Want to know the cutting edge technology in applied behavioral finance?

It's not what you think. It's not a new risk questionnaire nor some piece of software.

In a word, it is: Conversation.

A 🧵... 1/ Generally speaking, behavioral finance has not landed well in the wealth space. Everyone loves Kahneman et al. and who doesn't love a shiny dashboard with lots of personality metrics and whatnot.

Half-read books and some toys don't get the job done, however. 2/

For anyone interested in client outcomes and the execution of financial advice, I'd reco reading Dan's thread.

He highlights something quite interesting and also dangerous: our industry's fixation on "biases."

1/

https://twitter.com/danhaylett/status/1552575910448185346

As the @shapingwealth platform ramps up, I've publicized my views on "BeFi 2.0", the crux of which is going beyond biases and figuring out how to have better conversations about things that matter. About what our clients care about vs. sales scripts, market "insight," etc.

2/

A conversation I have almost every week now (🧵):

Them (a financial planner representing "high net worth" families; sometimes "ultra"): I really like what your building here.

Me: Thanks! We're super-excited about it.

1/6 Them: One thing though, our clients are different than everyone else. They have a lot of money. They are special and expect to be treated that way. [Note: this is said earnestly]

Me: You sure about that?

2/6

Somehow behavioral finance has become boring. A snoozefest. How could a galvanized discipline which once broke down walls evolve into something that’s sort of, well, meh?

Despite its prevalence, how has the *application* of BeFi been mostly a swing and miss?

A🧵...

1/ When you read Michael Lewis’ The Undoing Project, you can’t help but be enchanted by two random Israeli psychologists saying to the entire economics profession: When it comes to people, you have no idea what you’re talking about. Bazinga!

2/

I believe that Charley Ellis’ thesis in "Winning the Loser's Game" is foundational for understanding investing and life generally: Win by not losing.

However, there is an important piece to it that is mostly ignored.

A thread... 1/x If you’re reading this, you likely already know that Ellis uses a tennis analogy to make his point: pro athletes win by hitting harder shots while amateurs win by keeping the ball in play and allowing their opponent to err. 2/x

I've been thinking about this quote:

“The sculpture is already complete within the marble block, before I start my work. It is already there, I just have to chisel away the superfluous material.” ― Michelangelo

1/x This past year has been strange for some obvious reasons, and for others that are private. Caring for an aging parent has moved to the next level and the thought of my oldest leaving for college next fall is impacting me in ways I didn't anticipate.

2/x

I was asked to speak to a group of interns (age: college or just graduated college) at a local org. I always feel a bit awkward sharing my career path as it's quite odd and non-linear. Nonetheless, I shared what I think are 4 (by no means all) key drivers of a good career:

1/6 1. Curiosity. Spend most of your time being interested, versus being interesting. Figure sh*t out, talk to people, learn a ton about whatever strikes your interest.

But downside: Lack of focus. At a certain point, you need to hunker down.

2/6

📌A thread on finding meaning during tough times...

There probably has been no better moment for any of us to distinguish what we commonly refer to as "happiness" from meaning. For starters, this article is a good take on the topic. 1/

nytimes.com/2020/04/07/opi… The key distinction here is between the day-to-day sentiment (or mood) we feel versus the more reflective consideration of the bigger picture, of what's really important in life. 2/

I just wrapped up @michaelbatnick's Big Mistakes and I want to offer a few observations. First, it's a damn good book - a great romp through market history through the lens of how the mighty fall at times. Each chapter can be stand-alone but together they weave a great tale 1/ Sometimes the deepest virtue of something is in its conception. It's a master stroke to focus on big mistakes instead of big wins. Even to this day, the money biz remains overly focused on heroes and not enough on learning and adapting 2/