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Every Dentist Faces These 3 Risks – Episode 208


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Worried about making a decision you’ll regret? These tips will help you think more rationally.

Understanding how your personality affects your choices can be difficult. In this episode of the Dentist Money™ Show, Reese and Ryan talk about what you can do to make more rational decisions.

If you feel like “what am I doing with my life?” you may not be taking enough risk. If you’re burnt out or scared, you may be taking too much risk. Reese and Ryan have some ideas to help you think, “Ahhh, this is just right!” when it comes to making important decisions.

Podcast Transcript:

Ryan Isaac: Hey-o fellow Dentist Money Show listeners. This is your friendly host, Ryan Isaac, back with another good one this week. Today we’re talking about risk. Not the game, but the thing. Risk. It’s a tricky topic because so much hinges on our own personalities. As a business owner, as busy dentists, you’re constantly making decisions about risk in your practice, about the future of financial markets, and so many other decisions. As a reminder, book a free consultation with one of our advisors today. Just go to dentistadvisors.com. Check out the calendar and schedule something that’s convenient for you. We’ll call and help you take control of your future. Or just give us a call. 833-DDS-PLAN. Again, thanks for joining us. Really appreciate it. 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, here with my trusty old cohost, Sir Ryan Isaac of Glenmore.
Ryan Isaac: Of Glenmore. Hailing from Glenmore. I got to point out your voice is hoarse today because you gave four hours of expert talking at the University of Utah Dental School. Shout out to them.
Reese Harper: It was a lot. Shout out to my young friends at HCS. It’s a great place. And proud of them Utes. Today for the podcast I am wearing my Utah Jazz shoes, Donovan Mitchell specials, the stealth black and green editions, and I got a T-shirt with a Spida Mitchell logo on it.
Ryan Isaac: Matching. I got to be honest. That might be a power dad move. That’s a pretty powerful dad move. Matching T-shirt and matching sneaks.
Reese Harper: Yeah. Yeah, I think it is.
Ryan Isaac: That’s a powerful dad move. I like it.
Reese Harper: Yeah. I think people are questioning my… They’re questioning me in a whole new way. How have you been in the desert?
Ryan Isaac: The desert’s treating me right. Everything’s great. It’s warm and hot.
Reese Harper: Your beard’s flowing in the wind.
Ryan Isaac: It’s No-Shave November. I did get a head start because I wasn’t clean-shaven when it began. But it’s too long right now, but I’m committed. I’m going to keep it going. I’ve never been to a beard barber before. So any listeners who want to give me any beard barber tips, I need to pick one. And I don’t know what to do. I’m really nervous. Compared to-
Reese Harper: Well, I pray for you. I do pray for you.
Ryan Isaac: Thank you. So I’m going to ask you a question about today… Okay. So today we’re talking about risk and I’ve got a cool story that I just heard yesterday on a podcast. It was just so fascinating. And then I’ve got a story about a really cool experiment. You don’t know either one of these are coming and I’m going to spring them on you live in front of the audience and put you on the spot. But that’s the most real Reese we get. But here’s the question that I’m going to start with real quick. We’re talking about risk today. I feel like when I hear stories of you as a young lad roaming the plains of Idaho, you were a fairly risky child. You’ve had a lot of broken bones and surgeries. Is that a fair statement?
Reese Harper: Yes, this is true. Yes, and my ancestors exponentially more than me. But I did have quite a litany. Compared to my kids, I don’t think my kids are going to have stitches.
Ryan Isaac: We need to get them some.
Reese Harper: Stitches were the regular-
Ryan Isaac: Summer activity. Quarterly stitches?
Reese Harper: It was multiple… Yeah, it was a quarterly activity at a minimum, yeah.
Ryan Isaac: We don’t have time for all the glorious stories of jumping sleds and cars and boating accidents-
Reese Harper: The audience doesn’t want to hear that. Getting run over by the tractor and getting hit by boats. Dog attack.
Ryan Isaac: Shooting guns. Yeah.
Reese Harper: Mule kicks. Pitchforks through the thigh.
Ryan Isaac: But I also… What!?
Reese Harper: That was one. You didn’t want to hear it. I’m not going to tell it.
