00:00:00
Welcome to personal finance for
00:00:02
long-term investors, where we believe
00:00:04
Benjamin Franklin's advice that an
00:00:06
investment in knowledge pays the best
00:00:08
interest both in finances [music] and in
00:00:10
your life. Every episode teaches you
00:00:12
personal finance and long-term investing
00:00:14
in simple terms. Now, here's your host,
00:00:18
Jesse Kramer. Welcome to Personal
00:00:20
Finance for Long-Term Investors, episode
00:00:22
120. I'm Jesse Kramer. By day, I work at
00:00:24
a fiduciary wealth management firm
00:00:25
helping clients nationwide. You can
00:00:26
learn more at bestinterest.blog/work.
00:00:27
[music]
00:00:29
The link is in the show notes. And by
00:00:30
night, I write the best interest blog
00:00:32
and I host this podcast. I put out a
00:00:34
weekly [music] email newsletter as well.
00:00:36
All of which help busy professionals and
00:00:38
retirees avoid mistakes and grow wealth
00:00:40
by simplifying their investing, their
00:00:41
taxes, and their retirement planning.
00:00:43
Later today, Professor John Dinsour will
00:00:45
be joining me to talk about marketing
00:00:47
and advertising and debt and some really
00:00:49
intriguing conversation about how debt
00:00:51
and loans and financing and other
00:00:53
somewhat risky financial behaviors get
00:00:55
sold and get pushed on people like you
00:00:57
and me. But first, we'll do a review of
00:00:59
the week. This one is from AB17, who
00:01:02
says, "Exceptional and essential
00:01:04
personal finance podcast. I stumbled
00:01:06
onto Jesse's podcast, and from the very
00:01:07
first one I listened to, I gained so
00:01:09
much knowledge. Jesse has a fantastic,
00:01:11
easy to listen to voice, and his
00:01:12
delivery is spot-on. I love the topics,
00:01:14
and it keeps me motivated to do better
00:01:16
with my portfolio. Jesse's advice is
00:01:18
based on sound financial principles. I
00:01:20
respect this guy. At his core, in
00:01:21
addition to whatever talents he
00:01:23
possesses, he has the heart of a
00:01:24
teacher, and the AMAs are fantastic."
00:01:27
Well, AB17, thank you for the kind
00:01:29
words. You're right. I'm not sure what
00:01:31
talents I possess, but whatever they
00:01:33
are, both my parents were teachers, as
00:01:35
I've talked about here on the podcast
00:01:36
before, and I'm glad that maybe that
00:01:38
teaching gene comes across in these
00:01:40
podcasts. So, AB7, shoot me an email to
00:01:42
Jesse at bestinterest.blog, and I'll get
00:01:44
you hooked up with a superoft podcast
00:01:46
t-shirt. Before Professor Dinsmore joins
00:01:48
us, let me tell you why I am weak. I'm
00:01:51
weak. And on average, I might bet that
00:01:54
you have some weakness, too. And I wrote
00:01:56
what I'm about to read. I wrote it in
00:01:57
2022. And the title of this article is I
00:02:00
am weak. So are you. The more I admit my
00:02:02
weakness, the better I become. And you
00:02:04
might be the same way. So here's an
00:02:06
example. YouTube works on me. I can
00:02:08
waste hours on YouTube. YouTube knows
00:02:11
the stuff I like to watch. It feeds me
00:02:13
as much as I'll consume. And when we
00:02:15
think about that fact, we might draw
00:02:16
back a little bit and say like, "Ew."
00:02:18
And Twitter, when I was on Twitter,
00:02:20
Twitter worked on me, too. So did
00:02:22
Facebook. My Facebook timeline was
00:02:24
littered with foster dog stories. Get
00:02:26
it? Littered with foster dogs. The
00:02:28
YouTube and Twitter and Facebook, they
00:02:30
learned my weaknesses. That is, in other
00:02:32
words, how to manipulate my brain and
00:02:33
how to keep my attention. And their
00:02:35
techniques worked against me. I am weak
00:02:38
against them. I'm weak against their
00:02:39
techniques. Here's a crazy stat. At
00:02:41
current rates, the average person, and
00:02:43
hey, that might be you, the average
00:02:45
person will spend six years of their
00:02:47
life scrolling through social media.
00:02:49
Sugar works on me, too. and so does salt
00:02:51
and so does fat. The food industry knows
00:02:54
how to make food as appetizing as
00:02:55
possible. And my taste buds and my brain
00:02:58
chemistry are victims of that fact or at
00:03:00
least we're weak against that fact
00:03:02
whether I'm a victim or not. And here's
00:03:03
another stat. 74% of US adults over the
00:03:07
age of 20 are overweight or obese based
00:03:09
on the okay based on the sometimes
00:03:11
maligned BMI or body mass index. My BMI
00:03:14
is 28, 29, 30 depending on the day. I'm
00:03:18
overweight. I am overweight and my ego
00:03:20
wants to believe that I'm strong enough
00:03:22
to overcome the addictive allure of
00:03:24
social media or the addictive allure of
00:03:26
a sugar stuffed food. I want to say
00:03:28
something like, you know, how can those
00:03:30
people waste all that time on social
00:03:31
media? How can those people shovel that
00:03:33
junk food into their faces? But I am
00:03:35
those people, right? Big social media
00:03:37
and big food. Their tactics work on me.
00:03:40
I am the psy that they had in mind. Can
00:03:42
I be blamed for this? Well, armies of
00:03:45
programmers and psychologists design
00:03:47
social media platforms, and armies of
00:03:49
chemists and food scientists find the
00:03:51
optimal levels of sugars and salt and
00:03:53
fat in the foods they design. What hope
00:03:56
does a simple man like me have against
00:03:58
that? If I'd known I'd get addicted or
00:04:00
taken advantage of, maybe I would have
00:04:02
avoided the stuff in the first place.
