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“Listen to Your Heart” Good for Romance, Bad for Investments – Episode 270


Valentines finance podcast

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Should you trust your “gut instinct” when it’s being manipulated by so many outside influences?

On this episode of the Dentist Money™ Show, Ryan and Matt discuss the outside factors that can influence what you may believe is “pure” intuition—and those outside factors make your intuitive responses anything but “pure.”

Your brain is amazing, but there are reasons why it’s an imperfect processor. You hear those positive “follow your heart” stories, and intuition does have its place, but when you have the time to go through a more rational process you’ll likely get a much better outcome.

 


 

Podcast Transcript

Ryan Isaac:
Hey everybody. Welcome to another episode of the Dentist Money Show, brought to you by Dentist Advisors, a comprehensive fee-only fiduciary financial advisor just for dentists all over the country. Check us out, dentistadvisors.com. Today on the show, Matt and I talk about the role of intuition and your gut instinct in making financial decisions, and if it’s good or bad and what you can do about it to make better financial decisions in your future. Thanks for joining us. If you have any questions, go to dentistadvisors.com, and enjoy the show.

Announcer:
Consultant an advisor and conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now here’s your host, Ryan Isaac.

Ryan Isaac:
Welcome to the Dentist Money Show, where we help dentists make smart financial decisions. We love you today. This is the Valentine’s episode. I’m your host, Ryan Isaac, here with the mighty, the mountain, the beautiful on this Valentine’s day, Matt Mulcock.

Matt Mulcock:
Mi amor. Mi amor. Isn’t that something?

Ryan Isaac:
What is happening, Matt? Welcome back to the show, my friend. How’s it going?

Matt Mulcock:
Yeah, thank you, Ryan. I’m feeling the love right now. I’m feeling a lot of the love. You called me beautiful today, so-

Ryan Isaac:
Yeah, well, it’s Valentine’s episode.

Matt Mulcock:
Feeling good. I’m feeling good.

Ryan Isaac:
If you’re listening to this, when it comes out, it should launch within a few days of Valentine’s day, probably pre-Valentine’s day. We like to be preemptive here at the Dentist Money Show.

Matt Mulcock:
Just right before Valentine’s day, [crosstalk 00:01:27] and maybe this is a reminder that Valentine’s day is coming up to all you people out there that need to be reminded, like me, who is terrible at this kind of stuff.

Ryan Isaac:
Yeah. So let us serve as your friendly reminder to reach out to your friends, family, significant others, and make them feel loved to on Valentine’s day. Please don’t forget it. Especially if you have someone in your life where the day means a lot to them.

Matt Mulcock:
Yeah. I think it’s been a long enough time with my wife, we’re over a decade now, where she just knows the expectation’s low. If she keeps expectations low, then if something happens, she’s excited. It’s like a treat.

Ryan Isaac:
That’s funny, man I’m like, there’s something in my brain, I don’t like showing people extra affection or love just because the calendar told me to. It feels phony. I’m just like, well, what if we’re fighting that day? But the day before, we were totally feeling it, and we had a great date night. It was like a great day. But just because the calendar says it doesn’t mean I’m going to be phony to you.

Matt Mulcock:
Exactly right.

Ryan Isaac:
But maybe it’s, I don’t know, that’s just my brain.

Matt Mulcock:
All these dates do is create a high level of expectations and pressure, and it’s usually a problem.

Ryan Isaac:
I feel like we’re starting the show with a hot take there. We are anti-Valentine’s day. Hey, we’re all friends here. It’s a safe space, so we’re feeling the love today. Thanks for joining us on the show today. We are going to talk about kind of a fun topic that has to do with this Valentine’s day, and this is the topic of all of us. I was going to say people or clients, but this is all of us. We all do this. This is a human condition.

Matt Mulcock:
We’re all humans.

Ryan Isaac:
We make decisions with what we call gut, our gut decisions, gut instincts. Because it’s Valentine’s, though, we’re going to say you decide from the heart,

Matt Mulcock:
Decide from the heart.

Ryan Isaac:
My heart told me to do this thing.

Matt Mulcock:
Follow your heart.

Ryan Isaac:
None of us are exempt from this, call it a process if you will, of making decisions in our lives, everything from little things. From it’s time to eat, I’m hungry, to I should buy a two million dollar building or I should invest in that-

Matt Mulcock:
Basically the same thing. Chick-fil-A or two million dollar building.

