Neuroeconomics: The Brain Behind Your Bank Balance with Kevin Parton
Have you ever pondered the intricate relationship between money and our emotions? Today, I dive into this complex interplay with Kevin Parton, a Partner and Senior Advisor at Vela Wealth. With a rich background that spans beyond just crunching numbers, Kevin offers a unique perspective on how our financial behaviors are deeply intertwined with our personal histories, beliefs, and emotions.
In this episode, we journey through Kevin’s own experiences, from his humble beginnings to the transformative moments that reshaped his understanding of wealth. We discuss the psychology behind financial decisions, the impact of our childhood beliefs on our adult financial behaviors, and the often-underestimated role of behavior in determining financial outcomes. Kevin’s insights challenge the conventional wisdom about money, urging us to look beyond the surface and explore the deeper emotional and psychological factors at play. Join us as we challenge conventional money wisdom, diving into the emotional depths and unpacking the baggage we all hold about true wealth and well-being.
And as with everything I share on the podcast, this is what I believe based on what I’ve read and researched. But please don’t take my word for it. Keep what sticks, discard the rest and for goodness sakes, go out and test drive it!
What You’ll Learn In Today’s Episode:
Behavioural financial management vs technical financial management.
The cultural relationship with money.
The common behavioural motivators that we may not be aware of.
How to overcome shame around money.
A common fear most people have regarding money.
The psychology behind gamifying wealth building.
Why behavior is a bigger determinant of outcome than bank balance.
How to change your relationship with money.
Ideas Worth Sharing:
“To gain wealth means to question one’s morality.” – Kevin Parton
“Nothing has been more valuable to me in this profession than understanding human behaviour.” – Kevin Parton
“People will pursue goals that don’t actually mean something to them.” – Kevin Parton
“If you can speak to someone and understand them, then the financial knowledge starts to become valuable as well.” – Kevin Parton
“It’s only when you pursue what you want that you’re happy.” – Kevin Parton
“Let’s change what you’re working towards, and change how you’re getting there, and you’ll be happy now and happy when you arrive.” – Kevin Parton
“If you don’t have the behaviour to manage money, that doesn’t change when you have it. In fact the inability to manage money is amplified.” – Kevin Parton
Resources:
Kevin Parton: LinkedIn
The Psychology of Money: Timeless lessons on wealth, greed, and happiness by Morgan Housel
Connect with me: Instagram
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Speaker 1 0:01
Hey, it's Christina. Thanks for joining us, and welcome to the Squeeze.
Speaker 2 0:12
But nothing has been more valuable to me in this profession than understanding human behavior, I So
Speaker 1 0:28
today on the show I'll be speaking with Kevin Parton. Kevin is a certified financial planner with additional CLU, RRC, and EPC designations, and he works with Vela Wealth. I've known Kevin for a number of years now, primarily as our financial planner, but during that time, what I valued most were the conversations we've had that have strayed outside the usual framework, such as how the investment funds are looking, how the stock market is doing, whether I'm ever going to be able to retire. In fact, I've noticed that we spent a fair chunk of our time on what could look like tangents or digressions or segues, but have in fact paid bigger metaphorical dividends anyway to me personally, and that's because those conversations strayed into the realm of psychology and our relationship to money, and what I'd call certainly the juicier aspects. Money is just one of those issues guaranteed to pack a lot of punch, you know, like religion and politics. So I thought inviting Kevin onto the show seemed like a good, good opportunity to unpack a little bit of the money baggage we all carry around. So a little bit about Kevin, his origin story is under statedly middle class, roof over his head, a couple of trips to Disneyland, and having to wear his sister's hand-me-downs at 21 All of Kevin's assumptions about money were up-ended when he got an admin job with a friend's father, who was a financial planner, and he described a couple of light bulb moments to me when money and income alone he discovered doesn't guarantee continued financial success. And I think if you've ever run across any lottery winner stories where they've returned to their, you know, humble pre-lottery beginnings a few years down the track. Then you know what he's talking about. What does predict outcomes? He discovered was behavior, and that's the psychology that we'll get into a little bit more during our conversation. But Kevin also had to contend with a bit of what he called the money, sort of as the root of all evil belief that I think many of us can relate to, and perhaps why we may feel more suspicious around wealthy people. Anyway, we'll unpack that a bit more. All in all, Kevin and I had opportunity to explore the topic of money from multiple vantage points and through multiple lenses, and I hope you enjoy our conversation. Welcome, Kevin.
Speaker 2 2:38
Welcome. Thank you for having me today.
Speaker 1 2:41
I'm happier, I'm happy you agreed. So, Kevin, you and I have known each other for a few years. In one sense, it's easy to think about you as kind of like my money guy, and I kind of said that facetiously before, but obviously you're so much more than that. So, because I want to unpack your story and the story of our relationship to money a little bit with you today, so would you be willing to tell me a bit about your earliest memories about money and why, as an adult, you decided you wanted to organize other people's money?
Speaker 2 3:10
Yeah, absolutely. I really like sharing this story because it humanizes wealth and wealth managers, but yeah, I recall growing up in a household, which was, I think, as we would describe, middle class. I'm one of four kids. My mom took a decade plus off of working to be at home. My dad was the household breadwinner, and so I never grew up really wanting for things or realizing things were missing, but some months we had more craft dinner than others, and you, those were good months. As a grown-up, you realize, oh, that's because craft dinner is cheap, and that's what that's what you could feed a family of six. But a comment that came up regularly, and I reflect back on this a lot, is if I asked for something, the response was, why not ask for four, because to ask for one thing was crazy enough, why not be really crazy and ask for four of them, and that was the relationship to money, is just money is this thing you can't get, we don't have it, we don't understand it, but don't be crazy and ask for things, and that very much influenced sort of an underlying belief system I have, even subconscious about money, and another one, and it's sort of one step to the other. When you think about it, in the context of money is impossible to grab, to reconcile with that fact, it might be a little bit easier if you to say I'm not actually trying for money, and so, why might you not be trying to gain wealth? Well, because to gain wealth means to question one's morality. It's people who have money have clearly done things that are bad, maybe they've stepped on people, they're cold, they're businesslike, and so wealth and good morals don't go hand in hand, so I. The opposite is non-wealth and good morals do go hand in hand, so these are kind of some conflicting, deep-rooted belief system that I were ingrained in me, but, but contradict with, because we, money was this, this taboo topic, as any child or teenager might attest, if you tell me I can't have something, it's all I want. So, I've had this sort of pursuit of wealth as a result of it not being available and consciously unavailable, but there's a deep-rooted feeling associated with the acquisition of wealth as morally bad, which I think brings to a head the significance of behavioral finance over strategic and technical finance is even somebody who's been in this line of work for 13 years, I'm constantly working through the emotional components of what it means to manage wealth, to have wealth, to be in a profession where I talk about wealth, where growing up someone like me was the bad guy, and so, realizing down to the core of me that what I do is good and can be good, and to be okay with that is has been a journey, but yeah, so my most recent memories of money were the belief systems that existed around money having money and what money can do for you, and those are things that most people maybe don't even understand or reconcile with as they venture into being an adult and pursuing goals.