00:04:03
But I'll say this, knowing my weakness,
00:04:06
being aware of my weakness, helps out
00:04:07
immensely. If I waste an hour watching
00:04:10
dog videos, I don't ask what the hell
00:04:12
just happened. I know exactly what
00:04:14
happened. I I recognize my weakness. I
00:04:16
was weak against them and I kind of fell
00:04:18
victim to them again. I I ought to know
00:04:19
better. I know that I need to recognize
00:04:21
my triggers and catch myself early in
00:04:24
the act. But okay, what does this have
00:04:25
to do with the world of personal
00:04:27
finance? Well, marketing and advertising
00:04:30
must work, too. Since my monkey brain
00:04:32
falls prey to social media and unhealthy
00:04:34
food, I know I'm getting led along or
00:04:38
tricked or at least convinced by
00:04:40
advertising and marketing, too. I must
00:04:42
be. I'm sure of it. My ego, of course,
00:04:45
wants to think that I've armored myself
00:04:47
against the slings and arrows of a
00:04:48
marketer's arsenal. But let's be honest,
00:04:50
if the experts have outgunned me on
00:04:52
social media and food, then the
00:04:54
marketers are probably winning, too.
00:04:56
It's only logical. But unlike with
00:04:58
social media and food, I don't know
00:05:00
exactly how I'm getting tricked.
00:05:02
Advertising and marketing can be subtle,
00:05:04
indistinct, sometimes hidden in plain
00:05:06
sight. You can believe that you're
00:05:08
immune to marketing, and you can claim
00:05:10
that your purchasing decisions are
00:05:11
always of your own accord, but the data
00:05:13
show differently. Here's another stat.
00:05:15
The average person sees 1,700 online
00:05:19
advertisements, like banner ads, per
00:05:21
month. Do you think you ignore all 1,700
00:05:23
of those ads? You know, why do you buy
00:05:25
Nike shoes? Why do you shop at Whole
00:05:28
Foods? Why is Iceland on top of your
00:05:30
travel list? You might not know why, but
00:05:33
somewhere a marketer is probably
00:05:35
smiling. I mean, do you really know how
00:05:37
marketing affects your spending habits?
00:05:39
Now, what can we do about that? If we
00:05:42
want to fight back against the constant
00:05:43
onslaught of advertising, it's an uphill
00:05:45
battle. Go ahead and and Google
00:05:47
something like how to fight against
00:05:49
marketing techniques. Go Google it.
00:05:51
Almost all of the top results are
00:05:53
actually pro-arketing articles like 11
00:05:56
ways to sell anything to any audience.
00:05:58
In other words, tons of people are
00:06:00
working on better ways to sell you junk.
00:06:03
Very few people are trying to help you
00:06:04
buy less junk. This battle really is up
00:06:07
to you and me. I'm here to help, too.
00:06:09
But it's up to us on an individual
00:06:11
basis. There aren't that many people who
00:06:13
are really gathering groups of people
00:06:14
together to fight on our side.
00:06:16
Nevertheless, here are a few quick ideas
00:06:18
to fight back against incessant
00:06:20
marketing. The first one, unsubscribe
00:06:22
from any email you don't want, including
00:06:24
my emails. Email marketing is incredibly
00:06:27
effective. Don't let a brand sneak into
00:06:29
your inbox and and into your brain every
00:06:31
day or every week or something like
00:06:32
that. The second tip, look at
00:06:34
advertising critically. Rather than
00:06:36
observing an ad like a pathy, I watch
00:06:38
ads like an investigator or a scientist.
00:06:40
I try to break down the advertisement
00:06:42
and hopefully develop some sort of on
00:06:44
the-fly defense against it. I ask, "What
00:06:46
exactly are they trying to sell and how
00:06:48
are they trying to convince me to buy
00:06:49
it?" The third thing you can do, review
00:06:51
old purchases. Was that purchase
00:06:53
worthwhile? If not, do you think that
00:06:55
advertising or marketing maybe played a
00:06:57
role in convincing you to make that
00:06:59
purchase? And the fourth one, ask, "What
00:07:01
am I paying for? A popular fashion
00:07:03
company sells leggings for $100 a pair.
00:07:05
Well, what are you paying for?" You're
00:07:07
paying for an image of eliteism and and
00:07:09
maybe sexiness. And that image was
00:07:11
created by marketing. And I bet some of
00:07:13
you know exactly what liking brand I'm
00:07:15
referring to. And that fact alone proves
00:07:17
how marketing works. That's brand
00:07:19
awareness. And I'll ask you if you have
00:07:21
any interesting techniques against
00:07:23
advertising and marketing. By all means,
00:07:24
please reach out. Share them with me.
00:07:26
Jesse atbestin.blog.
00:07:27
So there's nothing wrong with weakness.
00:07:30
We're all weak in our own unique ways. I
00:07:31
am weak. So are you. But recognizing
00:07:33
that weakness, that is a strength. To
00:07:35
plug a leak, you first have to identify
00:07:37
the leak. And that's what we're doing
00:07:39
here today. Or keep on eating Cheetos in
00:07:41
your sexy leggings cuz you know those
00:07:43
dog videos won't watch themselves.
00:07:45
Either way, I think this is a really
00:07:47
interesting idea we're talking about.
00:07:48
and John Dinsour and I are about to talk
00:07:50
about it a little bit more. Here's a
00:07:52
quick ad and then we'll get back to the
00:07:54
show. Did you know my written blog, The
00:07:57
Best Interest, was nominated for 2022
00:07:59
Personal Finance Blog of the Year and
00:08:01
it's been highlighted in the Wall Street
00:08:03
Journal, Yahoo Finance, and on CNBC. I
00:08:06
love writing, especially when that
00:08:07
writing is to share financial education.