Ryan Isaac:
Yeah. Or I should bring on a partner. There’s a lot of very large, and obviously we’re going to concentrate on large financial decisions. First thing I want to ask you though, Matt, is how often do you think you talk to people that are facing a decision where they reference that they feel good about it? I feel good about it. My gut’s telling me this is good. How often do you think that comes up for you in conversations?

Matt Mulcock:
I mean, all the time. I’d say it’s a multiple times a month occurrence that I’m hearing some iteration, some version of, “I just feel good about it.” It’s usually something to do with a new home purchase. It’s always the house or remodel or something like that, because it’s the most emotional decision you’ll make.

Ryan Isaac:
If it’s the primary residence, we already know how that conversation’s going. Logic’s out the window and we’re just going to be talking about how it feels.

Matt Mulcock:
Yep, yep. The other one I hear a lot in the same vein is specifically with investing, but usually around like, “I’m just going to get out or I’m going to wait. It just feels right.”

Ryan Isaac:
The timing [crosstalk 00:04:57].

Matt Mulcock:
Trying to time things and say, “It just feels right. I have a gut feeling here.”

Ryan Isaac:
My gut’s telling me. Today, what we’re going to do is I’ve got some cool research and opinions from industry leaders in different industries than ours. I’ve got a fitness and health, nutrition guru-

Matt Mulcock:
What? No, we never do that. We never bring up fitness here.

Ryan Isaac:
Shocking. I’ve got a professional poker player’s opinion on gut instinct and what we call intuition, and then I’ve got another person who’s an author and a blogger on human psychology and intuition. So we’re going to talk about some of the things that they reference, but the thing I’m going to say, this is anecdotal experience so I don’t know if studies would back me up on this, but like you, Matt, I have a lot of conversations with clients where decisions are, they’re justified by the gut. The heart, right? It’s feel. I feel good. So good.

Matt Mulcock:
Feels good.

Ryan Isaac:
But here’s what I’m going to say. After my career, it’s coming up I think on 14 years right now, watching hundreds of dentists, clients and non-clients, make financial decisions, I will just confidently say I’m putting my stake in the ground right now. It’s my big flag.

Matt Mulcock:
Here it is. He’s dying on this hill.

Ryan Isaac:
It’s a flag. I will die on this hill. Please save your gut instincts for love and friendships and people interactions, and keep them as far away as possible from anything financial. No exceptions. Okay? That’s it.

Matt Mulcock:
The bigger the consequence, the more you keep that away.

Ryan Isaac:
Leave it alone.

Matt Mulcock:
Yep.

Ryan Isaac:
Save your gut instinct. Save your my heart’s telling me for people and relationships. Get it out of financial decision making. That’s hard to do though, but that’s what I’m going to, that’s just what I feel after all these years.

Matt Mulcock:
Is this what your gut tells you?

Ryan Isaac:
It’s what my gut’s telling me, is that we need to get our gut feeling out of making financial decisions.

Matt Mulcock:
Feels right. Yeah.

Ryan Isaac:
We do. So yeah. Let’s begin here with a couple of things. I’m going to start with my fitness hero right now. It’s a guy I follow for all of my training and programming, but it’s a guy named Marcus Filly. This guy’s amazing, man. I mean, he’s 20 years in his industry and he’s very highly educated and tons of experience. I follow his programming, get nutrition and my workouts from him, but he sends out some really cool, every Friday, really cool webinars and emails on the psychology of some of the stuff he does. One of them a few weeks ago was intuition, and the email was specifically talking about people who were trying to eat intuitively. That’s a form of, call it dieting if you want, where you just listen to your body and feed it what it needs when it wants. Which I’m like, dude, our bodies trick us all the time.

Matt Mulcock:
I got some thoughts on that, but more around children. We can come to later.

Ryan Isaac:
I only want burgers all the time, and Rockstars and Monsters all the time, but that’s not going to be good for me. So he had this email called intuition is overrated, and first he defined, so let’s define this right up front. So when people say gut feeling, gut instinct, they’re talking about intuition. From the dictionary, intuition is defined as the ability to understand something immediately without the need for conscious reasoning. That’s heavy though.

Matt Mulcock:
It’s your first reaction.

