Come On In – The Water’s Fine

It’s summertime, which, for many families, means time to go to the beach. Being a Florida kid, summers at the beach were almost mandatory for me. Every year we saw the same families at the same beach and played with their kids. All day, every day we kept busy making sand castles, collecting coquina shells and sand dollars, fishing with sand fleas, and swimming in the bathtub temperatures of the Gulf of Mexico. I enjoyed playing with my sisters and the kids, but it was really cool when the moms and dads would get in the water, pull us around on rafts, bait our hooks, or race to the sandbar with us.

“Jaws” came out in June 1975. Because I was only nine years old, I was not allowed to see it. When we got to the beach that year, the kids were in the water, but not as many adults. We asked them why they wouldn’t come in, and some admitted, laughingly, that they were scared because they had seen the movie. “BUT IT’S JUST A MOVIE,” the kids screamed. Yet, because the adults were so scared, I began to worry if I should be scared, too.

Later in life, I came to know the source of the adults’ fear as “probability neglect” stemming from “availability bias.” In better words, if it is emotionally intense, vivid, and easy to imagine, we view it as far more probable than it really is. When we obsess about its possibility, we reinforce our imagination, and make the problem worse. I also came to know the source of my own fear as the herd mentality – if they are all running from something, then I better run, too.

Movies are in the business of vividness and emotional intensity. So is much of today’s media. The danger in this is that many of us are led to believe that unlikely events are far more likely than they are, simply through the suggestion of a scary image or scenario. While shark attacks still loom larger with beach goers than they statistically should, what other fears do Internet bloggers and some media outlets prey upon? World domination by China. Collapse of the dollar and widespread mayhem. Hyperinflation.

Remember the markets in 2008? Many retirees sold their portfolios in a panic, believing the financial world had truly ended. Media didn’t give them much else to consider. Herd mentality – how could the rational thinkers have had their voices heard? It was nearly impossible. Some days, it still is.

How do we check our fears at the door and strive for wise, rational decisions? One way is to gain experience. The best experience is the kind that repeats similar sequences of actions and provides immediate feedback on outcomes. Think of firefighters and emergency physicians. They get repeated exposure to similar events, with constant feedback on their progress. After a while, they know too much to be scared.

What are you scared of? Can you jump in the water and gain enough experience to learn about it?

Another way to reduce fear is to tune down the mainstream media. Check their sources. Choose your channels mindfully. Do your own research. As a nine year old bookworm, when I got home, I looked up “Sharks” in my Encyclopedia Junior Brittanica. I also read “Jaws.” Great whites are rare in the Gulf of Mexico. There was extremely little chance that one would darken our warm, shallow swimming zone. But on my first beach day the next summer, toes inching from the sand to the surf, I still thought about it.

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Nudging Time and Money

Many people have a spare change jar, where they accumulate change until the jar fills and then take it to the bank or change machine to turn into bills. For them, this works as a kind of forced savings. Banks’ keep-the-change programs, where debit charges and checks are rounded up to the nearest dollar and the difference is transferred to a savings account, are based on the concept that saving in small increments adds up to big balances over time.

Ricardo Young, a 55 year old assistant grocery store manager I met recently, found the jar works better than a bank account. Every week, he purchases ten-dollar rolls of quarters from his employer, takes them home, and empties them into his change jar. For Ricardo, this works as a way to save an extra forty dollars a month. At today’s interest rates, he is hardly missing out on having the money in the bank. If this kind of discipline is what helps him not spend it, I am all for it.

Many of us have tricks we have used to keep us from doing what we should not do, and to encourage us to do what we should do. Richard Thaler and Cass Sunstein wrote a book on this subject: Nudge.

In the 2000s, a bank in the Philippines offered a quit-smoking nudge. Smokers who wanted to quit would open an account with a dollar, then for six months would deposit the money they would otherwise have spent on cigarettes. At the end of six months, the account holders were given a urine test. If the test was negative, the smoker got the money back with interest. If the test was positive, the money was donated to charity. A study by MIT’s Poverty Action Lab showed those who wanted to quit were 53 percent more likely to achieve their goal using the bank’s program.

A simple but powerful example for me was a time management nudge suggested by my husband, Skip. I used to have a big long To-Do list that I carried with me everywhere I went, like luggage. One day I was complaining about how long it was and how I never seemed to get everything done. He took one look and said, “Well no wonder – you have a year’s worth of work there.”