00:08:10
And I usually write one or two articles
00:08:12
per week. You can read them all at
00:08:14
bestinterest.blog.
00:08:16
Again, the web address is
00:08:18
bestinterest.blog.
00:08:21
Check it out. Professor John Dinsour is
00:08:23
a leading scholar in behavioral finance
00:08:25
and marketing and advertising, exploring
00:08:27
how individuals make financial decisions
00:08:29
and the psychological factors behind
00:08:30
them. His research bridges theory and
00:08:32
practice, offering actionable insights
00:08:34
for everyone from retirees to policy
00:08:36
makers to financial planners, seeking to
00:08:38
understand decision-making, nudges, and
00:08:41
long-term financial well-being. So,
00:08:43
without further ado, here's Professor
00:08:44
John Dinsmore.
00:08:50
John, I uh I read an article about you
00:08:52
saying that you want to, you know, help
00:08:54
consumers recognize when financial
00:08:57
decisions are being influenced by clever
00:08:59
marketing. So, let's start there. I
00:09:01
mean, what are some of these clever
00:09:03
marketing things going on that we're
00:09:04
maybe not even aware of? You know, I
00:09:06
think a lot of times all of us would
00:09:10
agree with the statement that
00:09:11
advertising works. probably not all of
00:09:13
us would agree with the statement that
00:09:14
advertising works on us. The tricky
00:09:17
thing about persuasion is that you don't
00:09:19
really know all the time that you're
00:09:20
being persuaded when you are. It's going
00:09:22
to get more and more difficult with AI
00:09:26
becoming the engine of everything of
00:09:28
getting these highly adaptive ads that
00:09:31
are based on not someone who meets your
00:09:34
profile but on you, your search history,
00:09:37
any ads you've clicked on, any of your
00:09:39
prior purchases. So I think and I
00:09:41
especially when it comes to finance,
00:09:43
it's going to be something very
00:09:45
difficult to navigate because a lot of
00:09:47
us don't fully understand finance, but
00:09:50
if we're and we're buying it more and
00:09:52
more online, whether it's car loans,
00:09:55
mortgages, whatever, credit cards, you
00:09:57
know, we really need to be careful. And
00:10:00
I think that AI in particular and maybe
00:10:04
driving consumer finance to where the
00:10:06
classroom is going now, which is more
00:10:09
off more and more offline because so
00:10:11
many of the AI tools are so good that
00:10:14
you know I and a lot of my colleagues
00:10:17
are reverting exams to being you know
00:10:18
paper and pencil, not being able to take
00:10:21
them online and that sort of thing. That
00:10:22
may be where consumers need to go when
00:10:24
it comes to shopping for well anything
00:10:27
but also in particular finance.
00:10:29
>> Yeah. Really interesting. You mentioned
00:10:31
a word there adaptive ads which you know
00:10:33
I can think to myself when I go watch a
00:10:35
YouTube video I recognize the fact that
00:10:38
I'm being served an ad for some product
00:10:41
in my search history. I kind of realize
00:10:43
there's something being specifically
00:10:45
targeted at me the individual. I mean,
00:10:46
is that what you mean by an adaptive ad,
00:10:48
or is it even more kind of crazy and
00:10:51
dystopian than that?
00:10:52
>> If you saw Bladeunner 2049, there's a
00:10:55
scene after Ryan Gosling is coming back
00:10:58
from just getting the hellbeat out of
00:11:00
him and then like a 10story holographic
00:11:03
image of his AI girlfriend starts
00:11:06
pitching him some product. I mean, I
00:11:08
think we will get more sophisticated
00:11:10
about this, too. I mean, my kids are
00:11:12
constantly saying, "Well, that's AI."
00:11:14
But then they're quicker to pick it out
00:11:16
than I am. But no, I I think it's in
00:11:19
some cases, like today, there going to
00:11:20
be some things where you're like, "Okay,
00:11:22
that's very creepy. I feel spied on."
00:11:25
And then in other cases, I think AI will
00:11:27
adapt enough to become less identifiable
00:11:30
to create more subtleties and things. So
00:11:33
you have a harder time knowing that, oh,
00:11:35
this is based on my Amazon account or
00:11:38
whatever. Zooming out even even a little
00:11:40
bit further and this is going back to
00:11:41
your first answer. You mentioned this
00:11:43
idea that most of us are aware that
00:11:46
we're being advertised to, that we're
00:11:48
being persuaded. Most of us are aware
00:11:50
that it works on somebody, but very few
00:11:52
of us are willing to admit that it works
00:11:54
on us. And I I feel like I I've heard
00:11:56
that statement in some form mentioned
00:11:58
before and I'm aware that that's kind of
00:12:00
part of the whole advertising industry,
00:12:02
>> but do you have any like concrete
00:12:04
examples of that that even if it's more
00:12:06
traditional advertising than modern
00:12:08
advertising of just the fact that
00:12:09
whether you realize it or not, this
00:12:11
stuff probably is working on you, right?
00:12:13
I mean, I know for me and I finally I
00:12:15
think my wife has finally gotten me to
00:12:17
stop like I would sometimes buy these
00:12:20
weird novel contraptions. We were having
00:12:23
some drain flies in our kitchen. I don't
00:12:24
know if you've ever had drain flies in
00:12:26
your kitchen.
