The Wealthy Barber Podcast - #33 — John Y. Campbell: Why the Financial System is Broken and How to Fix It

Episode Date: November 25, 2025

Our guest this week is John Y. Campbell — a globally respected Harvard economist and one of the most influential voices in academic financial economics. Over his career, John has published more than 100 academic papers spanning fixed-income markets, equity valuation, portfolio theory and household finance.   John’s newest book, “Fixed: Why Personal Finance Is Broken and How to Make It Work for Everyone,” makes a compelling case that the financial system — while vital — is failing ordinary people. Between unnecessary complexity, steep fees, confusing products and poor incentives, most households are left navigating a system that isn’t built with their best interests in mind. John draws on decades of research to explain what’s gone wrong and how better product design, smarter regulation and clearer advice could dramatically improve financial outcomes. In this episode, Dave and John explore how the system can be fixed — from mandatory universal retirement accounts to simpler, standardized financial products, to improving disclosures on credit cards. They also discuss the pitfalls of active mutual funds, the challenges of financial advice models, the role of technology in impulse spending and the rise of gambling and meme-stock behaviour. It’s a wide-ranging and accessible conversation with one of the world’s top financial thinkers. If you care about personal finance, financial policy or simply understanding why the system feels so confusing this episode is a must-listen.   Show Notes (00:00) Intro & Disclaimer (00:55) Intro to John Campbell and His Book “Fixed” (05:14) How Should the Financial Industry be Fixed? (09:30) Mandatory Universal Retirement Accounts (12:52) Active Mutual Funds Have Costly Fees  (15:48) The Different Models for Financial Advice (18:37) How Standardized Financial Products Could Help (21:07) Life Insurance and Complexity (24:57) Two Thoughts on Debt (26:21) Technology and Impulse Spending (29:24) Gambling & Meme Stocks (31:19) Policy Ideas to Fix the Financial System (36:21) How Disclosures on Credit Cards Could Be Improved (38:33) Conclusion

Hey, it's Dave Chilton, The Wealthy Barber and former Dragon on Dragon's Dent. Welcome to the Wealthy Barber podcast. Well, we'll be hosting some of the top minds in the world of personal finance. Yes, that's to balance me out. The podcast is about making this subject not just easy to understand, but dare I say, even fun, honest. Whether you're trying to fund your retirement, figure out how to build a down payment, save for your kids' education, manage debts, whatever. we'll be here to help you do it. Before we jump in, a quick but important note,

nothing we discuss here should be taken as investment advice. We don't know you and your personal financial situation, so we're not here to tell you we're specifically to put your investment dollars. We're here to educate, get you thinking, and we hope entertain. But please do your own research and or consult with your financial advisor before taking any action. Hey, it's Dave Chilton, the Wealthy Barber with the Wealthy Barber podcast. I am beyond excited about today's podcast. I really am. What a guest we have. John Campbell. He's a Harvard professor, economics. He was formerly at Princeton. Where did you get your Ph.D. at Yale? You've covered off pretty much every Ivy League school. His advisor, by the way, was Robert Schiller. That was his advisor when he got his PhD. His background is amazing. If you go online and read about him, he commands tremendous respect in the world of financial economics. He's one of the big thinkers out there. He's written on asset pricing, asset allocation,

the macro world, et cetera. He's had a number of very prominent books, very impactful books, the econometrics of financial markets, which was turned into a musical years later. I'm kidding. Of course, it wasn't. But none of that, interestingly, is why I wanted him on the show so badly. It's because I came across this book at my local bookstore, fixed. And it is fantastic. I want to read this subtitle. It's why personal finance is broken and how to make it work for everyone. The title, I think, is a double entendon. I'm not sure if John would say, but he's got some solutions in there, some very innovative

ones, some very important ones, but really he was saying fixed as in the system is raped. It's rigged against the consumer. And so the purpose of today's podcast is to have him kind of walk through that thinking, how he got there, what we can do to make this a better situation, better the outcomes for the average person because right now, let's be honest, they're not where they need to be. Welcome to the podcast, John. Thank you very much, Dave. And yes, indeed, you're quite right about our title.

