065: Daniel Crosby on Why Financial Advisors Need to Understand Human Behavior to Better Serve Their Clients

[INTRODUCTION]

 

Welcome to this episode of the Elite Advisor Blueprint Podcast with your host, Brad Johnson. Brad’s the VP of Advisor Development at Advisors Excel, the largest independent insurance brokerage company in the US. He’s also a regular contributor to InvestmentNews, the Wall Street Journal, and other industry publications.

 

[00:00:27] Brad Johnson: Welcome to the Elite Advisor Blueprint, the podcast for world-class financial advisors. I’m Brad Johnson, VP of Advisor Development at Advisors Excel, and it’s my goal to distill the best ideas and advice from top thought leaders and apply it to the world of independent financial advisors. On today’s podcast, Dr. Daniel Crosby is back for round two. Daniel’s first appearance is still one of our shows most downloaded episodes today, so I’m honored to have him back on and I know all of you are going to get a ton of value from this one. And for those of you who missed our first conversation, you can find it at BradleyJohnson.com/38. In this conversation, we dive into Daniel’s most recent book, The Behavioral Investor, in which examines the sociological, neurological, and psychological factors that influence our investment decisions, and sets forth practical solutions for improving both returns and behavior. It’s one of the most comprehensive examinations of investor behavior done today and he provides readers with concrete solutions that will refine their decision making processes, increase self-awareness, and help them constrain the fatal flaws to which most investors are prone. 

 

Here are three of my big takeaways from this episode. Number one, Daniel gives advice for financial advisors, whose clients are interested in cryptocurrency and other emerging tech or investments and how to navigate those conversations. Number two, what’s your primary role as a financial advisor is and what your clients are wired by evolution to want, which also tends to be in constant opposition. And number three, how the best financial advisors build financial plans for their clients rather than portfolios in order to help them get where they want to go. 

 

Okay, before we dive into today’s episode, as a special thank you to our blueprint listeners, Daniel was kind enough to get us some copies of his latest book, The Behavioral Investor, and I will be mailing those out until they’re all gone. So, here’s what to do next if you’d like your free copy. Number one, I just ask that you leave an honest review out on iTunes for our show. To make it easy, there’s a graphic right at the top of the show notes, BradleyJohnson.com/65. 

 

[00:02:32] Brad Johnson: Or if you happen to be listening on a mobile device or a mobile player, most times you simply need to scroll down and the link will be right there in the show notes. Number two, once you’ve left a review, just drop us an email via brad@bradleyjohnson.com with your iTunes username and the best mailing address and we’ll drop you a copy in the mail as a thank you. That simple. Also, quick apology to our international listeners outside of the US who have been kind enough to leave reviews. Due to shipping prices, we can only ship these domestically so please just go support Daniel and grab a copy of his book at your local bookstore or out on Amazon. So that’s it. As always, thanks for listening and without further delay, my conversation with Dr. Daniel Crosby. 

 

[INTERVIEW]

 

[00:03:17] Brad Johnson: Welcome to this episode of the Elite Advisor Blueprint. Dr. Daniel Crosby is back for round two. Welcome to the show, Daniel. 

 

[00:03:25] Dr. Daniel Crosby: Yeah, man. Great to be here. 

 

[00:03:26] Brad Johnson: So, we’re already off to a win. The last episode, we had the last second curveball with someone getting a massage in the podcast recording studio. That didn’t go down so I feel like we’re already ahead today. So, let’s dive in for round two. One thing as I was, you know, I always like to go back and review previous conversations just to kind of get a refresh. Your show has been one of the top downloaded that we’ve ever done. And I think it just shows the need for basically all that you teach about, behavioral finance and all of the things that advisors out there struggle with, with really control the emotional side of their client’s investing behaviors. So, because the timing just so happens to be right, I noticed that Bitcoin is back to the spike. It’s like every time we get together for an interview, apparently the Bitcoin gods they show favor because it’s now that’s all back all over the news with crypto. So, let’s just open the conversation there. Do you own any Bitcoin today? 

 

[00:04:28] Dr. Daniel Crosby: I don’t. No, I don’t and I think sadly I wish I could attribute more of it to me but I think the talk around Bitcoin was a lot of what boosted the last one so let’s give it another go. You know, I don’t own any cryptocurrency but I will say I have a deeper understanding and more respect for it than I did initially. You know, I think initially I was very dismissive of it and listening to Patrick O’Shaughnessy’s deep dive on it on his podcast, actually made me sort of understand some of the philosophy behind it. I think a lot of the people that are engaged in trading cryptocurrency day-to-day are not sort of deep-seated philosophical libertarians that buy into it for sort of its intrinsic value. I think they’re just sort of a greater fool type scenario where they’re trying to sell it for more than they bought it for, but I will say I was really, really dismissive of it early on and that I gained at least a deeper understanding and appreciation of it. And so, I think the next time a big innovation comes around, I’ll be slower to dismiss it, I think. 

 

[00:05:32] Brad Johnson: It’s interesting. I now do officially on some Bitcoin and part of it was just being in the financial services space. I wanted to have a smallholding so I could understand just how it works and how if the market’s up, how does it correlate and one of the followings there’s been a few things that I’ve read on it, but Andreas, I’m going to mispronounce his last name horribly, Antonopoulos. Are you familiar with him at all? 

 

[00:05:55] Dr. Daniel Crosby: I’m not. 

 

[00:05:57] Brad Johnson: So, he wrote a book called The Internet of Money. I think this is interesting because I guarantee as Bitcoin or crypto, in general, becomes more prevalent if the price continues to spike, it’s going to enter once again into the conversations financial advisors have with their clients. Most of our advisors are working with retirees. So, that’s really scary when you have a volatile cryptocurrency that retirees are looking at investing in. But one of the analogies I thought was really interesting was he made the analogy of just the technology. He didn’t make bets on the actual currencies, whether it’s Bitcoin or any of the others out there. He said the technology is sound. What we don’t know are the winners and he compared it to email when it first came out. He’s like, “It took me three days.” This was like a hardcore computer nerd, right, and he’s like, “It took me three days back in like the mid-90s to send an email because the technology was so new and nobody there weren’t all of the different systems built around it today.” He goes, basically that the way that he looks at crypto is the same way. It’s in its infancy. 

 

And so, that’s where you have all of this misunderstanding and all of these spikes and prices because people don’t really understand how it’s going to be used. So, it’s like betting on a dot-com company in the late 90s. So, I just wondered if there was any other thing because I know you live and breathe this world all day long that you might be able to give some advice for financial advisors out there where these conversations are going to continue to enter. As this technology becomes more prevalent, obviously there’s a lot of behavioral finance behind those questions. So, if you were going to give advice to financial advisors out there with once again kind of a spike in crypto you’re seeing out there, any advice that you would give them?

 

[00:07:31] Dr. Daniel Crosby: Yeah. So, first of all, I’m going to speak to this first concept. It’s this behavioral tendency to confuse the impact of a broader movement with the fortunes of a specific company. So, you look at something like Internet search, which has been absolutely transformative but if you had bet on the early internet search companies, you’d be owning stock in Yahoo or Ask Jeeves or FlipDog whatever those little early search engines were. And Google was like Google was double digits in. I mean, they were like the 18th search company or something like that. And who’s to know? So, the technology transformed the world. Airlines are the same way. I mean, air travel was absolutely transformative but you look at Buffett and he says he wishes he could have shot the Wright brothers there on Kitty Hawk that day because he’s invested in airlines over the years and has always lost money. 

 

So, airlines have been a horrible investment and yet air travel has absolutely revolutionized the way we do business. And so, you got to be careful not to confuse the transformative nature of a movement, like blockchain with the fortunes of a specific company, and so ideas around diversification are as present here as they are anywhere. So, to the extent you can invest in the underlying principle or the underlying movement and not on the fortunes of one specific company or one specific currency, I think that’s a wise thing to do. And the second thing, I think, would just be to be educated. I forget who wrote it but right behind me, I’ve got a book called Cryptoassets that I read that was really fantastic and it really did give a deep dive on the subject. I attended a conference here in Atlanta, a blockchain conference here in Atlanta and again, like walked away with a more nuanced understanding, not enough in the end to get me to invest but at least to be able to speak about it coherently and to understand why people do. 

