The transcript from this week’s, MiB: Meir Statman on the Intersection of Finance & Life, is below.
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This is Masters in business with Barry Ritholtz on Bloomberg Radio.
Barry Ritholtz: This week on the podcast, I have an extra special guest returning champion, professor Mier Statman. We’ve talked a number of times about what investors really want, all sorts of different aspects of behavioral finance. His new book is really comprehensive, A wealth of wellbeing, a holistic approach to behavioral finance. I found this conversation to not only be informative, but to be rich with both data and anecdotes. He has spent the past 44 years stunning this work. Lots of what forms his opinion is data driven is based on research he’s done, and he really flavors the book with a lot of specific anecdotes. I found it quite interesting, and I think you will also, with no further ado, my conversation with Professor Meyer Statman.
Mier Statman: Well, I’m so delighted to be with you again, Barry.
Barry Ritholtz: So before we get to the book, which I’m really enjoying, I I have to go over your background, which is really fascinating, right? So your academic background, you get a Bachelor of Arts and an MBA from Hebrew University of Jerusalem. You come to the US where you get your PhD in economics from Columbia University. Was academia always the plan?
Mier Statman: No, it was not at all. I, I didn’t really know exactly what I wanted. When I was in the army, I was destined to go to a kibbutz, a collective farm in Israel, and, and I took a course on agriculture and, and we had an economist who came and talked about exporting oranges and what it involved. And I was thinking, you know, this is stuff that I can understand that, that makes sense to me. So I’ll, I’ll, I’ll pick economics. My dad said study accounting, you know, that’s a practical thing. I, I thought that I’ll, my, my second major is going to be literature because I did not know that I had sufficient background in mathematics, but I went to one of those psycho tests and they say, you can, you can take it. And, and I did. So I studied economics and statistics and then finance for an MBA.
Barry Ritholtz: So your curriculum vitae is kind of fascinating, mostly because as far as I can tell, since 1980, you’ve had one job that’s 44 years Professor of finance at Santa Clara University. You’re the Glenn Kleek professor. That’s amazing. 44 years, the same school is, has it been the same subject the whole time?
Mier Statman: Well, you know, it is the same subject, but the subject itself is changing a lot rapidly And I’m, I’m lucky to be one of those people who is changing the subject. And so it turned out that it is just the right place for me. It is a place that values teaching and values scholarships. So, so teacher scholar is the way we describe our faculty, and that is what we strive to be. And it is open, perhaps because at the beginning it just was turning, moving from being just a teaching place to a teaching and scholarship place. And so they didn’t really have the notion that it must be a paper in the journal of ans or whatever it was. Right. Just do stuff that has an audience, you know, and, and they, to this very day, they’re very flexible as to the audience they have in mind. It might be fellow academics, but also professionals and also the general public. And so they, they’re delighted When I write something for the Wall Street Journal, for example. Huh?
00:03:50 [Speaker Changed] So you got the PhD from Columbia. How did you make your way to California? That’s not the first place you would think of.
00:03:58 [Speaker Changed] Well, you know, when I was studying at Columbia, Iwas teaching at Rutgers College, and when I got my PhD, I went to the chair of the department and asked whether there’s a pay raise accompanying completion of the PhD. And, and he said, well, the way you get a a raise is you go to another university, you get an offer, and then we see if we can match it. And so I went to Binghamton University, which you know, is, and that was the end of February, highly
00:04:29 [Speaker Changed] Regarded in suny.
00:04:30 [Speaker Changed] Right. It’s a highly regarded and cold.
00:04:32 [Speaker Changed] Right. Not a fun place in the winter, especially if you’re from a much warmer climate like Israel.
00:04:37 [Speaker Changed] Yeah. And so I went to Santa Clara and it really felt like home from the beginning. Now remember, this is a Jesuit, a Catholic Jesuit university. Right. And I am Jewish, so, so, you know, I didn’t really know much about Jesuit, so Christianity more generally, but it just turned out to be just right. And I say, you know, they’re kind of similar. Both begin with the letter J. So
00:05:04 [Speaker Changed] Hey, they both started with the same book. Right.
00:05:07 [Speaker Changed] You know, it is a wonderful place. Yeah.
00:05:11 [Speaker Changed] So you’re teaching the same subject for 40 plus years, but as we said earlier, behavioral finance and the entire field of economics has clearly evolved over that time. You’ve been part of that process pushing behavioral finance through one, two, and now let’s call it three generations. Tell us a little bit about that process.
00:05:36 [Speaker Changed] Well, so I studied standard finance, which we all studied at graduate school then, and, and some places still where people are rational. They are interested only in maximizing their wealth, maybe subject to risk considerations. And that is it. And, and you say, so what are they going to do with the wealth? And they say, well, that’s not our field. You know, that’s marketing. I never, I never felt that that is right. But I didn’t really know how to put it together into something that would look like an academic paper. I, I came to New York to study at Columbia that, that was in the summer of 73, and that was just before the Yom Kippur war and the energy crisis and so on. And Con Edison felt compelled to suspend its dividend. And they had the raucous annual meeting in April of 74. And people were really trying to physically harm the, the chairman of the board.
00:06:44 Really, Mr. Luce one, one woman said, I used to be a husband, now Con Edison is my husband. Where’s my dividend? You know, I live on the dividend. And it occurred to me that contrary to what we studied about rational behavior, it did not occur to them that they could sell a few shares and generate homemade dividends. That’s right. So that stayed with me. And then when I came to Santa Clara, I heard my colleague, her Sherin speak about those issues of mental accounting and framing and self-control. And it just clicked, you know, I said, here is the answer to the issue of, of dividends. Now, I did not know at that time the work of Kahneman Anderski. And the funny thing is that while I was at the Hebrew University, the economics building was right next to the psychology building. And Kaman and Furge themselves were doing their work there, but I had no idea who they were, their work. None of my professors mentioned
00:07:44 [Speaker Changed] That that was late sixties, early seventies though. Right. They hadn’t published and then really become named yet.
00:07:50 [Speaker Changed] That is exactly right. That is when they did their, their pioneering work. Wow. In fact, I went over to do some of those experiments later on talking with them. It turns out that none of them were their experiments, but, but at least, you know, it kind of give, gave me a sense. But I just did not know how to connect it. And then once I got to know their work, it really clicked together. And so the, the first paper that, that her sheron and I did was about dividends. It is about why it is that people like dividends. We were exceedingly lucky to have Fisher Black as the reviewer, as the referee for that paper. And he said, and, and you’re gonna see my blush now. He said, this paper is brilliant.
00:08:37 [Speaker Changed] Really? Oh, that’s great.
00:08:38 [Speaker Changed] I
00:08:39 [Speaker Changed] That’s high praise coming from
00:08:40 [Speaker Changed] Him. The editor the editor wrote after a lot of soul searching, I guess. I agree.
