Episode 76: Meir Statman talks about his new book, A Wealth of Well-Being, host Rick Ferri
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Welcome everyone to bogle heads on investing episode number seventy six. Today, our special guest is mayor stock, a professor of finance at santa Larry university, who focus this on behavioral finance and attempts to understand how investors make decisions. He is the author of two books, what investors really want, and recently released a wealth of wealth.

Hi everyone. My name is rick ferry, and I am the host of bogle heads on investing. This episode, as with all episodes, is what to you by the john sea bogle center for financial literacy, a nonprofit organization that is building a world of well informed, capable and powered to investors.

Visit the buggles center at boggle center dot net, where you will find a treasured rover of information, including transcripts of these podcast. Today, our special guest is professor mayor statement. He is a professor of finance, has sent a clary university, and his research focuses on behavioral finance as the attempts to understand how investors make financial decisions and how these decisions are reflected in the financial markets.

Professor statements research has been published numerous academic and professional journals and has won many awards. His first book, published in two thousand eleven, was titled what investors really want. And his recent book, a wealth of well being, a holistic approach to behavioral finance, digs into the third generation of behavior finest, which widens the lengths and brings in many other aspects of life when making financial decisions that may not lead to more money.

But IT leads us to what professor stock ment calls a portfolio of well being. So would no further do let me introduce professor mayor stock men. Welcome to the bogle heads on investing podcast.

Well, i'm delighted to do with uric.

I've been following your work for many years. You written a couple of find books on the latest one will be the topic of our discussion in a few minutes. But before we get to that, you have a very interest resting upbringing. And before even get to you, can you tell me about your parents?

Well, my parents were teenagers in poland in nineteen thirty nine, uh, when the night is invaded, and they were on the eastern part of poland. And so refugees, jewish refugees that were escaping the atrocities, would stop by.

And so they they understood that they Better go, or bad things will happen and so they crossed the river, the river books uh IT travelled they lived in uh cyberia and then down to as pakistan, which is where they met and got married. And I was born in a persons camp which the polite world before a refugee came in nineteen and forty seven, and we came to israel in one thousand and forty nine. And the funny thing, there were so many families who are identically situated that IT seems like it's just a Normal thing .

you're opining. Wasn't israel when the country was being formed?

indeed. And of course, when you are a child, you know just one environment and that is your particular neighborhood, your particular country. And so in the nineteen and fifteen, uh as I was growing up, the was rushing food was russian so you had to have a coupon uh in addition to uh, money, uh uh and so my dad was managing grocery stores, uh uh and so we had a bit of Better access to to food IT is H A childhood like like any childhood has its own peculiarities.

So then you ended up going to hebrew university and getting your undergraduate degree.

indeed. Yeah, my undergraduate degree. And then I continue immediately a infect combination with an M, B, A. So that was the late sixties, and I was in the building that he was the economics department. Uh, and so I study the economic statistics and then fine us.

And in the building right next to me was the psychology department, and I would go there from time to time to earn pocket money by participating in experiment. And and I just found out later that can man university was doing their revolution. We work right then, but I never heard there are names are from my professors. I had no idea what they were doing, which tells you about about how standard economics and standards, finance in particular.

were, at the time.

small and very narrow and and really kind of proud of being narrow.

So then you decided to come here to the us. And go to columbia university to get your PHD.

That is right. I I had I had a boring job as a financial analyst, and so I took that day. But by then I was married.

And in fact, we are expecting a baby. But I never really thought about IT a units of risk. I just felt compelled more than .

you've had a wonderful career. Before we get to your books, I want to talk about the generations of behavioral finance. You you talk about the beginning of at all being standard finance h, which wears were this idea that all people were rah in all, and everything they did were very computer like, immune to emotion.

Everybody did math perfectly and no one made mistake. This was the thinking of standard finance before we actually get into the first generation of behavioral finance. To talk about that way, you're thinking.

at the beginning of the nineteen and eighties, I became familiar with the work of time on university. My colleague, her chaffin, did some work that had to do with mental accounting and self control with dick lor. And so we kind of got together and as we were speaking about self control and mental accounting, I member red my experience in new york in nineteen seventy three, seventy four, soon after we arrived where uh, the energy crisis came in, con Edison, uh, the utility company of new york.

