Hello and welcome to the Billion
Dollar Backstory podcast.
I am your host, Stacy Havener,
and today I am joined by Dr.
Daniel Crosby, psychologist, behavioral
finance expert, New York Times bestselling
author of many books, including my fave,
the Laws of Wealth, and the award-winning
host of the Standard Deviations Podcast.
Most of you will know Daniel for
his work as Chief Behavioral Officer
at Orion, where he shines a light
on the decisions people make about
money and why they make them.
Or perhaps you'll know him as the finance
face of Diet Coke and we will get to
that . So Daniel, welcome to the show.
Also, I should say, no pressure.
You're the first guest.
No pressure, no pressure.
Don't waste my time with
your brand new podcast.
No.
Congratulations.
Congratulations.
Congratulations on the launch of the show.
Really
exciting.
Well, thank you.
And thank you for being here.
Um, so look, I'm gonna ask the
question that I've always wanted to
ask you, and we're friends and, and
I think people should realize, I've
never actually asked you this before.
So you are a Chief Behavioral Officer.
What does that mean?
What do you actually do?
Yeah.
You, you and you and my mom.
We all wanna know,
mom, are both you and my
mom are both confused.
So I, the best, the best introduction
I've ever gotten was by someone who did a
little research and said that there have
been fewer, uh, chief behavioral officers
than people who have walked on the moon.
So I think it is a, I think
it is a fair question.
Right.
That, what does a chief
behavioral officer do?
So if you think about behavioral
finance, behavioral finance to me is
just finance that accounts for the
beauty and the messiness of, of humanity.
And so my job as Chief Behavioral
Officer is to help advisors give
advice and help my company build
technology that, that maximizes the
beauty and minimizes the messiness.
So that's my, that's my easy answer.
Okay.
I love that.
That's not so easy though.
What if I was in fifth grade?
What would you
say?
Okay.
So if you were in fifth grade
training Tools and technology.
Okay.
Training tools and technology train.
I train.
You're a smart fifth grader.
No, you're a gifted kid.
Okay.
But I was, but I mean, you're like a
ninja on why people make decisions.
Yeah.
Except Ninja, you can't use ninja
or rockstar in the year of our
Lord, 2022 . We're, we're beyond.
We're behind.
All right, fine.
All right.
We're behind, we're beyond Ninja.
How about magician?
I don't know.
There's something, we, we're gonna work on
this, we're gonna have a little session.
We're gonna work on this.
Yeah.
Yeah.
Help me with my, so with that, yeah, we'll
help, we'll work on your storytelling.
So with that, I'm guessing,
did you come from a long line
of behavioral scientists then?
Like, did you just wake up, let's say in
fifth grade and just know this was your
calling?
No.
In fifth grade, I wanted to be
the catcher for the Cardinals.
Uh, but that didn't, that didn't pan out.
Of course.
So, and, uh, yes.
Yeah.
So that, that didn't pan out.
But the, the way that, that I got into
it was, was very sort of roundabout,
you know, a little bit, a little
bit like your own story perhaps.
Um mm-hmm.
, my dad was a financial advisor.
My dad is a financial advisor rather.
And so I grew up sort of in a home where,
where you talked about investing and you
really talked about stock picking a lot.
And like even around
the dinner table where.
we're talking about how to sort of parse
a good investment from a bad investment.
And when I went to college, I,
I very much went with an eye to
doing what my dad did, right?
I'm like, I'm going to
be a financial advisor.
Okay, I'm gonna be an asset manager.
You know, something sort
of, sort of in this world.
Well, I got to my first year of college
and took some psychology courses just
in, in fulfillment of some GE courses
and, and absolutely fell in love.
And then after my first year of college,
I did something a little bit unusual.
I went and served a mission for my church.
So I spent the, the next two years of
my life, my 19 through 21 year years,
uh, as a missionary in Southeast Asia.
So I lived in Manila, Philippines
and learned to speak Tagalog and was
doing service and things like that.
And so I came back with.
, sort of this deep fascination with
culture and this deep love of people.
And the, the psychology piece had
taken root in a, in a very big way.
A and at the time, Stacy, I
had sort of a binary view of,
of finance versus psychology.
It's like, okay, so here's finance.
These are the numbers people,
here's the psychologist.
Mm-hmm.
, they're, they're helping people.
This is the people profession.
And so that's what I want to do.
So got a, uh, finished a bachelor's,
uh, went on to get a PhD.
And, and, and it was only, uh, late
in my PhD when I was really doing
sort of full-time counseling, but
I just candidly just burned out.
I mean, I just kind of fell to pieces,
uh, because 40 to 50 hours a week of, of
talking to people who were in the depths
of despair was just too much for me.
Like, I couldn't, I couldn't set
up the appropriate boundaries.
Like I couldn't.
I couldn't not take my work home with me.
And so I was just burning out and
I knew there was no way, I mean,
I was 23 when I started my PhD.
I knew there was no way I was
going to be able to do this,
you know, for the next 50 years.
And so I came back to my dad and
said, look, I, I love psychology.
I love thinking deeply about why
people do the things that they do, but
I can't do it in a medical context.
Like I'm just not cut out for it.
And so he sort of introduced me
to this idea that there was a
ton of, he goes, well, there's a
ton of psychology in, in my work.
And I'm like, what are you talking about?
Like, you know, like you're, you're
a sales guy, you're a numbers
guys, you're an analytical guy.
And that, you know, that near
suggestion, you know, long story short,
set me on a path to begin to explore
what, what I now know as behavioral
economics, behavioral finance.
But my dad didn't have that language.
I mean, my dad didn't.
know what behavioral right finance was.
He just knew about market psychology.
So I, and I I love that.
Thank you for sharing.
And I imagine that even though you're,
maybe you're not always talking to
people in the depths of despair mm-hmm.
in your current job, there probably
are some similarities between
that work and those conversations.
I can only imagine that your psychology
background is super helpful in,
in how you serve people today.