00:08:48 [Speaker Changed] So, so the interesting thing about dividends, from my perspective, I always thought dividends were preferred by investors over stock buybacks. Yes. Right. Stock buybacks are arguably more tax efficient. But if you are like those people who are ConEd investors, if they’re living on the dividends, we used to call those widows and orphan stocks, the loss of a dividend is a real loss in income and people really feel it. Yes, of course you can sell a few shares, but I’m gonna bet those people who either bought that stock or were handed that stock by a parent or a spouse, were told This is a great reliable dividend payer, never sell it.
00:09:30 [Speaker Changed] Exactly. And, and people make the distinction between what is capital and what is income. And so the rule that we follow is move money from income to capital, such as 401k, but don’t dip into capital. Right. When you spend dividend dividends count as income, and so you can spend them freely, but selling shares that’s dipping into capital, you know that.
00:09:56 [Speaker Changed] And they’ve been admonished against that their whole lives.
00:09:58 [Speaker Changed] Exactly.
00:09:59 [Speaker Changed] Is that pivot. And we, I have all these examples that I have to hide ’cause I don’t want people to recognize them and we’ll talk about them. But in my day job, one of the things that we notice all the time are people who have been workers and savers and investors hit a certain point where they slow down working, they have a ton of money in the bank and in their portfolio, and they have a real hard time making that adjustment to, hey, you don’t have to be an accumulator saver, you could start spending some down. Even if you live to a hundred, you are good. It’s a very tough transition.
00:10:38 [Speaker Changed] It is indeed a very tough transition. Yeah. When, when my mother-in-law was old, she had a rickety old sofa. The kid said, you must replace it. And she said, no, it is just fine. Finally, they just bought a new sofa and tossed the old one, and she smiled and she said, well, you are dipping into your inheritance that,
00:11:01 [Speaker Changed] So I, I literally, I had a conversation with a guest who was driving a 25-year- old car. I said, why don’t you go get yourself a new car? And his answer was, I’m dipping into the money I would otherwise give to charity. And I said, not for nothing, but you know, the latest cars they have the emergency stop and the seatbelt pretensioners and the improved brakes and the lean departure warnings and the automatic stop in case you’re getting too close to the car in front of you. If you’re not around to keep making all this money, you’re gonna have that much less to give to charity. And about three months later, I got an email, all right, you guilted me into getting a new Lexus. I go, listen, the 50 grand you’re spending on the Lexus that’ll keep you alive, you’ll be able to keep giving money to charity for that much longer.
00:11:48 [Speaker Changed] Exactly. I, in fact, I just days ago gave my 30-year-old Toyota station wagon to my handyman, and my wife compelled me to buy a Subaru that has all of those good features, all the safety features Right. That you mentioned, and it took me a while to make this switch, but
00:12:06 [Speaker Changed] The last time you were here, we talked about compounding and how money grows over time. You just don’t recognize how much all of these little incremental changes, whether it’s automobile technology or your phone or whatever, you know, you don’t notice it year to year, but 20, 30 years later, oh my god, it’s a much better phone, it’s a much better car. It’s a much better things improve over time and why not have the latest greatest if it’s gonna protect you and your family.
00:12:36 [Speaker Changed] It is. Yeah. I, I was reluctant to do it and of course I’m happy now that, that I did, I listened to my wife, what can you do this better than that? Happy, happy
00:12:46 [Speaker Changed] Wife, happy life. Right. Let’s talk a little bit about the book, which I’m finding to be fascinating. And I wanna start with a quote from you. Financial wellbeing alone is not enough. True life wellbeing comes from living a satisfying life full of meaning and purpose. That doesn’t seem like the traditional Wall Street definition of financial success discuss.
00:13:13 [Speaker Changed] Well, it is not, but of course it is. It is just common sense. That is, if you just think about your life, when I think about mine and, and the listeners as well, in finance, we usually end with financial wellbeing. That is what you should do, right? To get financial wellbeing. But, but what comes after that? So if you ask people what really matters in life, they’re going to say things like family and friends and work and health and so on. All true. But often they forget the finance part. And so it is this kind of like, like, like two worlds. One, one focused on finance entirely and one focused on things other than finance. But of course finance by itself enhances wellbeing. That is, being a millionaire really makes you happier than just earning 50,000 a year. And being a billionaire is not, is not bad.
00:14:08 You know, I’m, I’m a few million short of a billion, I don’t really aspire to, to a billion. I’m, I’m doing just fine. But it money matters, period on its own. But it also matters because it underlies other things. If you want a sure divorce, make sure that you are unemployed and, and there’s not enough money to support your spouse and, and children. So you need money for family, you need money for health, you need money for education. You even need money for religion because you know, they expect you to support the, the church or synagogue or any other temple that, that you go to. And so money matters because it underlies everything else. You don’t have to be wealthy to enjoy friendship and family and the rest, but you have to have some minimum that will get you there. And from that you can build on, of course to get life, wellbeing, life where, where you are, you can describe yourself as, as say, having a vocation, not just a, a job.
00:15:19 [Speaker Changed] So it sounds almost as if you are referencing Maslow’s hierarchy of needs. You have to take care of your basic survival. You need a shelter, food close, and then the next tier is you want a little bit of security and a little bit of reserve to deal with any sort of emergency. And then beyond that, you want options to be able to spend your time how you want. Is that the wrong frame of reference or, or does it, is there other parallels?
00:15:48 [Speaker Changed] It is similar to it except that that sequence is not a sequence that any, that everyone goes through or aspires to that is there are lots of people for whom gathering more and more money gets to be the ultimate in what life is meant to be.
00:16:09 [Speaker Changed] The contest aspect
00:16:11 [Speaker Changed] Of it. Yeah. The contest and so on. That that is what their,
00:16:14 [Speaker Changed] And that’s the polite way to describe it.
00:16:16 [Speaker Changed] Yes. So, so I, I think that that Maslow got it right. And, and I, I think that I can describe myself as someone who followed Maslow, that that is, I have more than enough money, but I also have a vocation. I’m, I’m 77 now and I’m not even thinking about retirement. That is not because I need the money. It is because I am a professor. This is who I am, an emeritus professor. You know, you get the title that, that you are no longer connected to
00:16:50 [Speaker Changed] Students. You’re still teaching classes now, right?
00:16:52 [Speaker Changed] I am still teaching classes. Wow. I’m still teaching classes. I’m still writing. Yeah. This, this is my life. I mean, of course I I have,
00:17:00 [Speaker Changed] You have lots of other things going
00:17:01 [Speaker Changed] On, but I have lots of other things. Right. I I, yeah.
00:17:03 [Speaker Changed] So, so that’s a perfect opportunity to ask about the four kinds of capital you explore in the book, financial, social, cultural, and personal. Let’s go over each of those. What what what makes them all so different?
