Invest Like the Best with Patrick O'Shaughnessy - Dan Egan – Designing Better Decisions - [Invest Like the Best, EP.18]

Episode Date: January 3, 2017

My guest today is Dan Egan, who is the managing director of Behavioral Finance and Investing at Betterment.  In this wide-ranging role, Dan has his hands is most of the ways that Betterment interacts with its clients and how it invests their money. This is one very interested and smart guy who is clearly passionate about helping investors make better decisions.  In this conversation, we explore everything from science fiction, automation, investor behavior and how Betterment tries to solve problems that goes beyond the automated asset allocation that is their bread and butter.   Please enjoy.   For comprehensive show notes on this episode go to investorfieldguide.com/egan/ For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

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The views expressed in this podcast do not necessarily represent the views of CFA Institute. Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfield guide.com. Patrick O'Shaunisee is a principal and portfolio manager at O'Shaunacy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect

the opinion of Oshamously Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Oshonofy Asset Management may maintain positions in the securities discussed in this podcast. My guest today is Dan Egan, who is the managing director of behavioral finance and investing at Betterment. If that job title sounds wide-ranging, it's because it is.

Dan has his hands in most of the ways that Betterman interacts with its clients and how it invests their money. This is one very interested and smart guy who is clearly passionate about helping investors make better decisions. We talk about science fiction, automation, investor behavior, and how betterment tries to solve problems beyond the automated asset allocation engine that is their bread and butter. You can find show notes at investor field guide.com forward slash Egan, EGAN. Now please enjoy my conversation with Dan Egan.

Thank you very much for doing this with me. we're going to start somewhere. I try to start somewhere interesting every week, so it's not just about business. We'll start with sci-fi. We met just in person for the first time maybe, I don't know, a month ago or so. Both of us were speaking at the Evidence-based Investing Conference. And we got talking about sci-fi. And so I'd love for you to share maybe your own origin story for how you develop the passion

for reading sci-fi novels. And then we'll get into some favorites and some more specific questions from there. Definitely. I was trying to think back. on this. I think the first thing I ever read, which might have been considered sci-fi, was actually Kurt Vonnegut, short story called Harrison Bergeron, I believe. And it's actually just sort of this social fiction thing about what if we got into a world where everybody was fundamentally equal? And there's this person called the handicapper general, where if you're unusually beautiful,

you have to wear a mask. Or if you're unusually strong, you have to carry around these weights. So it's this sort of pursuit of everybody actually being completely equal to each other and a sort of dystopia that comes along with that, the lack of vibrancy and diversity that you get from a society that allows people to be different and really enjoy each other. So I think that was probably the first one. And that very simple what if kind of way of thinking, you know, like what if we changed this? What if we, how can we think about what's really going on that are unspoken assumptions about how. how we work or how society works, was what kept pulling me down into it. I think there's a lot of stuff that's considered sci-fi,

but when you look at, one of the core things for good sci-fi for me is that we're going to either talk about real science or we're going to change something about the way things works, the way things work that's going to tell us about ourselves. And a lot of sci-fi is just sort of about space operas and various things, which are really entertaining and really easy to read, but don't play that what-if game quite so much.

And I think Ursula K. Le Guin wrote a beautiful introduction to one of her books. It says the job of this is to really think about if we change, you know, that there are two genders. What if there's only one? Or what if you can be both genders or, you know, what if you can be immortal? You know, all of these what-if questions about how it would change society, those really make you think. And I love that.

This is already a great example of why sci-fi is so neat because I had never heard of the Vonnegut's story. but if you heard of John Rawls, the moral philosopher, John Rawls? Absolutely. So it made me think of him where his question that he poses, which is such an interesting one, is what kind of system of government or society would you design if you knew you had to live in it, but you had no idea where you'd be born. Absolutely. You could be born at the absolute bottom or the absolute top.

Like what would give the faire shake no matter what? No. Which is such an interesting kind of thought experiment. And it seems like sci-fi, good sci-fi, is great storytelling married to systematic thinking. So these writers want to understand kind of the levers that make not only people, but institutions and countries and nations tick

and then kind of peel something away and make you think about it in a different fashion. Definitely. Absolutely. Can you give us, I don't know, as many as you want because there are so many, some of your most favorite or most formative and maybe even dive into some of the ideas, the reasons why he like him so much. Definitely. One of the ones that I read recently that I really,

really loved was in this book, your life and people like you, I think it was, which it's a book of short stories. One of the things I've learned recently is that I love short stories. Like, I love long form, but at the same time, there was a book, Some, just S-U-M. It's like a bathroom book. It's, you know, like all of these are sort of like 10-page short stories. So your life and people like you, I believe it's called, has a story in it where basically, by default people start taking or have this very easy non-invasive procedure done to them that makes them not realize when people are attractive, right? It's like you can still identify people. You just don't have that lizard brain reaction of like you're attractive and you're not

attractive. And so most people go through life having attraction be a non-physical thing. And this is pervasive, right? It's not just about who you end up hitting on a bar. It's like who gets asked for, you know, who gets hired in a job or who you're friends with and all these things. And when children come of age in this book, they can have that turned off. They are given the choice at that point to decide if they want to have this sort of visceral feedback loop about what other people look like. And so there's a couple of different, it's told from a couple of different viewpoints where there's a young woman coming of age and she recently, her boyfriend, who she had loved, broke up with her and she realizes that she's quite attractive. And she's like, well, wait, no, he should really like me.

hasn't turned this thing off and he's less attractive than her and he realizes that he doesn't like this feeling of number one realizing that he's unattractive but also knowing why other people are judging him like this so great example of like let's take one thing you know the sort of pervasive effect of attractiveness across our society and let's turn it off or let's give people the option of turning off and the other cool thing about it that I think about is this obviously from a behavioral perspective the idea of defaults by default naturally we're going to attractiveness. We're going to notice, you know, symmetry of people's faces, all this stuff. By default, we're able to get pregnant. And so what if we turn these on things off and we flip

them and said, the default is not that thing. You have to choose to do that thing. You have to, both people before they get pregnant, they have to, like, actually say, like, I don't know, I'm going to flip this switch and now I can actually get pregnant both from the man side and the woman side. You know, I'm going to turn on this thing that allows me to see other people as being attractive. Think about all of the little consequences that bleed across the side about making that one little change. And it's really quite remarkable. You realize how much of your own life is influenced in tiny, tiny ways by these automatic

defaults that you didn't even think about. So it's kind of, it seems like some of the books you love are both ideas you've mentioned so far, identifying customs or conventions. And not so much flying in the face of them, but just asking the question, what if it was, what if the defaults were different? Absolutely. What about the big names? Do you have the Philip K. Dix, the Isaac Asimovs?