Speaker 1 6:32
Yeah, well, and as I was listening to you, I couldn't help reflecting on my own childhood. I don't know about you, but I was raised in a Christian household, and there was a whole lot of scripture, and a whole lot of sort of talking about, you know, the evils of money, and there's a way in which I can see as an adult that I have some unexamined core beliefs around that, like as I think about, you know, when we encounter people in the media who have a ton of money, I think I might have very quick sort of almost knee-jerk judgment that there's something nefarious, there's something, there's probably a little bit of controversy around how they got their money, and that's not necessarily going to bear out. I mean, I think there's a lot of people who've done a lot of legitimate things to come up with a lot of money. So, did you, were you raised in a religious household? Just out of curiosity,
Speaker 2 7:24
no, it wasn't a religious household, but it may have been bred of my grandparents on my mom's side were immigrants from the Netherlands, and they left the Netherlands post World War Two, so immigrants growing up in relative poverty with a number of kids, and so maybe being the children of immigrants in a country where many people weren't immigrants, the opportunities financially to get ahead weren't the same, and, and that, and that could have been what it was, is if you grew up in an environment where you know your parents are struggling because they're immigrants, and, and so you don't have a foundation to build off of, like I said, I think self-awareness is obvious when you're aware and completely foreign when you're not.
Speaker 3 8:06
If
Speaker 2 8:07
you, if you assume the role of maybe victim, I got dealt a bad hand, rightly or wrongly, then it's much easier to say, well, it's because I don't have money because it's bad to have money, or I don't have money because.. so I think there may have been something in there, is the opportunities weren't great, that the advantage wasn't the same, and instead of saying, well, so what, let's figure out how to make the most of it, it's well, these are the reasons why, and that may have been it, without, of course, being a psychology major,
Speaker 1 8:36
yeah, well, I mean, I think we can speak in some general terms about the cultural impacts, because then I'm reflecting on my dad growing up in Denmark, which was occupied during the war, and he talked about, you know, he had memories of Nazi soldiers coming around to the farm and just helping themselves to basically everything, and so, you know, my dad and his siblings got in that, in, well, they were probably taught to, or told to hide things, and so, as an adult, I grew up with a dad who used to hide food, and so I think that the just the notion that you could have things taken from you at any time, I can actually see that now in my dad's relationship to money. He was very secretive about it, and that idea that easy come, easy go. So I think I think actually a cultural overview is useful. I do want to go in a little bit more of a neuroscience direction, and some other ways as well, but I think a cultural stopover. I think that's crucial to unpacking our individual relationships. So, you've been at this for a while, you've probably gleaned all sorts of anecdotal insights into human nature. In fact, I'm not sure if you knew this, but the father of coaching, Thomas Leonard, was actually a financial planner in the US. He conceived of coaching because he realized that most of his conversations with his clients were actually focused not just on investing, but on their whole lives, like what mattered to them, their values, how they were motivated, their families, all of. Stuff, so he found himself in all these conversations that went beyond just money. So, can you relate to that as a financial planner, and like, have you also learned a lot about human nature in your line of work?
Speaker 2 10:13
Yeah, absolutely. I think being in the, in the industry for 14 years, have more letters next to my name that are that are in my name from the context of learning financial strategy, but nothing has been more valuable to me in this profession than understanding human behavior. I know I say frequently, I coach people to make good financial decisions and counsel them out of making bad ones, because that's what I spend most of my doing, my time doing coaching and counseling. Unfortunately, that's not common knowledge, and a lot of people pursue academic accreditation from from a technical component, but knowing what someone should be doing and why they're behaving a certain way and getting them to do the right things for them takes more than just showing them facts. I think, as we can all attest to the fact that over the last number of years understanding factual knowledge and emotional reaction to that knowledge can differ quite, quite, quite a lot. So, yeah, I totally agree. I think pursuing knowledge in human behavior in the art of counseling, that's that's something that's incredibly valuable to this, and that's what makes these relationships so important is you can replace someone who's got a technical skill with somebody else who's got a technical skill, but it's, do I feel like I trust somebody, do I feel like they understand me, and like I said, that the more I understand how someone's lived experience, both personally and what they were taught growing up impact how they behave. The more I can either help them become self-aware of that or change how I deliver a message, so that it resonates with them. You know, you talked about the idea of how growing up in during the war can impact how you react to money if I know someone has a propensity to hold on to a certain amount of cash because earlier in their life they didn't have much of it, and I start proposing that, well, holding on to that much cash isn't the best financial decision, they may acknowledge, sure, you're right, but now I'm trying to take something from that is emotionally meaningful, and they're not going to do the thing that's best for them, and something I've learned is that the most logical or rational outcome for someone isn't always the one that's going to work best for them, because if they won't do it at all, what was the point of saying it? So, I completely recoaching and counseling are at the forefront of what we do, and if you can speak to someone and understand them, then the financial knowledge starts to become valuable as well.
Speaker 1 12:43
Yeah, well, I can see how so much of your success is going to rest on the ability to first of all create that trust and safety with folks, because people are quirky, right? And then you bring in something like money, like money, politics, religion, those are the big button pushers, and so I can imagine from your vantage point, like I'm just thinking about myself and my husband, and like how we show up as your clients, and like you know what we've given, given away in terms of our quirks around money, and and now that I think about it, you know, I can imagine you're seeing a really big variety of things in your clients, so what are some of the.. I don't know if you're comfortable with this, but like quirks in terms of the trends, like what are.. what are some of the behavioral motivators you're seeing that we might not actually imagine exist, but are maybe more common than we think.
