is what you get. Most advisors are very good. I would say that most are worth the fee.
[00:43:18] Dr. Daniel: Not all. There are certainly some bad actors. Money is one of these things that touches every part of our lives, and if you can take that off your plate and you can get the right person in your corner, it tends to raise a lot of boats.
[00:43:33] Joe: Jesse, I wasn’t gonna ask you that. Jesse, is it worth hiring you? Well,
[00:43:38] Jesse: not always.
[00:43:39] Joe: I would’ve loved to have Jesse go, “Yeah, no, I don’t think so.” Not always. What I wanna ask you about, though, is the other side of that, which is Paula mentioned the investor policy statement. Yeah. The investment policy statement. How do you feel about that?
[00:43:49] Jesse: I’m a big fan. I’m a big fan of getting things down in writing, and it doesn’t have to be anything…
[00:43:55] Jesse: It doesn’t have to be highfalutin’, it doesn’t have to be complicated, it doesn’t have to be wordy. It’s just, um, it’s that, um, going back to a behavioral idea, it’s that commitment consistency principle where if y- if you commit to something, and, and sometimes it means saying out, out loud or sometimes maybe it means writing it down.
[00:44:13] Jesse: My understanding, and Daniel, I’ll look to you to correct me, but this is, I think, from Robert Cialdini’s book Influence, is once you commit to something, most of us, maybe not all of us, but most of us have a hard time thinking of ourselves as a liar. So once we commit to something, we want to be consistent so that we can refer back to our previous selves and say, “Yeah, my behavior is consistent with the way I used to be, that thing I used to say, or that thing I wrote down.”
[00:44:37] Jesse: And so once you write down this simple investor policy statement, code of conduct, Ten Commandments, whatever you wanna call it, uh, you are likely to follow up and be more consistent with those, with what you previously wrote down But it, it’s funny, Joe, when you, when you mentioned the idea of hiring me.
[00:44:52] Jesse: I’ve got a couple of really good buddies who are CFP, financial planners, yada, yada, yada, and they’ve recently hired their own financial planner, another trusted person in the industry. Sure. Because even they recognize, they’re like, “You know what? I might be a financial planner, but sometimes my spouse, you know, she doesn’t see eye to eye to me on these things, and we need a neutral third party.”
[00:45:12] Jesse: Or I come in with certain biases about the way I think money ought to work, and I want a trusted third, neutral third party to be that outside source. You know, again, you can’t see the picture if you’re inside the frame. So it, it- I think it’s very interesting and, and I find it actually very compelling the fact that there’s some financial planners who I really, really respect, and they’ve hired their own financial planner to help them be that, that third party.
[00:45:37] Joe: For the vast majority of my life, I’ve had a separate outside financial planner, and not just for me, but also because Cheryl’s heard my crap forever. And if I say, “Let’s do something”, she’s like, “Yeah, whatever.” But if my financial planner says it and hasn’t talked to me ahead of time and just goes, “Hey, let’s do that.”
[00:45:56] Joe: And, and I also like having somebody to argue with, frankly, you know? Having somebody… I mean, in a good way. They’re on my team. I know that they want what’s best for me, and if they see a different path to get there, how great is that? Daniel, what’s another way that we can get between us and that lizard brain?
[00:46:13] Dr. Daniel: Anything that you can do to make your biases work for you is a good thing. What do I mean by that? My son is a martial artist, and one of the ideas from martial arts that I really love is the, the circular theory of self-defense. So if Joe is attacking me, as he sometimes does, and he’s throwing a punch, and he’s throwing a punch, I’m not gonna- This happens
[00:46:39] Joe: regularly.
[00:46:40] Dr. Daniel: Yeah. Any given Tuesday. If he’s throwing a punch at me, I don’t wanna block the full brunt of that punch. I wanna roll with that resistance and let his exertion work against him. It’s like Jesse talked about with the Danny Kahneman thing, right? No, if, if Nobel Prize winners can’t be introspective enough to get past their own ego, what hope do any of, of us have?