We considered using the word rigged, but it's been used for too many other book titles. So we went with fixed, meaning both the similar meaning to rigged, but also that we think there are ways to fix the situation that personal finances in. Give us a, you know, a three or four cent, a summary of the thrust of the book before we dive into some of the details. Okay, so our starting point is that personal finance is difficult. It's really hard. People make mistakes. We start the book with some very painful stories of things that have gone wrong for individual people in their lives and the impact on them. And then we ask, why is this? And part of it is just that finance is inherently difficult. It's

challenging. It requires numeracy and a lot of things that don't come easy to people. But the big theme of the book is that actually the financial industry is making matters worse, not better. And we argue that the mistakes people make in personal finance and their reluctance to shop around for good products has really corrupted capitalism. You know, what is capitalism? It's competitive provision of goods and services by private sector firms that are trying to make money. And when that works well, you get good products at low prices. But unfortunately, competition supplies the products that people think they want rather than what they actually need. So if people are confused, you'll get a lot of products with spurious benefits, hidden costs.

And then even beyond that, people don't like to shop. So they really get captive to certain firms that have brand names that can raise prices on them and really behave abusively. And finally, many financial products are hard to manage once you've bought them. You know, it's easy to make mistakes that rack up fees like overdraft charges on bank accounts or late fees on credit cards. And this, of course, creates more revenue for the financial industry, some of which is passed on to consumers up front. We get free checking accounts.

We get rewards on our credit cards. but the sobering fact is that the good deal that you or I might get because we know how to manage these products is partly the result of the bad deal that other less sophisticated people are getting. And there's a transfer really from the poor to the rich and we think that should be a matter of serious concern. No, you said all that extremely eloquently and you're bang on.

I mean, when you look at the financial industry, oftentimes they make things much more complicated than they need be. And my argument has been that mystery is margin, that the more complicated it seems, the easier it is to have the higher price product. I think you would agree with that based on what I read in the book. The simpler the approach, the simpler the product, oftentimes the better for the consumer. But do you really think that these companies are going to walk away from the profit margins they have now? How do we get them to move in the direction that you're so hopeful they will? Right. That's the big question is how can we,

shift this. And the last part of our book is about solutions. And we start by ruling out some simple things. So many people say, oh, it's financial education. Let's just do more financial education. I know, you know, that's the business you're in, really. It is. With your podcast and your books. And, you know, it's a very worthy thing to do. I'm involved in financial education a little but too, both at the college level here at Harvard, but also, you know, I'm on the board of the Council for Economic Education, which promotes kindergarten through grade 12, elementary, middle school, high school, financial education. It's a great thing to do, but we feel in the end it's not going to be sufficient by itself, because there's a race, if you like, between financial

education and complexity of the system, and complexity has been winning the race. And no matter how hard we run with the financial education, there's always going to be, you know, new products, new complexities, new bundling of different products in a confusing way. And so that by itself is not the solution. We also talk about technology. And we say technology can be very helpful. It can lower fixed costs. It can make comparison shopping easier. But it can be misuse.

And technology can be, you know, you can give. gamify things like gay trading stocks. You can make it so fun to gamble, basically, that you distract people from their true financial needs. We also come out as skeptics on the very popular approach known as Nudge. I love this part of your book, by the way. I thought you did a great job here. Oh, thank you.

