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Episode #546 - Be A Super Communicator With Charles Duhigg

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

Well, hey there. Welcome to the show dedicated to helping you not just survive retirement, but to have confidence because you're doing the work to really lean in and rock it. My name is Roger Whitney. I am a practicing retirement planner with 30 years’ experience.

That's a long time, and I am the founder of, I feel old all of a sudden, founder of agile retirement management. For the last 10 years or so on this show, been hanging out here, honing my craft as a planner, but also, and more importantly, empowering you to not just create a retirement plan, but create a plan that you can have confidence in so you can go create that great life.

It is July 3rd. Big month, love July, middle of summer. This month on the show, we're going to focus on answering your questions and we're going to have special guests. Charles Duhigg is on the show today. That'll be fun.

In addition, on July 8th, which is Monday, We are going to have the live results show with Mike and Judy, where you can come on. We're going to walk through the analysis of the feasibility stage of their plan. Is their ideal retirement plan feasible? I don't know. I haven't even done it yet. We're going to look at that and then talk through how to get to a feasible plan. In addition to that, that same night, we are opening up enrollment to the rock retirement club, which is our online community and education platform where we will give you the education, the planning tools, as well as the support in the community to build your plan of record so you can start to walk this journey, not just by yourself or with an advisor, but with a group of people, that are all in the same season of life and have the same spirit. So, we would love to have you join the club. 

You can sign up for the results webinar at livewithroger.com. In addition to that, Nichole told me to remind you in our 6-Shot Saturday email this Saturday, we are going to include our agenda for our private retirement conference for the club that's coming up in October that you can go to if you're a member of the club as well as a sneak peek of a meetup we had in the club where I helped a member think through a retirement planning issue and we had the community, help contribute as well. You'll be able to see that video replay as a learning exercise and get an idea of some of the stuff that we do in the club. 

All right. Well, that's a lot of stuff. So, if you want to get that stuff, by the way, you can sign up for our 6-Shot Saturday email at rogerwhitney.com.

Okay, let's get on and talk about relationships

I don't often have guests, but I received an email from Charles Duhigg a few months ago related to his new book called Super Communicators: How to Unlock the Secret Language of Connection. I've been a fan of Charles Duhigg, a little bit of a fan boy I was like, no, this isn't really Charles and I replied and we connected and had a conversation and It is Charles.

So, Charles wrote the Power of Habit, which is a wonderful book. He writes for the New Yorker from time to time. He was a New York times journalist. They won the Pulitzer for some of the work that he did there. After connecting with him, I really, really like this guy and his book is an important book for me and for you because relationships are a core one of four non-financial pillars that you and I need to work on.

Building quality relationships in order to really be able to rock retirement. All the studies show that. So, Charles and I had a conversation about his research into how to be a better communicator to build those relationships.

HOW TO BE A BETTER COMMUNICATOR

Charles, how are you doing? 

Charles: I'm good. I'm good. How are you?

Roger: I was very excited to get connected with you because we have four pillars for the financial world and four pillars for the non-financial world. that we think are just foundational to, well, rocking retirement, but actually just having a great life. One of the pillars is relationships. As we get older, studies have shown people get lonelier and lonelier. Their friends die off, they move away, they don't regenerate younger relationships. So, this is a big issue. 

Charles: No, it's a huge issue, and it's not inevitable. Right? I mean, the thing is that you're right given no effort or energy around it, then yes, as we get older, oftentimes we tend to atrophy in terms of how many people we're seeing, how many people are available to us. But there are some very easy things to do to maintain those relationships and to build new relationships. You're exactly right. What the research has shown us is that most people are probably familiar with the Harvard study of adult development. Their big finding was that the best predictor of your happiness and health and success, however you define that at age 65, is having a handful of close relationships at age 45. That doesn't mean that you stop having them when they're 45. It means that you've learned how to make friends and to keep those relationships real. 

