155: The Geometry of Wealth with Brian Portnoy

[INTERVIEW]

Casey Weade: Brian, welcome to the podcast.

Brian Portnoy: Thanks. Wonderful to be here.

Casey Weade: Hey, I'm excited to have another Harry Potter fan here with me. Now, I'm making an assumption there after reading the Geometry of Wealth, which I truly enjoyed that read. It made me think not just about my life, but the lives of others, lives the same as we work with so many meaningful conversations in there. And right off the top, you said money is the Lord Voldemort of topics.

Brian Portnoy: That's right. So, yes, Harry Potter fan. I have three kids. They’re now teenagers but they didn't use to be so we went through a Harry Potter phase. And yeah, Lord Voldemort, meaning that it's something that we don't want to talk about that sort of lurks in our mind as something dangerous, a specter, and money is like that. We find it a very intimidating topic. It's stressful and we generally lack financial education in our educational system, so it becomes something that we want to stay away from even though we can't.

Casey Weade: Yeah, that's right. I noticed that you refer to several children's books throughout your book, loving Dr. Seuss. I saw that as well. I can definitely tell you had some young kids at the time.

Brian Portnoy: Yeah. Although I think you probably would agree that the best children's literature is often the most insightful into our humanity. And so, some of the things that I referenced in the book in terms of Dr. Seuss or Harry Potter, I think they're very revealing into the things that matter.

Casey Weade: Oh, I do. And the whole book, I felt some about 75% of the way through the book. So, I regret to say that I did not completely finish the book, but I'm 75% of the way through the Geometry of Wealth written by a Ph.D., a CFA, someone that grew up in the hedge fund world. And I have yet to see, you discuss portfolio construction, stock selection, good mutual funds, bad mutual funds, the appropriate amount of risk to take with a portfolio. And I think it's very rare to make it 75% of the way through a finance book without talking about specific investments or tools. Why did you structure it the way that you did?

Brian Portnoy: Yeah. It's a great question. And the answer is that Geometry of Wealth is actually a prequel. So, talk about other cultural references. I'm a Star Wars nerd. So, the idea of a prequel also appeals to me. I had written a book some years ago called The Investors Paradox which got into making better investment decisions. And maybe we'll talk about this field of behavioral finance. I know it's an interest of yours and you've had some great guests on in the past, but Behavioral Finance is the study of why money decisions are so difficult. And that I'm very proud of that effort but it occurred to me both professionally and personally as a husband, as a father, as a son to aging parents that the hard part of money actually isn't the stocks and bonds. Yes, you can make mistakes. Yes, there are better and worse ways to invest but there's a whole host of decisions and attitudes, as well as values that come into the money story. I wanted to take those seriously again, not only as a professional investor and a student of market history but as just a guy in the world who's trying to figure things out. So, the premise of the Geometry of Wealth is let's start at the beginning. Let's talk about what really matters and then let's get to maybe having some thoughts into the way money fits into a meaningful life.

Casey Weade: And off the top, you talk about you focus on this concept of wealthy versus rich. And I thought that was really helpful. When I was a little kid, we didn't have much initially, lived in an apartment complex, dad flipped some houses, and I ended up becoming fairly successful, all the hard work and blood, sweat, and tears that he put in. And some would call us rich and my dad, mom would always say, "We're not rich. We’re wealthy.” And I don't know that I ever really understood what they meant by that until I read it in your book.

Brian Portnoy: Okay. Yeah. It's a really important distinction. And hopefully, people don't think of it as just a semantic one. What I mean by rich versus wealthy is rich is having more money and the things that money buys. Wealthy, by contrast, is the ability to underwrite a meaningful life and there's a lot going on in that second sentence, underwrite a meaningful life. So, what is meaningful? And then what does it mean to underwrite meaning? How awkward is it to ask? Can I afford a meaningful life? It makes us feel almost kind of icky. So, I develop in the book the concept of funded contentment, which kind of gets into the way we want to bridge purpose and planning. And just to comment on the word “rich” for a second, all societies but especially American society, it's very much focused on the accumulation of more and that's not necessarily a bad thing. That's a good thing. That's part of the pioneer spirit. That's part of the value of growth and success and prosperity and progress. That's a really good thing.

But what we know in a fair amount of detail from social psychology and other academic disciplines that look into the human psyche is that the quest for more is often very unsatisfying. And the reason why things like having more money, beauty, fame, even accomplishment don't necessarily make us as happy as we think that it will is because we're on something called the hedonic treadmill, this idea that we're sprinting toward the next thing, but we know on a treadmill, no matter how fast you run, you don't get any further. And when we achieve goals, whether it be raising our kids or getting the next home, or the vacation home, or even retirement, the really big topic, so many of us are focused on, we often get to those goals and we win. And we still say, what's next? So, I wanted to pivot the conversation away from rich, which is the quest for more and focus it on wealthy, which brings us into this notion of funded contentment.

Casey Weade: How do we get past that? I've had many of these conversations where I'll say, "Well, you have enough,” or what's enough and many advisors are having those conversations and I think many of us ask that question, how much is enough? And when we get to enough, it doesn't seem like enough. How do we know what enough is? What's that really mean in the end? And how do we just content with that? How do we finally reach this point where we're content, we have enough, and then we can move on with life?