Ryan Isaac: No. No, I want to, we can’t. So do you think… Fast forward into your prime age right now. You’re an entrepreneur, you started a business, you gutted it out, you were 12, 13 years into a business.
Reese Harper: Am I in my prime? I don’t know. Yeah, maybe.
Ryan Isaac: I think so. I think you’re in your prime right now.
Reese Harper: Some might say, I haven’t said it. But some might.
Ryan Isaac: I mean compared to the average human though too. As an adult you are probably a more risky person to pursue the career path and business path that you’ve pursued. Right? It’s carried on.
Reese Harper: Yeah. I operate on a uncomfortably… I’m always a little bit faster-paced than I probably… Than would be comfortable for others.
Ryan Isaac: All right. I’m just really curious. So yesterday I listened to this podcast. I just typed in the word risk into my podcast app and I wish they would have kept going, but there was this Red Bull podcast called Risk Made Me Do It and they just interviewed insane athletes, like Red Bull athletes that do crazy stuff. And they didn’t have too many episodes, but it was really cool. So I listened to this one episode with this lady named Kim Chambers. And it’s just crazy stories. So Kim Chambers, if you look her up right now, she’s a world famous… They call them open water marathon swimmers. They’ll swim for like 20 hours individually or as a team in open seawater, which is so frightening. Yeah. But she was telling this story of how she was living a pretty normal life.
One day she’s wearing high heels and trips downstairs on her high heels, hits her legs so hard that it almost had to be amputated. Just by falling down stairs and hitting her leg. Had to relearn to walk, like two year process to relearn to walk. It was kind of crazy. So normal life, has this accident. And then during her rehab process she starts swimming. And maybe she swam a little bit before, but she was definitely swimming a lot in her rehab process. And this was up in San Francisco. And she’s swimming with these people who say, “Hey, we want you to come help crew for us on this race we’re going to do.” In the swimming races it’s a team. I think it’s six people that goes from San Francisco to… I’ve never heard of these islands until yesterday. Farallon Islands. Do you know what those are? Have you heard of those before? The Farallons?
Reese Harper: Is that-
Ryan Isaac: Like 30 miles off the coast of San Fran. She’s crewing on this boat and they’re testing the water for swimming. Turns out that these waters… They cross in this area called the Red Triangle. It has the highest population, highest concentration of great white sharks in the whole world, in this Red Triangle area outside of the Farallon Islands. So anyway, she says on the podcast, this why I bring it up, she says on the podcast, after having this accident, living pretty normal life, getting interested in swimming. She says she remembers the day, the moment, the year, when she’s sitting on this boat in this Red Triangle, great white shark inhabited waters, with this team of swimmers. And they say, “Hey, do you want to start training with us to do this?”
And she’s like, “Yes, I’m meant for this.” And then fast forward like a year later or so. And she actually becomes the first woman to swim the reverse, Farallon Islands to the Golden Gate Bridge. It’s a 17 hour swim. She starts at midnight and swims in black water. Choppy seas at midnight by herself with a boat alongside of her for 17 hours in the most great white inhabited waters in the world.
The point is, I’m listening to this person talk about something in her brain that made her want to take risks that the average human… Way, not even close to the average human being would ever take. And to the point where actually said for this race, that Farallon to Golden Gate Bridge, she said that she wrote all of her passwords and banking information down on a Post-it in her apartment. She folded all of her laundry, cleaned up the whole house, because she wasn’t sure she was going to come back from the swim. She was mentally prepared to go swim this race and thinking, “If I get taken down by a great white shark, that’s totally part of the gig. And whatever. I’m prepared to do that.”
So the point of the podcast today that I want to talk about is obviously everyone has such a different capacity for risk. I wouldn’t have done half the things you did as a child in the mean streets of Idaho, the mean farms of Idaho. A lot of people wouldn’t make business or entrepreneurial decisions. Most living human beings would never swim in water like that. You know?
Reese Harper: I would definitely not.
Ryan Isaac: I’m so scared of sharks, man.
Reese Harper: You’re scared of small felines.
Ryan Isaac: I have a long list. Am I?
Reese Harper: You’re scared of small animals. I mean, small dogs even sometimes.
Ryan Isaac: Some. I’m good at dogs now. Scorpions qualify as small animals. That’s possible. I do have a long list of fears that are public now. They’re very widely known.