Ryan Isaac:
Yeah. That’s heavy. Understand something, not just hear something. Understand something immediately without the need of conscious reasoning. I would argue that there’s not a lot of consequential things in our lives that can go without the need for conscious reasoning, that you can just understand immediately, especially when it gets further and further away from our circle of skillset and interest and experience. But we’ll get to that. So anyway, Marcus Filly, he says in one of his newslets, he said, “Intuition is overrated in our modern day.” Which when you think about the way that we’re distracted and our attention is constantly pulled, our intuition is shaped. He says it’s being manipulated by everything around us, which is probably a whole other deeper episode. But what do you think about that, Matt? Our intuition, our gut feelings, what we think is like, “Yeah, that’s what I want to do. That’s what I’m choosing to do right now internally.” What do you think about the concept of that actually being pretty manipulated by forces around us in today’s world?

Matt Mulcock:
Yeah. I mean, I liked when he says the modern day. I mean right now, probably, I mean, not even probably. More than ever before, we are bombarded from so many different mediums, so many different angles, with so many different opinions and data points. I mean, from your phone that’s sitting in your pocket to the TV to all over the place. So I think from when you just defined intuition, I was getting the sense of it’s not a bad thing. It’s actually something that I think you can cultivate from experience and knowledge, but I think-

Ryan Isaac:
Yeah, we’ll get to that. Totally.

Matt Mulcock:
Yeah. But I think what he’s hitting on is it’s overrated today because you can’t do, I mean, I’m sitting here thinking it’s really hard to differentiate between what’s true intuition from your experience versus what’s just getting thrown at you on Twitter.

Ryan Isaac:
Yeah, man. I mean, there was another thing he said where he said what we think is our intuition is often just the product of someone else’s agenda. What’s it, a team of developers and engineers who are a billion times smarter than you-

Matt Mulcock:
Who hack your brain.

Ryan Isaac:
Yeah. Who literally know how to hack our brains and manipulate us into taking action subconsciously, like zombies, man. So anyway, that’s Marcus Filly coming from a fitness industry. His whole angle is unless you have incredible amounts of experience, and we’re going to get into how to define this, not having a rigid process in the way you exercise or feed yourself, it probably will be to your detriment if you’re just going to go on your gut. After probably not too long, you’re not going to be led down a very healthy place if that’s the case. By very definition, we can get to the point where something is, I don’t know if routine is the word, but it’s familiar enough. We’ve seen the outcomes enough of some situation enough times to go, “I know what’s going on.” Look, I’m guaranteed dentists feel this way after enough time in their own careers, before they see pictures or x-rays or even dig too far into someone’s mouth, I’ll bet they can figure out what’s going on intuitively just because they have that feedback loop that’s been repeated thousands of times.

Matt Mulcock:
Because of the experience. Intuition is the child of experience, right?

Ryan Isaac:
What’s that from?

Matt Mulcock:
I don’t know.

Ryan Isaac:
Did you just really make that up, or was that a thing?

Matt Mulcock:
You were just talking about it, and I thought it’s like intuition is born out of experience. So it’s like the child of experience. I don’t know.

Ryan Isaac:
Dude.

Matt Mulcock:
I’m sure someone else said it at one point.

Ryan Isaac:
Intuition is the child of experience, folks. We should end it there, honestly, because that is fantastic. Let’s go on to a world famous poker player. She was world champion poker player on the tour.

Matt Mulcock:
Annie Duke.

Ryan Isaac:
Annie Duke. Annie Duke is now a corporate consultant and a coach, especially in the financial industry and investment industry. She coaches a lot on risk and gut. She has some amazing experience with gut instinct after being a poker player. She was in a PhD program, and this was back in ’02, I think, ’04, and she went from her PhD program to becoming a professional poker player.

Matt Mulcock:
Dude, dang good one too.

Ryan Isaac:
Dang good one. This woman understands, she understands intuition and risk. I’m just going to share a few things that she’s talked about lately. She wrote a book. I mean, she’s an awesome writer.

Matt Mulcock:
Her book’s amazing.

Ryan Isaac:
She posts really cool stuff on Twitter. Lots of smart people are always re-tweeting her. She’s very well respected. Her book is called Thinking in Bets. It’s basically how to manage risk and intuition, and where’s the balance on that? Anyway, she said intuition goes wrong. I love this. She said, “Intuition goes wrong when you don’t hold it accountable to a more rational process.” So what she’s saying, and she related this to playing poker. She says, “When you walk away from the table, if you can’t walk away and have the ability to explain what you did and why you did it to somebody and deconstruct that process to them, like I folded or I called or I went all in-”

Matt Mulcock:
And here’s why.