Brian Portnoy: It's the hardest question. And the good news for you is, is that the last chapter of the book is all about the tension between more and enough. It's unresolved in my mind, but I'll share a couple of thoughts. The first is that both the quest for more and the satisfaction of enough are genetically hardwired into us. They're both valuable. That sense of growth and self-determination, super important for our identity, and the way we live our lives, and at the same time, that sense of calm, stillness, presence enough also, from a neurobiological point of view, super important. So, the thing is you can't stand still and run at the same time. They are mutually exclusive at any moment in time. And so, one thing I've been thinking about might even be the next book is how do we establish a rhythm between more versus enough and not deny the importance of either in our lives? And try to reconcile that it's not so much about balance and that we're always trying to have it just right. We're going to drive ourselves a little nutty in the search for balance, but instead, try to find the rhythm and at least be self-aware to know that sometimes you're in the mode of more, sometimes you're in the mode of enough. They're equally valid and we just need to navigate it and sometimes there are conflicts and tensions in our life that are irresolvable which isn't to say that they aren't edifying and an opportunity for growth and accomplishment and meaning.

Casey Weade: Is this why in the book you say financial wellness is an uphill battle?

Brian Portnoy: Yeah. Going back to the idea that money is a very emotional topic. We learned in grade school that money is a means of exchange or a store of value. But what it actually is, is an emotional lightning rod that captures or attracts fear, greed, hope, joy, regret, envy, you name it. It's a window through which we can see ourselves and if you think about what I call money life, which is not just not investing, but having a job, saving, spending, ensuring, giving charitably as well as investing, and so forth, not a day goes by when we're not making multiple money decisions. It's just unavoidable and so financial wellness is an uphill battle because it triggers in us just the core emotions that we feel and attaches to our identity. Who are we? Well, it's hard to answer that absent some self-understanding of where money fits into your life. It's difficult. We don't want to talk about it. We're much more likely to talk about our health or our friendships or religion or even politics, topics that can sometimes be very sensitive. We'll talk about all of that before we know about money.

Just think about the fact that most of us probably know everything about our best friend in terms of health, marriage. How much does your best friend make? Does your best friend have a balance sheet? What's his balance between assets and liabilities? Does he have a budget? Number one, we don't know. Number two, we don't want to know. It’s super awkward even though he or she is sharing with you every other intimate secret in their life.

Casey Weade: That was kind of an epiphany for me if you will because you said that in the book, I read that and I go, "Actually, I know exactly what all my best friends make, exactly what their balance sheet looks like.” I'm in a weird position, right? I like having these conversations. I think we should talk about money. We just don't talk about it enough. It's not open enough in our society and accepted enough in our society where we can have these conversations but it should be. And I guess I'm just in a weird place. Do you think we need to talk about money with our best friend? You say that, yeah, you don't know that. Do we need to know?

Brian Portnoy: We don't necessarily need to know in the same sense…

Casey Weade: What are the benefits, I guess?

Brian Portnoy: Yeah. So, I positioned it in terms of talking to your best friend. I also to an earlier point, I'm not a real doctor. I’m a Ph.D. so my friend might have some health issues, he could share with me the pain or fear or hope of whatever that situation is, but he should seek professional help. I can be supportive. I think what's really interesting and it speaks to what you've built and other friends in the industry have in our building is this idea that the wealth management industry, the financial advice business, not that long ago, just a generation ago was a brokerage business, selling stuff. Hey, you like IBM or you like General Electric and you want to buy stock? Thirty-four years ago, access to the capital markets was very difficult. You had to go through a broker. Fast forward to today, technology has obliterated all of that. And along the way through that process what some political scientists would call creative destruction in our industry, brokerage somewhat commoditized allocating and investing super important, but now a lot of people do it and our industry has evolved to a place where providing so-called more holistic planning, life coaching, and giving people the tools and the vocabulary to help them figure out where money fits into the life they want to lead.

Compare that to a stockbroker 40 years ago, 50 years ago. It's a radical change in the industry and I think you and I, and colleagues in the industry, we're thinking about this every day, but most people have much better things to do with their time than think about the evolution of our industry. And so, part of what I want to continue to do is communicate the value that advisors and coaches and educators have in this area because almost nobody would think twice or look askance at somebody who hired a coach at the gym to help them to get into better shape or maybe you need a dietician and get on a better path with your food. But when it comes to money, the idea that you would have, a guide, a coach, not a guru, not a therapist per se, but just somebody who helps you make decisions, it's a funny thing, but it's just in the last 15, 20 years that this has become something real.

Casey Weade: So, we need to have meaningful conversations around money. However, we don't need to have those conversations with our best friend. We need to be having them with somebody and that's where Shaping Wealth came into play, right? Is that kind of the premise around Shaping Wealth? And I also want to provide some guidance to folks because we still get these questions on a regular basis where how do I know that someone's putting together a true financial plan for me versus just me giving me investment advice?

Brian Portnoy: Right. So, a couple of things.

Casey Weade: It's hard to figure out. I think it's difficult to tell the difference for the average individual.

