Are You Beating the Market (and Does It Matter)? – Episode #332

The NCAA’s March Madness basketball tournament is known for its bracket-busting upsets and unexpected, last-second victories. But what if no one kept track of the score? How would that change the stress-filled drama? On this Dentist Money™ Show, Ryan and Matt get tournament crazy about investments and ask if benchmarking your portfolio should be March Madness intense.

 

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Podcast Transcript

Ryan Isaac:
Hello everybody, welcome back to another episode of the Dentist Money Show, brought to you by Dentist Advisors, a no commission fiduciary, comprehensive financial advisor just for dentists all over the country. Check us out, dentistadvisors.com. Hey folks, today on the show, Matt and I are talking March Madness, which is one thing both of us are very bad at every single. But we’re talking about the funny human behaviors that we learn from a system like March Madness and how it applies to our lives of investing and growing your net worth and meeting our goals or not and how we look around and prepare ourselves to benchmark against how other people are doing in life in income and money and all those things. So really a good fascinating topic. I appreciate Matt for basically having the content today from his blog, Money Matters, check it out, you can find that at dentistadvisors.com as well. If you have any questions for us after the show, go ahead and hit dentistadvisors.com, click the book free consultation button, let’s have a chat, we’d love to talk to you. Thanks for being here everybody. Enjoy the show.

Announcer:
Consult an advisor or 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. I am Ryan Isaac, and I’m here with the one and only Hollywood mountain, the bracket predictor, Matt Mulcock. What is up Mr. March Madness himself?

Matt Mulcock:
The only thing more inaccurate than the Hollywood mountain is the bracket predictor, so you’ve done yourself Ryan, but it’s good to be here.

Ryan Isaac:
We’re smack in the middle of it, of the tourney, as the big sports fans like to call it, the tourney, the big dance as they say.

Matt Mulcock:
The big dance, march madness.

Ryan Isaac:
Yeah, this is the time of year. You all know what we’re talking about, and half of you actually don’t [laughter]

Matt Mulcock:
Most of… Some of you may not.

Ryan Isaac:
Sports, it’s for all these sports fans out there. Matt, let’s just dive in a few… A little bit about our current… I’m pulling up our current company dentist advisor’s group.

Matt Mulcock:
It’s bad, it’s bad, man. It’s bad for me.

Ryan Isaac:
There are 17 people lurking around and… Where are you?

Matt Mulcock:
I’ve gotta be near the bottom.

Ryan Isaac:
I’m number three, dude.

Matt Mulcock:
You are?

Ryan Isaac:
I’m a number three, I’m tied for three, but my total…

Matt Mulcock:
Heck yeah.

Ryan Isaac:
My total available points are not as good as the other number three that I’m tied for. I’m tied for number three with Amanda, who named her bracket, Sports, go Sports. I’m excited for the tournament. We’re gonna talk a little bit about that today. You, Matt, as everyone should know by this point, has a blog out called Money Matters. Matt, where do they find that again?

Matt Mulcock:
You can find it… I mean they all get posted on our website. So you can just find it under my profile, or it’s mattmulcock.substack.com.

Ryan Isaac:
March Madness, and the whole system around picking a bracket brings out some of the most fun, interesting, unique, quirky things about human behavior and analysis and predictions and comparisons and hopes and dreams, and all of it gets crumbled within the first 24hours.

Matt Mulcock:
Our biases, yeah.

Ryan Isaac:
All of our biases. So we’re gonna be talking about some of these parallels today, which is… It’s just such a good… It’s such a good analogy every single year. Every year there’s just anomalies that nobody saw coming, but every year there’s anomalies. Every year something happens that nobody saw coming, but they just keep happening every year anyway.

Matt Mulcock:
This year alone, St. Peter’s first 15 seat ever to go to the elite eight.

Ryan Isaac:
Wild, yeah, that hadn’t happened ever before.

Matt Mulcock:
Ever.

Ryan Isaac:
Or you just telling me before, here in the final four we have coming up meeting together, are who? Tell us Matt.

Matt Mulcock:
So it’s Villanova versus Kansas and it’s Duke versus North Carolina.

Ryan Isaac:
That one. So I’m not the biggest sports person, but I do know that that rivalry is gigantic.

Matt Mulcock:
Huge.

Ryan Isaac:
Decades and decades big. And did… Have no idea that they had never met in the tournament before ever, ever.

Matt Mulcock:
Ever, which was… That threw me off.

Ryan Isaac:
In any round?

Matt Mulcock:
No.

Ryan Isaac:
How’s that even possible?

Matt Mulcock:
Yeah, no, I… That threw me off when I heard that. And we had to check it before this. We started doing this, ’cause a friend told me that they’d never… They’ve never met in the tournament. Though the two of the top five most storied programs…

Ryan Isaac:
Ever.