[00:47:05] Dr. Daniel: But- If you talk about the automation that Paula talked about, right? It rests on the reality that human beings are lazy, forgetful, and status quo prone. It’s the reason I have an HBO account that I forget about every month and just keep paying and never using, right? I can take that same tendency to be lazy, stupid, and status quo prone, and if I automate my retirement savings, then I can make my laziness and my status quo proneness work for me, right?
[00:47:40] Dr. Daniel: There’s other research. You know, we’ve talked about being emotional and how that can wreck a plan. There’s also research that shows that people who are, are tying their investments to something personal, like a picture of their children, save more and are less likely to panic, right? That’s totally irrational, but I will absolutely do it, right?
[00:48:03] Dr. Daniel: I’ll take that emotion and make it work for me as surely as it can work against me. So anything you can do to take your biased brain and make it work for you, I think is the best thing you can do.
[00:48:16] Joe: It, it’s funny you mentioned tying it to something emotional. I would try to ensure back when I was a planner, Daniel, that we would get really…
[00:48:25] Joe: You know, I’d find out how emotional people were about their goals, and I would make- Mm-hmm … the goals, what if we make it, what if we don’t make it, and then tie money to the goals. So this is why bucketing, even though, you know, the scientist nerds in our group will go, “Well, bucketing’s really inefficient,” it’s inefficient until your brain wrecks your plan.
[00:48:43] Joe: But man, in so many cases, people didn’t even reference, Daniel, the index fund we were in. They would say, “How’s my vacation house fund doing? How’s my retirement fund doing? How’s my whatever fund doing?” Like, it was always the goal versus what we were invested in
[00:48:59] Dr. Daniel: Yeah. H- haters will always poo-poo things like bucketing because money’s fungible, and that’s true, but it has nothing to do with the way that we think about it.
[00:49:10] Dr. Daniel: We think about money in buckets. People with a safety bucket have been shown to be 10 times less likely to panic in a choppy market, right? Money is fungible. Maybe that six months of income is not optimally allocated from a spreadsheet perspective, but we aren’t spreadsheets. We’re people. We’re flawed, and we think that way.
[00:49:34] Dr. Daniel: And so I think it’s better to be honest about who you are and what you’re dealing with and own a little bit of suboptimality to, uh, avoid against a, a boatload of suboptimality.
[00:49:48] Joe: Like the, the greater good, yeah.
[00:49:50] Dr. Daniel: Yeah.
[00:49:50] Joe: All right. Let’s finish this with a game. I wanna play one game to make sure that we’ve got this and to kinda help our stackers internalize it.
[00:49:57] Joe: We’re gonna call this game Is My Brain Lying to Me? And Doug, I got good news for you. You don’t have to be the one in the seat like you are on Monday and Wednesday.
[00:50:05] Doug: You’re kidding me. This is awesome.
[00:50:07] Joe: Isn’t this
[00:50:08] Doug: great? Oh my God, I was terrified of this moment. Now I’m loving it.
[00:50:12] Joe: Paula, is your brain lying to you?
[00:50:14] Joe: And the answers are gonna be true, false, or it depends. So Paula, your brain says, Paula Pant’s brain goes, “I should wait and make this move when the market settles down.” Is your brain lying to you?
[00:50:26] Paula: Yes. True.
[00:50:28] Joe: How come?
[00:50:29] Paula: Uh, because time in the market is more important than timing the market. Assuming that you are contributing consistently, you don’t wait for the market to settle down.
[00:50:40] Paula: You ignore what the market is currently doing and just invest periodically or withdraw periodically, but you do it at fixed intervals rather than based on what’s happening.
[00:50:51] Joe: We do, we do this live on, on YouTube, and, uh, Stacker Drew said he votes that, uh, Doug ask the questions. We w- we… I didn’t even think.
[00:50:59] Joe: W- we should’ve planned that ahead of time, Doug. All right. Daniel, your brain lying to you, true, false, it depends. Your brain goes, “Ah, I missed this rally.” You get a, you get a sum of money. You’re about to invest it. You’re like, “Ah, I missed the rally, so I shouldn’t do it.”