Brian Portnoy: It is. And so, what we as advisors, educators, coaches need to do is articulate what we're doing better than we have. Because the idea that you turn on CNBC and you watch a bunch of red and green numbers go across the screen, and people are saying, “Well, Exxon Mobil is going to go up or it's going to go down.” We need to do a much better job educating not only our clients, but the general public on what the real game is here and the real game is attaching money to a meaningful life. So, Shaping Wealth, yes, a relatively new firm that I launched, that works with financial advisors, individual investors, corporate financial wellness programs to provide content coaching and consulting on a lot of these things, providing the words and the scripts and as you saw in my book, I like to draw pictures. The brain processes images 60,000 times faster than words. But in the financial industry, we seem stuck with spreadsheets and Excel and numbers and 2.44 is much more than 2.43. No. They're the same number. We get so wrapped up. We need to do a much better job at communicating that. And I would like to be part of that solution, not just for people who have money, but I've been pretty active in the financial literacy movement. And there's a lot of interesting things taking place in terms of how we can connect to families from all walks of life to give them some perspective on money.

Casey Weade: Well, let's get back to this meaningfulness. So, you've run up a meaningful life several times. You talk about purpose in the book quite a bit. What is the difference between meaning and purpose and what do they mean to you?

Brian Portnoy: Yeah. Sometimes I use them a bit interchangeably. I'll take a step back and ask the question, what is happiness? What does it mean to be happy? And one thing I've seen in the research from lots of different directions, psychology, economics, neuroscience, and so forth, is that there's sort of a fork in the road between what I call experienced happiness and reflective happiness. And this is going to get us to the question about meaning and purpose. Experienced happiness is our day-to-day meaning you wake up, you're in a good mood, you're in a bad mood. It's your birthday, you're happy, something tragic happened, you're sad. That form of happiness and going back 2,400 years to debate among Aristotle and his cohort, that spectrum of pain versus pleasure, that's our daily experience. It's not shallow, it's not secondary. That is our core experience but there is also something going on in our minds, and frankly, in our souls that I call reflective happiness. And again, there's neurological basis for this as well. So, it's just not fluff or literature.

Reflective happiness is that deeper sense of what's going on with my life. Am I living my best life? From a brain chemistry point of view, it's harder to engage in that deep thinking. Our brains are quite lazy in a good way. Our brains are about 2% of our body weight and 25% of our energy consumption so it's always figuring out ways to take shortcuts. So, we don't want to spend too much time sitting around saying, “What's a meaningful life? What is my purpose?” It's super important. If we don't do it, we're missing something. At the same time, it's exhausting. So, I'd like to distinguish between that day-to-day pain versus pleasure, ephemeral happiness gets us back to that hedonic treadmill that I mentioned. And then on the other fork is this reflective happiness, this step, I call it the step back like, “Huh, are things going the way that I had hoped for? And what can I do differently? What are my regrets? Can I anticipate future regrets?” which is a whole mode of thinking, which I find interesting. And then we say, we can use the word meaning or purpose here, that there's something deeper that we want to achieve.

Casey Weade: Well, I might be in trouble because I'm thinking about meaning and purpose. And you said there's some danger and I just never heard that. I've ever heard anybody say that it's dangerous to spend too much time reflecting on meaning and purpose. I always thought there was a tremendous amount of value in that. So, it lends itself to the question, “Well, how much is enough? How much should I focus on this? How important should it be in my life? How do I focus on it in a healthy way?”

Brian Portnoy: Right. Well, for you and for me, It's sort of what we do for a living like it's become our passion. So, I think our minds are probably warmed up. So, we're happy to have these conversations with friends and colleagues and clients every day. I think most people just want to get on with their lives and don't want to every day think about what's my greater purpose and so part of my perspective is that we want to marry purpose with planning. So, why I wrote this book second and why it's a so-called prequel is that I recognize that, “Well, there's the investment decisions but prior to that, you need a plan,” because allocating capital into the market without a plan I would call speculating or gambling, which isn't necessarily a bad thing. I'm not casting a terrible value judgment. But I think by buying stocks or bonds that isn't attached to a specific goal, we would count that as speculation and lots of people do it and in moderation, maybe it's fine. I don't know if that's worth debating. So, prior to the investing piece, we need to have a plan. We have to have an articulation of goals and the types of cash flows or lump sum payments that we need to underwrite those goals, but prior to goals is the sense of purpose that we need to get into.

The notion of goals is tricky and probably more confusing than people give credit to because, number one, and we know this from a lot of social psychology research. We're pretty bad at predicting what we want in the future. And number two, even when we achieve what we want, the intensity and the duration of the emotions that we expect to feel are much weaker and shorter than we anticipate. So, we win the lottery. Great. Have a big party. A week or four weeks later, we're sort of just back to who we were. And so, assembling that chain from purpose to goals, to plans, to investment and other money life decisions is where we need to get people and you do this for a living. I do it from a slightly different perspective but this is a skill. And I think we are in a wonderful position to help people have better lives if we bring them along the process and make clear what that process is from the start.

Casey Weade: Well, I think one of the things that makes purpose so difficult to define is because we're trying to define it at one point in time. We're trying to say this is my purpose and that is something that's going to last into perpetuity and that was one of my favorite things about your book is it's about geometry and the circular nature of purpose. Can you just talk about why you made purpose a circle when it comes to the circle, the square, the triangle? And maybe we need to offer some context here and what the circle and square and triangle really mean.