Matt Mulcock:
Ever in college basketball, and they’ve been to so many Final Fours, so many championships, so much history there. And they’re within 30 miles of each other, they’re rivals, they play every year, multiple times a year, but they have never met in the March tournament, which is wild.

Ryan Isaac:
You kick us off, man, I like how this thing begins here.

Matt Mulcock:
Yeah, so the whole core piece of it was… As I was watching these games, number one, I was thinking, it’s just wild that I care… I truly, I’m a sports fan for sure, but I am not a collage basketball fan. I don’t watch a game ever…

Ryan Isaac:
Outside of the…

Matt Mulcock:
During the season. Never turn it on, just don’t care, it’s just not my thing. But the tournament starts, and I’m like, all about it, ‘ll rearrange…

Ryan Isaac:
Is it because you do a bracket, do you think?

Matt Mulcock:
No, ’cause I don’t really… I’ll do a bracket for fun with friends or would do it at work obviously, it’s just kind of for fun.

Ryan Isaac:
No expectations, though.

Matt Mulcock:
But I don’t really, you know…

Ryan Isaac:
Okay. So that doesn’t level up the excitement for you?

Matt Mulcock:
It doesn’t. I think it’s a factor, I think it is a factor.

Ryan Isaac:
Game advisor.

Matt Mulcock:
I’ll be honest, I think part of it is nostalgic for me. I just have done it ever since I was a kid, I’ve been way into it, it’s fun. There’s something about it that’s really exciting and just like, it’s cool.

Ryan Isaac:
It is yeah, a tournament… Tournament is a cool… It is cool.

Matt Mulcock:
Yeah, it’s just fun. But I started thinking about it and I was like, “Man, it’s interesting that like the underlying… ” And this is probably obvious, but it’s one of those things you dont… Maybe we take it for granted a little bit. We don’t think about. I’m like, the underlying factor here of why anyone cares about a sport or any competition is the ability to win or lose. And what that comes down to is the scoreboard in some way. So I thought about it, I’m like, “If you removed the scoreboard… ” I was watching some random game in the tournament. Again, care nothing about these teams, and it was coming down to the wire, I’m glued to the screen, my heart is pounding as I’m watching this game go back and forth down to the wire, and I’m like, “If you remove the scoreboard, everything goes poof,” it’s like you don’t give a crap.

Ryan Isaac:
Exactly.

Matt Mulcock:
You literally do not care. So I thought it’s the same thing in life and money, it’s like you need a scoreboard to care, and that’s the premise that I… The foundation of what I was writing about is, and then we can talk about it here today, is like the different scoreboards in our life that we can… That we use, whether it be properly or improperly, we can talk about when it comes to things like investing, or income, or lifestyle, in this case, obviously with dentists, their practices and things like that.

Ryan Isaac:
Yeah, I love the… I mean, yeah. That’s just probably one of our more natural tendencies as human beings, is just to compare ourselves. In today’s day and age, it’s just… It’s the easiest thing to do, it’s probably one of the most detrimental things that we do as humans too.

Matt Mulcock:
Yeah.

Ryan Isaac:
I was wondering how helpful it even is. Like in our business, as you know and many know, we keep a lot of data, we only work with dentists, we have for 15 years, and we have a lot of data on people. We have a lot of behavioral data, we know a lot of things, like how people spend their money and what they…

Matt Mulcock:
We know lots of things.

Ryan Isaac:
We know a lot about you, what kind of houses everyone’s buying and how much building debt that they carry, and student loan interest rates, and net worth growth, and just a lot of data. And one of the… It’s funny because one of the things clients are usually most interested in is they want to see the benchmarks and how they stack up against other people, but at the same time, it’s not always that helpful. It’s not always that helpful, ’cause there’s always a caveat in a benchmark in a comparison, and sometimes we compare things to things that aren’t even comparable, but we think they’re comparable. So anyway, yeah, I totally agree. It’s such an interesting stage for this, just the psychology of comparisons, for sure.

Matt Mulcock:
Yeah, well, that’s… I mean, spoiler alert, it’s a three-minute read, you can go check it out, but it’s… I’m not gonna spoil much. But that’s the premise of this whole thing is, there is a scoreboard no matter what. Again, we need a scoreboard to care about, I think, really anything. The question is what… When it comes to a basketball game, the scoreboard is the scoreboard, it’s consistent, there’s not like… The rules are pre-set, you have to fall within those rules. When it comes to life and money, building a practice, whatever, like, there’s… There are not really pre-set rules, there’s guidelines, but really when it comes to the scoreboard in real life, you get to choose it. So I mentioned in that, you’re far better off, like to your point, Ryan, not looking at anyone else around you, not looking at anything external. The whole point of what I was writing about is, how about we decide to use our own personal life, our goals, our values as our own scoreboard and forget everything else.