Reese Harper: That’s rational. That’s a rational fear. A scorpion fear.
Ryan Isaac: Sometimes they feel slightly rational.
Reese Harper: Yeah. I think a lot of people would be freaking out about, “Oh, a black, dark water swim.” I don’t like swimming in dark waters period.
Ryan Isaac: Like a dark pool is enough to wonder.
Reese Harper: You’re like, “What’s underneath there?” You know something’s there.
Ryan Isaac: It’s just, it’s crazy. So what we’re going to explore today is this relationship between risk and people’s financial decisions and how some people are just wired differently and how at the end… See I’ve got another story for you. You don’t know what’s coming. But we’re going to talk about what people can actually do if they happen to be the kind of people that like to just take risks even if they don’t need to. We’re going to talk about how you can temper that and some measures you can put in place so that you don’t make any major decisions and get eaten by a financial great white shark in the middle of a black ocean for no reason other than-
Reese Harper: I want to go and chat a little bit when we come back about this idea of how to determine if you’re… To put yourself in the right risk category for yourself so that you feel comfortable and that life feels good and you’re not freaking out and that you don’t think you should be taking more risk. But you just own who you are. And can move on and be yourself.
Ryan Isaac: All right, well let’s take a quick break and when we come back we’ll start there.
Matt Mulcock: Hey Dentist Money Show listeners. It’s Matt Mulcock with Dentist Advisors. I want to invite you to join Ryan Isaac and me for a monthly webinar series where we tackle one of the Elements topics each and every month. It’s going to feel a lot like the Dentist Money Show, but you’ll have the ability to ask questions, answer live polls, and get a behind the scenes look at how we work with clients. You can sign up for free at dentistadvisors.com/webinar. Hope to see you there.
Ryan Isaac: All right, we are back. So Reese, let’s get into what you were just saying before the break about knowing yourself and the types of risks that you should be taking to have this. I think that’s an interesting concept, a balanced risk life.
Reese Harper: Yeah. I think it cuts both ways because if you put yourself… Last week I went to this executive education course at Wharton for… There’s about 50 or 60 people. You had to apply to get into this class. I don’t know how difficult the application process was, but-
Ryan Isaac: Let’s say it was world class.
Reese Harper: Based on the quality of the people that were there, I was really impressed. I was like, “Wow.” There was a few founders of companies, but a lot of these people worked… Major executives running divisions of… Oh, I met the COO of all the Accenture consultants. Just 500,000 employees globally.
Ryan Isaac: What?!
Reese Harper: I was just like, “Holy cow!”
Ryan Isaac: Imagine the Christmas parties at that place?
Reese Harper: Yeah. I was like, “So which continent do you guys pick to go to your party at anyway?” But there was a lot of really sharp people there and they talked about how difficult… The conference was on scaling and growth of your business and how to grow properly. The difference between growth that’s linear and scale and operational efficiencies have to be cued in and all of these financial metrics. It blew my mind. I was enthralled the whole week and it was like nine hours a day of education for five days straight and you got a little sack lunch and it’s tasty.
But it was just constant barrage of really… It was heavy. It was great. And it’s so worth my time. If anyone’s ever thinking about doing a large dental expansion, this would be a great course to go to. But anyways, one of the themes in day four, which was operational efficiencies, was talking about how people usually don’t dial in their efficiencies at the place they should be. They’re either too high or too low basically. And different metrics that you have to have in place in your business so that you’re progressing at the right pace but not too fast and not too slow.
And too fast, you end up crashing the business, and too slow, you end up getting eaten up by competitors and replaced by technology that is better than yours. Right? And so the point that I’m making is how it’s so difficult in life, I think, to get things just right. It’s very easy to either have too much or too little. It’s a classic Goldilocks and Three Bears kind of theme, right?
Ryan Isaac: Goldilocks’ risk then.
Reese Harper: Yeah. Getting your risk in your life to where… Because you’ll know if you’re not taking enough risk. You’re going to be bored and frustrated and anxious and you’ll feel like, “What am I doing with my life? Who am I? What am I doing?” And if you’re taking too much risk, you’re going to be feeling emotionally drained, physically drained, sick, tired, worn out, burnt out, and maybe scared. The right amount of risk isn’t just about doing crazy things. It’s about coupling your ability with your goals.
