Bizarre, but one of the bigger problems we have is getting people to expand and enjoy their money.
How do you think about enough? Like, what's enough?
I'm not sure there is like a certain amount for anyone really because the goal posts are constantly moving. Delay gratification, delay and delay and delay. And then when do you actually get the gratification? Funny because the money stuff really doesn't matter in the grand scheme of things. You know that, right?
Welcome back to the U Potential podcast. If you follow markets, there's a good chance you know Ben Carlson. He's one of the most respected voices in investing, co-author of Animal Spirits podcast, and author of the new book Risk and Reward. Today, Ben shares what history teaches us about risk and how to make better decisions when markets and our lives are uncertain. Before we head into this episode, please subscribe here on YouTube or wherever you listen to your podcast. And now, I hope you enjoy this fascinating conversation with Ben Carlson.
Ben, welcome to the podcast.
Welcome to uh mini not put together Canada. I guess that is that what you guys look at us up there in Canada?
Well, I'm from Michigan, so that's basically Canada, right?
Yeah, you are. You're very close. You can see into Canada.
Well, I hope you can come join us for a beaver tail tonight now that you know what it is.
Just told me what it is, and I think it sounds delicious.
Um Ben, I thought we could only start in one place. Let's imagine it's Friday and you're heading to the lake. What is it about the lake that speaks to Ben?
The water is kind of my happy place. I think anytime I can be have the water be visually there in the background, be on the water. Uh I I just love it, and I feel like I have a new appreciation for it with my kids um because we just have so much fun, and it's just creating experiences. And uh growing up in the Great Lakes, you know, it's a big thing. And the fact that we have these really brutally cold winters, I feel like it makes us appreciate when we can actually use the water, right? So, the summer is like we want to get as much in as we possibly can. It's funny, I'm being in California, I feel like, man, I wonder if they take this for granted cuz they get this nice weather all the time, but I feel like being in a colder climate, it actually does like make you appreciate it more.
I'm from Edmonton, so I I know the colder climate. Do you say that to make yourself feel better about living in the cold? I feel like I do sometimes.
No, I I mean, once a year, around February or March, I definitely ask myself, why do I still do this? Why do I still live here? So, that's definitely some give and take.
Um I I want to go back to like I my wife and I we bought a a cabin, we call it Do you call them cabin or cottage?
Yeah. Yeah, there's there's a part in Canada that calls them cabins and cottages. Anyhow, what was the decision to do something like that? As planners, or sometimes we don't like to see a dip in the savings accounts, but yet you decide to do that.
It's funny because I had this talk with some of our financial advisors, and they're like, this is a terrible decision financially. What like, why would you do this? And my wife and I had twins, unexpectedly. I don't think anyone ever plans for that. Our other daughter was three, and we really like to travel and get out and do stuff and create experiences, right? That's the thing that, you know, spending on material items isn't going to make you happy, but on experiences, that's like all the research shows.
And we said, you know what? It's going to be really hard for us to take vacations now, because we have these two little babies, and they have car seats, and they have stuff, and and we have kids are so much stuff you have to bring. We had three kids, three age age three and under. And we just thought like, we need to we want to be able to create experiences with them, but it's going to be hard to get on planes or go on really long trips, and we thought, what if we find a place that's close to us in this beautiful place that we like, you know, and it's not that far from home, and then we can have friends and family come experience. So, that was kind of the idea behind it. And it was a little bit of a leap of faith, and yeah, it's like, man, that's that is going to hit the savings rate a little bit. Uh so, I don't really look at it as much as a financial asset. It's like this emotional asset.
And it it does pay dividends, and we've created so many fond memories there, and I'm so happy we did it.
How about seeing the kids when they're splashing the water?
Oh, it's great. Yes, and I I was never a boat person growing up. We got a boat, and we pull on like tube, and you're right, it's it's smiles, and then especially in like the digital age that we grew up in. You know, these kids are growing up with screens in front of them all the time. And having a place like that that you're outside all the time, and you're away from the screens, and you're not thinking about the news, and you're not thinking about social media, and all this other stuff going on, it's a really great break from all of that stuff. It's just, all right, we're living in the now and the present. Let's enjoy it.
Yeah. There's a song that says, well, you said buying material things versus experiences, but there's a song, I don't know if you've heard this, money money can't buy happiness, but it can buy me a boat.
Right. Yes, and it's funny, being in middle age, I realized that there are actually some material possessions that can make you happy. I feel like that the personal finance thing to say is like that you buy something material, and it gives you this dopamine boost, and then it goes away.
But I don't know, if I buy a nice sweater, and I wear it a few times, and people compliment me on it, I can I can wear it many times. So, you know, I think it kind of depends on the way that you look at these things.