Ryan Isaac:
The first thing you were talking about, and it’s very relevant for the last 10 years of investing, is comparing returns against benchmarks, right.

Matt Mulcock:
Yeah.

Ryan Isaac:
Which is a normal thing to do, it’s very standard practice in our industry, build a portfolio and then compare it against a benchmark. Walk us through a little bit about what you wanted to dig out of this thing and show people in terms of benchmarking their performance of portfolios.

Matt Mulcock:
Yeah, for sure. So there’s a lot of, I think, remnants and things, like traditions, I will call them, that have been passed down from professional money management to the personal investor.

Ryan Isaac:
Yeah, stuff we do not because it’s actually helpful, but because it’s just always been done and no one has really challenged it enough yet.

Matt Mulcock:
Yeah, no one’s… No one’s thought like…

Ryan Isaac:
Status quo.

Matt Mulcock:
Oh, that’s why a professional money manager would do that, maybe their incentives are different than mine. As a personal investor, you don’t often think about that, it’s just, that’s your tradition that’s passed down because of whatever it may be, movies or just culture, whatever it is. So one of the main traditions there is benchmarking, right. So a portfolio… A professional money manager is gonna usually be benchmarking their, let’s say they’re managing a mutual fund. They have to have a benchmark of some kind to track progress, it’s their scoreboard. Well, again, what has happened, what we see all the time, Ryan. I know you and I deal with this on and off throughout the year, depending on what’s happening in the market, is if we ever find it… We don’t do this all the time, we’re not trying to emphasize monthly or quarterly, like, “What’s a [0:11:01.4] ____ good share returns?” but any time that conversation comes up, it’s usually followed by, or it’s often followed by, well, how am I doing against the market? And they’re usually referring to, as we’ve mentioned this many, many times the S&P 500.

Ryan Isaac:
Or the Dow, yeah.

Matt Mulcock:
Or the Dow.

Ryan Isaac:
If you’re in the United States.

Matt Mulcock:
It’s usually one of those two. I use the S&P in this post as my example, ’cause I think that’s probably the most… I feel like it’s the most common one used. So what I said in there is it’s a valid question, but it’s flawed logic, and it’s not anything… Anyone that’s listened to this show or been to our webinar, or any webinar we’ve done, you’re probably gonna know why we talk about this quite a bit, which is the flawed approach of using something like the S&P as a benchmark is it’s only 500 of the largest stocks in the US and it has a growth tilt. So a well diversified portfolio, a well constructed portfolio, would not be using that as a benchmark. You would just… It’s a flawed benchmark. It’s not even the same thing unless you had a portfolio of 100% large cap growth stocks.

Ryan Isaac:
Yeah, unless your portfolio was the S&P, basically.

Matt Mulcock:
Exactly. Then…

Ryan Isaac:
It’s not an appropriate…

Matt Mulcock:
It’s not an appropriate benchmark.

Ryan Isaac:
Benchmark.

Matt Mulcock:
Yeah.

Ryan Isaac:
Yeah, ’cause they’re not comparable, they’re just two different things, but it’s… Like you said, that’s the most common reaction is, “What’s the market doing? How am I doing against the market? Did I beat the market?”

Matt Mulcock:
Yeah.

Ryan Isaac:
And a lot of times, I don’t even think… That’s how people are probably thinking about “the market,” that phrase, just because that’s what’s… If you live in the United States, that’s what’s reported on the news, that’s like the first… I don’t know, when you pull up the stocks app.

Matt Mulcock:
Yeah, it’s always one of the first three you see, yeah.

Ryan Isaac:
It’s one of those first two, right, like Dow Jones, Nasdaq, S&P, those are the main ones that get put on there. So that’s probably what they mean, but I don’t even think people really could define what they mean by the market. I think if you ask most people who said, “How is the market doing?” If you asked, “What do you… Define the market, and then I’ll tell you.” I’m pretty sure most people would probably just stop there ’cause it’s like, “Oh, I don’t… ”

Matt Mulcock:
They don’t really know.

Ryan Isaac:
“It’s a good question. I don’t know, I haven’t really thought about what the market is actually supposed to be, I just hear that on the news, like the market’s crashing, so… ”

Matt Mulcock:
There’s still two reasons why I think people would still point to it as like a benchmark, even if you said your portfolio is not comprised of that. The two reasons that I said, and this is, number one, years ago, Warren Buffett said, made a comment about how the normal person, just everyone out there, you’re better off just putting everything in the S&P, and then number two is more speaking to recency bias, which is the last 10-12 years, the S&P has absolutely crushed it.