Brian Portnoy: Yeah. I don't have a show and tell. I don't have placards or note cards or anything but, yeah, I've been influenced again to a point I made a little while ago of people in our industry who have actually drawn pictures and created simple messages that respects the person across the table as opposed to what a lot of our industry, not only was, but still is, which is a ton of numbers and it's intimidating. And we then, unfortunately, get involved with effectively feeder, where the investment or the financial expert is playing the role of experts and the clients across the table is trying to keep up but they probably don't fully understand what's going on, but they'd be embarrassed to say. It's funny. My dad has a financial advisor, and every six months he calls me to say he had the conversation and I asked, “Well, did you understand what he was explaining to you about your portfolio?” “No.” He sent us a lot of spreadsheets and numbers and, by the way, his advisor’s quite good but yeah, he walks through all the numbers and I don't know what this mutual fund is or, “Oh, you're going to swap this out for that.” My dad's like, “I don't know what any of this means.”

But then my dad says he does answer the one question that they worry about, which is am I going to be okay? They're stepping way back immediately saying, “Okay, I'm glad you the expert of putting all of this together.” And speaking of my dad he said something when I was young, which has stuck with me, which is, "It's a round world. Things happen. We’re never done figuring things out.” I can think about the stages of my life. The idea that the way I was in my 20s and 30s is not at all the way that I am today. I’m sort of the same person, but we change. And I think those who are willing to embrace an adaptive mindset are in a much better position to have a wonderful and meaning life than those who are absolutely rigid, because maybe too famous quote from Mike Tyson, "Everyone has a plan until they get punched in the face.” We get punched in the face every day in little ways. And every now and then we really get socked in the face. I don't know anybody whose life has gone according to plan or what they could have predicted.

So, having that adaptive mindset and thinking about the circle, and that we're going to be asking ourselves these questions and what I mentioned earlier, it's dangerous to do this too much. It's more exhausting than it is dangerous. We don't want to sit around every day asking what's a meaningful life. We want to spend time with our kids or grandkids. We want to go golfing.

Casey Weade: Making it meaningful.

Brian Portnoy: Yeah, we want to do it. We want to live it. And so, the circle is supposed to capture the simple idea that we are permitted to not have all the answers at any moment in time and recognize that everybody is on a journey where they're kind of winging it.

Casey Weade: Yeah. Well, that begs the question you talked about in the book that we don't know what our goals are. And that makes planning incredibly difficult. You said, and so I thought, well, then what is an appropriate and meaningful retirement goal? And maybe we should separate that out between a meaningful purpose or an inappropriate purpose for retirement and an appropriate goal for retirement.

Brian Portnoy: I'm really glad you brought up this topic. I've been thinking about it a fair bit lately. Retirement’s a funny thing. You know the history more than a couple of hundred years ago, there wasn't retirement. You kind of work until you died or you couldn't work anymore and you were part of a larger family unit and they took care of you. I re-watched for the hundredth time the original Willy Wonka the other night with my 13-year-old daughter. It's really one of my top five movies of all time. It's brilliant on so many levels. And Grandpa Joe and Grandma Josephine, I mean, they're sitting in that bed for 20 years and that was the family units really not that long ago. Fast forward to today, we have a system where at age 62 or 65, whatever the number is, you “stop working” and then you can enjoy life. And while there's nothing wrong with the notion that at a certain point, you're tired, maybe you can't sell your labor into the market in the way that you once could, totally normal and legitimate, this idea that many of us are living on a script that says, "Develop a deep sense of identity based around your craft and your vocation, and your professional passion, as well as the people that you share that with, and do that so well that you have enough money to stop doing it.”

Well, what happens to all of the meaning and identity and connection related to your work that stops and then needs to be filled by something else? And so, this retirement script that we all to some extent have bought into, some 100% and don't even think twice about it. I’m sure you thought it. You do this for a living. You thought about it very, very deeply. What are we doing? So, when we talk about retirement and someone aged 30, 40, 50 really begins to plan for this, is the goal here to not work? Is the goal here to stop working? It may be in fact that like your passion is playing golf and you want to play seven days a week. That's totally fine. This is a space where everyone should do exactly whatever it is they want but I think there needs to be from the financial advice community, the encouragement to think a little bit differently about what are you gaining and losing from “retiring” and are their sources of meaning? In the book, I talked about four broad sources of contentment, maybe we can get into that.

One of the things along the way before you get to 60 or 62 or 65 that you can be engaging in so that you aren't forcefully putting yourself on this so-called hedonic treadmill. Because I know I've counseled and talked to hundreds of financial advisors over the years, I've spoken to thousands at different conferences, and increasingly as longevity expands, which is, I think a net positive, people live late into their 80s and into their 90s. Someone does everything that they should. They take your advice. They save well. They spend responsibly. They make smart investment decisions. And they sit down with you at age 62 and you say like, "High five like you did it. You won the race.” What I've heard back from so many advisors at this point is that increasingly, the couple across the table and frankly, the man says, “Well, what's next?” Like I got here. I got 30 years to go and I'm still relatively healthy and vibrant. Today's 60-year-olds are last generation's 45 or 50-year-olds. We're connected through technology. We travel. We've got all these toys and fun things.

So, I think re-scripting that retirement narrative is going to be one of the great challenges for our industry and for our clients in the generation to come. And I'm looking forward to I actually think that's going to be a very fun conversation.

