true WELLth Podcast: Dr. Daniel Crosby Episode Transcript

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Daniel Crosby: Any cursory study of the good life will show you that money is very good at resolving bad things, right? Like if your roof is leaky or if you get sick and you want to send your kid to a safe school, money is good at taking care of sadness, but it does very little to bring about happiness.

Manisha Thakor: Hello, and welcome to true WELLth. I’m your host Manisha Thakor. If you are new to this show, you may be wondering how listening to us will benefit you. So let me explain. The purpose of this show is to help you better align the way you spend your money and or time with what matters most to you in life. Why? Because at true WELLth, we believe that structuring your days around this powerful time, money, meaning formula puts you firmly on the path to live a richer life. Another thing that’s unique about true WELLth is that we craft each episode through the lens of these three thought-provoking big picture questions. The first, what if everything we’ve ever been taught about money and making it is wrong. The second, what if success, as traditionally defined by society, is really just a path to disconnection from self, community, and life. The third, what if true WELLth is experienced, not as the result of striving for more, but in embracing your own unique definition of enough.

Manisha Thakor: Clearly these are not small questions with quick answers. To get clarity, a wide variety of what I like to call mental kindling or intellectual fire starters can be extremely helpful. That’s why we feature such a wide range of guests on this show. In today’s show, we’re going to learn how research around making smarter financial decisions can also help us improve wellbeing in other areas of our life.

Manisha Thakor: Our guest today, Dr. Daniel Crosby, is a New York Times best-selling psychologist and behavioral finance expert. Now if that sounds like a mouthful to you, it does to Dr. Crosby as well. Daniel affectionately refers to his field as a mutt of a discipline that sits at the intersection of economics, finance, sociology, and psychology. If you’re wondering how a mutt of a discipline can help you find your true WELLth, I’ll give you a hint. This entire episode is rooted in the importance of understanding how our primitive brain works so we can identify ways to override it and live more joy-filled meaningful lives.

Manisha Thakor: So Daniel, you’ve given three TED and TEDx talks. The name of your first one, which has become extremely popular, is “You’re Not That Great.” Why do you think the insights you share in a talk that has such a depressing title have resonated so strongly with viewers?

Daniel Crosby: So the reason why that was such a successful and I think a resonant talk, was because that is the cornerstone of understanding that we have to have about ourselves if we are to make any other progress in life. So your realization that you are flawed, that you’re imperfect, that in many ways you’re pretty ordinary, that realization is a prerequisite for you to realize anything else about yourself. So understanding that you’re not that great and that’s okay, and only when you understand that you’re fallible, that you’re prone to weakness, will you ever begin to have this sort of introspective journey that will lead you on to actually being a great person.

Daniel Crosby: So I say in that talk, the great paradox is that only when we realize that we’re not that special is it that we’re able to put together a life that is actually quite special. So it’s a weird paradox that in our understanding that we’re flawed and that we’re broken lies our potential for so much more. So I think that’s the starting point of the journey.

Manisha Thakor: Daniel is a nationally renowned expert on how behavioral challenges, driven by the considerable influence of our evolutionary history, can keep us from making optimal decisions as investors. This of course, hurts our overall financial wellbeing. But before we dive into that, I wanted to ask Daniel if there were any behavioral challenges that can prevent us from making optimal decisions in other areas of wellbeing, such as social, emotional, and physical wellbeing.

Daniel Crosby: Yeah, absolutely. So I think exercise, nutrition, relationships are some of the best and easiest examples of the very same thing that we see in finance, which is that there is a massive “knowing-doing gap.” So at the risk of saying something that’s offensive to people like you with some really impressive letters after their name, you can learn everything you need to know about investing in about a week. Like if you read the right books, you could learn the blocking and tackling of investing in about a week. It’s not that hard. What is extremely hard though is sticking with that knowledge. Similarly, you could learn everything you need to know about diet and exercise in a weekend. I mean, you can read a couple of books and go, “Okay, I get it, I know what I’m supposed to eat, I know the kind of workouts that would be conducive to building lean muscle.” That’s not the hard part.