Are you a fan of some of the bigger works? Definitely. I mean, I actually went after at the conference you mentioned, Ubik, went and read it. And it really reminded me of... What do you think? It was really good. It's funny how when you, I don't know,

if you were to watch Star Wars, you know, I'm 36. I remember being, I don't know, like eight or nine in watching Star Wars. I mean like, this is the most amazing thing now. I kind of feel like kids today, if they watch Star Wars, they're like, the special effects are kind of janky. You know, like, so I read it and I was like, this, I, you know, this reminds me of number one, the end of inception, the movie where, you know, he spins atop and it's like, you don't know. You don't know if it's going to fall over. For reference, I don't know. Should I spoil it for everybody?

It's a hard book to spoil just because it's so out there and odd and no one's actually going to read it because it's like the most esoteric sci-fi book. But maybe don't spoil it. but you can maybe explain what the inception idea is. So, I mean, I think the fundamental thing is that there's this existential question that the book ends with about, you know, like, are we what we think we are? And it just cliffhangs you. You know, like the end of inception at the top, it's like, is he still dreaming? You don't know.

And that brought me back to actually, and that's funny that I'm now in movies, to The Matrix, where the original movie, you got the traitor with the little goatee, all bad guys always have facial hair. And he's sitting with like the agent Smith thing eating a steak, you know, and he's like, I know this isn't real, but it tastes good. And I want to be rich when I come back. And you know, this sort of like voluntary choice of saying, I will choose to be in something that I know is not real because it will feel good.

If you had to pick three books for people to dip their toes into the water, someone that's never read a sci-fi book before. Yep. What three books would you prescribe to see? where the idea is if you finish these three books and you don't like them, then you've learned something, which is that you're not going to be a sci-fi fan. But if you do like them, there are going to be three good books that give you a sense for what's available out there, what's possible if you continue to explore the genre.

One author who I think is worth trying out, at least one, is Ian M. Banks. He wrote a whole series of sci-fi novels placed very far into the future. and he's one of the first people, lots of sci-fi authors do this, it's one of the best plot devices ever, is the idea of time about what if, you know, like what if you can live longer,

what if, you know, like, I think Interstellar did a great job of it where they say if some of your family, you know, starts traveling close to the speed of light, they're going to age differently than you. How is that going to change your family structure? And how does it change the way that we think about, you know, in Star Wars and all these things,

people are firing lasers at each other. If all these ships are moving at the speed of light, they're just going to blow right past each other and never even see them, each other. So Banks is good for kind of like what I consider space opera, but dealing with the physics of the situation. The three body problem is this book by, I'm going to mangle the name, Shishuin Li, C-I-X-N-L-I-U, who's a science fiction writer that's coming out of China right now. That's awesome. I'm reading it right now on your recommendation. Yeah. Absolutely one of the best that I've read recently. deals with actually the game theory of being an intelligent species in the universe.

One of the things that evolution has kind of brought us to is this idea of individual selection, that it's like my genes that need to replicate and there's no such thing as group selection where we all have to band together to actually fight something. And all of a sudden, when you're on a cosmological scale, you know, your entire species needs to survive. And there's another intelligent species out there. This comes through in things like Ender's game and everything. Like, how do we get over nationalistic tendencies and tribal tendencies and everything?

And for better, for worse, it seems like the one way we can imagine doing that is if we define something so incredibly alien that it scares us more than each other. Yeah. Yeah, band together. Well, a great couple of books to check out. I will link to a few more in the show notes as well. And now we can pivot to your day jobs. So you are, you're a behavioral economist, I guess, by trade, which is for me such a fascinating and continues to be an emergent field. Now obviously popularized all over the place.

Michael Lewis has a new book out about kind of the birth of this field of thought and inquiry. And I'm curious what that means day to day for you. We've talked about it offline, but I think it'd be interesting for people out there that within this huge field that's become so important that we're not these kind of automatones that were people and that we behave with biases. How that translates into what you're trying to do to help your clients? I think one of the best parts about it is that I am effectively thinking about how to build something for myself and other people like me. You know, there's a, there's sometimes a sort of feeling of a relationship and financial advice where there's an expert who knows more than you and you come to them because of the asymmetry in knowledge. And what I do here is effectively, I'm actually saying, I am this flawed human being. I know where I go wrong.

I know how I wish things were done better. and taking a very specific set of academic work usually that's been done that I can effectively free ride on and applying it to make people better investors. I'm thinking about how what triggers people doing well. What are the fundamental predictors of success in terms of savings and tax and fees and market timing and so on? And if I wanted to design a system that made me a better investor with knowledge of all of those things and then you kind of everybody else gets it for free, I'm going to be looking at things like, you know, an investor dashboard is like a heads-up display on a fighter jet, right? And you had never put an odometer there that says, like, you've come 2,000 miles. And yet, if you log into most financial dashboards, they're going to say what your returns have been over the past, however long a period, which is not useful information.

It doesn't tell you what turns you need to make in the future, upcoming decisions you have to do, and so on. So a lot of it comes to design of what information should be right in somebody's face, how you portray it. what it's going to kind of like trigger in them, what emotions, what thought processes, and having a view about we want them to end up in a good place, how do we design for success? Seems like it's something that would touch every aspect of the interface, marketing, the brand, the product. Is that true? Is it kind of all, are you, do you have your hands in, in all those areas? Almost all of them. I like to think that, you know, one of the better ways is, helping people design the systems, the process, and so on,

so that it's not that other people have to know what, you know, the purpose of behavioral economics or finance is, but rather that they're just experiencing it seamlessly. One of the good examples that we've had is in the hiring process. Hiring, obviously, in finance and tech, has historically had some effectively profiling problems. And even for myself when I'm hiring people,

I don't really care about what their name is, what gender they are. So I want to set up an initial, application process that really is good at filtering out people who are not qualified and who I don't want and lets everybody else through. So what I started doing on my own team, we were just getting too many applications for analysts. As I said, we're going to have a normal application process and we're going to add on two questions. One, which is a super simple coding question that if you know how to code, you're going to look at it and be this is fun. I'm going to knock this out in five to ten that's no biggie.

