How to Keep Your Practice from Hitting a Plateau – Episode 111

What does it take to build a business beyond yourself? Even if you’re the only producer, how can you maintain the humanity of your practice as you grow? In this Dentist Money™ interview recorded at the Greater New York Dental Meeting, Reese welcomes Peter Shallard, Founder of Commit Action, and personal coach to entrepreneurs from Silicon Valley to Wall Street. Peter discusses the intersection of business and psychology and explains why it’s so easy for dentists to become their own worst enemy when trying to grow a practice. He talks about the lies business owners often tell themselves, how burn out usually sets in, and the danger of an all-or-nothing thinking.
Show notes:
www.commitaction.com

Podcast Transcript:

Reese Harper: Hey, everybody. It’s Reese Harper here, and thanks for tuning into the Dentist Money Show. I’m excited to share this episode with you, which was recorded at the Greater New York Dental Meeting not too long ago.
This interview is with Peter Shallard. He’s the founder of a company called Commit Action, and he’s known as The Shrink for Entrepreneurs. He works with business owners across the country, and he also happens to by my personal business coach, so I’ve gotten to know him pretty well after the past few years, and he’s had a huge impact on my life and business. He’s helped me navigate some really difficult decisions, and keep things in perspective when things have been pretty hectic.
Peter’s originally from New Zealand, then he got his start as a therapist, and became an expert in business psychology. Then he decided to spread his own entrepreneurial wings, and build a business around helping other professionals maximize their productivity, while maintaining a balance in sanity and life. A lot of his advice is grounded in science, and academic resource, and he’s able to apply it directly to the challenges of owning a business. This will be an inspirational conversation for a lot of you.
As always, I want to make sure you know how to get ahold of us at Dentist Advisors, if you’re ready to have a conversation about your own financial situation. To schedule a call, got to DentistAdvisors.com and click the link at the top to book a free consultation. You’ll find a time on our calendar that works for you, and then we’ll have a discovery call to assess your personal situation, and show you how to make work optional at an earlier age.
If it’s easier for you, you can always just give us a call at 833-DDS-PLAN. Also, don’t forget to submit your financial questions to Reese, R-E-E-S-E @dentistadvisors.com, or ryan@dentistadvisors.com. We’ll do our best to answer it on an upcoming show. Thanks again for listening, and enjoy the show.

Speaker: 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, Reese Harper.

Reese Harper: Welcome to the Dentist Money Show, where we help dentists make smart financial decisions. I’m your host, Reese Harper, at the Greater New York Dental meeting with someone who has extensive experience in personal coaching, a variety of entrepreneurs, including service-based professionals, dentists, doctors, attorneys, people like me. He’s my own personal coach, and also owns a company called CommitAction.com that helps business owners and individuals, executives, and small business owners all throughout the country stay accountable to goals they set. He’s created a company that’s quite interesting, though I’ll let him explain.
I’d like to welcome to the show Peter Shallard. Peter, thanks for coming on.

Peter Shallard: Thanks for having me.

Reese Harper: It’s good to have a face-to-face podcast with you, man, and I feel like we’ve got a lot of cool things that we’re going to get into today. I’d like to start by just asking you to clarify or explain any part of your background that you think might be helpful for people to know about you?

Peter Shallard: Yeah, okay. I’m known as The Shrink for Entrepreneurs, and that’s might sort of first business, my first claim to fame. I actually have a background in clinical psychology. My first business was a brick-and-mortar therapy practice back in New Zealand, which is where I’m from.
It’s kind of a long story, but I got started working with regular people, a lot of referrals from medical doctors for clinical issues, anxiety disorders, addictions, depression, and that kind of heavy stuff. I almost accidentally started working with entrepreneurs, self-employed people, and was absolutely delighted by the psychology of those people, the different ways that they think, and found myself really deeply fulfilled by connecting and being able to talk psychology with some of these folks.
So fast-forward through many years of trying to figure out what I wanted to do, and increasingly working with more and more of those people, I settled on this idea of specializing in that area. I started writing a blog back in the day about the intersection of business and psychology, which I think is how you found me. That’s how the kind of tagline, The Shrink for Entrepreneurs was born. I started doing this back when I think really nobody else was doing it, and so I had that early movers advantage.
And these days, I’m now based in New York, been here for six years, working with the founders of some really exciting startups. A lot of clients that I work with in the [VC]-backed, venture capital technology startup world, and then also on the other side of my practice, business owners who run companies that they own the large majority of, if not 100% of. Maybe partners, usually more cash-focused cash-cow businesses that are creating an incredible lifestyle for the owner/operator.
And then as you mentioned, what started as a little experiment, a lean startup kind of passion project a couple of years ago, turned into Commit Action, which is this company … We help small business owners outsource their battle for focus and productivity. We help them become the highest leveraged version of themselves by pairing them up with what is essentially an executive aid for personal effectiveness, someone that they work with very inexpensively, week-to-week, over the phone. We have a propitiatory software app, and we help them plan out their highest leveraged task, help them keep focused, hold them accountable.
It’s kind of like a personal trainer for your productivity instead of fitness.