00:17:18 [Speaker Changed] So, so financial capital is, is a kind of a straightforward, that is, you need, you need money. And money, as I said, underlies everything else. But it is also important on its own. And contrary to a very famous article that experienced wellbeing, emotional wellbeing stops growing after you have $75,000
00:17:43 [Speaker Changed] A year. And that’s an old number, right? That’s an old from
00:17:45 [Speaker Changed] A decade or two ago. But, but even, even adjusted for inflation, that is turns out not to be true. Oh, really? So, so a more, a more recent study by Killingworth found that it is not, so now Kaman and Deaton who did this original famous study, they asked people what emotions they had yesterday, but the emotions you remember from yesterday are not the emotions that you feel right now. The way he did it was, was working with an iPhone and asking people, how do you feel right now? And, and people had to make choices now. And it turns out that that in fact emotional wellbeing, experience, wellbeing grows without limit, but with, without limit. Without limit, but diminishing benefits.
00:18:34 [Speaker Changed] So it starts to plateau exactly. What what’s that number where you really see, because I remember seeing something, I don’t know if it was this study around 400 k, it starts to, or is that wrong? I
00:18:44 [Speaker Changed] Don’t, no. I, so if, if you go from, from say 20 to 60, that is three times, right? The increment is the same as going from say 100 to 300, right. Which is three times. And the second one you grow by by 200,000. But, but it, it really counts in terms of your wellbeing as an increase in 40,000 when you begin with 20,000.
00:19:11 [Speaker Changed] I gotcha. Yeah. Go going from broke to, alright, I have enough money to pay my rent and to pay the doctor and to get food. That’s like a big threshold. But going from a hundred to 300 or I would imagine 10 million to 30 million, you know, there’s a, there’s a joke I love to tell to, to clients, what’s the difference between $1 billion and $2 billion? And the answer is nothing. There’s no difference. Right? What, what, how does that, how is your standard of living gonna be affected between a billion or 2 billion? It’s the same.
00:19:42 [Speaker Changed] Yeah. Well, it is the same, but, but of course, if you have a, a fellow hedge fund manager, right? Who has a 25 billion, right? Boy, you feel like it’s puny. You know that I, I read, I read a book by a sociologist that interviewed very wealthy people living in Manhattan and, and a woman whose income annual income is in the millions and wealth is many multiples of that. She said, I guess I’m in the middle. You know, there, there are, there are people who have chauffeurs that have private planes and we don’t have that
00:20:16 [Speaker Changed] There, there’s always gonna be, unless you are, you know, Warren Buffet or, or Bill Gates or I guess now Elon Musk, there’s always someone that’s gonna have more money than you. Is that really the way people should be measuring themselves?
00:20:30 [Speaker Changed] I hope not. You know, this is, this is guarantee of being wealthy and miserable. That is not life wellbeing. It is surely financial wellbeing. But, but this is extreme example of the difference between financial wellbeing and life wellbeing.
00:20:49 [Speaker Changed] So, so I just wanna make sure I understand. The does money buy happiness question, so it starts to diminish, but in terms of proportions, when you’re going from 25 to 75 or two 50 to seven 50, the tripling is more or less parallel no matter where you start from.
00:21:10 [Speaker Changed] Exactly.
00:21:11 [Speaker Changed] Exactly. So you, you like drugs, you need a bigger and bigger hit to experience the same increase in, in satisfaction that you’re gonna get when you’re in the millions or billions.
00:21:21 [Speaker Changed] That’s right. Then. And once your, your income is, is 750 a year stop, you know, is
00:21:29 [Speaker Changed] That, is that so No, no, no. Is
00:21:30 [Speaker Changed] There a plateau
00:21:31 [Speaker Changed] Or
00:21:31 [Speaker Changed] I’m just describing it for, from my perspective, you know, right. That, that is, I ask myself, how much do you need? And there comes a point, you know, such as when you know that your state is going to be subject to estate tax, where you say, come on mayor, now it’s a question of whether you’re going to give it to the government or give it to, to charity. And so for me, I, I established with my wife, we established a, an endowment at Santa Clara University to support the work of my colleagues, you know, several million dollars. And I’m thinking, think about it, mayor. I mean, you have enough,
00:22:11 [Speaker Changed] I always laugh when people complain about the estate tax, which as of right now is married couple over $24 million. To me, it’s like the only excuse for paying a estate tax is you’re hit by a bus on the way to the estate attorney. You fill out some forms, you sign the documents, and you’re donating that money to charity as opposed to, you know, that’s to say nothing about trust and estates and doing all these other things if you want move money around, but it’s not that hard to not pay a state tax.
00:22:43 [Speaker Changed] Yes. But, but the question really is again about life wellbeing. So when I told my younger daughter that, that we have established this endowment, and I said, there’s going to be enough left for you, right? And she said, dad, I already received my bequest. Oh,
00:22:59 [Speaker Changed] That’s lovely.
00:23:01 [Speaker Changed] And you know, truth, I mean, she, she got quite a lot of help buying a house and, and so on. And I’m so happy that she is not one of those greedy people who know that they’re going to get 10 million and say, but I want 20.
00:23:17 [Speaker Changed] So, so let’s talk about that a little bit. Another quote of yours, life wellbeing comes when we live satisfying lives full of meaning and purpose. How can we measure meaning and purpose for ourselves? And how, as an academic, can you measure that in other people?
00:23:35 [Speaker Changed] Well, measuring it is really quite easy. Now, it is not as precise, you might say, as saying my income is 100,000 or 200,000. But you ask people, you know, do you think that your life has purpose? And they say, I have a job, I have a family. Okay. But, but, but I’m, I’m waiting to retire. You know, this is, and and what will you do? I don’t know, I’ll play golf and, and so on. Lots of people are like that. And, and I count myself among the very fortunate who’s a work and career is also a vocation. Right. You know, it is also who I am. And so you’re
00:24:14 [Speaker Changed] Not a golfer. Let me guess.
00:24:15 [Speaker Changed] I am nothing golf and
00:24:16 [Speaker Changed] There’s some great golf. I’m not a golfer either. I don’t, I can’t imagine looking forward to doing nothing but golf. That doesn’t hold any thrill to me. But some people love it. I I mean, I know
00:24:27 [Speaker Changed] I have nothing against them. Yeah. In fact, what, when, when I was about to say something along the lines you described about golf and making fun of it, in my earlier book the editor said, you know, there are many golf players who will want to buy a book. You want to annoy them.
00:24:46 [Speaker Changed] So, so let’s, let’s go over one of the other things that I picked up early in the book, the three generations of behavioral finance, so generation one of, of economics, well the original homo economists as humans are rational profit, maximizers, behavioral finance comes along and says, that’s not true. People are irrational. Generation two comes along and says, well, people are people and that what you’re calling irrational is just people being normal. You wanna expand this in generation three to say, behavioral finance describes people as normal, but we have to broaden our lens and look at people holistically, see the whole person, see the entire life, and not just look at individual transactions or, or survey responses.