[00:51:15] Dr. Daniel: Yeah. Uh, your, your brain is lying to you.
[00:51:17] Dr. Daniel: The, the answer is your brain is lying to you on all of these, but
[00:51:24] Dr. Daniel: Your, your brain- Spoiler.
[00:51:25] Joe: You gotta say spoiler …
[00:51:26] Dr. Daniel: yeah, just to ruin the game for everybody. Yeah. Um, no, your, your, your brain is lying to you. There’s a concept from Howard Marks that I refer back to a lot, which is called the perversity of risk, which is this very sort of cruel thing that when it feels like the market is safest, it’s actually most dangerous, and the reverse is also true.
[00:51:47] Dr. Daniel: And so the way that we are wired, uh, with respect to how we feel about a rally or, or a depression or something like that is, is 180 degrees off. So it’s, it- it’s hard to get that right at an intuitive level.
[00:52:02] Joe: Just because you said that, Daniel, I’m putting one in here where your brain’s not lying to you.
[00:52:05] Joe: Just Just because. Uh, Jesse. Jesse, your brain says, “I’ve already lost too much to sell my Six Flags.” Hypothetically.
[00:52:18] Jesse: Uh, I see. I see. Like Six Flags, the s- yeah, you’re, you’re referring to the earlier story. Uh, your brain is lying to you because, well, like we talked about earlier, there’s no guarantee that Six Flags will come up, will come back up.
[00:52:33] Jesse: And, uh, I think in those cases, as hard as it might be, um, you essentially have to forget the past and make a decision in the present moment with the information you have on a forward-looking basis. So your brain is lying to you about the way that… S- Six Flags is not like a rollercoaster at Six Flags. It does not always come back around.
[00:52:52] Jesse: Sometimes, um, you, you just fall off the rollercoaster.
[00:52:55] Doug: More like the hot dogs and elephant ears that you buy at Six Flags, which do come back around. That
[00:53:03] Joe: is, that is a
[00:53:04] Jesse: truth. What is an elephant ear?
[00:53:05] Doug: That’s the
[00:53:08] Jesse: fried dough- Oh, fried dough. Got it … the big, huge thing of fried dough- Got it. Got it … with the powdered
[00:53:10] Dr. Daniel: sugar
[00:53:10] Jesse: on it.
[00:53:10] Jesse: I, I
[00:53:10] Joe: just haven’t
[00:53:11] Jesse: heard that, um, I’d
[00:53:12] Dr. Daniel: never heard- What’s an-
[00:53:12] Jesse: Like a funnel cake? … that noun before.
[00:53:14] Dr. Daniel: Joe, are we, are we inviting uncultured people on the show?
[00:53:19] Joe: What’s an elephant ear? I know. What are we doing here? If we don’t know what an elephant ear… Paula, you know what an elephant ear is.
[00:53:23] Paula: I, I assume that it was a funnel cake when he said it.
[00:53:26] Joe: Funnel cake.
[00:53:27] Paula: Yeah.
[00:53:27] Joe: You can tell which zip code Paula grew up in. She calls it a funnel cake. That’s
[00:53:31] Doug: the highfalutin. She probably had
[00:53:32] Joe: aspic- Wow, wow …
[00:53:34] Doug: as a palate cleanser during her nightly meals.
[00:53:37] Joe: It isn’t mustard, it’s Grey Poupon. I mean, come on. Right. Funnel cake. Wow. Uh, uh, who are we on? Oh, Paula, speaking of you.
[00:53:46] Paula: Mm-hmm.
[00:53:47] Joe: Here we go. Paula, this is the same thought you have every week with trivia: I’m due for a winner.
[00:53:55] Paula: I have to say with trivia, because the questions are designed to be essentially won randomly, it would make sense that over a long period of time I would a- accrue about one-third of the wins.
[00:54:07] Joe: You would think.
[00:54:08] Paula: My, my losing streak has, it has gone on so long it is statistically improbable.
[00:54:14] Joe: You’re developing a boomerang. You’re developing a boomerang.
[00:54:19] Paula: So what was the question? It was, uh, I’m due for a win?
