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Episode #529 - How Systems Thinking Can Improve Your Retirement with Rick Nason

Roger: The show is a proud member of the Retirement Podcast Network. 

"Every day, I remind myself that my inner and outer life are based on the labors of other people living in debt, and that I must exert myself in order to give back in the same measure as I have received and am still receiving."

-Albert Einstein.

Well, hey there, welcome to the Retirement Answer Man Show. Roger Whitney here, I am your host. This is the show dedicated to helping you not just survive retirement but have the confidence because you're doing the work to lean in and rock retirement. 

If you're new to the show by day, I am a practicing retirement planner with over 30 years’ experience, and by night I host this podcast where I use it as a lab to sharpen my saw. In teaching you I actually learn and sharpen my craft and hopefully empower you to do the work to rock retirement. This is the 10th anniversary of this podcast, which is a little bit crazy to think about. 10 years of consistently having weekly episodes.

We're going to have an all-star cast this month. Today we have Professor Rick Nason. We're going to have Christine Benz this month. We're going to have Daniel Crosby this month. I believe we're having Michael Easter this month. Then, I think at the beginning of February, Michael Kitsis is going to hang out with us to celebrate 10 years of just trying to be intentional and thinking about how we actually rock retirement.

We have a big show today, so I'm just going to stop talking and get moving. We have Professor Rick Nason to talk about complicated versus complex. You know, that's a topic that's been on my mind lately. In addition to that, in our rock life segment, Dr. Bobby DuBois is going to talk about how to manage uncertainty from a health perspective. Then last, but certainly not least, we have Tanya Nichols from Align Financial to answer some of your questions with me. 

So, let's get this party started.

COMPLICATED VS COMPLEX THINKING WITH PROFESSOR RICK NASON

When I began to research the differences between complicated and complex problems, every article that I read referenced or quoted one professor, and that was Professor Rick Nason from Dalhousie University. who has a bachelor's in chemistry, master's in physics, PhD in finance, and wrote the book, It's Not Complicated, The Art and Science of Complexity in Business.

I reached out to Dr. Nason to explore this topic. We had a great discussion. He agreed to come on to talk about how this could apply to retirement planning. Let's explore this topic more with Dr. Rick Nason. 

All right, we're here with Dr. Rick Nason. Rick, how are you doing? 

Dr. Rick Nason: I'm doing great today. How are you, Roger?

Roger: Good. I discovered you following a thread. So, you're at the end of the thread that I started. It started with Arthur Brooks mentioning the difference between complex and complicated. He's a professor and wrote Strength the Strength. Then I took some advice from a friend of mine, Michael Easter, who wrote two really good books, Comfort Crisis and Scarcity Brain, and one of his mantras, because he's a journalist by trade, was always ask the Pope. It was a story of an assignment he had of how much does, you know, when he was young, how much does the Pope make? His editor gave this to him and some other ones and they all went around asking the church and everything else, and they went back and it's like, well, it's really hard to discover. We asked all these people and they're like, why didn't you just go to the Vatican? Just go to the source.

When I was looking up the source of complicated verse complex, I found a lot of articles. But they all referenced your book. It's Not Complicated. So, I said, well, let's have a chat. So, you and I connected. I appreciate your generosity in that. 

Dr. Rick Nason: Are you comparing me to the Pope? Like, I mean, I'm a Protestant. 

Roger: Ah, well, we won't go there. We'll go into this concept of complicated verse complex. I wanted to explore this. And the reason I was pulling this thread was to see how it relates to managing retirement planning over 30-year periods with lots of inputs that interact. So that was my purpose. 

Why don't we start with, can we define, I guess there's three types of problems, simple, complicated, and complex. Why don't we just start with defining what those are and why that's important. 

Dr. Rick Nason: Sure. Well, just to back up a little bit, there's actually all types of systems, but the three main ones are simple, complicated, and complex.

A simple system, just to use an example I'll steal from my book, is making coffee, and here I'm talking about an old-style coffee pot. For example, you might join a new company, you walk into the coffee room, you see the coffee pot's empty. You can more or less figure out by opening up the cupboard door. You can see the instructions for making a coffee and get it done. But here's the thing is the simple system is you can basically use a recipe, but it's also robust. This is kind of key. So, if you add a little bit too much coffee, guess what? It's Still going to come out like coffee. If you put a little bit too much cream in your coffee, you're probably still going to drink it. So, success doesn't depend upon exactness.

Whereas something that's complicated, it follows rules and laws. Those rules and laws have to be followed exactly.

So again, to take an example from my book, albeit a very simplistic example, is accounting. If you have two accountants who have the same financial data, they should come up with the same data for the company.

If they don't, one of them is probably going to jail, or potentially going to jail for accounting fraud. 

Then you get complex, which again, started from a book and I want to give a second example here is like a sales call. There is no recipe for a successful sales call. Actually, there's really no way to define success. Is selling 10 units of success or selling 1, 000 units of success? Is even getting invited back to make a presentation success? It can't be a really defined success and we've all had those robo sales calls. We all know how successful they are. So obviously following a recipe doesn't work. 

Now, here's the irony is virtually everyone except in finance considers the ultimate example of a complex system to be the financial markets, particularly the stock market.

When biologists talk about complexity, they talk about the stock market where anthropologists talk about complexity. They use the stock market as an example. 

Just really quick, just for completeness sake, there are lots of other types of systems. For example, a chaotic system, which is again, systems theorists, where incredibly poor marketing, so all these terms have different meanings from lay, so we lay person's view, so a chaos system is something that is completely 100 percent predictable, but actually looks like it's random.

A very famous example of this is weather systems, the models for weather systems, which is kind of relevant for those of you on the climate debate. Most weather systems are incredibly sensitive to initial conditions. You've probably heard of the butterfly flapping its wings. Butterfly flapping its wings in the Amazon changes the weather in New York. That actually comes from the chaotic nature of the vast majority of our climate models. So, if you change the initial conditions ever so slightly, you get a dramatically different result.

Then of course we have wicked systems, which are systems, which basically don't have. a solution. The classic example that they give to self-driving cars, you kill yourself. If you're going to have an accident, do you kill yourself or do you kill the person on the sidewalk? Type no win, darned if you do, darned if you don't, situation. There are others as well. 

Roger: This is very complex, the number of different types.

Dr. Rick Nason: Yeah, well, complex or complicated. The main one that people need to be concerned about is complicated or complex.

Roger: I'll ask you a question before we go there. These definitions and this are systems thinking is my understanding. This is not something new. This is a delineation that scientists and people have made for a long time of what am I dealing with, right? 

Dr. Rick Nason: Yeah, a lot of these concepts go back to since we had science. Having said that, it kind of became formalized in what we now call a science in the 70s.

Of course, the onset of computers has really accelerated this and made a need for a clear distinction between complicated and complex, even more so now with AI. 

Roger: Yeah, which is a whole other layer that I wanted to ask about. Yeah, yeah. Why is it important to identify, let's stick with those three, why is it important to identify which one we're dealing with?

Dr. Rick Nason: It's important to identify because through our schooling, through our education, you know, I'm a university prof, I'm a former derivatives trader, all highly trained, all the reg certificates, yada, yada. We've been trained to think complicatedly. Okay. 

Every time you took a multiple-choice test, you were being validated on your ability to think in a complicated fashion.

The reality is, is that most of the major issues facing the world today are complex, and if you try to solve a complex problem with our tools of complicated thinking, almost always you will make the situation worse. 

Roger: Worse, not just solve it, but worse. Worse. Why would that be? 

Dr. Rick Nason: Not only will you not solve it, and by the way, that's a whole other discussion, because we have to learn to think in terms of manage not solve, but you generally make it far worse.

Roger: That's the key differential is one you can solve, complicated, I was telling you beforehand I just completed this Lego typewriter with 2, 079 pieces, you said it was simple when I mentioned it, but you know, you're, advanced on this thinking, but it took me a long time to do this. Many times, I followed the rules, the algorithm, and when I didn't, I had to go back and undo it to get back to right.

Dr. Rick Nason: By the way, I should point out that something that is simple can be very difficult to do and something that's complicated can actually be quite trivial to do. But I'm more of a Meccano man. I don't know if you can see my robot in the background or not, but I think it's out of camera view at the moment, but more of a Meccano than a Lego person.