 

[00:09:40] Dr. Daniel Crosby: And so, educate yourself, read Cryptoassets, follow people like Tyrone Ross Jr., a financial advisor who is I think has a very balanced take on this and gives good advice, and don’t fall prey to either extreme, the extreme, no coiners who just hate this, and maybe have some sour grapes because they’re not driving a Lamborghini or the diehard enthusiasts that are sort of blinded by their optimism. So, that’s sort of three things I think you could do. 

 

[00:10:11] Brad Johnson: Yeah. I think it’s really interesting when so Andreas, that I brought up earlier who is I think one of the foremost experts out there, he literally says he spends all day every day on one coin, Bitcoin. And I don’t know how many hundreds there are out there now but it’s like you’ve got all of these like pop up hot dog stands in New York City that are like each slinging a different coin and here’s why this one’s going to be the best and that’s really dangerous stuff to get into. So, really to summarize what I heard you say is if you’re going to look at the crypto space from an investment standpoint and the broad movement where I think, “Hey, this technology over time is going to win versus the technology today,” you would invest broadly in some form of ETF in a smallholding because of the volatility and obviously, that’s all going to be dependent on each individual investors, time horizon, and all of that but diversified and smallholdings because the volatility were kind of a broad overview of some of the things I took from that. 

 

[00:11:08] Dr. Daniel Crosby: Yeah, absolutely. I mean, you never want more than about 4% or 5% of your wealth in any single holding, whether it’s a currency, an individual equity or anything else. And I don’t know for sure but I would guess that many or even most crypto enthusiasts have a great deal more than 5% of their total wealth in those holdings. That’s dangerous for an asset that you see go from 20,000 to 3,000 and back to 10,000 over the course of a very short period of time. You know, volatility cuts both ways. And so, the same sort of exciting upside volatility that gets us talking about it today that cuts to the downside too. So, yeah, you’ve got to let this only be a small percentage of your portfolio, even if you love it, just because I would say that about any asset class.

 

[00:12:01] Brad Johnson: Well, yeah, and crypto comes with one other and I’m not going to turn this into a 60-minute crypto conversation. I just think it’s interesting when we look at real-world that a lot of behavioral finance plays into that right now. The other danger with crypto that’s crazy scary that I don’t think most people realize is if somebody hacks my US bank account, there’s measures in place where US Bank that’s why it takes three to five days to transfer asset. Somebody hacks your crypto account, that money is gone forever and there’s no coming back from that. I think the average investor in that probably doesn’t understand to the level that that money could just disappear if you don’t properly store it. So, there’s a lot of understanding that needs to happen around that as that industry evolves. 

 

[00:12:43] Dr. Daniel Crosby: Well, it is a tricky conversation and one of the things that I learned from listening to O’Shaughnessy’s podcasts, the whole beauty of crypto is its decentralized nature. But once you keep it on one of the exchanges, a Coinbase, or one of these exchanges that make it easy to transact and keep track of, it’s just like a traditional bank account at that point. It has been recentralized. You’re prone to the single point of failure problems that we set every other financial institution. So, what makes it important and what makes it attractive and what makes it usable and sort of easy to hang on to are at times different conversations. And so, I’m confident that smart people are going to iron these things out but it’s not the kind of thing that you want to jump into just because everyone else is. And you know, the ultimate utility of Bitcoin and the blockchain will depend on its use outside of speculation. 

 

I think even the most ardent Bitcoin enthusiasts would say, “It’s primarily a vehicle for speculation right now.” We’re still not, I mean, there are Overstock.com, and the odd website takes it, but we’re still mostly just speculating in crypto right now. And ultimately, its staying power is going to depend on how we utilize it outside of speculation. And so, that’s another thing I’d be on the lookout for but, interestingly, I and others have been looking for it to do well at times when the market does poorly to see whether or not it would because it’s been referred to as a sort of digital gold. And you know, in fact, with recent dips in the market, recent political uncertainty, it’s done quite well. And so, that’s an interesting thing to observe, because the last time we had volatility, it kind of flatlined a bit. So, if it can provide sort of a real diversification at times of turmoil in the markets, I think it will begin, you know, folks like me will begin to give it a second look. 

 

[00:14:45] Brad Johnson: There’s just all kinds of crazy things that it leads to it like it’s the first money that doesn’t require a human to be in charge of it. And so, in the future, you could load up your refrigerator with five Bitcoins and say, “Hey, when we get low on eggs, buy some eggs from Amazon or Whole Foods or whatever.” And so, there’s all kinds of utilities in the future that I’m sure 10 years from now are going to blow our minds. 

 

[00:15:06] Dr. Daniel Crosby: Yeah, I mean, look man, I’m from a conservative religious background and I’m from Alabama so although the doomsday stuff I love like all those sort of like hands off my money stuff speaks my language, I’m anxious for the day when it really does sort of take the middleman out of the equation because I do think that’s the real value of it. I think it remains to be seen whether it still needs to be intermediated by the Coinbases of the world to make it useful. Because if we can cut the Coinbases of the world out, I think it gets a lot more attractive. 

 

[00:15:39] Brad Johnson: Yeah. You can go dig up your gold bars and trade them in for Bitcoin. Is that what you’re saying? 

 

[00:15:43] Dr. Daniel Crosby: Oh, yeah. Oh, yeah. 

 

[00:15:45] Brad Johnson: Cool. Alright. So, let’s dive into your book. So, I have it right here for those joining us on video. The Behavioral Investor, which, what’s the diagram that on the front? What are those called? What’s the term?

 

[00:15:57] Dr. Daniel Crosby:  It’s a Rorschach or an inkblot. 

 

[00:16:00] Brad Johnson: Which such a cool – whoever came up with your book cover, that was brilliant. So, I don’t know if you’ve had that one up or who did it, but…

 

[00:16:08] Dr. Daniel Crosby:  I dreamed it up. I certainly didn’t execute it. I said, “Give me an inkblot bull,” but all the execution props to my publisher Harriman House. They did a great job with it. 

 

[00:16:17] Brad Johnson: Cool. So, Let’s dive in. I love, well, you had me right from the beginning because you referenced the book, Sapiens, which is one of my probably top five reads of all time. So, let’s just dive into kind of the key things you said there. You use this analogy from the book, Sapiens, of drop one man on a deserted island and one monkey and who survives a year later? Probably the monkey. But drop 100 humans or 100 monkeys, and probably the humans. So, let’s dive into that concept but then how you started to use that to define some behavioral characteristics when it comes to just finance in general. 

 

[00:16:53] Dr. Daniel Crosby: Yeah. So, the notion with this monkey example is that the great genius of humankind is that we can work collectively like we don’t have sharp claws, we don’t have sharp teeth, we don’t have fur or big muscles. We’re not very powerful by ourselves and we’re not very clever but when we get together, we can operate around what Yuval Harari of Sapiens fame calls these functional fictions. We can do things like write a constitution, create an economy, create state borders, create laws that allow us to coexist and cooperate and work together and build great civilizations and sort of live at the top of the food chain. So, foremost among these is the financial markets in which we all operate. These are sort of the greatest of all the functional fictions. And so, we’re presented with this sort of odd paradox, which is our greatest invention is also sort of total nonsense. 

 

The green pieces of paper that you and I spend our lives and everyone listening spend their lives toiling for are really just an outcropping of human psychology. And so, the point I try and make there in the first third of the book is there’s no understanding of capital markets without understanding human behavior. Capital Markets, the bottom-most hurdle, the foundational atomic level of a capital market is human behavior. And I talked about atom, and how early scientists used to conceptualize they had an idea of an atom, but they had no idea what it looked like. And so, they had this idea that it was kind of universes all the way down, like, atom looked like a tiny universe that had tiny universes inside of it. And I say it was only as we gained an appropriate understanding of what an atom was and what it looked like and how it function, that we were able to harness the power of an atom to light up a city or to blow up a city. And similarly, it’s only as we understand sort of the root causes of human behavior that we’re able to effectively navigate capital markets. 