I had to pay more for the uh, oil they were buying and they could not raise their rates fast enough because as they're regulated and so they had to cut the dividend, then share hold the meeting uh was really rakers and in some people, uh, rushed to the stage trying to to do harm to the man. And so later on I got a transcript of this meeting and IT was absolutely fascinating, you know, is so Miller modigliani, part of rational finance standards finance, said, if you don't get a dividend from the company, you create hoa dividend by selling a few chairs 啊， did not occur to anyone the meeting, uh, why? Because IT violate the rule of keeping income separate from capital and don't dip into capital.

And selling shares to create those homemade dividend was very button. Uh, because IT was dipping into capital. Know those kinds of experiences.

models. I think there there were just mathematical models. Everybody followed and everybody said, well, this is the way finance works.

Yeah but the problem with any science comes when you have theory and then when you have observations and they don't match. And so natural tendency finances to dismiss the evidence, and my neural evidence is to dismiss theory. So so your .

evidence there was, these people are rushing the stage because they're upset. And this then becomes in way a representation of the first generation of behavioral finance, where you say people are irrational, bumbling behavior, so for than cognitive issues and emotional. And so you call IT the first generation of behavioral finance. That is right.

The thing was that he said he was rational behavior. You should dip into capital. He was actual behavior.

People don't dip into capital. So they're not maximizing wealth. Now the goal is standard finance is to maximize well.

If the goal is described in the first generation of behavior, finance was also to maximize well. But saying that people make mistakes because they are irrational. So for example, they they don't take in the capital. They trade too much. Uh, they think that they know is the future because they know the past and the whole panoply of cognitive errors that i'm sure in your listeners and you no very well.

Most of the stuff that we hear about know when the media is about this first generation of a bea behavior financial. We don't really even hear the second generation of IT and then the third generation, which is what your book is about.

So now that we're through all these cognitive errors and emotions and so forth, through the first generation of behavioral finance, you talking your book about the second generation of behavioral findings, and they here is where, hey, look, people are irrational, mean, they are emotional, they are Normal. That's how people are. And there are other reasons why people do what they do with their money, besides creating more money out of IT. Talk about the movement from the first generation, just an irrationality, to the fact that, actually, people are being rational.

Well, people are Normal.

L, L, that's the right. Normal.

The word is Normal. Neither rational nor e, rational. People are Normal. And and just just look at at other products and services that that is and ask yourself what IT is that people want.

Now watches are are, are a nice example, are a fifty dollar watch by scogan, uh, is going to show you precise time. A ten thousand dollar watch by philly party a will also show you the right time. Uh, so why is that the people buy those luxury watches? To say that their irrational is really too much IT is perfectly Normal because I say people care about utility arian benefits.

That is, show me the right time. Yes, I money is good for buying groceries, but they're also expressive and emotional benefits. I am a wealthy man, wealthy enough to afford this.

This watch IT is beautiful, gives me a sense of pride that I can do that. And then I was thinking, why is IT that we think about financial securities and financial service? This is is being different from all other products and services. And I said, that is really not different things are the title of that book that I wrote, uh, presenting IT was what invest really want exactly? And I just .

sell up your book. This is where this spot came from, publish in two thousand and eleven. I came from this idea of the second generation of behavioral refinance, where you say, you know, let's talk about what is that investors really want. Yes, they do want money, but they also want other things.

Yes, yes, IT is really important to me. I I am using myself as a laboratory, uh, and I am looking at experiences and they tell me things so so I remember speaking up before representation in montreal all years ago with an investor friends of the hippo university, and I said, some think about neutral funds. And he said, I am into hedge.

And so what did he just tell me? He told me that he is a wealthy man. Uh, he didn't want, you know that, right?

But he wanted to send a signal to you.

send the signal and he did to to be is kind of funny. But but IT is really an important observation that people think about securities as they think about watches and restaurants, meal and and all of the other things. And so I said, well, let's look at those other things. You know, people hate regret, so they hold on to their losers, because selling a loser a paper laws makes this loss real. And now they feel the pain of regret.

IT makes you .

a loser. And exactly, yeah, how was I so stupid? Cola dog, and you know you you have to see that. I mean, I know I am actually taking a lot of risk in the sense and buying index plans that go up and down by many thousands each day, but i'm very sensitive to regret. So when I and money I gets so interest .

that you talk about index funds because in a sense of utility arian a emotional and expressive. okay. So I mean, there is definitely a utility arian benefit to index ones. You get your fair share of market return, which we know from many, many, many studies, many of them going back decades.

But that's Better than what most people get when they try to outperform the market by using act of management are trying to pick stocks themselves, but IT does not provide an expressive benefit. You're going to be the most boring person at a cocktail party by getting up. Oh yes, I own the total stock market index.