00:25:34 [Speaker Changed] So let me describe very briefly how, how it develops. So, so standard finance, as you said, is people are rational. The first generation of behavioral finance. We found, for example, that people do stuff that is not maximizing their wealth. For example, they trade too much and doing that diminishes their capital or they make distinction between what is capital and what is income. And so we called them irrational, but irrational has this, this sense that they’re stupid, you know, and, and, and people are not stupid or, or by that measure, I’m stupid and likely you are. I said, look at things like, like a watch. Okay? So, so a watch has utilitarian benefits, but also expressive and emotional, you know, all watches, even those that cost less than a hundred dollars show you the precise time. But when you buy a a Rolex, you get not just showing time, but you also get those expressive benefits. I am a man who can afford the Rolex. And, and, and you feel proud. Those emotional
00:26:43 [Speaker Changed] Benefits from pro professor Scott Galloway describes that as it’s a way to signal your, a suitability for mating to the opposite sex.
00:26:51 [Speaker Changed] That that is one thing that it does. Yeah. That, but, but then all the people in married ones still still buy those, those fancy watches. Good for them. You know, that that is people signal their status and the status is about expressive and emotional benefits. And so that was kind of the second generation that said, people who buy Rolexes are not irrational. They are normal people. They just care about some other things other than show me the right time. And then I was saying, wait a minute, people want more than those expressive and emotional benefits. People want wellbeing, people want life wellbeing. Have you touched on family? Have you spoken about education, about work, about religion, about society? J just think about how whoever wins the election, they’re going to be half the country happy and have the country miserable. Right? And so it truly affects life wellbeing as well. And so we have to look at that whole, and, and as, as I said before, you need money underlying it all, but money is not enough.
00:28:10 [Speaker Changed] Huh? That, that’s really interesting. What, what led to the recognition that we’re going through these different generations of, of behavioral finance and that it’s evolving over time?
00:28:21 [Speaker Changed] Well, you know, I cannot say that, that it is a general feeling that, that is in my sense is that finance generally is still dwelling on the irrational stage. I think I moved forward to describe people as normal. And when I say utilitarian, expressive and emotional benefits to people in marketing, they say, tell me something new. I mean, we know that people in finance are still kind of reluctant to, to do that. And, and life wellbeing is really beyond their sense of what finance is. And yet when I speak about it to my students, they know exactly what it is that I’m talking about. And they tell me stories, their own stories. The graduate student said 15 years ago, I would’ve said that what is most important for me is to have money to spend it on myself. But now I have a son and he’s the center of my life.
00:29:21 [Speaker Changed] Your priorities change, right?
00:29:22 [Speaker Changed] They get it. Exactly. There is more than, than having money to make you happy. So
00:29:28 [Speaker Changed] I see this book as the logical next step to what investors really want, where you describe, hey, it’s not just about I wanna generate the most return on my invested capital. There are all these expressive and value-based and even status signaling aspects of people’s investments and portfolios, their personal values, what they believe in at the time that seemed a little radical to a lot of people. I think it’s now become accepted in the cannon of, of behavioral finance, how much of a leaping off point was what investors really want into a wealth of wellbeing.
00:30:10 [Speaker Changed] It is a natural progression. And so one of the things that I worked on even in the eighties, in the late eighties, was socially responsible investing, literally known now as ESG. And I said, look, there are people who are willing to give up wealth to be true to their values by, by divesting from fossil fuel companies or whatever it is that that offends them. These are not irrational people, these are normal people. Now it is a matter of kind of going further and saying, what else affects your life wellbeing beyond, say, investing in line with your values. And then you get into those issues of, of education, for example, you know, education is about getting a better job. Yes. But education is about so much more than that. You know, an educated person is likely to be a reader, is likely to be a thinker, is likely to have a different set of friends and, and all of that. It is not just about having a better job, it is about life wellbeing beyond financial wellbeing.
00:31:22 [Speaker Changed] Hmm. Really interesting. You know, I’m gonna stay with one investors really want, we use a custom index piece of software called Canvas. It’s now owned by Franklin Templeton. It’s got a lot of different uses because it’s a powerful piece of software. So with a custom index you can own them Vanguard, total market, like 800 different stocks. And you have the ability to say, I don’t want guns or tobacco, which is a very common request. I was speaking to Jim O’Shaughnessy about it, the New York Catholic Bishops say we don’t want any drug companies that produce drugs that cause abortion or insurance or hospital chains that provide those services. We just, we don’t believe that’s consistent with our beliefs. And if we underperform a few percent, we don’t care. How significant are people’s personal values to their portfolios. How important is this?
00:32:23 [Speaker Changed] Well, it it really varies by person. And in fact, I’m one of them who, who invest in general index funds and then makes donations consistent with my values. But for other people, you know, I, I have this standard analogy. I say imagine that you face a, a potential client, he’s an Orthodox Jew. Imagine saying, listen, pork tastes pretty good, it costs less than kosher beef. Why don’t you eat pork and donate the savings to your synagogue? Well, everyone understands that that is not absurd, right? So I say, look, if if having fossil fuel or tobacco stocks in your portfolio feels like pork in the mouth of an orthodox Jew, take them out of your portfolio. But if not, then it is perfectly okay to separate the two. And, and I like the term that you use. That’s the one I use values based investing. In fact, there is an ETF for, for conservatives and an ETF for liberals. And, and then there is the Ava Maria Mutual Fund where they exclude everything that offends the Catholic church.
00:33:30 [Speaker Changed] That’s, that’s really interesting. You know, I remember a couple of years ago there was an ETF called VICE and it was alcohol, tobacco, gambling, but it was all the vice stocks. Yeah. Because some people had been shunning them. They had become cheap enough that I recall for a while that portfolio was doing really well. It
00:33:48 [Speaker Changed] It did and perhaps still does. But, but most of it really is, is directed at people who want to poke the eyes, right. Or the socially responsible investors. Yeah.
00:34:00 [Speaker Changed] In finance, I’ve learned it’s all marketing anyway, right? Well, marketing,
00:34:04 [Speaker Changed] Everybody’s, you know, you cannot take marketing outta finance. You cannot, how, how hard you try.
00:34:10 [Speaker Changed] Let’s talk a little bit about another quote of yours often overlooked. The financial domain underpins all other domains of life and wellbeing, including health, relationships, and work. Financial stability enables pursuing other aspects of a fulfilling life. So you were discussing just this a little while ago, isn’t that obvious? Do we really overlook that you need money to do these other things? How, how do we find ourselves in this state of affairs?
00:34:42 [Speaker Changed] When you speak with ordinary people and you ask them, is money, all that matters in life? They would say no. You know, family matters and friends matter and religion matters and so on. It is just that when it comes to both academics and finance and also practitioners, financial advisors, still to this very day, many financial advisors have the attitude of I’m here to make you money. What you do with it? That’s, that’s none of my business. And so you think about that and you say, this makes no sense in many ways. That is, if, if a client says, you know, my oldest son really annoyed me, I think I’m going to write him out of my will. If you’re a financial advisor, you’re going to say, well, here’s the revision sign. The dotted line. I hope that you are going to say, are you sure you know, yes, you are going to be gone when they open the will, does it occur to you that now brother and sisters are not going to speak to one another? You know, you are, you are going to try to reason with a person and say, there is more than this financial decision. You have to think about what kind of life wellbeing it is going to bring.