[00:54:22] Joe: I’m due for a winner.
[00:54:24] Paula: Brain is lying to you because it assumes … All right. If you flip a coin 100 times and it’s a fair coin, and all 100 times it lands on heads, you might think that time number 101 is either, depending on who- your orientation, more likely to land on heads in order to maintain the pattern, or you might think, “I’m due for a winner, so it’s now time to land on tails.”
[00:54:54] Paula: But what’s actually true is that flip number 101 is independent of all previous 100 flips. It, you’re not more likely to land heads just because it continues the pattern, nor are you more likely to land tails because you’re due for a winner, right? Like, that f- 101st flip is totally independent of what has preceded it.
[00:55:15] Paula: For that reason, your brain is lying to you.
[00:55:18] Joe: Last one, Daniel. If I just hold this stock fund long enough
[00:55:23] Dr. Daniel: That’s it? If I just hold this-
[00:55:25] Joe: That’s it …
[00:55:25] Dr. Daniel: if I just hold this long-
[00:55:26] Joe: If I just hold it long enough. Things might be down now, but if I hold it long enough, it’s gonna be great.
[00:55:32] Dr. Daniel: Well, I think it depends. I, I think Jesse’s point earlier, I mean, if it’s Six Flags, if you’ve bought Six Flags because you’re a Travis Kelce fanboy, I think that’s not guaranteed.
[00:55:42] Dr. Daniel: I think if you bought the S&P,
[00:55:44] Joe: uh, it- But you think it probably would go up though, probably would go up …
[00:55:47] Dr. Daniel: I think if you bought the S&P, it’s a pretty safe bet on a long enough timeline, but things can stay goofy for a long time though. That’s what history tells us.
[00:55:56] Joe: Okay, so the closest I could get to your brain not lying to you is it depends, but we got close.
[00:56:00] Joe: We got close.
[00:56:00] Dr. Daniel: Yeah, well, what if your brain says, “Joe, you’re a kind and a special person, and you’re worthy of love”? Is your brain lying to you, Joe?
[00:56:08] Joe: My brain is wicked smart. Wicked, wicked, wicked smart. I feel like
[00:56:11] Doug: this whole episode was really just a vehicle to give Joe stock advice on his Six Flags investment.
[00:56:18] Doug: I feel
[00:56:18] opener: like that.
[00:56:19] Joe: Which, Doug, you think is a great idea, don’t you? Don’t you think that stock- It’s
[00:56:22] Doug: as good as my Rivian investment,
[00:56:24] Joe: yeah. Wasn’t it great? Rivian was good for a while until it wasn’t. All right, thanks to all of you for contributing, and I think we helped a lot of Stackers get better with their money and realize that, you know what?
[00:56:36] Joe: Our brain’s never gonna slow down. Chattering and putting that system or systems in place, automation, investment policy statement, maybe other people between us and our money, some great strategies to make sure that we don’t act on that advice. I love, Daniel, what you said especially, which was just because it’s a good thing doesn’t mean, or a bad thing, or it is different doesn’t mean it’s a great investment.
[00:57:01] Joe: It doesn’t mean I should change my investment strategy. Uh, Shane, by the way, hanging out with us on, on YouTube, and by the way, thanks to everybody hanging out with us on YouTube, says he was just about to talk about your Rivian investment, Doug. So even, even Stacker Shane. By the way, if you wanna hang out with us while we make the show, that’s Mondays.
[00:57:17] Joe: I love pretending it’s Friday on a Monday. Uh, so Monday afternoons at 3:30 Eastern Time generally-ish, we’re on between 3:30 and 3:45. All right. That’s gonna do it for today, except this: we gotta find out what all you brilliant people are doing. Daniel, let’s start with you. Thanks for hanging out with us, man.
[00:57:34] Joe: Good seeing you again.
[00:57:36] Dr. Daniel: Yeah, you too.
[00:57:37] Joe: So the book comes out again on your… I love how you gotta manufacture, like, th- this, uh, celebrations for your birthday. Are we at that age now where we just gotta come up with our own birthday cake and, uh, ice cream?