Daniel Crosby: The hard part is getting it done and that’s where personal trainers come in, that’s where financial advisors come in, and there is this massive knowing doing gap. I tell this story, I’m from Alabama, where perhaps the “knowing -doing” gap is at its greatest, but I grew up in Alabama and I live in Atlanta now and I was home recently and I drove by the hospital and there were 13 doctors and nurses out there in their scrubs smoking in the cold. And it’s like these people know better than anyone else that what they’re doing is not good for them, and yet they persist in doing it and that’s an easy behavior to pick on, but we all do it every day. We eat things we shouldn’t, we fail to exercise, we are cruel to people we love, whatever it is.

Manisha Thakor: Daniel, that phrase, the “knowing-doing” gap is spot on. What else should we know about our primitive brains to make decisions that better support our overall wellbeing?

Daniel Crosby: So let me do what I do best, which is digress. I read a book recently, a book called Lost Connections, it’s a book about depression and addiction, and one of the things that they found … We all go to Psych 100 and we learn about these studies on rats where rats are given two options. They’re given water and on the one hand, and then they’re given water … or water and food on the one hand and then water that’s laced with narcotics on the other hand. And so these rats will choose the narcotics over the sustenance all day long until they die, right?

Daniel Crosby: And so it’s historically been this proof point that like, wow, there’s all these biological hooks for addiction and wow, aren’t these things powerful, which is true to a point. But what they found is that when you put a rat in the cage with other rats, and with little tunnels and mazes and balls and stuff for them to do, rats for them to hang out with, meeting their social needs, meeting their needs for stimulation and other things, they really start to ignore the narcotic water. They don’t get hooked.

Manisha Thakor: As a lifelong introvert, Daniel’s comments about the book Lost Connections, which as a side note, I just started reading and literally cannot put down, are worth diving into just a bit more. In effect, what Daniel is telling us is that as humans we have broader social needs, needs which, well like all traits, vary in degree from person to person, but in general, the point is that being around people and especially people engaging in healthy habits can also help us direct our energies towards actions that will add to as opposed to detract from our overall wellbeing. And importantly, this is not a new phenomenon. Our primitive brains, for reasons of sheer survival, are hard wired to be connected to a broader community.

Manisha Thakor: So Daniel, when I’m wearing my financial literacy advocate hat, one of the things that I’ve noticed time and again is that to have the mental freedom and bandwidth to actually figure out what really matters most in life, plus the mental bandwidth to actually act on that knowledge, it’s essential to establish a solid base of financial wellbeing. Yet your work indicates that there’s some natural human tendencies that can make us our own worst enemies, especially when it comes to investing our hard earned savings. So what can you tell us about this?

Daniel Crosby: Well, in my new book, The Behavioral Investor, I think one of the predominant themes is the things that have led to our survival as a species, the things that have led us to be at the very top of the food chain, are in many cases the very, very same things that make us poor investors. And so, an easy example of this is loss aversion, which is our tendency to hate loss about two and a half times as much as we enjoy gains. So our ancestors, we weren’t always the only human species on the block.

There were Neanderthals, there were Denisovans, there was a group called the hobbits in Indonesia, there were all these other sort of humanoid species, and the reason that we’re still around and they’re not is because we were more cowardly effectively than they were. We were more scared of losing.

Daniel Crosby: And so while they were out there doing brave but perhaps stupid things, we were a little risk averse. We were loss averse, we were playing it safe, we were quicker to pack up and move on. And so through millions of years of evolution, we’ve come to the point today where you and I are here today because our great, great, great whatever ancestors were kind of cowardly. So that’s kept us alive, but it also makes us poor investors. And we have brains that haven’t had an upgrade in nearly 200,000 years that were tasked with making decisions about financial markets that are only four or 500 years old in terms of their development. So this is a pretty gross mismatch in terms of how we evolved as a species relative to the demands that are put on the average long-term investor.

Manisha Thakor: Do you reflect back on your own life? Have you made any financial decisions based on emotion or maybe based on your primal brain that you look back and now regret?

Daniel Crosby: Yeah, there’s really one big one. Like I said earlier, I grew up in Alabama. I love the American south. I love the food and the culture and the people and everything and feel very connected to the American south. But moved out of Alabama a few years back and moved to Atlanta, and we bought a really big house. And it’s a house we could totally afford, but it was still a dumb choice. And you know, it’s one of those things where I see it every day and I go, “You know, I shouldn’t have done this because it’s just more hassle, it’s not who I am, it’s not what matters.” It was me being insecure. It was me wanting to show the world that I had arrived, that I had achieved a level of professional attainment, and now it’s kind of become this thing that I’m ashamed of.