Reese Harper: It’s awesome man. Yeah, and it seems like the context that you’re bringing today is that personal interaction you’ve had with people on an individual level, plus as a business owner, creating something that is bigger than you with scale, and we’ll call them associates, that dentists will be able to relate to really well.

Peter Shallard: Mm-hmm (affirmative).

Reese Harper: There’s a level of scale that you’ve had to create in an organization in order to provide more care, more treatment to a lot of different types of people, and I think in that sense, you can relate to the audience as both a direct provider of care, and someone who has to empower a team of people to also take care of the craft that you’ve kind of honed in [and] your own skill set.

Peter Shallard: Right. Yeah, my story with that, I didn’t realize until you said it, but definitely there’s a lot of parallels. For the longest time, my goal was first of all to build my therapy practice, and have it just be kind of financially successful and pay the bills, and I got that, and then I kind of realized that I didn’t love that work. I pivoted the focus of the type of clients I work with, and started this entrepreneur thing, and this was like eight years ago or something.
Then it was my goal to have a full client roster of me doing one-to-one, billable by the hour work with these high-level entrepreneurs. For the longest time, I was just chasing after that as an objective, and I think the week that I hit it, and I had a full packed schedule, and made a lot of money, and felt great about myself, I got to that Friday afternoon, was exhausted, and just looked ahead into the future and realized, “There’s no way that I can do this for the rest of my life.”
I’ve got to figure out a way to build something that scales beyond me, and that was the beginning of the thought experiments, just the staring at a blank wall and thinking about how else can I create value in this marketplace. And all I know how to do is this service that I deliver, how can I capture and decode a little bit of that, and train others to do it? And that’s really how Commit Action was born.

Reese Harper: Yeah, I think that’s the kind of parallel, I guess, before I get into some of the questions, and I know people will want to hear. I think that it’s interesting to see the evolution that a service-based, human-empowered business goes through. You know? You develop some clinical expertise in your own craft, you get to the point where you’re really busy, you realize you can’t continue at the same grind and pace that you … Or maybe you can, but you may not want to continue at the same grind and pace, and so you want to create some scale by having other people grow an organization.
In dentistry, that’s done in a variety of ways, through hygiene production, through associate contracts, through expanding your operation to multiple producers. But what stops a lot of dentists from expanding into that larger, scalable organization is that they worry that the thing that they do so well, that makes their practice special, and unique, and most helpful is their own clinical skill, their own clinical ability, their unique way of looking at the art of dentistry, they don’t know how to transfer that as easily to another person. They feel like that clinical skill is what authentically differentiates them.
[inaudible] in many cases, or in most cases, that’s probably not what the patient perceives as the real value. It’s more that human experience that the patient’s having with the dentist, they communicate well with them, and good communication and good interaction with patients is the key to transferring from one doctor to another, and creating a better organization. I think that’s what you’re kind of trying to highlight, is that … How can you take a business, and not let it lose that humanity as it continues to grow? That culture that made it special in the first place, the personality and the communication style, or the passion that the founder had, how does that stay intact as we grow the organization?
It seems like that’s a good place to kind of continue to pivot our discussion. I think that in this journey of moving from a clinician, sole provider, to a slightly larger organization, to one with many, many, many locations, or someone who wants to just stay solo and do their own thing. I mean, there’s a lot of choice that you have to make along the way, and I just want to make sure that it’s a conscious choice that people are making, if they’re choosing to have a business that remains at a certain size. It’s a conscious choice, it’s not one that they’re making excuses for, or maybe telling themselves stories that aren’t true, that’s holding them back.
So kind of want to focus on that today. I guess I just spoke for a bit, I’ll let you kind of respond to any of that that you feel like is relevant.

Peter Shallard: Anyone who’s a service professional, who wants to think about scale, my encouragement is to psychologically try to step out of that belief system that what you do has to be so precious and unique. In a weird way, by paradoxically acknowledging that uniqueness … It doesn’t have to be what’s recreated, that there’s tons of other opportunities in business, and to scale whatever you were doing, to get people to do stuff that they can do better than you can, and that there will be customers who want what they can do.

Reese Harper: Yeah, and I don’t know if this might be a different point than you’re making, but it seems like in the business of dentistry, sometimes it’s … Even though you might have this psychological believe that what you do is entirely unique … Which it really is. I mean, no one’s personality can be duplicated.

Peter Shallard: Right.

Reese Harper: And no one’s exact artistic style as a dentist could be perfectly replicated, but the idea that someone else can do it, I don’t want say good enough, but well enough for another person to say:
I want to pay for that as well. I’m willing to pay for that, because that opportunity is available. I mean, there’s a slot in the schedule on Wednesday, and I want to have that slot, and I’m willing to have it with whomever, because I trust Dr. Johnson’s ability to hire the right associate, and have them match up with me, and I’m okay with that. It doesn’t have to be Dr. Johnson that’s the one delivering the care.
I mean, there are patients who are going to be fine with more flexibility, better schedule, different hours, time that they can show up …

Peter Shallard: And this is the crazy thing, is that in a perfect world, there’s going to be patients who actually really develop a relationship with that other person, and appreciate their personality, and their personal touch that they bring to the mix.

Reese Harper: Yes.

Peter Shallard: And you know-

Reese Harper: And maybe even more than they would’ve appreciated you, and that’s [inaudible] really … Is that what you were kind of saying? It’s not always a worse experience.