Um, also as, as your friend, I, I, I
often wonder like if you just see like
behavioral biases and other things
just like as flags around my head
when we talk, which is probably true.
That's okay.
. I,
I, I haven't wanted to bring it
up, you know, I haven't wanted
to say anything, but if you want,
if you want a rundown, I've got it.
Yeah, exactly.
Um, that was super interesting and.
what resonated for me.
There was something that you said
about your dad, which is he knew
these phenomenon were happening, these
biases were playing a role, but he
didn't have the language for them.
Yeah, and I relate to that very much.
Kind of being more from the art
side of things versus you coming
from the science side of things.
And I think that's why today having
you as our first guest is so important.
Not just cuz you're my bff, but also
because storytelling is so art and, and
that's how I always felt about it until
you and I started having conversations
and I realized, my gosh, there is so
much science behind why this works.
This isn't just like coincidence.
It's not just some like magic
sprinkle dust that happens.
Like there's actual scientific
reasons that this is happening.
Um, and.
. And so let's start with that a little
bit because I am the storyteller.
You are the scientist.
Can you just tell us, is
there a sci am is this true?
Does storytelling actually work from
your perspective versus my anecdotal
one?
Yeah, Stacy, one of the things
that, that I've observed about
you and and other talented sort of
psycho, psychologically minded prac
practitioners is you end up stumbling
onto a lot of the same things that,
that scientists have, have spent their
careers sort of codifying and naming.
And we really need science and, and
practice to work hand in hand if we're
gonna, if we're gonna have maximum
impact with, with human nature.
Cuz each brings their own, uh, you
know, their, their own strengths
and weaknesses to the party.
But yeah, to, to answer your
question, I I, I want to dig into
this storytelling piece a little bit.
because most people think that their
mind is the accounting department, right?
They think that their mind is the
accounting department, that it's sort
of weighing things, uh, you know,
making dispassionate decisions, uh,
accurately filing data and experiences.
Our mind is really the PR department
and, and what we know is that all
of the science says now that we make
decisions rather instinctually, rather
emotionally, and then we work backwards
from that to make PR plans that,
that justify those decisions, right?
And so storytelling is sort
of this grand shortcut to that
emotional core of a decision.
And if you can touch that emotional
core of a decision, then you can, you
can know that that person's going to
engage that PR department and start
to tell the story you want to tell.
So, to understand why
we are this way though.
Let's, let's do dig into
the science a little bit.
So your brain is small, you know,
relative to your body, it's like two
to 3% of your body weight, but it,
it consumes 20 to 25% of the calories
that you expend in a given day.
And so it's very energy inefficient.
It's very sort of metabolically expensive.
And so one of the ways that, that we are,
uh, always trying to, to bring these two
things back in line and to, to think less
candidly, is to answer an easier question.
Okay?
So if you are voting for the president,
right, like if you, if you are,
you know, casting your vote in the
midterms, it won't be for president.
But if you're trying to pick a good
political candidate at the midterms,
you have to consider like, um, , you
know, what's their foreign policy?
What's their domestic policy?
What's their economic policy?
How intelligent are they?
How sort of, uh, good
are they with people?
Yeah.
How long are they likely to live?
I mean, there's, there's 2000 things
you need to consider and then you've
gotta wait them appropriately.
It's an enormously hard decision.
So what you do is you
answer an easier question.
And the question that most people
answer when they're voting is, would I
like to have a beer with this person?
Right?
And so now if we like, is that true
or are you making that up?
Or is that really true?
It's a hundred percent true.
That's unbelievable.
No.
So, okay, keep going.
I
love this.
So, I mean, maybe it's not a
beer, but it's, it's like , right?
It's like how, yeah.
How, how cool are they?
Like how, yeah.
Do I like this person?
Sure.
And so think, think
about your world, right?
Of, of fun, select.
How many, how many funds are there now?
There's like more funds now
than individual securities.
It's crazy.
There's 10,000 hedge
funds or whatever, right?
So when you're trying to parse what
makes hedge fund number 9,500 different
from hedge fund number 6,212, right?
There's no way that you can
split every hair, right?
So you, you weed out
some of the junk, right?
You weed out some of the stuff
from an analytical perspective
that is just not a fit or the
performance is atrocious or whatever.
But once you get to that final
thousand or so funds, it's gonna
be about the human connection.
It's gonna be about who do I like, who do
I connect with, who has a resonance story?
And then I'm going to work backwards
to retrofit, to retrofit the data
to fit that emotional narrative.
. And, you know, the, the, the final
thing that I'll say here for your
listeners is, you know, Yuri Hassan,
uh, of Purdue and Princeton has a TED
talk and some research that I think
is just well worth looking into.
And he looks at what happens to
our brains when we hear a story.
And so he hooks people up to f MRIs, like,
so, uh, brain scans, and he looks at the
activity in, in, uh, you know, our brain.
So we look at Daniel's brain, we look at
Stacy's brain, they look very different
right at this, at this moment in time.
But then they play a story and
our brains look identical, right?
So, wow.
Storytelling has this power to
sync up two people in a way that
facts and figures simply do not.
So it's important to remember that.
and it's important to remember, yes,
once you've covered the basics, right?
If your fund is disastrous,
no one's gonna take right.
You know, right.
No one's gonna take the time, but, but
once you've sort of ticked the, the most
basic boxes, it's really gonna be about
that story, that, that relational piece
that was amazing.
And we should, we could just stop and
just loop that so that it really sinks
in, you know, seven times to hear it once.
Because something I hear from fund
managers a lot is, you know, they might
say, thanks, Daniel, that's great,
but that's not true in the investment
industry because we're all wicked smart.
And so that doesn't happen here.
And what, how would you like, give me,
what do I say to them when they say that?
I mean, I obviously, I tell them,
actually, no, this is a human thing.
It's not an intelligence thing,
but how would you address that?
.
Yeah.