Thank you. We, you know, we're responding to the famous book by Cass Sunstein. who's a colleague of mine at Harvard and Richard Thaler, the book was called Nudge. And he basically argued that you can help a lot of people by simply making a very mild suggestion, or possibly a default that will be, you know, like with a retirement plan,

you'll be put in the plan with a certain savings rate, a certain asset allocation. You can opt out easily, but the default will help people who don't know what they want to do. do. And this is very appealing because, of course, it has no side effects. It's like a medication that has no side effects. If you don't like it, you can opt out very easily. Who could object to that? Now, early on, this approach had some striking results. You actually can get

people to sign up for retirement plans by defaulting them in. And so people were very excited about this. The trouble, however, is that we ultimately, what we ultimately care about, is the savings that people have when they retire, right? We walk into have enough money, enough money when they retire. And it turns out that the initial nudge effect of signing people up sort of wears off over time because people change jobs, they take the money out, other people who weren't defaulted in, start saving later and they catch up, you know, things happen over life. And so the long-term effects are much weaker than the short-term effects.

So we say nudge is insufficient, and we have a chapter called shove. We say basically the government needs to get a little more aggressive here and actually shove the system rather than just gently nudge it. So what does that look like? So you go back to 401Ks, for example, and Ted Bena, and then you talk about nudge and they'll learn what they contemplated with the different default. But what does the shove look like? How much further can you go?

Right. So it's going to depend very much on, you know, the details of a particular country. It'll be different in Canada than it is in the U.S., different in Britain and so on. But we think the key is this theme of simplicity and universal access. So in the U.S., you know, over the last 50 years, we'd been multiplying tax favored retirement accounts. Right. You know, it's an alphabet. See, we've got 401Ks, we've got IRAs, we've got traditional Roth, we've got 429 plans, we've got ABLE accounts. Now we have Trump accounts, which are a little bit different. So there's a profusion of these accounts that people can use to look after themselves and save up for their lifetime needs. But profusion too often means confusion and people don't do any of it. The paradox of choice. Right.

What's also true is that people are disadvantaged if they work for a small employer or they're self-employed, because then they can't get a 401K, they have to open their own IRA, that's kind of daunting, and the contribution limits are lower. That's right. So we think at the date of first employment, there should be essentially a universal 401K that you can open. In fact, we would go further and say, you are required to open one. You can choose one from all the provider. but you have to open one, and then you can carry that with you for the rest of your life. Now, this is actually a little bit like the system they have in Australia, which is widely admired. You know, a universal carry it with you, single account DC system.

And companies could still match. So while you're at a company, they can absolutely still match dollar for dollar, but then you take those monies when you leave. Absolutely. Absolutely. And you don't have to, at the moment when you change jobs, you know, you either keep your old 401k and then, of course, you forget about it later, or you have to do a complicated roll over from one to another. It's all more difficult than it needs to be. And

that's sort of the big theme of the book is, let's try to think through simple product design that makes it easier for people to manage, but also very important, easier for people to shop for these products. That's right. Comparison shopping now is almost impossible because the complicated products that we put out there don't set up themselves up for apples versus apples. And so the consumer just kind of throws their hands up and walks away. So, you know, I think that's a very interesting idea. And would the government mandate your involvement and would they set a certain percentage of your income or would you not go that far? I think, you know, I think it's going to depend on the political economy, if you like, of our country. I mean, forced saving

in the U.S. is a really heavy lift. The land of the free. The land of the free. So I think I probably wouldn't go that far in the U.S. But that is what they do in Australia, and it works pretty well, actually. So, you know, but you have to be politically realistic about what can be achieved in a particular country with the culture that it has. Let's talk a little bit about some specific products. So in Canada, mutual funds have remained the equity vehicle of choice. We have not had the massive move to passive that we've seen south of the border. We've certainly had a move, but not the massive move.

Couple with that, the fact that our equity funds are often 200 to 250 basis points in annual fees, it's an unusual circumstance where many Canadians are finding themselves getting to retirement with 30 to 40 percent less than they could have had, would have had they gone a more simple and straightforward, a lower cost route. Why is that the case? Is it because products for the most part are sold and they're not bought? Yes, I think the practice of Using brokers as intermediary to push mutual funds on people is the source of a lot of problems. The evidence in the U.S. is that active funds that are directly sold, where you go to the website of a firm like Fidelity, you just buy it, those active funds actually end up competing pretty well with passive funds after fees.