Roger: There are a lot of reasons around that. One word that I've been really thinking about recently was the word encouragement. It's an old French word if you look at the etymology of it and it's "put in courage" and that's what relationships do right is you have your foxhole buddies, whatever without those you're by yourself and there's no one to put courage into you when you're dealing with life.

Charles: That's absolutely just the thing. I mean, I think if people think about them on this meaningful thing, moments of your life, they are inevitably moments that you shared with other people, right? Humans are a social creature, and the way that we build relationships, the way that we build meaning is often through conversations, right?

Communication is at the core of what it means to be both human, but what it means to build a meaningful life.

Roger: You wrote the Power of Habit, which is how I first got introduced to you, write for the New Yorker periodically, which I got introduced to through Cal Newport, who is really the only podcast I listened to. I love Cal. 

What moved you to explore this topic? 

Charles: I got into this bad pattern with my wife, actually. So, I'm a journalist. I'm a professional communicator. You know, my wife and I've been married for 20 years now. I found that I was coming home and I was complaining about my day, and I was talking about, you know, my boss doesn't appreciate me and my coworkers don't help me as much as they should. She would oftentimes give me some pretty good advice. She would say something like, you know, why don't you take your boss out to lunch and you guys can get to know each other a little bit better. Instead of being able to hear her advice, I would say something like, no, you're supposed to be supporting me and you're supposed to be on my side. You should be outraged on my behalf. She would get upset because I was criticizing her for giving me good advice. I think anyone who's listening knows this pattern, right? This happens in every single relationship.

So, I went to these experts and I said, “what’s going on here?” Like, why am I so bad at this? They said, well, it's interesting you ask us now because we're living through this golden age of understanding communication, right? Really for the first time because of advances in neuroscience and data collection, we understand what happens in our brains when we communicate with someone. One of the big things we found is that we tend to assume that a discussion is about one thing, right? It's about my day or about retirement or where we're going to go on vacation next year. But actually, every conversation or every discussion is made up of different kinds of conversations.

Those conversations tend to fall into one of three buckets. So, there's these practical conversations, right where we're making plans or solving problems, but then there's also emotional conversations where I might tell you what I'm feeling and I don't want you to solve my feelings. I want you to empathize. Then there's social conversations, which are about how we relate to each other and to society. They said, what we've learned is if you're not having the same kind of conversation at the same moment, it's very hard to hear each other and connect. So, I was coming home and having an emotional conversation and my wife was responding with a practical conversation. Those are both equally legitimate conversations, but because they weren't the same kind of conversation, we couldn't connect with each other. 

Roger: You're literally having two different conversations.

Charles: We're actually using two different parts of our brains, which is really, really important because the goal of communication, the goal of conversation is to achieve what's known as neural entrainment, to begin thinking alike.

Roger: To be in sync. 

Charles: Yeah, exactly. To be on the same wavelength. 

Roger: I was fly fishing the other day and we had a guide and he was like, now we're going to put on this strike activator. I'm like, what the heck's a strike activator? So, he puts it on, he puts it out. I'm like, Oh, you mean a bobber. So, I think, Oh, we just want to talk in sync, but people in their industry have all these fancy words for things.

I actually had this note, Charles, to talk about, and what you described with you and your wife was my wife and me. For 20 years, she would come home and tell me about her day. We're going to get into the three types of conversations. I was having a practical conversation like your wife was having to you, and she was having an emotional conversation. This went on for like 15, 20 years where there was frustration. Unlike you, and this is what I appreciate about journalists more and more. I've become friends with Michael Easter, who is a great journalist. You go to experts. You don't just wander in the forest by yourself. You go, well, why is this happening? Once we solve that, got in sync, things have been much, much better in a relationship.

Charles: I mean, it's interesting you say it went on for 15 years, because the truth is that you knew what was happening in the conversation. You knew that the conversation wasn't working, but you didn't know how to pinpoint the frustration, right? You didn't know how to pinpoint the breakdown. A lot of this book, Super Communicators and becoming a super communicator. It's not about learning something radically new. It's about being able to identify what you already know as a skill that you can use with anyone.