IT is a very utilitarian product, but it's not very emotional. It's not very passive. Now IT may be expressive to people who really understand investing and say, yeah, you're smart to buy index funds, but unless they know bad, typical people out of party, you go to a whatever or not, maybe not know that. So yes, IT makes you feel Better because of the utility arian benefit of the index funds. But IT doesn't give you that emotional and expressive of benefit.

That is, right now, you actually said that along the way, IT actually brings me expressive and emotional benefits lowing that in smart, that this is a really the right thing to do. And this is what I teach my students, and they come at IT from the perspective that you have to analyze the dogs that you are analyzing and self. And you know I I say always ah in every trade there is an idiot.

And if you don't know who IT is, you are in trouble. And I use the analogy of chemistry is being used before, but in a different way I say people, people trade thinking that they are playing tennis against the practice. All that is easy. And I say way to meet you know, there's a fellow at the other side of the net and and he is uh possibly an insider, possibly a professional tennis player in the analogy. Don't do that to just stand there.

But this is not where IT IT ends. You you have continued with your thinking and continued with your research, and you've gotten to A A different level beyond the second generation of behavioral finance. And you've gone to a third generation where people are still Normal, but that this idea of Normal is explicit in describing life well being. So here's what you're bringing the idea of well being into the equation.

my goal, which which was not something that I followed exactly, but the place in hindi, I can see. I'm trying to expand the circle of an as cognitive errors still are there and and IT makes sense to avoid them, people view investment with those utility arian expressive and emotional benefits. But then you ask, what is IT all about? And IT is about well being.

Money is a way station for well being. We need financial well being for life well being. But this is not enough.

I mean, everybody knows that. But there is a lot of literature by sociology and biologists and economists about well being, about life being. But IT is not known to people in finance.

And so what I did was to say, here are the domains of well being, and here are some stories that illustrators dry. Academic is studies. Just think about society, which is one of the domains right now. Half the country is happy and half the country. So we should really expand that circle offense to include all of IT.

So you won a book. The latest book is called a wealth of well being, a holistic approach to behavioral finance, which penetrates into a different level, the third generation. I spent a lot of time reading IT.

I have to say there was a few times in here when i'm reading IT, i'm saying, oh, you can't say that you're not allowed to say that it's true, but you're not allowed to say IT. That's how this a lot of this book was. We're going to go through some of those things.

And so what just just for the listen to say, you may not agree with everything that mirrors out in his book, but you have to agree that it's true for a lot of people and may not be true about you, but that may is true for a lot of people. They really did you scratch your ahead is like, wow, he's actually saying things that are taboo, not supposed to talk about it's all a part of a this idea of well being. And you talk about well being as though there are three types of well being. There is experienced well being, evaluated well being and then meaning experienced well being.

What is that so experienced well being is the emotions that you have at the moment? Are, are you happy? Are you sad? Are you bored? Are you frustrated? Now IT is important even in the long term, in the aggregate, because if you are anxious, uh, because your income is low and you know that the car is on its last legs and if IT breaks down, you will not be able to get to work and then you are going to lose your job. This really a gets anxiety, not just at one moment, that really is a continuous feeling. Uh, the same with sadness and occasional sadness is is okay, but sadness that is continue this a becomes depression becomes really something that is a much more serious. And so this is experience being evaluated.

Well being is about a question that the simple is, uh, how would you rank your own life if you were to rank from a zero, which is the worst possible life, five to ten, which is the best boss of a life, I U six to seven in eight or nine uh, and for that you have to think not just about how you feel at this very moment, but where are you? How are you doing relatives to ten years ago? How are you doing relatives to your comparison group, your coworkers and so on? And me kind of goes beyond that to answer your questions, such as, do you agree when I say my life has meaning? I know why I was put on this earth.

That really is a also part of that sense of well being. And so you can see that that they are not the same. And there are uh, sometimes conflicts between them.

You can enjoy experience while being when you are Young, using drugs, having many women. But later on, you find yourself old and with no one to help you, so you can enjoy one kind and then suffer, uh, in the other. So we're going .

to go through, the book is full of information IT IT. Really have to go back. And sometimes we read things a few times to really comprehend this was way beyond a happiness spoke up.

And there were a lot of happiness books out there kind of incorporates happiness, but it's much deeper than that. And that has to do with finance and how money into twins with the different well beings that we we're trying to a achieve. We start out at the beginning of the book talking about four kinds of capital is financial, social, cultural and personal. So we know what financial capital is, but when you talk about capital in the name of social, cultural and personal, how do you use the word capital when you're talking about cultural capital and social capital and personal capital? So financial .

capital is strait forward. We are talking about that. And this is known to all the people who know their finances.