Casey Weade: I think that, I mean, that's exactly why we titled the book, Job Optional. It's financial freedom at the base level, but it doesn't mean that we don't want to continue to work. We just don't want to continue to work for money that we need. Sara Lee, right? And I think your four Cs I just feel like we have to go there at this point because those four Cs as I see it, they form a meaningful life. That is a daily purpose. That is a lifetime of purpose, if we can incorporate all four of these things into our lives: connection, control, competence, context. And as you said here, I mean, one of those four is being competence. If we have this high level of competence in one area that we've lived our entire lives by, we've defined ourselves by, now that's gone, what do we do?

Brian Portnoy: Right. Well, let me elaborate a little bit on those just so folks know what I'm talking about or what we're talking about. So, part of the task I set out in this book, in writing about the ability to underwrite a meaningful life was the answer, well, what's a meaningful life? And it's such an absurdly large, large question, but at the same time, everyone has the right and, in some sense, an obligation to try to come up with an answer. So, I did. I have been thinking about this just as a normal human being for a few decades, but I made it a purpose to do a lot of directed reading in psychology, theology, super important philosophy, neuroscience, and just sort of bring together a lot of different threads. And I'm hardly the first. I'm the hundred millionth person to try to come up with a framework and what I came up with just for the sake of pneumonic was the four Cs, like you said, connection, control competence, and context. And they are in brief, and we can go into any of them if you'd like.

The first is connection and I always put that first because we are, at our very root, social beings. We don't just want to be around others. We need to be around others. Our genetic makeup is such that we have an intimate need to feel attached to a larger whole. We’re small T tribal, not the big T, bad, political tribal. We operate in groups. And one of the challenges now…

Casey Weade: Even if we say we're introverts, we still need human connection.

Brian Portnoy: Yes. Just because you're an introvert doesn't mean you don't - introvert doesn't mean I don't need human connection. It means that you need it in a form and a pace and a scale that works for you. So, the need for connection or belonging doesn't eliminate a lot of kind of personal dispositions but it is kind of unflappably important as the core of our identity. The second C is control, which is self-determination, autonomy, the pursuit of liberty. Just the sense that you do what you want to do. No one really likes being told what they can do or what they have to do. And so, one of the things about this sense of control is that it's not just a physical, “Oh, I can go where I want and do what I want.” It's also the autonomy to tell your own story. One of the reasons why I think many of us find certain movies about prisoners can be so inspirational and I'm thinking of the Shawshank Redemption and Andy Dufresne and what a wonderful film that is also in my top five along with Willy Wonka, I watch a lot of movies. We think about people who have been physically imprisoned rightly or wrongly, but their ability to tell their story and live a life in their mind and beyond their mind is very inspirational. So, that ability to tell our story is huge.

The third C we touched on, competence, it's that sense of identity you get from your work and there's a deeper state of being that some scientists call flow, which is that moment or that episode when you're doing something that you absolutely love. For me, it's writing for others. It could be playing an instrument, it could just be whatever their craft is, their hobby. And you look up and it's three hours later, like what happened? That's a very healthy state to be. And then the fourth C is context, which is the biggest of them all and sort of a little bit of a catchall. And that's the notion that people who have been seen to live for something beyond themselves tend to lead happier, more meaningful lives. And so, this is faith. This is nation. It's also your sports team. It's something beyond you. There's no right or wrong answer is what kind of fills that bucket, but that connection to others or to an idea is super important.

And so, what I did, and hopefully folks find it helpful was this create a very simple mental model based on these four Cs. It's not a scorecard. You're not trying to get 10 on each and if you get a 40, you have a super meaningful life and you win like this is not a game at all, let alone a game like that. But it's just a mental model and some words that I think give us a framework to think through what's important at a moment in time. And one thing I've done with some clients is to say well think about your life from beginning to right now and whatever the division, whatever the eras or segments are, that's entirely up to you. It could be as simple as childhood, adolescence, young adult, married, kids, that standard, but whatever your framework is. There could be certain life events that mark things off for you. And then think about the four Cs, those deep underlying sense sources of meaning, and what was important to you. And what I found, and I've done this for myself, what I found in myself and others is that the narrative changes.

There are times when connection to others is everything, that sense of family, that sense of love. There are other times, and it could be a day or a time of the day or a few year period where control, autonomy, that sense of power, I'm going to get stuff done could be what's really defining you. And so, one of the tools I've created is this sort of just mental map where you retell your life story through what was meaningful to you over time. Number one, to illuminate to just be more self-aware. Number two, to give you the lesson that things change back to our circle. We're always adapting. And three, recognize that the path forward is unknown and unknowable, but very exciting. Like there's a lot to do with this.

Casey Weade: Yeah, I still want a scorecard. It's a natural human need or desire. We want to measure ourselves against everyone else. We want to know where we stand. Are we on the four Cs? Are we 100%? Or are we a 60? And we need something to work on. So, if we look at this now, it's going to be my question. Are they equally important? And it sounds like they're not. They are equally important, but it's going to evolve. The importance of each one's going to evolve over time. Is that what I hear you saying?