Sometimes people’s ambitions are so high and yet their capability’s not as high as their ambition. That’s essentially the precise definition of too much risk, is when you’re doing something where your ambition is not coupled with your skill. Right? And you’re tipping over in front of your skis and falling down.
Ryan Isaac: Oh, I know. Yeah. I’m usually like the back of my skis. I’m going to usually tip back the back ski anyway.
Reese Harper: That’s all I’ll say. I’m sure you have thoughts on it too. I don’t want to take up the whole thought on that, but-
Ryan Isaac: No, that’s good. I didn’t think about that actually. This balance. Or think about it in that context. I thought maybe we could run through-
Reese Harper: In my life I feel like that’s been one of the problems. It’s taken me a while to not push too hard but not be so reserved that I’m always feeling like I’m underachieving. And I’m not going to push as hard as some people. My risk profile is not as high as some people’s. And it’s a combination of my ability and my level of ambition. I don’t have as much ambition or as much desire or as much drive as someone else to accomplish certain types of goals. Mainly money isn’t my primary driver. So for me there’s a limit to… Some people are like, “Why are you in financial services or why are you in human businesses like services?” I’m just like, “Because I want to make a difference.” I like the impact it has. “Why aren’t you in import/exports?” Or-
Ryan Isaac: Get rid of humans. Get some products [inaudible 00:16:13]
Reese Harper: I don’t care… because money wasn’t the reason I picked my career, you know? It was not even on my radar when I first selected this job. And I think a lot of dentists are in the same boat. You didn’t pick it exclusively because of money. If you would have been using the money filter, you probably would have at least been… It would’ve been a good choice. But it wasn’t the only choice, right? Everyone’s got a limit to the ambition that they want to have or push for and the trade-offs that that has plus your level of skill and your education level and your background level. Those combined are how I think you find the right risk profile for yourself and then be comfortable with that. Because there isn’t a right or wrong profile to have
Ryan Isaac: No. That’s true. It’s just got to fit well with everything… Who you are and everything you have going on in your life.
Reese Harper: Yeah. That’s maybe my side note to the set of bullets that I think are probably more in line with our conversation that’s upcoming.
Ryan Isaac: For the average dentist listening to this podcast, in my mind there’s three areas of risk that our listeners and our clients are taking in their financial lives. You’ve got business risk. Everyone’s involved in this practice that they own or multiple. They have real estate risk. A lot of people in houses, buildings in investment, real estate. And public markets. All different kinds of asset classes. They all carry different kinds of risk. Maybe we could just run through a little bit of how would you define risk in each one of those categories? For example, what’s the risk that people run when they own dental practices or private businesses? And then so on with real estate and public markets. How should we define… Because here’s what I’m getting at.
I feel like sometimes people don’t define what the real risks are and they say something that it’s not and it makes them shy away from an opportunity or too scared of it. For example, a really common one is people say a stock market. “I don’t want to put money in the stock market because it could just blow up and disappear.” You know? “All my money, I could lose all my money if I put money in a stock market. It’s a big casino.” But that’s not really a risk of the public stock market. You know?
Reese Harper: If you’re investing broadly-
Ryan Isaac: In a diversified portfolio. Yeah. It’s not a risk of a globally diversified portfolio. But let’s just run through real quick what are the main risks in your mind in each of those areas?
Reese Harper: Well, we should clarify that. It’s a very low probability we’ll say. It is a risk, but it’s a low, low, low probability if you’re investing properly.
Ryan Isaac: I mean all 16,000 publicly traded companies in the world disappearing and going to zero value, we’d have some bigger problems to deal with if that were the case.
Reese Harper: Risk of real estate investing. One of the risks is that it’s illiquid when you need it. I mean your equity in your property, it is volatile. It does go through cycles and it’s not always liquid. I had several periods of time in my life when even a line of credit or what I thought was a line of credit was taken away from me off of property. Both commercial and residential. It’s-
Ryan Isaac: We saw that a lot actually post-2008 with clients having their line of credit recalled.
