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Episode #532 - How To Manage Your Scarcity Brain with Michael Easter
Roger: The show is a proud member of the retirement podcast network.
You are not your job. You're not how much money you have in the bank. You are not the car you drive. You're not the contents of your wallet.
Hey there, Roger Whitney here, welcome to the show that is dedicated to helping you not just survive retirement, but to have the confidence because you're doing the work to lean in and really create a great life and rock retirement.
Now by day, I am a practicing retirement planner, walking this journey with people like you with decades of experience. By night I've used this podcast for the last 10 years as my own mastery journey of honing my craft and helping people create great lives and in turn helping you organize this stuff and get focused so you can create a plan that you have confidence in.
Welcome to the show. Now today we're going to have Michael Easter, New York Times bestselling author of The Comfort Crisis and Scarcity Brain is here to explore overcoming frugality, what we talked about last week with Dan Crosby, from a little bit different perspective.
Michael is a very thoughtful journalist who does his work, and so we're going to explore some of the evolutionary mismatch that might be hindering us from using our resources to create a great life in retirement.
In addition to that, we're going to answer some of your questions as we always do. Warning though, this is not a Roth free zone. We're going to have some Roth IRA questions. We'll let you know when it's a Roth free zone so you can feel a little bit safer.
Before we get started, if you like the show, you're going to love our 6-Shot Saturday email where every Saturday morning we send out an email with a summary of the show, links to resources that we talk about, so you don't have to jot those down. So, if you want to receive that every Saturday morning, you can go to sixshotsaturday.com or rogerwhitney.com and sign up for that weekly conversation over a cup of coffee.
With that, let's get on to the show and let's start with answering some of your questions.
LISTENER QUESTIONS
If you have a question for the show, you can go to askroger.me and type in a question, leave an audio question, just say hi.
CLARIFICATION ON THE 5-YEAR ROTH CONVERSION RULE
Our first question is a Roth question from T.
"Hey Roger, great show. I listen every week."
Well, hi T.
"I received a message about Roth conversions saying funds can be withdrawn without penalty within five years of the conversion, and if you convert your IRA to a Roth gradually over time, those conversions each re trigger the five-year rule for that portion of the money.
I thought I heard from you that once you establish a Roth account, you start counting the five years and later contributions do not reset. The five-year rule.
Can you clarify?
T."
If you meet the golden rule, which is a phrase I think Andy Pankow came up with, then you don't have to worry about any of this. Then the five-year rules are easy.
If you don't meet the golden rule, then they're pretty complicated.
Now, I want to set the stage. Remember, this is in the optimization pillar, so this is enhancing a plan that you already know is feasible and resilient.
So, what is the golden rule? Well, the golden rule is if you are over 59 and a half and have had your Roth IRA open and funded at least with a dollar for more than five years, then you can make withdrawals without taxes or penalties. If you don't meet that rule, then those details can get really complicated.
You can go to episode 497, where we talk about all the different rules around that. So, this 5-year rule, by the way, T, within this optimization pillar, is talked about, well, I guess I feel it incessantly, but I get, you know, I'm dealing with thousands of people, so everybody has some clarification. It's talked about a lot, but as long as you meet those two criteria, over 59 and a half, have a funded Roth for at least 5 years, you don't have to worry about any of this.
So, anyway, T, hopefully that answers your question.
SIMPLE IRA RULES
Our next question relates to simple IRA accounts. This is, again, going to be an optimization, you can maybe call this a feasible pillar question related to contributing money to accounts.
So, a simple IRA is a well simplified version of an employer retirement plan that really is just open. It has one very template document for the employer and then it's opening up individual simple IRA accounts and there are higher contribution limits with some match from the employer so you don't have to go through all the cost of administration of say 401k plan.
Joe has a question about the 2024 important numbers sheet. We'll put a link to that in 6-Shot Saturday. This is essentially a two-page sheet that gives you almost every limit and tax code and RMD life table and IRMA surcharge limits, et cetera. It's a very handy sheet to have. So, we'll put a link to that in 6-Shot Saturday.
"Hey, Roger, I was listening to your podcast on the important retirement numbers for 2024.
I downloaded the important numbers sheet that you offered. Awesome information. Thank you. My question is the simple IRA column. It says that the annual limit for an employee contribution is 16, 000, but then there's a parenthesis that says, or 17, 600 if eligible for that 10 percent increase. My question is, who is eligible?
I've never seen this before. I tried looking it up but couldn't find any information. Would love to know if I'm eligible."