Roger: But so, it's important to identify complicated versus complex because from a system standpoint, how you approach the problem is totally different, I would assume. 

Dr. Rick Nason: How you approach the problem, your mental attitude towards the problem. This is particularly appropriate for financial planning, thinking that you can solve your retirement planning problems or your financial planning problems is not a healthy way to go about it in my opinion, but also, I'll give you a stat that I'm sure that might not want to publicize, but we know that the more educated the financial expert, the worse their projections are. 

For example, another clear example of this is 75 percent of mutual funds underperform the proverbial monkeys throwing darts at the stock pages over a five year period. This is what we know. Obviously, it's not higher education, the certifications necessarily that count. It's understanding that you have to manage something, not solve it. 

It's understanding that financial planning is about people. Not Excel spreadsheets, it's understanding that financial planning is dynamic, not a throw it into an algorithm and have it spit out the answer and be done with it. 

Roger: I was journaling on this weekend, Rick, I was following the thread back in my evolution.

I have a lot of certifications after my name, most of them I got in my 20s and 30s because I felt the pressure to know and to be right so I could perform for my client in planning. I was approaching my craft as if I just need to be smarter so I can solve it and be right for my client. I had this aha moment of this is a fool's errand.

I'm always going to be wrong and the pressure from trying to solve something that's unsolvable was really taking a toll on me personally. My aha moment was, if I can't solve it because it's unknowable, I better start thinking about how I manage as life unfolds and how do I improve my decision making.

That's what led me down the agile methodology is, I better think about systems. I didn't even use the word systems because I didn't know that word from an area of to focus on things I can actually control. It was a pivotal moment, not just in my career, but in my life. I think it's important for people that are planning for retirement.

Dr. Rick Nason: The key features of complex systems are that they are not predictable, whereas complicated systems are 100 percent predictable. Well, I hate to tell you if you or any of your clients have truly mastered the markets and believe that they're complicated. Then I say, what the heck are they doing sitting here listening to this because they should be out making a trillion dollars cause hey, if you tell me what the market's going to do tomorrow, I'll be able to make a trillion dollars tomorrow.

Roger: I think even in retirement planning, because in retirement planning, most are not concerned about accumulating more, they're looking at I would call the complex system of a comment you used of utility through time of how I harvest this knowing that these outside forces could impact my life, inflation, sequence return, etc.

But also, the internal variables of change in preferences, life circumstance, health events, things that you can't predict. That's complex as well, I would assume. 

Dr. Rick Nason: Yeah, absolutely. 

You know, in finance, we talk a lot about maximizing utility, but we almost always immediately put that into maximizing wealth. In other words, we go from maximizing utility to maximize utility of wealth to maximize wealth.

You know, in my career, I willingly took an 80 percent cut and pay in a 90 percent cut and pay. You might call me and, you know, I've got letters behind my name as well for professional certifications in finance. You might say, how can someone in the finance field do something so irrational and stupid?

Well, utility is, in my simplistic view, happiness. It's freedom. It's flexibility. So first off, it's the focus on utility, but that utility is what makes us happy or what gives us joy those changes very much through time. 

Roger: You know, it's interesting about that, Rick, before you go on, I want to pull that thread really quickly because that is a struggle people have when they're considering retiring is that they're retiring at the top of their game and they're leaving a lot of money on the table.

They're so used to thinking about utility as accumulation or more wealth that it's difficult, sometimes impossible for them to reframe it. 

Dr. Rick Nason: Yeah, I'll give an example. When I quote unquote downsized big time, a lot of people thought I was completely nuts. I'll be quite honest, there were a couple days I thought I was completely nuts.

In fact, 20 years later, most people still think I'm completely nuts. But the thing is, I got to see all my daughter's rugby games except one. I got to travel the world other than just financial centers. I basically got to design almost every single day of my life. While I had obligations, I had almost complete flexibility.

So, what's the value of seeing your daughter's rugby games? 

Just all of those things that come into the equation my previous life literally had a car pick me up at 4:30 am on Monday, plop me down in my driveway on Friday night at around 8 pm Don't get me wrong. There are aspects of that life I absolutely love.

But now, you know, of course, my daughters are now older and, you know, going to see the rugby games isn't a big thing, but other things have replaced it and it's thinking about utility. In my view, money is solely 100 percent a tool. I realize that for some people, they might like to, you know, have a room or lost after room filled with money that they go swimming in and rub all over the body. You know, whatever.

But for me, money is solely a tool to allow you to do the things that you could do that you want to do if you had complete 100 percent freedom.

Roger: Again, I would imagine the key there is the intentionality of defining what utility is for you in your life. 

Dr. Rick Nason: That is complex. Unless you are the most simplistic person in the world, unless you are a complete knob, you are not an algorithm.

You do not run by rules, laws, and axioms like a complicated person does. You are a function of those you love, of those you don't love that you surround yourselves with. How many retirements have been brought on by coworkers? The environment of your peers, at your social club, at your church, in your neighborhood.

These are all factors that, whether you realize it or not, come into your utility and, I would argue, into your opinions about wealth and financial planning.

Roger: That's also on a continuum that changes over time. 

Dr. Rick Nason: Well, absolutely. Absolutely. 

Roger: So, how does one approach complex problems? 

Dr. Rick Nason: The first thing is to recognize what's complex and what's not, okay?

My first law of risk management is the mere fact that you acknowledge the risk exists automatically proves your management of it. The mere fact that you recognize that something is complex, which is kind of touched upon what’s complex versus what's complicated. I know a good book that explains it. But once you recognize that things are complex, I think that that automatically improves the situation greatly.

The second thing is to think manage, not solve. You don't solve a complex problem. You don't solve. Your financial planning.

 Two more steps. I'd like to explain one is do a try learn adapt approach. Okay. We don't have all the answers in finance, but adopting a trial and adapt approach is very good thing. Kind of the experts at this are ants. Okay, now I don't study ants, but in studying complex systems, your kind of forced to study ants because ants are kind of species that has mastered complexity the most.

We all learned that an ant colony has ants that go out and forage for food and they drop pheromone trails, yadda, yadda, yadda.

What we might not have learned in junior high is ants also have ants that do nothing, fix the colony. When it gets compromised, fix the nest when it gets compromised. There are ants that do nothing but take out the dead, and there's soldiers, ants that do other very specific tasks. But what most people don't know is ant colonies also have ants whose job is to do nothing but random stuff.

Now, here's the interesting thing. Here's the interesting thing. You can take away the soldier ants, the ant colony will survive. You can take away the ants that forage for food, the ant colony will survive. You can take away the ants that reconstruct a nest. By the way, this is going to be an expert, not me.

But here's the thing. If you take away the ants that do random stuff, the ant colony very quickly dies. So, the lesson from that is you've got to try and you’ve got to learn. You got to adapt. You have to be brave enough to say, hmm, this might work. Let's see. That's something that a complicated thinker has a very, very, very hard time with.

That's something who's been in a very strict top-down hierarchical organization has a very difficult time adapting to, but kind of actually one of the secrets of complexity. 

Roger: The way I think this presents itself in retirement planning is The top down approach of taking the spreadsheets and the financial models, and that relatively well for accumulation, you might argue, and applying them to decumulation, where there's a lot more going on there, and the way it will manifest itself is the 4 percent withdrawal rule, or brackets, which is trying to use a complicated approach to solve a complex problem and force a life to fit into a box.

Dr. Rick Nason: In finance, it's not complicated or complex. There are elements of both in it, right? 

Well, for example, taxes are complicated, and so if you understand that taxes are complicated thing, yeah, you throw the algorithms at it. You throw the expert advice at it. Some of the things that you mentioned, like the 4 percent rule, I hate to tell you the mathematics of money are the mathematics of money, you know.

Roger: It's a part of a bigger project. It's not the project. 

Dr. Rick Nason: Exactly, and so, separating out the complicated thinking for the stuff that's complicated and the complex thinking for the stuff that's complex, that's what I meant by recognize what type of a system that you're in, and you're exactly right. 