 

[00:19:03] Brad Johnson: Yeah. It’s the thing I took from Sapiens, I mean, that book, I reread it a second time just because it helped me understand how much humans go about their day, not really realizing why they go about their day that way. Kind of the underlying principles through evolution that have allowed us to survive and it goes right into investing where these things that have allowed us to survive, you shared an example of they unearthed I think it was 150,000-year-old human, Homo Sapien, and basically, our brains have stayed the same size over the last 150,000 years. However, the markets were essentially just created at least in the form they exist today about 400 years ago. So, we’ve got this old school computer in our heads, trying to now adapt to a completely different set of rules in today, and that’s not even taking into, I mean, we just talked about Bitcoin. That’s within the last handful of years. 

 

So, the financial world is continuing to get very, very complex and how does this old school brain keep up? So, what are your thoughts on just sticking to kind of the front third of the book, some things you uncovered that financial advisors can help their clients understand or coach or educate them on to start to guard against themselves for lack of a better term?

 

[00:20:21] Dr. Daniel Crosby: Yeah. So, this point about the oldness of our brain with respect to the newness of capital markets is important. And also, our brains are just so hungry. Like this is one of the takeaways for me. Your brain accounts for about 2% to 3% of your body weight, but it accounts for somewhere between 25% and 40% of your metabolic expenditure, your caloric expenditure in a given day. And so, that’s enormously inefficient. And so, our brains are constantly, constantly looking for ways to work less. We are constantly looking for ways to think less. That’s one of our primary motives as a human being is to think less. And that is a really damning indictment of trying to make good investment decisions. And this is especially true when a decision is emotionally laden or complicated and financial decisions are all of those things. 

 

So, I talk in the book about how people who are watching someone they perceive to be a financial expert on TV, the parts of their brain associated with critical thinking and decision making actually go to sleep. Now, that just is what it is. We sort of laugh and go, “Oh cable news is making us dumb,” but that is exactly what our clients want. But it just has to be us. It just has to be us like we have to be the ones tucking that brain into bed and not some guy screaming about markets and crisis and giving impersonal advice. And so, understanding as an advisor that your primary role is to help your clients think less about these things is sort of a twist. Because we go, “Oh, I want to educate them,” and that’s all good but really what they want is to not worry about it. They really want to not worry about it. So, anything we can do to sort of take this off their mind or put their mind at ease is exactly what they were evolutionarily wired to want. 

 

[00:22:20] Brad Johnson: Yeah. It’s actually kind of a scary thing when you think about it. And then that’s why there’s so much regulation, suitability compliance around financial services is actually the very best advisors I’ve ever seen, they really simplify this ultra-complex world into core basic principles. Kind of like your book had four key parts to it, right? And the problem is people can take advantage of that, right? So, if you’re a great financial advisor out there, building a holistic plan that’s kind of built on a CFP standard or whatever kind of your go-to core philosophy is, the very best advisors take that, build a process around it, and then clearly deliver to their prospects and hopefully clients someday, that, “Hey, here’s how we simplify your life. You don’t have to worry. We build this all for you.” It’s good, right, based on what you actually want to achieve. The issue is there’s also people that simplify it, but then do no planning whatsoever and just sell a product out there. 

 

So, how do you guard against that? What are like checkpoints that you’re looking for if you’re giving somebody advice on do your due diligence, you’re looking for an advisor that actually gets you where you want to go, and what sort of things should they be asking out there?

 

[00:23:32] Dr. Daniel Crosby: Yeah. So, when my wife read my last book, she hasn’t read, by the way, Katrina, if you’re listening, she has still not read my new book and it’s really putting a strain on our marriage. But when she read my last book, she said the favorite part was there was a checklist on how to choose a good advisor. And I think there’s a couple of things to think about. So, the first of all is connection. When you look at the literature on psychotherapy, which is how I started being a shrink, the best predictor of psychotherapeutic outcomes has nothing to do with training, like level of education, or even the particular approach. The best predictor of treatment outcomes is how much you like your therapist. And so, it’s going to be like, do I like this person enough to listen to them and take their advice? And so, as a first sort of gatekeeper, I would say, “Do you even like this person? Do you like them enough to take their advice?” because their job is going to be to keep you from being your own worst enemy so you’re going to need to like them. 

 

Beyond that, you’re going to want to know how they get compensated. And again, any kind of squirliness, any kind of discomfort when you ask someone, “How do you get paid?” or any sort of infantilizing you is a red flag and run away. And then the next thing I think you’re going to want them to do is explain their investment philosophy. And if they cannot explain to you how they invest your money in like under two or three minutes, it’s nonsense. Like it should be simple and it should be streamlined, and they should have it at their fingertips. And so, there’s more ways, of course, but you need that likeability factor. You need someone who’s going to be ethical and honest with you and I think asking about comp is a good proxy for that. And then you need someone who knows what the heck they’re doing and then I think asking them to explain their investment process to you is a good proxy for that. 

 

[00:25:26] Brad Johnson: Alright. So, I’m going to venture into potentially dangerous waters here. I just know you’re cool with that, Daniel. You’ll be fine. You’re good on your feet. So, I was reading your – it was actually the section on so it’s part one of The Behavioral Investor. And last conversation we got into a bit how the general investor so financial advisor’s clients tend to do the exact opposite of what they should do, right? When a bull market, a strong bull market’s happening, especially the longer it runs, clients get riskier. They take on more risk because, “Oh, this thing’s always going to continue to go up, right?” And you go into bull territory, they actually go the exact opposite and they get averse to risk when in reality they should be doubling down because, hey, everything’s on sale, right? So, I want to flip that now and talk to the financial advisor. 

 

And one of the things that you mentioned, it was group one versus group two in the market and basically, there was a study, I forget who it was done by, it was chapter one or two, those they did two groups. There was one in a stable rising bull market and there was a second group in a volatile market. And so, basically, they allowed them to develop their investing behaviors in two very different markets, right? And then they took the two groups, and they swapped them. And what they found was it dramatically impacted their future investing habits. So, I want to start there, but I’m going to translate it to my question is how that impacts financial advisors. But let’s start let’s unpack that a bit and understand psychologically why that happened.

 

[00:27:04] Dr. Daniel Crosby: Yes. So, Morgan Housel has written quite brilliantly about this recently about our understanding of the world or in this case, capital markets, is almost entirely predicated on the years in which we’ve been living or investing. And yet our experience of markets or life is only an infinitesimally small piece of actual market history. So, I’m 39. I’ll be 40 years old this year. I’ve been investing for 12 or 15 years. And so, my take on the market when I got out of grad school and got my first big, big boy job, it was a year before the great financial crisis. So, you take someone like me and you take the primacy and recency effect in psychology, which says things that happened early in a sequence and recently in a sequence are the most memorable. 

 

And so, someone like me who started investing in 2007, in 2008, and quickly got crushed you’re finally like, “Okay, yay, I’m doing everything I’m supposed to. I’m setting aside money. I’ve got a real job. I’m doing everything right,” and quickly sees that money get halved, like that impacts me for the rest of my life. And my take on what markets look like is materially formed by that. And then I talked to my dad about this last weekend when I was with him. My dad is a financial advisor. He is a big bond guy and he has lived through whatever it is. He got his job the day I was born. So, he’s been in the business for 39 years and he has lived through like a 38-year bull market in bonds. Of course, he’s a bond guy, like bonds have never done anything but good for him. But we talked about the need to be a financial historian to take a broader view. 

 

[00:28:56] Dr. Daniel Crosby: And what I’m trying to do in my books is educate you about probability relative to history, so that you can tilt historical odds in your favor, because otherwise, we get such a narrow, narrow view of what the world is like. And you see this here. You see this with a lot of these I’m not picking on this movement because, dear lord, they’ll come after me. But you know, you look at…

 

[00:29:21] Brad Johnson: You have a Twitter account. Be careful. 

 

[00:29:23] Dr. Daniel Crosby: That’s right. You do look at like, I’ll read articles by people in the FIRE movement, which I think has done a lot of good. This is financial independence retire early, right? I think the focus on aggressive saving and living sort of a Spartan lifestyle, good stuff, like live minimally, save lots of money. I’m on board. But you look at some of the assumptions by these people who are often very young and have started saving 9 or 10 years ago have seen 12% annual returns over that whole time and they go, “Oh, I’m retiring now. I’ve saved $300,000. So, I’m going to retire now.” Because you get 12% a year and like, “Wee,” you know, you get 12% a year and I’m going to take 4% a year out and like wow, that’s easy. And markets have a way of making people look bad if they’re operating on too short a timeline. 