So, it sounds like Joe has a Simple IRA plan. Well, it's not surprising that you haven't heard of this, Joe, because it came as part of Secure 2. 0 Act. So, employers with less than 20, or equal 25 or less employees Get a 10 percent bump to the general and catch-up provisions, and businesses with 26 to 100 employees can do it, provided that they meet some other criteria.
If you have less than 25 employees, 25 or less, Joe, then you qualify for that extra bump in employee contributions for the simple IRA. So, if that's the case, you get to save a little bit more in a tax deferred manner.
THE TAX IMPACT OF WAITING TO TAKE SOCIAL SECURITY
Our next question comes from Vance related to Social Security.
He says,
"Your recent answer about Social Security included the increase in monthly payments as a primary reason to wait. I realize that every situation is different, so the following will not apply to all, but is rarely mentioned. What is the tax impact and lost investment income of waiting?"
Essentially what Vance is referring to here is if you wait to take your social security in order to receive a higher payment, when you do decide to take social security, most likely you're going to be drawing money from your investment accounts, meaning that you're going to have to supplement to pay for your lifestyle by not having the social security payment.
Whereas if you take Social Security earlier, you'll have your investment assets able to continue to grow, assuming that you haven't invested. I think that's a very valid reason, Vance, to take Social Security early. The key here is to think through it logically.
We had a client about three, four months ago, where the initial plan of record was to take it at age 70, but when we examined it, more thoroughly in our annual review. It's like, oh, there's maybe an opportunity to take it earlier for a variety of reasons one was client preference, one was the fact that they were in a position where they could have the money invested over time If they took social security early that that plus their other income sources would cover their lifestyle or a lot closer. That other money would have a lot longer timeframe to grow. There are a variety of reasons.
I applaud you for just thinking through it logically.
The correct answer here, Vance, is you're not going to have a crystal clear, quantitative, that's the way to do it. There's a lot of things coming into play here, including longevity and other sources. The key, which it sounds like you're doing, is to think through it logically and make a judgment call.
This is an optimization question, so you have multiple pathways. That's why you want to think through them in an organized way so you can just make a judgment call. My guess is, at the end of the day, it doesn't matter whether you take it now or you wait till 70, but you need to have a resilient or feasible in a resilient plan of record in order to create that what if scenario So you can figure this out and just make that judgment call, but you're right. That is one of the secondary consequences of delaying social security is that you're going to have to draw money from your investment assets So those assets aren't going to grow.
PRACTICAL PLANNING SEGMENT WITH MICHAEL EASTER
So now we're going to move on to our discussion with Michael Easter.
One thing I want to forecast next week with the Michael Kitsis interview, we're going to realign the format of the show. We're actually going to have just a mini case study, an example of a listener applying some of the principles that we talk about on the show and sharing their story. So that'll be exciting.
Something new. We like always to like to do new. So, you can check that out next week with Michael Kitsis. But for now, let's go chat with Michael Easter. About how we are hardwired sometimes to hold on to our money.
All right, we're here with my friend. Can I call you my friend now, Michael?
Michael: Yeah. Yeah, dude. Awesome.
Roger: Awesome. I'm here with my friend, Michael Easter, award winning journalist, contributing editor to Men's Health, which I used to read religiously. I don't know if I've read it in a while, but I feel pretty healthy. Professor at University of Nevada, Las Vegas, UNLV, and Author of The Comfort Crisis. My favorite book, was it 2023 or 2022?
Michael: 2021.
Roger: 2021. My favorite book in 2022 because I read it in 2022. Oh, I read it in 22, and then Scarcity Brain is his most recent work. We're going to talk about both of these. How are you doing Michael?
Michael: I'm good. Thanks for having me.
Roger: This will be fun. We're going to dive right in. Okay. I want to talk about both books because I think they relate to a lot of the issues that people deal with as they age, but also as they enter a time of life freedom. I don't even like the word retirement, but it's having more control over your time and obviously the money end of it.
So, let's start with The Comfort Crisis. For me, that is what I call the energy pillar. There are four pillars in non-financial retirement, which is in my world anyway, energy, passion, having relationships and a growth mindset. I think of The Comfort Crisis really hitting on the energy pillar, building energy so you can show up for your life.
Are you familiar with who Phil Stutz is?
Michael: I'm not.
Roger: There's a documentary called Stutz on Netflix that you might like.
Michael: Maybe I've come across it. I'll have to watch it.
Roger: Yeah. It really plays well with The Comfort Crisis. One of my favorite quotes from Dr. Phil Stutz is "You will never be exonerated from uncertainty, pain, or the need to do hard work."