00:12:27
>> It's not great. They are what they sound
00:12:28
like. Uh these little like fruitfly size
00:12:31
insects
00:12:32
>> that if you haven't cleaned out your
00:12:35
drain, they end up making a home there
00:12:37
and it's just it's totally gross. But
00:12:39
probably because I had forgotten to turn
00:12:41
my microphone off on my Instagrammer, I
00:12:43
start getting pitched all these almost
00:12:45
like infomercial type of bug trap
00:12:48
things. And there have been some other
00:12:50
things as well. So I I you know I I am
00:12:52
acutely aware as and my wife is acutely
00:12:56
aware that I am susceptible to
00:12:57
advertising. So but the adage about
00:13:00
advertising is what it's the right offer
00:13:01
to the right person at the right time. I
00:13:04
mean there's probably another plank in
00:13:06
that which is so long as they don't know
00:13:08
you've been spying on them. But in the
00:13:10
case of the bug traps or some other
00:13:11
things that I bought clearly social
00:13:13
media has caught me when I was in the
00:13:16
mood to buy something and pitch me the
00:13:17
right product. Well, this is a good
00:13:19
transition then because I think this is
00:13:20
I pulled this quote I think from
00:13:22
something I saw that you wrote which is
00:13:23
that marketing tactics deliberately or
00:13:26
not exploit biases and blind spots when
00:13:29
it comes to evaluating debt in this
00:13:31
specific case you were talking about you
00:13:32
know the marketing of financial products
00:13:34
the marketing of loans and debt and that
00:13:36
kind of thing. What biases or blind
00:13:38
spots are we talking about here and how
00:13:40
do these specific marketing tactics
00:13:42
exploit our biases and blind spots?
00:13:44
>> Yeah, I mean there's a bunch of them,
00:13:46
right? So I would say if you look into
00:13:49
there's one of the biggest biases is
00:13:51
something called loss subversion right
00:13:53
so uh the authors of that conan and
00:13:55
tverki have they won a Nobel prize for
00:13:57
it they've had books written about them
00:14:00
and it's really just that we hate losing
00:14:03
much more than we love winning and when
00:14:05
you put that into a financial context a
00:14:07
lot of times we will buy a lot of things
00:14:11
like extra add-on services like extended
00:14:13
warranties and things like that because
00:14:15
we're so afraid of making the wrong
00:14:18
decision or a losing decision that we
00:14:20
become very susceptible to that. So, you
00:14:23
know, my wife's car a couple years ago
00:14:25
just up and died. Like, we were having
00:14:27
lunch and we looked out in the parking
00:14:28
lot and there was like fluids all over
00:14:30
the parking lot and you know, we had it
00:14:32
towed in and it was pronounced dead on
00:14:35
the scene and so we had to go get a car,
00:14:37
right? We went and shopping for now the
00:14:41
big sort of family SUV we had had was a
00:14:43
very comfortable car. It was awful in
00:14:47
terms of reliability. So, I think we,
00:14:49
you know, we wanted to go, we went to a
00:14:51
brand that had a a strong reputation for
00:14:53
reliability. Of course, we're hearing
00:14:55
how reliable it is the whole time during
00:14:57
the sales pitch and the moment we commit
00:14:59
to buying it, they pivot into, well, but
00:15:02
it doesn't mean it's foolproof and this
00:15:03
thing could blow up and it could really
00:15:05
cost you, right? It was like 20 seconds
00:15:07
ago, you were telling me how reliable
00:15:08
this thing and now you're convincing me
00:15:10
that like, you know, doom is right
00:15:11
around the corner. But it is I mean the
00:15:14
car is the second biggest purchase most
00:15:16
of us ever make, right? So naturally
00:15:18
we're going to be extra cautious about
00:15:20
that and so a lot of us end up buying
00:15:22
extender warranties and that sort of
00:15:24
thing. I on my car that I the last car I
00:15:28
got I remember they said well you know a
00:15:31
pro we can spray it with a protective
00:15:32
coating and I think they wanted like a
00:15:34
thousand bucks for it. And I had
00:15:37
actually driven I traveled a bit to get
00:15:39
the car cuz I I found it on what I
00:15:41
thought was a good deal. And I said,
00:15:43
"Well, okay, but how long would that
00:15:45
take?" And they're like, "Oh, it takes
00:15:46
like five minutes." And I was like,
00:15:47
"Well, if it takes five minutes, why
00:15:48
does it cost $1,000, right?" But I, you
00:15:51
know, in that case, I declined. But
00:15:53
there have been other times where I've
00:15:54
I've definitely bought tack on insurance
00:15:55
and warranties and that sort of thing
00:15:57
because I mean, I am very loss averse.
00:16:00
>> Yeah. I just think about right every
00:16:02
Amazon purchase now, especially I think
00:16:03
for maybe it's like electronics. I feel
00:16:05
like they usually try to they tell while
00:16:08
you're checking out, don't you want this
00:16:09
extended warranty? Travel now usually
00:16:12
comes with some sort of travel insurance
00:16:13
add-on pitch they're trying to make to
00:16:15
you. And specifically, you know, John,
00:16:17
mo most of the listeners here to this
00:16:19
podcast are DIYers in their financial
00:16:22
lives, maybe even like thinking about
00:16:24
retirement through a bit of a DIY lens.
00:16:27
And I think immediately of annuities. I
00:16:30
I don't know how familiar you are with
00:16:31
annuity products as part of retirement
00:16:33
planning, but it's basically this
00:16:35
insurancebacked product that says,
00:16:38
"Don't risk losing everything you've
00:16:40
saved for retirement. Here's this steady
00:16:42
protection that provides you guaranteed
00:16:43
income." And when you really look at the
00:16:45
underlying math, you say, "Oh, well,
00:16:47
that probably isn't that appealing a
00:16:48
deal, but it's sold as protect, protect,
00:16:51
protect, don't lose, don't lose, don't
00:16:52
lose." And just going back to that loss
00:16:55
aversion, what else? I mean I know
00:16:57
Conorman and the Terski were full of
00:16:58
really interesting biases. Are there any
00:17:00
others that that really stick out?