 

[00:30:22] Brad Johnson: You know, you look back and there’s all of these signs of the principles you just explained. So, you look at the generation, which would have been, well, my grandparents and my great grandparents that lived through the Great Depression. And there was always these stories of they had these jars of money hidden around the house. Going back to what you’ve got the recency, what’s happened most recently, but it goes back to as you were super impressionable in those early first experiences in the market, how did that play out? And what’s so interesting, you bring it up in the book, it also relates to politics, religion, and you look at all of the early wiring, I was brought up in a Methodist household, so, therefore, that’s hardwired into a lot of my belief systems through life. 

 

And so, I think what’s interesting though, is you talk about being aware of them and so if you know you have these biases, let’s know we have them and then let’s start to kind of get outside of our own headspace and look at how could these be impacting us positively or negatively and let’s make sure we’ve got third parties that help us control that. So, here’s where we’re going to venture into potential interesting territory. There was this post. You ever read The Oatmeal by chance, the blog? 

 

[00:31:40] Dr. Daniel Crosby: I’ve read it. Yep. The little cartoon?

 

[00:31:42] Brad Johnson: Yes. Are you familiar with this one, You’re Not Going To Believe What I’m About To Tell You, that post about George Washington’s death?

 

[00:31:51] Dr. Daniel Crosby: Oh, and dinosaurs? 

 

[00:31:52] Brad Johnson: No. I’ll just give it a highlight. We’ll throw it in the show notes, but just for context. So, it tells two stories and it starts out, “Hey, George Washington, founding father, would you believe, they’ve dug him up and his dentures were actually a donkey’s tooth, a piece of wood, a piece of ivory, something like that.” And so, then it goes, “Actually, that’s not the truth. Do you know, actually, he had slave’s teeth in his denture?” And so, it starts to unpack these biases of when you hold certain beliefs of George Washington as a founding father, now you’re like, “Oh, that’s kind of weird that his teeth were made of those other things like wood and ivory but that makes sense. That was a long time ago. But then as soon as you say something that’s fairly controversial, that now challenges right and wrong, and this image of this person that you had in your mind, now there’s this, you can speak better than I can. There’s a certain part of your brain where your long-held beliefs that’s now challenging them. And your brain says, “Stop. I’m not willing to like take this in objectively. I now have to put up this wall.” 

 

I want to speak to how that impacts financial advisors, but I want to stop there because we’re kind of going in stair steps here. Why does that happen? Why does challenging these long-held beliefs? Why whether it’s politics, religion, how to manage assets, why does our brain just like fight it so hard and won’t let us objectively sit back and just say, “Hey, let’s observe this,” and start to seek to understand for lack of a better term? 

 

[00:33:21] Dr. Daniel Crosby: Yeah. So, I thought you were going to say that George Washington lived and died and never knew there were dinosaurs. So, I missed the same point, though, right? Like dinosaurs had not been like found and set forth it where he lived in the world at that time. So, it’s crazy. Like, what don’t we know about the world? What do we accept as truth that just hasn’t been discovered yet or is just wrongheaded? You know, I gave the example in one of my first ever TEDx talk. It was called You’re Not That Great and I gave sort of seven hard truths for living a good life and one of them is a lot of what you believe is wrong because there’s just a lot that we don’t know, and then we uncritically accept things. So, here’s the reasons. You know, you’re asked about the reasons. Go back to that brain being so metabolically expensive example. 

 

If you are going to revisit a long-held and cherished assumption, your brain has to work overtime to think about and to discern and to digest the truth of that. Your brain wants to accept something, put it in a box and never think about it again, just from a strictly metabolic level. So, leaving that aside, that’s just the physiological reason why it occurs. There’s also some costs, right? So, I’ll give the example from my own life. So, I grew up Mormon and I’m still Mormon so I served a mission for my church for two years, right? For two years, I walked around in a jungle knocking on doors trying to get people to join my religion. If I leave that religion, if I today said, “There’s stuff I don’t like about Mormonism. I’m out,” I have to look back at 1999 to 2001 and say, “That was a waste of time.” And that’s tough, right? That’s tough to do. 

 

[00:35:22] Dr. Daniel Crosby: And on a smaller level, we all have the sunk costs, right? Like, what if we’re an advisor and we’ve been telling our clients to do this for a decade, and then we go, “Oh, yuck, like I don’t know if I love this anymore.” There’s a lot of water under that bridge and we don’t want to undo the past. So, there are some costs. There are social costs, right? Let’s say, I grew up a democrat and now I want to become a Republican or vice versa. There are social costs. You got to now get into arguments at Thanksgiving with mom and dad or whatever. So, there’s all kinds of reasons be they physiological, social, or other that really keep us static. And one of the things that I talked about in the book is this tendency towards conservatism, which is basically just saying that we preference the status quo for all the reasons I just mentioned, and more.

 

[00:36:14] Brad Johnson: Yeah. I see it all the time in our space. So, going back to growing up Mormon, I’m going to use the same analogy in the financial world. So, Advisors Excel, so I grew up in the insurance space kind of insurance is fixed income, pension or placement, which then evolved into how life insurance can be built into plans for tax planning, which then evolved into a $7 billion asset manager, right, that’s about three years old. So, I grew up on this side that evolved over into the asset management side. What’s been really cool about this podcast is now I’ve got guys that grew up on the other side manage 500 million, a billion-plus, and they grew up on the RIA side. And now to your dad’s example of bond, the bond run is interest rates dropped over the last 30 years, of course, bonds look great. Well, we don’t know but as interest rates start to climb, how’s that going to impact bonds? It’s going to be the opposite with the way math works, right? 

 

And so now we have RIAs that grew up in a very fee-only / fiduciary world used interchangeably when in reality those are two separate definitions, right? Fee-only is not another word fiduciary but oftentimes I think the industry makes those interchangeable. And now they’re coming back and they’re starting to say, “Well, what if we start to look at fixed annuities as a bundle? What if we start to look at life insurance as tax planning opportunities?” And it’s like, growing up Mormon and leaving a religion. 

 

[00:37:41] Dr. Daniel Crosby: Yeah. 

 

[00:37:42] Brad Johnson: So, if you’re a financial advisor out there that’s trying to truly be a fiduciary kind of the example I make is a true fiduciary puts all the financial tools in the toolbox, doesn’t eliminate any of them, and looks at them objectively and says, “Which one best most efficiently solves the need or the problem, fixes it?” That’s really, really hard for certain financial advisors to do because they have these preset biases of oftentimes decades of experience, because they grew up in a certain brokerage house or wirehouse or insurance-focused firm. How would you give advisors advice because so much of that gets in the way of creating amazing financial plan for their clients, which is what they all actually want to do? 

 

[00:38:26] Dr. Daniel Crosby: Yes. So, there’s a – I think you have to adopt a mentality, that truth and goodness are rarely simple, right? We decamped into this insurance good, asset management bad, and vice versa. We decamped into these black and white places, and truth is almost always gray. That’s just one of the things that I’ve learned over my study of trying to ascertain truth and then studying the biases and juristics that get in the way of seeing truth. Truth is almost always somewhere in the middle. So, the minute you find yourself saying, this good, this bad, these people righteous, these people wicked, whatever, whether it be politics or science or asset management, the truth is almost always gray. 

 

And if you find yourself decamping into these good and bad things, you’re falling prey to this simple-mindedness and it’s lazy. Like it’s intellectually lazy. And it feels good, right? It feels good to have a tribe, it feels good to be a righteous crusader but the truth is usually very complicated. It’s certainly true of creating a financial plan. It’s been true of me. I mean, I grew up. I came into this industry as an outsider and had to sort of learn it myself. And whether it be my acceptance of different sort of investment factors, I came into the world of factor investing, thinking momentum was just absolute voodoo, just having come up through sort of a Buffett monger type model ditto insurance. You know, I thought insurance yuck, insurance is bad, and my views on those things have changed as I’ve opened my mind and gotten a deeper understanding of the complexities of life. 