And IT is the notion is that the more money you have an income wealth, they hire your well being. As simple as that. Social capital really has to do with the circle of free friends. Do you have many close friends, or do you have some close friends but many who are distant?

Pencil will help you of our example uh you know that classmate from college a maybe A C E O right now and you've lost your job IT is okay for you to call and say, hey, but he i've lost your job. Do you have any leads for me? Ah so you can see that in different struct of society that different kinds of social capital among the four IT might be, hey, I need to go to the doctor, cannot afford in uber, can you give me a ride?

These are the kinds of things that you have. And so people in the working class, usually heavy and never set of of friends, but but kind of deeper friends. Uh, the elites have sn close friends, but they have many those contacts that can help them are in many ways, cultural capital has to do with just knowing what is okay and what is not.

IT is about knowing what is okay to say and what is what is not. You know, coming from israel with one culture to the united says with another. Of course I was.

I was on my toes. You know, knowing that in a different culture, can you speak about baseball? Can you speak about the Opera?

Uh, all of these are part of cultural capital. And then personal capital. You can think about character.

Are you conscious entity? You know, do you find saving easy or difficult? Are you tall? Are you handsome? Uh, people who are tall, men who are tall and handsome find that the effect advantageous at to work situations that interviews and with women.

The more of that personal capital and that has to do with gender, has to do with race, with all the other things that make you A A personal nationality. Just being an american is advantages relative to many other countries. You are going to to visit a country, europe. You don't need a VISA, or as somebody from another country might needed you is .

interesting that we talk about capital in that way outside of money. Talk about with your friends social capital and what they can help you with cultural capital. I was in the marine core, so immediately when I talk to somebody who's in the marine core, you know, we have a connection.

I don't have to have known them. They may not have been a friend, but we associated in that way and then personal nationality and all that. But these are all actually know.

You think about IT. IT is capital in a way and situation, behavior, oral finance person. It's not just about money, but it's about total human capital.

And so in your ideas of investing, sometimes we do things that may not benefit us financially, but IT does fall under cultural or social or personal. Where does make sense to do them that way? Is that the idea?

Yeah, that that is the general idea. And you can see also what when you say risk, know that you say, um what is your rist tolerance and so immediately people think about those investment questioners and where are we going to put you on the their inspiration from here? But in fact, uh, the risk that I can bring the most rewards, our career risk, uh, that is for me, that was coming from israel to study for the P, H, D.

Not knowing what comes next when I complete my P, H, D, will I get a job? I took IT at risk and IT worked well. And now I invest in a kind of modest risk just well.

I versify portfolio of index. And and so we have to, again, broaden the notion of what returns are and what risk is. So returns, you know, you have utilitarian returns and expressive returns and emotional returns, and you have the kinds of risk that I just talk to that and IT applies to many amazing.

I I like to say, you know, the biggest risk life are not in the stock market. If you want real risk, get married, always have children. People laugh because the point is really obvious. And yet when we talk about risk, somehow we show that to the sign instead of realizing the death really belongs in the center.

quite Frankly. And I didn't think about how finance gets expanded and and to all these other areas. But but you explain IT all in your book.

And so a financial capital has an interesting spot. Not only is an important for income, wealth IT feeds into these other type of capital. You know, you can afford an education if you have money.

You can afford to live in neighbor od that has Better schools. You, as you said, you can afford to pay people to culture your lawn rather than you have to culture your own lawn. The interesting thing though, about financial capital, you do bring this out quite a bit, is there are negatives to this.

There's a downside to try to get more money and growing your wealth. And that has to do with keeping up with the Jones could actually creates stress. IT takes away from well being. So explain that whole consent.

So we are we are interested in our own incoming wealth, how we are doing personally and however, are we doing relative to our comparison group, uh, neighbors if you really associate with them, but not if you don't associate with them, but of course co workers you must associate with and family you must associate with. And of their come, your are comparison group.

And people care about how they are doing, but they also care, and sometimes even more about how they are doing relative to their group. If mr. Jhones got a one hundred thousand doll, bonus said, and mr.

James got two hundred thousand dollars. The first feels miserable because he got just one hundred thousand and we say, hey, but you know, one hundred thousand dollars is pretty good money. But they their aspiration of their comparison is with with somebody else.

