The Compound and Friends - True Wealth is "Funded Contentment" (with Blair and Brian Portnoy)

Starting point is 00:00:00 Hey guys, it's Blair Ducanet, and I am here on the phone with Brian Portnoy. Brian is the head of education at Magnetar Capital, and he's the author of two books, The Investor's Paradox and The Geometry of Wealth. I saw Brian last month at the CFA Wealth Conference, and he talked about some of the things that he wrote about in The Geometry of Wealth. Most importantly, how money and happiness relate to each other and how wealth is really defined as funded contentment in his description. So, Brian, thank you so much for agreeing to come on and talk to me a little bit about money and happiness.

Starting point is 00:00:37 Yeah, my pleasure, Blair. Awesome. So happiness or wealth is funded contentment. Could you elaborate a little bit on that concept? Yeah. I've been in the, I guess, finance and investing business for a couple decades now, mostly in the weeds on investing, portfolio management, the science and art of portfolio construction and all that fun stuff. But as I know, as I've begun to think about, you know, these topics more broadly, I wanted to get into what it meant to be truly wealthy. And what I've been writing about is the fact that being wealthy isn't the same as being rich. Rich is having more money. And the quest for more is often, as we know from a lot of psychology, not particularly satisfying. I think of wealth as

Starting point is 00:01:26 the ability to underwrite a meaningful life. And as you alluded to, my shorthand for that is funded contentment. I think what all of us are trying to do is to fund a contented or joyful life. And that leads us in different directions than just trying to get rich. And that leads us in different directions than just trying to get rich. Yeah. And it's so much about when we speak to our clients about their goals and explain to them that meeting their goals, the requirement isn't that they beat the S&P 500 or a commercial index, but they're really bombarded every day with the opposite message, you know, whether it's the financial media, the 24-hour news cycle, their neighbors, you know, at the cocktail party. It's really hard to help people understand this concept that it's not about making more, it's about focusing on the goals. And I think really the job of an advisor is transitioning in a way to help our clients try to figure out what that means for them. The problem comes in various layers, and you just touched on the most important one,

Starting point is 00:02:33 which is that beating the market for some reason has become kind of a cultural phenomenon, but it's totally irrelevant to achieving goals. But we also know at a deeper level, again, from the social psychology literature, that just achieving your goals doesn't necessarily make you happy either, because once you achieve it, there's this dynamic or process known as hedonic adaptation, which is a sort of a clunky word for, hey, wherever you get, you then want more. So I think the modern financial advisor has to grapple with the fact that just having a list of goals and achieving them, that even in of itself isn't enough. Wow. Okay. That's a new concept for me. So thank you. So I just went on a trip and I took my two-year-old son to Paris for a few days and there were a lot of naysayers, you know, he won't remember it and it's going to be really hard. And I was reflecting back on your concept about

Starting point is 00:03:31 there's two kinds of happiness. There's the happiness that you feel in the moment. And then there's sort of the reflective happiness that you remember. Could you bring me up to speed on that again? Because I thought that was really important. Yeah. So the brain's wired for at least two different forms of what we would generically called happiness. And, you know, my terms for those are experienced happiness and reflective happiness. The neuroscience and psychological literature uses a bunch of different vocabularies, but that's what I'm rolling with. Experienced happiness is just sort of day to day, good mood, bad mood, pain, pleasure, feeling happy, feeling blue. It's ephemeral. It comes and goes. Reflective happiness is what I call the step back. You step back and

Starting point is 00:04:18 you ask, am I living a good life? Are things going as I had hoped to? That's actually a very effortful activity. Experienced happiness is just, you know, sort of almost unconscious thinking. You kind of feel what you feel versus reflective happiness. You got to put some effort into that. So it's not something that we do all the time. meaningful life. And, you know, to your issue of taking your son to Paris and, you know, I have some kids and I've traveled all over with them. It can be very difficult. It could be very aggravating, but it can also be a very meaningful experience for you and potentially for them. I mean, at two years old, who knows? But so finding the more meaningful experiences, I think, is what we're really after. And then trying to ask the hard question of, well, how do you afford meaningful experiences is where I believe kind of the not only the modern financial advisor, but the modern client of a financial advisor is heading toward. Yeah. And I will tell you, though, that I found out that if you have a stroller,

Starting point is 00:05:25 they let you go in front of the crowd at the Mona Lisa. So pro tip there. It all worked out. Yeah, it was a fun event. One of the things that you also mentioned at CFA Wealth was the concept of gratitude. And I thought this was really powerful because how gratitude can help enrich one's life. And if I take a moment to stop and think, of course I'm grateful, but I feel like every day in the moment, I don't take that time to stop and think. What are some of the other things that you've learned about gratitude? Well, gratitude and generally being gracious is about the most selfishly constructive or constructively selfish thing that we can all do. Just saying thank you makes us feel better.