You know, one of the thing, , one
of the things that, that I like,
uh, about my world of human
behavior is it's so pervasive.
I mean, it is a human thing.
Like no one is immune to these things.
Yeah.
And if you look at, you know,
even my sort of by guiding light
here as Daniel Kahneman, right?
Daniel Kahneman, who won a Nobel Prize
for his research into these, into these
matters about 10 years ago, you know,
when they ask him like, Hey, how has
your own decision making improved?
Like, uh, you know, how is your
own ability to fight bias improved
as a result of being like the
granddaddy of behavioral finance?
And he says, effectively, not at
all, because like, I'm still a human.
And even though I know all of these
things, I still fall prey to them.
So, you know, people in our industry
who, who would look you in the eye and
tell you that they're not susceptible to.
Narrative or that they're not susceptible
to some of these behavioral things that
we're talking about, and it's the height
of, of hubris and it's just not true.
Um, you know what's right,
what's, what's even wilder.
And maybe this, this will be a
point for, for future conversations.
When I was writing the behavioral
investor, I looked at the excitatory power
of different conversations on our mind.
So again, going back to our F M R I
machine, you hook someone up to this, a
apparatus, and then you have different
conversations with them about sex
and death, money and religion, you
know, all these hot button topics.
And the one that excites
the mind the most is money.
Like more than sex.
Mm-hmm.
more than death, more than fear, you
know, more than religion or politics.
Money makes us go absolutely haywire.
And so, you know, you, uh, you are never.
Dispassionate about money and the
fact that we work in this industry
doesn't mean we're less dispassionate.
It means that we're crazier.
If anything,
.
Thanks.
Preach on that.
Um, and actually this is, you know, we
were talking, um, sometime back the, so
Kaya, um, and I wish I could unpack that
acronym, but I'm not gonna be able to,
I'll have to put that in the show notes.
But Kaya, um, did this study on allocators
and it was amazing because again, it
started to put data around something
that I felt for a very long time.
And so one of the things they researched
in this study about how allocators
make decisions is what is the role of
qualitative due diligence as compared
to quantitative due due diligence.
And they did something really cool because
they didn't just ask the allocators.
They then turned around and asked
the asset managers what they thought
the allocators answered here.
And no surprise there
was a massive disconnect.
So the first point in that study was, um,
qualitative due diligence is as important,
if not more important than quantitative.
So that's 0.1.
But 0.2 was when the asset managers were
asked how the allocators weighted things,
they overwhelmingly said the allocators
favor quantitative over qualitative.
And you know, in my mind, I'm sort of like
have this phrase that swirls around in my
head, which is, I guess it's a question
more than a phrase, which is, are people
buying a fund or are they hiring a human?
And I would love to get
your thoughts on that.
The study, the whole thing.
Yeah.
So let's go back to the, the CAA
research, right, which is Chartered
Alternative Investment Analyst, right?
That's I think what
it's, thank, see this is why, this is
why I have a friend who's a scientist,
.
So the ca the CAA study.
The CAA study, right?
It, it, we have to understand first
of all that people are not good
reporters of their own behavior.
Cuz go back to this idea that
your mind is a PR agency.
It is feeding you plausible nonsense all
day to make you move through the world in
a way that doesn't, uh, sort of let you
in on how, how truly emotional you are.
So there's all kinds of research.
There's research on hiring,
and when they say, oh, there's,
there's great research on hiring.
They, they created
fictional, uh, police chief.
Reports.
Right?
And so one was a man and
one was a woman, right?
And so this is, uh, a role that at
least historically has had a strong
gender stereotype with it, right?
Historically, we associate a police
chief with being a man, right?
And so, people, by and large
wanted to hire a man for this role.
So they created two different profiles.
One was very sort of street smart, smart
smart, street smart and experienced.
The other was, uh, sort of, uh,
had a great pedigree, right?
Like advanced degrees, lots
of criminology expertise.
And so then they presented them
as a man and a woman, right?
Whichever one was the man, people
said was the winner, right?
So they said, look, when, when the man was
presented to them, when the man was street
smart, they said, yep, we wanna hire
the man, uh, because he's street smart.
And that's better than the woman
when the tables were turned.
they still wanted to hire the
man because they said, oh,
well he has a better pedigree.
Right?
They retrofit their desire to hire a man,
uh, onto the facts of the case, and we see
this again and again, and again and again.
Right?
So going to the Kaya study, right?
First of all mm-hmm.
, we have to understand that no allocator
is going to look at their process and
go, yeah, I make emotional decisions.
Right?
It's not in their best
interest to do that.
Their PR department, it is not making
them privy to that information.
The best research that's ever been done
on why people do what they do and why they
make decisions comes from Bob Chaldini
and his, his research on influence, right?
If you look at the influence,
like, so Chaldini isolated the six
pillars of influence, and there
is some analytical stuff in there.
You know, one of them is authority and.
, that's part of it, right?
Your fund has to be good enough.
There's certain boxes that you have to
tick, but if you look at the other sort
of pillars of how we make decisions,
you get stuff like liking, right?
We get stuff like liking.
So how much do I like this person?
We get stuff like social proof.
What are other people doing?
What are other allocators doing?
Right?
Nobody ever got fired for
choosing I B M kind of stuff.
That's social proof, that's hurting.
And then there's reciprocity, right?
There's, we know that people do
business with people who have done
nice things for them, you know?
So it's everything from, yes, the
authority piece, how good is the fund, but
it's also at least as much, how much did I
like the, the people at the organization?
What are other people doing?
Were they nice to me?
Did they buy me dinner?
You know, I mean, you know,
these sorts of things.
are a bigger determinant than sort of the
meat and potatoes of the fun performance.
Very well said.
And, and I think, you know, so, so
staying with the, the Kaya study,
when you have the asset manager who
thinks, oh no, the allocator only
cares about the numbers, what happens
is then you have, you know, a, a table
proverbial table where two people are
sitting there having a conversation.