He suggested I calendar each task, and schedule more time for each item than I think it will take. I had more than 120 items and started trying to put them on my calendar. I found out I could realistically only put 3 to 5 per day. This forced me to prioritize, but also to recognize that many of the tasks were not that important. My time was my limiting factor.

Now when a calendared task is staring me in the face, I am more likely to do it. I think his exercise helped me recognize I have to choose my tasks wisely, because I don’t have forever. Funny how all my life I have recognized money is finite, but often failed to remember that time is, too. In fact, we can find ways to make more money, but we can never make more time. We can only make more life with the time we have.

Are you as good at saving your time as you are at saving your money, or could you use a nudge in one direction or the other? What time or money nudges have worked for you? Comment here or drop me a line at

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The National Association of Really Ethical Dentists?

I am a behavioral economist. That means I study how monetary incentives drive decision making and behavior. Until I changed dentists about three years ago (due to a move), the dentist usually spent a few minutes looking around my mouth during my semiannual cleaning and then said, “Nice teeth!”

Now I am on my second dental office where I am told I need a rinse solution, or have three cavities (that I don’t feel yet, when I have only had one cavity before), or, the latest, I need gum grafts so my teeth don’t fall out. (The periodontist just joined the office, and he is the dentist’s dad. You do not have to be a behavioral economist to wonder if there are skewed incentives here.)

I am 46 years old. I walk every day, brush twice a day, floss and take my calcium citrate about three times a week (now I will every day, and I just bought an electric toothbrush). I like something sweet after dinner, but I am not overweight, don’t smoke, don’t drink alcohol or soda, am not chronically ill, and have no family history of periodontal disease. For over 30 years I was told I have “nice teeth,” and now all of a sudden, I don’t?

In the financial industry, as you may be aware, there are powerful incentives for professionals to recommend and upsell products that are not always in the best interest of the consumer. For example, variable annuities tend to pay the highest commission of any financial product, therefore I am not surprised I get asked a lot of questions about them. People are hearing about their many benefits from those who are paid not to understand their downsides.

In response to conflicts of interest like this, an association of financial advisors who choose to be legally bound to “do the right thing” was formed in the 1980s. It is called NAPFA ( I am a member. We all agree to submit our own work for peer review, to sign a fiduciary oath, and to only accept compensation from clients, never from product vendors. There are approximately 1,000,000 people who call themselves “financial advisors” nationwide, and NAPFA membership is a whopping 2,500. With the amount of product compensation at stake, I am not surprised our group is so small.

My question, though, is, does the dental industry have an association of dental professionals who pledge to really, always, put the best interests of their patients ahead of their own? Who will actually tell a patient they have nice teeth? If that kind of dentist says I need rinses, crowns, grafts, or a lobotomy, fine. I will accept that my carefree dental visit days are over.

I guess with city water fluoridation and better dental habits, dentists don’t get as much routine work anymore, so it’s harder to make a living just filling cavities and doing root canals. One understandable result of this trend is the explosion in cosmetic dentistry. That’s fine by me. “Cosmetic” implies, “not necessary.” But, another result of this trend is the economic incentive for dentists and hygienists (their best sales agents, according to the dental practice blogs I found) to make mountains out of molehills in your mouth. To make the unnecessary seem more necessary. That’s not fine by me. In my research to find the ethical dentists, I found many blogs explaining how to upsell patients. There is even a firm called, “Big Case Marketing” which will help you, Dr. Dentist, sell more “big cases.”

As an uneducated dental services consumer, I have no reliable way to judge who the good guys and gals are. I thought there might be a group of dentists, like NAPFA financial advisers, who decided to band together and promise to keep the patient’s best interests first. If you know of such a group, I would like to know about them. Just in case I have a real cavity.

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The Painting Gene

I did not get a painting gene.  By painting, I do not mean the artistic kind, requiring creative talent and the ability to synthesize the world as you see it into a one-of-a-kind colorful expression.  I don’t have talent even close to that. No, I mean the kind of painting you use on a wall in your home.  One color, applied with a roller and brush. How can I manage to make a simple task so hard?  I discovered the answer this week.  My financial gene usurped my painting gene.  This means I am genetically incapable of putting enough paint on the apparatus, whichever it is.  Unconsciously and automatically, I want to use as little paint as possible so I do not have to buy more.

Experienced paint-people know this is a disaster waiting to happen.  When you do not use enough paint, your wall becomes a collage of streaks and stripes of varying shades and shapes, instead of an uneventful homogenous surface. To fix it you practically have to call in a professional.