Starting point is 00:06:15 There's now science that can demonstrate this psychologically and even physically. Expressing thanks, helping others, being generous. Not only does it have the benefit of hopefully helping the people you're trying to help, but you have a deeper connection to not only those people, but to your community and even more deeply to your humanity. So to me, it's kind of inspirational to think about the fact that being purposely generous and gracious can lead to a more meaningful life, which, you know, I think is kind of a win-win for all of us. Yeah, that's really powerful. So, but at a certain point, though, we all need a certain level of comfort to be secure, to be content, to be happy. But does money not buy any level

Starting point is 00:07:03 of happiness? What's the research on that? Well, again, we'd go back to the distinction between experienced happiness and reflective happiness. And in terms of sort of that day-to-day, you know, feeling good, feeling secure, when you live in poverty and you can't afford basic essentials, food, shelter. In that case, money absolutely buys happiness or at least a sense of security that's absolutely critical to kind of higher levels of kind of achievement and self-actualization. Countless studies have shown is that beyond what I'll call a middle of the road, middle class income, that, you know, have having a higher salary doesn't make a big difference. Once you can afford those basic things, you know, going from one hundred thousand dollars a year to a million dollars a year to ten million dollars a year does not buy you more experienced happiness. Your day to day is what it is. We all have psychological set points. happiness. Your day-to-day is what it is. We all have psychological set points. Some of us are naturally cheerful. Some of us are naturally gloomy. And we kind of go back to those set points. And having more money, having a higher income doesn't really make a difference in that

Starting point is 00:08:17 regard. So it's really about getting your head in the right position to not want to strive for what your neighbor might be achieving, to figure out a way to be happy in what you have and figure out what it is in your life that will make you content. Yeah, yeah. I mean, true wealth to some extent is a state of mind, but I wouldn't want to dismiss kind of the practical elements of it. In fact, you know, in the geometry of wealth, two thirds or more of the book is on the practical side of, okay, once you've thought about what a contented life is, how do you then go ahead and afford it? Because there's just no getting away from money. You know, we can casually say, and everyone says, oh, money doesn't buy happiness. But, you know, to some extent, as we've discussed, it does. On another level, and I think a very important one,

Starting point is 00:09:04 it hedges or eliminates sadness. And sadness and happiness are not opposite ends of the same spectrum. Those are distinct neural experiences. And so, you know, the thesis that I've been trying to put out with the book and other writings is that you need to calibrate both purpose and priorities. You have to have a plan. That's where financial advisors come in, not so much as a market expert or an expert on the economy, but really saying, hey, here's a roadmap. Let me help quarterback this plan for you and get you where you want to go with the understanding that when you get where you want to go, you're going to be like, oh, great. Now what's next? And that's a totally natural thing. That's actually a good outcome on the back of having the plan that's been put in place. Wow. Every time I talk to you about

Starting point is 00:09:54 this, I learn a different facet and I feel like this rabbit hole is never ending. So Brian, I really appreciate you coming on. We could do this for an hour and a half and not even scratch the surface. But Brian, tell people where they can find you, where they can read your books. How do we keep up with you? Oh, absolutely. So the main way to keep up with me is on Twitter. I'm at Brian Portnoy. My personal email is shapingwealth.com. And I work for an investment firm in Chicago called Magnetar. And at Magnetar dot com, we have a bunch of interesting stuff as well. Great. Well, Brian Portnoy, thanks so much. I'm sure I'll be back with you soon asking more questions about this because this is a topic that's near and dear to my heart. Awesome. Thank you. Bye. Bye.

The Compound and Friends - True Wealth is "Funded Contentment" (with Blair and Brian Portnoy)

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