The allocator might wanna know things
like, who are you as a human being
and who are the other people at your
firm, and what's your culture like?
And how do I know you're gonna stay there?
And your team is incentives to stay there?
And what's your process?
What's your philosophy?
What are your values?
Like all of these qualitative
things, how do you think about risk?
And the asset manager is sitting
there saying, here's my data.
Here are some charts.
I've crushed my competition.
Here's 18 different ways you can see that.
, any questions?
Maybe you wanna talk about my portfolio?
We can do that.
Wanna know what I have
the highest conviction in?
And that is why those conversations break.
Mm-hmm.
, they break down because one side
wants one thing the allocator
wants more about Who are you?
I'll get to the numbers.
I've seen them.
I don't need you to show me the charts
cuz I, I have, you know, whatever
research software I use, but what
I can't get from those software
system is who are you as people.
Yeah.
Yeah.
And so I, I love Cini, but
yeah, keep going, please.
Yeah.
And even, you know, even going to that
authority piece, Chaldini found that,
that even authority, like unmitigated
authority is obnoxious, right?
I mean, there's a reason why, right?
You read my bio and, and I
didn't read my bio right?
I didn't come on here and say
like, oh, hey, I wrote these
books and I did these things.
Because people go, God, who is this?
Right.
So like even, you know, even the
process of talking about how great
our fund performance has been can
be a little off-putting if it's
not sort of counterbalanced by
some of these relational things.
I mean there's a world in which
you talking solely about how
awesome your performance has been
is seen as hubris or arrogance
and, and is offputting to people.
So not only is it not everything,
it could actually work against you.
You know, the research shows
if you don't so true if you
don't do it in a balanced way.
So true.
And I think if people buy your
performance, cuz maybe there
are some people who are chasing
performance and you know that that's
all that is what they care about.
Well the thing is, if they buy that, if
you find someone that that's what they
want, guess what they're gonna sell.
Yeah.
Your performance, when you're
down, they're not gonna ask why.
They're not gonna give two
craps about what's going on or
you know, you're out of favor.
They're gonna literally hit.
The, the cell button.
And so, you know, there's another
side to it, which is not only
getting somebody to choose you,
but then to keep them with you.
It's, it's a great point because,
you know, you, you want to
control the controllable, right?
And we know that even among the
most talented managers, right?
There's, there's long
periods of underperformance.
Even in top decile funds, we'll have
1, 2, 3 years of underperformance.
And if you don't have those other
sort of hooks, right, if you don't
have those other points of connection,
your toast, I mean, you don't wanna
live and die by that first sword.
It's a, it's a hard way to run a business.
Agreed.
So I wanna go to authenticity and,
and we talked, um, about this a
little bit when I was on your podcast.
And again, I, so I think
it was the pratfall effect.
Is that right?
Am I saying that right?
Um, and if you want to, this.
Yeah.
So this was, it was awesome.
It was one of my favorite,
um, parts of that podcast.
Um, but instead of doing that one on
authenticity, I wanna talk about something
that I see so often in you mm-hmm.
, and that's humor.
So I, I actually was on the
phone with a, a very large, very
well-respected, uh, investment boutique.
And they, and they were asking,
they were sort of sharing with
me, like, we get into these finals
presentations and we just never win.
And my question to them
was, well, how often?
So my first question was,
how often does anybody laugh?
And I mean, they were like, what?
Like, does not compute, right?
And then I said, okay, forget laughing.
How often does anybody.
and they were like, no, no one smiles.
Like this is very serious work.
And, and my heart kind of broke a
little bit cuz I thought, oh my gosh.
Like, just so unfun.
But can you talk about humor
and the power of that from a,
the authenticity perspective?
You're so good at it.
Yeah.
I, I appreciate it.
You know, there's, there's really
four things that we look at.
You know, for, for a psychologist like
me, we wanna operationalize everything.
We want to codify it, kind
of put parameters around it.
And so when people talk about authenticity
in a vacuum and how likable it makes
you, I just kind of roll my eyes.
But if we, if we want to get
into like, the science of
authenticity, here it is, right?
Yes, please.
There's, there's four things
that we look for when we want to
connect with someone authentically.
So we'll start with the one that
you brought up, which is humor.
We consistently across cultures
like people who are funny.
. And if you think about some of the best,
um, you know, public speakers you've
ever heard, very commonly they start off
their remarks with some sort of a joke
to get the, the audience on their side
and to sort of cre create that bond.
The other thing that we know, just
from a stickiness perspective is that
humor makes learning more enduring.
When, when we interject, you know,
say you're giving a pitch, say you're
giving a presentation and you're one
of, uh, you know, however many that
are that are pitching that day, we know
that humor makes presentation stickier,
that people have far better recall
for humorous information than they do.
Uh, then they do sort of draw information.
So if you want to be remembered, if
you wanna stand out, if you want to be
likable, being humorous, being funny
is, is a fantastic way to do that.
The second one, we won't spend much
time on, it's being attractive, right?
. So we like people who are, we
like people who are good looking.
Uh, which isn't super shocking,
but, but we also know from the
research that good looking doesn't
mean you have to look like a model.
I mean, it basically means you're,
you know, you're, you're well put
together, you're well dressed,
you're clean, whatever, right?
So we like people who are attractive.
We like people who are funny.
We like people who give us compliments.
And the, the research here
is really funny, right?
Um, we actually like people who give
us compliments, whether or not we
perceive them to be sincere . So, um,
there, there's actually this advisor,
there's this advisor who I hope
is, hope is not listening to this.
I hope he is not a Stacy fan, because,
you know, every, every time I go home
and, uh, you know, I'll be out with
my wife, you know, getting dinner or
whatever, we inevitably run into this guy.
I'm from a pretty small town and,
uh, we, we'll run into this guy and
he'll, you know, he'll come up to my
wife and he is like the consummate
southern guy, you know, and he'll say,
oh, you know, you look so beautiful.
Like, I can't believe, you know.
Can't believe you look so beautiful.