Thank goodness I was not painting a wall.  I was only priming our subfloor to prepare for carpet.  My husband of 25 years knows better than to put a roller in my hand to paint anything other than something that will be covered up shortly.  He got the painting gene.

So we both know (after some trial and error) where I am at my weakest.  But that does not mean my financial gene does not serve me well in other venues.  The trick has been figuring out when to let it do its thing, and when it needs a leash.

With all of our money habits and attitudes, in fact, there are times when they contribute to our success, and times when they hinder us.  Before we recognize that difference, we risk painting a financial collage like my subfloor –  varying streaks, stripes, shapes, and shades.  Instead, rather, a financial picture could be an uneventful backdrop to simply living a life.

Sometimes it is hard work to discover and admit when we are getting in our own way, but my husband and I have learned that once you map your “talent” genes, you require fewer professionals to fix the mess you made.  It costs less overall, and you stay married longer.

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Does Happiness Buy Money?

“Building wealth is important for your happiness, but focusing on it is not.”   So spoke Dr. Robert Biswas-Diener, the “Indiana Jones of positive psychology” at a recent financial conference.   A survey using a Life Satisfaction scale showed that people who value love more than money are way happier than people who value money more than love.  The latter are, in fact, miserable.

Much of his research has been in desperately poor areas of the world – the slums of Calcutta, for example.  Calcuttians say Americans cannot be happy because we have too much money, which gives us too much choice and distractions.   People he interviewed in India are, unlike a lot of Americans, happy with themselves and happy with their communities.  More specifically, they are happy with their morals and their looks.  They are not as happy, however, with their health, their income, and their resources.   All of these factors enter into the Life Satisfaction happiness scale.

In linking his research to the financial world, when we ask ourselves, “How much do I need to retire?”  “What’s my ‘number?'”  or “What’s the best mutual fund for the 21st century?”  the answer, therefore, is  “It depends.”  It depends on what retirement means.  It depends on what the number is for.  It depends on whether it’s important to always be searching for more, or to simply have enough.  It depends on whether we are willing to suspend our societal belief that money buys cures for unhappiness.

The reverse is more likely.  Happiness can buy us money.  First, in general, happy people are shown to be healthier.  (Biochemically, happy people produce more fibrinogen which avoids blood clots and boosts the immune system.)  Healthier people have lower medical bills = more money.    Second, happy people are shown to get more promotions and pay raises.  People in general are more likely to advocate for happy people.  Network of advocates = more money.  Third,  happy people expect that things can get better.  These expectations may be optimistic, but are also often realistic. Because these positive expectations are achievable, things often do get better, thus reinforcing the expectation. Setbacks are viewed as only temporary, rather than permanent failures.  Living with the expectation that things can get better, as distinct from wallowing in discontent, means a greater sense of current satisfaction and wellbeing.  Wait a minute, isn’t this the mental state we have been expecting money to buy for us all along?  Perpetual state of satisfaction and wellbeing = priceless.  Happiness can buy money, because if you are happy, the money you have goes a lot further.

How do we get to be one of these happy people if we are not one already?   We must first understand that happiness is not a destination. It is a process. There are three practices that can contribute to it.

1)  Quit making inaccurate predictions of how much happiness we will gain from X or Y.  The reason is, the disappointment of something not meeting our happiness prediction hurts far more than the glee of unexpected pleasure feels good.  If we enter into more transactions, whether relationship, consumption, or financial, without being in future-happiness-prediction-mode, and accept and enjoy only what is in the present, we are far less likely to experience disappointment and regret.

2) Discretionary income should be spent on experiences not on possessions.  Experiences would mean things like moving across town, entering a marriage, or traveling.  We tend to adapt to material stuff, forgetting that it is there, but not experiences.   Experiences allow us to savor the past because we drag “magical moments” into the present.  We don’t remember shoes from ten years ago but we remember our first skydive or a foreign trip.    However, even with experiences, we mispredict how happy we will be from a certain expenditure.  A trip to the Grand Canyon could bring just as much remembered happiness as a cruise around the world.  Eight days in Hawaii could bring the same remembered happiness as fourteen days.

3)  Spending money on others brings happiness dividends.  Experiences also include things that connect with others.  Happy people consistently report being charitable.  Does being happy cause them to be charitable, or does being charitable cause them to be happy?  Either way, if you want to increase the correlation between lasting happiness and money, ironically, you should connect with others by giving some of it away.

For many of us, by practicing a few more happiness principles, we can begin to build wealth by, paradoxically, not thinking about it so much.

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