And another one, which is just do you have a view on, you know, a somewhat complex diversification question? Just to show that you've thought about it and this is something in the back of your head. The purpose of those is not only to test knowledge and kind of like natural passion, you know, have these people, are they coming to the table with the skills necessary, but are they okay just investing those extra, whatever it is, 10 or 20 minutes to answer those questions? As soon as you do that, you know, finished application rates dropped to about five

percent of what they had previously been, and I'm only dealing with five percent of absolutely fantastic high-calibre candidates. So take that, you know, process, have two questions that basically are going to naturally identify who's going to be a great fit for this. That's your filter. And you should interview almost everybody who gets through that filter, because they've kind of shown that they're going to be good at their job. The interesting term for this, or the popular term is this idea of nudges, that if you can sort of set defaults or screens, you can get a long way from what would otherwise be a real mess. So I want to come back to that dashboard idea, the investor dashboard. So first, how often do betterment clients on average check their account?

Too often. There is no sort of, and I think part of that is, um, we've made it. Is it like on average? Is it monthly? Like, what's the frequency? I don't know at the top of my head. I would put it probably somewhere between weekly and biweekly. And I think when you look at the numbers, there's a little bit of strangeness to it and that we're growing very. quickly. So people check at an astonishing rate in the first 90 days. And that's, you know, some of that's actually good. They're setting up their account. They need to log in. They need to set up goals. They need to understand the way the system works. And part of it is even just a basic auditing procedure. Are they doing what I think they're doing? Let me just double check and make

sure when they say they're investing into 12 ETFs and fractional shares. Are they actually doing that? Okay. They're actually doing that. So it tends to trail off significantly after that 90 day period. You know, it nudges up a little bit. We generally go from about, I believe it is 50 in 10,000 customers logging in during normal market periods to about 100 per 10,000 customers logging in during things like Brexit or the election when they kind of have some stimulus that they're worried about. And it is definitely higher on mobile. Mobile phones are, without a doubt, the most sort of dangerous environment to be making investing decisions in. because it's so small, it's so contextless, and for better, for worse,

you can be in a bathroom at a bar after just hearing a tip from some guy, and you can actually make the decision without any thought at that point in time. So making a mobile experience, which is on par in terms of nudges with a larger web-based experience, has been one of the most interesting challenges.

So really interesting, and I love this history of buying, the transaction part of buying and selling securities, where the kind of costs and, and arduousness of it used to be much more cumbersome, right? You needed, it was a whole process to even buy a single share. Now, obviously, it's incredibly easy. Now, it's much, much cheaper to do it now, which I guess is good, I think is good.

Right. But maybe it's not good because the, you know, everything we know about average holding periods and overtrading and some of these things that have actually gotten worse as the tools themselves have gotten better. Yep. So how do you think about that? How can you as a behavioral economist try to start to chip away at the biggest problem in investing, which is this behavior gap, this behavior problem? I'm fascinated by this.

So we can spend as much time here as you want. I love to hear examples, like tangible examples of things that you have, systems that you've set up, nudges that you've introduced, suggestions you have for the future, for how we can get people to stop making all these same stupid common mistakes. Absolutely. And I think you touched on a great point. I think financial instruments and financial costs have going down so much that I sort of think about it like a power tool. We used to have maybe an axe. And you know, an axe is dead simple to move. You can still have an accident with it. But now we have chainsaws, like power saws that could really do some damage. And you need to design them very thoughtfully with things like dead man switches and safeties and various things like that. Or sometimes just that it's not the right tool for the job and making it very clear. One of the most common things that I I see is a mistake. There are a couple of them is what I call prohibition, right? So I'm just going to not let you do that. That doesn't work. And I think we saw that in the 1920s. And the response that has been more more intelligent to say, we're going to try and figure out

how to mediate and kind of like reduce the extremity of this kind of behavior. The way my parents said it is like when I was, I don't know, probably about 16 or 17, they're like, we know you're going to drink, just do it here. Because that way you're not driving around and you're not at at greater risk for making mistakes. So don't prohibit. You can't stop people and say you're just not allowed to do that. You have to allow them to do it, but really kind of give them salient options

that they can go to instead, or things that are going to stop them and they track, they can do it, but are not going to stop them, but they're going to make them think about it differently. So a great example of this is a service we have called tax impact preview. So when a customer comes in a taxable account and goes to change their asset allocation,

say from 90% stocks down to 0% stocks because they're worried about the election or whatever, it's going to in real time calculate exactly how much tax we estimate they're going to pay at the end of the year because of this transaction. And this is done in real time. We don't necessarily know what their end-of-year tax situation is going to be, but this is the impact of this decision. And generally speaking, we split test this. We actually run test to see whether or not we're doing the right things for our customer.

customers. And it reduced allocation changes by somewhere around 70%. And you can either think about this in a classical rational economist way that people just didn't realize the effect that these decisions would have in the next year. And we've just given them the relevant information and helped them make a better decision. Or you can think about it in what's called a counter-biasing format, which is that people really hate taxes. And by putting up some tax figure, it has a disproportionate effect upon their reaction to it. Generally speaking, it seems like it's the latter because, number one, the average tax impact that we showed people was a little bit less than a dollar. So if you're really worried about markets tanking, you should not be worried about paying a dollar in tax next April.

The other thing that was very interesting about it, this isn't perfectly defined, but we looked at where people were from and mapped where they lived back to the vote count in the last presidential election, so the second Obama administration. We said how strongly Republican or Democrat was it will view you as being randomly drawn from this county and look at how sensitive you are to tax impact preview. People who tend to be from very liberal democratic areas tended to be far less sensitive to tax than people who came from very conservative areas. So not perfect. We don't actually know that the customer was or wasn't, you know, fiscally conservative or anything, but it's a good indicator and that people really dislike tax in an almost irrational way.

This is not just a mathematical decision. There's actually preferences. And we're stopping them in their tracks from making a market timing decision that they're worried about the market going down with a definite certain tax decision where they say, I'm definitely going to pay that. Do they have to click some sort of button? Like how is this served up to them? Is it like a gate they have to get through? Or is it just like, by the way, you know, here's the number. And then, you know, execute.

One of the things that I love about working at Betterman, we have great product designers who, think through these issues very well. And we tend to take a conservative, iterative approach. So the very first time that we launched this, you had to click a button. You had to opt into seeing this. And when we saw how effective it was, they actually changed and said, wait, like, it looks like it's doing the right thing. One of the things that we were worried about it backfiring on is withdrawals.

So, you know, if you need to pay for your car to be fixed, you should take the money out, right? Like the tax is not that big a problem. Don't put it on a credit card, actually pay for it. And so we were looking at, is this also influencing people's withdrawals in any negative fashion? The answer was no, okay, you know, like it's doing the right thing and it's not doing the bad thing. Once we had confidence in that, the product designer said, okay, we're going to make it non-optional. Everybody is going to see this if you are doing something that has a potential tax impact.