Ryan Isaac:
And here’s why I did that. Regardless of the outcome, I lost or I won, regardless of the income. Here’s why I did that independent of the outcome, and why it was the correct decision independent of the outcome. If you don’t have the ability to repeat that to somebody, then you’re not understanding what intuition is. You’re being misled by that.

Matt Mulcock:
She tells the story where she’s learning poker, her brother is a brilliant poker player, one of the best ever. She tells a story that when she was learning, and she would be over, the round would be over, whatever. You can tell I’m not a poker player.

Ryan Isaac:
Is it a round?

Matt Mulcock:
The round, right. The match.

Ryan Isaac:
Is it a quarter or a period or a half?

Matt Mulcock:
Yeah. The half.

Ryan Isaac:
I think it’s halftime.

Matt Mulcock:
The quarter half. Yeah.

Ryan Isaac:
Go sports.

Matt Mulcock:
I feel like Ted Lasso when he’s going over to coach soccer and he’s like, “Four quarters, guys,” and they’re like, “It’s actually two halves.” He’s like, “Two halves. Okay.”

Ryan Isaac:
Whatever it is.

Matt Mulcock:
But the hand would be over, and she’d go over to her brother who was obviously her mentor at the time, and would be like, “Hey, tell me what happened.” She’s like, “My first gut instinct always was to talk about like how I got unlucky, or I had the right move but always got unlucky or this happened, whatever,” and he’d get mad at her and be like, “What was your process? Tell me why. Break it all down.”

Ryan Isaac:
Cool.

Matt Mulcock:
Yeah.

Ryan Isaac:
That’s so awesome. I didn’t read a lot about her brother. I don’t know a lot about that story. Her book is sitting in my Kindle, and I haven’t gotten to it yet.

Matt Mulcock:
It’s a great book.

Ryan Isaac:
I’m on day five of my no social media, so I’m reading more. So I’ll probably get there sooner than later.

Matt Mulcock:
Dude, you’re going to break records this year. I’m going to talk to you in December and you’re going to be like, “I finished a thousand books this year.”

Ryan Isaac:
Or at least I’ll just be happy and clear minded. That’s what my goal is. Anyway, so Annie Duke. Yeah, just so cool. To her, she says intuition can become a skill. It can be developed. But even when it is, she says it should only be a starting point for your decision-making. My gut’s telling me this, but. She says the process after that should be having the process so understood or the decision-making so understood that you can explain it to someone else. It should be documented. She says that if there’s no accountability, like the whole brother story, she walks off, she has accountability to explain to someone why she did something. If there’s no accountability and explaining your decision-making, that decision-making process sticks in your head. The problem with that is intuition, really all that is from a psychological standpoint, it’s just pattern recognition. So from the time we’re babies until whatever point we’re at right now, as we’re listening to this.

Matt Mulcock:
To old men.

Ryan Isaac:
Grown babies.

Matt Mulcock:
Grown babies.

Ryan Isaac:
I’m a grown baby. Grown children. What we think is intuition is just pattern recognition. So what’s crazy is you might be like, “I intuitively respond when I meet a person of this personality type.” Your intuition might be leading you in a healthy relationship or interaction with a human, or your intuition might have been conditioned by early pattern recognition that wasn’t healthy, and you actually respond with what you think is healthy intuition in dealing with the type of person or situation when it’s actually not good for you.

Matt Mulcock:
Are you saying maybe you’ve got mommy issues or something?

Ryan Isaac:
You might have some mommy or daddy issues or some pet issues. I mean, you know, we’ve all got issues.

Matt Mulcock:
Yeah, we all have issues. Yeah.

Ryan Isaac:
So anyway, the mighty Annie Duke, so cool. It was really cool. I love reading her stuff on Twitter and the articles that she posts and everything. Let’s go to one more. The point of this, where we’re going to get to. We’ll take a break in a little bit, but we’re going to get to is we’re going to come back and hit, I’ve got four main points, like takeaways of things that we can do, especially relating to financial decision-making, that might help us override our gut feelings a little bit, or keep them in check.

Ryan Isaac:
One more thing. This is from a blog post on Psychology Today. It’s talking about the two scholars, Daniel Kahneman, a very well known guy, and a guy named Gary Klein. Some of their research, they’re kind of like leading experts in research on intuition in psychology. First thing they point out to keep in mind is that oftentimes we think intuition or gut feelings are that they’re simple, right? It’s like, it’s my gut, man. It’s animal instinct. It’s my primal nature.