Michael: Yeah, totally.
Roger: Accepting that you will never be, most people create stress in their life when they're trying to be exonerated from having to do work, having to go through pain or uncertainty. I think of pain, uncertainty, and hard work, I think of. You will never be exonerated from discomfort, right?
It's just a matter of when you actually have to deal with it, right? You can be more comfortable now. You're probably going to be more uncomfortable or under discomfort later in life.
So, when you were exploring this subject, talk to me, what was your objective in exploring The Comfort Crisis? Why did you pursue that as a project?
Michael: Oh, I mean, so my job as a journalist and my job is to make observations and tie threads together that might seem like they're seemingly disparate at the surface, right? I just saw through my life and through my work at Men's Health that most things in life that have a big, good, you know, things that are good for us, I guess I will say, you usually have to go through short term discomfort to get the benefit.
All right, so if you think about exercise, exercise is uncomfortable in the short term, but it improves your life in the long term. If you think about it, if you wanted to lose weight, you will probably have to eat less. You're going to be hungry in the short term, but then you'll reach that goal in the long run.
Same with mental health. You probably have to go through some short-term discomfort, have some hard conversations, and then your life improves afterwards.
It was really just noticing that sort of architecture of improvement that you have to do things that are going to be challenging in the short term to get a long term benefit, and yet the catch is that I think our world is set up today, and this is new in the grand scheme of time and space, to incentivize taking the sort of short term comfort, the short term reward at the expense of long term growth. So, one of the stats that I use all the time is that 2 percent of people take the stairs when there's also an escalator available. What that tells us is that humans are wired to do the next easiest most comfortable thing even when we know it doesn't serve us in the long run. The reason for that is because for all of time to survive doing the easy thing, doing the comfortable thing, it would have given you a survival advantage, right?
You don't want to move around too much when you've got a scarcity of food. In the past, right? You want to default to safety and shelter and not take risks and all these things, but it doesn't necessarily serve us today.
Roger: Did you know that going into writing the book and doing the research?
Michael: Well, I think it's like you make a few observations, you go, oh, wow, those all have the same commonality. Then once you start to actually really dive into the book and start. So, books generally start with a proposal, which is kind of like a business plan for a book, and so you write out the proposal and then hopefully a publisher buys the book and then you go report the thing. I mean, I learned a lot in the reporting that was not in the proposal. Just things that I hadn't even thought of that just sort of manifested themselves, because I did a lot of on the ground reporting and went to a lot of different places.
Roger: Now you call it reporting is that I read it as you did research to see to prove the point, or once you found an assumption, you didn't just make it. You went and did the research too, is this really true? Which is, I guess, what a reporter does.
Michael: Yeah, exactly. Exactly. Yeah. Standard issue journalism, hit the ground, go talk to people, go places. Read as many studies as you can talk to as many interesting people as you can. Ideally you want to go there. I think one of the issues that journalism is facing now is there's a lot of writers who don't leave the office and especially in the world that I work in, and I imagine a lot of, I mean, I imagine most worlds, if you're not out actually doing the thing and going there and having conversations with the people who are living the thing and doing the work. You're just, you're not going to totally get it. I mean, you're just kind of like pontificating from a chair and it's, you're just not going to learn as much.
I mean, I really learned that when in reporting The Comfort Crisis, like I said, there's so many topics that ended up in that book that are just a direct result of having been out in the world and doing that reporting or researching whatever we want to call it and having them sort of appear and go, oh, wow, I didn't expect that, but then they end up in the book, right?
Roger: By human nature, we're wired to pursue comfort because we're trying to stay alive, right? From a long-term perspective.
Michael: Yeah, exactly. So, the world for all of humanity's 2. 5 million years was uncomfortable. It was harsh. There was never enough food. It was too hot. It was too cold. It was X, Y, Z, discomforts you can think of. So, the people who lived and spread their DNA were people who tried to avoid discomfort, right? They did the next easiest thing. They didn't burn energy when they didn't have to, right? When it got too cold, they were like, we got to get a fire going. We got to get warm. This sort of desire, we all have to be comfortable. kept us alive for all of time.
Now that you apply that, I mean, it still helps us in many ways, but once you apply that to a world where you can do comfortable things all the time, it tells us, yeah, don't take the stairs, even though that's going to be better for your health in the long run. When you have the opportunity to overeat a little bit, you might as well take it, but we now are surrounded by food. That doesn't make as much sense. There's just so many areas where this manifests itself in daily life.