You know, I I think a lot about that, like the material items versus experience. And I also think people can go on an experience just to check it off on the box that I went on an experience, take a couple Instagram shots. Maybe the experience wasn't as good. And that was worse than buying the sweater in a way, cuz you have all these expectations, and like, wait, an experience should be making me happy, but I don't feel happy.
Right. We have Yeah, you're right. We have to take a picture at this place, and a picture at that place. And you go to on some of these trips, and you see there's a line of people waiting to take a picture. And you wonder, it's like, are you experiencing this, or are you just here to like you said check it off the list?
So you said you weren't really a boat guy but now you boat guy?
Technically it's a couch that floats so I got a pontoon.
Yeah so I figured that's I I grew up on the waters you know around the water. So in northern Michigan and so I had friends who had boats but there was never a thing in my family. My dad's like we're not taking care of a boat it's too hard it's too much and what they say someone told me that boat stands for bust out another thousand right? Uh but I I love it. It's it's it's like I said it's a great way to we just put it away for the season and it's something that we get excited to do every weekend. It feels like we're going on a vacation when we go up there every weekend.
I bought a boat recently. It's the best. That's the thing it's so good I love it.
My wife and I both said why would we ever want to do that it's so much time and effort and work but it it it really is like that's my happy place now.
Yeah. Let me straight here but you used to take your lunch pack a lunch and save your lunch money. Is this a true thing? What was going on when there's a young Ben on the story he was telling himself about money?
I like to tell I think so many of our money habits are either they're inherited through like your DNA and and your family and people came before you or you you witness the habits of other people and for some reason from a very young age I was a saver and yeah my dad would give me 20 bucks a week because and our lunch at school cost two or three dollars or something you'd say here's your lunch money do with it what you will and I thought after you know buying lunch a few times and not really caring for it I thought well if I just make my own lunch I can pocket the money and every week I'm putting aside $20 and $20 and and I was growing my stack and I'm saving. At one point my family my brother or something found my stash and he said where did you get all this money? Where is it coming from? And I told them and they were and they were more impressed than anything. Uh but no one realized I was doing it but I it is funny that I that was just my mentality from a very young I mean we're talking like fifth grade or something.
Yeah. So you I know you're interested in like financial behaviors and you've been in this industry for a while. What do you think the average person gets wrong when it comes to understanding our financial behaviors?
That some people now that behavioral economics is this big widely known thing, right? For 20 years people have been talking about it. That there's like a prescription that you can have to every person that's like avoid this bias and that bias and that bias and you'll be okay. But I think everyone's personality is a little different and everyone I think everyone has their own sort of bias and I think the the hardest one is like the one that you're blinded by and everyone has their blind spots of things that like they see in other people but not themselves.
And so I think that is kind of my thing about behaviors like it's some people the fear of missing out is the greatest thing and they get taken advantage of during the booming bull markets. Other people it's no the loss aversion kills them and they get you know further people it's chasing performance and what I you know, so I think it's it's kind of something different for everyone and you have to figure out what like the lesser version of yourself is that's going to get you.
Mhm. How do you find people get there to figure it out especially in this busy chaotic world?
I think it's a lot of trial and error and it would be great if more people could just I'm going to study history and I'm going to learn from mistakes of people that came before me, right? Cuz all these things it feels like the the you know, the economic environment is always different and the stock market whatever is going on in it is different but the the human reaction is always pretty similar. But I think some people just have to feel it for them just like in just like investing you have to kind of go through some of these things. You have to understand what it's like to the feel of losing money like what it feels like to lose money. Right? You can't like I'm going to create a paper portfolio and I'm going to invest in these 10 stocks and see what happens. It's much different when you have your own money at stake and you see a little piece of it get incinerated one day because the stock had a bad day or the market had a bad day or whatever it is. So, sometimes I think it just comes with experience.
Do you recall the first time where you lost a good amount of money there you're like, "Oh, shit."
I mean, I started really investing for the first time heading into the great financial crisis. And it was like every time I you know, every 2 weeks I'd have money come out of my paycheck and go in my retirement accounts. And it would just constantly go down every time. I bought here and it goes down. And for like a year straight, feel like every time I put money into the market, it just kept going down and going down and going down. And it's kind of like after a while, I guess I just sort of got numbed to it or used to it. And I think having that happen so early in my career was actually really helpful. Because I didn't have a lot at stake. So, I wasn't like worrying about it so much. Whereas people who were in their, you know, 40s, 50s, 60s with more money at stake were super nervous. I was like, "What does it matter to me? I don't have a huge nest egg at this point. I can I'm fine if the market goes down more. I'll just keep buying." And so, I think it was actually kind of helpful. But it did sting a lot because it's like, "Gosh, I I put all this money in and now it's worth half of what I put in or something."
Makes me think about like, "Why did you keep coming back?"