 

[00:40:24] Dr. Daniel Crosby: So, a financial plan is set up to meet the complexities of life. So, it’s never going to be as simple as this good, this bad.

 

[00:40:32] Brad Johnson: Yeah. These are the conversations I’ve had to your point that’s so spot-on is I see it’s like republican / democrat. I see that same thing with insurance, asset management mostly. And what’s been really cool, though, I started in 2007. As the world has evolved, those two worlds are converging, and they’re going to continue to converge because the truth is, if you’re an RIA, guess what, your clients are going to die. And what’s the most efficient way for tax purposes, assuming they can get underwritten to transfer wealth and avoid taxes? Life insurance, at least as it exists today. And one of the interesting facts around this is so many advisors they let how a product or how an asset manager markets their services define their product selection. 

 

So, two conversations I can think just off the top of my head, both of these firms manage over 500 million of assets, they crush it on the asset management side. And when we finally unpacked the conversation, they said, “You know what the truth is, Brad, the guy two blocks over swings annuities all day long and I just can’t bring myself to offer them.” So, basically, what they’ve done is based on how one firm in the country markets a certain product or solution, I should say, has defined what’s on the menu for their clients that could potentially serve some of their clients better. And that’s a really tough thing to unpack because it is truly you have to start to understand your own biases and be open to them. And if you’re truly trying to serve your clients at the highest level, my thing is as a fiduciary you don’t eliminate anything. You objectively look at all the options and you say, “Hey, what’s the best one that’s going to serve our clients?” and that’s, unfortunately really, really hard to do. 

 

[00:42:25] Dr. Daniel Crosby: Yeah. Well, the other consideration here bringing it back to the behavioral piece, the best suite of products for your client, the best portfolio for your client is the one that they can live with, like the one that they can take the ride on. So, for me, as someone who is enormously risk-tolerant and good income, good risk tolerance, all this other stuff like an annuity is the wrong choice for me, like I can take the ride up and down inside. It’s fine but for a lot of people, they would be better off with an annuity than trying to exist in markets where they are going to panic and do the wrong thing at the wrong time. So, almost any product can be the right if you’re taking that person’s behavior into full perspective, but it’s hard to do that in a way that’s not self-interested. 

 

You know, it’s hard to do that in a way we see the world through our lens and so knowing that advisors get compensated differently, in some cases, depending on the products that they recommend, it’s hard to get outside of your own financial motivations, your own compensation. But the best advisors are able to do that and take that client’s behavior into account because I think there’s just about anything that could be right if you’re thinking about that person deeply enough and understanding their behavior. 

 

[00:43:50] Brad Johnson: Yeah. And the other thing too is time horizon, right? Like you’re in the accumulation phase. You’ve got a few more years ahead of you as am I but annuities are not typically in the accumulation phase. It’s more of a pension type income and what’s been really interesting is goes back to portfolio construction. I mean, why did your dad use bonds? Because guess what, in the last 30 years, there’s been some serious bull markets that happen and that was his fixed income portion of the portfolio. So, that protected his clients versus the downside and I think that’s the key thing is great portfolio construction. If it’s a whole inequities in the market, yeah, you’re going to lose clients the next time the market corrects 20% or 25% if that’s the exposure they have, and they don’t have, as you said, the risk tolerance to stomach that. And so, all right, I’ll get off my soapbox there but thank you for diving into that a little bit because I think if there’s one thing I would love for this podcast to be able to do for advisors out there is really start to understand their own behaviors that maybe don’t allow them to serve their clients at the level they would like to. 

 

And I think all of us come with these certain lenses that keep us, you know, I have them, you have them, but as soon as we can acknowledge them and start to understand them, that’s when we can start to make better plans for our clients.

 

[00:45:06] Dr. Daniel Crosby: Well, now that you’ve stepped off your soapbox, if you’ll allow me to please elevate myself the mind with respect to your last point, you know, Jason Zweig has written about this quite nicely and he says that behavioral finance should be a mirror and not a window. Like this isn’t primarily a window onto our clients’ behavior. It’s a mirror which we should reflect on our own behavior. And when people read books like the Behavioral Investor, financial advisors, in particular, I think, unfortunately, a lot of the time is they’re reading this book with an eye to like, “Aren’t my clients dumb?” “Yep, yep, totally like, yeah, that’s Mrs. Jones. That’s Mr. Smith. Yep, yep, they do all these things. They tick all these boxes.” All of the research shows that financial advisors are every bit as prone to this biased thinking as anyone else. And yet the weird thing is, we also know that people who work with advisors do on average significantly better than those who do not. 

 

So, it’s just like dating or dieting or any other thing. When it comes to our own behavior, we’re not great at taking our own advice but we can dispense advice to other people, right? Like, we know, we can tell our friends like, “Yeah, you might not want to date that person,” and I’m seeing some things that are wrong but when we’re in a bad relationship we’re blinded to it. And so, all the research shows that advisors do dumb stuff with their own portfolios, even as they’re able to counsel their clients away from those same obstacles. So, to any of the advisors listening, that are reading books like mine, use it as a mirror, first and foremost, and you’ll be able to help your clients better when you’ve helped yourself. 

 

[00:46:51] Brad Johnson: That’s really good advice. It’s one of my mentor’s handful years ago, he said, “Anything in life that you’re trying to get better at or improve, go get a coach.” They’ve been there, they’ve helped others. They’ve shepherded them through this, whatever. Working out, go get a trainer that meets you there. They’re going to hold you accountable. They’re going to protect you from your own laziness. Same thing with financial services. But one of the key takeaways I still remember from our first conversation, you’re a very intelligent financial advisor that has your own financial advisor to guard you against your own biases. If that doesn’t tell you anything, I mean, I don’t know what will out there. So, let’s speak to parts two, three, and four of your book. So, Part Two, Investor Psychology, Part Three, Becoming A Behavioral Investor, Part Four, Building Behavioral Portfolios. So, if you want to distill those down in a short amount of time where the audience can learn from that, that’d be awesome. 

 

[00:47:49] Dr. Daniel Crosby: Yeah, so basically, you think of it like a funnel. We begin a really big picture, very philosophical. We talked about the sociology, the physiology and the psychology of investment decision making. So, we talked about how your brain, your body, and even the societies in which we live in conspired to make us sort of fallible, biased investors. Then I drill down a bit and talk about a specific universe of bad behavior. These are the four primary mistakes that we make as a result of all the things mentioned in part one, and then the last two parts can be thought of as a bit of a, “So what?” like, okay, so here’s everything that’s stacked against us. Here’s the specific ways in which we make errors. And then the last half of the book is sort of, “So what do we do about this?” And one of the things I’ve gotten good feedback on from the book is there’s a bulleted sort of, “So what?” at the end of every chapter. 

 

Because one of the things that I have disliked historically about behavioral finance is that it’s been a touch esoteric. It’s been sort of highfalutin ivory tower type stuff and being a product of the Alabama public school system, I could not let this stand. I needed to make it a little bit more practical. And so, yeah, I think there’s a strong applied bent to the book. Even when you’re reading part one, and you’re reading stories about the plight of humankind, don’t worry, it gets a little bit more applied as you go on. 

 

[00:49:23] Brad Johnson: Yeah, with both of your books. And I gave you this compliment in the last interview, but it holds true in your second book as well. Hey, I came from a Kansas public school system so I’m going to put that on par with probably whatever Alabama has. 

 

[00:49:34] Dr. Daniel Crosby: I don’t know, man. I don’t know. 

 

[00:49:37] Dr. Daniel Crosby: But you do a great job, number one. I don’t know if you do all your own research or if you have somebody on your team that helps but everything is sourced and I love like you take true studies that give real-world feedback and happenings but then you apply it in story format, and you really simplify it and you make it consumable, which this content historically, I don’t think has always been in the space. So, well done on that front. Are there any parting thoughts on the book other than what we’ve covered before we dive into a couple of questions to finish up here?