00:17:02
>> There have been a bunch of things that
00:17:04
of course they are giants in their field
00:17:05
and so there have been a bunch of
00:17:06
offshoots for it. So another thing
00:17:09
related to loss aversion is what you
00:17:11
call like an anchoring effect that
00:17:13
typically people find the first piece of
00:17:15
information that they see and they kind
00:17:18
of block out anything else. You know, a
00:17:20
big reason for that is, you know, we are
00:17:22
asked to be well, we're asked to make
00:17:24
decisions on a lot more things than it's
00:17:27
would ever be capable to be an expert
00:17:29
on. So, in a lot of cases, especially if
00:17:31
we're dealing with something that makes
00:17:32
us a little anxious like finance. A lot
00:17:35
of times we just well they call it
00:17:37
seizing and freezing, right? So, you
00:17:38
seize on the first piece of information
00:17:40
that you find that you think gives you
00:17:42
the answer you want and you freeze out
00:17:44
everything else. Well, when you're
00:17:46
dealing with things like, you know,
00:17:48
loans and credit that they usually have
00:17:50
a lot of components to price, they may
00:17:52
have escalation causes. They may have
00:17:54
all these things. People will seize on
00:17:57
like an introductory interest rate and
00:17:59
then, you know, they won't pay attention
00:18:01
to anything else. It's like when people
00:18:03
buy something online and they don't
00:18:05
incorporate any shipping cost to it if
00:18:07
it's $50 plus. I mean, I don't know if
00:18:10
you've ever done this where another
00:18:12
example of maybe me being one of the
00:18:13
bigger suckers out there where you see a
00:18:15
really attractive upfront price for
00:18:17
something and you click on it. This
00:18:19
thing's usually $80. They're advertising
00:18:21
it for, you know, 60 or 70. So, you
00:18:24
click on it and then of course it's like
00:18:25
$25 to ship it, which is absurd. But, I
00:18:28
mean, this we do the same things with
00:18:30
loans. We'll take that initial rate and
00:18:33
even if it's only good for a couple of
00:18:35
months and then it escalates, you know,
00:18:37
that's what we encode as the price and
00:18:39
then we block out all these other
00:18:41
things.
00:18:41
>> Have you looked into the buy now pay
00:18:43
later at all? Like this growing theme of
00:18:46
services in the finance industry. It's
00:18:48
there's a few companies that are now
00:18:50
like trying to out compete each other to
00:18:51
to win that race. But I can go buy a
00:18:54
$500 product on Amazon, not pay anything
00:18:57
for 3 months, or maybe they just divide
00:18:59
it into, you know, 10 months of even
00:19:01
payments, and they're charging me some
00:19:03
hidden interest rate in there. I mean,
00:19:05
any any specific thoughts on on that
00:19:07
service? Economists refer to something
00:19:10
called intertemporal discounting, which
00:19:11
is just like a really fancy way to say
00:19:13
that depending whether if something is
00:19:16
in the present or at some point in the
00:19:18
future, we're going to look at it in
00:19:19
different ways. If we push things off
00:19:22
just a little bit into the future, we
00:19:24
have a tendency to think it's way more
00:19:25
affordable than it actually is. You
00:19:28
combine this with the general sort of
00:19:29
optimism that we have that, you know,
00:19:32
we're always going to have more time,
00:19:33
money, and energy in the future than we
00:19:34
have today, right? So, even if it's only
00:19:37
three or six months out, people are
00:19:39
likely to think, well, you know, I'm
00:19:41
strapped for cash this month because,
00:19:43
well, you know, my car needs to get
00:19:45
serviced. But there's lots of expenses
00:19:47
like that every month. What you really
00:19:49
need to think about is how many months,
00:19:52
you know, do you end up the month and be
00:19:53
like, "Wow, I've got all this money in
00:19:55
my account." Probably not too many of us
00:19:57
do, but we have a tendency to think of
00:19:59
the future we will. When you push off
00:20:01
payments for things like that, oh, this
00:20:03
month I'm broke, but in a few months I'm
00:20:05
going to have all this stuff sorted, and
00:20:06
it's well, there's all these different
00:20:08
expenses that creep into your life that
00:20:10
you're not anticipating. So, I think
00:20:12
psychologically that's why a, you know,
00:20:15
buy now pay later is really attractive
00:20:18
to a lot of people because they fool
00:20:20
themselves into thinking that they're
00:20:21
going to be able to afford it when they
00:20:23
probably won't be able to.
00:20:25
>> How do we unfool ourselves? I mean, you
00:20:27
gave some answer there about just like,
00:20:28
you know, you almost need to just be
00:20:29
more realistic with yourself. But I love
00:20:31
that fact. I wrote it down. We all think
00:20:33
we're going to have more time, money,
00:20:35
and energy in the future than we really
00:20:37
do. And I can look back and say, "Yeah,
00:20:39
there have been times before when I've
00:20:40
I've assumed I'll be able to
00:20:42
fundamentally change my life over the
00:20:44
following 12 months." And then in
00:20:45
retrospect, you look backward and say,
00:20:47
"I didn't quite hit my my my high goal
00:20:50
there." But are there any I mean, in
00:20:51
practice, is there anything we can or
00:20:53
should be doing to just be a little bit
00:20:55
more realistic with ourselves? I've got
00:20:57
two boys, 12 and 15. And I remember
00:21:00
always thinking, you know, as I've
00:21:02
progressed through the parenting and the
00:21:04
boys have grown, okay, well, I'm broke
00:21:06
because we're paying for daycare, but
00:21:07
once we're done paying for daycare, you
00:21:09
know, we'll be good. But then, of
00:21:10
course, they're doing sports and all
00:21:12
these other things and braces and all
00:21:13
this stuff keeps coming. though I've
00:21:16
finally come to grips with being wrong
00:21:18
so many times that it's really in my
00:21:22
mind it's more the test of you know
00:21:24
where are we now in terms of you know on
00:21:27
most months you know are we eatking it
00:21:29
out to get to the end of the month or or
00:21:31
do we feel like we have some space there
00:21:34
and I think that's a better judge of
00:21:36
where you are right now and where you've
00:21:37
been recently versus trying to figure
00:21:39
out where you'll be in the future
00:21:40
because I once got laid off from a job
00:21:42
it was right around the great recession
00:21:44
I don't think anyone has that in the
00:21:46
career path of I have a layoff or two
00:21:48
and you know I think half of all workers
00:21:51
end up getting laid off at one point or
00:21:52
another. We we should assume we're going
00:21:54
to get laid off at one point or another.