Brian Portnoy: I think so. I mean, it's going to be however it works out and you can be intentional. You can be deliberate about kind of tapping into sources of a good life that maybe wasn't what was missing. But it's funny what you say about this. I joke about the scorecard and we're joking about the scorecard. People want a scorecard. But I will say this, if your measure of what counts as a meaningful life is relative to the lives of others, it's going to be less satisfying. You've probably heard the old quote from the original JP Morgan, going back 100 plus years who said that, "Nothing corrupts one's financial judgment worse than the sight of your neighbors getting rich.” You know, there's no getting around our connection to others and part of that is envy and comparison. We can't eliminate that but we can certainly contextualize it and maybe use that as an engine of growth.

And the second point I'll make about the scorecard which I think is important for people is that it's hard to score 40 and it's ridiculous to even talk about it that way because these are sometimes in conflict with each other and the biggest connection versus control. You're connected to a group. You have a sense of belonging. You're in your tribe. You go along. Your identity is formed by that. And at the same time, you want to do your own thing. You want to chart your own course. Being part of the group and doing your own thing at any moment in time could be in direct conflict. And so, these are sources of meaning generally but the idea that we can max them all out at all times is a little bit silly.

Casey Weade: Absolutely. And so, we've got connection, control, competence, context. I see all of these things as things that can develop a meaningful retirement. We've talked about this in so many different guests, staying socially connected, continuing to set goals, analyzing your career and finding that there's usually something in there you actually enjoyed, pulling that into retirement with you. And having some context, having some faith, serving a higher purpose, maybe that’s volunteering, whatever that might mean for you. And so, where does money fit into this equation? Where does money fit into the four Cs here?

Brian Portnoy: So, now we start the real conversation. We only have five more hours to go. No, just kidding. Where's money fit into this? Let me just answer it by saying that the big mental model that I try to deliver the ingredients around the box that the three shapes, the circle, the triangle, the square, is to say that there's a relationship between defining purpose, setting priorities, including financial priorities, and then making decisions especially money decisions and not just investing but saving, spending, insuring, giving and, and so forth. So, money fits into this because coming full circle from where we started, it's an inescapable topic. There's just no getting around the need to have a roof over your head and food on our table at minimum. And so, because of that…

Casey Weade: I got to say, I don't want to interrupt just because as I'm thinking you don't need money for the four Cs, right? I mean, context, competence, control, connection? I don't see a need for money in there necessarily.

Brian Portnoy: So, you're right to some extent. But one thing that…

Casey Weade: I don't mind being wrong, Brian.

Brian Portnoy: Yeah. Well, I'm professionally wrong. It's what I do. So, what you're doing is touching on a real kind of ambiguous area in the scientific research on the relationship between money and happiness. So, there is a relationship between money and happiness in terms of being able to have a roof over your head to feeling safe. So, if we think about the distinction between winning a game versus not losing a game, from a genetic evolutionary point of view, we're hardwired, more so to not lose than we are to win. There's a principle known as loss aversion. It's the idea that losses are two to three times more painful than gains are pleasurable. And so, our disposition is to be safe because on any given day, you don't have to win the game of life but on any given day, if you lose it, there's not a repeat button. You can't put a quarter in the slot and play the game again. So, we are wired, those of us who are here, our disposition from an evolutionary chain, is that survival is everything. We first survive and then we thrive.

And so, having resources, money to survive, critically important. And unfortunately, as you know, we live in a society where that's not the case for everyone. People do struggle and that has significant psychological impacts on them. So, there is up into the point where we can afford those necessities a pretty strong relationship. Beyond that, the day-to-day happiness is not really associated with our level of income. So, you can go from $100,000 to $1 million, and it doesn't really change kind of your day-to-day disposition. But there is now research that shows as it pertains to reflective happiness, the four Cs, the sources of meaning, that as you have more and more financial security, you can indulge in these things more and more.

Casey Weade: You can indulge specifically in more focus on the four Cs.

Brian Portnoy: Correct. So, in terms of community or connection, I can say, the ability to afford the membership dues and to be part of the club, that's just a very practical part of it, whether it's your club, your church, your synagogue or whatever the venue is. Control, I think it's easy to make a case there that money makes a difference. I'm not going to describe the type of money that people say they have when they can tell other people to go pound sand but basically, you can control your destiny a little bit better when you have the resources to not be obligated to serve others. Money and competence, there's no getting around the fact that all of us work for a living in part for that paycheck. And so, there are some sort of deep emotional fissures there. And then finally, context. I think that's a tough one. Having a sense of obligation toward others, yeah, I would argue with you perhaps that there's a pretty ambiguous relationship between having money and your ability to live for something beyond yourself.

But the fact is that and I talk about seven dimensions of money, life, earning, saving, spending, investing, insuring, and giving. I think that was six or seven. Borrowing, that's the seventh. Across all of those dimensions, we get triggered in certain ways that impacts how we feel about ourselves and how we feel about our communities.

Casey Weade: Yeah. It seems like the question or what you said, you said money alleviates sadness more than it inspires joy.

Brian Portnoy: Correct.

Casey Weade: I feel like that fit - does that fit in here?

Brian Portnoy: It does. It does because it gets to this issue of loss aversion or risk aversion, the idea that we don't have to thrive but we have to survive. And so, alleviating sadness, alleviating pain, I think, is prior to achievement, having more, gaining happiness, however you want to put it. So, there's actually not been much scholarship on this topic. The first serious large scale study of the relationship between money and sadness was published in 2014. So, think basically now, but what I've seen so far from scientists, from psychologists, social psychologists, and such, is that money alleviates aggravation, sadness in a pretty direct way.