The managers actually beat the market a little bit before fees. they don't give any of the reward to the investors. The investors break even with passive funds. But, you know, if you're a U.S. investor buying a directly sold active fund is not a terrible mistake. It's not going to benefit you, but it's not going to kill you either. However, if you buy a broker-sold active fund, those are the rip-offs because those funds don't beat the market before fees. and then they have high fees, including often front-end loads or back-end loads, large percentage fees that you pay when you buy in.

And that's really, that's the killer. And too many people still, even in the U.S. are doing that. One of the concerns we have throughout the book is the inequality in all of this, that, you know, better educated, higher income, people who have some sophistication about finance know how to avoid these ripoffs, but people who just are less familiar with finance struggle and often make the wrong choice. And I know that's, you know, that's a concern that you express, quite right. No, for sure. And I mean, again, the longer we're looking at the data, the more we realized how tough it is to help perform the broad market averages and also the impact of fees,

of course, is overwhelmingly negative. But the industry would push back and say, okay, John, you're making a lot of good points, but how are we supposed to make money? We've got a lot of people coming in who've yet to build up wealth. They're saving a few hundred dollars a month. If we don't put them in a product that has 100 to 200 basis point fees and we get them on an ongoing basis, we can't justify giving them the time it takes to develop a relatively well-rounded financial plan. They're not going to pay a few thousand dollars out of their meager savings to get going. What's the answer? Over time, is it AI stepping in to provide some of the basics and more efficiency. Yeah, I think this is an area where technology really does help. I think robo advising

now is pretty cheap, and it's going to improve with the arrival of AI, but even the sort of pre-AI version of robo advising, which essentially puts you in the equivalent of a target date fund, you know, that's not bad. I mean, certainly it's much better than paying high fees for customer advice, which may not be that good. I mean, the academic studies, there are some interesting academic studies of the Canadian financial advice industry, actually. What those studies show is that, you know, each advisor has their sort of thing, their shtick, you know, their portfolio that they like.

And then they put all their clients in that thing that it doesn't look like there's a lot of customization. And, of course, they're charging a fee for it. So I think one has to be concerned about it. without that. What about the fee-only financial planning model, whether it's a flat fee of a few thousand dollars or whether at least it takes the commission out of play and let's say it's 70 basis points per year? What about those models? Do you think they're more likely to benefit the consumer? Yes. I think fee-only financial advising is the way to go. If you need financial

advice, whether it's from a robot or from a human being, I think paying the fee, understanding audit costs and then getting, you know, objective or neutral, unbiased advice, that is really the way to go. And I think that model will take over in the next 10 to 15 years. Do you know what? I mean, even in the States, middle income and up, you're seeing that model more and more often. In Canada, a little bit less so, but some of our more prominent firms are going that

road. I do think you'll see it. Now, again, a lot of those firms don't particularly want to deal with people starting out, people with less money, because they don't have the assets under management that they're bringing over that are going to make much of a difference to the firm's bottom line, those people have to do it on their own quite a bit, whether it's reading the wealthy barber or using robo advisors, but how do we educate them initially? And I know you're saying that education can't do it on its own, but how do we draw their attention to all of the problems out there?

I would argue that the biggest message I try to deliver is keep it simple because not that's what you can grasp. That's what works. Yes. And you know, I think we what we want to try to do here, Dave, is we want to try to exploit the power of inertia and doing what everybody else does. I mean, because it's very striking when you compare countries around the world. Everyone has a different financial system. And in every country, people say, well, of course it's our way. What do you mean you have some other weird institution, right? So people get used to what they are familiar with.

And if you can establish sort of, you know, benchmark products that people, people know and trust and get used to, then they can be offered at lower cost because they don't have to be marketed so aggressively. So, you know, one example that we talk about in the book is reverse mortgages or, you know, ways for older people to extract home equity when they're retired, when they might be short of cash to support their retirement, but they maybe own a big house and they don't want to move, but they need money. So a reverse mortgage is a product that's designed for that.