So we are kind of able to iterate through and get comfortable with the idea that we were going to be kind of forcefully nudging people to think about these things, but only because we'd studied it along the way. This made me pull up on my computer a little sentence. There's a book called The One Sentence Persuasion Course. And I'm sorry for the author because I'm going to read the sentence. It's a pretty short book. But it says people will do anything for those who encourage their dreams, justify their failures, allay their fears, confirm their suspicions, and help them throw rocks at their enemies.

So this tax thing as an enemy is an interesting analog that people are so averse to it that you're able to, I mean, 70% is a massive reduction, right? Because one of the criticisms I hear most often from people I just, you know, random people I'm talking to is that in the robo advising world, it's going to be too easy to make, just like, you know, buying and selling is much easier and cheaper now. It's going to be too easy to make acid allocation changes. Yeah. That reflect, you know, behavioral mistakes. So are there other things that you've tried or that you see, the tax one seems brilliant.

But what else do you do? What are some other examples? You know, there are even really small things. So it used to be that when you logged in on your summary page, losses and gains were coded as bright green and bright orange, right? Like classic things that you see everywhere. And I fought for quite a while to say, listen, can we just make them less emotionally lading? They're a number.

You know, like there's a positive number to a negative number. We took those off. And there were people who were a little bit grumpy about it. But generally speaking, we have. have the benefit right now of being able to say we're either building for the only 220,000 customers that Betterman has right now or building for the half a million or one million or two million that we're going to have in the future and I want to get this right from the ground level up. So that's a good example of something that's reduced it over time.

If you go to a performance page, we now have the ability to if you add in the S&P 500 as a benchmark index to your portfolio, automatically content talks. talking about the pitfalls of using that as the benchmark, go up on that screen and encourage you to read them. Which has, and I think this is one of the interesting things about the general behavioral thing is how much of it is education. All the evidence points to the fact that if you're going to do education, it needs to be right point in time. What's the question on somebody's mind? What are they thinking about? You have to deliver it like super surgically in order for it to be effective.

Otherwise, don't worry about education. Just do nudges in various other design elements. And I think one of the kind of misunderstandings also that people have about betterment is who our customers are. And so this sort of when a big downturn comes. So here's a genuine question for you. Because I love these criticisms because I have no idea what they actually mean. What's a big downturn? I would probably say it's something like 30% or more.

Right. So over the period that I've been at Betterment, we've experienced, I think it's like three 10% drawdowns, so quote unquote, correction, and 1 20% drawdown. I think it actually topped out at like 19.6% down in the S&P 500. And these are the kinds of little false alarms or like whiplashy type drawdowns that I think actually are what hurt people's long-term returns because they see the 10 or 20% drawdown. I'm like, oh, this might be the 30 or 40% drawdown. I need to get out now. Since I've been here, there have been absolutely the most perfect classic sort of whipsawes where it's like a drawdown and then it rallies. A drawdown and then it rallies.

If people haven't learned over the past three or four years about like head fake type drawdowns, they haven't really been paying attention. But I actually am a bit sanguine that when there's a bigger drawdown, we are going to be fine. I think there's a lot of self-selection that works very well for us. We have a younger customer base who are generally in the accumulation phase. And they tend to regard drawdowns as a buying opportunity. If you're, I don't know, 45, you still have 20 years left until retirement. You see a big drawdown and you say, well, I have 20 years. Like, I'm going to top it up.

I've got a bit of spare cash on the side. We tend to self-selected people who understand a passive index tracking philosophy. So they naturally are not thinking that they're smarter by reacting to market movements. They're going to tend to stick through it. We have a lot of tax features that make drawdowns a little bit like lemonade out of lemons, tax lost harvesting, for example. You get to look at this and be like, oh, well, you know, at least I'm going to have some tax offsets this year.

I think the thing that is really interesting from a public point of view is say, Betterman has half a million customers, if one basis point of them is really unhappy. So, like, you know, 1% of 1% of that entire customer base is unhappy, you're going to hear about it. They're going to be on Twitter. They're going to be on various other places, being publicly grumpy about it. And you're really going to miss this amazing silent majority of people who are like, I'm perfectly cool. Like, I think it's fine.

So I think that there's a kind of asymmetry of publicity exposure that we have right now, where we got a great customer base who are bought into what we're doing, who genuinely don't seem to react negatively. But you're going to hear about, you know, the very loud minority. Do you think that though when Betterman gets to, and even let's say you get to two million customers, right? That's so many people that at the 30, 40, 50 percent bear that we see next, that they're not going to be any different because people don't sell at the bottom,

market's bottom because people sell. Right. Yeah, yeah. And I think people get that backwards. So don't you, I mean, it just seems hard that once you get to a sufficiently large size and, you know, the amount of money that the average account size hopefully grows, right, as people continue into their prime earning years, seems like it would take a Herculean behavioral win for you to keep people from making the same mistakes that everyone else's makes, right? I like to call that job security. Yeah. I think that there is, there's genuinely a ton to do.

One of the best parts of my job is that we have these ideas about things we can do. and I get to call up some of the leading academics in the space and say, what do you think about this? Here's, you know, it's not like we're Panglossian about whether or not this happens. It's something that is on our mind. And to the point about sort of like how we do things or how I think you kind of deal with habits and so on, we are never making decisions about what to do in a downturn during a downturn. We have always set out a systematic plan of if this, then that type flows. What if this happens?

Then here's what we're going to do. Here's how we're going to pull the trigger on various things. so that during some kind of a crisis, we're just executing on a plan. So we have those plans, whether, you know, and we're always adding to them and learning from the last one. Every single downturn, we have run some kind of an experiment to test whether or not we're doing things effectively. Do you mean an example? So very early on, I think it was late to that. When was the taper tantrum?

Late 2013? 2013, yeah. Yeah. So, 14, maybe. Pretty, pretty, you know, there was media kind of. It was a sort of classic, this could be bad, what's going to happen next type scenario. And conventional wisdom is that you should reach out to your customers before they reach out to you. And so we had heard this.

I had heard this for my previous roles. And so we said, okay, we're going to send an email, a timely email telling people what's going on and why and so on. And there were actually four different conditions for that email. Number one was a control, which was actually probably about 50 or 60 percent of the population, because we weren't sure that this email was going to be effective. We wanted to hold them back because you can always email a control group after you've done it if one of those treatment emails is really good. And then we had three or four different treatment emails that either focused on sort of

what's going on in the markets or a very positive personal congratulatory issue that you haven't done anything yet, that you seem to be acting rational. So this is what's called generally a growth mindset psychology. Tell somebody that they are the good that you want them to be. and they'll feel very motivated to fulfill on that implicit compliment. And then a couple of other sort of very normal, one of them's like, don't do anything, stay the course.