Ryan Isaac:
Yeah, it’s beat every other segment… Well, not every other… You could probably narrow down some little segments…

Matt Mulcock:
Yeah, of course.

Ryan Isaac:
But yeah, it’s been like the top performing index of the whole world for almost 10 years now.

Matt Mulcock:
Yeah, so my response to that, in this is with… I basically respond to both points with one piece of data, we just hit this, Ryan, in our, I think our last webinar, where we highlight really the tale of two decades, and just mention that, you know, from 2000-2009… Again, I acknowledge that it’s easy to say, “Well, I should have just been in the S&P the last 10 or 12 years.” Like, yes, of course, if… I should have picked…

Ryan Isaac:
Yeah, if we could go back. Yeah.

Matt Mulcock:
Yeah, I should have picked Kansas, Villanova, and Duke, and North Carolina in my final four.

Ryan Isaac:
Or I should have bought bitcoin, I mean…

Matt Mulcock:
Yeah, exactly that…

Ryan Isaac:
If we’re going that back to do should haves.

Matt Mulcock:
History always seems inevitable in hindsight, you always can look back and be like, “Oh man, I knew this was gonna happen.”

Ryan Isaac:
Well, okay, so just on that, history always seems inevitable, that is like if every year up until 2022, I don’t know what the first year that the tournament actually started, but if every year you said, would you put money on Duke, South Carolina meeting? No, North Carolina.

Matt Mulcock:
North Carolina.

Ryan Isaac:
North Carolina, Duke meeting, would you put money on that? I think most people would be like, “Well, yeah.”

Matt Mulcock:
Yeah.

Ryan Isaac:
Top teams, rivalries, they always make it really far deep into the tournament. Yeah, but we always think it’s inevitable, but there’s plenty of years where the things we think are inevitable don’t happen the way we want them to.

Matt Mulcock:
: For sure. But literally, I’ve caught myself even in this tournament, just speaking of these final four. Going into the tournament, I’d done a little bit of research, again, I don’t watch college basketball, but going into the tournament, I did a little bit of research, like…

Ryan Isaac:
So you did your own picks… You went through each bracket yourself.

Matt Mulcock:
Yeah, I went through each one.

Ryan Isaac:
I do the auto-fill.

Matt Mulcock:
Yeah, you’re doing better than me, so…

Ryan Isaac:
And I beat you, yeah.

Matt Mulcock:
Yeah, exactly. So, but I go through and I’m like, okay, and I kinda like, “Who did well in their, like… ”

Ryan Isaac:
Totally.

Matt Mulcock:
But before the March, before the main tournament, these are conference tournaments, right? So I’m looking, okay, who has momentum? Who has this? And North Carolina was a team on my radar ’cause they got hot near the end of the year, from my research, right? So now, and I picked them to go to the second round or something and then lose. But now I’m sitting here, I catch myself doing it, being like, “Man, I knew, I knew North Carolina was gonna go far.”

Ryan Isaac:
Yeah, I knew it.

Matt Mulcock:
But I only knew it because they’re now here, okay like…

Ryan Isaac:
Yeah, uh-uh… Well, yeah, me and you both picked Baylor, I was just looking at mine, Baylor, North Carolina in the second round, and…

Matt Mulcock:
Oh, and we picked Baylor to beat them.

Ryan Isaac:
Yeah, we picked Baylor, yeah, that was my winning team.

Matt Mulcock:
Yeah.

Ryan Isaac:
So I’m out.

Matt Mulcock:
Yeah, exactly. So the point I make there is, if you go back to the decade just before this, again, well, we’ll forget the last two years for a moment, if you just say 2010-2020, S&P absolutely crushed it. Yes, very valid to say. “Well, I should have just been… I knew it, I should have just been there,” but if you go back to the decade prior to that, what we refer to as the lost decade, if you would have had everything in the S&P 500, you would have had, at the end of the decade, and you added no more money to it, you just put like a $100,000 in [0:16:51.8] ____.

Ryan Isaac:
Bought the S&P in the year 2000 and waited till 2010.

Matt Mulcock:
Everything in the S&P for 10 years, you would have come back and it was down 9.1% total. It was a negative 0.95% per year for 10 straight years, on average. It was the worst… Speaking of this, Ryan, of things that you don’t… The Duke, North Carolina thing, it was the worst decade in history for the S&P 500, including the Great Depression.

Ryan Isaac:
Yeah, which is wild. And then we always talk about what you own and when you own it, whether it’s a piece of real estate or a dental practice or the S&P 500, over very long periods of time, it smooths out the randomness and the luck of it all, but in shorter periods of time, it’s just total crap shoot.