Roger: So, the utility player and having the agility, the other thing that came to mind as you were saying that, Rick, is one of my favorite quotes by Phil Stutz, which is "you'll never be exonerated in life from uncertainty, pain, or the need to do work" which is essentially what we're talking about here.

We're always going to have uncertainty, we're going to always have to work to manage it, and it's going to be really hard sometimes. You're never going to be exonerated from that, which essentially is talking about the complex problem of life. 

Dr. Rick Nason: You know, I get up every morning and give thanks for uncertainty because if life was completely certain, A, I wouldn't have a job as for 90 percent of what I do, because I'd be replaced by a computer by this afternoon.

B, it would be pretty darn boring. 

Roger: In how to manage it, obviously realize it, that way you can decrease your frustration and stress because you realize it's not solvable. So, what are some other steps that you can take when you realize that a large project is complex in order to feel like you have some agency and a hand on the direction of things?

Dr. Rick Nason: There's 1001 small things. I think the main thing is, you know, when I do this in a corporate setting, when I talk about this in the corporate setting, I talk a lot about humility and self-esteem. I talked about humility, self-esteem and empathy. Actually, empathy probably doesn't play as large a role in the financial realm, but having self-esteem to say, I don't know, is very, very, very, very powerful.

Actually, if you just take a deep breath and realize, shoot, even the best has significant issues with this, that in itself, but also having yourself assume to say, hey, guess what, regardless of what happens, I will survive, regardless of a mistake or two, I will survive. 

Looking at the financial planning industry, it's always interesting. I'm a huge fan of college football. I watch less professional football, but just as an experiment, watch the advertisements for financial planning on a Saturday versus on a Sunday. Okay. The financial planning companies have it down pat because the demographics of the two are actually quite different.

Okay. What you'll see on Saturdays, you'll see pictures of people with their grandkids and the advertisements are all about the utility of wealth. On Sunday, the demographic is generally younger and it's all about greed or don't mess up. Very, very, very, very different. Seriously, you laugh. Take a look at the series of the most popular finance commercials that run on the two days. 

That's kind of the difference I'm talking about with humility. Okay. On Saturday, your content to walk down the beach with what the companies obviously want you to think of as one of your grandkids or the next generation, yada, yada, and you are content with that. 

Whereas on Sunday, the focus is on don't lose 2. 2 percent investing with XYZ discount brand but save it investing with us and they literally give you the number to the dollar of the difference that you would have if you invested with brand X discount website versus brand Y discount website. There, the emphasis is on being wrong, and on the other it's on being content and that I think is the difference between complex thinking and complicated thinking and between humility and panic.

Roger: So, when I think of retirement planning, I think of, I use the example of someone that goes to the gym if we're in the accumulation mode for decades. I mean, decades of accumulating and that builds more. When you get closer to retirement, if you're not thinking about this already, and maybe you should, the whole game changes because you're going to Saturday and about the utility of time and you're going to decumulation and harvesting rather than sowing and understanding that you're making that change.

If you don't, you'll continue on with one mindset, and have a mismatch between process verse what you're actually trying to solve for.

Dr. Rick Nason: This also gets back to the utility versus time thing as well. Okay. We focus so much on the dollar amounts at various points in time, but the reality is, is going to see a 20$ rock concert for me back when I was in my early twenties and now, I'm dating myself cause when the heck was a concert ever 20$. Okay. Actually has. In my mind, anyway, a lot more value than the 400 that the equivalent ticket would cost today after the inflation adjusted.

As we go through our life cycle, I've always been interested in demographics and I got into demographics actually when I was in graduate school, David Fred, who's famous demographer wrote the book, boom, busted echo, spoke to the PhD students and it was very illuminating.

I started to think about it. Well, okay, right now I'm in my 20s. How am I going to feel about this when I'm in my 40s and my kids are going off to university in two to three years? Then how am I going to feel about it as I now start into my 60s? That focuses on utility and the different points of utility through time.

First off, I was totally wrong in how I would think about it. Simply going with the algorithm that he with the most money and the investment account at the end wins.

Roger: I was thinking of Richard Urie, the negotiator. I heard an interview with him recently and he talks about you have to have the ability to go to the balcony he calls it and get perspective, to observe. 

I didn't ask you about this before but I'm curious one You know, as I've worked on fleshing out the agile process as it relates to retirement planning, one of the things I think is important, and maybe you would disagree, is since we're managing things, optionality seems to be very undervalued.

Yeah, everybody's focused on optimizing, which in my mind, if you try to optimize, especially financially, you can end up making things a little bit brittle. So, when things go differently than you expected, it can break a lot easier. As a result, I think having more buffer in the system when you're managing complexity would make sense.

Dr. Rick Nason: Well, first off, a full disclosure, I'm a former registrator. So, I'm a firm believer in optionality. I'm a firm believer, no pun intended, that options are valuable. I don't just mean financial options. 

A lot of people who look at complexity think that agile thinking is the beyond end all answer to complex situations, and it's not, but it is certainly compatible and consistent with complexity thinking and obviously flexibility is huge. Optionality is huge. Never exercising your options early. Again, I don't necessarily mean just financial options. All of those, I firmly believe, are key elements of not only a sound financial plan, but a sound life planning, period, full stop end of story.

Roger: The last thing I wanted to hit on briefly, because I know you're doing research on this, and this is an area that I have not opened the Pandora's box to, I've danced around the edges, is artificial intelligence and AI, and how that will play, whether it's going to exacerbate the differences, or maybe it makes complex problems more complicated.

What is your initial, or wherever you're at in your thinking on how AI plays into this discussion about complex versus complicated in systems? 

Dr. Rick Nason: Yeah, I actually go one step a little farther. It's actually digitization and AI. Okay. Okay. Take my former profession of being a registrator, as a profession, that's almost been completely decimated by digitization and AI, and it's not really sophisticated AI.

Back when I worked in derivatives, virtually everyone had a PhD, or each desk had an army of PhDs. Now someone who wants to spend five minutes on the web with AI can download all the tools that we had and more in a much more sophisticated way. So that industry has been decimated.

Again, let me back up. Okay. I only learned three things in getting my MBA, my PhD in finance. I'm actually a physicist by training. One of them is just when you think it's a trend, you find out it's a cycle. So what AI is doing is it is completely decimating from my viewpoint, the financial industry.

I've spoken at four major industry conferences this year. For this talk that they asked me to come in, I always have to put my running shoes on, which if you saw how big I am is, is a bit of a comical oxymoron. But anyhow, it's fundamentally changing finance careers, not only in hardware, not only financial management, but in financial planning.

We see this, everyone's going to their phone for their financial planning and AI is in essence crowding out a lot of finance professionals. As a finance professor, of course, I have a lot of students who want to go into a finance career and they have to totally think about it. Ironically, here, I'll get in trouble by a month's back. Hopefully it will forget about before I go back. But in university finance, we are, in my opinion, so far, we're like 40 years out of date. We're so far behind the eight ball and how we're preparing students for this. 

AI is crushing the jobs, but ironically, what it's doing is, it's crowding out all the complicated thinkers, but what's left is the complex thinkers. For that, we need humans. 

I'm working with one of the major AI companies on basically building AI to recognize what's complex, so it doesn't try to deal with it. Because by definition, AI cannot deal with complexity. Now, a lot of our issues, if we go into our financial planning, for instance, with a complicated mindset thinking that there's a solution, guess what?

My phone's going to give you a better solution than any financial planner. Now, is it going to be a good solution? Hey, there's no saying in risk management, it's far better to be approximately right than precisely wrong. Well, this is going to give you something that's very precise, but getting back to your optionality, it's probably also going to be precisely wrong.

So, what this means is AI is actually, very ironically, creating a space for human risk management, financial planners who can think. 

Roger: A phrase I've said for years is, I can Google knowledge, I can't Google wisdom. That human judgment. 

Dr. Rick Nason: Empathy, that's even more key. Okay. I'm fully with you on the judgment.

Okay. Fully with you on the judgment. But it's empathy that's even more key, and it's a sociological imagination, which is probably something that we don't want to go into, but I encourage your listeners to watch the video, which is available easily, Trillion Dollar Bet.

Which was about long-term capital management, which of course had two Nobel prize winners.