[00:57:49] Dr. Daniel: But when the royalty check hits on the birthday, it’s like a little, it’s a little more-
[00:57:52] Dr. Daniel: icing on the cake, brother. That’s what we, that’s what we’re going for. I mean, and, uh, a, a little more icing, let’s be honest.
[00:57:59] Joe: Yeah, so October 16th. I didn’t write it down. It’s October 16th.
[00:58:02] Dr. Daniel: October 16th, yep.
[00:58:03] Joe: Yes, and the book is called?
[00:58:05] Dr. Daniel: The Behavioral Investor.
[00:58:07] Joe: And can we pre-order it?
[00:58:09] Dr. Daniel: Well, it’s, uh, this is a second edition, so if you want the old one you can get it now.
[00:58:13] Dr. Daniel: But yes, you can pre-order the new one as well.
[00:58:15] Joe: Yeah. Who wants the o- what’s the difference between the first edition and second edition?
[00:58:19] Dr. Daniel: So there’s updates to all the chapters, but there’s a brand-new chapter on how practically to apply this to a specific asset allocation that optimizes anxiety-adjusted returns.
[00:58:31] Dr. Daniel: You know, kind of like we talked about today, a lot of times we’re trying to optimize spreadsheet returns. Uh, I’m trying to optimize returns for real people with real brains who make poor decisions from time to time.
[00:58:42] Joe: I bet it was fun going back and just reading through it.
[00:58:45] Dr. Daniel: Ah, it, it’s been a blast. Uh, writing books is the, uh, least lucrative and most fun thing I do.
[00:58:53] Dr. Daniel: Uh, it’s my favorite part of my career.
[00:58:55] Joe: I think you and I first met around version one. Mm-hmm. Around the first time, so we gotta have you back again this fall to- Love it … dive deep again, ’cause it’s been quite a while. Paula Pant, what’s going on at the Afford Anything podcast, my friend?
[00:59:09] Paula: Ooh, on the Afford Anything podcast we, uh, recently had Cody Berman on the show.
[00:59:14] Joe: Cody.
[00:59:14] Paula: Cody, yeah. He retired in his 20s. Uh, retired meaning, uh, hit financial independence in his 20s. He did so by hustling a lot. He basically tried every idea that was out there. He tried them all, and then stuck with the ones that worked, and kept his cost of living ridiculously low while making a bunch of money as an online entrepreneur.
[00:59:35] Paula: So he talks about various paths that a person can pursue if they want to reach financial independence. He discusses this concept of net worth FI versus cash flow FI. Um, basically judging the size of your portfolio versus the actual amount of, like, residual income that’s coming in every month. So that is on the Afford Anything podcast.
[00:59:57] Joe: It’s amazing that a guy as young as Cody is can talk so, um, with so much authority on so many different things, ’cause he has tried. Yeah. So is, he’s like a human guinea pig. Yeah,
[01:00:05] Paula: yeah.
[01:00:06] Joe: Yeah, he’s just an awesome guy, and he’s on the Afford Anything show. Awesome podcast. Speaking of awesome podcast, how about that Personal Finance for Long-Term Investors, Mr.
[01:00:15] Joe: Kramer? What’s going on there?
[01:00:16] Jesse: Well, uh, July’s shaping up I think to be our best month ever, so that’s, that’s kinda cool. And, um, this past week, depending on when this episode comes out, we released an episode-
[01:00:27] Joe: Best, b- best ever means best content, right? Means like y- you-
[01:00:31] Jesse: All of the above … produced the best stuff- All of the above
[01:00:32] Jesse: we’ve ever made It’s just, you know- Yes … things are just, oh, you know, I’m a lucky guy, what can I say? Lucky, lucky, lucky. Things are good. We’ve released an episode recently, What Your Brokerage Statement Doesn’t Tell You, and then, uh, next week we have an episode, we have another Ask Me Anything episode coming out.
[01:00:47] Joe: Awesome. And people actually do, they ask you anything.