Matt Mulcock:
My lizard brain.

Ryan Isaac:
It’s my lizard brain. It’s such a pure thing. It’s untainted. It’s just a pure instinct, you know? It’s my survival brain. That’s not true. What we were just saying is it’s actually pretty conditioned by our surroundings in our entire lives, in healthy and unhealthy ways. So the first thing you say is, don’t assume that our gut instincts or feelings are just simple, pure, and basic. They’re not. The way they describe it is that intuition comes from pattern matching. So like we were saying, you just recognize patterns in your life and then you behave accordingly when you start to see these things come up again.

Matt Mulcock:
And you probably don’t even think about it. You wouldn’t even be able to consciously point to it.

Ryan Isaac:
Yeah. You don’t think about them. So let’s list a few of these. I think this would be fun. Based on typical dentist conversations making a decision, what are some situations where, and we don’t have to say what all the possible reactions are or gut feelings are, but let’s list a few situations just so people can put some context and feel normal about this, where there’s a pattern or habit recognition that just bubbles up immediately. So I’ll start. Number one, a new client has never invested money before in their whole lives. Very common scenario with our firm. People are hiring us for the first time in their lives, becoming investors for the first time, and the first time you say the word stocks or the stock market-

Matt Mulcock:
It gets pronounced stonks.

Ryan Isaac:
Stonks. First time you bring up the stonks with an N, there’s a pattern recognition for a lot of people. Some of them are neutral. Some of them don’t have enough of a pattern recognition, or a pattern matching as Kahneman and Klein put it, that they don’t have a reaction. Some people’s reaction are they have positive recognition with that thing. Their gut tells them, yeah, I think that’s the thing you’re supposed to do to make money or grow your wealth. A lot of people, because this stuff isn’t taught anywhere, the stonks aren’t educated, there’s no education on stonks.

Matt Mulcock:
There’s no stonk education anywhere. It’s no

Ryan Isaac:
There’s no stonkucation in the schools. A lot of people’s patterns that they’ve come to, not even consciously thinking anymore, it’s like, “Well, that’s a casino and that’s betting and that’s gambling. It’s rigged and it’s not good for me. I got to do something else.” Or, “I can’t do that.” Or, “That’s risky. I don’t want to lose my money.” Things like that. What else comes to mind? Some decision making, whether there’s just a quick gut reaction [crosstalk 00:20:29].

Matt Mulcock:
Yeah. I mean, I think the other big one, I think stocks definitely or just investing in general. There’s so much to that one. I think another one that comes to mind is debt, kind of the same thing. A little bit different obviously than when people come to us, because they are generally well-versed in debt, but I think the pattern recognition, the way they approach that, the experience they have with it, the lessons they were taught as kids about it, whether or not they’re listening to Dave Ramsey or not, they’re going to bring a different level or insight or experience to that discussion each and every time they have it.

Ryan Isaac:
They’ll have a gut reaction to being like, “Debt. I need to get rid of it as fast as I can.” I mean, we’ll go back to what Marcus Filly said, yeah. Intuition is sometimes being manipulated by everything around us, often the product of someone else’s agenda. If you go to the definition back to that, the ability to understand something without the need for conscious reasoning. So you’ll mention debt to some people, and there’s not a conscious reasoning process that starts firing. There’s just a reaction to whatever has been conditioned about what debt means to them. None of these things are, well, some of them are wrong. Just factually incorrect, I guess that is true. That’s true. But I mean, everyone’s reactions, they’re just going to be based on the lives that we’ve led and the things that have been around us the whole time.

Ryan Isaac:
So yeah, I think investing debt. Trying to think of another one that elicits a strong, emotional response. Spending. When you bring up spending, especially between spouses or partners sometimes, there’s a pretty strong emotional response. It’s not tied to, what’s the definition again? A conscious reasoning process. You just have a reaction to it. You’re either like, “I spend, but it’s fine.” Or, “It’s too much. I got to budget and I got to cut. I got to cut.” And you constantly live in this month by month of, “I know I spent too much. I know I got to cut it, but I haven’t. I’m not going to do it. I don’t know how, or I can’t.” Anything else come to mind that elicits a strong gut reaction response?

Matt Mulcock:
I mean, another one in regards to investing, we were mentioning the stonks and the financial markets, but then another one when it comes to investing, I think it’s a big one is real estate as well. That’s another one that I think we see it a lot.