Roger: Wonderful book, wonderful book. When Genius Failed, yeah. Trillion-dollar bet. I haven't seen the video. 

Dr. Rick Nason: Yeah, yeah, the video, it's a NOVA special. If you go to the NOVA website, it's there.

If you go on YouTube, it's there. Here you literally have the brightest people in the room who failed spectacularly. One, because they didn't have it for a lot of reasons. But in terms of concave thinking, they were the creme de la creme, but they didn't understand complexity. They didn't have a sociological imagination. They didn't have empathy. They didn't have humility.

Another interesting side view to this, which another video that's widely available, is Fog of War, for those of your clients who remember Robert McNamara, who was a hero in World War II for his complicated thinking. But when he became Secretary of Defense under Kennedy, and then later during the Vietnam War, of course, he wrote a very powerful book, which was made into a documentary called Fog of War, both the book and the documentary.

Again, he describes how his complicated thinking led him astray.

Roger: I'll have to check the book out. One study I read related to this, and we don't have to pull this thread too hard, is years ago it was by the CIA looking at analysts and the quality of their analysis. One of the conclusions of the paper was that the smarter you are, the quicker you are to judgment and the quicker you are to filter information just for confirming what you've already decided, which essentially kills curiosity.

Dr. Rick Nason: There's also another aspect of that, which is the Dunning Kruger effect. Okay. The Dunning Kruger effect is basically this very U shaped or very humped curve where basically at one end of the spectrum, you are so uninformed that you don't know how uninformed you are. These are the people who think that they would make great Formula One race car drivers, et cetera, et cetera, who've never been in a racing car in their entire life. Basically, they're idiots. 

But at the other end of the scale, we see that the people who are truly considered to be the creme de la creme in terms of wisdom, they actually massively underestimate their ability and wisdom. So, it's only the mediocre people. By the way, someone who speaks frequently in the media and then gets screamed at for it, I see this all the time. What the media wants and what society wants is they want a complicated thinker. They'll tell us inflation next year is going to be 2. 9769432 Powell’s going to lower the rate to this exact amount on this. 

They want certainty. That's what sells in media and that's what sells in real life, but it doesn't work in real life.

So again, would you rather be precisely wrong or approximately, right? 

Roger: I think that is a great way to end this discussion, which is, I think, critical to retirement planning if we're focused on the utility of life over time. Dr. Nason, thanks for hanging out with me. 

Dr. Rick Nason: Roger. It's been a lot of fun. I've enjoyed our discussion. Take care.

LISTENER QUESTIONS

Now it's time to answer some of your questions. If you have a question for the show, go to askroger.me. As we kick off this month of celebrating 10 years of the show, I couldn't think of a better person to start off than to have Tanya Nichols from Align Financial with me to answer some of your questions.

Hey Tanya, how are you doing?

Tanya: Hi, Roger. Glad to be here. 

Roger: What were you doing 10 years ago? 

Tanya: Oh, my gosh. 10 years ago. I was 32, and what year was it? 2014. I was raising toddlers, and I was a financial advisor in a big, big company. Wirehouse.

Roger: Were you still at the Wirehouse then? Okay, and now you have an independent practice in Duluth, Minnesota that works with people nationwide mainly women or professional women around retirement.

Well, how your life has changed. 

Tanya: Yes. What were you doing 10 years ago?

Roger: I was starting a podcast. I was a partner in an investment advisory firm with about 15 people with a downtown office. I never imagined I would be the version of person I am today. Did you think this is what the version of Tanya would be when you were 10 years ago?

Tanya: Absolutely not. I had no idea I would be where I am today. 

Roger: I think that's normal life. That's part of forecasting the future. You think about planning for retirement, you're just making these guesses that the path could be totally different and that's okay. A good thread to pull there at some point, but we're going to answer some questions today.

Tanya: Okay. 

ON PERFORMANCE PORTFOLIO CALCULATIONS

Roger: Our first question comes from Norma related to performance calculation. This is something we don't get into very often. So, I'm going to read this question. I'm not going to summarize it. It's not too long. 

"I’ve been retired for about 6 months and have questions now about something that previously didn't concern me.

It's about calculating my overall performance of my portfolio. I have a TSP account; I have a Fidelity account. I never gave it any thought about how performance was calculated, whether it was monthly, quarterly, yearly. It's probably because these accounts were for future use. Now I need to be concerned so I can track this myself because I'm using the funds now."

She's basically asking, well, how do you calculate performance when you're looking at your portfolio?

There are a couple ways of doing this. So, the two main ways are time based and dollar based normal. So, time based is looking at what was the dollar at the beginning, what are the dollars at the end, and the difference is performance. Dollar weighted performance is actually calculating performance based on every single deposit and every single withdrawal. Here's an example, let's say you have a hundred thousand in a portfolio. Then at the end of the year, it's worth 120, 000. Well, that would be 20 percent increase, right?

But what if you had deposits and withdrawals within that year that could influence what the actual performance was, right? Because of the investment that you're trying to analyze. Didn't have any say of when you invested and when you took money out. Maybe you invested at the high and took money out at the low. Well, that's going to impact your overall performance, but it doesn't necessarily reflect the performance of the actual mutual fund or what have you. 

So, when you think about performance, Tanya, how do you approach this with clients? 

Tanya: Well, I mean, I think probably similar to your firm, we have some really great tools that handle that calculation for us. Ours are all time weighted, which I think removes the impact of the person's financial decision making on the performance. I think it is harder to do. Norma brought up the fact that she doesn't have all of her accounts at one brokerage firm, which I think if she's trying to get a sense of overall, like what was my performance for the year to maybe, because if you think about it, what's performance for it's to match up whether or not our sustainability or feasibility calculations inside of our tools.

Like, are we meeting those expectations? Like if our tool is telling us we need to average 6 percent over the course of a lifetime. The purpose of calculating and understanding the performance of your portfolio is to see whether or not you're on track at the same time. I think if you are using a tool like that, you might not need to calculate performance all the time.

And you could just kind of step away from that conversation. I do think it's going to be difficult to measure that if you don't have your accounts in one or two. Firms and 20 years ago. I remember running time weighted and dollar weighted calculations in excel spreadsheet, you can build those formulas and you can run those assessments. I don't know a great tool to do that for do-it-yourself investors though today Do you have you heard of anything like that?

Roger: I do not. I don't play in that world, so I’m just not as familiar, but I agree with you. I think having all of the accounts at one custodian or firm helps because a lot of times they will just naturally do calculations and put them on the statements or they're able to run reports. So that I think makes it a lot easier because nobody's building spreadsheets for this except for the geeks, which is fine for them.

Norma, I guess the question is when you're thinking about performance. What are you trying to solve for? What is it you're actually trying to glean from examining performance? I love the fact that you're right. When you're just accumulating assets, there's not a purpose for every dollar in retirement that really changes.

It's important to know why you're investing every dollar and how it serves the short term or the long term. So, I would say that time weighted performance is the number that you want to use when evaluating a particular strategy or mutual fund because that takes out any influences on dollars So if you're buying actively managed mutual funds you want to always evaluate them on a time weighted average. You can find those on the fact sheet of any mutual fund or investment strategy, or even ETF. You can actually go to their website and get the fact sheet and they'll show you the year to date, 1, 2, 3, 4, whatever, all the way through inception, time weighted average performance relative to their benchmark, which is the index that they're comparing themselves to get.

So that is actually pretty easy to do because they're all publishing that to help you evaluate individual investments. When it comes to your personal performance, which is going to be dollar weighted based on when you're putting money in and out, I'll be honest with you, because we, at least in our firm, we're not buying actively managed things.

We're buying the markets and doing the pie cake structure as we've talked about. We don't really look at performance that much because it's not what we're trying to solve for. We're not making decisions around performance. We're making decisions around when I need the money.

I think to your point, Tanya, regardless of performance every year, you're going to reexamine is my plan still feasible from a long-term perspective, whether that's using Money Guide Pro or New Retirement or whatever retirement planning tool, it becomes a lot less Important because you're not trying to beat the markets in any sense, right?

Yeah, I used to be a performance geek Tanya and probably you too. 

Tanya: Oh, well, we were raised that way. 

Roger: Yeah, because it was all about trying to beat the market. When you leave that and you're looking at outcomes like you and I do because we specialize in retirement It becomes a lot less meaningful.