But unfortunately, you know, they have a pretty low market share and also a bad reputation at the moment because they tend to be expensive. Right. They're expensive in part because of the marketing costs because you're trying to reach suspicious and easily confused seniors. And so it's sort of the product is trapped in a bad equilibrium where it has a small market share. because it's expensive, but the small market share makes it expensive. And it's expensive in what way? Because the interest rate is a premium rate, higher than the conventional borrowing rate, and also there are fees associated with it oftentimes.

Yes, exactly. And I mean, I will mention that one other problem that arises is that many seniors exaggerate the value of their home, which of course, is the collateral on the loan. Right. So they think the borrower thinks the home is super valuable. The lender maybe more objectively understands that it's not. So that creates an issue. But I do think that with a bit of a push from government to establish a standardized product

and sort of put it out there that, yes, you know, here's the standard product, these are the terms, this is the way the rate will be quoted. It's a good thing now go out and shop. You know, we could harness the force of competition to lower the cost. Agree. No, I agree. In Canada, interestingly, a lot of people have kind of done this with the help. of their adult kids, the people taking the reverse mortgage maybe 70, so their kids are

45, have set up their own into some extent. They've used a HELOC, a home equity line of credit to keep the interest costs down and kind of manage the cash flow forecast going forward because they've wanted to avoid those high rates. I think there is some competition now and you're seeing the rates come down closer to the conventional lending rates, but they're not there. We haven't been burdened by quite as high a fee set as some of your reverse mortgage offers have been. All right, let's move over to the most complex of all areas, life insurance. You talk to the average consumer and they have no feel. Frankly, you talk to people in the financial business often and they have very little feel

for how insurance truly works, what one makes sense, what kind of policy, what amount even makes sense? What are your thoughts on the insurance industry and the way that that product is marketed to the consumer? Insurance certainly is an area where complexity and bundling creates problems. the traditional whole-life insurance policy that builds up cash value, you know, that is really a bundled saving an insurance product. It's very hard to evaluate. You know, many years ago, there was a case for it based on tax advantages that you could save tax-free within a life

insurance, a whole-life insurance vehicle. But of course, the rise of 401ks and IRAs has really taken that rationale away. And I think in today's environment, it makes much more sense to have term life insurance, which is much simpler, easier to understand what you're getting, and combine that with saving in a 401k or equivalent account. Yeah, absolutely. And you know, you go back to the traditional whole life. One of the challenges I always had with the product was that you're paying for two services. You're paying for protection if you die, protection for your loved ones, protection for yourself if you live through the cash value building up, but you can't receive both. In the old-fashioned traditional product,

pre-Universal Life. You only got one of the two. You can't be simultaneously alive and dead. And that was another problem with the product. And again, the complexity of the product is so few people understand it. I'll never forget this. I'm at a conference in the States in California. I'm speaking on personal finance and after we're going back and forth about universal life. And two actuaries who've been involved in developing the specific company's product are arguing back and forth about how it works. There are two actuaries working for the company having a heated exchange about how the product works. And you're going, well, that is a complex product when the actuaries can't come to grips with exactly how it works and they're going

back and forth in a heated manner. So how is the average consumer supposed to understand all this? So now when we hear about, you know, infinity, banking, etc., it's way beyond what the average person can grasp. Yes. And, you know, there are some other problems I'd like to highlight. I mean, one thing that's become clear in recent years is that there's this huge issue of lapsing in life insurance. So people buy these either a long-term life insurance policy or a whole policy. They start paying and then, you know, somebody loses their job or a health crisis or you just forget to pay and you let the product lapse.

Now, on the one hand, the insurance company doesn't love it if you lapse immediately because they're selling costs. They want to get a few years of premiums. But actually, they do benefit if you lapse, you know, after a few years, but before you get to the end. because with life insurance, early on, you're young and healthy, you're very unlikely to die. They're not going to be paying out in the early years. So they're just collecting the premiums and investing them.