[01:00:50] Jesse: They do. I- usually it’s financial planning related, but I will say when- Oh, bummer … episode 150 comes out, it’s gonna be all personal questions. Oh. So we’re, we’re mixing it up once every 150 episodes.
[01:00:59] Joe: Oh, my goodness, 150 coming.
[01:01:01] Doug: I can finally ask you boxers or briefs?
[01:01:03] Jesse: You can. You can, Doug.
[01:01:05] Doug: All right.
[01:01:05] Jesse: My answer won’t change, though.
[01:01:08] Joe: What, is it, is it, that I, I just, I, I need to know, is it all the above? Neither? Like
[01:01:13] Jesse: what- Well, it’s like- Where you going? … remember that show this is a deep cut. Remember that show- … from Netflix like 10 years ago about that guy in northern Wisconsin who was embroiled in a very contentious, unfortunate crime?
[01:01:26] Jesse: And part of the issue with the crime was one of the victims of the crime claimed about how she ripped his underwear, and upon further investigation, the accused man didn’t own any underwear. And it was part of the reason why he was acquitted. Anyway, that’s what, it made me think of that.
[01:01:41] Joe: I don’t know that.
[01:01:42] Joe: I don’t- And uh- … but I wanna go watch it now. And Daniel’s like, “My God, what are we still doing here? Let’s
[01:01:47] Dr. Daniel: go home.” Yeah, I would’ve thought, I would’ve thought he would’ve known about the elephant ears given the taste in TV. Like I- I know … it just seems like, it just seems like you’re one of my people, Jesse.
[01:01:55] Dr. Daniel: I just- Binge-watch
[01:01:55] Jesse: Netflix and eat elephant ears.
[01:01:58] Dr. Daniel: Yeah, I mean, it just seems like you- you’re, you’re my guy. You’re my people.
[01:02:02] Joe: That’s on the Personal Finance for Long-Term Investors podcast, also where the finest podcasts are found. All right, everybody, that’s gonna do it for today except this, Doug, what, uh, what should be on our to-do list after today’s show?
[01:02:16] Doug: Well, Joe, first, take some advice from His Royal Highness, 3rd Earl of Hanover, Dr. Daniel Crosby Esquire, don’t let one bad decision take you off your game plan. Stay confident, and pay your T-Mobile bill. Those guys play hardball. Second, wanna protect yourself from yourself? Well, just like our VP of HR, Paula Pant, says, “Obey your investing code of conduct.”
[01:02:43] Doug: Then give yourself three demerits and put yourself on a performance improvement plan if you violate it. But the big lesson When Joe’s mom says the, quote, “Spanish treasure fleet is here,” remember she’s talking about the ladies pulling in for her poker night. You do not wanna see that look on her face, by the way.
[01:03:02] Doug: She’s maniacal. Thanks to Dr. Daniel Crosby for joining us today. You can pre-order his upcoming book, The Behavioral Investor, wherever books are sold. We’ll also include links in our show notes at stackingbenjamins.com. Thanks to Paula Pant for hanging out with us. You’ll find her fabulous podcast, Afford Anything, wherever you listen to the finest podcasts.
[01:03:27] Doug: And finally, thanks to Mr. Jesse Kramer. Mr.? Mr. Jesse, okay. Mis- We’re going with it. Mr. Jesse Kramer for joining us today. You’ll find his filthy podcast, Personal Finance for Long-Term Investors, wherever you go for podcasts. Think for a minute, Stacker, where are you now? Here’s what’s cool. You can find Jesse and Paula in that same spot.
[01:03:49] Doug: It’s super easy. This show is the property of SP Podcast, LLC, copyright 2026, and is created by Joe Saul-Sehy. You’ll find out about our awesome team at stackingbenjamins.com, along with the show notes and how you can find us on YouTube and all the usual social media spots. Come say hello. And oh yeah, before I go, not only should you not take advice from these nerds, don’t take advice from people you don’t know.
[01:04:18] Doug: This show is for entertainment purposes only. Before making any financial decisions, speak with a real financial advisor. I’m Joe’s mom’s neighbor, Doug, and we’ll see you next time back here at the Stacking Benjamins show
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