Ryan Isaac:
You started the show with the emotions tied around the primary residence that we buy. The house we live in, the houses we live in are the most emotional thing we ever, we as advisors can attest to this. There’s nothing more emotional, not even your practices, the buildings you’re in, your partners, probably not even your spouse in some cases.

Matt Mulcock:
Yeah. I’m guessing not, no. I mean-

Ryan Isaac:
Then the houses we live in, man. They’re so emotional.

Matt Mulcock:
If your spouse is sitting next to you, don’t agree with this, but we know that your house is more emotional.

Ryan Isaac:
Shake your head. Say, “These guys are idiots. It’s not true.”

Matt Mulcock:
On Valentine’s day? Come on.

Ryan Isaac:
On Valentine’s day nonetheless.

Matt Mulcock:
I love my spouse.

Ryan Isaac:
This is a Valentine’s day show, guys. Keep it loving.

Matt Mulcock:
Where’s the love?

Ryan Isaac:
Yeah. So anyway, I mean, there’s a big list of them, but I think that’s a good example. I basically just want people to feel normal, but what we want people to take from this, especially being a financial advisor, again, watching hundreds of dentists make decisions for years and years, I want people to take away that having a natural response that we think is our gut telling us something is that’s okay, but that can only be a starting point. You can’t always trust it. Let’s take a quick break. I want to come back and hit, I got three or four points of some practical things people can do to maybe override, or what Annie Duke says, give your gut instincts some accountability before you act on them. So take a quick break. We’ll be right back.

Matt Mulcock:
Hey Ryan, how can a podcast listener find out more about what we do?

Ryan Isaac:
Well, one great way, Matt, thanks for asking by the way, is to join one of our webinars. You and I, as you know, because you’re there, cover one financial topic in a lot of detail every single month on a webinar that you and I both host. We show charts and graphs, screen shares, and we take live Q&A from the audience. It’s a great time. It’s very informative, very interactive. They should join that.

Matt Mulcock:
I totally agree, and it’s really easy. You go to dentistadvisors.com, click on webinars under the education library button on the homepage.

Ryan Isaac:
Out of the Psychology Today blog post, Daniel Kahneman, Gary Klein. Their paper is called, for any academic nerds out there that want to go read this, it’s called Conditions for Intuitive Expertise. I guarantee someone will go read it.

Matt Mulcock:
I’m going to go get my hands on it.

Ryan Isaac:
Someone will go do it. Conditions for Intuitive Expertise. They listed two ways that we can develop better instincts and gut reactions. They don’t really call it gut reactions. They call it instincts, which I think is probably more appropriate. Number one, they said that it has to be quality practice with feedback. In my mind, that means time. That means patience. It means slow steps to progress. It’s not a jump to expertise immediately. That applies to a lot of things, but so they say quality practice with feedback. Their point is it actually doesn’t matter how much you practice at something. If there’s not a feedback loop to a system, a thing, or a person, this is what Annie Duke said, accountability that might know that thing better than you to tell you if you’re doing it. I mean, if you ever practiced anything incorrectly, in the gym for example, it’s easy to practice improper technique on a lift and then just get it embedded in your head, and then you get hurt one day. Where you can’t even progress past a certain point, because your technique’s bad right now.

Matt Mulcock:
You get the wrong movement pattern on something, and like you said, it’s ingrained in your brain, and then someone comes along after a while and they’re like, “Hey, you’re doing that wrong.” Well, good luck trying to undo that movement pattern. Yeah. It’s really difficult.

Ryan Isaac:
It’s really hard. If we apply that to a dentist making financial decisions, and the way that we do financial planning, how would you relate that, Matt, to the way that we deliver financial planning for a client year in and year out in their lives? When you’re talking about quality, well, instead of practice quality, reputation with repetition, with feedback, how does that apply to financial planning?

Matt Mulcock:
Yeah. For us, the number one thing I’m thinking of here is this is why we approach it in the way we do in the sense of comprehensive, right? We’re not looking at any one aspect-

Ryan Isaac:
That would be the quality part.

Matt Mulcock:
Yeah. We’re talking about-

Ryan Isaac:
Comprehensive would be the quality part.

Matt Mulcock:
Yeah. So when we talk about quality, it’d be, are we looking at the whole picture? Every aspect of your financial life, not just one product, let’s say. Or then even broader than that, just your investing. Investing is not your financial plan. It’s a part of your financial plan and the financial planning process. So the quality aspect there. And then the way we’re delivering it is we are providing feedback on a regular basis on all of these different aspects or financial health indicators that make up your whole financial plan and whole financial life.