Asking deep questions. One of the things that we know about super communicators is that they tend to ask more questions than the average person, and we're all super communicators at one point or another, but these are consistent super communicators. They tend to ask more questions, 10 to 20 times as many questions. And some of those questions are very special because they're known as deep questions. They're questions that ask other people about their values, their beliefs, or their experiences. That can sound kind of intimidating, but it's actually as simple as if you meet someone and you say, you know, what do you do for a living? They say I'm a doctor. Instead of asking, Oh, where do you practice medicine? Asking, Oh, what made you decide to go to medical school? Right? That's a question that invites someone to talk about their values and their beliefs and their experiences. It's an easy question to ask, but it's a skill. It's a skill that you use with your wife and you use with your good friends. Once you recognize it as a skill, you understand, Oh, I can actually use this with anyone. 

Roger: Lot of that is just cultivating curiosity. I would imagine thinking of it as a detective or journalist, I wonder why they think in that way, like, even if somebody reacts negatively to you rather than respond.

I wonder why. Let me ask a question. 

Charles: Yeah. And I think it's not so much cultivating as just listening to your curiosity cause the truth of the matter is we are all curious, right? Sometimes we get in our own way because we go into a conversation and we're saying, I want to impress this person that I'm smart, or I want to convince this person to like me, or I want to convince them that I'm right and they're wrong and they should agree with me.

What we're doing in that is we're getting in our own way cause our instinct is to ask someone a question and then just listen to their answer. In fact, once we understand that the goal of a conversation is not to agree with each other. It's not to find things we have in common. The goal of a conversation is just to understand how you see the world and to speak in such a way that you can understand how I see the world. Once we set that as the goal, it makes conversations a lot easier because you don't have to hold yourself to this high standard where you have to say something brilliant. You just have to say something understandable and listen.

Roger: That pressure is real. I spent in my industry, the first third of my career feeling the pressure to be the smartest person in the room in my domain. That's not possible, and it puts so much pressure. 

Charles: No, and the other thing is that we know from studies that even if you were the smartest person in the room and you said such smart things after that discussion, very few people will remember what you said. They will all remember, however, how you made them feel. This is an important thing, is that we often focus on trying to sound really professional and polished and great. 

Roger: I gave up on that long ago. 

Charles: Yeah, yeah, exactly and all the best conversations we've had, if you had a transcript of that conversation it would look like a mess, right? It's people interrupting each other. It's people saying things in ineloquent ways. I'm not even sure ineloquent. I think it's ineloquent is the word. Yeah. 

Roger: Yeah. Nichole Mills, my staff grammarian who always tells me when I speak wrong would catch that. 

Charles: Exactly. Exactly. So, the point being, this is a good conversation and it probably looks like a mess on a page. But that's kind of the point is that a good conversation is a conversation where you're present in the discussion. Instead of thinking about how it might appear later, you're thinking about what it's like to experience it now. 

Roger: So, as you pursued these topics because of your own curiosity related to you and your wife, where are you at now from being a super communicator?

How have you evolved?

Charles: I've changed a lot and a big part of it is these three conversations I mentioned that when I come home and I start complaining now, my wife will often say, like, do you want me to help you come up with solutions? Or do you just need to vent and get this off your chest? You just want to complain.

And it's actually kind of really nice to hear her ask that because usually what I say is like, no, no, this isn't that big a deal. I just need to vent. Like, I just want to talk about my day. Oftentimes I haven't asked myself that question, right? When she asks me, it helps me figure out what I want out of this conversation. That's changed a lot. I ask a lot more questions now, but it might be helpful just to identify what a super communicator is for the audience. So, and there's a pretty simple question for this, which is okay. If you were having a bad day and you came home and you wanted to call someone who, you know, would make you feel better that just talking to them would brighten up your day. Do you know who you would call? Like, does that person pop into your mind? 

Roger: Charles, you already know how to do it.

Charles: Who is it for you? 

Roger: It would be my brother-in-law who's upstairs, Kevin. He would be the first one probably. Yeah. 