Speaker 2 13:41
Well, I think there's, there's sort of two levels I find, and this is where how you ask questions can become very, very important or crucial. And sometimes asking the same question two or three times to get people to think about the answer is there's a lot of things people think they want because we're told what we want.
Speaker 3 13:59
I want a bigger
Speaker 2 14:00
house, I want a nicer car, I want to travel, I want a vacation property, and something I've recognized is two things: one is people will pursue goals that don't actually mean something to them, and thus the ability to commit to achieving that goal is very, very difficult, and a lot of times they say I don't have the willpower, I can't, I can't figure out why I'm not willing to do those things without reflecting on what are you, what's your north star. So that's what I see a lot, is people just, I want to retire early. Well, when you think about it, if you like what you do, which many people like it more than they think, especially when they don't have to do it for money, retiring early isn't what they want to do, but it's what they think they want to do. So that's what I find is the first thing is just acknowledging that people will say they want things because they haven't really thought about what it is that they want, and the other thing is that they spend so much time pursuing what they think they want that they don't take the time to wonder, which is why you hear oftentimes people who have money say once you have enough money you. Realize that that's not what you were after, but it's easy to say that when you have enough money, when you don't have all the things you think you want, you're like, of course, you would, you're rich, but I do want all of these things, so those are some of the quirks, and then, like I said, that it's navigating that behavior, it's well, you said you want this, but you're not doing the things you want, How do I communicate that to you in a way, and sometimes people will use spending money as a coping mechanism for not doing the things they want, so this is where it can become this weird spiral. Is if you're pursuing a goal that you don't actually want, and in order to achieve that goal, you have to work a job or have an imbalanced life to earn enough money towards that, then you got this unmet need. I'm not fulfilled with what I'm doing, and I'm not fulfilled with the goal I'm pursuing, but I'm not acknowledging that. So, a coping mechanism could be to treat yourself. So, now I'm gonna go spend money on things that make me feel better temporarily, but now we're impeding the process of getting the thing I wanted, so I have to keep working harder at the job I don't like to get there. So, it's just this like feedback loop that's not great, so finding people in that feedback loop and helping them understand that, like, let's really focus on what you want, because it's only when you pursue what you want that you're happy. It's only when you take ownership of that, that the thing you're doing to pursue that goal makes you happy. You're no longer miserable in your job, because the thing that you're working for is actually worth working for, and then you're not using spending money or maybe behavior that's contradictory to your goal to cope for things, so that's that's again where it just becomes this journey of psychology, because people can very much believe they want what they say they want.
Speaker 1 16:34
Yeah,
Speaker 2 16:34
and use tools that they have to do that. I know how to work, but if it's not exactly what you want to do, then you can be aggressively pursuing a direction, and much to your best effort, beginning in your own way, and none of the time actually reflect on, is this what I wanted to be doing in the first place.
Speaker 1 16:53
So you're speaking to what I would call implicit motivation, like when I work with my university students, and we hit this module, and coincidentally enough, that's what we're doing on Monday, motivation, and there's the way this way that I really want to just flesh out what you said about, you know, seeking these goals that we don't actually want, and so, you know, I think about the popular culture around us, and as long as I can remember, there's been this big symbol of $1 you know, just hanging out there in the air, like this is what you should want, this is what you should want, and I mean, it was pretty early on in my life when I recognized that money was a symbol, it wasn't a thing in and of itself, and so then I got to have a bit more of a dynamic, complex relationship with it, but I look around and I see so many people still chasing money. In fact, probably I would say well over a third, maybe maybe closer to a half of my, my class this semester. They're doing their business undergrad, and they are in the accounting stream, and when I read their responses and their little bits and pieces of homework, I see such a common theme that is so over simplistic that it's a bit shocking to me. I just want to make more money, I got to get in with one of the big three, so I can make money, and as you said, retire early, so that whole piece around, like, so here you are with your clients, and they're telling you they want this thing, and then in order to get that thing, they're having to do this other thing, which they don't particularly enjoy, but they don't have the implicit motivation, as you say, that like the willpower to actually do the thing and get to the thing, the thing doesn't even exist. So, my question is this for you, and I don't, I don't know where it will go, but, like you said, it's this careful balance of being able to almost imagine you holding up a mirror, you're holding up a beer, and you're going, "Hey, look, look what you're doing, dumb, dumb. I obviously, you're not going to say that. How do you get around what I would call loosely like people shame, because I think money does have a lot of shame to it. How do you mirror back, and like, what's your, what's your technique for sort of sidestepping that that shame piece that can come up for people around money,
Speaker 2 19:07
and this is again nothing is more beneficial in life, I think, or in this industry than experience having these conversations. I've have clients who are doctors, and to me one of the most nerve-wracking things is to go into a doctor, and I guess actually drop your trousers. That's an embarrassing and vulnerable moment. Like, how often do I do this? And then when I went into a meeting with doctors, and they're like, the most nerve-wracking thing we do in our life is show you our balance sheet, I realized, oh my goodness, it's all subjective, because they do it every day, so I have to bring that approach to the conversation. Is I can be very cut and dry about it. Hey, let's just have a conversation, tell me what's going on in your world, but if I don't understand the vulnerability required to let somebody in. In and and tread lightly, then it creates this wall of shame, and so I think telling those stories is helpful, letting people understand a question I get more often than most is, How am I doing? How do I compare to other people, because everybody wants to know how they're doing, and is there sort of a relativity about it? And I mean, oftentimes I tell people, if you're working with a financial advisor, you've got a leg up, that's a good start. You've taken this stride to ask that question, and that in and of itself is a vulnerable moment. But yeah, everyone wants to know how they're doing, and how do I do compared to other people, because we live in this world where comparing oneself to other people is oftentimes how we determine our value, and I want to say this, not from a position of I know more, I am actively in the process of trying to figure out how I define my value in the absence of certain things, my pursuit of status and success and and wealth are also me trying to use external factors to then prove to myself in the world that I am worthy, so I think these are just things that I know I can, I can look, I can help someone else look in the mirror far easier than looking in the mirror myself, but having these conversations does help me reflect on the fact that, okay, like, you know, I could probably use some of this humble pie as well. It's just, it's understanding, it really is. It's letting people understand that contextually they're okay, and taking the focus away from, am I doing good enough, do I have enough? When is enough enough? When am I allowed to feel good about myself? And, and turning that question on, say, if no one was looking at you, if it didn't matter,
Speaker 1 21:51
yeah,
Speaker 2 21:52
what would you feel was enough?