And if you then lapse, the cash value that you get when you lapse is nothing like what they've been able to earn on your premiums. So they're laughing all the way to the bank, and the person who lapses has really lost out. This is another area actually where cross subsidies arise because... For sure. That's the best example. You know, it lowers the premiums that everybody pays. So I might be able to get cheaper life insurance because other people are losing out. And, you know, we think it's an illustration of this problem of cross-subsid.

No, that's a great example. Maybe the best example, in fact, of all. What about on the debt front, obviously, the credit card industry? I mean, when I was young and you and I were approximately the same age, credit was made available by certain institutions. now credit is aggressively marketed. They are trying at all times, all different angles, to get people to borrow. What are some thoughts on everything from credit cards to lines of credit? Let me offer two thoughts, two principles.

One is credit is cheaper if you arrange it in advance, right? Before you need it. So, indeed, you know, having a credit card or a line of credit, which is set up before the emergency, tends to work out better than you know, suddenly being caught short and desperately trying to look for for sources of funds. This is what, of course, leads people in the U.S. to very high-cost lenders, like payday lenders. The second thought is that things generally go better when credit is tied to income what you're going to use to pay it back rather than tied to spending what gets you into debt in the first place. So we're in favor of innovations like paycheck advance credit where employers can, you know, accelerate a paycheck a little bit in implicitly lending the employee's money.

We think that's much better than buy now pay later credit, which is tied to impulse spending and encourages people to overspend because it doesn't feel like you're spending any money. No, those are great points. In fact, you brought up the impulse spending. We see more of that now than ever, of course, not because humans have become. but because technology through the algorithms has become better at exploiting our weaknesses. And the technology that you and I talked favorably of earlier, maybe AI steps in and it helps people with their financial advice and their financial programming, but it's also can work against us quite easily. And of course, it is. What are some thoughts on that?

Sometimes people say, well, look, all these problems are going to be fixed by having AI agents, right? We're going to have AI agents, which will look after us. Well, my reaction to that is, how do you know who the agent is working for? I mean, who's paying the AI agents electricity bill? And in academic economics, there's a branch of economics called agency theory, which is about how agents can kind of go off the rails and work for themselves rather than working for you. You think you're employing the agent, but actually they're acting in their own self-interest.

And I really worry about AI agents. you know, having those conflicts of interest. When you go back and we talk about the algorithms again and people are online, they're on all their social media sites, I mean, temptation is everywhere. We talk about keeping up with the Joneses, but the Joneses used to be, and literally in the initial paper, where your neighbors, people of similar incomes, similar values of their homes, et cetera. Now, of course, you're trying to keep up to the Kardashians.

You're seeing everybody, you're seeing all your friends at all their highlight moments. How psychologically does the average consumer fight some of this all? and not give in a temptation. I've suggested a lot of old-fashioned things, like the Stephen Covey inject 24 hours between the decision to buy and the actual purchase, because oftentimes that makes you walk away. But what other thoughts do you have on that front? I wish I could be helpful on that.

I feel, actually, this is where psychologists are needed to, you know, help people overcome their biases and temptations. It's a really hard one. And a lot of the advice is, you know, sounds. sort of old-fashioned and moralistic, you know. Beware of gambling, you know, don't drink too much. Things love for this, you know. I think it's going to vary across different people and there's different demographics,

different ages. You know, it's interesting in the course of publicizing this book, I've been on a number of podcasts, personal finance podcasts, and very often there's a target demographic. So, for example, I was on Money with Katie, which he targets. millennial women. And I think some people do use podcasts that are targeted to their demographic as a way to kind of help strengthen their understanding and their

willpower and avoid temptation. And, you know, maybe that's a good approach. Sign up for a personal finance podcast, whether it's the wealthy barber or something else. Well, I don't drink and I don't gamble. So at least we've got that part down. It's interesting, by the way, sitting back here and watching a lot of the spending summaries I've sent, how much gambling we are seeing now. I mean, the gamblification of the markets even. I mean, when you look at

the meme stocks, et cetera, that's just another form of gambling. My argument is this is 95% isish male, young male. We're not seeing the young female market behave this way. For the most part, they're doing the right thing or at least trying to do the right thing. Is this testosterone-driven, what is it that has pulled these young men into this very aggressive form of betting, in essence, stocks, meme stocks, and whatever else. Yes. And, you know, it's also sports betting. For crazy the numbers.