You're so smart.
You're so funny.
You're so great.
You know, how'd you have three kids?
Just like on and on, like
Rapid fire compliments.
And the, the last time he did
this, I was like, oh my gosh.
Like that guy is so full of crap.
Like, you know, like as he was,
as he was walking away, you know,
to my wife, I'm like, chase.
I'm like, that guy is so full of it.
And she goes, yeah, so
why do I love it so much?
And, you know, we're all,
we're all my wife, right?
We like people Yeah.
Who pay us compliments, whether or
not we perceive them to be sincere.
So I, I would tell you don't give
insincere compliments, but, but we
know that that compliments work.
And then the final thing, Stacy,
is the, is the least utilized and
it's, we like people with whom we
share a common struggle that is
like authenticity, you know, that is
like black belt level authenticity.
If you can connect with someone over.
Shared interest.
Right?
You, you both like golf for you both
like the same football team or something.
That's okay, that's good.
But if you can connect with someone over
a shared struggle, that's incredible.
Right?
This is stuff like, you know,
uh, this could be anything.
Right?
I've connected with a lot of people over
raising kids, like raising kids is fraud.
Sure.
Right?
Raising kids is tricky.
It's scary, it's uncertain Sometimes
even when you have happy, healthy
kids, that's a point of connection.
You know, having started a
business like the early years
of starting a business, right?
A lot of these folks will have been there
and, and be honest about your struggles
and look for common commonalities
and common points of connection.
This is the one where I think we leave
a lot of value on the table cuz our,
you know, our parents told us that,
that if we don't have something nice
to say, we shouldn't say anything.
And so we don't want to be
candid about our struggles or,
or our shortcomings or our pains.
But here on, on National Mental Health
Day, which is today, I think we should,
we should own these things and, and
just be candid about this and look
for points of connection where, where
someone we're trying to connect with
may have been through a similar thing.
Gosh.
Well, a masterclass on authenticity.
Thank you for that.
That is so good.
And then I would say like, for additional
homework, go watch the podcast we did,
where you unpack Pratt fall effect too.
Yeah.
Um, the struggle thing is so good.
I mean, all of it is good, but
that struggle because it's so
inter integral to a good story.
If there's no struggle, if there
are no stakes, no one cheers.
. So if you think that you're gonna like
polish your story and it's just gonna
be this really neat, like everything's
rainbows and unicorns and look at all
the great stuff I did, guess what?
We're a story ever.
You have no fans because that's not real
life and you haven't given the person
you're talking to anything to hang
onto and the middle is messy and that
has to be there in your storytelling.
So I love that you said that it's
super hard for people to do in general,
but very difficult I have found
for investment managers to share.
I had one manager who was asked like,
tell me about a mistake you made and
sort of, you know, what you did with it.
And they literally refused to answer.
Refused to answer.
Needless to say they did
not get the allegation, but
like they don't wanna share.
Yeah.
Yeah.
I mean there's too much sort of
bravado and masters of the universe
stuff, but you know, think,
okay, so we, we'll take it from.
Um, sort of a literary perspective,
and then we'll go to the, the
psychological perspective.
I mean, from a literary perspective,
a story with no conflict and
no struggle, like you said,
would be the worst story ever.
And you are telling a story, it would be a
completely useless story without something
you've overcome from a psychological
perspective on the authority front.
Chal dini's research shows that your
authority is at its absolute peak.
When you are candid about something
you don't do well or you're candid
about a weakness, and you follow it up
immediately after with your greatest
strength to say, look, this thing
was tough, but now we're doing this.
Right?
The, the easy example, this is a silly
example, but it's, it's one that I think
we've all been through, is when you go to
a restaurant, right, and you, you ask the,
the server, you know, what's good here?
And they go, oh, everything's great.
Like, everything we do here is great.
And you're just like, that is the worst.
That is the worst answer.
And you know, when, when, when they say
to you like, look, don't get the fish,
do get the steak, or, you know, whatever.
You go, oh, okay, thank you.
Like, you know what I mean?
We, we trust that person More research
shows, we tip them better when they are
honest about like, look, this is not good.
Like, this is not great.
So true.
This is great.
Just be honest about it and own it.
That is so true.
And I'll give an an investment example.
So this is one of our, our former clients.
He was amazing.
Um, all our clients are amazing.
I guess you can't have a
favorite client, right?
But, but there are, there are favorite
pieces from all, all different clients.
But this one was, um, a red flag's
checklist and anybody can implement this.
So basically what this, um, founder,
portfolio manager did was for every
mistake he made, he would say, I am gonna
put this on a list that I will check.
For every investment I make so that
I won't make that mistake again.
I will for sure make other mistakes, but
I'm gonna try to sort of mitigate the bias
of making that particular mistake again.
And so this checklist grew over time and
it was literally part of his process.
And I thought, what a simple but
brilliant way to kind of a, to just
get better at your craft, but also
to just show how you respond to
mistakes because we all make them.
Yeah.
Checklist, red flag checklist.
I love it.
I love it.
So good.
Yeah, I think we should all have that.
Um, alright, I wanna switch gears
a little bit because I said at
the top that people might know you
as the finance face of Diet Coke.
. And if people haven't seen this,
because maybe they're, they're like
me and they don't love Instagram,
which is where maybe you're sharing
a lot of your Diet Coke stuff, even
though I know it started on Twitter.
Can you give us the backstory of this?
Yes.
So a few months ago, um, I decided
to quit drinking Diet Coke, right?
So I, uh, I drank a ton of Diet Coke.
I would, you know, we won't talk about
the specific numbers, but it was a lot.
I was drinking, I was drinking a lot
of Diet Coke, and it just wasn't, you
know, it wasn't good for me, right?
It wasn't good for me.
So, so I quit for a period of
about, uh, about four months.
And so I put this sort of sarcastic
tweet out on Twitter that said, Hey, you
know, you see these sort of, um, these
threads on Twitter that are like, Hey,
I did this thing and it worked for me.