Matt Mulcock:
Pure timing.

Ryan Isaac:
When were you born? When did you start working? When did you have enough money to buy the thing or invest in the thing? And were you alive… Were you alive during the seven-year period of time when DSOs were retiring 43-year-old dentists?

Matt Mulcock:
Right, right, exactly.

Ryan Isaac:
Giving them so much money, they get to retire in their 40s. That never happened before and never happened again. Were you alive during that time, it’s like there’s just crap shoots of little spurts during small chunks of time that are… It’s just total luck of the draw.

Matt Mulcock:
Yeah, exactly. So then if you flip this, and I said to be fair to the S&P, and to… What happened literally, it was like, again, tale of two decades, the next decade it completely flipped, the S&P did on average over the next… The following decade per year on an annual basis, did over 13.5% per year for a full 10 years.

Ryan Isaac:
Which is a little above it’s historical very long-term average. So…

Matt Mulcock:
So it flipped and rebounded, did very, very well. Again, you probably would have made up for… I haven’t looked at all the numbers, but I think over that 20-year period, if you take all together the S&P averaged about 6 and a half-ish, so over the 20 year period, below its historical average, but again, it rebounded and led all categories the following decade. So again, my whole point of that was just saying it’s not a great benchmark for the reasons that we’ve highlighted. Number one, if you have a well-diversified portfolio, you’re not comparing to the S&P anyway.

Ryan Isaac:
‘Cause they’re not the same.

Matt Mulcock:
They’re not the same thing. And then number two, I think the final thing that I put at the end of the section is, if you’re still not following the logic or you just disagree, totally fine. A thought experiment I encourage people all the time to go through is, let’s fast forward to the end of your career. The end of your career, you have two scenarios, number one, you beat the S&P, you’re sitting here at the of your career, you look back and you’re like, man, I beat the “market”.

Ryan Isaac:
Suckers.

Matt Mulcock:
Yeah, I beat it. Suckers. I beat it by, let’s, say 3%. You beat it. Awesome, you should go work on Wall Street, but you can’t retire ’cause you didn’t save enough money.

Ryan Isaac:
Yeah. So you say in option one, you beat it, but you didn’t hit your own personal goals.

Matt Mulcock:
Yeah.

Ryan Isaac:
Okay.

Matt Mulcock:
Number two, you didn’t beat it. By the time your career is over, you’re looking back and saying, man, “the market”, I under-performed it by 2%, but then you go look and you’re like, “Oh, but I reach my goals, my personal goals and I’m riding off into the sunset, work is optional.” The whole point is, why do you care? It’s not about… If you really think about it, it’s not about the benchmark itself, it’s really about your own personal life and you reaching your goals. The market is an arbitrary measuring stick.

Ryan Isaac:
Yeah. And then, which opens it up for… What I like about that is that it opens it up for more people to have more success in a broader way, because if success is defined so narrowly as achieving whatever some arbitrary index is achieving in a rate of return, that’s a very narrow definition of what success can be versus like, maybe you didn’t beat the S&P and maybe you actually didn’t even end up having as much money as you thought you could have or wanted, maybe your practice didn’t get as big as you thought, but what if it was enough, but you were like really happy and had tons of hobbies and spent a lot of time with people you loved.

Matt Mulcock:
Like at the end of the day, what matters is what you just said, is that these personal goals, you achieving work being optional, which by the way, even that is different for every single individual, completely different. Retirement is something different for every single person, that definition of success should be unique to the individual, and it has nothing to do with whether or not you beat an arbitrary index or benchmark.

Ryan Isaac:
Funny, yesterday, I was taking a drive with my family and we were walking around a beach around here, and this is like, this stretch of beach has some of the most insane real estate I’ve ever seen in my life, I just… Kind of the real estate you see in person, you’re like, I can’t believe one…

Matt Mulcock:
Is this Dana point?

Ryan Isaac:
It’s Strands beach in Dana Point.

Matt Mulcock:
Strand, I lived right in those condos right there. Yeah.

Ryan Isaac:
The real estate that sits off of that little boardwalk…

Matt Mulcock:
By the way, not in the real estate you’re referring to. I did not live in any of those places.

Ryan Isaac:
You lived in one of those? They’re like $20 million houses [0:22:15.7] ____.

Matt Mulcock:
I lived in the poor people condos across the street, yeah.