Charles: Okay, so for you, Kevin is a super communicator and you're probably a super communicator back to him. Now, let me ask, what does Kevin do that makes him the person that you would want to call? 

Roger: He listens. He is always solution focused, and still has a balance of empathy with it. Yeah. Yeah. He doesn't try to fix me per se.

Charles: My guess is, does he ask you questions? 

Roger: Yeah. Yeah. Tons of questions. 

Charles: Yeah. Tons of questions. He's probably proving that he's listening. He's probably maybe sometimes echoing back what he hears you say and saying like, am I getting this right? Sometimes he's just asking you follow up questions that prove that he's paying attention. Like you don't feel like he's just waiting his turn to speak. Is that fair? 

Roger: Exactly. He's curious. 

Charles: So those things that we just described, those are specific skills. As I mentioned, all of us are super communicators at one time or another. But there are these people who are consistent super communicators. They can have the same conversation and relationship that you have with Kevin with anyone on demand. The only difference between them and everyone else is that they recognize that the skills that Kevin uses when talking to you and the same skills, which I'm sure you use when you're talking to Kevin, you probably have those same skills and spades when you're talking to him.

Those are fungible skills that can be used with anyone. You can have the same kind of conversation you have with Kevin with a stranger on a bus. You just have to recognize, here's what Kevin is doing, here's what I'm doing that's special in this conversation, but I can do it with anyone, and that's what makes us a consistent super communicator.

Roger: So, like, walk me through that person on a bus. How would that work? 

Charles: Okay. So, step one is you want to ask a question, right? Preferably a deep question. On a bus, there's a guy named Nicholas Eppley at the University of Chicago, who's actually doing this experiment a lot. He does this himself. He'll get on a bus and his goal is to get someone to talk about their hopes and dreams within three questions. That sounds audacious, right? That sounds like it'd be super socially uncomfortable. It actually usually only takes him two questions because he sits down.

Roger: I was going to say, it actually doesn't sound that difficult to get people to talk. 

Charles: Exactly because you sit down and you say, like, what do you do for a living? Someone says, I'm an accountant and you say, Oh, did you always want to be an accountant? Was that your dream when you were a kid? They say, no, of course not. Nobody dreams of being an accountant. When I was a kid, I wanted to be an astronaut. Right. So now, like, now you're actually having a real conversation because you're like, so what happened to get you from wanting to be an astronaut to being an accountant, like take me through the journey. Now you're having a real conversation and you're saying, Oh, I wanted to be an astronaut too. Like I actually, but then, you know, I found out that like, I really wasn't good at sports. I thought I was good at sports, but I'm not good at sports.

So that's step one. Step one is asking a deep question and it's a lot easier than people think it is. 

Step two is that once you ask that deep question. You need to prove that you're listening and we prove that are listening through a couple of different techniques. One of those techniques is simply asking to follow up questions, right?

I'm going to show you that I'm listening to you by asking you follow up questions that show that I'm paying attention. 

Roger: Because if you just come back with your version now, we're just playing ping pong. 

Charles: Yeah, exactly. Sometimes my version is actually something that adds to it, right? Like you say, I decided to become a doctor because I saw my dad get sick when I was a kid, and I say, “oh, that's interesting, I became a lawyer because I saw my uncle get arrested”, right? I've shared something about myself. I've done so in a way that shows that I'm paying attention. It shows that I'm listening. It's also not trying to steal the spotlight. It's not like I speak in monologuing about my uncle for the next 10 minutes, but rather I say like, Oh, this is an experience that we share so I'm proving that I'm paying attention. 

Now in a conflict conversation, in a conversation Where we might disagree with each other, where it's a hard topic, where it's something that we're not looking forward to discussing, there's actually a technique for this known as looping for understanding, which is very similar. You just ask a deep question. Then you repeat back what you heard the person say in your own words. It's important here not to mimic the person, but to show them that you're actually paying attention and that you're processing what they're saying, that you're thinking about it and you're seeing the deeper issue that they're trying to bring up.