And they think that they deserve that. All that is what they aspire. And meanwhile, while they don't have IT, they feel frustrated, they feel sad and so on. In the book I I tell about about a studies of very wealthy families in new york, manhattan. Uh, so here's A A woman whose family income is two million dollars a year and her wealth is many times that.

You know, you would think that he is in in seven eleven, but he says, you know, I think that we are about average because we know so many people who have show first and private place. And and I look at this, I I say, wow, you know, just being upgraded to business classes. Me, you know.

I speak with a lot of people. I speak with a lot of people who live in california in a work in the tech industry and in their network. S been there early forties, or sometimes five, six, seven million, and they own a home worth two million, and they feel poor relative to the people around them. And I said, if you are in any other place except where you are, you'd be wealthy.

Thing is that as we age, the nice thing about aging, you learn to just drug and say, you know, so joe has more money than me, big there. Really knowing one enough is one of bogles is that is that is true. And as you age, IT is easier to do that when you are Young, IT is good that your aspirations succeed.

Your situation, that is why you know, you strive to to get good grades. This is why you strive to rise at work. But when you are getting to be beyond middle age, all of those things, if you are lucky, you starching for more money.

IT is something that I think that you acquire as you age more. At least I know I have, because I know you're used to self as an example here.

I think so I think that competitive spirit of earlier years, uh, where IT was really uh, make you perhaps even mad that somebody else won the lottery, somebody else got a promotion. Now you say good for him. You say i'm doing just fine. Be happy with what you have.

You did point this out of your book. That is, people accumulate a lot of wealth, their other s go down. And other words, instead of relying on family to do things for you, you can now go out and buy that. Instead of family helping you raise your children well, you can just take on the day care IT narrows your other types of well being that you have around family social.

Well, yes, so you can see that you know when when I got married, there was twenty two. Now my bride was twenty one, and my parents and other parents got together to decide 啊， 好吗？ Each pair of parents is going to contribute to the Young couple to get them going to get down payment on on a house.

Well, IT was not easy to get bank loans at the time for things like that. And and credit cards really did not exist. And my parents had a bit more than other other parents, but nervous parents borrowed some money because they wanted to match what my parents often.

They borrows some of that money from relatives, zero interest, and they paid the bank when they could. For that, you have to have social capable. That is more than i'll just charged on my car.

And so you can see that if I need to go some place and my car is broken, well, I just order and uber. But somebody who has less money finds people are pretty expensive. And so they are going to wait until their neighbor is going in the same direction. And the I get a ride from that person. Well, if you're going to do that, then you Better maintain good relations with that neighbor.

I can see how .

those things that have to do with money and status effect, things that have to do with, say, friendship. What you do if you are Young person and good friend from college is now getting married and she's going to have her wedding in hawaii and SHE invites you. Well, you might not have the money for for airfare and hotel in addition to a gift, some rise accepted and groom accepted, and some see, that is betrayal of friendship. So you can see how money, even when IT becomes of friendship, can create those kinds of frictions.

The next part that you talk about is saving and spending. You talk about a life baLance between spending now and saving, yet you constantly saying the book that IT is really hard to find this baLance, because IT requires a whole set of tools, mental accounting, self control, and that is very hard. So, you know, a lot of people say, just find a baLance in life, me and you'll be happy, everything i'll be good. But where you are saying is he finding a baLanced is not easy.

IT is not easy and IT is good that we have some institutional arrangements that make you a bit easier, god knows. Just imagine that we didn't have social security. Think about the people say, just give me my social security money and I invested the way I want to do Better than the bureaucracy. Well, suppose that you put a little bit point and IT goes down.

Now you are living in the street, what then? And so IT is good that we have the government do such security, good that corporations, often for one k finding the baLance is indeed 的 difficult。 And and many times we make mistakes in our early years by spending too much and in our later years.

And that is really one that that strikes me. People find that difficult to spend. People have plenty of wealth, but they have gotten used to the notion that saving is not just for the future, saving makes them feel good now, saving makes them feel virtuous. When I wrote about IT some years ago in the wall street, john, I got so many touching responses of people telling me what you are describing me. Second, now that I read that, I went out and I bought myself some fancy go clubs or high five speakers or whatever IT is knowing that that I can afford that you wrote.

if that makes you happy, but truly makes you happy, you should buy IT. If only you could afford IT. I do want to say one thing though, again, this is controversial. You are not a big fan of the fire movement, financial independence, retire early. You say no, they're in a way pushing .

the wrong idea. Well, this idea of retirement is near vana sounds a really a ridiculous to me that that is i'm seventy seven and i'm still working. Uh, do I have to know financially, I can retire, but teaching and scholarship is my vocation.