Reese Harper: Yep. That’s a risk. Liquidity is a risk. Price is a risk. I think that selecting the wrong property, being in the wrong city, being in the wrong market from a tax or income tax perspective. I saw people in Orange County when Mello-Roos tax was first passed. Their properties took a huge hit. When you have a multi-digit almost 200 basis point tax increase just on residential housing for… You’re already in one of the most expensive real estate markets in the country just to pay for better public education that you didn’t really know was going to be the case when you bought your rental or your building or your condo. And you have a pretty significant price… The geography does play into that for some. What are your thoughts on real estate? What are the ones you’re thinking of?
Ryan Isaac: Yeah. Same things. I’m trying to break down in my mind too what are the… For me when I hear risk, I want to be more specific with it when I hear people talk about it. Because to me every decision, especially financial decisions, it’s just a series of, “What kind of pain are you willing to feel?” Or, “What kind of pain are you willing to put up with?” You know? Everything’s got a cost. So some costs, like you’re mentioning here, are financial costs. There’s other costs that are time costs. There’s other costs that are stress levels or they cost you your health. You know?
Reese Harper: That’s why I don’t like risk as a word.
Ryan Isaac: I don’t like the word. Exactly.
Reese Harper: It’s too arbitrary. It’s not specific enough.
Ryan Isaac: Yeah. I don’t like when things are described as, “Well that’s risky or not risky,” because that’s not really how it works. It’s like this thing, whatever you’re choosing, if it’s you’re buying a building or you’re going to put money in a 401k or you’re going to open a second location there… It’s just a series of pain points that you’re willing to go through in order to experience some kind of upside, which is also not always financial. So I think about real estate in all the things that you mentioned and I think about the times when people just carry a burden of owning physical things that they just wish they didn’t own. You and I have both had pieces of real estate, you more than I, but I’m not a real estate person. I’ve never had the intent of carrying multiple properties in my life for income and the four or five year period of time when I had a rental myself, it just bugged me. It wasn’t a financial cost. I actually made money on it. It wasn’t a tax burden. It wasn’t a liquidity problem at the time because I didn’t need it.
Reese Harper: Just another thing to worry about.
Ryan Isaac: It’s a thing, man!
Reese Harper: Some people don’t know even what you’re talking about, but some people know exactly what you’re talking about and they’re going, “Yeah, I just hated that. I just wanted to be more free.”
Ryan Isaac: Thinking about it.
Reese Harper: “I wanted to not have that weight on my shoulders or respond to it. Even though with my property manager managing it, I didn’t like to talk to them. I didn’t want to have this other thing.”
Ryan Isaac: They just don’t want to know it’s there.
Reese Harper: It’s simpler.
Ryan Isaac: I just don’t want to know it’s there. Every time it rained or the house I lived in if the air conditioning had problems it’d be like, “Well, what’s the rental going through right now?” I just don’t even want to think about this thing. But for other people that doesn’t matter. Like, “I want 20 of these things.”
Reese Harper: It’s worth going through because they’re like, “Well dude, you made a boatload of money.” Ryan, you made a lot of money owning that rental. You did.
Ryan Isaac: Yeah. Got to sell it for a profit and it made money. Cashflow it every month that I owned it. It’s fine.
Reese Harper: There was nothing financially bad about this thing. You just didn’t want to do it.
Ryan Isaac: Nothing. I didn’t. It was the mental cost. So that’s how I like to think about these different asset classes, people that own businesses and real estate and public markets. What are some of the financial and nonfinancial costs? In a business, I mean it’s probably obvious, but the same thing could be said. If you have a second location opportunity and let’s say financially it’s fine, but you’ve got 10 more employees now. That alone might make someone be like, “That’s a risk.” You could call that a risk that I just don’t want to put up with. For me it’s not risk, it’s just what pain are you willing to deal with? And you have to approach every financial decision with that same question. Like what-
Reese Harper: I think that’s the pain of business ownership.
Ryan Isaac: People?
Reese Harper: The primary pain you have to be willing to deal with and like is interacting with lots of other people who need you constantly.
Ryan Isaac: People pain.
Reese Harper: You have to like that. Or if you don’t like it, you have to be willing to take a lower return on it and hire someone that does like that if you want to own a business. And you’re probably going to own less of it. If you’re willing to deal with the people pain, which is… Not just deal with it and deal with it.
Ryan Isaac: But thrive in it.
Reese Harper: But actually care about it. Yeah, and embrace it.
Ryan Isaac: Do something with it.