Roger: So, I think in the book there was an argument, there's a mismatch with the abundance of comfort we have today, and it's not really serving us. I think of the, as you were talking about taking the stairs, I was thinking of those runners in airports that move you along faster with walking. Yeah. It seems like the world is designed. We all want comfort. People want to retire because they want comfort, right? They're tired of all the work and the stresses related to it.
Michael: Yeah. The word actually is mismatch. So, anthropologists just call it a evolutionary mismatch when a drive that we have that we evolved to have that served us all the time, we get put in a different environment and it becomes counterproductive.
Roger: What do we do about that to counter that? Or should we do anything about it? Why is that a bad thing to be comfortable?
Michael: Yeah. Well, I mean, if you're always doing the next most comfortable thing, I think that you see problems start to set in pretty quickly with people. So, the average person today, for example, takes about 4, 000 steps a day. Now in the past, people took more than 20, 000 steps a day and they were also active in many other ways, right? So, then you go, okay, well, why do we have this surge of chronic diseases we all have today. It's like, well, because we take 4, 000 steps a day, right?
The drive that we have to be comfortable, it doesn't serve us in the long run, and you take eating, for example, right? We evolved to overeat when we had the opportunity because food, there was usually never enough food. So, if you happen upon, like just by chance, you happen upon a pile of food. You're like, well, I should eat all this. Cause then it'll make me a little bit overweight. Then when the famine inevitably comes, I'm probably going to survive that because I have some weight on my frame to weather the storm.
We still have that in a world where like there's no famine in the U. S. so it leads people to become overweight over time and that can cause issues. I mean, on and on and on.
Roger: That we have more food, that we eat more and we're moving less. And I think in your book, you have a quote that from some of the research that being out of shape is the new smoking in terms of a crisis, at least in America.
Michael: Yeah. I think one stat I came across is that it can take as many as 13 years off your life. We do know that one of the best things you can do to improve your, not only just how long you're going to live, but how well you're going to live is to be active. Like you find that people, once their knees start hurting or because they've been inactive their whole life, or once their back starts hurting for the same reason, quality of life just goes down super-fast.
They start moving even less, and then it's usually not long until someone passes away, and if you can just like maintain activity your entire life, like your chances of living much longer and much better are very high.
Roger: This sounds hard, though.
Michael: Yeah, well, it's evolution doing its thing.
Roger: But we will never be exonerated from it, right?
I think of Peter Attia, and you had a great interview on Peter Attia's show of embracing discomfort, taking the stairs, or silence in meditation or stressing your body, you change the trajectory that you're on, right? An old phrase I used to have been, hey, you can focus on your health or not. You'll likely live just as long, but if you don't focus on your health, your life probably will just suck more because you won't be able to do the things that you want to do.
Michael: Yeah, exactly. I do think obviously there's a barrier to entry, but I do find that once people actually start exercising or become more active or lose a little weight, whatever it is, the benefits start to compound and they start to kind of almost quit. They feel off if they don't get enough movement in, and that's really, like I said, it's like things that are challenging in the short term come with the biggest long-term rewards.
Roger: Okay, so how do we start being more uncomfortable?
Michael: I mean, I do the, the reason that my whole brand and newsletter is called 2 percent is like the stairs are a metaphor for the decisions we can make every single day, right?
You've got the stairs on the left. You got the escalator on the right. You got to get up there one way or another, which are you going to choose, right? You can take the escalator and that's more comfortable in the short term, or you can go up those stairs and by doing that every single time you have the option, you're going to be way better off.
Like people think this kind of stuff doesn't add up. It's like, oh, it does. Like, for example, there's a Mayo Clinic study that found that people who just move more throughout the day don't even exercise. They can burn as many as 800 calories a day. That's like running 8 miles. So, this stuff really does add up, and it applies to anything in life, right?
It applies to the relationships you have with people. Are you going to, like, pick up the phone and call someone? Wouldn't it be much easier to text, but, like picking up the phone and actually having a conversation is going to be better for that relationship, right? It applies to how we approach food. It's like, it's okay to be a little bit hungry sometimes.
Like, you're not going to starve, right? Your brain might tell you are in the short term, but you won't. If you can just take that idea of like 2%, the idea of embracing short term discomfort to get a long-term benefit and apply that to as many areas of your life as you can. Even in your work life too, right? That's where the magic starts to happen.
Roger: What I like about that is because we tend to make these health-oriented things big. I got to join the gym. I have got to buy the equipment or the clothes and it feels productive. You actually get the sense that you're doing things. Science has shown you're getting the sense that you're accomplishing something when actually you're not doing anything.