Speaker 4 21:54
Yeah,
Speaker 2 21:54
and that's a question that most people don't stop to think, because they're too concerned with what other people think is enough.
Speaker 1 22:00
Yeah, yeah, because when it comes to, you know, keeping up with the Joneses, we're talking about money for the most part, we're talking about money.
Speaker 2 22:06
Yeah, and it is a very easy way of measuring, quote unquote, success. I do like that we're endeavoring into an era where success now is healthier balance. It's not in many cases, work 14 to 16 hours a day, sacrifice yourself for the success of your professional career, and there's enough research out there to indicate that there's the law of diminishing returns, and you will actually harm yourself physically and mentally, and thus actually not be doing the thing you think you want, but if the tool we have to get the thing we want is, I just work harder, and then the thing we want isn't actually the thing we want, then, then, yeah, we're using the tool we know, we're pursuing the goal we think we want, and this is where people get stuck often, is I feel like I'm just running on a hamster wheel, yeah, so let's, let's, let's change what you're working towards, and change how you're getting there, and you'll be happy now and happy when you arrive,
Speaker 1 23:02
yeah. It's that reinforcing loop that you referenced before. And then just now, when you're talking about, you know, I almost, what I heard in what you were saying was like a bit of a millennial blowback. So, you've got like our boomers who are just like, you know, we're going to retire, oh wait, no, we're going to start a whole new job, like, and work ethic comes out of that generation, and the one prior, and then you've got millennials going, "Hell no, no. I mean it when I say, you know, balance. And I've had nine different jobs by the time I'm 25 which I'm Gen X. I am not a boomer. I like to say I'm not a boomer, since all the millennials use that as an insult these days. There's a way in which, yeah, there's like a reckoning going on around that balance piece, and I appreciate your, you know, correlating that that balance piece with, you know, it's just, it's just inviting everybody to just kind of take a pause and say, like, what am I doing all this for? So I retire. I don't know if you remember those commercials, you, you may, may not, it was, I think it was freedom, 55 you probably do, yeah. And so then it set this idea into the cultural zeitgeist that that's what we should achieve, and I'm going to be financially free at 55 but then I can say I've also done a lot of work around retirement and done some credentialing around some coaching practices specific to that, and training, and that's oftentimes, as I think most people know, is like a real big crisis of identity when we retire, and a lot of people just have no flippin clue what to do with that time. So, all this to say, what I'm hearing from you is that your experience, and I think you're probably a pretty intuitive, observant guy. Anyway, I get that from you, and always have. That you're so much of what you're actually doing, managing money, is managing people.
Speaker 2 24:50
Yeah, exactly. It's helping people try and understand themselves and giving them space to do so in sort of a non-judgmental environment.
Speaker 1 24:59
Yeah, that's. The key, so then what do you think? What would you say is a fear that is common to most people when it comes to money, whether they have money or not. What do you think is the fear? The
Speaker 2 25:09
biggest fear is not having enough, not being worthy, not having enough to do the things they want, and I think that's that's the motivator. Again, if you're motivated by fear, you do the thing that you think you need to do, so I want to sort of go back, and this is where kind of this reckoning I think is coming. As you talked about the millennials who now aren't willing to do things 20 3040 years ago, if you worked really hard at a job, then the goals you were, you're out to get - early retirement, buy a home, travel lots - those were very attainable with that tool. Work hard, make money, get these things over the last 20 3040 years. Those same goals have become harder and harder to attain with that same tool. And so I think what we're seeing is people going into the workforce saying, well, I've been told I want a house. I've been told I want to retire early, and I believed it, but like the money I'm making and the cost of living are so far apart that this is either unattainable or the length of time and the work it'll take to do that, I'm not willing to do that. So that's kind of what we're seeing this, and I don't think it's a, it's a enlightened change, it's just a fact of the matter of like when you make things so incredibly difficult for someone to do them, then they throw in the towel and say, okay, I'm going to find another way to live, because this isn't worth it anymore,
Speaker 1 26:35
that's a great point, so do wealthy people fear losing their money, I well,
Speaker 2 26:43
wealthy is subjective, I think. One can define themselves as wealthy if they're content with what they have, because they're, they have enough money to be happy. I think those who aren't content with what they have maybe would still describe themselves as wealthy, but they most certainly have a far greater fear, and, and I also find the difference is, how do they get that wealth? And this is sort of a big thing. If you have earned the wealth yourself, then there is this sort of understanding that I can earn it again, and age plays a role in that as well. If you, I've seen this with inheritances, windfalls, settlements, lotteries, when you haven't earned the money yourself, the fear of losing it is very, very strong, and oftentimes leads to making not great decisions, and the likelihood of running out of that money is, is, is high. I mean, statistically speaking, almost half, if not more, of people who win the lottery end up filing for bankruptcy or burning through that money within a number of years, and it's because if you haven't done, if you don't have the behavior to manage money, then that doesn't change when you have it, in fact, the inability to manage money is amplified by the fact that now you have a bunch of money that you didn't have. I remember a joke by Chris Rock one time, and he said the best something about having money just amplifies your problems, and he made the joke. He's like, when I was broke and I had $20 all I could spend at the bar was $20 I could only get into so much trouble. He's like, but then I had a million dollars. You can get a lot more trouble with a million bucks. Sometimes poverty protects people from themselves, and it was a joke, but it's true. Don't know how to spend money, coming into a bunch of money just allows you to do more of the behavior that kept you from from having money in the first place, so I think, yeah, it's, it's fears exist for different people for different reasons, but I think wealth, as, as, as a term or an amount of money on its own has different impacts to different people, age matters, pre-existing experiences of behavior, how you earned that money. If you earned that money, those really impact one's experience with that. And then just general contentment. I've never been more admiring of someone who does not care what they're supposed to want, and is completely happy with what they have, because that's that's the ultimate goal, is is wealth should be to buy freedom, freedom to do with your time what you want, and freedom to not worry about other people, and that can come at a variety of different stages in life, relatively like based on what you, what you think and feel, right? So,
Speaker 1 29:42
right,
Speaker 2 29:42
that's why I focus a lot on goals, like what you want, because if you chase what other people want you to want, or what you think you want, you're going to spend a lot of time being unhappy in pursuit, and then arrive at the destination, and not feel the sense of gratification you hoped.