00:36:04 [Speaker Changed] So I’m glad you brought up the, the concept of financial advisors. My experience has been the best financial advisors are very empathetic to people’s whole life. But I wanna again, go back to what you wrote. Good financial advisors must evolve into wellbeing advisors. They must form emotional connections with clients and provide personalized guidance beyond just investment management.
00:36:31 [Speaker Changed] Exactly. So, so from a business side, the skills that financial advisors have traditionally prized that is they know investments, they know stocks, they know hedge funds, robo- advisors do that work for a fraction of the fee. You want to realize losses, they’ll do it automatically for you. You want to rebalance your portfolio. They’ll, they’ll do that. What it is that you bring is of course knowledge. You know, you have to be at the frontier of knowledge of finance. And I liken financial advisors, good financial advisors to financial physicians, you know, in the same way that of course you want a physician who knows medicine, but, but you also want someone who is listening to you, who is asking you a question, who listens between the lines that you can disclose to even embarrassing things about your health. And there are embarrassing things about, about our lives that we are not disclosing to acquaintances because a good physician is one, when you leave the office, you have a sense that even if the news, the medical news is bad, at least you can see what is coming. You get that sense of, of empathy, that emotional contact is really what is going to keep that physician as your physician. The same applies to, to advisors. You know, you cannot promise them, I’ll get you a higher returns than the advisor down the street because you cannot deliver that. Right? You can say, I care about you and your family, you can disclose things to me and I’m going to guide you to of course take care of your financial wellbeing, but also of your life wellbeing.
00:38:20 [Speaker Changed] Huh. Really interesting. So, so you brought up a doctor. That’s a perfect segue to our next question. If any one part of your wellbeing isn’t healthy, if your health is suffering, if you have some sort of physical or emotional setback, everything else seems to suffer. It seems that all of these different parts that you’ve been describing are financial health, our social health, our, our actual physical health. They all seem to be interrelated. How do we maintain a healthy balance amongst all the different parts of our lives?
00:38:54 [Speaker Changed] That really is an issue that, that I’ve encountered that, that others, our older daughter, for example, is living with, with bipolar illness and mental. You
00:39:04 [Speaker Changed] You discussed that in the book Pretty,
00:39:05 [Speaker Changed] Yeah, I discussed it in
00:39:06 [Speaker Changed] The book frankly
00:39:07 [Speaker Changed] Before there was a diagnosis when we just had kind of an inkling something is not going right. The therapist said that it is our fault, you know, that, that that we are perfectionists or whatever. And it was just a matter of whether Nava is to blame or, or I
00:39:24 [Speaker Changed] Am Nava being your wife,
00:39:25 [Speaker Changed] The Nava being my wife. And so the family, the children part was damaged and then the marriage itself was, was damaged. You know, we, we let, we let our anguish kind of seep into our relationship and, and suddenly, you know, even though I could see that I’ll get any or that’s not a problem. It just weighed on me. And what I’ve learned over time is to separate things that that is, I think now of life wellbeing, kind of like a portfolio. It it has stocks or the equivalent of that domains marriage, children, friendship, education and so on. Now some stocks will do very well in your portfolio, some will do very poorly. But you look at the portfolio as a whole. And so we have to look at the portfolio as a whole and we can kind of transfer returns in some ways, transfer wellbeing from say the, the work part to the, I have a disabled child and you know, the, the fact that my wealth is high means that I can support that ill daughter without constraining myself in terms of consumption. So, so that is a very good thing. And, and, and so I think, I think one is really to learn to move life wellbeing from one domain where it is extra to one that is missing. There’s another one that is really important and that is disclosure. And I’m very happy that I disclose my own pain because when you disclose your pain to people, the typical response is they tell you about theirs and it might have nothing to do with kids, whatever it is.
00:41:07 [Speaker Changed] They open up,
00:41:08 [Speaker Changed] They open up and, and, and suddenly you move from being an acquaintance or a colleague to becoming a friend in an odd way, kind of like, like for free. You enhance the wellbeing of that new friend and he or she enhances yours. It didn’t cost you anything. You know, you, you go home and you say, I feel better just knowing that life is like that, you know, that, that I’m not the one that God has chosen to inflict a handicap on. That is life and people manage. And, and if you can help people, of course, if you can help them in more direct ways, that is wonderful. Nava, my wife has been a volunteer at the National Alliance on Mental Illness, NAMI for many years. She, she has helped so many people and families and I’m so exceedingly proud of her for doing that. And so it enhances her wellbeing. It enhances my wellbeing. We know it gives meaning to life. So we know that we are doing good.
00:42:13 [Speaker Changed] Since you brought up your, your wife, let, let’s talk about what you write about marriage. I don’t think I’ve ever heard it described as the largest financial decision we make. Explain that.
00:42:26 [Speaker Changed] Well, if you can think about it, you know, that that is of course, of course it is. Right? It is not, it is not buying this stock or that putting money in your 401k marriage costs money. It, it also, it brings money and it costs money.
00:42:40 [Speaker Changed] It it’s also the partnership that you’re gonna face all these financial challenges through your whole lifetime.
00:42:46 [Speaker Changed] Exactly. And and so I tell my young students, they say, you know, I married, I was 22 when I got married. The Nava was 21. Look around you here on campus. You see men and women who are worthy of you, you know,
00:43:01 [Speaker Changed] Who do you wanna spend the next 50 years
00:43:03 [Speaker Changed] With? Who you want? Yeah. Who who do you think? And, and if you think that there is this giant marketplace online where there are people someplace who are just your soulmate, forget that, you know, that that is, you build your life together. It is a joint enterprise deciding to come to the United States from Israel to study for the PhD. I can imagine see a, a wife who says, no, I, I don’t want to, to separate from my family and and so on, but what would I have done? I’m lucky that, that my wife went along. And so yes, yes, yes. Speaking as somebody who has been married for some 54 years. Wow. I can tell you that a good marriage is a wonderful thing.
00:43:51 [Speaker Changed] So now let’s ask the opposite question. What does your research say about divorce and subsequent wellbeing? Not just financial, but total wellbeing?
00:44:03 [Speaker Changed] I think that lots of people are not fortunate enough to find someone who is really a partner. I’m not even talking about about abuse. I’m just saying that people really go in different, in different directions and it creates strife. Now, interestingly enough, when a couple says that they’re divorcing, say to their children, in many cases the children are relieved because they’ve lived with their strife for a long, long time. And they’re kind of anticipating that, right? And, and they can see that actually going from father to mother is not the worst thing. It is actually better than watching them bicker. It’s
00:44:45 [Speaker Changed] A relief. It
00:44:46 [Speaker Changed] Is a relief. Exactly. So, so when it comes as a shock, when when you totally did not expect it as a child, that is painful and it takes a while, if ever to heal. But when marriage gets to be so bad that it really seeps into everything where, where you think about it at work, where it affects your health and so on, there comes a time to like a company that abandons a project without throwing good money off the bed, you know? Well,
00:45:18 [Speaker Changed] Some cost fallacy is a big deal, right? Yeah. At a certain point you gotta take the right down and, and move on.