Casey Weade: Even beyond that $75,000 that we always hear.

Brian Portnoy: Yes. And that $75,000 number that gets tossed around in the literature, beyond which it's claimed that money doesn't buy more happiness. That number is difficult to talk about because Manhattan, New York versus Manhattan, Kansas $75,000 means something very different. But having the roof is leaking, the ability to just get the roof fixed, or to have a house where the roof would never leak, that's an alleviation of aggravation, of pain, of sadness, that money does buy. And that's not insignificant and throw on top of that, inconvenience. We live in a society of great convenience. Money buys convenience, not saying it's always a good thing, but it's there. And I guess if we have one truly valuable asset, it's time. And so, convenience means creating more time for better experiences in life and money does buy that. So, to make the claim that money buys happiness makes people uncomfortable but there are elements of truth to it that we, I think, not only as practitioners but as guides or coaches to others need to be able to articulate.

Casey Weade: Bottom line, money buys happiness. I know a lot of people are going to be happy to hear that.

Brian Portnoy: Yeah. Well, I think the chapter in my book that covers that, I think it's called, Yes, No, Maybe.

Casey Weade: I do remember that. So, we've spent so much time here on this discussion of money and purpose and kind of philosophical parts of finance but I was just breaking into the segment of your book where you start talking about more specific financial guidance. And one of the things that you talked about there is market timing, tactical buy-and-sell decisions. Can we just touch on that a little bit? Because I just felt like that was an important thing to bring into the conversation. People are going to benefit from understanding the difference between market timing, buy-and-sell decisions. I know we're making a hard transition here but as we run out of time, I think it's important to understand the difference because it's a question that we get all the time and say, “Well, you can't time the market.” Yeah. Well, you can. I mean, there's just this argument that goes on regularly with clients. I think it's largely just a misunderstanding between market timing and tactical buy-and-sell decisions.

Brian Portnoy: That's right. How to get into this? So, I've been in the investment world for more than 20 years. I've engaged with some of the most sophisticated hedge funds and other investment platforms in the world for a long period of time. So, I've been behind the curtain and have seen how supposedly the best of the best, billionaires and sets of millionaires, how they're allocating their capital, how they have access to opportunities, and so on and so forth. And one just point-blank observation I'll make is that I can think of hardly anyone who has, including those who have every resource in the world for Bloomberg terminals in front of them, a bunch of digital monitors, analyst, assistants, I can't think of more than a few that know how to time the market, period. End of paragraph. This idea that you can see what level the market is at and get in, get out at the right time, really, really hard. Now, there are professional traders and there are sophisticated trading strategies and if that's what you want to do for your career, I say go for it. Not many people have a lot of success. A handful have enormous amounts of success and that's great.

But as it relates to people who don't do this for a living, who don't appreciate that every security, even that small-cap stock or microcap stock that you think nobody else has heard of but there are actually 100 people at desks around the world watching that stock 24/7, that you're going to have some sort of informational advantage, some sort of trading edge over people who do this every day. I mean, it sort of defies credulity a little bit. So, market timing, just not a good use of people's time. Tactical trading, depending on how you define it. Let me say something slightly different. One of the healthiest things that we can do for our portfolios is rebalance. So, you have a certain allocation, take a very simple portfolio of stocks and bonds. And given your timeframe, your risk tolerance, and the other special considerations, you’re 70% in stocks and you're 30% in bonds. Again, this is super high-level but a little bit crude. Well, you know what happens? Every day the market moves. And so, your portfolio is going to be out of balance, and let's say stocks rally. And now you're 75/25. So, you're overly allocated to a risky asset that you would prior said, “Given my objectives, I want to be 70%.”

So, what do you do? You sort of in, hopefully, a smart, prudent way you scale back your equities, and you scale up your bonds. So, you go from you went from 70/30 to 75/25, back to 70/30. That is tactical trading. That is market timing, in a sense, but because it's in the context of a plan that's tied to your goals, which are then in turn underwritten by your sense of purpose, then the whole chain connects and you have something holistic and I think quite workable. I'll say one other thing, which is that some of us can't resist the urge to trade. It's fun in the same way that we love betting on golf or going to the casino or great, that's totally fine. But if you're making your stock and bond decisions in the context of a plan, great. That's investing. If you think, "You know what, Amazon is the company not only of the present but in the future, and it's going to be everything,” or, “Oh, my, there's no profits there. I hate it. So, I'm going to be short,” totally fine. But let's just be very clear about the fact that that's more of a speculative call on a company that you don't know anything more about than 1,000 other analysts looking at the stock 24/7, but it might be, you know, you might be right. Doesn't mean that you're skilled, but you might be right. And I think it's very healthy to draw the line between investing and speculating without casting judgments that speculating is a bad thing. But just to keep it in context and probably assign a relatively small amount of your portfolio to that sort of activity.

Casey Weade: That you're taking part in yourself. Now, you say in the book and there's difference between market timing and tactical buy-sell decisions. And you can't do market timing. You can conduct tactical buy-sell decisions, but you say that's a different game than what any individual investor or financial advisor should be playing. And I think some are going to say, I'm sure there's going to be a handful that go, "Well, I'm an individual investor, and I'm the most brilliant person in the world,” but then there's going to be a larger majority that are saying, "But I thought that's what financial advisors did.”