 

[00:50:13] Dr. Daniel Crosby: No. I really just hope people, this is a weird thing to say, I hope people will read it and I hope it will hurt your feelings a little bit. Like, I hope you will read it and I hope that you will feel implicated. You know, the best thing I learned in my Ph.D. program because effectively, I do nothing I went to school for like I trained to be a shrink, and I’ve never done it. So, I’ve spent my entire career in financial services but what we had to do in grad school was watch video of ourselves giving therapy. And my peers would critique that just like an athlete watching tape. You’d go over it and that has served me so well, like that has served me so well because the first time you did it, you’re so defensive and you’re so angry when someone says, “Hey, you could have done this better.” Because we live in a society where everyone gets a medal. Nobody ever says a mean thing and if they do, they say it from the anonymity of some Twitter egg account or something. 

 

And so, like getting harsh feedback from someone who loves you and cares about you, and I do love you and care about you, listeners, is something that can really benefit you. So, I hope that the advisors listening will read my book and will allow it to sink in that they’ll use it like that mirror. 

 

[00:51:30] Brad Johnson: Awesome. Yeah, I love the mirror analogy. That’s so good. Because so much of that I was reading, I was like, “Oh, I screwed that up. Yep. I remember when I did that,” and when you can look at it that way but learn from it. A mistake is not such a bad thing if you can learn from it and it can impact future results. And by the way, I think as you term it training to be a shrink, I think that’s some of the best training you could have in financial services. I just feel like that’s what great financial advisors do a great job of is monitoring behaviors of their clients and knowing how that’s going to impact their investment decisions. 

 

[00:52:06] Dr. Daniel Crosby: You know, shout out to my former client, ATB Wealth in Canada. They have a team, they video record the advisors during their meetings with clients and then they have a team of coaches, who sits down with those advisors and watches the tape and teaches those advisors to be more empathetic to handle client concerns better and it’s absolutely a fantastic program. So, shout out to the ATB Wealth team. Great work. 

 

[00:52:32] Brad Johnson: Wow. That’s cool. You know, it’s interesting, I mean, I’ve seen in the last 12 years I’ve been doing this, I’ve seen a flood of female advisors. Back in the day, it was all 65-year-old white dudes. That was essentially our whole industry. And now I look, there’s a ton of female advisors crushing it. Going back to empathy, I mean, they’re just naturally more empathetic than us guys and you just see how clients flock to that because that’s what they actually want in those conversations. So, actually, a firm out there teaching advisors how to be more empathetic. 

 

[00:53:04] Dr. Daniel Crosby: Yeah. I talk about it in the book but women are actually perfectly positioned to both the asset managers and financial advisors. I mean, the skill set needed and it’s fascinating to look at the research on gender differences and investment management and within there, there is not a single category where men beat women with respect to generating alpha. So, women stay the course better, they wait probability better, they’re more patient, they’re less likely to go to cash. I mean there’s 20 studies on how women are better with money than men. And yet when you ask people it’s something like 85/15. When you ask people who’s better at managing money, men or women, everyone thinks men are better and all of the studies show the opposite. So, yeah, women are super well positioned to work in this business. 

 

[00:53:55] Brad Johnson: Wow. So, you and I need to start polishing up the resume, huh? 

 

[00:53:58] Dr. Daniel Crosby: No, man. Let’s get out of here. Let’s turn it over. Let’s turn it over to the people who know what they’re doing. 

 

[00:54:03] Brad Johnson: Do you know any other psychologists that have made the same transition you have, just out of curiosity? Because that seems naturally hardwired that training would work really well in our space. 

 

[00:54:13] Dr. Daniel Crosby: So, it’s interesting. There’s Kathleen Burns Kingsbury is sort of a financial coach. She’s not an advisor per se but she started off working with eating disorders and transitioned into our industry. And then there’s prominent research, you know, like Daniel Kahneman is a psychologist and things like that but in terms of advisors, I don’t know that I know any but certainly some sort of prominent thought leaders that have made the switch. 

 

[00:54:39] Brad Johnson: It goes back to they spent eight years in school or however long it takes to be this one thing, you know, kind of your story of going on the mission as a Mormon. I can’t give all that up to start over, over here. 

 

[00:54:49] Dr. Daniel Crosby: I mean, look, it’s a weird transition and my mom still asked me if I’m ever going to actually like help anybody. She’s like, “Hey, you know that school we paid, you know that doctorate we paid for, you ever going to do any good in the world with that?” So yeah.

 

[00:55:04] Brad Johnson: One of these days she’ll come around. One of these days. 

 

[00:55:07] Dr. Daniel Crosby: Yeah, one of these days I’ll make you proud, mom. 

 

[00:55:10] Brad Johnson: So, well, cool. Daniel. As always, man, I could have you on here like every episode. It’s always a fun conversation but let’s dive into a couple questions to wrap up if that works for you. 

 

[00:55:19] Dr. Daniel Crosby: Let’s do it. 

 

[00:55:19] Brad Johnson: Alright. So, this one, I don’t know that I may be asked this one other time, but this one feels perfectly suited for you. You’re pretty introspective. What is your first memory of money? 

 

[00:55:31] Dr. Daniel Crosby: My first big memory of money is buying shares in the Chicago Tribune, which like, that’s how old I am. A newspaper was a good investment. So, I was a baseball nut, I am a baseball nut, and ironically, I’m a big Cardinals fan. And so, the Tribune owns or at least partial owner of the Cubs at the time, but I remember my dad telling me, you can be effectively a part-owner of a baseball team. I’m like, if I had a billion dollars, I would be full owner of a baseball team. So, like as a kid, understanding that ownership of stock was fractional ownership of a business and that I could own part of a baseball team absolutely blew my young mind and I’m part of owner of the Braves today. So, you can still do this and it’s such a cool thing to me. 

 

[00:56:24] Brad Johnson: That’s really interesting. So, I just did an interview with David Bach and one of his earliest memories was his grandma. So, his favorite restaurant when he was a kid was like every kid McDonald’s, right? And his grandma took him there and she was like, “Some people just work here. You could actually be an owner here,” and he purchased a share of McDonald’s. So, let’s go back to premise. That was one of your first memories. Do you think that’s part of what led you into what you’re doing today? Because that’s pretty interesting. That’s not most people’s memory. Your first memory of money is actually buying a share of a company at a young age. 

 

[00:56:58] Dr. Daniel Crosby: Oh, there’s no doubt. I mean I grew up. When you think about how little the average American family talks about money and how taboo it is and how confusing it is, there’s no doubt that growing up the son of a financial advisor, my dad is somebody who loves the game of like unearthing deep value stocks and finding hidden value and investing in individual equities. And so, growing up in a house where we talked about that all the time was absolutely formative. And you know, the other thing I saw my dad do, he paid off our house when he was just 35 years old. And the way that he did that was by torturing us. The way that he paid off his house so fast was by just feeding us the most disgusting food like we had like beans and rice for every meal. Whatever the cheapest thing you could eat was, we had that for every meal so he could pay off our house. 

 

And so, seeing his, I mean, truly obsessed, obsessive hatred of debt and seeing the way that he researched and invested in stocks, both of those things were absolutely formative and I’m positive contributed to me being who I am today. 

 

[00:58:13] Brad Johnson: So, the FIRE movement is actually your dad’s fault is kind of what… 

 

[00:58:16] Dr. Daniel Crosby: Yeah, my dad is the original FIRE hipster.

 

[00:58:21] Brad Johnson: That’s cool. All right, if you could look back, at what age did you make the decision you were going to go down the path of being a psychologist?

 

[00:58:28] Dr. Daniel Crosby: I would have been 21.

 

[00:58:31] Brad Johnson: So, you finished kind of undergrad and then you transitioned over? 

 

[00:58:35] Dr. Daniel Crosby: No. So, I went to one year of college, been a two-year mission. So, from 18 and 19, I was a freshman in college. From 19 to 21, I lived in the Philippines. And so, I was a missionary. I dropped out of college to be a missionary for two years. And during that time, you’re teaching English, you’re building schoolhouses, you’re doing service and I came back with just like a deep love of people and a desire to do good in the world. And to me, psychology seemed like the surest professional route to continuing what I enjoyed about being a missionary. 