Ryan Isaac:
That is still expensive, but it’s the kind of real estate you see in person that kind of really actually takes you back like, “Wow, I didn’t… ” I think it’s kind of insane to see stuff like this in person. My kids were talking about it,” and one of my daughters was like, “One of my goals is to grow up and I wanna be able to buy that house right there, and we’re looking at this crazy house. And then my other daughter, who’s a little bit younger, goes, “Is it okay if I don’t want the big house? What if I want something else?” And I was just listening like, “Yeah, that’s a good question.” The answer is yes, it’s totally okay.

Matt Mulcock:
100%.

Ryan Isaac:
But also, it’s just so dependent on each person, which is why these topics matter.

Ryan Isaac:
This is an important announcement from the Dentist Money Show podcast system. Go to dentistadvisors.com and click the big green book free consultation button. Schedule a time for your free consultation and save your financial future.

Matt Mulcock:
I mean, Ryan, don’t you think it’s a bit much?

Ryan Isaac:
Yeah, it’s probably a little bit much, but I think some of our listeners might find getting a consultation should be more like an emergency.

Matt Mulcock:
They probably should. We are saving financial lives.

Ryan Isaac:
Let’s go into the second part of what you… Unless you had something else to finish up, there was a kind of a second part to this about the life scoreboard. Was that the title, actually? Scoreboard of Life?

Matt Mulcock:
Yeah.

Ryan Isaac:
I don’t remember. You didn’t like the title and I liked the title, but…

Matt Mulcock:
Well, no, this is like the title of the next section was…

Ryan Isaac:
Yes.

Matt Mulcock:
I kinda broke it down into the investing scoreboard, and then the life scoreboard, yeah.

Ryan Isaac:
Yeah, you had a couple references to some studies in quotes here, walk us through that ’cause I thought these were super cool.

Matt Mulcock:
Yeah, so I found this fascinating as I was kinda going through this, I don’t know if you’ve ever read any… And I don’t… I forgive me, I don’t know how to pronounce this. Is it Meyer or Meyer Stottman? I don’t know, I’ve never heard his name pronounced.

Ryan Isaac:
It’s probably Meyer, I think its Meyer.

Matt Mulcock:
It’s probably Meyer, Meyer Stottman, he’s written several books. He’s kind of heavy, to be honest, his books are relatively heavy, he’s an economist, brilliant, brilliant guy, but one of the studies he’s done and something he’s focused on in a lot of his work is around the idea of income and life satisfaction is very relative and very subjective. So he does this study and a survey where he… Forgive me, I don’t know all the details of how many people participated, but it was pretty sizable at the time and very comprehensive, and it kinda shook some people up in the financial world when this first came out, but the survey was basically uncovering that people answered…

Matt Mulcock:
When it comes to income, they would rather make $50000 in income in the neighborhood… As long as the average person in the neighborhood made $25000 versus make $10,0000 where the average in the neighborhood made $250,000. I just found that so fascinating, ’cause I’m sitting here thinking, you would think double my absolute income and my life satisfaction will go up. I think that’s a pretty fair statement. Right?

Ryan Isaac:
Yeah. Objectively, that seems true. If I had more money, I will have a better lifestyle.

Matt Mulcock:
I’d have a better life. That’s totally fair to say. And we’re talking double. You double my income, I will have more life satisfaction. I can do more, it opens up more freedom, more stuff, more bigger house, whatever, things that we objectively say like, ? Okay, this is gonna help me with satisfaction in my life.” What he uncovered with this is that is sort of true as long as you also factor in what are people in my immediate surrounding…

Ryan Isaac:
If you’re winning everyone else.

Matt Mulcock:
If you’re beating everyone else.

Ryan Isaac:
That’s it.

Matt Mulcock:
That’s why I said this isn’t even keeping up with the Joneses, this is like, I gotta be better than the Joneses.

Ryan Isaac:
I gotta beat the Joneses.

Matt Mulcock:
I gotta beat the Joneses.

Ryan Isaac:
Joneses version 2. That’s wild.

Matt Mulcock:
It’s wild, and there’s was another study…

Ryan Isaac:
Sorry, I’m just comprehending this out loud. I would rather have half as long as it’s more than the people around me.

Matt Mulcock:
Than the people next to… In my immediate surroundings.

Ryan Isaac:
As long as I’m beating them, I’ll take half.

Matt Mulcock:
Yep.

Ryan Isaac:
That seems so counter-intuitive, but clearly people chose it.

Matt Mulcock:
Yeah, exactly.

Ryan Isaac:
More people chose that option.

Matt Mulcock:
And there was another study that backs this up. I was done in 2010, I believe this was in Europe, but the one of the… And I link to the study, so you can go and dive, if you wanna be a nerd like me and dive into the stuff.

Ryan Isaac:
You do your homework, you show your sources, you’re not… No [0:26:37.8] ____.