Peter Shallard: Right.

Reese Harper: Sometimes it’s better for them.

Peter Shallard: Sometimes it’s different, and the thing is that people … Like, not all customers are the same, not all patients are the same.

Reese Harper: So let’s talk a little bit about some of these … You made the comment of self-sabotage a little bit earlier when you’re talking about this concept of how some entrepreneurs, and I think this is particularly true within the dental profession, we feel like there’s … We get sometimes caught up in how much progress we should make. We get stuck at plateaus. We hit a ceiling. Things flat-line.
Talk to me a little bit about the [self-sabotagey] mentality that relates to the growth of a business.

Peter Shallard: I see this personally a lot in the owner-operator businesses that I’ve been fortunate enough to touch and connect with over the years. I think that for people who know how to build business, and can get started, and can make money, and have some degree of success being self-employed, I think that the next great challenge is finding how psychologically plateaus in businesses are created, because it’s amazing how people will reach a certain level of performance financially for what they’re doing, and in their kind of heart of hearts, and in their rational mind, know that they want to take it to the next level.
There’s almost no business owner in America who will tell you, “Oh, yeah. I’m really happy with where I’m at. If I can just have another year that performs exactly the same revenue-wise or whatever.” That that’s what they want, everybody wants growth, and yet so many businesses push the same numbers year after year, or have this minute variation kind of riding a rollercoaster, that might go a little up and down, but it ultimately always circles back to the same place.

Reese Harper: Yeah.

Peter Shallard: And I think that self-sabotage in the psychology in the owner/operator is a really big part of that.
I think that what I see with entrepreneurs is that a lot of people are afraid of failure, a lot of people struggle with kind of paralysis in terms of getting things done, because they don’t want to take big risks in life and business. But there’s this other thing on the other side of it, where people who build businesses, and are kind of living that self-employed, slightly entrepreneurial life have an unconscious, often totally unknown to them fear of what success might actually look like, and what it may actually do to their lives. What really serious growth might do to their lives.
And so one of my favorite questions to ask people, especially owner/operator kind of entrepreneurs is: What would it look like if overnight your business was to just double, or triple, or something like that? What would that do to your life?
And when I’m talking about what it will do to your life, what I mean is your personal life, your emotional life, your relationship with your significant other, your relationship with your kids, your relationship with your own body, your physical health, that your emotional kind of outcome of having an explosion in business. And so many entrepreneurs are in a position where if they really paused for thought, and consider what really serious growth would mean for them, the net effect on their life emotionally, of explosive business growth would be negative.

Reese Harper: Yeah, if you think about this from a dentist context, let’s take an average dental practice that does a $1 million dollars in collections, and just imagine that you’re the person that wakes up the next day, and your production on your calendar is set to do $2 million dollars in collections for the year. You’ve doubled the amount of work that needs to be done that next day.

Peter Shallard: Right, right.

Reese Harper: And think about the implications that that would have on your own personal life.

Peter Shallard: Right, and so the entrepreneurial labor of building an organization to scale in that direction, because the truth is that the magical business growth genie never shows up like that. No business grows unless you’re like Instagram or something, it doesn’t grow 2x over night, just like that.
So what actually happens is that businesses grow step-by-step, and incrementally, but there’s this weird point that a lot of people get to where they grow their business, they grow their business, and then they start to get a little stressed out, and they start to get a little emotionally unfulfilled. They’re finishing days as an owner/operator with a net negative emotional outcome, where they’re just kind of burnt out, they’re getting tired, and the business is starting to grow to the point of they’re psychologically overwhelmed, where it’s kind of knocking on the door of being a little too much.
And at that point, a lot of the activity that that business earner may have been unconsciously contributing, and that have been contributing to the growth of their business, that will actually start to slow down. That’s what we mean by self-sabotage.
That those little things that have helped the company, and some people are more aware of these than others. It could literally just be the way that you greet the patient, you know what I mean? These things that have been getting word of mouth referrals, that have been making a difference for potentially years, as that emotional ceiling has approached, people will start to kind of unconsciously reduce that behavior. What happens is the financial performance of these companies, they grow, grow, grow, and then all of a sudden something happens, something changes, and the company will just flat-line. The growth of the business will just flat-line.
If you talk to one of these entrepreneurs, they’ll tell you they want growth. So the reason that this is psychologically interesting, and it is self-sabotage, is there’s an internal conflict. There’s a part of these people that really believes rationally, consciously that they want to take it to the next level, they want to grow by 20% next year or whatever it may be. Then there’s this other part of them unconsciously that knows that any further step in that direction is actually going to make their life a little emotionally uncomfortable, and it’s nothing major, right? Because it’s not a 2x, it’s like a 1% growth, and then another percent.
While that internal conflict exists, it’s very, very difficult for progress to actually happen. These people start fighting themselves psychologically, and you can see it on a [P&L]. You can really see where this happens in a business, where inexplicably, for no reason, it has nothing to do with the market, but the company just starts to flat-line or be on that rollercoaster, where if you zoom out of any kind of wave pattern far enough, it just looks like a flat-line, too. It’s the same thing.