 

[00:59:09] Brad Johnson: Okay. So, I’m going to completely switch my question based on that. Was there any moments like to this point like you look back to young Daniel, you’re like, “Wow. That blew my mind and completely changed the trajectory of my life.” Was there any like story from that? 

 

[00:59:24] Dr. Daniel Crosby: Yeah. So, growing up in an upper middle class family and then going to a place where the average daily wage was $5 and going to a place that was the size of Alabama, if you sort of compress the archipelago of the Philippines, it’s about the size of Alabama, there’s 4 million people in Alabama, there’s 90 million people in the Philippines. So, like going to a place where there was so much want, and so much hunger and need, and yet people were so happy and so wonderfully generous like, I mean, people would literally give me their last cracker. It was just incredible. Seeing that just gave me a lifetime of perspective on what money could and couldn’t do. And I wish I still had more of that because I remember getting back from my mission and I was so skinny because as you know, I left at like 185 pounds and came back at like a 137 because the Philippines is a lovely country, but the food is not good. Okay?

 

[01:00:37] Brad Johnson: It didn’t compare to Southern cooking.

 

[01:00:39] Dr. Daniel Crosby: Right. There’s a lot of sardines and rice and a lot of walking, and I just lost a lot of weight. So, none of my clothes fit. And so, when I get back, my parents are getting me new clothes and I just remember whatever, $50 for a shirt or pants and I’m like, “This is a month’s wages. How can I do this? This is profane to spend money the way that we do.” And I’m thoroughly cured of that and just an ugly American now, but I wish I had maintained some more of that perspective and I think it’s good however you get it. Whether it’s through travel or Peace Corps or church service, however you get it, understanding what money can and can’t do and understanding that there’s people that live very differently than you is an invaluable lesson. 

 

[01:01:23] Brad Johnson: Yeah. Travel gives you so much more perspective. That’s one of the things my wife and I strive to do is every summer we take our kids on somewhere where we just want to ideally not the ultra-touristy version, but like the real version. And I remember a trip to Sweden and just the minimalism there like we are so – we do everything to the extreme over here. It’s almost gross the level that Americans have to have these objects for status or whatever egotistical needs we have and it just like, “I need more of that in my life,” where you bring things like that, like what you brought back from your mission trip back and can impact you. 

 

[01:02:06] Dr. Daniel Crosby: Well, it’s interesting because my wife is Norwegian and so I actually studied Scandinavian attitudes about money and we have this notion that If you’ve got it, flaunt it, like yeah, like you earn this like rub people’s noses in it because like you made it, baby. In Scandinavia, there’s this idea that if you’ve got it, be cool. Like, if you’ve got it, be humble about it. And there’s a notion in Japan I found when working with Japanese clients that like, they have the saying that something to the effect of like the nail that sticks out gets whacked kind of notion. And so, these are all just again social constructs, like we don’t have to act with money the way that our surroundings would have us act like these are chosen attitudes. These are cultural constructs going back to our early conversation when we can choose to be different with money. And I think as Americans, we would be a lot happier and a lot healthier if we studied other cultural approaches to money and adopted some of them because I think a lot of folks have better ideas about this than we do. 

 

[01:03:19] Brad Johnson: Agreed. Well, I think a lot of the studies show they’re happier, right? So, it must not be working the way we do it. 

 

[01:03:24] Dr. Daniel Crosby: Yeah. 

 

[01:03:25] Brad Johnson: So, let’s go back 21-year-old Daniel, so just coming back from your mission trip, right? 

 

[01:03:31] Dr. Daniel Crosby: One year of school under my belt.

 

[01:03:32] Brad Johnson: Okay. What advice would you give yourself like, Daniel today looking back to 21-year-old Daniel, what advice would you give yourself? 

 

[01:03:39] Dr. Daniel Crosby: You know, I think I would tell myself to slow down a bit like I’ve always been, I wake up everyday kind of with my hair on fire and that had some upside like I’ve written a lot of books and I’ve had some success. But I think 21-year-old Daniel felt behind because I had taken two years off, and just to say like it’s all going to work out. It’s all going to work out and to stop and be a little bit more present I think is something that I struggled with then and I struggle with now is always sort of living three steps in the future. So, 21-year-old Daniel was very freaked out. His friends were all juniors and he was a freshman. And so, I would tell him it’s all going to work out. “Look, man, you’re going to make a couple of bucks, you’re going to marry a beautiful woman. Chill out a bit.” 

 

[01:04:32] Brad Johnson: Yeah. But you came back as like Buddha. So, it was cool, I’m sure. 

 

[01:04:36] Dr. Daniel Crosby: That’s right. You know what, you lose it very fast, you lose perspective very fast. It didn’t take long for me to turn back into an idiot. 

 

[01:04:45] Brad Johnson: Two more questions and we’ll wrap this. So, one of the things I admire about you is so you have a Twitter presence and it’s one of the most authentic Twitter presences I think out there like I love the fact you’re you. You make some corny jokes. They’re funny more often than mine are but I just love that you’ve kind of got this personality out there living online and you’ve got a pretty massive following. So, as far as Twitter, I think there’s a lot of financial advisors that are like I call it Twitter envy like I’ve got four followers. How would I build a following if I even wanted to? Can you speak to like how you view Twitter maybe whether it’s more on the personal side, it’s just an outlet for you, or maybe from the business perspective? And then secondarily, I would love to hear like what are your favorite Twitter accounts to follow. Who are your favorite people out there that really bring value to you out there out on the platform? 

 

[01:05:35] Dr. Daniel Crosby: Yeah. I would say, in terms of Twitter add value and be real would be my two sort of takeaways there. So, add value like have something to say, have a unique perspective. You know, try and share my podcast. I share my research, I share ideas I have on Twitter, and I hope that they are of concrete value. Like I hope people learn something from following me on Twitter but I also try and give people a sense of who I am. You know, my last tweet today is a perfect example. Today’s the one year anniversary of my sister in law’s death. She was 32 years old. She had two master’s degrees. She was a concert pianist, she was a wonderful aunt, and she died of cancer at 32 years old and it broke my damn heart. 

 

And it’s just like you put that out there and you’re just like, “Look, today sucks. I’m sad like and what I’m going to do today is I’m going to spend today trying to keep her memory alive and teach my kids about their aunt and teach them to do good in the world because she was a champion for the little guy and I want to teach my kids to be the same way.” So, like, don’t be scared to put a little bit of yourself out there. I always kind of throw up in my mouth a little bit when I see like the wirehouse advisors push out the same content and, you know, I have lots of friends who work at wirehouses. My dad works at a wirehouse, but when you see 500 advisors push out the same article at the same time, you just go, “Ah, come on, guys,” like put a little bit more of your unique self out there both through your ideas and your heart. Best follows on Twitter for behavioral finance content because that’s you know where my head goes first, Morgan Housel does absolutely incredible work. Brian Portnoy wrote a book called the Geometry of Wealth. That was the best book I read last year. Who else? Nick Maggiulli does really cool stuff with data visualization. Corey Hoffstein for the hardcore, like finance quantum nerd stuff. Those are the ones off the top of my head, and Jamie Catherwood for good financial history lessons. And Jim O’Shaughnessy for GIFs.

 

[01:08:00] Brad Johnson: I was going to say he’s got his GIF game. 

 

[01:08:02] Dr. Daniel Crosby: Yeah. His GIF game is unstoppable, but like, people like Cliff Asness and Jim O’Shaughnessy are like on my Mount Rushmore of great investing minds. And the fact that these two brilliant super-rich guys like slum around with people like me on Twitter is like the beauty of Twitter. So, Cliff Asness. Jim O’Shaughnessy, absolutely great, great follows as well. 

 

[01:08:26] Brad Johnson: That is the beauty of Twitter. I mean, assuming you bring value once again, you can just walk into a room and have the craziest eclectic mix of people in there, depending on what conversation you’re in and it’s a fun platform to be on. Okay, last question. What’s the best business advice you’ve ever received? 