What I think it was kind of a very negative frame of what somebody can do. And what we found was that compared to the control group, the people who sent the email to just did more in general. They were more likely to deposit as well, but they were more likely to change their allocation or withdrawal. And that to me kind of indicated there's this targeting issue. Most people weren't concerned about what was going on.

They might not have even been paying attention to it, but we were the ones to initiate the conversation about something that maybe they should be anxious about. And we kind of caused, we had some false positives in our kind of like treatment arm. So we switched from it being a shotgun blast thing out to all of our customers to when somebody logs in during some kind of a market stress or market crisis moment, we're going to message them right then. It's going to be part of that initial login experience. is here's the message about what's going on right now and that you're doing the right thing. Don't worry about it.

So in that case, we were able to go from a high false positive rate to basically a nearly 100% surgical targeting of people who are going to be stressed and are at risk of doing something. Yeah. Amazing. The leverage that you can get through technology solutions, right? Where, you know, I have not, frankly, made up my mind on this on Robo versus a really skilled advisor.

are I know the power of relationships. And so I just deeply believe that there is some value in that if it's done well. But I can't quantify that. And I don't think there are good studies or would even be possible to really run a good study as to whether or not one is better than the other. But given obviously I know where you stand on the issue, I'd be curious to hear some of your kind of investment philosophy roots. So how you got to where you are today, which I think it's fair to categorize you as maybe not an efficient market. thinker, but as a behavioral economist, but as someone who believes in asset allocation, in low cost, probably above all else, I would just be curious to hear where you started

and how you got to where you are today. Yeah. It's so I grew up in Philadelphia and I probably had heard the name Vanguard and John Bogle long before most people really even should have for better or for worse. But yeah, I really came into it, you know, from a classical economic education and you keep hearing these sort of like the market is efficient. I don't know that I ever really bought into it. But I think it's, you know, I'm kind of, I don't know what a semi-week form, you know, the market is sufficiently efficient that I don't really need to care about. It's inefficiencies. And but what I, what I think I came into it is like I started looking at it from my own point of view about where I have leverage. And I mean like a classic,

what are these things where I can like affect a small change on my side and there's a huge change a huge impact with high certainty on an outcome in the future. And these are things that have high certainty. I tend to not think low cost. I tend to think net value. But if I'm getting the exact same thing for a lower cost, that's pretty much a guaranteed improvement in my outcome. So I try to find things, taxes are another one that are pretty darn predictable.

There's something that really influence normal investors like you and me that all of the people who you tend to think of as being the great investors who work. work with charities and endowments and various things, they don't have to worry about this. This isn't like part of the optimization process. Looking at like liability identification. So through the course of my life, you know, like I had to buy a wedding ring. I had to put a down payment on a house. Now I've got a kid.

You know, like I have to be realistic about there are these things in the future that I'm pretty much going to have to spend time on and money on. And the better I am at identifying and planning for them further in advance, the more immunized I'm going to be from those kind of liabilities. The second is genuinely trying to remove myself from execution and management as much as possible. And this gets into things like habits, but also automation, where I want to sit down and say, what do I believe? What are my principles about how I should do this?

And I want to design a system that automatically does it for me. I want to be at arm's length from the execution. So that I, you know, if you think about it as even a tactical trader, you say, here's my hypothesis, here's my entry points, here are my exit. points. Now, I don't want to be involved with actually doing those trades. I've spelled out what should happen and somebody else should go and just do it. And I think that that's kind of a very strong form behavioral perspective of people are so fallible in certain execution settings that they really, they should never do them. They're in a hot emotional state. When my, I don't know,

favorite and scariest studies on this is on judges granting people parole or probation. And it's basically like, when did they last eat? You know, here's, if you're going to go for parole at like 4.30, just don't. There's no chance of you getting it. So there should be some way, this is such a serious decision, there should be some way of saying, the way the judge will make a decision is, you know, like, here are the factors, here's how you weight them, and it should not involve when they last eight. So I try and take myself out of the doing as much as possible and instead design the, you know,

the thought processor flow diagram or decision structure so that it can be executed properly. That was one of those studies that knocked my stocks off too. And so much so that I was very skeptical of it. I wanted to see what the sample size was. And I actually found it through Daniel Keneman. So, you know, a pretty big name talking about this study. And the fact that the decisions the judge was making were parole decisions, which is crazy. Right.

They're deciding whether or not someone's going to go free. I know. and it is just a, every time they eat, the rate goes up to whatever it is, 60 something, and it goes down pretty much in the linear line. It's amazing. And close to zero until right before their next meal. It's like, oh my God. They've found similar things.

This is even scarier with doctors. Something that I joke about, but I actually think it's really true. If you're going to the hospital or something, bring chocolate. Because doctors, the high-end diagnostic ability goes way up if you just literally give them like a piece of chocolate and wait five or ten minutes. So, you know, if you've got something seriously, wrong. Just give your doctor a chocolate bar, chat for a little while, and then get into the nitty-gritty. And they'll be actually better at diagnosing you. This is going to be a little tangent, but you're

exactly the person that I want whose opinion I want on this. So we talked about sci-fi. So obviously you think about kind of the future. We're talking about the fallibility of human decision-making. I am curious to think or to hear how worried you are about this kind of coming wave of automation where we had, we're in this kind of information age now. It used to be that we were automating mostly mechanical, you know, repeatable mechanical jobs. And now there are computers that read x-rays better than radiologists. There are all of these, not just skill, but problems like the one,

two you just mentioned with judges and doctors, two positions that, you know, most parents would be thrilled if their child ended up as a judge or a doctor, right? That's at the top of society. And it seems as though big aspects of their jobs are susceptible to a more repeatable automated system that split tests that learns that's automated. So what do you think about all this? It's such an open question. We don't know what's going to happen.

But I'm sure you've thought about this. I'm curious to hear your thoughts. I am incredibly, incredibly worried and incredibly, incredibly excited at exactly the same time. So the optimist in me says, as long as we nail education, this will be fine. As long as everybody feels like they're a part of the system. And I think we worry, so sci-fi, there's this phrase that E&M Banks wrote in one novel that has always stuck to me. Money is a symptom of poverty. Truly rich cultures and societies don't need money because the level of scarcity of resources, they don't use token.

to exchange things to get things done. Maybe it's pride and prestige. Maybe it's some sort of like vocational pull that leads you to be artisanal in one way or to do incredible place. I don't know what it is. But there's this idea that at some point if we've automated a lot of the stuff

that to be honest throughout history, we wanted to automate. Nobody wants to be a mine worker, a coal mine worker. Nobody wants to do incredibly dangerous labor that might end up with their wife being a widow and having an orphan. So once we take away those bad things,

what are we as people in terms of our vocations and jobs? And that's where I think the scary part is for me is that a job isn't just money. A job is something that you love doing. It's pride. It's your place in a community. And I think we do need to think very carefully about ensuring that the vast majority of every society feels like they're contributing, like they have kind of like a purpose. That's going to be a tough transition. I think for a long time it's been very clear.

about, you know, like, you know, my father, my grandfather worked as a steel worker. And while it was like he would tell stories about people getting your arm, like literally molten steel would go on your arm, it's gone, right? But there was also a pride that it was tough work and you were making good money and it was dangerous and you were manly and all this sort of stuff. So I think that we need to, like, kind of identify not only that more people are educated in such a way that they can partake and contribute to the higher end things, I think defining what the goal of AI or whatever it is, that's still a thing.