Tanya: On all of the disclosures, it says past performance is not indicative of future results. I think that's the other recognition after evaluating money managers for over 20 years, you might've found this as well, Roger, like what happened last year does not have anything to do with what's going to happen in the coming years. So whoever won last year, it doesn't mean they're going to be the winner next year, whether that's an index fund or an active fund, or if you're looking for, okay, who did the best last year, you might inadvertently end up with a bunch of small companies or international companies or large cap companies, because you're just looking at performance when you really want to stay focused on that overall mix and how the overall mix of your pie cake is going to serve your long term goals.

Roger: I'm sure we're going to have some follow up questions about this, so we can maybe dive into this a little bit more, but Norma, I would focus on keeping it as simple as possible in the feasibility of your plan performance. 

If you're at least using the structure that we use, the process we use, it becomes much less important in terms of tracking. Not that we don't track it, but it becomes much less important. So hopefully I gave you some concept of how to deal with it. 

HOW TO DECIDE WHETHER TO STAY WITH AN ADVISOR OR MOVE TO ANOTHER FIRM?

Now let's get to the next question from John, related to investment companies and should he switch investment firms? 

I'm going to try to summarize John's question. He has his 401k that's being managed by the firm.

He has about 500, 000 in an IRA being managed by an advisor, Edward Jones. And he's had that money there for five years. And I'm summarizing your question here, John. The advisor you work with has a CFA, a CPWA, and a CEP, and you generally like this person. Recently, another firm, Fisher Investments, has sought your business, and they've run their own analysis of my investments and suggest that they can do better than your current manager. 

"Fisher's fees are higher than what I'm currently paying now, but even if you neutralize that, Fisher suggests that their investment strategy is better and that they are outperforming my current provider.

I'm struggling with whether to stay where I'm at or to move to this other firm. I like my current advisor and I do believe he has my best interests in mind. But I also don't want to be short sighted if another investment firm can outperform from a performance standpoint. 

Thanks for your wisdom. You might share and keep up the great work."

Just so you know, Tanya and I debated, do we mention the firms that, because John gave us firm A and firm B as an example. So, we're going to mention them. I have my thoughts, but Tanya, I'd be interested in your thoughts. He likes his advisor. He's been generally happy, but he's getting pitch that another firm can out beat the performance of the current firm.

Tanya: Well, I have a strong opinion on this and I would say I would never personally advise someone to switch based on performance, which is kind of similar to the conversation we were just having regarding Norma's question. I think I would not switch because of performance. John mentions that he likes his current advisor and he does believe that he has his best interest in mind. I think that's important. 

I also would be curious. He thinks that his new advisor is doing better than his old advisor, which was TIAA CREF, which was probably like an old retirement plan in a target date fund. I think he mentioned so my take is I would not switch based on performance, I would be focused on the services you will be provided and so looking at you know you're five years away from retirement John. So, to me having an advisor that specializes in helping people make decisions about all aspects related to retirement strikes me as more important than performance on either side because after running and managing and evaluating the performance of outside money managers for over 20 years, it is very difficult to assess who's better than whom when it comes to that sort of decision making.

I wouldn't use performance personally. I'd use services off and fees charged for said services. 

Roger: For said services. I like that official ending there. Just the fact is, I have strong opinions too, Tanya, and I'm going to share them. The simple fact is our industry is designed to scale and get more and more clients as a rule.

The way that they do that is through familiar relationships. Being likable and generally when they're talking to a prospect, which is what you're called when you're not a client, the MO to attract that client outside of being likable is to analyze a portfolio and share how you can do better. So basically, say how horrible that portfolio is. Mine's so much better, you should come with me. 

That is how we as an industry, not Tanya and I would say in real retirement planners, they don't do that, but that is how our industry is structured because it's all about more clients and that's what's happening here. Investment performance is very difficult to understand because it's not just simply that it's grown more. Well, we've been in a bull market for 10 years now. Everything's growing. There's a concept called risk adjusted performance. Yeah, I can grow more by taking more risks. The industry spends probably billions of dollars on research showing how our strategy is better and looking at all of our smart people talking about smart things and predicting the future.

It's all BS. I mean, it's done with good intent. I would maybe see that, but it doesn't help you on your journey to rocking retirement. You need somebody that's going to be in your corner. One of the biggest levers in your life is going to be having someone that you trust is competent. Helping you make decisions, not just about investments, but all sorts of things.

One of the smallest levers on your dashboard is going to be trying to improve your performance by picking better managers. That's probably I would argue that you're likely, if you go down that road, you're going to detract from your performance and waste a lot of time that you could be spending on things you actually have control over.

So, I would not switch. 

Tanya: Okay, and make sure that you're looking for a retirement plan.

Roger: If you're focused on retirement, not just the generalist in financial planning. That's a whole other thing I have strong opinions on is financial planning is not simply retirement planning. It is a specialty. So yeah, I would be careful about that because it's just a game to try to get more money.

That's what the industry does. If you have somebody that you think has your best interest at heart and they're smart and he has certifications that aren't BS certifications, they're real certifications that take work and nobody tells them to do it, they do it because they want to improve their craft.

That sounds like a pretty good situation to be in. 

HOW TO TAKE YOUR RMD

All right, our next question comes from, oh, how are you? It's a mystery. Oh, Brian, it comes from Brian. It's an audio question. Tanya, let me know if you can hear this. I want to make sure you can hear this. Brian, Brian, you get extra credit for giving us an audio question, by the way.

Brian: 2024 will be my first year for my RMD. My expected income will be around 70, 000. Should I take that in a lump sum and in the beginning of the year or end of the year, or should I take it over equal payments during the year? 

Thank you, Brian. 

Roger: Thank you, Brian, for the nice tight question. All right. So, Brian's going to have a, we'll assume it's a 70, 000 RMD this year.

First time he's doing it.

Tanya: I love monthly, personally. So, we do encourage our clients. I think it depends on what you're trying to solve for, as always. But one of the things I like about setting up a regular payment process is this is going to be something that's going to happen ongoing and so it just becomes a part of your monthly budget.

Now, that being said, I have some clients who do major gifting from their required minimum distributions. That's called a qualified charitable distribution and you can do that after you're 70 and a half, actually. So, Brian, if you do any gifting, like two charities or churches, one thought would be to make sure to do that gifting or consider doing that gifting out of that required minimum distribution, because it's an above the line deduction. I think that's how to say that. So, it comes right off of your adjusted gross income, which is a better tax benefit for most people. But I like monthly personally, because then you kind of set it and forget it, and then just recalculates every year, and you get a new check and you don't have to rethink it every single time. And my experience has been if you have to rethink when to take your money, it becomes a bigger decision. And then you're worried about is the market up? Is the market down? Oh, I don't want to take this or I do. And then it's this whole big extra stressor throughout the year.

What do you think? 

Roger: What I like about monthly. So generally, we'll have clients who will either take it at the beginning of the year or in the fourth quarter. I can't think of any that are doing it monthly and I tend to let them drive that decision because I'm not that convinced about anything. But actually, the logic you were just saying, Tanya, makes a lot of sense to me in the sense that by taking it monthly and just having it set up, you automate a decision so you don't have to think about it again. I like that because we have enough to think about. I've seen clients that want to wait and wait and wait and then they're scrambling to get their RMDs and maybe they're traveling or the paperwork is getting shuffled and everything else. The nice thing about automated or just taking it right up front in the year is that you don't have to think about it again.

The qualification is if you're doing QCDs, Qualified Charitable Distributions, you want to factor that in. So, if you take it all in the beginning of the year, in the fourth quarter, you want to do a QCD, you can't, right? Because you've already taken the distribution. So, I like this idea of just monthly. 

Tanya: One of the other tricks that we use is we will funnel the distribution. Like, let's say they have an IRA and a joint brokerage account or a single brokerage account like an after-tax type of account will have that distribution move into the taxable account monthly, and we'll figure out whatever their monthly cash flow needs are for the year.

Let's say it's 5, 000 a month. And we know the RMD needs to be 2, 000 a month. So, we'll have that required minimum distribution go into the taxable account every month. So, 2000 moves into that account. To help fund that 5, 000 a month payment. Then when the payment changes the next year, because RMDs change every year, then you don't feel that change because you're still getting your 5, 000 a month.