 

[01:08:46] Dr. Daniel Crosby: The best business advice I’ve ever received is from my dad who told me to put first things first and it’s basically the best business advice I received is that business isn’t all that important. My favorite line in any book is the line in A Christmas Carol, where Marley’s ghost is talking about Marley’s ghost comes to Scrooge and Scrooge, he’s got all the chains and everything and Scrooge goes, “Oh my gosh, basically, like why are you in hell? Why are you in hell? Why are you walking the earth is this tormented ghost?” He goes, “You were such a great man of business.” And Marley’s ghost goes, “Business? Mankind was my business.” And so, we’re all going to worry about money. That’s easy. Like, we all worry about money. That’s going to take care of itself. You’re going to work hard, you’re going to do the things you need to do, and you’re going to be fine. 

 

Like we work, we are blessed to work in an industry where we all get paid well, like we’re going to be fine. If you work hard and you add value, it’s going to work out in the end, but mankind is our business. And so, taking what we do and then viewing that attitude that mankind is your business and we need to keep first things first I think is the key to real happiness in business. 

 

[01:09:58] Brad Johnson: Yeah. You just made me think of there was somebody talking about how they’ve incorporated gratitude into their morning routine. And the truth is, if you’re listening to this podcast or watching this on YouTube, you’re like the top 1% or 2% in the world population. 

 

[01:10:14] Dr. Daniel Crosby: For sure. 

 

[01:10:15] Brad Johnson: So, if you’re sitting there stressing, go take a trip to the Philippines and see what there is to stress about in life because we’ve all got it pretty well when it all comes down to it. If you’ve got your health, you can always go make more money and that’s one of my favorite quotes out there. 

 

[01:10:30] Dr. Daniel Crosby: Absolutely. 

 

[01:10:31] Brad Johnson: Well, Daniel, I knew the conversation was going to be awesome that you always over-deliver. So, thank you so much for joining this morning. Can’t wait to get this out to the world. Until next time. 

 

[01:10:40] Dr. Daniel Crosby: Thanks for having me. 

 

[01:10:41] Brad Johnson: All right. Take care. 

 

[01:10:42] Dr. Daniel Crosby: Take care.

 

[CLOSING]

 

[01:10:47] Brad Johnson: Thanks for checking out the latest show. On to this week’s featured reviews. This week’s first review comes to us from user Harrier86, “Great way to start the day. Five stars. I really enjoyed listening to the John Israel episode. I have read about the importance of gratitude but this podcast put it at another level. I got so much out of this podcast. I look forward to the next one and plan to listen to the past episodes.” Thank you so much for the review and for listening in. I find it’s fitting that so many of these reviews have mentioned the episode I did with John Israel, who did the Mr. Thank You Project where for those that haven’t heard the episode, he wrote five handwritten thank you cards a day for an entire year. And we go into just the incredible events that happened due to that intentional act that he did for a year. And it’s fitting to read reviews like this one in the month of November where obviously we have Thanksgiving, to take time and just be grateful for everything we all have. 

 

I know sometimes in financial services, the days are fast, and the client meetings can sometimes be stressful, but we really do work in the best industry out there where you can make a massive impact on not only your clients but on generations to come. So, if you haven’t lately, just take a moment to sit there, be present, and realize the amazing work you all do because we truly sit in a seat where you can make a massive difference for those we serve. 

 

The next review comes to us from user Irish2478, “Excellent podcast. Five stars. I’ve recently found this podcast, and I’ve greatly enjoyed listening to them during my morning commute. Brad always has an incredible lineup and seeks to provide invaluable information and advice on each topic being discussed.” I appreciate the kind words, Iris2478, and I love the fact that the show has become a part of your morning routine. I find most top performers turn their commute into time where they can educate themselves whether with an audio book, a podcast or some other form of just bettering themselves in general. 

 

[01:12:48] Brad Johnson: In fact, for those who haven’t checked out the episode with Hal Elrod yet, he discussed his Miracle Morning Routine on Episode 32. Great habit to maybe kickstart 2020. It’s available at BradleyJohnson.com/32 and I’m excited my friend, Hal, will actually be speaking at our event coming up in January at the Cosmopolitan so that’s going to be awesome. Also, it’s awesome to hear that our show can be a morning routine for many of you out there. And for those of you out there that have an idea or a guest that may be an awesome fit for the show, please don’t hesitate to connect with me out on Twitter and make some introductions. Some of my very best guests have actually come from our audiences’ suggestions. You can find me at Brad_Johnson out on Twitter. Please connect with me there. 

 

Okay, last featured review for this week comes to us from mfrye6140, “Gratitude. Five stars. Enjoyed listening to this episode and will certainly be reading Mr. Thank You Project in 2019. In representing a Christian not-for-profit financial services and insurance company, there are many aspects in which I’m able to positively impact people that others cannot. And I’m excited to activate the gratitude effect in my business.” So awesome to hear that you’re out there making an impact for others. And thanks for taking the time to leave a review and for listening in. Since a few of these reviews have mentioned gratitude and showing thanks, and we do happen to be in the month of November, here’s just a quick idea that I’d love for you all to run with. It’s something that’s become a bit of a family tradition for our family that we always do around Thanksgiving every year and we call it being a “secret shopper”. It’s one of the most amazing experiences we do every year and you can literally pull it off in an afternoon and it just creates an incredible experience for some lucky strangers. So, for those of you that are interested in running with this idea, here’s how you do it. 

 

[01:14:44] Brad Johnson: Number one, you simply take whatever you’re willing to give, maybe a few hundred dollars, show up at your local grocery store with the intent to buy groceries for complete strangers. Use cash as some people will try to find out who’s actually paid for it. We’ve experienced just about everything over the times that we’ve done this. And what you want to do, number two, speak with the store manager right when you get there ahead of time, let them know what you’re up to. And that whoever you stand behind in line, you’ve chosen them to anonymously pay for their groceries. Oftentimes, the store manager will actually be in on it with us where they’ll kind of stand there at the end where all the aisles kind of converge, and we’ll give them a head nod. And then they’ll take the envelope of cash to that cashier and simply tell them to say, “Hey, you’ve been blessed today. Your groceries have been bought by a secret shopper,” and then just watch the magic unfold in front of you. You can’t really describe it. I’ve got multiple stories where we’ve seen incredible reactions like a veteran breaking down and crying at the cash register because someone was kind enough to do that for him. 

 

Another one where an older lady literally accused me of buying her groceries and I had to play it off. So, pretty much anything can happen but it’s such an awesome organic experience where you can truly give back to others and not need to take credit for it. So, anyway, I just wanted to throw that in. There was a theme of gratitude from the reviews so that’s a cool way that our family does it every year, where we’ll just run around the grocery store, see who looks like they need their groceries paid for and we’ll anonymously do it. So, I guess it’s not so anonymous anymore. But if you all can benefit on your side by taking that and kind of the compound effect of putting that idea into motion out there, that’d be really cool to hear some stories came back. So, anyway, wanted to share that. Other than that, that’s it for this week. 

 

[01:16:32] Brad Johnson: And for those of you that have interest in diving deeper or figuring out how you may be able to have our team help you implement many of the ideas shared on the show, my day job happens to be consulting financial advisors from all across the US on how to grow their business and design a practice that serves them versus them serving it. And yes, it’s possible to grow your business and work less. It’s a model we’ve replicated over and over in markets all over the country. So, if you’d like to apply to see if it makes sense for us to have a one-on-one conversation on how to overcome what may be getting in your way, you can do that at BradleyJohnson.com/Apply. It takes about five minutes to fill out the application so we can understand what your business looks like, what challenges you may be facing, and how myself and my team may be able to help. Taking the first step is as simple as applying at BradleyJohnson.com/Apply. Well, that’s it for this week. Thanks for listening in and I will catch you on the next show. 

 

[01:17:31] Brad Johnson: Thanks for listening to this episode of the Elite Advisor Blueprint. For access to show notes, transcripts, and exclusive content from our show’s guests, visit BradleyJohnson.com. And before you go, I’ve got a quick favor to ask. If you’re liking the podcast, you can help support the show by leaving your rating and review on iTunes. Not only do we read every single comment, but this will help the show rank and get discovered by new listeners. It really does help. Thanks again for joining and be sure to tune in next week for another episode.

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The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Advisors Excel. The guest speaker is not affiliated with or sponsored by Advisors Excel. For financial professional use only. Not to be used with the general public or in a sale situation.