AI is a little bit like a dog. Like it doesn't just make the right decision. You have to train it what the right decision is. And then it can kind of take over and identify the patterns and everything. So I think that it's still up to us to figure out what good is and how most of society can take part in it and be proud of being part of society. If that's the case, we can end up in the Star Trek world, right? We're like, there's no money, but people are like, they love prestige and science and like exploring. talking to each other. Otherwise, we're going to end up, you know, in some very, very unhappy society. It's

incredibly unequal. Not because, like, people are greedy, but because the laws of scale and physics are just so stacked against them. You know, like, I think about this in terms of a, like, Mark Zuckerberg, like, there's no way to build Facebook and have it scale and there's one network. He's going to end up rich. That's just, like, the function, you could tax him all you want. I don't think. I don't think most people want taxes as a handout. I don't think like redistribution is really the solution to that problem. You need to actually help other people say, here's the job that I'm going to be proud of now. It's interesting that some of the Zuckerberg is a great example, but there are elements of what's going on that just magnifies these inequality problems. And I have no idea what we're

going to do about it. Because on the one hand, if you are conflict-history and you, and you, you know, redistribute 90, let's say his tax rates 98% or something like that. It's going to, in some ways, probably discourage risk-taking, right, of the sort that he did. Maybe, maybe not. We don't know. I'm sure, I think we know that he's a passionate guy and maybe he would have done it no matter what. But it seems like such an interesting problem that, especially when you're thinking about your own career, when I think about my career or a loved one's career, like what to tell them to focus on. And one of the litmus tests I always go for is, is there something that, that's just that you don't like about your job that's that's repeatable that you have to do over and over again and

you don't like it a lot of things you'll do over and over again you like them a lot that's great but if you have to do something over and over again and you don't like it there's a very good chance that that thing is going to be cheaply handled by technology and you should just get rid of it is a great business case for it right i'll pay for somebody else to do it yeah like it should go away eventually it's funny so um on your way in here you asked you know people for questions and when somebody asked about like my decision to come to betterment, right? Which was, I was at Barclay's wealth for years. Granted, I had to wear a suit every day, but it was a, you know, like, it was a stable job.

I was very comfortable there. And it was actually this issue of sort of like money versus happiness that made me come here. So I was making, you know, you hear about these like above $70,000 a year, happiness doesn't increase. And, you know, like, I live in New York City, so maybe it's a little bit higher. But I was like up around there. And I was spending 40, 50 hours. a week and a job that was like, you know, maybe a five out of ten on my happiness scale. And here I have the opportunity to, like, definitely take a huge pay cut, but to jump to somewhere,

which possibly, not guaranteed at all, would be like a nine out of ten or a ten out of ten on the happiness scale. So I'm actually, I really like strongly progressive tax rates. I actually wrote something about this a little while ago because I think they encourage really good behavior and they're not actually going to stymie any kind of passion or creative impulse. If you're motivated by money, like, you're going to be pretty crap at that anyway, unless it's something that's just making money, like finance. If you're entrepreneur or designer or something else,

you are just motivated to get out of bed and do that thing anyway. And I think that, you know, you could tax me significantly more. And unless you start taxing the enjoyment that I get from coming in and doing something that I feel is good and that's intellectually challenging, you're not going to stop me from doing it. To that end, what is the current, area that you're working on here at Betterment that has you most interested that has you jumping out of bed? What problem is it that you've identified that you're trying to solve for clients?

So to your point earlier, I touch a large number of things and that diversity of projects is probably the overarching thing. How do we personalize and tailor portfolios, investment solutions, advice, not only to different people, but different people who are different in a circumstantial way? Betterment announced a deal with Uber drivers where they would subsidize the retirement account and they really strongly encouraged Uber drivers to take up an investment account with us and IRA. And we also have Betterment for business, the 401K line of business. Again, in the retail side, you're predominantly getting people in who have chosen you.

Either they have a recommendation for a friend. That's our highest acquisition channel. Or, you know, like they've done the research themselves and they really believe in what we're doing. So that self-selections really worked for us very well. In the bedroom for business line, you have people who their employer chose you. And so dealing with that slightly different population and understanding how they're going to approach you is kind of an interesting change. And all through this, people want the right level of control. So we're very aware that people want to, you know, oh, you have too much international or can I do socially responsible investing with you?

Right now, we're a little bit Henry Ford saying you can have whatever color car you want, long as it's black. It's not that we're like black is definitively, you know, like the second derivative optimal. There's no way that anything better. We're just like it's a little bit hard to flex infinitely to update everything that people want. So I think that idea of what kind of variation in advice do you need? Like genuinely, like I live in New York City, maybe I should be in a New York municipal bond fund. That's a form of personalization that an advisor would recommend. On the other hand, you know, like, I want to be long, some good pharma stocks. I don't know so much about that.