Matt Mulcock:
Yeah, so there’s a link to this, but one of the main quotes I pulled from this, from the abstract, it was, I think summed it up was, the study… The researcher said, “We found the ranked position of an individual’s income predicts general life satisfaction, whereas absolute income has no effect.” So kind of again, the same thing, it backs off Meyer Stottman, it’s… Has nothing to do with absolute numbers or objective numbers.

Ryan Isaac:
Ranked position.

Matt Mulcock:
It’s all your ranked position, yep.

Ryan Isaac:
Yeah. Wild. It’s just so crazy, it reminds me, I think I went and found this really fast, we did an episode… Well, I don’t even know what we’re on now. This had to have been 40, 50 episodes ago called Why Your Neighbor’s Lifestyle is a Bad Benchmark.

Matt Mulcock:
Goes along with this perfectly…

Ryan Isaac:
Number 284, go read this blog, go check that out if this topic is interesting to you because… What was that phrase again? Ranked position.

Matt Mulcock:
Your ranked position versus your absolute income.

Ryan Isaac:
We’re funny creatures, man.

Matt Mulcock:
Oh yeah.

Ryan Isaac:
We are funny creatures. And just going back to the first point about benchmarks on the S&P and investments. It’s good to wonder how you’re progressing, and it’s good to keep… We keep insane amounts of data, we’re really nerdy with data, we get that, and we do lots of comparisons and benchmarks, ’cause that tells us as advisors a lot of things, where people are headed and how it’s going for them. But it is funny how many conversations I’ve had recently, maybe the last few months or so, especially that markets have cooled off a little bit and gone down a little bit, how many people, despite having a high enough net worth, enough liquidity, enough savings rate, enough profitability, enough income, not just enough, but like plenty enough, it’s more than enough, are still concerned with a portfolio, a diversified portfolio, underperforming one index in the world over a six-week period of time. I’m not talking about all time, I’m talking about a six week period time.

Matt Mulcock:
Or like two weeks, even two weeks. Yeah.

Ryan Isaac:
Or a four day period of time.

Matt Mulcock:
Yep.

Ryan Isaac:
I mean, that’s how we’re wired. We’re weird creatures. It’s really fascinating, and we do this apparently in every aspect of our life.

Matt Mulcock:
In every aspect, and that’s why… And I, by the way, I’m guilty of all of this, it’s not like I’m sitting here.

Ryan Isaac:
Totally.

Matt Mulcock:
On this high horse saying…

Ryan Isaac:
No.

Matt Mulcock:
I’m above all this. I write about this because I find it fascinating, ’cause I look at myself saying, “Wow, I do this.”

Ryan Isaac:
You’re doing this.

Matt Mulcock:
“This is me.” And so the last piece of this, when I talk about these studies is, and my wife and I talk about this all the time, I said, “This is why we read new stories around… ” And I found this, again, I linked to it,” 64% of Americans have saved almost nothing for retirement.” I think the average right now is like $29,000 in their retirement, the average, or 64% of Americans. It’s wild how little people have saved. So this exact thing is why I can read the story like that and be like, “Man, I’m so grateful for my position in life and where I’m at, and I’m so far ahead of that, not sitting on a beach house in strands Beach, but I look at that and say, “Oh man, it gives me some global perspective,” it’s great. And then guess what? Five minutes later I go back to being jealous of my neighbor’s car or the remodel my neighbor’s doing.

Ryan Isaac:
Completely. Totally. And it never ends, it never ends. We’re wired this way, which is, I don’t know if this brings it all back, but that’s why having accountability from another human being that’s not emotionally involved in your exact decisions is kind of the only key that gets us through it. Sadly, and unfortunately, it’s not a lack of information that keeps us from behaving this way. It’s definitely not a lack of apps or notifications or rings and pings and dings and things.

Matt Mulcock:
Rings and pings and things and things.

Ryan Isaac:
To get Dr. Seuss-ie on you, it’s definitely not a lack of those things that keeps us from behaving that way, it’s just we just can’t control ourselves. There was a quote at the end of this thing from a famous writer, Jason Zweig that…

Matt Mulcock:
Yeah. He’s so great.

Ryan Isaac:
What was that quote?

Matt Mulcock:
So he’s awesome. If you have not followed him or read any of his stuff, he writes for The Wall Street Journal. He’s fantastic. He’s written a couple of books, I believe. So yeah, the final quote that I finished, I summed it all up with was, “Investing isn’t about beating others at their game, it’s about controlling yourself at your own game,” and kind of what I put there is if you could just replace investing with the word “life” and that it’s just as true, that life is about beating… Is not about beating others at their own game… At their game, it’s about controlling yourself in yours.