00:21:56
But I I think so yes, you know, God
00:21:59
willing this our ships come in for all
00:22:01
of us in the future, but I think the
00:22:03
present and the recent past is a better
00:22:05
judge of where you'll be. Here's a quick
00:22:08
ad and then we'll get back to the show.
00:22:09
I love getting your questions and some
00:22:11
of you ask me questions about the wealth
00:22:12
management firm I work for in Rochester,
00:22:14
New York. Others ask about the Best
00:22:16
Interest blog and this podcast, Personal
00:22:18
Finance for Long-Term Investors, which
00:22:19
operate without advertising, without
00:22:21
pushy sales, and with no payw walls. How
00:22:23
can the blog and podcast stay afloat
00:22:24
without me dumping my own money into it?
00:22:27
Well, to answer both those questions, I
00:22:28
want to point you to episode 78 of
00:22:30
Personal Finance for Long-Term
00:22:32
Investors. I intentionally recorded
00:22:33
episode 78 to shine light on those
00:22:35
topics and inform you how you are
00:22:37
actually helping and can continue
00:22:38
helping these projects carry forward. So
00:22:40
if you've ever been curious about the
00:22:42
business of my blog and podcast or if
00:22:44
you're curious about my day job in
00:22:45
wealth management, please check out
00:22:47
episode 78 and let me know what you
00:22:49
think. So my wife and I yesterday, it
00:22:51
was a Sunday, we had on our beloved
00:22:53
Buffalo Bills on in the background.
00:22:56
Go Bills. Uh, and I heard what must have
00:22:58
been my millionth advertisement for a
00:23:00
sports gambling app. I mean, they're
00:23:02
they're just ubiquitous, especially when
00:23:04
when you're watching live sports.
00:23:06
They're ubiquitous. And I've on this
00:23:08
podcast before gone deep on my I'm kind
00:23:11
of way out on the spectrum, I think, of
00:23:12
disliking sports gambling and kind of
00:23:14
what it does to us on a societal or just
00:23:16
an individual level. But I'm curious. I
00:23:19
see this very interesting confluence of
00:23:21
a what I would call a terrible financial
00:23:24
behavior and a gigantic marketing
00:23:26
machine that's trying to like
00:23:28
proliferate that behavior. And not to
00:23:30
put you on the spot if you haven't dove
00:23:32
too deep on it, but I'd love to hear
00:23:33
your thoughts if if you have any. I
00:23:35
think I align with you. Like, you know,
00:23:37
if you're Charles Barkley and you've
00:23:39
just got absurd amounts of money, you
00:23:41
know, and you want to go blow a half
00:23:43
million at in Vegas this weekend, you
00:23:45
know, God bless you. But most people
00:23:47
don't have that kind of slack in their
00:23:48
budget. But let's say you're one of the
00:23:50
big gaming companies and we all see them
00:23:52
advertising all over the place. So
00:23:54
you've probably got what hundreds of
00:23:56
thousands if not millions of customers.
00:23:58
So I doubt they're really getting in on
00:24:00
people's profiles on an individual
00:24:02
level. But at the same time, there have
00:24:05
been issues that have come up in the
00:24:06
news recently of, okay, you guys have
00:24:08
been targeting sending more offers and
00:24:11
bigger offers and incentives to people
00:24:13
who clearly have a problem gambling.
00:24:16
Now, if you're in the data center of one
00:24:18
of these big gaming companies, you might
00:24:19
just see it, hey, this is one of our
00:24:20
best customers. So, what's the
00:24:22
difference between the a best customer
00:24:24
and someone who's ruining their life,
00:24:25
you know, and I think actually if you I
00:24:28
personally think you could probably flag
00:24:30
certain profiles and things like that,
00:24:32
but I would guess in a competitive
00:24:35
marketplace, gaming company one says,
00:24:38
well, if we stop this person or
00:24:40
discourage this person from gambling,
00:24:41
they're probably just going to go to the
00:24:43
next gaming company through the app. I
00:24:46
mean, they, you know, they can, if you
00:24:48
have not set your privacy settings
00:24:49
carefully, and most people don't, you
00:24:51
know, they know when you're near a
00:24:53
sporting event, know when you're near
00:24:55
one of their casinos, all of these
00:24:57
things. And they also have all this
00:24:59
extra data they've been able to compile
00:25:01
on you through that app and other apps
00:25:04
on your phone. So for certain goods, I
00:25:08
mean, I have to put gaming near the top
00:25:10
of goods that when heavily armed with
00:25:13
information in a digital environment
00:25:14
could really wreak havoc. This is my
00:25:17
total lay person's opinion, but just it
00:25:19
it seems the way that things are going
00:25:20
in the marketing and advertising world
00:25:23
or just maybe when I think about this
00:25:24
other broad issue of just like the the
00:25:26
social media kind of echo chamber slash
00:25:29
kind of addiction world of people just
00:25:31
falling down these these kind of bad
00:25:33
paths in the social media world. It's
00:25:35
that the service, whether it's a social
00:25:37
media site or a gambling site or just an
00:25:41
advertising agency, they know a lot more
00:25:43
about you and they know a lot more about
00:25:45
human brains than you do. And and to
00:25:48
some extent, we're all probably
00:25:50
relatively powerless against them. But
00:25:52
maybe not. I mean, I'm sure there are
00:25:53
some hopeful things we can do. So maybe
00:25:55
we can focus on that right now, John. I
00:25:57
mean, short of becoming a complete lite
00:25:59
and getting rid of all your electronics.