You're not taking the stairs. So, it's these little micro changes, which bluntly get harder as you get older, right? Because you know, obviously your energy level and your biochemistry are changing, but your knees creak a little bit more. I mean, I hobble a lot, but I'm always happy when I exercise, but it's hard to get exercise or taking the stairs when your knees are a little creaky that day.
Michael: Yeah, and I mean, there is a lot of. I will say, as a general rule, less activity will get you sicker than more activity will. So even when you look at research on knee injuries, people who have the most knee pain aren't necessarily the most active. It’s usually people who are the least active who have the most knee pain, just because everything has so devolved that when they do go out and do anything, it's like, they’re working on nothing and then knee pain sets in.
Yeah, does that answer your question?
Roger: It does and I think the key is you're going to have to fight that trend. Like as you get older and you're dealing with the aches and pains that come from getting older, you almost have to lean into it. You almost say, you know, pain is my friend. It's okay to be discomforted.
It's better to walk and be a little achy than not to walk at all.
Michael: Yeah, because, okay, so what's the answer? It's like, I'm not going to walk. Okay, well, you're probably going to be dead in like five years if that's your approach.
Roger: To go back to the outlive, you've changed the trajectory of your life. The arc has changed to some, probably to the detriment of your health.
Michael: Yeah, exactly. When people really stop moving, it's really not good for their lifespan afterwards.
Roger: So, the message here is take the stairs and make incremental changes.
Michael: Yeah, take the stairs. Go for a walk. If you're parking in a parking lot, park as far as you can away. Again, people are like, well, that sounds too easy. It's like, okay, well, I guarantee we’d all be a lot healthier if we actually did it. So why don't we actually do it and then see how it goes.
Roger: I want to pivot. There's a lot to talk about. We could talk about that for an hour, but I want to pivot. I think there's a lot of parallels to your book, Scarcity Brain.
For me, this hits on what I call vision. Vision of what we want our life to be. In our world, what I've discovered, we just had our 10th anniversary for the podcast, which is awesome. One of the unexpected things I discovered through whatever 500 plus episodes is that there's two crises is if that's the word, in retirement, there's the real crisis of the majority of people do not have enough money for whatever reason, they either because they weren't able to take the discomfort of saving or life circumstance or whatever. That is the real crisis.
There's another not very, you know, you almost feel weird talking about this crisis because it's like, well, that's not a problem relative to that big crisis, which is not being able to get out of the loop of accumulation because accumulating more and more, whether in this case, we're talking wealth and possession, there's a, well, unhealthy feedback loop of safety. Just give me more. Just give me more. Just give me more.
What I have found is that people have difficulty overcoming their frugality once you get to the harvest time of life when you've built your wealth out of luck and hard work or whatever circumstance and now you're set to where you have to harvest it, which is, means you stop saving, you stop accumulating, and you lose your purpose in work and you're supposed to actually go spend this money. So, most people will default to not doing that. Understandably. That abundance, it's a crisis for those people, right? Because then you end up having a life unlived, dying with too much money, which denies obviously the experiential things you could have done and the memories for your family, but it also denies the world what you could have used those resources for. In your research for Scarcity Brain, which is one of my highly tagged books here, why do we have this constant feeling that we don't have enough?
Michael: You're going to find a theme here that most of my work, I think that basically the past explains current behavior, even if it doesn't seem to make sense.
So, kind of back to evolution, it's the humans evolved in environments where there was never enough of what we needed to survive food, stuff, information, even status on and on. If you were the type of person that overdid those things, hoarded those things when you got them, craved those things, you would have a survival advantage.
Today we just have that ancient DNA that tells us to keep getting more, keep hoarding, that you don't have enough. In a world where we do have a lot of these things, right? I think that can present another one of those mismatched scenarios.
Roger: Yeah, I think in retirement especially because the modern retirement is very different than our grandparents in that we're living longer than ever. We don't have pensions like they had and the modern retiree, our grandparents, when they retired, they were sitting on the park bench, right? They were worn out from all this physical labor that we were talking about earlier. I remember my grandfather was a postman. When he moved to Florida, he was done. He was just worn out physically and modern retirees, they're living longer. They don't have pensions, and they're actually wanting to be on the playground of life. This is their chance to actually go do things. There is a huge worry of running out of money, even with people that are extremely wealthy. It doesn't matter how often you show them that, that worry is so prevalent that they deny using their resources.