So so meaning IT provides meaning to my life that I will not get just from having leisure. And so really makes no sense to kind of divide the live into those two parts. One, you work like a horse with over time, with god knows what else is spent close to nothing.

And then you have the riches of free time forever. IT does not work. And more than that, I really is quite risky because you don't know what will happen. You know, you you retire at four teen.

Are you think that you have a million dollars a two or three and that is going to last you, but the market is not CoOperating and so on? You might find yourself in a situation that is really hard. And so just baLance is that just be reasonable, you don't have to work yourself today. There is such thing as family and leisure and all of that, but don't divide your life into those two apartments and and remember that retirement can be pretty boy.

You also talk a lot about overdoing IT where you can become a mizer. And becoming a mizer is not good at actually low as you will be. And even though you have more money, more wealth and actually lower your well being.

that's what I found from from this. When you give permission to spend and you say, hey and or you can spend, uh, without trouble, IT really is going to enhance your well being. Or if you don't want to spend the dinner yourself, how about spending IT on your kids, on your grand kids, on the community? Uh, if you have this this extra money, there are people who are poor in your neighbor od close far, won't you get some higher while being?

If instead of being the richest man in the cemetery, you get to share your wealth while you are alive? You can say in a way that there are self explanatory, they are common sense, but many people don't have that common sense. You know what? When I had an example in one of my articles in the most three journal about buying latish at tarbuck ks, and yes, of course, if you if you save IT and you invested, you're going to be to have so much more when you are sixty five uh, and I say, well, you spend that same amount on the parts for your baby and sure, you're not going to have your baby at sixty five.

So so there arent some things where you have to to ask yourself, how much is IT worth now and how much will I be later? And i'm not just that people spend a lot of time thinking about IT, but but you have to develop something like an intuition about IT that is going to guide you, right? My mom would say, spend money, but don't waste them.

This is all under the realm of well being, how we feel, who we are and being A A mizer where you never spend money and you don't give money to your children who needed because you don't want to spoil them. I hear that all the time is like, I don't see how if you are children are in the mid thirties and they say the marriage struggling at work and you know, maybe not having kids yet because they need to work and yet some people still won't help their kids. They say, what I want to ruin them is an interesting mindset that some parents have.

I think it's really as part of cultural capital. As I said, that is in israel. My parents, my parents gave us money when when we needed IT, uh, with a warm hand, how people grow to be reasonable or spend fords, we don't really precisely. No.

there's a chapter you have on investing. And I think we're in line with the bold heads idea of don't try to think that just because you have a PHD in a molecular biology that you can go out and pick stocks, you just use index funds. You have your own three fun portfolio.

We have something in the bogle case called the three fun portfolio. Well, you have your own three fun portfolio, which is uh, a world equity fund, a bond market index fund, total bond market index fund and a money market fund, which is really a simple portfolio. We actually call that a two fun portfolio because we leave the money market emergency money out. But it's interesting that that's the same concept that you came to and .

all of your work, yeah, keep IT simple. Stupid is is still a good, a bAndra for foreign stings. The total stock marked fund has born in three thousand stocks. If you asked me what are their names, you know, I might know two or three dozen.

Do I know their financials of cost? You know, I just I just buy a reverse by portfolio and and I assume that that eventually IT is going to do well. I have to really get out of the minds of my sites that doing analysis of stocks is going to get them extra.

I always asked, you know, who is the idiot on at this side of the trade? That is, as much as, you know, being an engineer working in biotechnology, there are people who one have inside information. And even if they don't have inside information, they know this company and industry inside out.

This is their day job. Why do you think that you are going to be able to beat them? So whenever I feel like trading, I ask myself this question, and then I set tight one more thing .

about investing before we move, because they don't want to do well on investing that much. I want to get to all these other things is that you talk about acid allocation. And as you get older and you realize you have more money than you need, that this idea of reducing your exposure to equity may not be what you want to do because you have more money than you're going to need. So you're going to be now saving for your children or charity. And therefore, you know, maintaining that higher equity allocation gives you satisfaction, gives you more will be IT.

makes IT makes a lot of sense. And I like to say that we want two things in life. One is not to be poor and the others to be rich uh and so what must begin?

You can say that bonds are are not being poor and stocks are for being rich. So if you have enough such that you ask yourself, what if the stock market goes down by fifty percent to sixty percent to seventy percent, will you still be OK? And the answer is yes. Then you can have a portfolio is still allocated mostly to stocks and and then leave with again for for family, for charity, for all good things.