Reese Harper: No one loves… I don’t love going through eight hour days of meetings with my people and then eight hours later worth of email and service and having travel on top of that. There’s days where I’m just burnt out. But I’m not burnt out because of the interactions I’m having with those people. I really love it. I love seeing people learn things and progress. I want to teach. I want to sit there and chat with them about it and see if they learned something and I want to listen to them and I want to learn from them and I want to hear what they’re experiencing. I love that stuff.
And that’s why having a larger and larger business doesn’t actually bother me. I can’t meet with as many people. So your meetings go from maybe meeting with the only eight employees that you ever had to meeting with the eight people that manage the eight people times eight. But you still have eight hours of meetings, but they’re just with different people. But I love that part. And I think a lot of people that go into practice ownership, they don’t really know. It’s a mixed bag there. And the challenge is you don’t have to like that, but someone in your organization really does have to like that if you don’t like that. Because that’s a job required in business. And that’s a risk that a business has to bear for the most part.
Ryan Isaac: I like what you said though. If you’re in a business but you’re not the person who really wants to bear that part of it, then you have to take probably a financial… I don’t want to call it a hit, but you have to take-
Reese Harper: No, it is a hit. It’s a hit. Straight up.
Ryan Isaac: Financial hit. Where you’re either not going to make as much money or not have as big of a piece of the pie because someone else is going to have more equity in order to deal with that issue or that piece of the business. Those are the trade-offs I’m talking about. When people say risk, what’s really the risk here? Is it just a matter of, “Do I make money or lose money?” Or is it just a matter of, “Is it a 5% or a 10% return?” To me it’s a lot more than that. And I think people can make slower… Which I want to talk about in a minute. But slower, better financial decisions if they start breaking out what they think risk means.
So public markets for example. Something that we hear pretty frequently is a fear of stock markets. And it’s usually expressed like, “Well I don’t want to lose all my money. I don’t want to put money in and then it’s not worth anything like 10 years later.” Now that can happen if you pick one company or a small group of stocks or you’re trying to… I mean people have done that. People own stocks of companies that didn’t exist later on. But when you own a globally diversified portfolio of thousands and thousands of worldwide companies, the likelihood of all your money disappearing is just not a very high likelihood. So that’s not a right way to assess the risk.
The real risk… This is what I tell people all the time. Having a 401k or a brokerage account with mutual funds, costs are super low. Barrier to entry is low. Liquidity is high. Transparency is high. You can outsource it for reasonable costs. The risk of total loss is really low. The real risk or pain that you have to deal with with investing in a public market is the fact that it’s priced every second of every day and it’s always in your face and you have to emotionally deal with the fact that it’s going to be giving you feedback on its value every single day that you own it.
Reese Harper: Well, and what you’re saying, a word that a lot of people use to describe that is volatility. Right? And I think that that is exactly the… It’s the hardest thing to deal with when you own a stock portfolio is… You know when… Well, sometimes you don’t know exactly what’s going to happen because you’ve never been educated and so it scares you when it goes down. But if you have been educated properly, you know that the minute you decide to really become an investor in public markets, you’re embracing volatility. That is the cost you’re willing to pay to be a successful stock market investor or a bond market investor is volatility. Bond market volatility is pretty low. But when you invest in public securities or public markets, you’re going to experience up and down price change like you said every day.
And that’s hard when the media is telling you one thing and your friends are telling you one thing and you’re hearing that like the Chinese trade policy is going to be doing this to the market and then… You’re hearing all this information. You’re seeing your account just move up and down constantly. And the more money you save, the more those swings look like they’re worse. They look worse than ever. Because you get more money. The swings, they don’t get worse on a percentage basis. They scale the same.
Ryan Isaac: The dollar amounts.
Reese Harper: On a dollar amount basis you’re just like, “Holy cow, this is the worst.”
Ryan Isaac: It’s frightening.
Reese Harper: That’s the reason why so many people actually trust public markets with their savings is because if they diversify enough, they can trust that this whole financial system is going to hold these people accountable within their own companies because it’s just so transparent that their price changes so fast. No one’s going to want to mess with that. You don’t want to do anything that’s going to make your company share value tank and so you’re very cautious about the choices you make and you’re thoughtful about it. I don’t know, I think that’s one of the risks of public markets for sure is that volatility. And you got to pay that price.