Michael: Yeah, I mean, I get it. My grandpa retired when he was like 50, and he was like, ah, probably lived till 72, and he lived till 83 and my grandma lived till 90 somethings. They had like, the money goes till we're about 72 and they were smart with that. I mean, they were totally fine in the end, but yeah, I mean, it's definitely much different now.
I even take the case of my mom, she's 73 and she still hasn't retired. She's just kind of been saving. Part of it, I think part of it is financial, but also part of it is that she just enjoys her work and I can kind of do it at a lower level for a while and we'll see how it goes and yeah, so.
Roger: Well, continuing to work and save is also inertia, right?
It feels good, because earning money is agency. I mean, probably one of the first agencies that we've had in our life is the first time we earned a dollar and we could choose what we wanted to do with it, right? One thing that you pull out in Scarcity Brain is the idea that we are wired that less is bad.
Michael: Yeah.
Roger: More is always good.
Michael: Yeah, more is good. So, there's this great study that I will talk about. It's by this guy who's at University of Virginia. I won't get into the whole weird reason that he made the finding. But basically, they did this series of studies where they had people solve problems. All these different kinds of strange problems.
For example, one was okay, make this Lego bridge normal. Another one where they had to improve a golf putting hole. It was a mini golf hole and the hole had all these features on it. Like it was just like a hoarder hole, right? Another where they had to improve a trip to Washington DC that had, was a 12-hour trip and they had 12 different things planned for the trip.
In all these examples, he gives people. He's like, how would you improve this? They're all totally packed with stuff. The obvious answer is to remove things in all of them, right? Every single time, the people, they would add more things. So, they were like, oh, I think if we just add another excursion to this already packed trip, or I'm going to solve this problem with the Lego bridge by adding more Legos rather than simply taking them away so the bridge is straight that way.
With a golf hole, it's like, it would have been a lot better if they had just removed some of the features, but they all just added. So, this was 8 out of 8. When he asked people, how would you make this worse in a couple examples, they said, oh, I would take stuff away. What he basically found is that when we try to solve problems or when we try to improve something, humans tend to default to addition.
We don't even think of subtraction. So, it's not that adding or subtracting are any better, right? They're basically the same, but if we're not even thinking about subtraction when we've come to a problem or when we try to improve something, that's a big problem, right? Because we're leaving 50 percent of our options off the table, and there's a high likelihood that if you do the math half the time, that might be the right answer.
You see this too. Like, you just see how much stuff, I mean, think of how much more stuff we have in our homes, right? If you have a problem now, it's like, well, hell, there's definitely something to fix this on Amazon and you end up with like some super specialized vegetable spiralizer, right?
It's like this very distinct tool to solve this one problem. Then it's like, you do that enough times it's like, well, why does our kitchen have so much crap in it? It's like, well, because you add so much, right?
You look at this other great study that found incoming university presidents are more likely or 10 times more likely to add new programs than they are to remove ones that aren't working, and this is like in Scarcity Brain. I just have this suit. It's probably the longest paragraph in the book where I just do this rapid fire of like, here are all these modern examples and all these different facets of life where you can just say like, yeah, we add, we just keep adding and adding and adding.
Roger: Where that has played out in my profession when it comes to the financial part of it, Michael is when we're building what we call a retirement plan of record. I don't want to know, and it's somebody coming in new, fresh. We build the plan without understanding anything that they actually own. So like if they had an IRA or a 401k, I don't even want to know what's in it.
I just want to know the value of it with the idea of building what should be, rather than tweaking what is, because if you just take what is, usually it's adding to it, right? Or move these things around and buy these three things. It ends up being a lot simpler solution if you don't get caught in all the, in all the other stuff.
Michael: Yeah.
Roger: Last week I had a behavioral psychologist, Dan Crosby, who's a good friend on, who focuses more on the behavioral tricks we have just in investment management. Which I think there's a lot of value there, but I love these two books as it relates to retirement planning, because it's not about, we have so much psychological baggage beyond just simply investment, greed, fear, decision making defaults to more and that doesn't always serve as well.
We default to comfort that doesn't serve us always.
Michael: Yeah. Well, it's also like I would imagine having a giant pile of money in the bank is more comfortable too, like wanting to let it sit there, right. It gives this illusion of safety in the meantime; you're missing out on all these life experiences that you could have had.
It's like people have a hard time asking why am I working in the first place? It's not a pile of money. The pile of money only helps you achieve some other means. I mean, maybe it could be the pile of money for some people, but that's like, okay, now you've got the pile of money. Then what? Like no, one's ever satisfied with the number, right?