00:26:01
I mean, what are some other things that
00:26:03
we can all start doing on an individual
00:26:04
basis to at least become more aware of
00:26:06
these ways in which we're being
00:26:08
targeted? Part of it is, you know, check
00:26:11
your settings for your different
00:26:13
platforms and your different apps. I
00:26:15
have found personally, now maybe I
00:26:17
misjudged it, but I know I have found
00:26:18
personally I have set privacy settings
00:26:22
for like a certain social media and then
00:26:24
when I update the app, it reverts to a
00:26:26
default.
00:26:27
>> Oh boy.
00:26:28
>> So, you have to be pretty vigilant about
00:26:29
that stuff. And I think a big thing on,
00:26:32
you know, one of my favorite
00:26:33
psychological like tidbits is the people
00:26:36
who are most biased in the world are
00:26:39
people who think they aren't biased at
00:26:40
all because they're not monitoring
00:26:42
themselves and they're not adjusting for
00:26:44
it. Instead of bias, let's talk about
00:26:46
being vulnerable where if you think you
00:26:48
aren't vulnerable to this stuff, chances
00:26:51
are that you are because you have such a
00:26:53
feeling that you are invincible on this
00:26:56
stuff that you're going to be persuaded
00:26:58
without knowing it. So and so I think if
00:27:00
you can be you call it in psychology
00:27:02
call it self monitoring right so if you
00:27:04
can be sort of vigilant about your own
00:27:06
vulnerability and then also try and keep
00:27:09
platforms whether it's your browser or
00:27:12
your social media or various mobile apps
00:27:15
be vigilant about checking your privacy
00:27:17
settings uh I think that will help
00:27:19
>> that's interesting I feel there's a
00:27:20
parallel there I feel like sometimes
00:27:22
some of the worst investor stories I
00:27:24
hear are the people who are sure their
00:27:26
system beats the market you know they're
00:27:28
sure they're smarter than everyone else
00:27:29
or they're sure that they are um kind of
00:27:32
invulnerable to the things that befall
00:27:35
the rest of us. And usually those are
00:27:37
the people who maybe like one in a
00:27:39
hundred of them actually are as smart as
00:27:41
they think they are, but the other 99
00:27:43
aren't.
00:27:44
>> But let's let's pivot. So I know your
00:27:46
upcoming book is all about specifically
00:27:48
the marketing of debt.
00:27:50
>> And many retirees or many, you know, the
00:27:52
kind of pre-retirees who might be
00:27:54
listening are probably a little wary of
00:27:56
taking on new debt. So that's a good
00:27:58
thing.
00:27:59
>> But because they maybe are a little more
00:28:01
assetri, they've been saving for many
00:28:03
decades. They still tend to be heavily
00:28:06
targeted towards debt products. I'm
00:28:08
thinking of credit cards. Reverse
00:28:09
mortgages are a big one that that tend
00:28:12
to cover uh uh target retirees rather.
00:28:14
Maybe some sort of medical financing to
00:28:16
help alleviate the fear of future
00:28:19
medical costs. So I'm just I'm thinking
00:28:21
I I want to pivot a message a little bit
00:28:23
directly toward those current or future
00:28:25
retirees. if you have any thoughts. It
00:28:27
sounded like reverse mortgages were
00:28:28
something you were pretty aware of.
00:28:29
Maybe we can start with that or just any
00:28:31
thoughts you have on on what retirees
00:28:32
should be aware of.
00:28:33
>> I'm not especially, you know, more
00:28:35
versed than the average person on
00:28:37
reversed mortgages other than I guess
00:28:40
I'm in my 50s. So, I have my mom's
00:28:42
retired, my mother-in-law's, and I have
00:28:44
colleagues who have recently retired.
00:28:45
One of them actually who was we took him
00:28:47
out to lunch and he spent the whole time
00:28:48
talking about reverse mortgages. You
00:28:50
know, I will say as far as targeting
00:28:53
seniors, I mean, seniors are, you know,
00:28:56
among the most exploited populations out
00:28:59
there, right? You know, my
00:29:00
mother-in-law, we lost my father-in-law
00:29:02
a couple years ago, and my mother-in-law
00:29:04
is doing great. She has a very, you
00:29:05
know, she's in South Florida, as you
00:29:07
might expect, but it is very active
00:29:09
social life. She's doing really well.
00:29:11
But, you know, on Facebook, she's
00:29:13
getting targeted by more like
00:29:15
25-year-old Italian princes who just are
00:29:17
looking for the company of a single
00:29:21
woman in her 70s, right? And I mean,
00:29:24
thankfully, my mother-in-law is pretty
00:29:25
shrewd. She's not going for any of this,
00:29:27
but she has friends who have fallen for
00:29:28
these things, right? So, whether it's an
00:29:30
Italian prince in his 20s or it's
00:29:33
different financial products that are
00:29:35
being pitched hard to you, I mean, I
00:29:37
think it's these old truisms. If it
00:29:39
seems to be good to too good to be true,
00:29:41
it is. I think the other thing is most
00:29:44
people with finance, if you don't think
00:29:47
you understand or you have enough
00:29:48
information, get help from some a friend
00:29:51
or a family, family member who works in
00:29:54
finance because studies have shown
00:29:57
financial understanding or the effects
00:29:58
of financial education fade over time.