Ryan Isaac:
Yeah. That’s the feedback loop. You spent this over the last 12 months, is that good or bad? Or does that help your cause or your goals? This is your net worth. This is how much it grew. This is how much it grew from saving. This is how much it grew from your investments growing. This is how much it grew from your debts going down. There’s dozens of little pieces of feedback, so in helping a dentist make better financial decisions, we’re helping them revisit these topics with frequency. Quality meaning in depth, right? Like you said, an investment account is not a financial plan. An insurance policy, please, is not a financial plan.

Matt Mulcock:
Definitely not.

Ryan Isaac:
Please. It’s not a financial plan.

Matt Mulcock:
We beg you.

Ryan Isaac:
We’re begging with our hearts on this Valentine’s episode. So that was number one, quality of practice, repetition with feedback. Number two, they said, is they call it a high validity environment. What they just mean is it has to happen often enough for you to develop what they call pattern matching, what Annie Duke would call pattern recognition. Or shout out to Marcus filly, what he would call informed intuition. So you have to be in an environment where the feedback not only happens as you practice quality practice, but it happens enough times to learn it the right way. Now, going through dental school, residency, associate, I mean, you’re learning feedback with high, high amounts of repetition. But how often do you buy a two million dollar building in your life?

Matt Mulcock:
I’m going to go ahead and guess not very often.

Ryan Isaac:
If you’re a dentist, maybe once, or maybe never. You’re not a real estate developer. Go ask a real estate development team how often they see that. It’s hundreds. So you need to be in a process where you see something, they call it high validity environment. It just means it happens a lot. Here’s the thing though, as a dentist, if your goal after 10 years of school and half a million dollars of student loans and a million more dollars of practice loans and real estate loans, if your goal is to become a good dentist and run a good practice and make tons of money and retire well one day, maybe even early, you don’t have the time, nor can you afford to try to force the time to happen, to put yourself in a high validity environment of becoming an expert investor or financial planner. You already have a career.

Matt Mulcock:
Or many things outside of what you’re doing as a dentist.

Ryan Isaac:
Many, many other things. Marketer, accountant, consultant. There’s just so many things, even though you’re incredibly smart and well-educated and successful, that’s in your silo. You’ve done high quality practices with feedback and high validity environment in dentistry.

Matt Mulcock:
And developed your intuition in that.

Ryan Isaac:
You have incredible intuition when it comes to oral health and how to fix mouths and teeth and make people feel better, but not when it comes to building a portfolio or choosing what kind of insurance policy to buy, or whether or not you should buy that piece of real estate, or venture off from your dental expertise into the world of land development, or I don’t know, anything else really. Which I guess this kind of begs the reason, is the reason why you outsource things. I mean, that’s the whole point. Did we talk about that? I think we talked about that in one of our last episodes. Developing the skill of outsourcing. This is the reason why, because without it, what happens is what Annie Duke says. You walk away from the table, you make a decision without running it past somebody, you don’t have a real clear way to explain why you did it, and then it just sticks in your head in a silo and never gets questioned or challenged.

Matt Mulcock:
You’re not getting that feedback. I think too, as you’re describing that in the story or thinking about Annie Duke, if you don’t have that immediate feedback, you’re not getting it from people like you said that have the experience, that have the actual intuition that can push back on you, I think your brain starts to trick yourself. This is where I think you fall victim, you’re more likely to fall victim to over-indexing on outcome versus process, right? You just start to think about the outcome and not thinking that process, because you don’t have anything in place to push back on you, and again, like you said, hold you accountable.

Ryan Isaac:
Cool. We’ll wrap up with two quick ones here. Kahneman and Klein in that article, they talk about what they call fractional expertise. We’re kind of hitting on this. Basically, we only have enough time and resources and probably interest and natural skill and talent to get really intuitively good at a few things in our lives. If you went to school for a decade in a long educational track and business track to become a specialized doctor, that took your ability from being able to be more general. You’re very specialized. They call it fractional expertise. There’s a thing we’ve talked about before on the show called the Dunning-Kruger effect, which is really fascinating. Those are two doctor’s names, Dunning and Kruger. They were psychologists.

Matt Mulcock:
I believe so, yeah.

Ryan Isaac:
Their study, their famous study, the Dunning-Kruger effect, it was just the proof that the less we know about something, the more confident we are about our ability in that area.