Ryan Isaac: We wanted to take a break for just a second. Remind you how easy it is to book a free consultation with one of our dental-specific advisors. What you do is you go to dentistadvisors.com and you’ll see a big green button that says Book Free Consultation.
Reese Harper: Can’t miss it!
Ryan Isaac: Click that button and book a time that works for you. Or you can just call us at 833-DDS-PLAN. Let’s start a conversation about how we can help you with your finances.
Last thing here, I’m going to tell you a little bit of a story. It’s an experiment that’s done a bunch of times. There’s some cool research around this, but I don’t want to put words in your mouth because we want to hear the unfiltered off-the-cuff Reese. But when I read this I just thought of an immediate tie to having a good financial planner at the table with you. So that’s all I’m going to say. Hopefully that wasn’t leading. Did I lead the witness?
Reese Harper: No.
Ryan Isaac: I didn’t lead the witness on that.
Reese Harper: I don’t think so.
Ryan Isaac: I was curious… I was sure there was a lot of research and studies on this. I was curious what kind of factors influence someone’s decision making? Are people inherently risky or not risky or are is there a spectrum of it where people can be influenced to take more or less risk based on their environment? Which I was pretty sure is the case.
So there’s some really cool research and studies where they show that people who either by nature or just in their environment, when they’re prompted to think faster, get their brain moving quicker, they’re more likely to take more risk and they’re more likely to rate that risk as not negatively consequential. So let me give you an example. So in these studies, they’ll take groups of people. And in one group of people before they do a little activity, they’ll have one group of people watch a video that’s nature and the frames move at… The frames change a lot slower and there’s slower music, right? And the point is to slow their brain activity down and then they do this activity.
The other group of people, they’ll have them watch movies of like car chases, war. There’ll be metal playing. They’re trying to get their brains moving and thinking and the frames per second will change… A lot fraction of seconds on the video. Or they’ll have them… Another experiment they had people read. They told one group of people they have to read purposely slow, just passages out of a book. Or they’ll tell the other group they have to purposely read really fast. Right? They’re just trying to speed up a brain or slow down someone’s brain.
Then the experiment, which apparently is a pretty common thing, it’s called a Balloon Analog Risk Test. Basically either physically or on a computer, they have the balloon that’s hooked up to a pump. And they incentivize the people. Every time you pump up the balloon, like one pump, one thing of air, you get some money. Zero through five pumps is worth a certain amount of money and then five through ten is double that and 10 through 15 is like triple or quadruple or five times as much money. What they’re trying to do is they’re trying to incentivize people to blow up the balloon up to the breaking point without bursting the balloon.
If they stop, they keep all the money they’ve collected up to that point. If it was like 10 pumps and they got the money, they keep it. If it didn’t burst then they stop. But if they pop it, if they go on to the 11th and then they pop it, then they lose all their money. So this balloon experiment is actually pretty common. And what they found, which is really interesting, is these groups that were forced or incentivized to think slower, at some point they would just stop. They would just take their money, they’d do like seven pumps or nine or eleven and blow up the balloon. But they’d be like, “Okay, that’s enough. I’m going to walk with my money.” The other groups that were forced to think faster, they were all bursting the balloons, almost every time.
They’d always go through it and they’d never just walk with their money. They’d just blow the balloons up and they wouldn’t walk away with any money. So this whole concept of, “Can you get a person, even an inherently risky person like Reese Harper on the farm, injuring himself on all kinds of melees and tomfoolery, can you get even an inherently risky person to slow their thinking down where they’re not taking as many irrational risks that could harm them?” So I read these experiments and my first immediate thought of, “Oh, how do you practically implement a system to prevent yourself from taking unnecessary risks?” I don’t want to put words in your mouth, but my immediate thought was, “Man, this Element system and the way that we do financial planning for clients every single month, I say this to people all the time.” It forces everyone to slow down and think about really small pieces of a bigger puzzle a month at a time and have small bite-sized conversations about things slowly. Just slow down. Think about something.
Reese Harper: Some people feel like our process… One of the things that I’ve been asked, not by a lot of people, I think 90% of people will say, “That’s genius, what you guys are doing. I love it. This is the right way to approach finance.”