00:30:00
If you're not steeped in it and you can
00:30:03
feel yourself like, well, I think it's
00:30:05
okay, slow things down. Like if you're
00:30:07
dealing with someone who's not going to
00:30:08
allow you extra time to make a decision,
00:30:10
you don't want to be working with that
00:30:11
person anyways. But I think get, you
00:30:14
know, get the help you need. I mean,
00:30:15
especially as seniors who are being
00:30:18
targeted for this stuff more so than a
00:30:21
lot of the rest of us. I can think of a
00:30:23
couple examples in my kind of tenure
00:30:25
here working at a financial planning
00:30:27
firm where I feel like I've failed
00:30:29
clients is because only after the fact a
00:30:32
client came to me and said, "Hey, uh,
00:30:34
Joe, just by the way, last month I did
00:30:36
X, Y, and Z, and I just figured you you
00:30:38
would want to know that just to, you
00:30:39
know, so you know, on your end so we're
00:30:40
all on the same page." And I kind of
00:30:42
think back and I go, "I really wish you
00:30:44
had told me about X, Y, and Z
00:30:46
beforehand." Thankfully, it hasn't been
00:30:47
fraud. It hasn't been buying some awful
00:30:49
product. that hasn't been like a five
00:30:51
figure mistake, but it might have been a
00:30:53
a $500 mistake. And still, just the idea
00:30:56
of having someone in your life, again,
00:30:57
whether it's a trusted family member,
00:30:59
whether it's a a fiduciary, hopefully
00:31:01
adviser, anything like that, your
00:31:03
accountant, someone to bounce these
00:31:05
questions off of, a third party to help
00:31:07
you with some of that decision-m can be
00:31:09
huge. But let's transition, John. We,
00:31:11
you know, a few minutes left. Let's talk
00:31:13
a little bit more specifically about
00:31:14
your upcoming book cuz I will say, you
00:31:17
know, this this confluence of marketing
00:31:19
and finance is something that I've got
00:31:21
just a really I I I love both of those
00:31:24
topics and uh especially on the
00:31:25
marketing side, I know enough to be
00:31:27
dangerous in terms of like how
00:31:29
manipulative marketing can be.
00:31:31
>> Sure.
00:31:31
>> And then uh I also know and and for the
00:31:34
audio listeners right now, you can't
00:31:36
judge a book by its cover, but your book
00:31:38
cover is so cool. So uh I Well, again,
00:31:40
I'm glad you like it. Yeah. So maybe you
00:31:43
can describe for the listeners in 15
00:31:45
seconds what it looks like, but really
00:31:46
I'd love to you just to to dive a little
00:31:47
bit more into the contents of the book
00:31:49
itself and why we ought to pick it up.
00:31:51
It's called The Marketing of Debt: How
00:31:52
They Get You. It is actually just
00:31:54
recently out and so you can find it
00:31:56
online. It most any place online that
00:31:58
that sells books. I there have been
00:32:00
different books about kind of the
00:32:03
psychology of money. And so this is
00:32:06
about that, but I wanted to take it an
00:32:08
extra step to say, okay, here's where we
00:32:11
are most vulnerable and why, but here's
00:32:14
how marketers c can exploit those
00:32:17
vulnerabilities, right? Here are the
00:32:18
tactics they use and this is why they
00:32:20
work. So something you were talking
00:32:22
about like a client who would say, well,
00:32:24
I've it was a $500 bad decision. So, one
00:32:27
of the things I go into is okay, well,
00:32:29
if you're a marketer, you're seeking
00:32:33
simplicity and clarity for the things
00:32:35
that you think are a benefit that that
00:32:37
are attractive, right? But when you get
00:32:39
to things that are very complicated and
00:32:41
undesirable, like say pricing for these
00:32:43
products, you are seeking complexity,
00:32:46
right? You're breaking the price up into
00:32:48
a bunch of different parts. You're
00:32:49
calling the different parts of the price
00:32:51
different things. There's an interest
00:32:53
rate, right? There's prepayment
00:32:54
penalties. There's convenience fees.
00:32:56
There's all these things. And so that's
00:32:58
what I really wanted to get to was to
00:33:00
take, so here's why we're bad at this,
00:33:03
but here's how marketers make it worse
00:33:05
because that's the stuff that we're
00:33:07
going to we run into all the time. It
00:33:09
applies to things besides finance, but I
00:33:11
just kept it in a financial context
00:33:13
because well, I started writing a book
00:33:14
and I wanted to finish it. So if I tried
00:33:16
to incorporate everything, I'd be
00:33:17
writing this for the rest of my life. So
00:33:19
that's what the book is about. And you
00:33:21
know, I hope people find it interesting
00:33:22
and useful.
00:33:23
>> That's awesome. We'll send some links in
00:33:25
the show notes so people can find that
00:33:26
book really easily. Professor John
00:33:28
Dinsmore, thank you so much for stopping
00:33:30
by Personal Finance for Long-Term
00:33:31
Investors.
00:33:32
>> Thanks, Jesse.
00:33:33
>> Thanks for tuning in to this episode of
00:33:35
Personal Finance for Long-Term
00:33:37
Investors. If you have a question for
00:33:39
Jesse to answer on a future episode,
00:33:41
send him an email over at his blog, The
00:33:43
Best Interest. His email address is
00:33:45
00:33:48
Again, that's jessevestinterest.blog.
00:33:52
Did you enjoy the show? Subscribe, rate,
00:33:54
and review the podcast wherever you
00:33:56
listen. This helps others find the show
00:33:58
and invest in knowledge themselves, and
00:34:01
we really appreciate it. We'll catch you
00:34:02
on the next episode of Personal Finance
00:34:05
for Long-Term Investors. Personal
00:34:07
Finance for Long-Term Investors is a
00:34:09
personal podcast meant for education and
00:34:11
entertainment. It should not be taken as
00:34:13
financial advice and it's not
00:34:15
prescriptive of your financial
00:34:16
situation.