And now, you know, the prediction markets have been deregulated and a lot of what's being done on those prediction markets is sports betting. Absolutely. And, of course, then we're seeing scandals within sports because you get corruption, unsurprisingly. I struggle with this because, you know, I'm just a person. that is, just the way I'm wired, I've never seen why gambling is appealing. But, of course, I've worked with many people in the financial industry over many years, and actually many, many people employed in the industry do, do like to gamble, and it's, you know, typically they will do it in a controlled manner.

But, you know, lots of people I know like to fly to Las Vegas for the weekend, and I've never seen the deal. But I'm aware I must be missing something. I studied your background very extensively, all the things you've written, at great papers on asset allocation, for example. If you were also buying meme stocks in the background, I would be rattled. Okay, so I really would be. I would be rattled.

So I'm really glad to hear that you're not doing that type of thing and that you're not taking junkets to Vegas every second weekend. It would be very inconsistent with what I've learned about you through my reading. So, no, it's good to hear. Okay, in summary, talk a little bit more about the last part of the book and some of the ideas that the two of you advanced and things that you think governments and policy makers throughout the world should be looking at.

Are we stealing ideas from some of the countries who've done certain things well and trying to combine them in innovative ways in the US, Canada? Yes, absolutely. One of the things we argue is that it's important to look around the world and see places where good products exist. So in the book, we mention a few examples.

You know, Germany has a very basic checking account called a Basis Conto, which is available. for anyone and is very simple and easy to manage. So we recommend that. We think in the world of fixed rate mortgages that Denmark has very good institutions that are significantly better than the U.S. system. And actually, you know, there are also emerging markets that have leapfrogged some of the legacy systems that we have in this country. So, you know, in Brazil has a kind of central bank digital currency that makes payments very cheap. So there's some interesting innovations there.

Well, even in Africa, it's amazing how many of the impoverished nations leaped ahead on payments. Right. Because they had to. They had so many unbanked and didn't have the capital formation to allow them to do it the traditional way that they got innovative. And I think we will see more and more of this going forward. But do you think a lot of this comes down to can we convince policymakers to make some changes? Because as I said earlier, will the industry embrace things that in essence are going to shrink in margins? We're living through a period now where there's actually a backlash against consumer financial protection regulation.

And of course it's happening in the U.S. with the Trump administration shutting down the Consumer Financial Protection Bureau. But interestingly, it's also happening in the UK where there's a center-left government that is also trying to roll back this type of regulation. Now, part of the reason is that a lot of this regulation came in immediately after the global finance. crisis in 2009, 2010, and people kind of confused, mixed up the rationale for consumer financial protection with a general concern for financial stability. And they say, you know, we've got to put in all this regulation to stop the banks from failing. Well, the memory of that crisis has faded, and now, particularly in the UK, there's a big worry

about growth and a feeling like we need to deregulate to unleash growth. But I think, in fact, the reason for consumer financial protection regulation is different. It's not really about financial stability. It's about addressing all of these problems that we've just been talking about for the last half hour. Now, the other problem is that the type of regulation we've had for the last 15 years or so is very backward looking. It amounts to the regulators coming in and saying to big financial institutions, we want you to be nice to your customers and we will decide what that means

and if we decide ex post that you weren't good to your customers we will fine you, we will name you, shame you, damage your brand and understandably the private sector hates this because business people want to know what the rules are so they can compete within the framework of the rules

so we think that for the future consumer financial regulation needs to be forward-looking and design-focused. We think the regulators need to do the hard work of specifying what a simple, easy-to-use, easy-to-shop-for product looks like, and they should mandate that these products be offered. Now, they're not going to say what the price should be. They're just going to say how you quote the price. Right.