That's kind of more speculative. So those, that kind of tension between personalization meaning good personalization and personalization means specular personalization is one of the kind of things that we're thinking about here. And also expanding into the breadth of our services into different areas. So state retirement plans that are sort of subsistence. that a lot of people, that's their best guess for it. I recently, you know, it's kind of an interesting, I did my health care enrollment recently

and ended up really going deep into HSAs and looking at this and be like, well, for me, like, I'm a healthy young guy. This is basically a triple tax-free investment account that I can put money into. Maybe I should be focused on doing sort of stuff like that. The last thing that's kind of interesting is how the modern, coming back to the idea of like costs just keep coming down. what's the future of funds and of betterment? We're going to, you know, if we're, if we keep growing at the rate that we're growing,

we are going to become very good in the fund, very big in the fund marketplace. And scale brings problems of its own. But you start looking at, you know, if somebody really wants a socially responsible investment portfolio, that means different things to everybody. The only real way to do that is to actually cut out the middleman and just start designing indices that are different for every individual person. And then we happen to have an omnibus structure that allows us to trade fractional shares, zero costs. We could basically build personalized indices for every goal that you happen to have, whatever it may happen to be, and manage them very cost effectively and tax

efficiently. Meaning get around the fund structure entirely, the ETF and mutual fund structure, and be effectively building security by security indexes for each person. Correct. That what you're saying? Yeah. Yeah, it seems like if costs come down enough, and obviously there's still, there are still tax advantages embedded in the ETF structure. We don't know if they'll last or what they'll look like in the future. But the ability through in-kind transaction to kind of step your basis up through time when you trade is a huge advantage. Definitely. And so I'm fascinated by this, by this idea that in the future, it will just be individuals who directly own individual securities

via betterment or some other platform. And it's completely custom tailored. So in that world, how much would you really let people tailor it, given your investment beliefs and philosophy that some form of efficient markets, markets are efficient enough? People shouldn't try to, people shouldn't design a biotech index for themselves. Right. So how do you think about that? Where would the line be?

The general principle is like, don't let people hurt themselves really badly, I think. It's definitely, again, it's not prohibiting. It's not saying you're, because again, like, you're just going to go do it somewhere else. If we say you absolutely can't, you go, okay, well, Robin Hood will let me. I'm going to go do that. So it has to be some modicum of, we're going to let you do enough that you feel you're getting that juice. We're going to let you overweight biotech, but you're not allowed to have more than, I don't know, 20% of your portfolio in it. And I don't know where those numbers or lines are specifically.

But the point is to try and flex as much as possible. I think there will eventually be some people who really fundamentally, I want to just trade currencies. Those exist. that is not going to ever be betterment's competitive advantage. There are people who have been in the DIY brokerage world for a lot longer, who are a lot better at that. That's not novel or innovative. That's not going to actually give us an incredible growth or market share.

We keep looking at what are the things that are not zero-sum trading things. Where can we expand our services? They're going to help more people who never had access to that kind of a service before. We recently launched an asset location service, right? So something that used to use to have. have, at least to me, a very complicated thing that generally an advisor had to look after and run tax numbers on. I know I've looked at the tools that some of our competitors have, and it was like, if you were an independent financial advisor, you had to enter all of this

tax information yourself. It was up to you to say what the after-tax return of one asset class was versus another. So I really like, for better, for worse, the, I don't know what you call this, the TV model of innovation, where there are some things that would generally novel that we can do, but a lot of what we're doing is saying, here's something that we know is good, and we're just going to take it and productionalize it so that it's low cost for everybody. But when that happens, it's like a light bulb going on. We say, everybody gets tax loss harvesting. Boom.

You have like $1,000, you can get tax loss harvesting. You have an IRA and a 401k and a taxable account. You can have asset location. I think that commoditization of the doing of the algorithm rather than the coming up with the algorithm, we're going to just keep pushing on that across the board. So that last kind of philosophy, right, of just give it to everyone, maybe one of the answers to this question. But if you think about all the different variables and dimensions of companies like

yours, I'm curious in which area you think betterment's moat, so to speak, is widest, meaning what aspect of, and obviously this is, if we do this again in the year, right, there's going to be so much different about this space. it's just growing so quickly and the technology is changing so fast. Asset location, tax loss, harvesting, you know, customization, all these things. But right now, and hopefully this will persist into the future, where do you think your mode is widest? I'm going to share something with you that's almost like inside information just because nobody else knows about it. It's the people who work here.

So I joined, I was about employee number 21. And after working there for a few months, I was like, this is just a crazy group of people. Like the people who do like coding are really good. The people who do design are really good. And so there's a little bit of like, oh, gee, how are you going to scale a company to do this stuff? Betterman's now 220 people. And I have the exact same feeling every day. Like the lawyer, one of our lawyers who's like an incredibly deep ERISA lawyer guy, he actually helped design the DO law rule.

He gave them some feedback on it. Like he's a great guy. He loves his job. He's going to keep pushing on it. the software engineers that I know here, like, again, they're so good that they go in and they say, this could be better, we're going to rip out this entire piece of software, rewrite it in a new language because it'll perform so much better. About two weeks ago, one of our engineers, I don't know, figured out some way how to use AWS better

that reduced our costs by 50%. Right? Like, he was just like, we can do better than this. We can keep doing it. And that's pervasive. Our customer service team is just amazing. Like, they genuinely are really trying to help people. I think recently consumer reports.

put us as like us vanguard and one other person is like the best customer service and financial services. So I don't know the people at any of these other companies. So I can't, it's not necessarily that, but I have been struck by the fact that everybody here is passionate, works really hard, loves what they do, and works well with each other. And there's very little politics and very little bullshit. That's hard to compete against. Like if there's one person who you don't want to compete against, it's somebody who enjoys what they do more than you and does it with people that they enjoy doing it with. That last point is a really good one. I'm curious how you make, how does that scale? So you're employed 21. Yep. You're at 10 times that now. Beyond the, I think,

great but obvious characteristics of passion, loves what they're doing, work hard, are there other things that you are screening for as you look for new people that maybe people out there could think about for themselves or their own businesses that aren't just those kind of high, those kind platitude level stuff. Yeah. So we recently, I think, went through this and like, you know, the things that we definitely screen for, number one is horsepower. Number two is, I don't exactly know how to put it, but like some sort of like learning flexibility, openness. So if you, one of the questions I used to ask during interviews was tell me about a time where you failed and just tell me what happened. And the question is actually to see how comfortable they are with admitting that

they failed about something and what they learned from it and how they moved. done from it. It's not, you know, like, I'm not trying to, like, make you feel bad, but, like, failure is part of what happens. And it's more important that you're really okay with it and that you can talk about how you learn from it. So that openness or, like, comfort learning and being wrong is one of the things that I think we definitely select for. And I think just a desire to do something well, to make something better. I think I keep coming back to people. Every once in a while I get asked one of these, you know, like, where do you think the S&P is going to be? And I'm like, I have no idea.

But I keep coming back to, it's a quote from Abraham Lincoln. The best way to predict the future is to build it. And that's how I can kind of see things happening, is that we have people coming here like, okay, this is underserved and there's a way we can do this better. I'm going to go in and I'm really, I'm pushing for us to make it better in this marketing way. One other thing that I think has done very well is that, and this is, I have incredible, give huge credit to John Stein and a lot of the management team here and the board of directors. This is a very open friendly place to work.

If I had like been in the elevator with the CEO at my previous company, I probably would have tried to figure out how to not talk to him because I would have felt like you could only do something wrong. Here, you know, like CEO, whoever it is, you can joke with them. They're perfectly friendly people. You can bring ideas up with them. and it really does feel like a very horizontal culture where you can speak up and have your ideas considered. And it feels like a good family. We recently had not only Thanksgiving here, but also our holiday party.