Speaker 1 29:56
Yeah, and I appreciate your discernment there, and. Sort of teasing that apart, because obviously there's tons of nuance to it, and I knew that I was sort of lobbing you a bit of a, you know, an easy, but it's a subjective question, but I think what I was going for was really the popular culture notion of wealthy, the yachts, the private jets, the, you know, in my times, in my various careers, I've had exposure to some of that world, especially when I was in corporate aviation, and so that's the thing, and the reason I was asking it, it's a little bit of a give, I guess, in some regard that it's really easy to make up that that is actually the answer to freedom, the yacht, etc. etc. and so by asking the question, you know, do wealthy people fear losing their money? It is almost a rhetorical question. I think I think the fact is what you've just said is that nobody is immune, and also nobody is prevented from feeling fulfilled and satisfied, regardless of what the number is in their bank account, so to speak. So I'll also want to come back to something you made a really great point about the difference between people who earn the money and the people who get it through other ways, like inheritance or lottery, or probably other ways as well. And one of my husband's favorite lines comes from the movie The Descendants with George Clooney, and that's all about a family with a big inheritance and a lot of land in Hawaii, and he says the main character says about money and about giving your money to your kids, he says give them just enough to do something, but not enough to do nothing, and so there's something in there about the incredible difference between earning it and being given it, and I've seen this because I have people in my radar who are in my orbit who have inherited, and I myself, I mean, little bits and pieces, but I've earned it, and I can see such a variety in the way that we think of money, the way we spend money. In fact, there just is. I think it's such an important point to consider, because earning it, and I'm gonna, I'll focus on myself. I can't generalize hugely, but I think what you might be pointing to is that people who earn their money and then feel, you know, the sense of freedom and the fact that they could lose it, the resilience piece, the faith in themselves, I think, is the part that says, well, I can, I can rebuild that, and so it's not this sort of easy come, easy go that I think factors so heavily in what I would call our lottery, our lottery mentality, right, like all my problems will go away for $5 right? So this actually, I want to take us in a bit of a direction, that different direction, because I've done a bit of superficial research into this study of neuro economics. I'm not even convinced or positive that isn't agreed about term by the experts. Is that a term you know,
Speaker 2 32:57
neuro economics? Yeah, did that be the psychology of money is the title of a book that I think everybody should read, but yeah, I think there's more and more of understanding that human behavior is is very much the biggest influence in outcome is becoming more commonly known, so neuro economics, I think, would be a very accurate statement to describe the most important component of economic outcome.
Speaker 1 33:28
So, I'm going to go into that a little bit. So, I first got really interested with neuroscience through Peter Block's work, and that was all really geared towards neuro neuroscience and leadership, because that was what I was doing, and so I was reading about the research of a guy named Brian Knudson, and he was a Stanford researcher who uses the fMRI, and so he's observing, you know, what's happening in our neural circuitry, as you know, as his subjects were investing, I guess he had some sort of games that they were doing online that were simulating investment, and he was able to identify what parts of our brains were switching on and off as we were investing, which, you know, I found quite fascinating. I'm not exactly sure how comprehensive his studies are, and whether his research has been peer reviewed or replicated, but what caught my attention was the difference between what he referenced as the thrill of the chase or what some would refer to as possibly greed, and then the actual reward itself, so in other words, that our anticipation of the reward produced higher levels of brain activation than actually receiving it, and then the other part of his research showed that our anticipation was strong enough to shove aside our logical evaluation of the likelihood of something being a good move, so an example, and we've talked about is the lottery ticket, so when the lottery itself goes up, so the payout starts to increase, then. And ticket sales go up, and I think anyone can understand what's going on here. In fact, I think there's a psychologist, Daniel Kahneman, he was quoted as saying, "We judge the probability of an event by the ease with which we can call it to mind. So we hear 5 billion, and it's easier to imagine winning 5 billion than it is to imagine the almost impossible odds, right? Like in this article, they said there's a greater likelihood of Ozzy Osbourne being made the next pope
Speaker 2 35:30
than you winning the lottery, so that we can visualize the payout easier than we can confront the logic that is actually going to show us we're not going to win, so super lengthy segue into a topic, into the topic of greed, but I was curious. Do you ever see this play out where the anticipation of the payout is what's the motivating factor, much more so than the actual attainment of what the thing is someone's chasing? Does that make sense? First, it does. Yeah, almost, almost every day. I mean, finish reading a book that sort of spoke to this, and I again try my best to recall the science in the book here, but dopamine is released in your body not as a reward system for the achievement of a goal, but a reward system to continue pursuing something you think is worth pursuing. So, that's where the pursuit of something actually creates this internal reaction that is positive for you. But oftentimes, if you pursue something and then you're not generally content with the outcome, or the pursuit isn't enjoyable, then what you're doing is, again, you're creating this biological feedback loop where your brain remembers that pursuing things and achieving the goal isn't great, so it can become very, very fun to pursue things, but, but not necessarily to attain them, and this is again where it comes back to sort of teaching yourself to enjoy the process, because if the outcome isn't as enjoyable as you think it is, you should probably enjoy the process, or helping people recognize that if you're waiting for some eventual day with which you're happy, you're probably going to be disappointed when you get there, especially if there's an immense amount of struggle, but we see this as well with people's want to be in control of things, I mean, the advent of self-directed stock accounts and gamifying the industry. None of this happens, for the most part, to the benefit of the average person. It's appealing to a part of their brain that wants to be in control of things, that wants to pursue things, and wants to say, hey, if I click this button, if I make enough trades, I'll achieve some result, but the statistics are overwhelmingly against that being beneficial, and so it's pandering to our biology. Give me a dopamine release, but if the outcome that you want is I want to be financially independent, the tactic you're using isn't likely to get you that result, so again, it's understanding our own biology to recognize that what we want in the short term, what our brain tells us is good, isn't necessarily actually good for us. It's, it's, you're just, you're triggering something in your body.