Reese Harper: Yeah, so I mean, what we’re saying is that basically the business owner, the dentist is looking at his practice, and realizing that in order to have the success that they want to have, it’s going to kind of create massive problems for them, because they’re looking out into the future and saying, “This is how it’s going to be when it’s this big, and I don’t want it to feel like that.”

Peter Shallard: Right.

Reese Harper: And so subconsciously, or consciously, they might not be taking any incremental steps towards that, because the idea of it getting significantly larger means I’m going to have havoc in my life. When the truth is no business grows like that, if we can just incrementally take small steps towards …

Peter Shallard: Well, I think the thing is, is that the incremental steps have to kind of overall make your life better, and that’s the sort of emotional mathematics that entrepreneurs need to understand. That if you’re going to grow a company, and work on incremental step growth, which is what I recommend everyone works on, like that’s how to do it.
Those steps, as you’re going, they have to be these experiences of, wow, hiring this person, or opening up this part of the business and bringing in new customers, or whatever it is, new sales channels, that marketing campaign that really worked off … Finding ways to grow a business have to at the end of the day, at the end of the week, create a net positive impact to your life at an emotional/psychological level.
For an entrepreneur, as your business grows, your life should get better. If at any point that statement is not true, as your business, grows your life gets better, if that becomes untrue, as my business grows, my left starts to get worse … Like, you’re going to have weeks that are like that, but if that is an ongoing trend, that’s where the self-sabotage enters, because there’s a part of your unconscious mind that’s job is to be a watchdog for the emotional/psychological quality of your life.

Reese Harper: And you’ll end up kind of capsizing as that part of your brain says-

Peter Shallard: “I’m done.”

Reese Harper: “I’m done. I’m burning out.”

Peter Shallard: Right, it’s this part of us that’s number one job is to move up toward pleasure, and away from pain.

Reese Harper: So let’s talk about that kind of concept a little bit more as it relates to getting burnout, and what we see … The point of running this business was to have some level of personal gratification, but to build my company, I had to delay my gratification for so long, I had to invest so much money into building this practice, now it’s time for me to harvest it. But maybe I’ve built habits that have made me grind, grind, grind for so long, that it’s hard for me to sort of try to figure out how to enjoy life, too, and continue to grow.

Peter Shallard: Right.

Reese Harper: Talk to me a little bit about how burnout happens.

Peter Shallard: Yeah, this is something I’ve become a specialist in, because I just see it so much. The thing about business owners and successful people, and I can guarantee literally anyone listening to this, who’s the kind of person who goes out of their way to listen to content like this, right? They’re an ambitious, focused person, is that we’re all good at delayed gratification.
Now, this isn’t true of humans in general. There’s actually a ton of research to show that delayed gratification is what’s known by behavioral psychologist as conscientiousness, the ability set goals, to sacrifice short-term pain for long-term pleasure, all of that kind of delayed gratification stuff. That is actually a major problem, that it’s the major social pathology of our time, that increasingly, people are really bad at that. Everybody wants instant gratification now.
The one exemption is business owners. Ambitious people, people who are willing to go spend that money, and go to school for all those years, and really put the time in to build something, have that innate tendency, that natural ability be very, very good at setting aside pleasure in the short term so that you can have that long-term payoff. My clients are all the same. Every single entrepreneur I talk to has the story of … You know, for a lot of the, it’s like being that teenager, where their other friends were like screwing off, and doing crazy stuff, and having a bunch of fun and wild times, whatever that looked like. They were the one who was staying home, trying to find a way to earn a little money on the side, who was studying hard if they were academically-minded, who was grinding and hustling, and pushing for a better future, while their friends were living in the present.

Reese Harper: Yeah.

Peter Shallard: That trait as a personality trait is something that’s highly correlated with entrepreneurial success. Business owners who have that background are more likely, and there’s all kinds of incredible research, including a study done over 30 years, following children who demonstrated this trait, looking at their financial performance over their entire lives. The research is in, and it shows that that stuff matters, that the people who are highly conscientious tend to perform better in business, make more money, and all that kind of stuff.
But like a lot of stuff in entrepreneur psychology, it comes with a price. There’s a double-edged sword to this, which is that some people get so good at delaying gratification, that they kind of go on this journey of building a business where they’re continually saying no to the pleasure, the fun, the enjoyment and the present. You know, to use a really out of date psychological metaphor, and it is just a metaphor, they’re saying no to the inner child, that part of them, the part of you and me that we all have that just wants to eat cake, and play video games, and watch cartoons, and have a good time all day. And everybody has this part of their mind, that rational kind of adult mind says no to it, suppresses it and says, “Let’s just focus. Let’s get really productive.”
The problem that I see is that it turns out building businesses is really hard. It takes a really long time, and it usually takes a lot longer than most people think. Most young people have incredible hubris, right? We get started with whatever we’re doing in our career, and we think, “Oh, man. I’m going to have a jet ski, I’m going to have this amazing life.” You know, the bathtub of champagne, whatever it is that your goal is, in a few short years, because I’m smarter than everybody else, I’m going to work harder.
So we’re these conscientious people, and we suppress the inner child, and say, “All right, let’s get to it, lets build this amazing life.” A couple years go by, what do we find out? It’s harder than we thought it was going to be. Most entrepreneurs answer to that is not to kind of readjust their expectations, it’s to double down. Work even harder, and just start tracking their time in 15-minute increments, it’s to get up earlier, it’s to go to the gym more so that they can focus better, so that they’re increasing … They’re looking at supplements, they’re looking at [nootropics], they’re trying to think about, “How can I optimize?”
They’re reading books by Tim [Ferris], about how to be in the zone every minute of the day, instead of a 40-hour work week, they’re thinking, “How could I make it like a …”

Reese Harper: An 80-hour work week in 50 hours. Yeah.