So, then you only change that cashflow when that's a part of the plan. Now, sometimes we'll change the RMDs if we're maxing a tax bracket or something like that. But in general, I think the less. The more automated, the better. 

Roger: Yeah. One thing that you want to make sure you do, Brian, with whatever you decide to do, is that you have some mechanisms for accounting for the tax on the required minimum distributions.

You may not have had to deal with this before, but you have to pay the tax in the quarter that you receive the income. So as an example, if you took all of that 70, 000 out in quarter one, you would want to have at least an estimated tax payment made for that first quarter to pay the tax on that income that you realize that year.

Now you can set up with your custodian that you automatically have them take out a certain percentage so that way you don't have to think about it. But that's one thing you'll want to think about is having taxes taken out periodically based on how you decide to do this.

Tanya: I do think if you set it up from your retirement account, as long as you make that withholding happen at some point before the end of the year, it is considered as paid throughout the year.

So that's one way to get around paying the estimates in the first quarter is just making sure it comes, the tax payment comes out of your IRA account at some point throughout the year. 

Roger: Good point. Good point.

Tanya: We usually withhold the taxes monthly too for clients again, just to kind of keep it simple. People usually manage monthly cash flow a little bit easier. It seems like pensions and social security. 

ON THE DYING WITH ZERO BOOK

Roger: Yes. All right. So, did you read the book Dying with Zero?

Tanya: I did. 

Roger: By Bill Perkins?

Tanya: Yes, because your really fantastic club members recommended it to me. It was excellent. 

Roger: Okay. Well, we had a comment from Joe on this and he says, 

"Spot on Captain Whitney about the complications of dying with zero.

Again, love the aviation references and winds and weather and moving targets. It's difficult to hit a carrier with all those complications."

He's referring to my complex verse complicated video. I think he says that he's approached this and has gone down a rabbit hole, but it just seems like more work to try to do that.

I just wanted to share his comment. It's virtually impossible requiring way too much effort in his opinion. I think that's the key there when you're trying to optimize certain things. Yeah, well, you could do this journey, but do you want to do all the work on that journey? Maybe you could just take an easier trail and not worry about it.

ON DON QUIXOTE

Then our last comment is really about Don Quixote because I bought this book. I'm trying to read some classics, Tanya. I'm trying to be more educated, trying to smarten myself. 

"Hey, Roger, 

I retired in January of 2023. Awesome. I started reading Don Quixote in September 2022 and finished in February 23."

So, this is like a yearlong journey. They read it in two parts and he provided some cliff notes for me and says it really helped by reading the cliff notes summary before reading the chapter in the book. 

"It does take some perseverance to complete the novel, but I think it was well worth the time.

Thank you for the podcast."

Thanks, Doug, for that tip. That's one thing I've heard when you're reading classics, Tanya, I think Cal Newport said this. It's always good to read something about the classics to help give you context. I think that's what Doug achieved here. I have not started Don Quixote yet. It is intimidating because the book, I should bring it. It's like that thick, Tanya. I'm holding it. It's like, I don't know how many inches thick, but thanks, Doug. I'll let you know when I start and when I finish, we'll see how that goes. 

All right. So, before we get to the smart sprint, Tanya, you cool to hang out for one little segment that you're not aware of?

Tanya: Of course. 

BOOKS I READ THIS MONTH

Roger: Okay. It's the beginning of the month. So, I always talk about the books that I read in February. 

All right. So, the first book I read was Die with Zero by Bill Perkins, and you said that you read it. What were your thoughts about that book? 

Tanya: What I liked about the book is, I think it doesn't necessarily mean you have to die with zero, but I think it gives people permission to recognize, especially in the financial kind of nerd world community that we're in here. It's okay to spend down your nest egg. I think that's what he's trying to say is like, it's okay to spend on your nest egg.

The most important thing I took away from it is when the gentleman was talking about how he could water ski and he decided not to, and then he realized I might never be able to water ski again. So, I better do it now when he was 50. I turned 40 a couple years ago, and that really has stuck to me that there may be some things in our life that we might never be interested in again or be able to do again, so why not do them now? 

Roger: Yeah, I think that was the big takeaway for me. I love the book, and I didn't think I would.

Everybody was telling me I should read it. I'm like, eh, okay, I'll read it at some point. I actually really love the book, and it addresses those that are struggling with overcoming frugality because it really puts it in context. Bill has an engineer's mind, so he thinks in engineering terms, but the idea of actually Rick Nason, the guest today, the professor that we're talking about complicated verse complex. We also talk about utility over time as well, which is what Bill was talking about in Dying with Zero, which is certain things you're going to be able to do. I actually went through that exercise of what are all the things that I want to do and then looking at the timeline of my life and well, when can I actually get the most bang for doing these things, right?

Maybe watching classic movies is later in life and maybe mountain biking needs to be now, right? We don't think in those terms. He talked about the idea of gifting, right? Gifting money to your, when you die to your 60-year-old child is going to have a lot less utility to them than gifting it to them when they're younger and same things with spending money on, well, I just bought a Bronco spending money on a Bronco now is going to have a bigger impact on my life than having a sports car when I'm 70.

So, I like that concept within reason, I think some of the things I didn't agree with was, I think he comes from, and there's not a negative, the guy's worth like a billion dollars or something. I don't know what he's worth, but he's worth a lot of money, really a lot of money. So, he has some of that perspective, but I don't think the point that detracts from the points that he makes. 

The second book I read was Life of Pi. I forget the author. There's a book, Life of Pi.

Tanya: There was a movie too. 

Roger: Yeah, it was a movie. Yeah, I read the book. It was a movie, really good movie, about a boy who, a shipwreck, and he's on a life raft with a lion in the movie, I believe.

It was a really fun book. It was, you know, he's an Indian boy. just a really good book. I enjoyed it a lot, a lot of perseverance and seeing how he, and this didn't come out in the movie as much for me. That's one thing I've discovered as I've read books that have movies is there's nuances in the book that don't really come out in the movies.

In this case, this whole structure was him managing the trauma. It looks like he wasn't really on the boat with the lion and he didn't have the hyena, I think it was, and all the other things, but this is how he processed it to protect himself because of something that happened to his mom, etc. It's just, there's so much more depth in a book.

Highly recommend it.

The last book I finished in February was It's Complicated by Rick Nason, the guest that we had on. I think that's actually a must-read book for people that think about decision making and planning that are really into that. I would suggest it because I think that nuance is critical to retirement planning.

So that's all I've read. Did you read anything this month in February? I'm putting you on the spot here. 

Tanya: No, I just finished a book last night that I was laying in bed. I was actually crying during the book and Greg yelled from the living room. You okay in there? So, I read it in like three days. It's called Lessons in Chemistry.

It's a novel and it's definitely a quick read like a beach read, but it's an independent woman in the 1950s and sixties who is a chemist. She is a chemist and just the challenges that she faced being an independent woman at that time.

Roger: No doubt.

Tanya: It was absolutely fantastic.

So, it's a novel. It's not a true story or anything, but I highly recommend it. 

Roger: Why did you cry? 

Tanya: It was a very emotional ending. 

Roger: Don't tell us the ending. Don't spoil it. 

Tanya: I don't want to give it away. Okay I also just read Geraldine Brooks Horse. I would never have read it on purpose, but a friend of mine recommended it to actually two friends of mine recommended Horse and it is fantastic. She has another book called March. So, both novels are really, really excellent.

Roger: I read somewhere that less than 50 percent of people read a book a year. 

Tanya: Oh my gosh. Yeah. Do you have a target? 

Roger: Do I have a target? No, I, no I don't. I just. Okay. I feel like I've slacked off with three a month because I'm trying to make reading my default activity rather than being on Twitter or checking email or TV. I feel like I've slacked off.

ROCK LIFE WITH DR. BOBBY DUBOIS

So, in today's Rock Life segment, where we focus on the non-financial parts of life and retirement, we're going to focus on energy with Dr. Bobby DuBois. Mr. Bobby, how you doing, man? 

Dr. Bobby: Well, I'm feeling a little uncertain today. That's the word of the day. 