00:45:22 [Speaker Changed] And, and very often people will say, you know, I should have made this decision five years ago.
00:45:28 [Speaker Changed] Let’s talk a little bit about education and a college degree. Some people have argued, ah, no one really needs a, a college degree. Economists like Nobel Laureate Angus Deaton has written, it’s the single most important dividing line in terms of lifetime wealth, happiness, wellbeing, health, even. What are your thoughts on education and getting a college degree?
00:45:51 [Speaker Changed] I definitely agree. Yeah. People say that the value of college education has declined. I say to the contrary, I remember in my first days at Columbia, I was reading something, perhaps a Newsweek quoting an assembly line worker at an automobile company saying, you know, I earn as much as an assistant professor. And he was right. You know, my, my first job at the city University of New York in 75, I earned 13,500 for the year. But of course now I earn multiples of what a blue collar person is earning, right? And on top of that, my life wellbeing is higher. That is, I really enjoy reading books. I enjoy making sense of the world. I enjoy teaching. There’s nothing wrong about being a, a handyman. I I have the most wonderful handyman both in terms of skills and a person, but you know, he does not have that college education.
00:46:52 His range of interests is different, not necessarily worse is different. I can see that it would not have worked for me. And so both in terms of financial wellbeing and, and in terms of life wellbeing, you are really doing better as a college graduate. And so if you are qualified, if, if it is for you, do that. And if you are not sure, begin with community college, figure it out, work at it. You know, it’s not easy that, that is, there are days when, when you would want to quit, but give it a chance because without it, you are going to be at a disadvantage. Even if you own three houses, even if you own a business and you make a ton of money, there is a sense that something is missing.
00:47:45 [Speaker Changed] You devote an entire chapter to striking the right balance between saving and spending. Why is it so difficult for us to reach that sort of comfortable balance, especially when you’re younger, when you want to go out and have a good time and buy things. But really the sooner you start saving, the longer it can compound for
00:48:08 [Speaker Changed] That is right. It is hard to save, especially when, when you are young, because there are many needs and there are many temptations. If your friends are going to go to this bar and it costs a good chunk of money saying, you know, I cannot afford that, I think I’m going to say goodbye now. That, that is very, very painful. And, and so we use techniques, mental techniques to help us. I talked before about this framing and mental accounting and self-control, that that is, if you contribute money from your paycheck to the 401k, you don’t see that money, right? And so you don’t spend that money if you follow the rule of don’t dip into capital, it means that the moment you say, I think I’m going to dip into my 401k, there’s going to be a voice in you that says, no, I don’t think that that is the right thing to do.
00:49:04 And so young people figure out a way to use those mental tools to get them to save and spend. But spend sensibly, the problem arises when those young people get older and now they find themselves as being as I am accidental wealthy people. And now it is a matter of, hey buddy, relax. Okay, you don’t have to buy stuff on sale. You don’t have to go for air dinner at a discount. You can fly if it is a long flight, you can fly business class even if the price is outrageous. For many people, saving and being frugal turns into miserly, right? And they find it really hard to break that habit. And so it is really hard and, and I hope that their kids or their friends are going to say, Hey, rely, in fact, I have a friend who says, listen, if you fly economy, your son-in-law will fly first class.
00:50:10 [Speaker Changed] That’ll, that’ll teach you. You know, I have a colleague, Nick Majuli, young guy in his thirties, he’s, he’s our, our quant. And he has this mental device he does, if he wants to go out and buy something, let’s say it’s a piece of clothing or something, it’s $500, however much that item is, he has to match it with a contribution to his 401k. So he’ll say, if I’m gonna spend $500 on some piece of junk, I also have to put $500 as an investment. And it forces him to spend very responsibly.
00:50:44 [Speaker Changed] That is a very good technique. Whatever works for you, for us, you know, now, now that we, that we fly business class when, when we go to Israel for example, we’ve also increased our charitable contributions by at least that amount and more. So,
00:51:00 [Speaker Changed] So, so you’re matching the, the expense of plane ticket with a charitable
00:51:04 [Speaker Changed] Donation. Yeah. So, so, so I say, you know, I treat myself well, but I’m treating those who have less well as well.
00:51:12 [Speaker Changed] That’s great. So I’ve seen some data that shows a correlation between the time people spend with friends and families versus the time they spend working with coworkers and the impact on overall happiness and, and, and life satisfaction. Tell us a little bit about social capital and how people use that.
00:51:34 [Speaker Changed] Well, social capital has to do with your circle of friends, close friends and acquaintances that you can rely on. And so, and so some of them are really close, some of them are close enough such that you can say, I’m short of money to pay the rent. Can you lend me $2,000? Some cases they’re going to say, sure, they can do that. And they, and they will do. But then there are also acquaintances, for example, if you’ve lost your job, you know that there are other professors who you know, and you can call and you say, Hey Joe, do you know of any openings or if your son is going to apply for college as a professor, you, you can call and say, give me some, some pointers as to how to, to write an essay that is going to be compelling to the admissions people. And so there’s kind of a range of people who are friends. And one of the things is really for higher socioeconomic people, that is people with higher education and higher income, they have many more of those casual friends that they can call for
00:52:50 [Speaker Changed] Bigger network
00:52:52 [Speaker Changed] References. Exactly. And, and network. Whereas for the people in lower ones, there is a tighter, smaller but tighter closer circle of friends where you can say, you know, can you give me a ride to the doctor because my, my car broke down, or some something of, of that kind. Hmm.
00:53:10 [Speaker Changed] So that’s social capital. Tell us a little bit about cultural capital.
00:53:14 [Speaker Changed] Well, cultural capital is about knowing what is the right thing, what is acceptable. And sometimes it can be confusing that that is, here we are at a time when you are not really sure if you should appear with a tie or without, if you are going to go on television, you are concerned that if you have a tie on, you’re going to be the only one with a tie on or the only one without a, a tie on. And so you need to know what are the things that are acceptable, what kind of clothing, what kind of books, what kind of movies are the kinds that you can talk about with your friends, whether people in your circle, and I, and I remember when, when I came from Israel, I did not really know, you know, Americans were, were, were like, like a tribe in the Amazon that that is, what is it that makes them a tick from, from small things to large,
00:54:15 [Speaker Changed] Very different country than Europe and, and elsewhere. Yeah,
00:54:19 [Speaker Changed] I grew up in Israel, you know, people say aren’t Americans very materialistic and you say, well you have to go to Israel and, or at least at that age because at that age, getting a car was a big deal, not in the United States, you know? Right. That is,
00:54:41 [Speaker Changed] Especially today.
00:54:43 [Speaker Changed] Well, yeah, we, we had this, this kind of joke, half joke, how serious do you have form Micah Idio kitchen? You know, because it was, you buy an apartment, but can you afford also at that time it was fashionable to have cabinets kind of laminated with formica,
00:55:01 [Speaker Changed] You know, now it’s the granite countertops with the nice wood cabinets.