Well, now we're going to get IT as a really interesting stuff. So we went through the finance stuff being is saving, investing in financial. Now we're going to get in to some part of the book that well, can you really say that has to do with dating and marriage and weight hood in divorce, parents, children, elderly parents, grandparents, siblings, all the family stuff.

And so we going to start out with dating and marriage. You find that there is a strong link between marriage and well being. We can all agree on that. I want to get to the controversial stuff. Here's what you said.

Marriage enhances well being more for men than women, because women have the the household chores to do and they have childbearing duties while men benefit from the social support of women. You're not supposed to save this may, but that we get more out of IT in a way than women do. So our well beings, men's well being, are benefit more than women's well being .

from married yeah well I think some of IT has to do with with housework and even in uh couples that the profess equality uh that tensor on women more than men. But also I perhaps even more important, women have more friends, more for social capital than men when women are without a, they usually have some circle of friends that is going to be there to support them. When men find themselves in their situation.

Once their wife dies, they realized that the only social contact ahead was through thread SE. And now they they feel entirely lost. And so you can see how that social capital really matters and and why IT is important for men to develop a friendships that are reasonably deep, such that you find yourself in a situation we are a north entirely alone. So I I tell a story about about a man who who lost his wife and he he was reluctant to accept invitations to go to dinner with with friends who are in his situation, and eventually he did and and now he is kind of any community of people like him. They have dinner together and they can lean on each other, if not financially, surely emotionally.

And I just think this is a great example of social capital because it's true. I see IT. I live in over fifty five community and the whole purpose of the over fifty five community, so that to bring people together, men can go play goal or play, pick ball, whatever.

And they they develop their own groups, their own social groups. And I think this is helpful. When somebody in our group wife passes away, they have the social network in these over fifty five communities that you may not have in other places.

When I was reading that, I just being being very clear to me that, D M, i'm living in a place like this where we're kind of practicing that. But let me up, move on divorce. So sometimes things don't work out.

What you say is that a lot of times divorce occurs because there wasn't well being before people got married. Another marriage doesn't solve that. If your well being is low before you get married, the higher probability that you're going to get divorce can explain how all that works.

Yeah so so people who have higher well being are more likely to attract to mate. They are more optimistic. For example, they smile more.

You see that in marriage. Now, of course, they are going to be bumps in in every marriage. But being dour and sour is not really a good recipe. But IT is important to know that that sometimes IT is too good people to people who can enjoy high well being.

They are just not matched, right? And so divorce, even with kids, might be a Better solution than just living there together for the sake of the kids know the kids get the point in. In many cases, if IT was obvious that parents don't get along when they divorce, kids, in fact, are relieved that they don't have to witness that stress every day.

And they can go to the home of mother and a home of father and have a Better time then when they are together. And so there are really many stories and and they go in different directions, and people have different views as to what to do. For some people, IT is, you married, you have kids, you Better stay together if they are minor.

Other people say, no. IT just does not make sense for us. We can go our separate ways, take care of our kids, both financially and emotionally, and go on with our lives.

And so I think that what will happen to readers of the book is that they are going to see themselves in some of the stories, and some of the stories will strike them as being strange. But that's good, because IT kind of prompts thinking, and you know that you are not alone. And perhaps once you reflect on IT, I believe that people can change, you know, keep people can improve their well being.

Exactly what happened to me as I was reading through the book. There were some things like that just turned me the wrong way. I said I I don't believe that it's not what I would do.

Then there were some things, oh, that's me. And what you do in the book though, you know, it's not like i'm right in that other person is wrong. That's not what IT is, what enhances my well being and what enhances that other person well being and when we enhance somebody else is well being completely different.

And what enhance is my well being. But we try to keep everybody within our own belief system in the book really opens that up in many different ways. So it's much more than a finance. But, but, but IT does all relate to finance.

As you were saying, you know, if you have one person in a relationship who's that spend thrift to worse, that they hide spending and high debt from the other spouse, I mean, this is going to eventually blow up. So really interesting observations that you put way beyond basic behavioral finance that we read about. You gave a lot of parental advice in the book.

A lot of IT has to do with what we call helicopter parents kind of the phrase. They want their children to be involved in all these things. And i'll realize that, that actually takes away from the child's well being.