Peter Shallard: An 80-hour work week, and … Yeah, and make that happen even faster.
One of the things I see is that there’s a limit for most human beings on how much that kind of inner child suppression can happen, that when burnout strikes, one of the ways that it manifests is that a lot of entrepreneurs start engaging in this destructive behavior, where they’re doing really juvenile stuff, and I had this.
My personal experience with this, I pushed myself in this way. This isn’t just something academically that I’ve learned about. I’ve done the research too, but I had this journey for myself, and what it looked like was deep in hustle of building my company, I was waking up on Tuesday morning feeling completely unmotivated. I didn’t want to look at work, didn’t want to go in, didn’t want to open the computer. Just didn’t want to touch it, and I’d do things like order a pizza at 11:00 in the morning, and watch stupid shows on TV on a Tuesday. Right? Like in the middle of the day, because frankly, it was almost like a feeling of depression.
That’s how burnout manifest for a lot of these highly-conscientious people, where it’s almost as thought this part of them that’s just saying, “No to conscientiousness. Let’s have a little pleasure in the moment.” What happens is people grasp at experiences that are pleasurable, right? Like eating pizza, it’s because that’s what the 10-year-old inside of me wants to do. You know what I mean?

Reese Harper: Yeah.

Peter Shallard: It’s just I want to feel good right now, and I had constructed this life for myself that was denying basically any way of feeling good in the present, because it was sacrificing everything for this long-term payoff, this vision I had as a business owner.

Reese Harper: Yeah.

Peter Shallard: I mean, the answer to this, and what I recommend if you want to kind of make yourself resilient to burnout as an entrepreneur, kind of be anti-fragile in this way, is that you have to start building aspects of your life that are pleasurable, but you want to have. You have to construct for yourself as a business owner that has fulfillment in it today, that isn’t just an exercise in delayed gratification. You know, where you don’t have like a bucket list of things you’ll finally do when you make it big, or when you sell the business, or whatever, that your life in the present moment is fundamentally worth living. That you if you got hit by a bus when you walked out of your office one day, that you wouldn’t expire on the spot with thousands of regrets, that you should’ve done things differently.
So I kind of preach this balanced approach to entrepreneurship, because what I’ve seen is that some of the most ambitious entrepreneurs, who are so good at delaying gratification, they only have a few years of that. If they really push that really, really hard, they can get into some pretty dark places, and so finding the balance extends that lifespan of being able to be a maniacally-focused entrepreneur.
That’s how I’ve hit a lot of home runs for clients, is being able to get them back on track by finding ways to work with that inner child. You know?

Reese Harper: Yeah, I think that’s great insight, and I think one of the things that can creep in, maybe a cognitive bias that can creep into holding people back from finding that balance is this concept of all-or-nothing thinking.

Peter Shallard: Right.

Reese Harper: Where we go from kind of thinking in extremes. I’m just curious how you see that manifesting itself with some of the clients that you interact with, and in coaching clients for Commit Action. How do people interact with … How does this all-or-nothing thinking affect people?

Peter Shallard: Yeah, so all-or-nothing thinking is something, sort of black and white thinking … It’s, again in the psychology world, essentially known as splitting. It’s something that I see a lot in the entrepreneurial population. It has to do with the way that we evaluate external results, circumstance, things that we create as entrepreneurs. For some reason, business owners psychologically are kind of bad at this, and I think a part of it is that they have … You know, the thing the entrepreneurs is that they have higher expectations for themselves than almost anyone else would expect. That’s what I think unifies business owners across industries, different ages, demographics, countries. It doesn’t even matter. Everyone who plays this game to some degree has these extraordinary expectations for themselves relative to the rest of the population.
And so what that does is it creates … These high expectations can create a psychological dynamic of almost perfectionism, where we aim to have things happen in business to hit targets. A good example is just a financial goal that a business kind of aims toward, and we tell ourselves we’ll feel good, we’ll feel a sense of accomplishment when we hit it. Then if we get to 90% of it, or 95% of it, we feel as though we failed. Right? We feel miserable, and so the funny thing is, is if your goal is to make a million bucks, making $950,000 is a pretty good outcome. You know what I mean?

Reese Harper: Yeah.

Peter Shallard: And as I’m explaining this, everyone’s just thinking, “Yeah, that’s completely rational.” But it’s crazy how that mental black or white thinking applies in so many parts of business where we might as a business owner, get furiously angry with a staff member for mistreating one customer out of 100. Right? And like, the staff member’s had a bad day, or it’s at the end of a long afternoon. We see it as this monumental failure, when in actual fact, we’re catching them doing something wrong, when in actual fact, they’ve been doing something right 99% of the time.
And so splitting black or white thinking is that tendency to think when it comes to customer service, we’re either killing it, we’re nailing it, everybody is loving us, or we suck, we’re miserable, this is terrible, it’s a disaster. You see that happen when that one bad review of your business online can ruin your day. That splitting, that’s black or white thinking, and all-or-nothing thinking in action.