Let me tell you how to do it.
So I said, Hey, you know, whatever.
Three months ago I stopped
drinking Diet Coke.
, uh, I want to talk about some of the
changes in I've seen in my life and
I said something like, you know, my
one reason for for living is gone.
I've lost no weight and I've
seen no differences in my health.
Or, you know, something
sort of snarky like this.
Well, it went kind of crazy.
Um, it had gotten about
8 million interactions.
Um, as of about, you know, the time
I went to bed, I was actually in,
in Utah visiting family at the time.
And so I went to bed and I'm like,
yikes, this thing is really, you know,
really doing numbers . And so, you know,
I, I wake up the next morning though.
We, we are on vacation and so I go
to a, a minor league baseball game.
I'm a big baseball fan.
I go to a minor league baseball game
with, with my family, and I start
getting texts that said, you know, omg.
Elon Musk.
Elon Musk.
And I'm like, what is,
like, what is going.
. And so figure out that Elon Musk had
retweeted my tweet and then had commented
on it a number of times, talking
about how much he loved Diet Coke.
And Elon's mom retweeted it.
And so it just went crazy.
And I was getting calls.
Um, you know, uh, Buzzfeed
did an article on it.
All these sort of other
aggregators did articles.
It was the number one trending topic, uh,
in the world on Twitter for, for a day.
And it was just this really
strange, surreal thing.
Like 35 million people interacted with it.
I mean, that's like one
in 10 Americans, right?
I mean, it was just, it was incredible.
But then, you know, there's
sort of all the peripheral
weird stuff that happens too.
People were fighting in my
comments about, I mean, literally,
uh, e everything, right?
Like how Koch was, you know, part
of the new World order and trying
to like, bring about Armageddon
and like conspiracy theories and.
And health nuts.
And I just had to sort of tune it out.
So it ended up just being this funny
thing, but in the moment it was actually
really kind of anxiety provoking.
Like it was really strange to be like, all
of these people are sort of looking at me.
And it was, it was really sort of strange.
Now I just sort of laugh about it,
but it was doing such numbers and it
got so many kind of weird people in
my sort of social media front yard
that it was strange for a moment.
So
thank you for sharing that.
And I would like to take another side
to this and it goes back to authenticity
because everything you described
when you unpacked the sort of four
principles of principles of authenticity
you sort of had in that tweet.
If you think about it,
there was a struggle, right?
There was a little bit of humor.
Um, and.
, I'm sure it was incredibly surreal,
but also it made you really human.
Yeah.
Like that is something, right.
And, and for, it may be hard for you
to believe, but there's a lot of people
who, you know, see you up here and you
know, you're wicked smart and you have
this big job and you're, you know,
luminary or all these things that you
are, and this made you a real person.
And one of the things I know that
happened since is like, people now
when you're at a conference, they're
not just coming up to you with
their favorite Daniel Crosby book.
They're coming up to you with a can of
Diet Coke and asking you to sign it.
And like that's really amazing.
It, it's really funny.
Like, so first of all, great, great
connection you just made, you know,
I had never thought about it in
those terms, but you know, this,
um, this ad agency in, in England.
actually did a breakdown of my
tweet and sent me their white
paper on, I mean, it was wild.
This thing was so strange,
but it went, so, it went cool.
It was so nuclear.
But they, one of the things
that they identified, they were
like, how did this go so viral?
And they said it was sort
of self effacing, right?
It was, it was humorous.
Mm-hmm.
and sort of poking fun at myself.
It's like I did, I didn't get healthier.
I didn't lose weight.
Like I didn't, you know,
I didn't feel better.
Like, and, and sort of the, the honesty
about that in a world full of threads
about how everyone's crushing it, uh,
I think was, was refreshing to people.
Yeah.
So I think, you know, and,
and agreed and a simple joy
mm-hmm.
. So yeah.
Now, now I'm back on.
Now I'm back addicted, but I'm, I,
I'm happy to say I'm about 50% of,
I'm drinking about 50% as I mu as much
as I was before, but still enjoy one.
Enjoy one every now and then,
especially with Mexican food
or a burger or something.
You got to,
yeah, it's, it's too good.
Well, I love that.
It's actually a great case study
of authenticity in my opinion.
Um, now when I first saw you speak,
this is before we were friends, it was a
Schwab conference, so no, this is a little
bit of a, um, a walk down memory lane.
Like this is your life, Daniel Crosby.
I think, actually you're gonna
hate me, but I think you were
talking about this book here.
Yeah.
Personal benchmark probably.
So do you remember what year that was?
I mean, I think, I don't even
remember when that book came out.
I think that book came
out in 2013, so 2014.
Okay.
Yeah, it might've been a while ago.
So that was a very long time ago.
Um, but I remember it distinctly because
here you are on this stage, obviously, you
know, with all this incredible knowledge
and expertise you're sharing with us.
Yes.
Um, and not to keep that humor thread
going, but it, you were funny and you
told stories and so, and, and, and since
I've known you in everything you do, you,
you, you tell us the bias or the effect
or the kind of the scientific part.
You explain it in a way that
we can understand and then you
bring it to life with a story.
And I'm assuming that's intentional,
but to me it's an example of
the power of storytelling.
And I just wanted you to
explain like is, I'm sure it's
intentional, but is it intentional?
And, and why do you do
that?
So it's, it's a hundred percent
intentional and I'm, I'm in
the very early stages of, of
working on a new book, right?
I was scarred by writing three books in
five years and I needed a little break.
But , I'm getting, I'm, I'm,
I'm getting back on the horse.
And you know, when, when I've been
talking to my research assistant
about, about putting this together, I
said, look, here, here is the formula.
, we're gonna begin every chapter with
a story, which is your hook, right?
We're gonna, we're gonna
hook the reader with a story.
Then we're gonna move on to the
specifics of the science, right?
What does the science say about
the principle that we tried
to illustrate with the story?