Maybe I'm a glutton for punishment. I I you know, I read all of the John Bogle and Warren Buffett books about, you know, being fearful when others are greedy. And I'm like, "If if not now, then when? Like when is the because I had I I certainly had people in my life, people I worked with who were saying, 'Listen, the financial system might go under. I'm taking all of my retirement contributions and I'm putting them in a money market fund. I'm sitting in cash and I'm just I can't take this pain anymore. I'm I'm tapping out.'" And I thought, "I'm in my 20s. What if the stock market goes under, I have bigger things to worry about." And I I kind of had this mentality of it you know, it doesn't matter as much. But now I'm in now I'm a middle-aged person. If I had to go through that same great financial crisis kind of scenario again, probably a lot more painful for me.
So I I it's going to be interesting to see like when that next financial crisis happens like wow, how does it how does it actually change the way I feel about it?
How do you think you'd react now?
I think pretty similarly. I mean the stock market crashed 35% in like 5 weeks during COVID, right? That was I don't know how we're going to ever live through a more uncertain time than that in our lives, right? Uh I still remember being at home cuz everyone was was kind of stuck at home and and talking to clients, you know, in my makeshift office in my bedroom while my kids were downstairs running around and uh you know, that was a very scary time and people just, you know, didn't know what was going to happen in their lives, with their health, with the markets, with the economy. Like is this ever going to, you know, we turned the economy off, the global economy was shut off and we turned it back on again and uh you know, I I felt pretty confident then that it was going to be okay. I didn't know how quickly things would come back, but I I do think that going through enough of these cycles has trained me to be okay with this stuff.
Yeah. Certainly does provide some training. You hit an all-time saving goal, but yet it was one of the most informative things that you made a mistake, if I'm not mistaken.
Yeah. I I I'm an old-school spreadsheet guy. I don't use any of the, you know, these online tools that'll track money. I still going to and I track my net worth in all of our accounts and savings accounts and all these things. Each year I just look like how much did we save for the year and what was our savings rate and I kind of track it over time and I created this little chart and I to show and then I I saw in on a 2021 or 2022 it's like we hit an all-time high in savings. And it was a big jump from the year before. And my wife had come to me not that not not too far before that and said, you know, my priority financially is like we don't have that much time left with the kids before they're in high school and they're in college and they're, you know, going away and you're not going to see us hang out this summer. So, I want to take more trips as a family. I want to and she was kind of saying, "Let's Let's open up the purse strings a little bit." I thought yeah, that that's actually you're right. That how much more utility am I getting from that extra savings that we hit this all great savings? Could we take a little bit of that and enjoy some more and have more balance? And it really did make me rethink this like is is getting this beating that goal every year, is that really going to make me happier in hitting some threshold, some number? Is that going to make me happier or is actually enjoying some of it now and having a little bit of a smaller nest egg going to move the needle more? It That is what moves the needle more. Enjoying some of it. And that you asked me before about being a younger person and a saver. Those are really took me a long time to come around to that.
I My wife and I butted heads a lot when we first got married about do you know, I I'm constantly like you know, going at her like, "Do we need to go out to eat as much as we do? Do we need to and and she is like, "Why are you all, you know, is this really what I signed up for? Like a the this budget person who's constantly coming after me?" And so, it did take a while for me to realize like, "Oh, yeah, there has to be way more balance. It can't be just save everything and compound and get to this level and because at that point you're it's going to be impossible to change those habits, right? And actually turn into something of a spender and you delay gratification, delay and delay and delay. And then when do you actually get the gratification?"
I feel like you're speaking for every uh financial planner spouse who says, "Honey, did you see the spreadsheet there?" Yeah. The The come come check out the spreadsheet. I don't care about the spreadsheet. Good for you for softening to the the realities that the spreadsheet might not tell the whole story.
Yeah, like I said, it wasn't easy. Uh and I said like I got a lot of these financial habits from my parents and like my father is is a died-in-the-wool spreadsheet guy.
Right? And he I've tried to get him to come around and he really won't. He just he he he has simple pleasures in life and he likes them and he doesn't really want to spend a lot of money. Uh he likes having that just safety component. But for me, it it it's better to be a little more balanced. And sometimes you feel like oh my gosh, I'm saving so much, why aren't I spending more? And sometimes you feel like gosh, I'm spending so much, why aren't I saving more? I think kind of going back and forth between those two extremes is is a good place to be where you're constantly like worried about one or the other.
When it comes to like the client work and the clients you see, where do you see them wrestle with this concept?