Brian Portnoy: Right. And gets back to a comment from towards the start of our conversation about, well, what is it the financial advisors do? And going back 50 years, what they did was they brokered securities, stocks, and bonds that people couldn't access otherwise. Fast forward half a century, yes, they sell securities, but they also build portfolios. They do risk assessment. They establish goals and they do some of the other things that we've been talking about for a long time now, which is to create a larger life plan within which money makes a lot of sense. My general view is that if someone is hiring a financial advisor to be a market guru, there's probably going to be some disappointment along the way. Maybe it works out but if your benchmark for success is the S&P 500 versus your own goals, you're kind of teeing yourself up for failure. Or at least not necessarily failure, but disappointment because there's always somebody who's going to be doing better. Your neighbor bought Amazon 10 years ago and you thought, “Oh, it’s just a fly by night bookstore.” And so, now he or she has a ton of dough and you feel badly about that. Okay, well, if we want to get into the game, we need to ask well, what game are we trying to play? What would count as a win?

Casey Weade: Well, I think it's really insightful to start measuring yourself against your actual goals rather than measuring yourself against somebody else. I was just trying to think of the name of Rachael Cruze's book, which is Love Your Life Not Theirs as I was just taking a look. And that's kind of the premise around the book and I think that brings us really well back into financial planning. What are advisors there for? To help you define meaning and purpose and help at drive the ultimate plan and make decisions upon that over time, then continue to revisit this as a circle, where you're always revisiting, updating the purpose, updating the plan, updating the allocations based on that original decision, that purpose. And that's just why it's so important to have a framework. And I know we're running out of time here but there's one question that we get asked all the time that I think you'll have a really interesting answer for, a really helpful one for a lot of individuals and one of the questions we get asked all the time is how much should I have in stocks? Or how much risk should I be taking in my portfolio as I step into retirement? Just wondering how you answer that question. I'm 65. You know, how much should I have at risk? How much should I have in stocks?

Brian Portnoy: I think the answer is 47.3% for all people regardless of circumstances. Is that good?

Casey Weade: That's great. Yeah. brings me back to what your friend, Dr. Daniel Crosby, said on a previous podcast. He said it's not about having the best portfolio but the one you can live with.

Brian Portnoy: Yeah. And Daniel is the best. He is the leading voice in behavioral finance, applied behavioral finance right now. Yeah. So, 47.3% was a joke. That didn't count as advice for me or for you. I mean, do we need to put disclaimers or flash something on the screen? No. It's so depends on the context within which we're dealing in terms of someone's balance sheet, in terms of someone’s expenses and income needs. I mean, someone in age 65 could be sort of have tens of millions of dollars but also tens of millions of obligations and actually be balance sheet poor. It's a lot easier to see assets than liabilities because people love showing their assets. No one loves showing their liabilities. So, very hard from the outside looking in unless in a seat like yourself, you kind of get to see exactly what's going on in somebody's financial life. So, how much should they have in stocks? They should have enough in stocks that if it's money that they don't need to touch for at least five and hopefully seven years, they're willing to endure a 50% drawdown.

Casey Weade: That's good. That's a good enough answer for me. So, let's end on this one final question. How do you define meaning and purpose in your life?

Brian Portnoy: It starts with Tracy and the kids. So, I wrote the Geometry of Wealth in part for me. I turned 50 recently. I've got three kids, a wife I love, a community that I love and want to support and aging parents. So, I'm a totally normal guy. So, when I wrote the Geometry of Wealth, and specifically kind of worked out what's important, sense of belonging, sense of self-direction, my passion for work, and so forth. Those are the categories that I think through these things but if much of what we're doing what I'm doing is help people with regret minimization as opposed to goal maximization, I think my greatest regrets at the very end will come from things that I didn't do for Tracy and the kids.

Casey Weade: That's good stuff. I just like regret minimization. That's a good purpose. I like that.

Brian Portnoy: Yes. And as Charlie Munger, one of my investment…

Casey Weade: That’s the first time I've heard that one.

Brian Portnoy: Yeah. As he says, invert, always invert. And like I said, we're wired for more but sometimes having less of something bad is better than having more of something good.

Casey Weade: That's good. So, hey, thanks for joining us, Brian. As you're listening, if you enjoyed the conversation, I know you're going to enjoy the Geometry of Wealth, which has been one of my favorite reads of 2020. If you're ready to really think, yeah, this isn't one that you can just flip through the page. So, you really need to spend some time reflecting as you're reading this book. And if you're in for that kind of a reading experience, I would encourage you to take us up on an offer. Brian has so generously signed a bunch of copies, send them over in a box here in our office, and we're going to send them out until they're all gone because I know they're going to offer a tremendous amount of value out there in the world.

If you'd like to get a copy of the Geometry of Wealth at no cost to get a signed copy, you'll only get it here, all you have to do is write a review for the podcast and shoot us an email with your screen name at [email protected]. If you're not sure how to do that within the podcast app, you can always go on over to RetireWithPurpose.com, click on the podcast tab right there on the top that says leave a review. The more reviews we have, that is the currency of the podcasting world. So, if you enjoyed this conversation, if you know that there's individuals out there that can help, that's one of the ways you can help us spread our message. So, thank you for joining us. And thanks for joining us, Dr. Portnoy. I hope we get to do this again.

Brian Portnoy: Thank you

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