And then we're going into like
bullet point specifics, right?
You know, we're going to, we're
gonna talk about, you know, the,
basically the why, what, and how.
And so there's the idea that
you're not a storyteller.
I just, I just, uh, I, I
push back on that, right?
Because if people are meaning seeking
creatures born into a world where
meaning is not always easy to find.
And so religion, government, art,
money, economies, all these things
are stories about why we're here.
how the world works, what
the good life looks like.
All of these things are stories
and, and storytelling is just
about taking chaos, right?
The chaos that the world presents
us and packaging it and presenting
it in a way that's, that's pleasing
and memorable to the human mind.
And so you, you cannot
help but be a storyteller.
You can be a bad storyteller.
Like you can tell like sloppy,
haphazard, unintentional stories , right?
But you cannot, like, you cannot
keep from being a storyteller.
So like, you're at that crossroads
the minute you were born, you were
born into a storytelling universe.
And so it's like, do you wanna,
do you wanna follow Stacey Havener
on, on LinkedIn and, and listen to
her, you know, the Gospel of Stacey
and become a good storyteller?
Or do you wanna be, uh,
you know, sloppy with it?
Uh, you're gonna tell stories.
Yeah, you might as well tell the good.
.
Oh, that's so good.
That's a quote right there.
That's amazing.
Um, okay, so what about the
other side of storytelling?
Can we talk about, talk about
the dark side of stories.
Mm-hmm.
. Mm-hmm.
. Um, and I've had more than one person
say this to me, oh, lipstick on a pig.
You know, you tell stories when you've
got, I don't know if you can say a bad
word on podcast, so I won't, I don't know.
I'm learning.
So if you've got a crap product, you know,
you, you tell a story about it and you're
basically, it's basically manipulation.
That's the knock.
And how do you respond to
that?
Yeah.
So with all of the things that we've
talked about right there, there's
certainly the potential for that, right?
I mean, there are certainly people mm-hmm.
who tell stories with the intent
to, to mislead or or to lie.
I'm gonna assume, though, for the average,
you know, For the average like boutique
fund manager, they're just trying to
tell a story to get people, you know,
to, to take, take a look at them in a
world where it's hard to get a look.
So we have this weird obsession,
you know, kind of going back to
our authenticity conversation.
We have this weird obsession with
being sort of off the cuff or
impromptu in our communications, right?
Like, you would never show up
to an important meeting with
your boss completely unprepared
and just go like, this is me.
Like, you know what I mean?
, you would ne , you know, you would not,
um, you would not fail to prepare to run
a marathon because that's an inauthentic
accounting of your athleticism, right?
You wouldn't, you wouldn't have a child
and go, well, I'll just wing it because
that they should get the real me.
And yet, like we show up to our
communications all the time.
with little or no preparation because
it feels, you know, manipulative
or, or stilted or something.
If, if we prepare too much.
No.
Like again, we are walking bundles.
My whole, my whole shtick, right?
My whole area of study is we are
walking bundles of values and bias and
preference and psychological scar tissue.
And that's true of us, and that's true
of every person with whom will interact.
And so the process of telling a
well-crafted story is not a manipulation.
It's an opportunity for us to reflect
on those biases and those values and to
be thoughtful and intentional about the
story that we're telling instead of just
going an autopilot, which is where the
nasty parts of, of those biases and those,
those values can sort of rear their head.
So again, you don't show up to other
parts of your life and just wing it.
because that's, that's what
it takes to be authentic.
Why are you carrying this bad
idea to your communication
and your storytelling efforts?
Agreed.
It's so dangerous.
It's so dangerous for people to
think that if they prepare or if
they tell a good story, that it's
going to be received as negative or
manipulative or spin or inauthentic.
And there that perception is, is real.
Yeah.
Um, being a good storyteller doesn't mean
you're some like slick sleazy car salesman
hawking, like fund products, right?
I mean, that's not what this is about.
Um, so I have a question for you.
I know I started with a a, a real
question, and this is another real
question, , so I know a little bit about
behavioral bias and how powerful that is.
in the sales process.
Like literally it's something we track.
I mean, it's super
predictive in closing a deal.
Mm-hmm.
. And so I, I sit here as your friend
and I see all this amazing work that
you're doing, and I have one really big
question that always pops into my head,
which is, why are you not in sales?
I mean, you would literally crush it.
So, so I would make more
money if I were in sales.
I'm confident of this.
So thank you for your concern.
I think if I had spent my career in sales
, I, I definitely would've made more money.
But, you know, I'll, I promised, uh,
to tell you sort of a funny story.
I, my, my first job after getting my
PhD was in, um, pre, pre-employment
assessment of bank executives.
So they would bring me in at the ripe
old age of, you know, 27 to sit down
with sort of the future CEO of a bank.
And I would give, you know, him or
her, A personality assessment, an IQ
assessment in like a four hour interview
to sort of try and assess the fit
between them and, and the organization.
See how smart they work.
So if you look at the, the psychological
literature on job success, right?
The, the two things that are the most
predictive are first intelligence,
like iq, general intelligence is
the most predictive of job success,
uh, in, in almost every job.
And then the second is, um,
sort of how organized you are.
You know, if you get someone who's
smart and organized, that's a
formula for success in just about
every endeavor except for sales.
And so the thing that we found is
that salespeople, you didn't wanna
hire the smartest person in the
world to be a salesperson, and you
actually didn't even want them to be.
All that organized.
The relational stuff
was far more important.
, you know, the EQ stuff was, was far more
important when we were hiring salespeople.
So I'm probably too stuffy.
I'm probably too nerdy to be as
successful as all that in sales.
So I appreciate the vote of confidence.
I probably should have
done it, but here I am.
I love my job and I love my work.
So we're gonna have to leave it
to people who are, well wait a
minute, wait a minute.
Time out, because you're being
really southern yourself right now.
So basically, let me just say
back to you what you just said.
Um, you're too smart for sales.