We wrote that they feel much more stress with the extra curriculum activities that they're involved, and then they do just with their school work. And how trying to help your child can actually be hurting your child because you're putting too much stress on them. Tell me that portion wasn't about findings, but I found that all very interesting and IT all does fall together with your well being, your child well being, your your family well being. And you said this portfolio, well beings, which of course includes your children's well being.

many things, many things that surprised me, that I found fascinating. And I think that that readers will find them fascinate thing as well. That is, why is that there is this big fascination now with getting the kids into an league college? I've lived in this country for fifty years.

IT was not like that. I I studied at columbia a but IT was not because of its prestige, because they offered be the financial aid that IT was was necessary. So what is going? You know, this is not that economists try to figure this out.

So theologists tried to figure this out. I kind of bring IT together to make sense of IT. And perhaps people can get kind of advice from that.

I have uh many neighbors that seems like all my neighbors are from from india, highly educated people, many of them engineers uh and they come from a culture where gradually from a top university is a big thing in the U. S. IT is a thing. Uh, and IT is big, but is not as big. It's not you can you can do well even if you graduate from a second of level college just understanding them and presenting IT and h, you know I talk about IT with with those and neighbors and they they begin to understand how this country is different.

You you talk about how the U. S. Is where you go to college. That matter is whether in canada, it's what you study in college that matters. No different culture.

exactly. So in some cultures, I know couple of colleague of mine was originally from korea and his wife is from sweden in korea. IT is really very important where you graduate from in sweden. It's not when you put those culture side by side, you say, why are they different and makes some judgment as to which of them is Better, which of them enhances well being Better than the other doesn't mean that .

you're gonna have more well being as a student graduating for one of those prestigious universities and then going and getting getting a job that that that job is going to give you any more satisfaction or any more well being then if you didn't take that path and which what that's what I found very interesting about a lot of the research that you're doing.

Then if you get into elderly parents as well in the sandwich generation and my grandparents, because I am when I have eight grandkids, you know, we love being a grandparent. But to have the grandchildren come and live with us and for us to raise them IT, actually probably for us, would diminish our well being, as opposed just seeing the grandkids and taking care of them once in a while, which would increase our well beings. But then you have a situation with money where maybe you have a divorced daughter who ends up moving in with you with the child.

The divorce daughter has to go to work, and you end up taking care. The child IT does tie into money in many ways. IT wood diminish well being.

But it's not something we would. Md, and I want to say to your daughter, well yet, take care of your kid and take care of you, but I don't want to is true. But people Normally wouldn't say.

I wouldn't say that to my daughter yeah I I would do IT and and I would at least pretend that i'm cheerful. H about IT that is important. But but of course um IT does make a difference. Having a disabled child reduces the world being of their parents. These are facts. And sometimes when you say to to people that kind of feel like you are hurting them feelings, you judging them, judging them, except when I say what I have a disabled daughter is on speaking from where you are and not trying to be condescending to you. To the contrary, i'm trying to be apathetic to you and say, I know how how you feel I am in your shoes and here's how we manage that is we take from domains that are plenty for like having another daughter who loves her older sister and supports her and having that increase the well being of all of us.

You have a chapter on health. People who have more money generally have more health because they can afford IT. They can afford to go to a doctor if they are feeling well.

They can afford to spend the time playing pickle ball rather than working three jobs. They're going afford to personal trainer. So their health is Better. So you know, money and health there are related, and it's all related to well being. And of course, if you have a long chapter on work, and this is a really interesting chapter, if you thinking that getting the next promotion is gonna you feel Better, you should read this chapter because you may be the opposite. Is such a fascinating book to to get into religion and society, nationalities, culture, just things that we could talk about for days.

I look at well being as a portfolio, the portfolio of those domains. There is money, of course, at the base of IT, but there are the his family and work and religion and society and all of that. And people allocate more of their well being to one of the others.

And some domains have lumped them, H. A kid that is a disabled or a kid that does not do what parents would have hoped, a work, work that is not satisfying and so on. And I think that the art of life, while being is, is the art of the portfolio.

That is, you you know that you're going to have some dogs are going to be dogs, but that's why you've versified because you don't know IT ahead of time. And the same applies here. These are the things that come out of my life. And when I speak to others, their experiences are similar.

And I I know what we run out of time, but I want to thank you so much for being a guest on the bogle head on investing today.

Well, thank you. All right. And I hope that people who listen, I will enjoy this .

concludes this episode of bogle heads on investing, john, us each month as we interview a new guest on a new topic. In the meantime, visit bogle center dot net bogle head bugle head Vicky bogo head twitter s he's facebook blog heads redit join one of your local global ads chapters and get others to join. Thanks for listening.