00:55:06 [Speaker Changed] Exactly. You have to know those things. Even if you are going to go against that grain, at least you know that you’re against the grain. You know, my mom would say, listen, suppose that you’re going to be the Israeli ambassador to Moscow and they call you to the Torah and you don’t know what to say. Think about it. You know, that is knowing what to say when you are called to the Torah is part of cultural capital that you need not necessarily just as, as a, as an Israeli Jew, but, but really as one who strives for a particular position.
00:55:43 [Speaker Changed] So I want to ask you a question because it’s an election year and the chapter you wrote on societal capital. You write, liberals tend to define fairness in terms of equality. Conservatives tend to define fairness in terms of equity or opportunity. What are these two tribes doing so differently and is there any chance of common ground between them?
00:56:07 [Speaker Changed] Conservatives generally say you are going to be paid as much as you put in. So if you put in a larger portion of the pie, you will get to eat a larger portion of the pie. Liberals say, you know, there are some people who are say disabled or some people who for some reason or another not because of laziness, are not going to contribute as much. Well, you know, they might not get as large a piece, but surely you don’t want to condemn them to, to starvation. How much responsibility do you have for others? And, and so you have that, the difference in, in points of view and, and it really varies. In Europe for example, people are more content to pay higher taxes that pay not just for their services, but also for the services of people who are less fortunate. In the United States, there is less of a willingness to do that. Socialized medicine, I mean, what can be worse than socialized medicine
00:57:16 [Speaker Changed] Dealing with an insurance company is the
00:57:18 [Speaker Changed] Dealing with an insurance company. Precisely. Well,
00:57:21 [Speaker Changed] Although there’s a series of trade-offs that when you have private medicine, you have options and you could do different things. People in Canada I know complain about long waits for very simple services.
00:57:31 [Speaker Changed] Exactly. And there are drawbacks to socialized medicine and there are drawbacks to capitalistic or, or private enterprise medicine. And some people are going to say, well, everyone has to wait if it is not urgent surgery. And others say, Hey, you know, I can get the surgery in the United States right the following day. So
00:57:54 [Speaker Changed] Before we go to our favorite questions that we ask all of our guests, I just have to ask, I know you’ve been speaking to people about the book, how’s it going? What’s the reception been like so far?
00:58:03 [Speaker Changed] It is, it is a very, a very good reception. You know, in some way what I say is not new and in other ways it is very new. The way
00:58:12 [Speaker Changed] You’ve structured it, in the way you tell the tale and organize. This feels very new. Even though I recognize a lot of the concepts from your earlier books.
00:58:23 [Speaker Changed] That is right. So there is a lot of literature about life wellbeing, say, done by psychologists, done by economists, done by sociologists. People in finance don’t know this literature. And of course like all academic literature, it tends to be kind of general that that in general divorce does not necessarily harm wellbeing. But tell me a story, illustrate it so that it kind of brings it to life. And so my task was to learn and bring the academic literature, the general literature, and then marry it with stories from everywhere.
00:59:04 [Speaker Changed] So it’s data plus anecdotes. Someone I know has a, a child that’s gonna go to grad school next year. This person has $10 million worth of stock cash real estate in the bank. All he does is complain about this kid’s gonna cost me $150,000 a year. And my argument with them has been, aren’t you saying this backwards? Shouldn’t be saying, boy, I’m fortunate that I could spend 150 grand on my youngest son and it’s not even gonna move the needle in my bank account. Are people so obsessed with money that they forget what a privilege it is? What a joy it should be to say you wanna go to grad school. Done.
00:59:49 [Speaker Changed] Absolutely. Yeah. I I saw an article just, just recently about someone who says, how is it if people who are very wealthy in three generations, it’s kind of from, from short sleeves to short sleeves, right? And, and so he says, maybe you should have fewer kids. And I say, whoa, you really got it backwards. You know that wealth is for people. People are not for building wealth. And if you are lucky enough, talented enough, hardworking enough to accumulate that wealth, be grateful and and have your kids live a bit better now, help them find a vocation. Okay? Of course you care about them not growing up to be, to be spoiled. Brands help them as as you can. You know, the last thing you want is to hold onto that wealth. You die at 95, the kid is 65 right now. He gets that money. Well thank you very much. Right? You know, it’s still good to get $10 million even when you’re 65, but it is their twenties and early thirties is when they need that money. This is the time to give it to them.
01:00:57 [Speaker Changed] So let’s talk a little bit about that struggle. Warren Buffet very famously has said, you know, his kids are gonna get a couple of million dollars, but they’re not gonna be wealthy and he’s giving away most of his money to charity. At what point do you run into the risk of spoiling the kids?
01:01:16 [Speaker Changed] I think that, that, that these are not two things that they really come together. That that is, you have to help your kid if you can buy a house or, or, or pay for, for education at the same time you want to say to the kid, I’m paying for college or for most of college, here’s your responsibility. Your responsibility is study hard. Okay? This is not a time just for play. It is the time for you to study so that you can develop as a person and as a professional so that you have a vocation. Those things go together. Kids kind of get the message. This is not free money. My, my parents are trying to guide me towards financial wellbeing and also life wellbeing, and I have to do my share. What
01:02:07 [Speaker Changed] Do you think about the parents who say, all right, we’re gonna pay for your room and board and tuition and books, but your half of the bargain is you have to maintain a b plus. So I know you’re not just out having too good a time you’re actually working.
01:02:21 [Speaker Changed] I think that that is reasonable. I, I think that, that it is reasonable to set expectations where you do it with a grade point average or other ways. It is really important for people to help their kids. I’ll tell you a quick story. I, I was, I was listening to a session that had to do with very wealthy people speaking to other wealthy people. And one of them had a daughter who was not interested at all in academic studies, but she was really very interested in art. And in an earlier session that day, somebody came to speak about art as an investment, and that gave him an idea. And he said, what if I open a gallery for her? It’ll really be the right thing for her. Will it make money or not? I don’t care. I have plenty of that, but it’s going to be a vocation for her. He had tears in his eyes. He was so relieved that part of his wellbeing that was so low is now going to be high. And, and I was thinking, that is wonderful. You know, this is why I repeat this story because it really touches me deeply,
01:03:33 [Speaker Changed] A, a clever solution. All right. So we only have about 10 minutes left. Let me jump to our favorite questions that we ask all of our guests. Starting with what’s been keeping you entertained these days? What are you watching or listening to?
01:03:46 [Speaker Changed] The podcasts that I am interested in are ones that have to do with society. So, so, so Ezra Klein, for example. Sure. Who has podcasts about society and how society operates and how government, this really resonates with me because this is something that I would like to, to know I’m less interested in, in the usual fiction series and so on. Which, which is not a very good idea because that’s part of cultural capital. And so people make references to shows I’ve never seen, and it kind of puts me in a defensive position.
01:04:21 [Speaker Changed] Yeah. You don’t strike me as like a bridger tin sort of guy. Like you’re not streaming that sort of stuff on that place.