The holiday party was much less tame than the Thanksgiving party. But the Thanksgiving party, you have, we had seven babies this year. And we're kind of all growing up together. and supporting each other, not just in the work, but in our actual lives. And that comfort and close-knitness is something that I haven't felt anywhere else that I've ever worked. Tell me about your most memorable, individual memorable day here. Oof. It's not a good indicator if you can't remember one, huh?

Take your time. You know, actually, I think it was when we moved into this building, we, so I think we might have been around 40 or 50 people at that point in time. And we needed to move from our old office space to our new office space. And, you know, I didn't know what to expect. So are we going to hire a moving company or whatever? And they did part of it. And then, you know, I don't know, week two in advance, they were like,

so everybody's got to be here on Saturday. We got to put desks together and put chairs together. And so you rock in on a Saturday. And, you know, like there's pizza and beers and people are putting together chairs and doing all this sort of stuff. And there's this moment of, like I want to be here. I want to continue to make this for a while.

There's a community and I like these people. They're good people. And we have the ability to genuinely build something unique or new that you're going to be proud of. And it wasn't like, you know, we're literally putting together chairs. But it's still one of my sort of fondest memories of realizing this was a company that I wanted to be at for a while.

And then my favorite question and one that I asked, every single person, which is what is the kindest thing that anyone's ever done for you? I'm going to admit something. I'm prepared for this one. Yeah, I know. I'm going to need to switch it up. I don't know my tactics. There are two that are definitely true.

The first one, which is a little bit obvious, but it's worth saying is my wife. So my wife's British. We met in London. And she not only said it was okay for us. And she was a diplomat. She was able to move around the world a little bit easier than a lot of people were. but she said, yeah, let's move to New York. Let's see what, let's do that for a few years.

And this is about your career. I'm comfortable doing that for a little while. And then when I asked, after a year, we moved to New York, a year later, I'm like, hey, could I take a giant pay cut and go do this startup thing with some kids? Once again, like, I mean, we thought through it. We really worked on it. My wife and I have the best arguments in the world. Like, they're genuinely really good.

It's one of the best things I love about our relationship is that, like, We don't agree on everything, but when we disagree, like, I come out of it feeling like we made a better decision because we disagreed on it. So definitely her for kind of giving me some leeway to try and do that. And to be clear, I'm absolutely going to pay her back for that at some point in time when it's like, now it's your turn. Where do you want to go? What do you want to do?

Like, I'm the trailing spouse. Let's go do your dreams. And then the other one that actually, I don't think it would have been thought about as a kindness at the time, but it's really important to me. When I was in like sixth or seventh grade, for some reason there was like a long period where I didn't have any good way of getting home after school. And there's this math teacher of mine who would give me rides home from school. And I really appreciate it. He was a good guy and he would like make sure of rainy days that I was able to get home rather than walk.

And one day I hadn't done my homework. And I realized it at the beginning of the class. And I was like, I did it through the course of the class. and I handed it in at the end of the class saying like, oh, I forgot it. It was in my backpack or something. And he got really upset with me. And he said, I saw you do your homework through this. And he said, you know, like, I'm just really disappointed.

Like, I've done good things for you. And you've disappointed me by kind of lying to me now. And that was like one of those moments where it just like hits you. Like, it's not even like shame. It's just like, I need to be a better person. And that moment in terms of like doing what's right, being honest about it, that stuck with me for a long time. And so I don't think he was trying to be kind at the time, but that kind of like line in the sand, it's really, it's been very good for me. That's amazing. And usually I close on that one, but I thought of another one, which I think you'll have a good answer to, which is for younger people out there, whether it's coming out of college or a graduate degree program that are really interested in markets.

One of the things that I'm struck by is, and I've started teaching classes and I really enjoy meeting students, that there are fewer and fewer people, for the obvious reasons, that are interested in things like asset management. But for someone out there that is passionate about markets, that just wants to get into this world, what advice would you have for them? Given the secular trends that we have towards index and low cost and, you know, away from security selection, things like that. that, what would you tell someone that came to you and said, where should I go? Tell me what to do

and I'll do it. I would say always double down on whatever is most interesting to you. That was a, I remember a game theory professor in college saying this thing of like, never compete against somebody who enjoys what they're doing more than you because they'll always beat you. And you want to be on the opposite side of that. So, and I think, you know, you talk about how much you read. I think read on whatever is most interesting to you. Like if a book is, is boring you, you don't have to feel like it's virtuous because whatever that is, it's going to interest somebody else and they're going to be really good at it. You put it down and go off into something else that really interests you. One of the ways I kind of, I had no idea I would end up working in finance at all. If you would

ask my parents, they would have laughed at the idea that I would be where I am today. And I got into it very backended through like psychology and then behavioral economics and psychology. It was a big letdown to me to realize that I was born in 1981. All the papers that I thought would be groundbreaking had been written in the 1970s by like Danny Conneman and so on and being like, okay, so maybe I'm going to need to like switch up my career path here a little bit. But then really got into like learning about the social construct of markets and the history of them like the capital ideas and against the gods books that talk about the history. Risk is only a few hundred years old as an idea, right?

Absolutely. If that stuff like if it, if you're reading about it and like you turn through those books, whatever books you're just like burning through, just keep looking at that and trying to figure out how you can work in that area. It like, if you had asked, I don't know, 10 years ago, can somebody have a career in behavioral finance at a robo advisor?

People would kind of gone, what, what, what, what? So that's the only other thing is like, it is worth taking shots that you think, like, things don't exist but should. My job, it's not like John Stein came out and said, what I need as a director of behavior of finance, I was a betterment customer. I kept looking and be like,

this could be better. This could be better. We can do more here. And I sent him an email with like six different things he could do to, you know, improve things. And he said, let's have a coffee. People and things like that are just way too risk-averse.

If there is something that you love and you want to see in the world, take the shot of like learning a ton about of it and like finding other people who can work with you to make it your job. Like you'll be happy. You'll be making something that you love. It's like the best setup ever. Probably my favorite line of the whole thing, double down on what's interesting. So we'll end there and it was Blaskin to know you the last couple weeks and month and I really

appreciate your time today. It's been fantastic. Thank you. Hey, everyone. Patrick here again. To find more episodes of Invest like the best, go to investorfieldguide.com forward slash podcast. If you're a book lover, you can also sign up for my book club at investorfieldguide.com forward slash book club. After you sign up, you'll receive a full investor curriculum right

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