Reese Harper: Talk to me a little bit about how … It seems like sometimes, at least in my own experience, referencing an external source of validation, like when I compare the success of my dental practice to another person’s dental practice, or someone I graduated with from dental school to someone else, I think in my experience, the comparisons within the dental industry tend to be pretty … I mean, everyone knows a lot of dentists’ numbers. The practice management consultants know numbers about other practices, a lot of things are shared. I feel like sometimes competition and comparisons have a big effect psychologically on dentists.
Do you see that happening throughout the entrepreneurial customers that you interact with?

Peter Shallard: Totally, and it gets caught up in this all-or-nothing thinking that we’re talking about, where it’s so easy to find out that somebody that you considered yourself a peer to you is doing slightly or significantly better than you are, and then that all-or-nothing thinking kicks in, and suddenly you feel like trash. Right? Suddenly you feel like you’re a failure, like you haven’t accomplished enough, like you’ve been making the wrong decisions, or the bad moves in life, or business, or whatever it is. That’s the all-or-nothing thinking, the making of sweeping generalizations based on this stuff.
Yeah, I think external comparison can really kick that off, and sort of trigger that in a lot of people. Definitely it’s something that I focus on for the mental health of my clients, is trying to move that locus of control, that game of self-comparison internally, rather than having it be external. And it’s tough, because we’re dealing with some hardware, like in terms of neurologically what’s going on in our brain, there’s an incredible part of our brain that’s focused on really paying attention to what the other humans out there are doing, right?

Reese Harper: Yeah.

Peter Shallard: The big part of brain science says that we’re incredibly social animals. There’s this big part of the front part of our brain that’s designed to be highly, highly sensitive to social queues, relationships, and dynamics with other people. Right? Evolutionary psychologists think that this has a ton to do with ensuring our place that we can survive and thrive in the tribe, that there’s going to be enough fruit left on the tree for us to eat, that the other people care about us, and all that kind of stuff.
So our brains have this innate bias that isn’t particularly relevant to modern life, where any time we identity ourselves as a member of a “tribe”, right? Like dentists in America, then that monkey mind starts to engage, and think like, “Well, how big am I compared to the other people? Am I safe in this tribe, or am I the little guy? What have I got to watch out for?” That’s hard to switch off.
If anyone who’s listening has these problems, I want to acknowledge that it’s not your fault, this isn’t necessarily pathological. It’s a part of human nature, but another part of human nature is being able to rise, use that really front part of our brain, our smartest part of our mind, and identify these patterns and these biases, and rise above them, because playing that game of comparison, and living for that defining your life around that, is in my opinion a recipe for unfulfillment, for burnout, for making a bunch of potentially really toxic and bad decisions in business.

Reese Harper: And it fuels that all-or-nothing mentality as well, right?

Peter Shallard: Right, and so the best thing that I think we can do is be aware of it, be able to feel those feelings, and have those thoughts, and let them pass over us, and then focus on what is our internal self-referential criteria that we have for judging our career, for judging our effectiveness for how we show up in the world. Deciding clearly what deeply matters to you as a person, what you want to be working toward, and then measuring yourself not in comparison to others, but in comparison to your past self. Right?

Reese Harper: That’s great insight. I want to hit a couple of cognitive biases that I think dentists carry with them, really briefly. One of them is this idea of what I’ve heard referenced as sunk-cost bias. Inside of financial planning, we look at it from an investment perspective and see it quite often appear in our clients, and feeling like … They might inherit a stock, or they might’ve invested money in something that ended up declining in value. Rather than objectively analyzing whether keeping that was a good thing or not, they just continue to hold it, and invest even more into it, even as it declines.
We saw this a lot in the energy sector, we saw it with gold over the last five years. More commonly right now, we may end up seeing this somewhat with bitcoin, depending on how it moves over the next few years. As someone owns a particular investment, sometimes that investment will decline, they’ll continue to chase after it. I see this happening also within dental practices, where they might hire an associate, and that associate might have been hired a little bit prematurely, or might’ve been the wrong person. No matter what ends up happening, whether the person was the wrong person, or whether they were hired prematurely. The financial performance of that hire just isn’t there. It’s the wrong time, it’s the wrong person, any number of reasons.
But since they pulled the trigger, and have been paying this salary for six to nine months, most dentists will feel a tendency to have this sunk-cost bias to continue to hold onto employees, or associates. You’ve got front office, and back, and associates that may just be the wrong fit the practice, or maybe that it was a wrong investment that the practice didn’t need at the time. The market can’t support it, there’s not enough new patient flow, all these factors. Rather than making a change, we’ll see people sometimes go on for years, four to five years, six years before they’re able to really just own up to the fac that this is not the right team member, or it’s not the right investment that they were making.
How do you see that playing out in your world?