I think it's worthwhile to step back and ask why you're working in the first place.
Roger: Also to realize that we’re naturally wired to want more, and I have some stickers around here. I can't find them. I like to make stickers, Michael. I'll send you a few, but one of them in the retirement planning work in space is the people that do retirement planning are numbers of people, so they want to quantify everything. My stickers. Say, I think three or four times in a row, retirement is not a spreadsheet. Retirement is not a spreadsheet that came to mind when you were talking about quantifying goals may not be the best thing to do.
I think you had an example like with GPA; you end up going towards the quantification grade rather than the actual learning so sometimes that can actually be detrimental to our fulfillment.
Michael: Yeah. I mean, I think what fascinated me, one of the most fascinating things when I was reporting Scarcity Brain, as I talked to this guy who, he basically discovered that humans have only been using numbers for about 10, 000 years, which is like, not much time at all, like in the grand scheme of things. Numbers are not really natural to humans, and there's still groups of people who don't use numbers in the world, these tribes in the Amazon, and they quantify things by more or less small, medium and large, like this one smaller. This one's medium. This one's large, and they can only count up to three.
This basically tells us like numbers are not this natural thing to us. We invented them in order to progress. But I think that the way we see them used now where we're quantifying everything. They tend to capture people's values and attention. We tend to think that like, oh, if you can quantify something like that is right, that gives you certitude, that gives you exactitude but we often quantify things are these like big, complex questions. You could, I guess, try and solve these or rather interpret the best way to do these different things many ways, not just with numbers.
So, you brought up GPS and that's a good example. It's like, why do you go to school? Yeah. It's like, well, you want to learn certain things, but you also want to like to learn to be around other human beings. You want to learn how to turn things in on time. You want, like, you could just go on and on and on. All the things that school is good for and what you were there to do. But when you put grades on GPS, students just start to obsess over the grade point average. Right. They're just like, that's all they care about. They miss all these other big, important things. Not only they, but like their parents and all these things.
Basically, once you start to quantify, it tends to capture attention and it tends to bend our values towards the number. So, we value the number for the sake of it while missing what the number is actually supposed to stand for.
Roger: Yeah. I see this with authors that want to be a New York times bestseller. They're more focused on that than the journey of writing the book or the impact of the book. Because that's the number in that case.
Michael: Oh, yeah, yeah.
Roger: I was thinking of college and Billy Joel came to mind, right? If you're a straight A student, you're thinking too much.
Michael: Yeah, exactly. I can tell you, like, these lists are ridiculous. Like, it's this insane algorithm to get on these lists. Like, I was on there and I'm like, I don't even know how the hell it works.
Roger: I was wondering if you actually, because that is a game that people play, to get on those lists.
Michael: Yeah, people used to like mess with, so then they had to like, then the New York Times had to invent games to stop the games and like it's this crazy thing and like it really there's obviously it's like some value in it but the value is entirely fabricated by what people think it stands for.
There are books that have sold millions of copies that never made the list because of what it prioritizes, right?
Roger: Scarcity Brain makes the case and very well researched that we default to more as humans we consider less as bad, right? So, we don't think about simplification. That quantification has a downside, right?
Your quantification is important, for sure. But it's like Aristotle's, you know, golden mean. There's a balance in the extremes. We tend to go to the extreme on quantification.
I want to hit on a couple more things related to Scarcity Brain, and how I think this all weaves into overcoming frugality and actually giving yourself permission to create a great retirement or life. Doesn't really matter retirement or not.
One is, can you define what the scarcity loop is?
Michael: Yeah, it's this behavioral loop and if you want to get a person to repeat a behavior over and over and over, behaviors that we overdo, they tend to fall into this scarcity loop. So, it's got three parts. It's got opportunity, unpredictable rewards and quick repeatability.
So, opportunity, you got an opportunity to get something of value. Unpredictable rewards, you don't know when you're going to get the thing of value. Could be now, could be later, and you also don't know how valuable it's going to be. Then quick repeatability, you can immediately repeat the behavior. So, where I learned about this was studying slot machines in Las Vegas.
That's exactly how slot machines work, right? You have an opportunity to win money, but you don't know if a game is going to be a loser, if it's going to be a winner, how big of a winner it's going to be, or when you're eventually going to win, and you can just repeat immediately. But this loop has been put in, it's what makes social media work. It's being put in personal finance apps. It's leveraged by online shopping. It's getting leveraged by all these different institutions and businesses today, often leading us to repeat behaviors that we later regret.