Then the third step to this loop for understanding is you ask if you got it right, and that's usually the one that we forget. But when you ask if you got it right, what you're doing is you're asking for permission to acknowledge that you've been listening. 

Roger: Which goes a long way in someone feeling they've been heard, especially in a conflict situation, right?

Charles: Absolutely right. 

Roger: When you're in a conflict situation, you want to be heard. 

Charles: That's the most important thing. When you're in a conflict situation, your suspicion is this other person isn't actually listening to me. They're just waiting their turn to speak. So, the only way we can short circuit that suspicion is to prove that we're listening. One of the things that we know from studies is that if I believe you are listening to me, I become more likely to listen to you in return. 

So that's the second thing is to prove that you're listening, whether it be looping for understanding or just asking a follow up question, and then the third thing is to show the person that you want to connect with them.

This is a little bit more ephemeral, but it's actually really critical. It's very easy when you think about it, right? So, what do super communicators do? They show us that they want to connect with us. That's why they're asking follow up questions. That's why they're sharing things about themselves.

That's why they're reciprocating. But more importantly, when we laugh, they laugh when we get serious or a little bit emotional, they get serious or emotional. They match the kind of conversation that we're having. They're inviting us to match them. Because what that does is it shows you, I didn't come to this table just to have you listen to me. I genuinely want to connect with you. So, this is back and forth. This is a dance where we're both participating. I want us to move together. 

Roger: Now those three conversations, we actually didn't define all three because I sidetracked you, so let's make sure we do that. 

Charles: Yeah, so there's the practical conversation, the emotional conversation, and the social conversation.

Those are the three big buckets that almost all conversations fall into.

Roger: One of the keys is understanding which conversation the other one is in or thinking that they're in. 

Charles: Exactly. What kind of mindset are you in? Which kind of conversation do you want to have? Then either matching you, what's known as the matching principle in psychology or inviting you to match me.

I'll give you an example because I think that makes it a little bit easier. So, a couple of weeks ago, I was in a meeting and we were waiting for the meeting to start and we were all sitting around the table and we had our agendas there. I just turned to the guy next to me who I hardly knew. I was like, you know, how was your weekend? He said, Oh, it was great. I went to my kid's graduation. It was like a great, great weekend. Now the easiest thing, the most natural thing would have been to say, Oh, congratulations. That's wonderful. Okay. Let's get down to the agenda, right? Let's start. But because I had spent some time thinking about this, I recognized it. This guy's actually telling me he's in an emotional mindset right now. He mentioned something that's kind of emotional, his kid's graduation. So instead of jumping onto the agenda, what I said was, Oh, that's amazing. Like, how did you feel watching your kid walk across that stage? Was it awesome? He chatted for five minutes. He loved to tell me about what he felt.

He mentioned that his own dad hadn't graduated from college and his dad had passed away recently. It made him feel so proud to see his own son graduate. I mean, and it's just five minutes, right? I listened and I kind of shared a little bit because my father had passed away recently. We just talked for five or six minutes. Then I said, Oh, this has been wonderful. We should probably get down to the agenda. Do you guys mind if we start the meeting and get down to the agenda? So, I was asking permission to move from an emotional conversation to a practical conversation.

Oftentimes it's just reminding yourself to listen for what kind of conversation is happening and then just leaning into it. 

Roger: I imagine it's okay to ask too, like with your wife, do you want me to fix this? Or do you want me to, are you just wanting to? 

Charles: Yeah, absolutely. In fact, in schools in New Jersey and New York, they teach teachers that when a student comes up and they have something important they want to discuss, the student should ask them as the first question, do you want me to help you to hug you or to hear you?

Which are the three kinds of conversations, the practical, emotional, and social, and students know exactly what they want. They say things like, no, I don't need help. I just need a hug. Or no, I don't need a hug. Like, I just need you to hear what's going on. This person's bothering me and I want you to know. 