And they're not going to ban firms from offering other products. but the goal is to try to establish simple products, which we call the starter kit, the kind of things that people should start out with, that these should become familiar enough that people naturally buy them, know how to shop them, shop for them. The vision really is that buying a financial product

should be more like buying an over-the-counter pain medication. You have a headache, you go into the pharmacy, You go to the shelf labeled painkillers, and you see ibuprofen. There's the brand name, you know, Advil or whatever, but there's a generic bottle right next to it. You know the active ingredients are the same. You know the dosage is the same. There's a little label on the shelf that tells you the price per dose,

and then you choose a product. You know, it's interesting after doing this for all these years, the starter kit products that you're advocating for, most people should never stray from those. Right. You end up complicated. things and think, I've got the basics down, but then you go backward in terms of performance fees and everything else. The starter kit products are the ones that most of us should just

stick to. I do have one more thing. I know you have a lecture and I'll be quick, but I thought you made a phenomenal point in the book about how the disclosure that we pushed for in the financial industry has almost worked against the consumer because it's so intimidating, so overwhelming that it hasn't been taken in. We have to make some changes to how the disclosure is communicated. A lot of disclosures are really too much and hard to read. So, you know, in the U.S., we have this thing called the Schumer box after Senator Charles Schumer, which describes credit card terms. And it's quite off-putting to read.

And, of course, you know, when you get a credit card offer in the mail, very often the bank will make sure that there's a nice glossy picture of a cruise ship or something that you'd rather look at than the Schumer box. But beyond that, a lot of the disclosure focus has been on. on giving people the APR, you know, the annual percentage rate. For sure. And that's important information. But I think we've forgotten that for many ordinary people, interest rates are not very easy to think about.

And people more naturally think in dollar units, you know, how many dollars are I actually going to have to spend on this credit? If I take this loan and pay it back at a certain time, what's it going to cost me in dollars? So put an example or is that what you're saying? Yeah, so we think that disclosures, we certainly want to keep the APR disclosure, that's very important, but we think that sort of disclosures of dollar costs in certain simple standardized scenarios will help people who, you know, didn't get an economics degree in college to really think through what this credit means for me in terms of my budget. because people budget in dollars. They don't budget in percent APRs. People stink at percentages. In fact, don't you find it interesting that even a lot of very strong people in math,

and of course you are surrounded by them, are particularly good in percentages on percentages. So you have a lot of good math minds that will say 50% is 25% more than 25% when it's actually 100% more. Like all of that, you see that mistake very commonly, again, from very bright people. Anyway, I do have to wrap up. Enjoyed this immensely. I want to say a couple more things about the book. Well, you mentioned reverse mortgages earlier. I did want to say one thing about the U.S.

reverse mortgage commercials. You apparently have to be very good looking and have a golden retriever to qualify for a reverse mortgage in the U.S. Based on the commercials, those are two criteria. But I want to plug the book one more time. I want to hold it up because, again, I enjoyed it immensely. And two things, your back cover quotes may go down as the greatest collection of back for quotes in the history and financial books.

holy smokes, did you get the big hitters to step up? So credit to you and it really speaks to how much you're respected in the industry. But the last thing is, any of us out there here that it's written by a professor of economics at Harvard, there's a thought that's going to be a bit intimidating, maybe tough to grasp, not at all. The book is very clear. It walks you through the logic of all the arguments the two authors are making in a fashion. You won't have any trouble grabbing onto. I highly recommend the book. I actually found to be quite a quick read and didn't get stuck on it at all, enjoyed it immensely, and it was very generous of you to find the time to come on. Well, thank you so much for having me, Dave. This is a great conversation.

Yes, I'm sure we'll see each other again. Be well. Take care.