Daniel Crosby: So it’s a very clear instance of me not following my own advice too. It’s that “knowing-doing” gap again, because I have literally written books on why buying a big house is a dumb idea, why it’s a bad investment, and why it’s one of the worst ways that you can buy happiness. All of the research says the best ways to buy happiness are on creating memories and experiences with people you love, deepening your education, these sorts of things buy real happiness. A house on the other hand very, very quickly becomes the backdrop against which you live your life. And so what seemed like a really special place on the day you walked in with your realtor, just quickly becomes the place where you throw your dirty socks and you clean the toilets.

Daniel Crosby: And so, yeah, I mean, I absolutely ignored my own advice. I didn’t sort of check myself or examine my deeper psychological reasons for needing this, you know, quote unquote needing it. And as a result made a big mistake. And I think it’s also proof that you can make a financial mistake even if you can afford it. I think a lot of times we talk about financial mistakes that end in bankruptcy or heartache that way. I think there’s plenty of financial mistakes that don’t end that way and are a little subtler than that.

Manisha Thakor: Now you’ve done some interesting work on distilling what you uniquely call investor stupidity down to four key traits. Tell us about this research.

Daniel Crosby: Yes, so one of the things that I’m proudest about in The Behavioral Investor, is I took this universe of investor stupidity, call it, right, to use the scientific term, there’s nearly nearly 200 ways that psychologists like myself have identified whereby you can make foolish decisions with your money. So it’s a little daunting. But what I did is I took that universe of 200-ish errors and I distilled them down to just sort of the fundamental psychological truths that underpin them, and I walked away with just a handful, and it was ego, which is our tendency to think we’re better and luckier than the next person. Emotion, which is our tendency to conflate our affective state with whether or not something is risky or not. The third was conservatism, which is our tendency to like what we’ve always done relative to something new, to sort of prefer the status quo and try and play it safe. And the fourth of these is attention, which is our tendency as human beings to basically confuse salients or vividness with probability. And that’s a little bit wordy.

Daniel Crosby: So the easiest example I can give of this is that more people have died this year taking selfies then in shark attacks by an order of magnitude, and yet we’re not scared of taking selfies and we are scared of swimming with sharks, because selfies are sort of mundane and every day and not unusual, whereas a shark attack is lurid and strange and vivid. And so we don’t make decisions based on how likely something is. We make a decision based on how memorable it is. So these are the four kind of big ways that we can get it wrong. And in the book I give lots of examples on each of those, on how you can change them.

Manisha Thakor: So what I’m hearing loud and clear from you, Daniel, is that we humans face multiple headwinds of ego, emotion, conservatism and attention. What steps can we take to minimize the effects of these four factors?

Daniel Crosby: If I just had to give one or two, that can help with sort of all four, I would say that the average investor needs to automate their financial life, they need to use the status quo bias in their favor to do things like automate the process of saving each month and escalating those savings over the course of time. And then the second thing that they can do is that they can outsource. I wrote in my last book The Laws of Wealth about how much better people tend to do when they work with a financial advisor. There’s numerous research out actually today from Charles Schwab showing how much better people do when they work with an advisor. And the biggest reason why this is the case is not because the advisor’s great at picking stocks or even because they know a lot about where the market’s headed, it’s because they keep them from a handful of catastrophic behavioral mistakes over a lifetime, and that’s a very, very big a deal over the long run. So, automate and outsource would be my easy two.

Manisha Thakor: As my conversation with Daniel drew to a close, I found my spirits lifting despite the fact that a good portion of our conversation was about the ways in which we humans screw up. Daniel’s upbeat personality and infectious curiosity about life’s bigger questions made me feel, well, happier. So that made me wonder, did Daniel ever struggle with negativity bias?

Daniel Crosby: Yeah. I’m going to go ahead and say almost every other day, almost every other day, except for when my books dropped. So, you know, here’s a point about human evolution is we’re not wired for contentment. Because again, going back to some of my earlier comments, our ancestors, which is again candidly the last time we’ve had an upgrade, our ancestors were moving around. They were nomadic, or at the very least, they didn’t have great means of storage and refrigeration and other things. You couldn’t really amass wealth or privilege or sufficiency in any meaningful way for most of human history. And so we were primed to go, “What’s next? What’s next? What’s next?” We are primed in a very real sense to wake up every day and go, “This isn’t good enough. I need more. I’ve got to do better.”