Ryan Isaac:
Man, it’s so true. Jason Zweig said that, it’s how we’re wired, unfortunately. If I look at this episode and go, “Okay, what are some takeaways from this?” I would look at this and say, number one, if you listen to this and you thought, “Yeah, I wonder how my portfolio does in comparison to these things? But now I wonder, do I even have a diversified portfolio? ‘Cause there’s a reason why we’re saying it doesn’t compare to the S&P, the reason is because you wouldn’t build a portfolio so narrowly.

Matt Mulcock:
Not optimal.

Ryan Isaac:
It’s not. Diversification reduces your risk while still giving you the best chances at a high return over long periods of time. So you might be listening to this and go, I don’t know if my portfolio is built the right way, I’m gonna get in touch. That might be one thing. Another thing might be a takeaway could be, I actually don’t have any data about myself, like forget other people, I’d love to benchmark myself, like I have no idea how my income or spending is trending, or, “Is my net worth growing at all?” If so, wh, y and how much and is not, or…

Matt Mulcock:
Yeah. Am I even tracking that progress? Yeah.

Ryan Isaac:
Yes. Do I know any of this stuff about… Maybe that’s another takeaway, or maybe another takeaway is, look, I just struggle to get over this human behavior and not fall into my same old pitfalls and traps, and I do, I need another person to just.

Matt Mulcock:
Say welcome to the club, join us.

Ryan Isaac:
We’re all of us, so I need another person to be there that I can call, text, email and ask questions to, along my whole career and investing life so that I stay out of these pitfalls, ’cause we’re all in ’em constantly…

Matt Mulcock:
I’d say one of the greatest failures when it comes to money, wealth, even life in general, life satisfaction, is a failure to define your own success. I think that’s kind of what leads to a lot of these issues, is people don’t even stop to think, like what is success to me? It’s kinda what you were saying, you’re like, “What is my scoreboard?” Again, not to sound cheesy but…

Ryan Isaac:
What is it? Yeah.

Matt Mulcock:
Truly, what is my scoreboard? What am I measuring my success off of? Is it my own personal values, like my own personal goals, that again, are so unique to me, or am I defining success off of what I see on Instagram or what my neighbor is doing or what I perceive my neighbor to be doing? That’s a problem there.

Ryan Isaac:
Yeah. That’s the reality, yeah.

Matt Mulcock:
It’s yeah. Am I basing success off of the highlights of other people’s lives, or am I basing it off of my own personal life and what might me and my family actually value and what we actually want out of life? I think far too few people actually take the time to define that for themselves and hopefully with an account, like we’ve said, an AccountaBuddy, someone that you can actually have these conversations with. And then not only that, but continue to revisit it ’cause it’s not like that’s just a great one-time thing. Good to go. I have my plan, I’m off. That’s really not where the journey ends, it’s actually where it begins, that’s where it starts, and then continually revisiting that. So that’s where I’d say hopefully is a big takeaway, is how are you defining success and then what are you putting in place, what system process are you putting in place or what people are you putting in your life to help you continually revisit that definition.

Ryan Isaac:
Yeah, for sure, man, I’m glad you said that. As you were talking, I was thinking, sometimes it’s hard to step away from work and money and cash flow and bill paying and investing, all this stuff, and ask questions outside of those things, like what matters to me and what’s important and what makes my life feel worth it. If those things feel chaotic, if you can’t even box those things up and put them into categories and set ’em aside organized cleanly, then it’s almost like so much chaos you can’t even breathe to go like. “Should I start a new hobby or should I pick up this old hobby I used to have in my life or spend more time… ” You can’t even do that. That’s why what you just said, having a system or this organization or people in your life to help take that off your plate and define it, let’s define what all these numbers are telling us in all these things in your financial life so that you can mentally separate and think about what really matters in life besides work and cash flow and profits and collections and all this stuff. So thanks for being a writer, first of all. ‘Cause that’s awesome. Really hard.

Matt Mulcock:
Yeah. Pretending, at least, fake until you make it as they say.

Ryan Isaac:
Well, you’re doing good, man. Thanks for doing that and sharing this. To all those still in the tournament, may the odds be ever in your favor. [chuckle]

Matt Mulcock:
Ever in your favor.

Ryan Isaac:
They’re usually not, they’re usually totally against you, the odds, but if you have any questions, as I always just go to dentistadvisors.com and click the book free consultation button. We’d love to chat with you. Matt, thanks for doing it.

Matt Mulcock:
Yeah.

Ryan Isaac:
Appreciate it.

Matt Mulcock:
Thanks Ryan.

Ryan Isaac:
Thanks everyone for listening. We’ll catch you next time on another episode of the Dentist Money Show. Take care everybody. Bye-bye.

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