01:04:27 [Speaker Changed] No, I don’t. You know, and
01:04:28 [Speaker Changed] It’s cotton candy. Some of it’s delightful,
01:04:31 [Speaker Changed] I’m sure, and, and really kind of like golf. It’s not my thing. Right. But, but I don’t resent people for whom it is their thing.
01:04:40 [Speaker Changed] So let’s talk about mentors who helped to shape your career.
01:04:44 [Speaker Changed] Well, I can think of, of Elia Harris, who, who was my teacher in high school, and he came from the United States. He graduated from Harvard, and he is a Zionist before he came, my teachers of English in both elementary school and early in high school, taught it through grammar. I cannot take grammar, not even in Hebrew,
01:05:08 [Speaker Changed] But by the way, I just finished a word with a preposition in the back of my head. I see that little x that you’re not supposed to end a word with a, a sentence with the word two, and that sometimes it just happens. Who
01:05:19 [Speaker Changed] Cares?
01:05:20 [Speaker Changed] Right.
01:05:21 [Speaker Changed] And so the first assignment he had was to write an essay. And suddenly I moved from the bottom of the class to pretty much the top of the class. And students came to him and said, why did I get a C minus? I had no spelling mistakes. And, and he said, that’s not what mattered. An essay has to be interesting on, on one of my essays. He wrote Very good indeed. And I didn’t know what indeed meant
01:05:47 [Speaker Changed] That. That’s great. Let’s talk about some books. What are you reading now and what are some of your favorites?
01:05:53 [Speaker Changed] So I’m reading now, or, or read recently Streets of Gold. It’s, it’s about immigration into the United States, the waves of immigration, immigration laws. And it begins with, with a story of, of someone at the turn of the century, the the the 20th century. And he said, they told me that in America, streets are paved at gold. Well, I found three things. One, the streets are not paved in gold. Second, the streets are not paved at all. Third, they expect us to pave them.
01:06:28 [Speaker Changed] That’s very
01:06:29 [Speaker Changed] Fun, funny. And so you, you kind of learn that the immigrants themselves did not really move from rags to riches, but their kids have done better than American kids of
01:06:43 [Speaker Changed] Why is that? I’ve watched that firsthand, and I’m always, I, I just always assumed the parents said, Hey, this is an opportunity we didn’t have back home. Take advantage of it.
01:06:53 [Speaker Changed] That, that I think is a big part of it, really, that there, there are those expectations that you place in your kid, or it may be the kids themselves kind of get without being told. You know that the Uber driver who took me yesterday from, from the airport, he said, you know, he works as, as an Uber driver. He does not earn a ton of money. And he said, it’s for my kids. And indeed they’re going to get better education and have better chances than, than they would’ve had in his, in his home country. And so if you look at immigrants today, it’s the same story that, that is, people are, are afraid of immigrants and, and and so on. But immigrants, you know, and of course I’m an immigrant, right? So I’m biased, but, but I think that immigrants add a whole lot more than they take away, especially if you count the second generation and the generations that follow.
01:07:48 [Speaker Changed] So, so streets of gold is one book. Give us one other.
01:07:50 [Speaker Changed] I’m also rereading a book that is called The War of Return. It is about Israel Palestine and it’s about the, the demand of Palestinians to go back
01:08:04 [Speaker Changed] To this is before the current, long before that conflict. Yeah. This is decades.
01:08:09 [Speaker Changed] There’s something very anomalous about this notion of refugees. That, that is, my parents were refugees when they escaped from the Nazis from Poland. They were refugees in the displaced persons camp in Germany where I was born. But they ceased being refugees when they came to Israel. And of course, my children and their children are not refugees. Somehow Arab nations. It, it has come that Palestinians are refugees, even if they were not among those who were made refugees in 1948. So it’s their children and grandchildren and, and they still have this notion that they’re going to go back to, to Ashkelon and Jfa and Haifa and and so on. And, you know, the, the, the sense is really that, that unless we kind of get away from that and we get to know that, that people make their lives where they are, they will never be peace.
01:09:06 [Speaker Changed] That that’s a big challenge. Alright, our final two questions. What sort of advice would you give to a recent college graduate interested in a career in either investment, advisory, finance, or academics?
01:09:21 [Speaker Changed] Well, what I would say to people really is what I’m saying to, to interns. When, when I send them into internships, I say, think about serendipity. Think about zigs and zags. That is the most important thing when you get out of college, is get a job. Any job you are going to learn from it. And if you hate this job, that’s a very good lesson because you’ve learned something not to go there. And so life is going to take you in many directions. Keep your eyes open, learn not just about the world, learn about yourself. Now, academics turned out to be the right way for me, I’m a professor, this is my vocation, but it is not for everyone. You know, if you are a financial analyst and that is what you do, you may aspire to be the chief financial officer, maybe the, the, the CFO of a company. Good for you. There are going to be many surprises that you’re going to encounter. Do that. And so don’t try to chart your, your life and career too far ahead. Just, just let things develop where you figure out the world and you figure out yourself.
01:10:44 [Speaker Changed] And our final question, what do you know about the world of behavioral finance today? You wish you knew 44 years ago or so when you were first starting out?
01:10:54 [Speaker Changed] Well, you know, in a way I would like to have known everything I know now, but in a way I’m really happy I did not, that that is, in a way I’m happy that, that I let things develop, that I discovered them as I did. It’s kind of like, like, like opening gifts. One at a time, one, one every year and be surprised and be delighted by them. And, and that that is what happened. You know, if, if you think about those generations of behavioral finance and, and the subjects that, that, that you have the new ideas, you know, things I could not understand at night when I’m tired and ready to sleep, I, I wake up in the morning and I get that, that, so, so I, I actually, I just thought recently about this idea of wellbeing as a portfolio, and I was just corresponding with an editor of a journal and she said, I really like this idea. Yeah. Can, can you write, can you write a paper about that? And, and, and tell advisors how they can use that in a conversation. I’m up to this challenge, you know, I like that this is, yeah, this, this is the, the kind of thing. So, so for me, one of the pleasures of life is really discovering new things, making connections that other people don’t. This is my comparative advantage.
01:12:18 [Speaker Changed] Well, that’s just delightful. Thank you Professor Statman for being so generous with your time. We have been speaking with Professor Meyer Statman, author of a new book, A Wealth of Wellbeing, a Holistic Approach to Behavioral Finance. If you enjoyed this conversation, check out any of the 500 previous discussions we’ve had over the past 10 years. You can find those at iTunes, Spotify, YouTube, wherever you find your favorite podcast. Check out my new podcast at the money short, 10 minute questions with experts about topics related to your money, earning it, spending it, and most importantly, investing it at the money in the Masters in Business Feed, or wherever you find your favorite podcasts. I would be remiss if I did not thank the crack staff that helps put these conversations together each week. John Wasserman is my engineer. Atika Val Run is my project manager. Anna Luke is my producer. Sean Russo is my researcher. Sage Bauman is head of podcast at Bloomberg. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.
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