It's really kind of the architecture of addiction. If someone is really just over and over and over with the behavior.
Roger: You really go into this in the book and I have a t shirt. I make t shirts just for fun. If I want a t shirt, I'll make one, and it says resist the algorithms. Yeah, which is if we're wired to always want more and less is bad and quantification is something that can become its own thing that may not serve us. When I read the scarcity loop and you went to a lab where they actually, it's like a gambling lab that even consumer product companies go to, etc.
I worry that we're fighting a loser's game in trying to overcome frugality because everything is pushing us towards getting into the scarcity loop, whether that's buying more things on Amazon or eating more potato chips or what have you. I don't know how you fight that.
Michael: Yeah, I mean, I'll tell you, it's harder.
There's more stuff that we can overdo today than ever before, I'll say that. I'll also say that people who tend to overdo those behaviors, if you can just substitute a better, more productive behavior, oftentimes the bad behavior falls away. It's really learning, like, if you find yourself overdoing whatever it is, online shopping, eating junk food, spending all this time on your phone on Twitter or whatever it is.
Usually that's an indicator that you're just bored or you're just inherently unsatisfied in your life in some way. There are other ways that you can get that stimulation that actually improve your life in the long run. Things like going outside, Volunteering, finding hobbies that don't drive you crazy like Twitter might, or take away your money like Amazon might.
I think it's really identifying that and then trying to find something that's going to give you whatever that thing was giving you that has positive benefits.
Roger: But usually, what people think of when they're trying to figure out their vision for their life. When you retire, it's sort of like going to college or getting your first job.
Like the slate is clean, you can live anywhere you want, you can make all new friends. And there's this stress of creating a vision. for the rest of your life. But that seems to be probably not a good way of going about it, because that's a lot of stress. Who am I going to be when I grow up is essentially the question.
Better to go out and play, just as you would have in school. Go join these clubs, go explore things, and that will naturally get you out of all of these online loops that are literally billions of dollars are being spent to keep us in that loop.
Michael: Totally. That's been demonstrated in a lot of studies as well.
Roger: The price of not pursuing this is literally your life. I go back to Bronnie Ware, who is a hospice nurse in Australia, who wrote a wonderful book called The Five Regrets of the Dying. All of them are related to missing your life because you are living a life that other people had expectations for you that had on you. You weren't living a life true to yourself.
That's really the cost of staying in these loops or not embracing discomfort is you're going to increase the chances of having regret at the end of life because I have too much money at the end, et cetera.
Michael: Totally.
Roger: Always enjoy hanging out with you, Michael.
We'll have links to your books. You won't get all my highlights in it, but we'll have links to your books and you can highlight it yourself.
Michael: Right on. All right, buddy. Thanks for having me.
TODAY’S SMART SPRINT SEGMENT
Roger: On your marks, get set.
Now it's time to set a little baby step you can take in the next seven days to not just rock retirement, but rock life.
All right. In the next seven days, I challenge you to take the stairs, do something that most people don't do. Maybe Park on the far side of the parking lot. Or when you are presented with stairs or an escalator, take the stairs.
I had this choice the other day when we were coming back from Colorado, which was a quick trip with, I'm carrying luggage and I had both pieces because Shauna had shoulder surgery early and I saw these stairs. I saw the escalator and I remembered Michael Easter, so I took the stairs. You know what? It was totally fine. Those little baby steps can make a big difference if compounded over time.
CONCLUSION
It's been an honor doing this show with you for the last 10 years, but I'm really excited about the future too. We have, we're going to bring back what's that mean? We're going to call it Retirement Fundamentals so we can build some basic knowledge. We're going to do some mini months, so they won't be months.
There'll be themes on specific topics. We're going to do more case studies, more retirement plan lives, but more mini case studies as well so we can hear other people's journey, not just planning for retirement, but rocking retirement now.
We have a lot of things planned and we're going to try to do it with integrity. We're just going to be who we are. We're always going to be curious. We're never going to bring anybody on just because they're popular. We're going to bring people on that we think have something important to say to you and me about our journey. We're going to do our best not to have advertising and talk about product. Now, obviously we talk about the Rock Retirement Club, which is a unique platform to empower you to do these things. But we're just going to try to be authentic and do this with you. And I am so honored to be able to walk this with you every week.
All right, go take the stairs.
The opinions voiced in this podcast are for general information only, and not intended to provide specific advice or recommendations for any individual. All performance references are historical and do not guarantee future results. All indices are unmanaged and cannot be invested in directly. Make sure you consult your legal, tax, or financial advisor before making any decisions.