Peter Shallard: Well, sunk-cost bias is one of those concepts, it’s a cognitive bias that shows up in a lot of areas in life. The obvious ones are … You know, always the investing example is the best one, and I see that in the venture capital world, and particularly in the angel investing world. People who are throwing out seed capital in exciting startup opportunities, and I know that some people listening who have got some pocket money, that they sometimes think like, “Why am I sitting here while all these amazing opportunities pass me by? My nephew’s got the next great startup idea,” or whatever it is.
Sunk-cost bias shows up for those people, and for angel investors, and even people who are qualified VCs. When they invest in a business, they invest in an idea that then under-performs, it doesn’t go well after that initial investment, and because they’ve initially invested, they’re more likely to want to throw money in it again. Whereas if that company came to them independently, like if a company, and it had seed capital given to it by somebody else, and then they were looking at this struggling, floundering company, and evaluating it with fresh eyes, a clean perspective, they would go, “This is a terrible investment opportunity.”
So sunk-cost bias the cognitive bias that has us evaluate decisions we have to make in the present with a bias that clouds our reasoning because of decisions that we’ve made in the past. It’s a cognitive bias that’s negative, because … We’re getting really technical, but it gets us away from the optimal, most rational, game-theoretically correct decision, and it can lead to an incredible amount of wasted money.
It shows up in hiring, it shows up in firing most of all. It can be there in a ton of ideas. I mean, I see entrepreneurs doing that with vendors, right? Like, “Oh, I hired this marketing agency, and they’re going to blow up my business with ads, and do all this kind of stuff,” and you’ve paid them for three months, and nothing is really happening, and none of it’s really working.
But in order to overcome sunk cost bias, you have to admit to yourself that you were wrong then, and you’re wrong now to continue investing. Sunk cost bias is uncomfortable with that admission. Sunk-cost bias that your brain saying like, “This is probably just easier to wait and see what happens, and pay for that fourth month, and keep this thing going.”
I’ve been there as a business owner, I think everybody has, and so being aware of this stuff is super critical when you’re playing with money, when you’re trying to scale what you’re doing.

Reese Harper: Yeah, we see it all the time in people’s hiring of financial advisors. It’s really common, because the financial advisory community is not … I mean, the quality of financial advisors out there is a very broad spectrum, just like attorneys or CPAs, or any profession. There’s great ones, and there’s ones that are detrimental to someone’s progress.

Peter Shallard: Right.

Reese Harper: And in any service business, any vendor can be categorized in that way, and we see that people get started … I think money, it’s particularly common. If you look at the financial services industry, the statistics are pretty staggering at how long people stay with their advisor, no matter who it is.

Peter Shallard: Right.

Reese Harper: It’s 90%+ retention rate, so if you’re listening to this, and you think, “Have I ever hired a financial advisor?” You probably only have hired one. You probably had one person in your life who’s managed money for you, but outside of that, you probably [haven’t] … Maybe you’ve had two. You’d be the exception if you’ve had two.

Peter Shallard: Right.

Reese Harper: And if you’ve had three, I’m sorry. You’ve had bad luck a couple of times, it sounds like, or maybe it’s not bad luck, maybe you just are trigger-happy, and you’re never content. There’s a variety of reasons that … I’m not going to try to diagnose here, but statistically, 90% of clients stay with their first financial advisor.
I think the reason that it happens is it’s hard to admit to yourself that the person you hired, right out of the gate, who you gave your money to, who took all of your money away from you, and is now in charge of it, and investing it for you and growing it, that you made the wrong decision.

Peter Shallard: And this is why understanding cognitive biases as a business owner is so critical, is that the other place that cognitive bias is really interesting is at the poker table. That when money gets involved … Sunk-cost bias is present in relationships, by the way. It happens all the time, I was there with girlfriends in the past.

Reese Harper: Yeah.

Peter Shallard: Do you know what I mean?

Reese Harper: Totally.

Peter Shallard: You’ve put six months into this relationship, so what’s another month to see if you can make it work? You know?

Reese Harper: Yeah.

Peter Shallard: And he or she has just done something absolutely horrible to you, and you know that you would never stand for in someone you had only met a week ago. This completely violates your rules or standards that you hold internally for the way you want people to treat you, or the way you treat others, and that kind of stuff, but sunk-cost bias keeps up there.
But in business, everything is kind of cranked up to 11, to quite the infamous Spinal Tap. When you put money down, you can see the psychological difference when you play a game of poker, and you’re using matchsticks or whatever to keep track of … You’re just playing for nothing, right? And people make all these wild moves, and then … If you have people that you play with, and that’s the dynamic, if you even just say, “Hey, let’s put $20s into the pot, and just make these matchsticks count for something.” Do you know what I mean? Suddenly, everything changes.
And the thing is, is that as business earners, we’re in that dynamic all the time. That hire that you’re making, the decision to work with that vendor, working with a financial advisor, all of this stuff is highly subject to this bias in our thinking. That’s one of the biggest ones, but there’s many of them.

Reese Harper: Yeah. I think that’s really insightful, and it leads me one other kind of cognitive bias that I want to talk about, which is this idea of confidence and overconfidence, and under-confidence. That an overconfidence bias sometimes is referred to as the Dunning-Kruger Effect, if I recall. Is that right?

Peter Shallard: Yeah, yeah. That’s right. Yep. That’s something that I also spend a lot of time talking about. It’s particularly important in the VC startup world, because trying to figure out who’s deeply suffering from this is a problem.