Speaker 1 38:19
Hey, you're listening to the Squeeze, and if you like what you're hearing, there's a whole world of citrus couching to discover. We've got an online leadership program, it's called Citrus You, and it features those three key tools you need to be a better leader, well, to be a better human. We also have a number of mini learning bundles that you can get into, and there's plenty more. If you're interested, you can follow us on Instagram, or check out our website@www.citruscoaching.com and the show resumes now. Well, and I think, like, when you think about, like, the way our brain is working, and how it's activating, you know, and that's based on our, you know, very, very old evolutionary brain development, and as well as the conditions that, like, I always say this, I come back to this all the time, because it helps me make sense of what we're talking about, that we have Fred Flintstones biology in George Jetsons' world, and so there's this myth, right? And so I mean, you could, you could probably argue, and I don't know, neuro-economic people would perhaps challenge me on this, but it's like, okay, so it makes sense that the pursuit is going to activate my brain, because I think that would be a play, a big role in survival from our, our evolutionary origins, whereas now the way our world is set up, and I love the way you describe gamifying the industry, because that makes perfect sense. It's like, you know, it's almost like, like, and it's not almost like it is that we have to see it that way, because our brains are wired that way. So then let's bring it back to. Okay, it doesn't work. It doesn't work when we do that, because the science seems to be indicating, as well, that our evaluation of the risk is like not very good. We nudge that out of the way for the thrill of the chase. So then you know, shy of somebody actually being able to create a partnership with someone like yourself, who's a financial planner, that they're just out there, I mean, they look so helpless to me in my mind, like with all the, you know, the cultural pressures and images to attain wealth, but then we've got our own brain biology that's saying, you know, moral imperative, like what's to be done about this, Kevin? How does the ordinary person get a hold of this? Stop chasing their tail with this one.
Speaker 2 40:48
I'll speak specifically to finance, and as much as technology has created many complications in gamify in the industry, it's also solved many problems. The access to decent investments that you don't have to be sophisticated to have, like there are platforms where it'll ask you what your goal is, what your comfort level is, and then it'll build a low fee portfolio for you to put money in, so that part is now sort of being done by technology, then acknowledging the fact that behavior is a bigger determinant of outcome than anything else, so that's what people should be doing, is saying, How do I pick things that motivate me, save money, or invest money, and hopefully I earn enough income to be able to do that, and let things be. That would be the best way to get ahead. Now, now that's a hard thing to do. Let things
Speaker 1 41:53
be. Yeah, people want
Speaker 2 41:54
to control what's going on, and in the absence of having, and this is the coaching and counseling part, there ups and downs in the world? There are ups and downs in the market, and so it's easier said than done. I spend far more time in a down market reminding people of cycles, and I spend equally as much time in an up market reminding them that I have nothing to do with what the market's doing. So, as much as they want to thank me for it, they're just in that cycle, and being there to answer that, and I think maybe a middle ground might be sort of having some of these reminders available to you, and recognizing that when the market goes down, I'm likely to think this way, but that's not to my advantage, or listen to anything Warren Buffett says, he's the biggest advocate of time is valuable more than anything. Do the same right things. Don't be so concerned about the specific investment, more so than the broader portfolio, which can be done. So, I think those are things. Is just acknowledging the simplicity,
Speaker 1 42:56
really
Speaker 2 42:57
from a technical component, and what needs to be done to get further ahead, and the complexity of our brains in trying to to solve for biological need, but, but by by catering to that, we may actually be getting the outcome we don't want.
Speaker 1 43:13
Yeah, I love it. It's like Warren Buffett, it's very unsexy, right? That approach, it's not got all the bells and whistles,
Speaker 2 43:21
yeah, because I mean, and that's the thing, is what you've, what you see on TV. I had a great example of this with watching poker on TV. When you watch poker on TV, you're always watching the hands being played, so it feels like in real life every hand I should play, and then you get people who play poker, and they get bored, because if you play it well, you fold a lot. Well, that's no fun. And so it's the same thing if you watch news or TV or you listen to stories, you're always hearing about the people who bought something and it blew up by 1000 times. You're hearing about the big stories and you don't hear about all the other ones. So there's this understanding that, like, if I just try this enough times, if I buy and sell enough, it'll eventually work out. And again, it's not playing the odds. It's if you hear about 1% of the time that's successful and not 99% of the time, but you hear about that 1% of the time all the time, then there's this disillusionment that it's it's far more attainable through that method than possible. So, coming to terms with reality, figuring out where to find that real data, and like you said, and recognizing that oftentimes managing your behavior and doing the unsexy thing is what's going to get you what you ultimately want at the end of the day, and patience often is key.
Speaker 1 44:37
Yeah, so it's almost like I'm hearing it as calm down, just calm down, chill out. You're not, you're not falling behind if you're not, you know, on the latest sort of whatever self-investment system or whatever. Calm down, take a pill, chill out. So, let's jump bigger picture here for a second. So, individual relationships to money are one thing, but it's a. A massive leap to envisioning the economics of something like a country. In fact, the whole reason we're having this conversation is because of something you told me about the Canadian government being strategic in their messaging in order to nudge Canadians in a particular direction with their spending habits, rather than coming right out and just saying do xyz. So, first, can you can you share that example again, and then second, what's going on here? Why can't we just hear it straight up?
Speaker 2 45:27
Yeah, so I feel like at each part of this conversation there needs to be a disclaimer that I'm not a psychologist and I'm not an economist, but I've done a lot of reading, and so what I was speaking to was the fact that in our current system, the tool that is used to manage inflation is raising or lowering rates, and sometimes that tool can work, and other times it's like using a hammer to open a door. If you only have one tool, there can be a lot of collateral damage. Well, in recent years, and called the last 20 years, the Federal Reserve, or Bank of Canada, or central banks have recognized that they can have a separate tool, not just they used to just raise or lower rates without announcing it or talking about it. You would just all of a sudden there'd be like a news alert, this is what happened. Now we spend so much time talking about it, and they recognize that there's a public forum that they can say things, and that what they say influences behavior. So, what is actually happening is when the Bank of Canada makes an announcement, they recognize that raising rates is not good for most people, but it's the tool they have. So, if they tell people we would not like to raise rates anymore, or we're going to try and bring them down, people then hear that and think, oh, rates are going to come down, I can go and spend more money because I don't have to worry about high interest rates. Well, spending more money drives up inflation, so they'd end up being liars. We said we were going to bring rates down. We told you that you spent more money, inflation went up. Now we've got to raise rates. They seem like seemed like liars, and they're raising rates. If they do the opposite, if they say, "Look, things aren't looking good, we're going to raise rates, you better buckle up. Well, then people buckle up. If they do that, then inflation comes down. Well, now the Bank of Canada can be a liar, quote unquote, because the information has changed, but now they lower rates, and that's their kind of tools. They recognize if we tell people what the worst outcome would be for them, i.e. more expensive debt payments, they will behave in accordance with that, and if they behave in accordance with that, then the outcome we actually want to have happen, which is inflation coming down, will, and we can lower rates. So it's this sort of cat and mouse game of saying, well, we realize we can get people to do things based on what we say, and if they do that, then we'll get the outcome we want. And so it's another tool they can use, which is helpful, but it can be very confusing, as I hear people all the time, so well, the Bank of Canada keeps saying they're going to do things, and then they do the opposite, they're just a bunch of liars. A, with new information comes new decisions, but they may be saying things to you to get you to behave a certain way, and that's part of the game.