Roger: That's modern society. But why are you feeling uncertain?

Dr. Bobby: Well, because that's, of course, the topic for today, we're going to talk about uncertainty and more specifically, we're going to talk about uncertainty, how it affects our health, not the uncertainty per se, but the discomfort that relates to that anxiety and how it can affect our health, and most importantly, what do we do about it?

The good news is, and the punchline is, that the tools we've been talking about for over a year apply beautifully to this topic.

Roger: I meant to send you a chart that I received. I'll send it to you after the show and maybe we can talk about this on a future Rock Life segment about the dopamine society and all the things that we do to make ourselves anxious.

So perhaps that will come up. So why do we want to explore this topic? 

Dr. Bobby: Well, and why today? Why didn't we do this six months ago? And why aren't we doing this six months from now? 

Well, as you shared at a high level, you and I went to Costa Rica together last month, and we were part of a very challenging experience. Endurance experience is probably the best way to put it. It was very physically difficult, but it also had some mental challenges associated with it. Our leader for the group, Michael Easter, wrote about The Comfort Crisis. I know he's going to be coming on the podcast, not too distant future, and so experience we had was proctored or led by Michael Easter. 

Now. For me, physically, it was very difficult, and I've done lots of difficult physical things, and this definitely was the hardest I've ever done, but what it also had was a heavy, heavy dose of uncertainty, and I was forced to confront my need for certainty, and the discomfort I felt around not having certainty.

I mean, they would not tell us, what were we going to do and how long was it going to take and midway through we never knew if we were 20 percent into this crazy thing or 90 percent and they wouldn't tell us and so I had to face a very difficult part for me, which is the anxiety associated with uncertainty.

So today I thought, this is a topic that's much broader than being in Costa Rica. It affects almost everyone and it has health consequences and things we can do. So, I thought, yep, today's a good day for that. 

Roger: I'm thinking this is a muscle that can be built because that was one of my threads that I pulled away.

For me, obviously it ended up being the physical dehydration that I had. I did not expect the uncertainty part, and that was definitely something that related to. Your challenge for me. I was like, okay, whatever that we'll figure it out. So, I maybe have built that muscle because I'm an anxious guy or have been in my youth anyway. It's interesting how this affects different people in different ways.

Dr. Bobby: I think that's absolutely true. We'll get to that in just a little bit.

What I faced there was obviously unique experiences not that many people are going to have but for all of us, we face uncertainty. When we think about our retirement and now, I'm two years into it, we envision that life will be grand and we'll be able to relax without the pressure of work, and that will just feel so comfortable and at ease, but the reality is in retirement and in life in general, uncertainty creeps in. 

Will I have enough money before retirement, during retirement? What about my health? As I age, is it going to get really bad? Am I going to get dementia? My relatives had dementia. I have uncertainty and anxiety related to that. What about outliving my spouse or not outliving my spouse, and how will that affect my spouse? And anxiety related to that, are my kids, okay? Are my kids going to be, okay? I mean, retirement, we still face all this.

In the United States, 19 percent of folks at any one point in time have anxiety. And over the course of lifetime, you know, that exceeds 30%. No, obviously, you know, if you're going to give a talk in front of people and you don't like public speaking, everybody's going to have some anxiety, but this is sort of a chronic state of dis-ease. That is 20 to 30 percent. 

Roger: I don't have them in front of me. Every study that I've read says that there's this disconnect between the state of the world, which is actually from a historical context, better than it's ever been, not just in the U. S., but worldwide, and the state of discomfort and anxiety we have about the world.

There's a big disconnect. We could overlay the internet and social media as part of the reason for that and what some have turned the dopamine culture of everything is structured to manipulate us to be anxious in some way. 

Dr. Bobby: I think that's right. You mentioned social media, you know, in the back of your mind as well, but somebody like the comment I put, do I have more followers or do the followers I have dropping off like flies? There's that anxiety obviously wasn't there a hundred years ago. They had a whole bunch of other ones like, is the bear in the woods going to actually eat me? So, there were different concerns they had. 

Roger: Oh, and we have an election this year. If you're retired, you're not working, and you have what you have, and the economy, etc.

It's a scary topic. Cal Newport came out with a new book on the 5th of March. called Slow Productivity that talks a little bit about that. He writes about this type of stuff extensively. I think that's a good source, but what types of uncertainty might a listener face? 

Dr. Bobby: Well, some of the ones I just mentioned, financial and relationships and kids and why do I wake up in the morning and all that stuff.

But as listeners probably know at this point, I can go down the touchy-feely side, but my real focus is what does it do to our health? That's really what I would like to pivot to. I think people probably won't quibble that anxiety exists. Look, as you said, some people are more anxious than others. Some are born this way. Some have traumas or life experiences that put them on edge. One of my sisters went through breast cancer and treatment, and I think forevermore, she will be more anxious about symptoms that pop up than I was before she had the breast cancer. Life experiences are terribly important.

I think at the highest level, it's pretty obvious that being anxious is not the most enjoyable place you want to be. That in and of itself, quantitatively, being anxious or uncertain, is I'm sort of interchangeably saying uncertainty and anxiety. Obviously, you could envision a person where life is uncertain, but boy, they're just happy as a clam. Most people don't feel comfortable with uncertainty. 

Now, are there other causes of anxiety than uncertainty? Absolutely. There is a bear in the woods, and that's not uncertain, so. But I, for the purposes of this, I'm going to really sort of equate uncertainty and anxiety. 

Roger: That's a really good distinction, because on this episode we have Professor Rick Nason, that basically says a lot of things in life are uncertain. They have to be managed, not solved. So that's a good distinction. 

Dr. Bobby: Just the mere presence of anxiety or uncertainty, for most people, doesn't feel good and when they've done population studies using quantifiable questionnaires, the quality of life that people report and their life satisfaction is reduced associated with that.

In and of itself, that's not a good thing. Studies have shown that anxiety affects sleep. It may, you know, your mind's racing, you can't fall asleep. Your mind's racing about these things and you wake up in the middle of the night and can't go back to sleep. It affects your sleep. Then a chronic state of uncertainty or anxiety will increase your cortisol levels. There are all sorts of kind of beliefs around what ill effects cortisol has, whether it's the cardiovascular system or your ability to fight off infections or potentially cancer. Yes, on the health side, there's a lot of reasons to say this is not a good thing and if we could reduce it, or at least feel more comfortable in the sea of uncertainty, that would probably be a good thing.

Roger: Like with cortisol, that has a purpose. A lot of this is, if you're anxious, you can get into chronic states of just different things happening physiologically. Is that correct?

Dr. Bobby: That's exactly right. 

I mean, look, we were designed lion is running after you ramp up your adrenaline and other things get away from the lion or at least run faster than the guy that's behind you so you escape the lion, perhaps the other person doesn't. When it's in a chronic state and that isn't a normal thing that our ancestors necessarily experienced, but we, in our society and how we confront things, that is the case.

Roger: We're not supposed to always be thinking the lion's chasing us. 

Dr. Bobby: That's right. Either consciously or subconsciously. That's correct. 

Roger: What I have observed from a person that has struggled with anxiety, but also in my practice, is it also, rather than put you on your toes to approach the future, it puts you on your heels, or you're in reactive mode, and that has a whole other string of downstream effects on how you approach life.

Dr. Bobby: That's correct. 

Roger: When I think about what to do about it, I think about, obviously you have the medical world, and then you have sort of the personal mental gym world. So what are some things that people can do to begin the journey, and you can tell me if I'm wrong, as I hope you always would, is this is a process and a journey, it's not a solution, because it's like, Jim, here are some things that you can start to do, and they're going to feel very awkward at first and weird, but they can help if you start to put in some practices. 

Dr. Bobby: I think that's right. I don't want to minimize, there are actually tangible things that would reduce uncertainty. You’re teaching how to do a plan of record has something called resilience and you're worried that inflation will go up and that's going to ruin my retirement.

Well, you're going to test that out in a Monte Carlo simulation. Your actual objective uncertainty could go down every time you get in your car and you say, you know, this thing keeps breaking down. It keeps breaking down. I just don't know the next time, whether it's going to make it to the market or not. You may decide it's time to buy a new car. So, there are objective ways to handle and reduce uncertainty. 