Reese Harper: Yeah, and I think it has particular relevance to the dental space as well, which is really interesting. [inaudible] kind of walk us through what that means, and what it’s about.

Peter Shallard: Yeah, so Dunning-Kruger is the names of two researchers who coined the term, they named it after themselves, the Dunning-Kruger Effect. They did a bunch of research that basically shows that … And this is kind of an uncomfortable thing for some people to hear, so I’ll preface it by saying everybody suffers from this in some way, shape, or form in some area of life. But what they basically found is that people with low IQ, low competency, or low capability in a certain area are … The lower that that competency, or capability or IQ is, the more likely they are to overestimate their intelligence, capability, or competency.
So there’s this weird gap, and you may know this anecdotally as the old joke, that 90% of people think that they’re above average at driving. Right? Everybody thinks that they’re a good drive, and usually their significant other is a terrible driver, or their mother-in-law is a terrible driver, or whatever. We all have these weird things, but again, in business, everything gets turned up to 11.
So the Dunning-Kruger Effect in business is dangerous, because it’s what causes entrepreneurs to assume that they’re a little bit smarter than everyone, that they know slightly more about things that they don’t know about, that they didn’t study. There’s so much that running your own business forces you to not become an expert with, but almost have to interact with as if you’re an expert. Right?
And I know this because I was the one who spent years honing by ability to understand people’s brains. I started out in business thinking, “I want to have my own therapeutic practice. I’m going to get really good at this psychology thing, and then the clients are going to just come to me. Boy, was I wrong, right?

Reese Harper: Yeah.

Peter Shallard: Because you have to learn about sales and marketing, and customer service, and then you have to learn about financial modeling, and book-keeping. We could go all day naming all the things that a really competent business owner, who’s really scaling something has to learn about.
So we’re continually presented with opportunities to be outside of our comfort zone, and in areas as business owners, where we’re low capability, low competency. Dunning-Kruger is that cognitive bias that has us overestimate ourselves, and because of that make, make rash decisions, make bad decisions, not take advice when we should. People who suffer from Dunning-Kruger tend to diminish the value of opinion from external experts and authorities, and think that they know better.
You know, this shows up in any area in your business that isn’t your core area, potentially in the core as well, but particularly where you’re working with an expert or advisor or anything like that.

Reese Harper: Yeah. Well, this has been great insight man. We’ve kept you for a long time, and we covered a ton of different topics. I really appreciate you investing your time and coming in to do this. It means a lot, and I think our listeners have been able to get a great dose of your expertise in all these different areas.
Any parting words that you’d like to leave with the audience?

Peter Shallard: Yeah, I think the message of today has really been: If you’re ambitious about your business, that one of the best investments that you can make is spending some time, and attention, and energy in developing your self-awareness, learning about and really getting to the heart of how you think and feel about the business that you’re building, and making sure that there’s alignment between what you deeply want and need as a human being, and what the business is actually producing. While those things are aligned, you’re going to start getting really great results.
So that’s kind of my message. That’s what I want to have people walking away … If there’s only one takeaway, it’s shoot for that psychological alignment.

Reese Harper: That’s awesome. Well, I really appreciate it. We’ll put Commit Action’s information in the show notes, and your contact information, so people can reach out, and get in touch. If people want to have a test drive on the Commit Action product, and try to understand a little bit about that, how do they go about engaging? Do you guys have a way for them to try to have a consult or some understanding of how to get started?

Peter Shallard: Yeah, so Commit Action, if you’re interested in getting some accountability, having somebody who’s kind of in your corner, who’s there to be your personal executive aid for your effectiveness, check it out. Our website has a ton of information. There’s places you can sign-up there, and check out some video stuff that we have that teaches you a lot about these aspects of psychology that I’ve described today, and a ton of stuff that we didn’t get into, that has to do with basically becoming the highest leveraged version of yourself you possibly can as a business owner.
We have tons of free content. Just go to CommitAction.com, and the rest should be self-explanatory.

Reese Harper: Great. Well, I’m super excited for this interview to hit the waves over the next little bit, and we will be stoked to have you back again next year to do it again.

Peter Shallard: Awesome, thanks for having me.

Reese Harper: Thanks, Peter. I appreciate it.
All right, everybody. Thanks for listening to my conversation with Peter Shallard. That’s probably one worth listening to against next time you need a little boost, which was nice of him to carve out some time for us.
So many great things to talk about. The idea of getting too good at delaying gratification, the importance of taking incremental steps, having a willingness to let go of certain responsibilities, the danger of all-or-nothing thinking, overcoming the comparison mentality, I could keep going, but hopefully you found some nuggets in there to help you maintain a pretty healthy mindset. I’ve put a link to Peter’s website in the show notes for those of you who are interested in learning more about Commit Action.
Also, don’t forget to check out the Dentist Money Show YouTube channel, and send us your financial questions, so we can answer them on the show. Just email reese@dentistasvisors.com, or ryan@dentistadvsiors.com. And if you’re ready to have a free consultation with us, go to dentistadvisors.com and click the link at the top of the page, or just give us a call at 833-DDS-PLAN. Carry on.

Behavioral Finance, Work Life Balance