Speaker 1 48:15
So, sounds like reverse psychology to me
Speaker 2 48:17
a little bit. Yeah,
Speaker 1 48:18
yeah. So, in a way, I guess the point, or the connection to what we've been talking about to this example, is that we've been talking about the individual within the realm of money, and this is just extrapolating out to the like a government and the relationship to all of us and our money, so it sounds like it's equally, as you know, fraught with these little kind of tweaks of our personality, and so therefore we have to be reverse psychology too, in order to get the outcomes we want. So, just our kicks, I think everybody knows a little bit about the financial crisis of 2008 when the housing market collapsed, stock market crashed. I don't want to go into all the granular details about subprime mortgages and the like, because people can just watch the movie, The Big Short, margin call, they wonder, understand it better. I think those are both actually really good movies from an entertainment standpoint. What I'm interested in, however, is what it is that creates the conditions for not just one or two people, but literally hundreds of people that would have to collude on something that was so precarious. I mean, obviously this whole situation wasn't something that could be easily predicted in advance and sort of steered before it went over the cliff. So, I guess I'm curious, and I know you know you're very clear in saying I'm not a psychologist, but you also have a front row seat to people's relationship with money, so what is it? Do you think that's that's happening there in the in the psychology of those folks that are colluding to take this very, very risky step when it comes to something like what happened in 2008 or leading up to 2008
Speaker 2 49:58
I think there's a. Few different angles to look at it. I try and view people through the lens of everyone, at least in their own mind, is doing what they feel is right. So I think that the term colluding, at least in the context I'm thinking of it, it suggests sort of a nefarious intent. I think maybe when some of these products were created initially, maybe it was this is a cool new thing, or I can see the benefit, but not down the road see the potential downside. So it may not have have been originated from the perspective of let's blow up the economy. It may have been let's create this tool, and we can think of many, many things that have been created in financial services as products or in the world that seemed great at the time, and then when perverted became not so great. What then happens is, as more people start to participate in a concept, less often less research is done. There's this assumed research was done, so if there's a reputable name attached to something, if a bank offers something, if a person with a good reputation offers something, the next person to get on board does less of looking at the information objectively and more leverages that someone else has bought in there, and so that can grow over time as you can have more and more people buying into a concept, an idea, participating in something because of the people who did it before them, and the thought is, well, they wouldn't be attached to it if it wasn't good, so that's enough for me. And now I'm attached to it, and the more people who are attached to it, the more they start to identify with, well, if I'm wrong, I must be bad. So being right supersedes objective truth, and I think that's that we talk about the big short, you know, the character of Michael Burry in the movie played by Christian Bale. He saw the objective truth, which is this can't continue to happen, but there were so many people bought into it going a certain way that he was fighting this uphold battle, he was the heretic, he was the person who was crazy and betting against things that couldn't go down, and there were so many people reliant on on that being true, that he was the heretic, that they actually were able to sort of manipulate the market enough to keep going, and as if you remember from the movie, he had spent a whole bunch of money making these short bets on the market, and it's a very expensive thing to do, and he almost went bankrupt because he had predicted the crash to happen well in advance of when it did, and that was kind of the crazy part, is he thought everything indicates that this should be falling apart, but for some reason it's not, and so there was enough momentum in the direction of we can't all be wrong, that it managed to sort of perpetuate it far enough down. So I think that's what it can start with a good idea, and then people get on board, and that's when it stops being we're objectively looking at whether this is right or wrong, we're looking at I'm involved because I trust the people who are involved, or if someone calls me wrong, now I'm defending my ego, and we stop looking at the objective truth and start looking at defending ourselves. We see this in law all the time, where people are in jail for wrongful convictions, but the lawyers refuse to look at the truth, because now you're questioning their credibility. And so, I think this - these are the cases, as well as when ego gets involved, or you want to be right more so than then find out the truth, then we can have things run rampant, and without adequate regulation or rules in place to prevent from this happening, bad things can happen.
Speaker 1 53:35
I like the distinction with the initiation, perhaps being like an innovation that's kind of a cool new thing. There's a sort of like a, an objective innocence about that, that I like, because I think, as we talked about at the beginning of this conversation, for me, I think I probably have some built-in assumptions and blind spots around money being a bad thing, kind of like what you were saying. So, it's easy to watch a movie like The Big Short, and just assume it was a bunch of really greedy people that got together and thought, how could we screw over the economy and rob it blind? So I like the idea of starting with an innovative, cool new thing, but then in the process, because this is psychology in a lot of the world that I've been working in, around becoming less critical because you start to gain mass, and then there's like this group thing that can happen, and then like we can't possibly be wrong, and so you know your statement of being right superseding objective truth is. Hello, human nature. Okay, so lastly, because I think you know this has been a great conversation, I kind of want to start to wind us down a little bit. I don't know if you've ever tuned into the HBO series Succession, but that's something that my husband and I have become. We were really incredibly obsessed with, and very sad that the whole thing is over. I think one of the reasons that I'll speak for myself, why I was so. So enamored of it was because of the incredible dexterity, like almost the gymnastics that the main characters were capable of in their attempts to try to remain connected to the source, right, the money, the power, the lure, that whole world, like that, the absolutely unscrupulous things that they were willing to do, the seat by the same token, I think there was a beautiful way in which the writers and producers were able to show the characters in a contrasting light as well, where I could find myself feeling empathy, or you know, sadness for the situations that they were in. So I think it's incredibly difficult, as you know, as a producer and writer of a television show, to be able to do that anyway. But I guess I was wondering. Well, first of all, you did you watch Succession?