Ryan Isaac: Thank you, 90% of people.
Reese Harper: Yeah, thank you. But some people say, “Why do I have to wait so long for you to look at that subject? You’re not really tackling insurance until May. Right? And it’s January and I want to do it now.” Okay. Well we can tackle it now for you if you have a question. We can address that. Anytime you have a question, just call in and talk about it.
Ryan Isaac: And we have the data. Yeah.
Reese Harper: But when are you going to slow down to evaluate, let’s say insurance is the topic, properly in a comprehensive way? Meaning look at your current property’s value, measure your current homeowners policy, and decide if you have an adequately high homeowners policy. So if your house burns down, you could actually replace it. Or if you’re going to be replacing it with a teepee. Right?
Ryan Isaac: Yeah. Or how much has your net worth grown and if you got sued this year compared to last year, would it all be covered?
Reese Harper: That’s a second question inside of insurance. Or how much general property liability do you carry on your office now that you’ve added all this equipment? Or how much life insurance should you have on both your life and your spouse? Or should you have life insurance on one of your key employees or a partner? There are 20 insurance decisions to make. That has to be done methodically and it’s always done better when you’re not in a point of duress or stress, but you’re in a logical-
Ryan Isaac: Thinking slower too.
Reese Harper: Yeah. So we like putting our financial planning stuff on a topical calendar because that allows you to address it and at a point during the year where you’re probably not emotional. On average, you’re not going to be emotional about each of these subjects each month. You’re just going to be like, “Okay, it’s time to do this thing now.” And what we’ve found is that these micro-interactions, these small subjects, these small things we’re tackling, over a long period of time, you actually get way more done, way more predictably and you end up being much more responsible. You end up being more rational. And like Ryan’s saying, I think you take less risk. And I was thinking that, right, when you shared that example before you gave the answer away. I was thinking that too. So yeah, I think that’s great.
Ryan Isaac: Yeah, that’s just what came to mind when I started thinking about people making slower decisions and what happens when you do feel emotionally charged, but before you make a decision, you place a phone call or have a meeting or shoot an email to a third party human being who’s not emotionally involved, who has all the data about you, who can give you context, make you sleep on it, and then talk again tomorrow. Over a lifetime, the outcome of that process of decision-making is just going to result in less mistakes. And like we say, the opening of every show, helping dentists make smart financial decisions. I think that’s the key of it is slow down, give this some thought, involve an unemotionally involved third-party person and walk through it out loud verbally with somebody and before you pull the trigger, so.
Reese Harper: Slow down and think through things. And I think finding the appropriate risk in some of these areas for your situations, also another good takeaway from today. Each person’s got different risk levels. I do think slowing down helps you take less risk, which… Or maybe not less but more rational risk. More risk that’s probably actually suited to your natural personality profile and the needs that you have in your life as opposed to speeding up, taking unnecessary risk or risk that doesn’t match your actual underlying profile. So I think that’s really the risk. The danger of all these risk-based decisions is making a choice that you actually regret. Making a choice that is either too conservative or too aggressive. And by slowing down you can actually make the right, rational choice for your risk level. Right.
Ryan Isaac: Cool. Well thanks [hos 00:39:33] we’ll just end with-
Reese Harper: Thank you. It was good stuff.
Ryan Isaac: Yeah, it was classic material. If you’re listening to this and you’re wondering, “Am I taking too much risk in some part of my life?” Or, “Am I paying costs that I’m not really willing to bear down the road?” Or, “I’d just really like to think through this with another human being.” Then go to our website, dentistadvisors.com. Click on the Book Free Consultation button and schedule a call with one of our advisors. We’d love to chat with you.
Head on over to the Facebook group, post a question. We get in there ourselves and answer every week and take a lot of those questions from there into the topics of the podcast. That’s dentistadvisors.com/group. And last but not least, we love seeing people in person as much as we can and we’re doing two to three events every month all over the country nowadays. So go to dentistadvisors.com/events, we’re doing live events all over the country. And we’re doing a monthly webinar series where we cover the Element of the month that we’re covering with our clients. We go into more depth and data than we do on the podcast. So that’s on dentistadvisors.com/events. Check it out. Come see us. Come chat with us and thanks for listening, everybody.
Reese Harper: Carry on.

Behavioral Finance
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