It's probably one of the most surprising things about the wealth management business that I didn't really expect. Like I came from this other side of the business. I was working with institutions, you know, pension plans and foundations and endowments. And they they had specific set spending targets, right? If you're a charitable foundation, you spend 5% of your money each year. If you're a pension fund, you have to pull out a certain amount to pay your beneficiaries. So like the spending was kind of set in stone. It was written out. You knew what the spending was going to be. The biggest surprise to me is what when I first joined Ritholtz and Chris Van who's the guy who runs our wealth management practice said, "It's it's bizarre, but one of the bigger problems we have is getting people to spend and enjoy their money."
And I thought, "No, you're crazy." Because you know, people love to consume. They love to spend. Just like think about everything you hear. But once I started like having conversations with people and think about it, it's like listen, for 40 years I've built these great financial habits and I saved and I compounded my wealth and I grew my wealth and I kept seeing the number go higher, right?
I hit all of these goals and the number kept going higher and higher and higher. And now I don't want to see that number go lower. Because people feel like it's you're losing something.
Right? That loss aversion like the loss stings twice as much as the gain feels good. And just people like have this aversion to seeing that number go down.
And I thought, "No, that's crazy." But it time and again I have people asking me like, "I need you guys to give me permission to spend, right? Take the family on that vacation, buy the convertible, get that vacation rental, buy the vaca- whatever it is, take the family on a cruise around the world." Um and so we get pictures now from clients who share, "Hey, I want I took the family on a trip to Mount Kilimanjaro and we climbed it and here's the picture from the top." And like that is really satisfying to see people actually like, "Okay, yes. That's the whole point of the money in the first place is enjoying it." And if it's not enjoying it for yourself, then it's how do we help other people and give it away maybe, right? And what are your charitable causes? And so yeah, that that's been a big surprise.
Yeah, a whole stack of money doesn't do you good if you can't deploy it in the right way. I had a chat with a guy he studies this experiences versus material items and looks at the enduring levels of satisfaction. But you made me think about the Kilimanjaro. But he talks about how like say the boat, like a boat can be an experience if you use it an experience. Like not And same with the sweater. But you got this phase of like anticipation. I'm going to go to climb at Mount Kilimanjaro. I got the experience of doing it. I'm like present in the moment, not just Instagramming it. But the recall, so there's this picture you make, the recall of it and I think back of big expenses, travel. I don't even think about the money, but my my my my bones remember. It's a good It's a good place to use your money.
Yeah, no, you're right. It's like a memory dividend, right? Like when my family gets together, we're constantly sharing stories about past trips together. Remember when we did this? Remember when that person said this? When they did this, you know? And it's constantly sharing those memories. That's great. And the kids love to get in on that, too.
Yeah. Um my mind's going back to your when you decided to spend a little bit money or open the purse strings was the words you used. What good relationship advice though for all the other uh financial planning husbands out there is open the purse strings. I bet your wife felt that like, all right, thanks for listening, Ben.
It's funny. We we had a friend who kids same age as my old My oldest daughter is 12 now, and she said this when you know, they were five or six. She said, I counted the other day and we have 12 more summers with them.
And then they go to college and then they you know, they become adults and they do the thing we don't see them as much anymore. And that was one of the things that really did put it into perspective for me. Like, oh yeah. Are the kids going to appreciate the money now or they going to appreciate it, you know, when I die and I pass it down to them when they're 50 or 60 years old? When are they going to want it more? Like, of course they're going to want it when they're young and they can have these these memories. So, yeah, you're right. It I think my wife probably was happy with it. Now, occasionally I still I still can't help myself. Come back to the, you know, do you know how much the credit card bill was this month or something? But I I tried it to avoid those conversations as much as I can.
It's baked into us. Um, I'm not even convinced This isn't a question, it's a thought. I'm not convinced I know what enough is. I'm starting to play around with satisfied. How do you think about enough? Like, what's enough?
I I've had this I've kind of changed my mind about this. I don't I'm not sure there is like a certain amount for anyone really, because the goal posts are constantly moving. And it's interesting because I think that is really good a good thing for humanity. You think about all these billionaires out there who are still trying to do stuff and create stuff. And it's like everyone always thinks like, if I had as much money as you, I'd go on an island somewhere, you'd never hear from me again. But these people still want to do something. So, there's I think for humanity, it's actually a good thing that people can never really get to that point of, okay, this is it. It's I've done enough. I've got enough. Whatever it is. It maybe for individuals that can be a problem, but I also think that it's it's more like you said, it's about you said satisfied. I think the word I always come back to is to being content with what you have, right? And just I think today's day and age it's it's being okay with I know that there's people who have more than what I have, right? And being okay with that. There's people who make more than me, people who are richer than me, people who are more successful than me. Because you see it all the time now. Where in the past it wasn't really shoved down your throat as much. So, I think that's that's the hard part these days is what people are striving for. Like if I just get what that person has, then I'll be happy. Then you get there maybe and you realize, oh, it didn't really change my life at all.