Now let's just assume, but for a lot, you can't reduce it. 

Roger: The phrase that we use is we call it the campfire of confidence where having confidence is having eyes on things and realigning yourself to rebuild that confidence of, okay, this is the plan of record that I've done. Here's my understanding of how it's going to work. Here's the stress tests that we've done to play around with it.

That builds confidence because you actually have realigned the direction that you're going and then you go off and live your life, but then that campfire starts to go down of confidence because you haven't looked at it in a while. So, you have to reacquaint yourself. So, it becomes a ritualistic type of rhythm because confidence is fleeting. 

Dr. Bobby: That's a good conceptual model. I like that. Well, as I alluded to earlier, the good news is there's not new tools you have to learn. All the tools we've been talking about are applicable to this problem.

I'm not going to sit here and say, well, they're applicable because I say they are, or I think they are. There are actual scientific studies folks, that that's what I tend to focus on. There have been many, many, many clinical trials with yoga and there was a recent summary of 35 trials, and of the 35, 25 of those showed real benefit in helping people feel less anxious with regular yoga practice.

Breath work, which is in the mind body space. Also, 16 studies that showed improvement and with various breath styles. We've talked about the Huberman approach. With the sort of double inhale and then an audible exhale, inhale through your nose and exhale out of your mouth, folks can look at, listen to the previous one.

We did meditation again. There's been more than 50 randomized controlled trials, more than 5000 people and there were improvements. This was the one where it might not have been sustained. I don't know all the details of the meditation practice people were doing. Cold plunge. Puts you in a happy place and when you're in a happy place, you may still be uncertain, but you don't care as much.

It's like, Oh, I'm really happy. Yeah. That uncertainty, nothing's changed, but yeah, I'm like a duck with water on its back at the moment and it just sort of rolls right off. Cold plunge has some benefits, and as we've talked about before, cold plunge is a new area for scientific exploration. So, the data isn't as strong yet being in nature. Just hanging out and walking and listening to the birds and looking at the beauty has been shown to reduce self-reported stress and heart rate, blood pressure, and all those things that make you feel uncomfortable. Then, of course, the very special one, which is exercise, which seems to solve just about all ills, one of which is perceived stress and again, many, many, many, studies by. 

Roger: I think exercise is, I think that's one reason why I am so focused on exercise as a personal habit and have been since my twenties. And that's been how I manage anxiety. Now what I don't see on here that I know has had a substantial impact in my life is drugs, pharmaceuticals.

Like I take, since 2009, I take Lexapro and I've experimented with going off of it periodically. People notice, usually others will notice before I notice, and I'm not, you know, I throw out the name of the drug. I'm taking you to talk to your doctor. I didn't have a clue, but it's had a significant impact on the directory of my life in helping me manage anxiety.

So, what role do pharmaceuticals play? You don't want, I don't know if you necessarily want to go there first. That's something you talk to your doctor, but. That's one I didn't see on here. 

Dr. Bobby: Yeah, I was focused on the things that folks can sort of do on their own. But you're raising a really, really important point.

I have a chemical imbalance in my brain. It runs in my family, and within 24 hours of being on medication, which they always say, well, it's going to take a month before you'll have any effect. Myself, both of my sisters, within 24 hours, we were different people. Now I was more suffering from depression issues, not so much anxiety, but medication for the right person at the right point in time can be a real game changer. 

Now, there's medications like Valium, those kinds of things, or alcohol. That just kind of dull your problems. That doesn't really solve the underlying problem. Problem that's going on in terms of anxiety, whereas some of the pharmacologic stuff can really change the wiring in your brain. I wouldn't minimize that importance. And by all means, talk to your doctor, be evaluated. If this is really a big problem, then that may be a direction to go in, and I totally support it.

Roger: One last thing I want to add, Bobby, and I probably should have done this up front because they may not be listening now. But for the dudes out there, the bros, the dudes, meditation, yoga, breathing exercises, that doesn't resonate with a lot of people. It sounds like foo-foo ish and new age ish. I just wanted to challenge the dudes out there. I feel like I'm somewhat dude ish. I do yoga. I do breathe exercises. It's okay if it feels foreign and uncomfortable at first. That doesn't make it wrong.

That doesn't make it not a good exercise. I don't know if that's a cultural thing or what you call that, right? It's just Oh, I don't do that. I'll go run. I'll go lift weights. But there's a lot to be had from all sorts of things, just like there are for strength training for people that never go to the gym.

I don't know why I feel I need to point that out, but it's sometimes we can compartmentalize things. Oh, that's not me. Well, how do you know until you try it? 

Dr. Bobby: Well, I think that's a really excellent point. I think it brings up another issue for me is that dealing with an issue like this is multifactorial.

So, let's say your body's, this isn't necessarily biochemistry, but let's just say we think anxiety is partly related to your cortisol level being higher, your adrenaline level, you know, pick something in your body that's high. Now you can go exercise it out if you like. Okay, I'm going to burn off whatever anxiety, hormone, whatever it is by exercising. That's great, and that's one pathway. 

Meditation might reduce some of those levels, but it also may make you more comfortable with whatever that ill feeling is in your body. So that's a second way to go about it. A third way with a cold plunge may not be changing your cortisol level, but it's increasing your dopamine level and as I said earlier, then all of a sudden you feel happier and whatever the anxiety is, just doesn't seem as problematic. So, you may come at it by burning up whatever is making you feel bad. You may combat it by increasing other happy hormones, and you may combat it by just being more acclimated to the discomfort feeling.

I think all of the above is helpful. 

Now, as people know, who have listened to me, I'm all about testing it in yourself, because these studies suggest in general, they may be helpful, but for you as an individual, they may be not helpful at all. So, how would you test it? Well, there's lots of anxiety questionnaires out there, you can find one, and they, you know, would ask you in the last two weeks, how often have you felt nervous, or on edge, or not being able to control your worry, or trouble relaxing and those kinds of things.

Then, you know, you add up a bunch of questions, you get a score might be a 10 30, whatever it is, that's your baseline and maybe tested over the course of a week every day and then try one or more of these tools. Then, of course, tests and these tools are not going to take two months to figure out whether they work or not.

Now, I would assume within a couple of days or a week or whatever, you're going to notice some improvements and you'll measure it on your questionnaire and you'll be able to say that worked. And then maybe you stop whatever it is you were doing and see if the anxiety difficulty returns and then you start it up again and you show yourself, ah, it really, really works.

By all means, these are things you can test at home. Look, if your anxiety is off the charts and your score is crazy high on these things, talk to your doctor. We don't want you to get into trouble. But for the most people, it's a level of anxiety that's not great, but it's not run to the emergency room right away.

Roger: I love that. We always end with what to do. So, do you have any final thoughts around this topic of uncertainty? I know you've had a personal journey here recently.

Dr. Bobby: I do have a kind of a final thought. In addition to when I would ask, well, how much further is it now? I never said we there yet that as a parent, I've learned that's annoying thing when they would tell me, Oh, that's a great question. Of course it wouldn't give me an answer. But during the course of the time, we were there, one of the leaders. Quoted Teddy Roosevelt, which is now something that really rings true for me. The Teddy Roosevelt quote is "Do what you can with what you have from where you are." 

Too often with uncertainty there is a sense that it is a dichotomous world. I'll succeed. I'll fail. I have enough money. I don't have enough money. Life isn't so dichotomous as it is a gradation. To remind yourself you can only do what you can with what you have with you from where you are is, for me, has become a mantra that's been life changing.

This is part of special forces training. You're in the middle of the jungle. Your gun isn't working and your compass is broken. All right, well, that's your reality right now. What can you do? You can only do what you can with what you have, which is you don't have a gun and you don't have a compass and where you are, which is you're in the middle of nowhere and you're not exactly sure where that is. I found this to be very liberating when faced with uncertainty, because all you can do is what you can do. I've incorporated it. It's been helpful. Maybe it'll be helpful for others. 

TODAY’S SMART SPRINT SEGMENT

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CONCLUSION

I never really have an elegant way of ending the show. I should have some kind of little speech by now, but I just like hanging out with you and noodling on this stuff. 

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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.