And also not that I'm gonna
be like, you know, sort of see
myself in this conversation.
But you did just say true or false,
that actually good sales people
are, are, are not that intelligent.
. No,
not I basic.
Okay.
I think I did credit.
Don't worry.
I, I'll
.
I think I did say I'm too smart for sales.
I'm gonna give you that one.
Dr.
Dr.
Havener.
It was a good observation.
I did say that, but it's not like
you want an unintelligent person.
It's just not, it's not like
you don't necessarily want
the one 60 IQ in a sales job.
They get bored.
You want someone intelligent, right?
You do want someone intelligent.
But in almost every other endeavor,
intelligence is like an unmitigated good.
Like the more the better.
And in sales it's like you want an above
average level of intelligence, but not so
much that, that they may find it boring.
or that that intelligence, I mean, we've
seen very consistently that sometimes
high levels of intelligence and high
levels of emotional intelligence don't
go together, uh, in the wild very often.
Yes.
And so you, you, you do want someone
with the high levels of, of emotional
intelligence as well, but Yes.
No,
and you got, and I was more,
I mean, that was really good.
And, and look, we've all seen it, right?
We've all been as salespeople in this biz.
We've all been with sort
of the, the brilliant mind,
um, on the investment side.
And you bring them to a meeting
and if you just let them go,
it's gonna be a disaster, right?
Mm-hmm.
, you need both.
And so, um, but yeah.
Okay, so that's fine.
I'm gonna, I'll do some like mantra
and some, some work after this to
try to build myself back up, but I
really appreciate your candor and
your authenticity around that topic.
Thank you.
Um, okay.
I have a fun thing I wanna end with, but
before we get there, given everything
we've talked about today, And given, you
know, your journey, I'm not gonna ask you
what advice you'd have for yourself, like
the younger you, I really want to know
what's the advice you have for founders?
What's the advice you have for
founders in finance and investment?
Um, I just tell us what, what you,
what you'd share with our listeners
around building in this space.
Yeah, so keeping with our behavioral
finance theme, I think I have two sort
of primary areas where I think that could
make you stand out in your business.
The first is everything that we've
talked about today, just designing
and building your sales approach
with an eye to storytelling, with
an eye, to a deep understanding of
how people actually make decisions.
Not how they account for those decisions,
but how they actually make decisions.
And I think that your go-to-market
strategy, right, the way that you
hire, The way that you tell your story,
the way that you incentivize people.
All of that I think will be materially
impacted by your study of human behavior.
The second in sort of a
more nuts and bolts way.
Stacy, this is something that
you and I have talked about.
I think there is a lot of opportunity for
sort of behaviorally focused product for,
for sort of behaviorally focused bonds.
Yeah.
I think that human behavior is
the only source of enduring alpha.
You know, you look at every, you
know, every time sort of a new, uh,
market anomaly gets discovered and
publicized, it quickly gets arbitraged
away except for the ones that
have human behavior at their root.
So, you know, we can count reliably
on people to make the same dumb
mistakes a hundred years from
now that they're making today
And so like, I think, I
think we need product that is
explicitly behavioral in nature.
Uh, so I think it can inform
not only the way that you.
Go to market and the way you build
your business, but it could actually
underpin the very essence of
your product.
Oh, I love that.
The last great inefficiency.
Um, that is so good.
Thank you for that advice.
Okay, so now I don't wanna say
this is my favorite part, but I
have always wanted to do this.
So this podcast may or may not be,
just so I can do this, and I've asked
you this before, um, about whether
or not you ever watched inside the
Actors studio with James Lifton, and
thankfully you had, so that's good.
Um, and so if, if anybody listeners
remembers this, it's was basically,
um, about, is about actors and
about the people themselves, right?
Their journeys, their careers,
things they'd worked on.
And in every episode, James Lipton
would end with 10 questions.
Yes.
And the idea is that it give
these questions, um, are modeled
after Proust's questionnaire.
Did I get that right, Daniel?
Because, you know, I struggle with
that one Prust questionnaire, and
so I came up with a version of it.
Some of 'em are direct
lifts from James Lipton.
And so I'm gonna ask you the
questions and you just answer
them, um, without explanation.
Okay.
No editorializing.
Are you ready?
Just, just quick
answers.
No editorializing.
Okay, go ahead.
Just the answer.
And then if we have time, we'll, you
know, maybe we'll pick one or two
and have you unpack it a little bit.
But this is so we can get to know the
real Daniel even more than we have.
Okay.
Are you ready?
Ready.
Okay.
What is your favorite word, ostensibly.
Oh, love it.
What is your least favorite word?
Und.
I'm not supposed to laugh.
I don't think I'm supposed to laugh.
Hold on.
. Okay.
That was a great answer.
I don't, okay.
What book inspires
you?
Uh, man.
Search For Meaning by Victor Frank?
Mm.
What person inspires you?
My mom.
What is your walk out Anthem?
Diet Coke by Pusha Tea, of course.
Oh
my gosh.
What is your happy place?
My office with a book.
Ooh.
What makes you uncomfortable?
People who have a poor
awareness of how their actions
impact the people around the.
.
Hmm.
What profession, other than your
own, would you like to attempt
fund manager or catcher for the Cardinals?
What profession would you not like to do?
Uh, anything that requires
me to two do physical labor.
And the last one is the epie question.
What do you want people
to say after you're gone?
I want to leave, uh, a legacy of leading
people to ask themselves hard questions.
Perfect.
That was perfect.
Thank you so much, Daniel, for your
time, your candor, your authenticity.
I think this is the exact way I
envisioned starting this podcast series.
With the science behind why storytelling
works and even more to let people start
to see that behind all these products
and behind all these, uh, philosophies
and portfolios, there are real humans.
And you've done an amazing job of
sharing yourself with us today.
Well, Stacy, your voice is a gift
to the industry and I'm proud of
you and I'm so excited to be, uh,
a regular listener to your podcast.
So congratulations.
Thank you.
Thank you so much.