Speaker 2 55:49
I admittedly have not watched it. I've heard plenty about it and been recommended. It's one of two shows that I think most people assume I will have watched Succession in Billion. I did.
Speaker 1 55:59
I assumed
Speaker 2 56:00
both of which I haven't watched. I don't know if that's to my detriment or not, but but I'm aware of the entire construct of the show, what it's about, and and to what you said, the psychology of what it would mean to be in a family tied to wealth and how that impacts behavior, what people are willing to do, and I think to the point you're making, how people can be influenced to make decisions that seem outwardly bad, but when you look at it through their lens, and oftentimes mental gymnastics or cognitive dissonance, they themselves feel they're doing what's best, so they can feel vindicated and feel like they have integrity because it's what's best for them, but most people tend to not behave in a way that they're knowingly doing evil or bad things. Our brain doesn't necessarily operate that way, to the best of my knowledge, which is why there's so much nuance. Someone can look like they're doing something evil, but to assume they themselves are evil and are consciously aware of their evil behavior are very different things, because I think most people do what they believe is in their best interest and is aligned with their value system, even if they've tricked themselves into thinking that way subconsciously.
Speaker 1 57:15
Yeah, yeah. Okay, so your first piece of homework is to watch the show, number of seasons, yeah, okay, and so then last links here. So we've talked a lot around the topic of relationships, our relationship to money, and obviously that's a deep, deep, deep topic, and we could go for days. So I know for sure from my practice in working with the clients I have over the years that it's afforded me an incredible insight into just how insecure people are in their relationship to money, so just kind of a last piece of advice from you, Kevin, and I know it's a tremendously general question, but like, so for someone who's listening, who's maybe got a little bit of like that shame we were talking about, like you know, they they're kind of comparing themselves to others and they're not sure if they're doing it right. Maybe they don't have as much money as they want, or they think they should be different, or you know, they have some habits about money that, you know, they kind of don't want to tell people about, or you know, just that kind of yucky, icky kind of shame part of relationship to money. What would be just a sort of a simple piece of advice that you would give someone who is maybe perhaps in that situation, so anything kind of come to mind.
Speaker 2 58:28
There's a couple, I think. First of all, understanding for whomever is listening that you're probably in a better situation than you think, and not to say that you're in a good financial situation, but most people beat themselves up about where they are far worse than they ought to, so give yourself a little bit of leeway there. I also think that that a way of understanding that, and this is not a plug for my own book, but the book, The Psychology of Money by Morgan Housel, is the best book that I've read on helping understand behavior on our patterns, on, you know, I think for a lot of people it's recognizing that if you don't have an understanding of why you do things and you're trying to accomplish goals with the only tools you have, it's worth accepting that that your best of intentions might not be good enough, because the tools you have aren't there, and so that's a great book to read that gives people a good understanding, and that might be a good starting point, and it really just gets to the root of recognizing that that you can solve a lot of the concerns, at least by making financial decisions by managing your behavior, I think that's helpful. Another thing can just be to reflect on on what it is that you want, like shame oftentimes comes from from feeling inadequate, but but then try and figure out what's what's the inadequacy coming from, is it because you don't have things that are really important to you or is it because. You don't have things that are important to other people, and I think you start to lose that sense of shame if you're less concerned about what other people have. We often want a roof over our head, that's important. If it came down to it, that's what we need. We don't need a 123, $4 million house. Now, living in Vancouver or the Lower Mainland here makes it hard to sort of have one without the other, but I think it's recognizing the difference between what's an actual need that's important to us and what's extra, the and then deciding, am I willing to do the work required to get that extra thing. So I think really sort of taking stock of what are the things you feel ashamed with financially, and are you ashamed because you're not doing what you know you could be doing? Is it a personal shame, I'm not working hard towards my goal, and I have internal shame, or is it I don't have the things that would make me feel better about myself externally? So, I think there's just a lot of self-reflection that would happen in that shame context, and then, and then giving yourself sort of the tools to help yourself out one way or another, and like I said, in the absence of being in a position to maybe work with a financial advisor, maybe finding someone you know in your life who you admire as a person who's also in good financial standing, don't just find someone who's who's rich but not up to, but find somebody who seems to have done so in a balanced way, and and try and get some pieces of advice from them that might be a way of sort of pairing it all together, reflecting on your goals, deciding what's actually important to you, grappling with where the shame comes from, if it exists, doing some reading for empowerment, seeking out advice from people who, who you admire, who you would like to emulate, and then looking at sort of the the existing tools for simple investing, simple contribution, and then just start repeating that behavior.
Speaker 1 1:01:56
Yeah, I appreciate that. I think there's something about our conversation, Kevin, that at least from my vantage point just sort of takes the whole sort of relationship to money and just brings it down into something that's just kind of an accessible conversation, at least that's what I'm hoping this is achieved, and you know, I know, like I said at the beginning, that I don't think I would have been able to have this conversation in this much of a grounded, curious, open way, you know, 20 years ago, or whatever. So I also want to acknowledge that there could be people listening who are, you know, maybe there's like a lot of debt or whatever, that's they're just at a phase of life where they maybe aren't even able to attain that sort of groundedness. But what I really appreciate is the accessibility of your advice, and not just that, but what we've been talking about today. So, I really appreciate your willingness to kind of jump into this and explore it, and unpack it, and you certainly have vantage point and an appreciation for human nature that I think is probably serves your clients well, because I think it is so much more than the balance sheet, obviously that matters, but the relationship, the trust, the openness to sort of being able to see and reflect back our messy, messy, messy human nature, and inevitably we're going to get in our own way when it comes to something as energetically dense as as money, so I really appreciate your time. Thanks so much for joining us, Kevin. And maybe one day we'll have a part two conversation. Thanks so much, Kevin. So you've been listening to The Squeeze. Thanks for joining us today. If you want to continue tuning in, don't forget to click subscribe. And, as always, we want to hear your thoughts, your comments, your feedback, and challenges. If there's anything you don't agree with, thanks for joining us. And see you next time.
Unknown Speaker 1:03:55
Bye.