Daniel Crosby: And that is again, an impulse that has kept us alive and has kept us at the top of the food chain. But it’s also one that leads us to a lot of angst, I think, in our professional lives. And so, almost every big day for me, you know, the day I got my Ph.D., the day I hit the New York Times best-seller list, the first time one of my books got translated into a foreign language, all of these sort of ostensibly big deal days have always been a bit of a disappointment for me candidly because we’re just always programmed to want more.

Daniel Crosby: So it’s part of myself that I’m not super proud of. It’s part of me that I’m working on. But I recognize that it’s a human tendency to not be content and it’s a human tendency for these big things that we look forward to, to not be as quite as satisfying as we might have imagined them in our mind. So it’s a lesson to me and I hope to others to enjoy the journey, to try and find beauty in the mundane, because we are programmed to never really arrive. And if you think that you’re going to be happy when x, y, z thing happens, you’re going to live a long, sad life of disappointment.

Manisha Thakor: Reflecting back on this conversation with Dr. Crosby, I was struck by just how wide ranging my takeaways were. To name but a few, first, I was fascinated by Daniel’s conclusion that our tendency for loss aversion when it comes to investing is not a sign of weakness. Rather, it’s an evolutionary strength that kept us alive as a species, and that with regards to our money, it can be mitigated through the twin tools of automating and outsourcing our finances.

Manisha Thakor: Second, I thought Daniel’s point that when it comes to improving your financial wellbeing, the real value of a financial advisor comes not in trying to help you find the next hot new thing, but rather by keeping you and your primal brain from making a handful of catastrophic financial decisions or errors that you’ll never be able to recover from.

Manisha Thakor: Lastly, and perhaps my favorite takeaway, I absolutely love Daniel’s proposed paradox, which I’ll paraphrase as saying only by recognizing that in addition to being flawed and imperfect, that we are pretty darn ordinary, can we get our egos quieted down enough to actually craft anything unique. To me, that felt like a gigantic warm and fuzzy invitation to take out a blank canvas and think fresh about those big picture questions around money and meaning, purpose and passion. As I mentioned when kicking off this episode, those big questions are exactly the ones we hope to help all of our beloved listeners and ourselves gain clarity on as a result of being part of this true WELLth community.

Manisha Thakor: And with that, we reach the end of today’s show. On behalf of the entire true WELLth, let me say we really, truly would love to hear what you took away from this conversation with Dr. Crosby. By the very nature of how we structured this podcast, each one of us will walk away from each episode with a different piece of brain candy. Hearing what resonated with you will help us select both topics and future guests. So please don’t be shy to share aha’s or even to give us suggestions on how to make the show better. Just pop on over to our show notes, which you can find at Remember that’s true WELLth, W-E-L-L-T-H Share your thoughts with us. We promise to write you back. Also in our show notes, you’ll find a link to Dr Crosby’s “You’re Not That Great” TED talk, which I loved so much I watched it three times the first go around. We’ll also have links to the two books Daniel mentioned in this episode.

Manisha Thakor: As an added bonus, after our formal interview ended, Dr. Crosby shared with me the name of a book that has been one of the biggest influences on his life and I’ve heard this book mentioned in the same context by others as well, so I’ll leave that as yet another reason for you to visit the show notes for this episode. And because these days no podcasts can end without this call to action, pretty please with an organic farm-to-table cherry on top, rate this show on iTunes. Seriously, there are barely words to express how much a detailed five star review will help other people find this podcast. So there, that’s my authentic, shameless plea to review our show on iTunes. I’m Manisha Thakor and that’s it for this episode of true WELLth.

Announcer: The true WELLth podcast is made possible by Brighton Jones, an innovative wealth management firm founded 20 years ago in Seattle. Today, Brighton Jones serves clients from the east to the west coast with a singular goal of helping them live richer lives. Today’s episode was edited and produced by Stan Hall with help from John Dougherty, Hallie O’Reilly, Michael Stubel, Marc Asmus, and Chris Sylvester. For more info on our show, visit