Matt Mulcock:
It’s like you watch one YouTube video on real estate investing and you’re like, “I can do this.”

Ryan Isaac:
I mean, you hear that all the time. “Dude, the guy down the road just flipped that thing for 300%. I got this.” Well, probably not.

Matt Mulcock:
I’m guessing not.

Ryan Isaac:
That guy’s a professional contractor that builds houses for 20 years. You probably can’t do that. It’s called the Dunning-Kruger effect. And then the opposite is true. The more educated and experienced you are at a subject, the more you realize how much you don’t know. I mean, think about your own areas of expertise. I think about the stuff I’ve spent a career doing, or someone in dentistry, they feel like yeah, I’ve learned a lot, but they’re cognizant, they’re aware of how many more smart people that are out there that know things they don’t know and how much there is still to learn.

Matt Mulcock:
Really quick, Ryan, I’m just going to say, you were just going over that and talking about the specialized nature of a dentist skillset. I don’t know if it’s expressed enough and emphasized enough, and maybe this is going to sound like, well, duh, but I honestly, in talking to dentists, I’d love to hear what you think about this. I don’t know if dentists fully understand the opportunity they have at their fingertips every single day, and that the differentiation of skillset they have over 99% of their peers. I only say that to say, when it comes to conversations around, I call it the squirrel effect. The dog that’s like, “Squirrel,” looking at different things. The shiny object.

Ryan Isaac:
That’s me in my life, constantly.

Matt Mulcock:
It’s like, “I want to go be a real estate mogul. I want to go do this or that or this.” I’m like, “Do you even understand that the skillset that you have that sets you apart from literally everyone? You should be going all in on that.”

Ryan Isaac:
Yeah. I mean, I think about dentistry all the time. It’s why I’ve always joked my whole career, since working with dentists, I should have been an ortho with two locations.

Matt Mulcock:
If I was smart enough, I would have.

Ryan Isaac:
Ortho. Isaac Ortho, two locations. It’s so true. I mean, you think about, man, dentistry. What other businesses carry a 40% plus profitability? What other businesses can you go to a bank without even having a business yet and be like, “I need a million dollars.”

Matt Mulcock:
And no work history.

Ryan Isaac:
No work history, I need a million dollars. In two weeks, you’ve got a million dollars in your bank to do your stuff. What other industry can you do all that, and then at the end of your career, when most people are retiring or maybe even getting laid off or they’re exiting the workforce, can you say, “You know what, I’m going to work a day a week and make a hundred grand?” Where else can you do that? And have tons of quality relationships, make an impact in your local community, do charity work, be a mentor. I mean, dude, the field of dentistry is-

Matt Mulcock:
Checks a lot of the boxes.

Ryan Isaac:
It’s spectacular, man. So yeah, don’t squander it. Man, you worked so hard for it. It’s so amazing. It provides so many opportunities. Don’t squander it. Let’s end with this one. The advice of all of these people, there’s a common theme. There’s a very common theme in all these things, that’s what we’re going to end up with, and we would give the same advice. Hands down, for sure, when it comes to making financial decisions, the common theme is do not underestimate how good our bodies and our brains are at tricking us. Okay?

Matt Mulcock:
So good.

Ryan Isaac:
Don’t forget that our brains and our bodies are so good at tricking us, and the world we interact in today, with our phones and technology and software and social media being in our faces all day long, people are engineering this stuff to further the trickery.

Matt Mulcock:
Yes, it’s so true.

Ryan Isaac:
They’re making our bodies and our brains even more sly and skeezy on us, and they are tricking us left and right. S, anyway, thanks for joining us on this episode, everyone. Thanks for tuning in, Matt.

Matt Mulcock:
Yeah, thanks Ryan.

Ryan Isaac:
Thanks for being here and adding your insight. If you guys have any questions about, if you’re listening to this and you’re like, “Man, I think I make too many decisions-”

Matt Mulcock:
Based on the gut.

Ryan Isaac:
“On a whim. Based on the gut. I need to run this stuff past someone. I need to be told I’m wrong every once in a while or get some context.” That’s what we’re here for. Give us a shout out. Go to dentistadvisors.com, click the book free consultation button, sign up a little chat with one of our friendly dental specific advisors, and we’ll help you out. You guys, thanks again, and we’ll catch you next time.

Matt Mulcock:
Buy some chocolates.

Ryan Isaac:
Buy some chocolates, buy some flowers, happy Valentine’s day. Take care.

 

Behavioral Finance

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