Roger: As I'm listening to you and I think about when people change seasons from full time work to, you know, we use the word retirement, but it's not, it's just different season of life with time freedom, you lose a lot of your social structure, right? From the corporation or from the business that you ran or whatever it is. Unless you have an outside social structure, whether it's church or organizations, you can feel lost where you don't have. So, my question is, a lot of people will feel shy, right?

My wife said the other day, "Roger, you're not shy." I actually think I am sort of shy. I can start conversations relatively easily because I've practiced it a lot, but for people that are intimidated by meeting someone new, they can't be Charles and his super communicator self or Kevin, his super communicator self, but they can find where they can get more to a golden mean that's comfortable for them.

How do they navigate that? 

Charles: So, I think there's a couple of things you mentioned. People leave this infrastructure when they leave their work life and you're exactly right, and let's talk about what happens in a workplace that facilitates that social engagement is that oftentimes it's just geographical proximity and then it's calendar proximity, right?

I have a meeting on my calendar every Tuesday at two o'clock with my core team. So, I know that I'm going to see them and it's easy for everyone to show up. I don't even have to think about that social aspect because it's there or it's one o'clock in the afternoon and we're all hungry. So, we might as well go eat lunch together.

Once we leave our workplace, that doesn't mean we can't mimic that same structure, right? It just means that rather than doing it for a work reason, we're doing it for an even better reason, which is a social reason. I schedule a lot of lunches and I schedule a lot of likes, just catch ups, just talking to someone on the phone or talking to them over zoom, and I think people shy away from that because they're like, what am I going to talk about? 

So that's the second question once you set that up. What do you do with it? Well, there was actually this really interesting study that was done at Harvard Business School where they took a classroom full of people and they said, look, you're about to go have a conversation with a stranger, and this is actually one of the most anxiety producing things you could ask people to do is to tell them you have to go talk to a stranger. They said, before you do this, we want you to take just like literally a minute and we want you to write down on a piece of paper three topics you might discuss. Questions you might want to ask and they're dumb stuff, right? Like, have you seen the new Dune movie? Are you going to the party this weekend? Whatever you want, just write them down. 

So, people do this. They take a minute. They write down these three topics and then they stick that piece of paper in their pocket and then they go off and they have the conversation with strangers and the students are all pulled afterwards and the teachers say, how did that go? What the students say is what they say, what's interesting is. The three things I wrote down, they never came up. Like there was so much other stuff to talk about, but I felt so much more relaxed and confident during the conversation because I knew if there was this awkward silence, like I had this thing in my pocket that I could go back to.

This tells us something important about what you mentioned, this hesitation, which oftentimes we hesitate to start a conversation with someone, someone even we like, because. We're anxious about the unknown. We're anxious that there will be awkward silences. We're anxious that we won't know what to talk about. We're anxious that it's been so long that it's going to feel weird to get like, we knew each other so well, but now we have to ask you basic questions like what's up with your wife? Is she still alive? Right. That we feel hesitant because we're a little bit anxious and that stops us from having the conversation.

But it's important to recognize that anxiety is not rooted in reality and that anxiety should not prevent you from having a great conversation. What it means is you have to manage the anxiety, and the way we manage the anxiety is just by jotting down three things we might want to talk about. 

Roger: I love that, and I think the structure of being curious and asking better questions of why you did this, actually takes all the pressure off of you to perform.

You can just ask questions, right? 

Charles: Yeah, and you don't want to make it an interview, right? You don't want to make it something where you're just asking questions. But the nice thing about deep questions is that it makes it very natural for me to answer my own question. Like, how are things going with your wife? Like, do you guys feel close to each other still? Yeah. You know, we feel this way and we've been going on vacations together. Yeah. Oh, that's interesting. Like I actually, me and my wife have been doing the same thing. 

So that's the nice thing about deep questions is that they invite the other person to say something meaningful, but they also make it really easy for you to reciprocate.

Roger: One thing I want to make sure we talk about is technology. I think it's very clear, rich quality communication doesn't mean a lot of people, but just good like Kevin, is critical for having a life that has a byproduct of happiness. 

Technology, I mean, the surgeon general just issued a warning on social media for youth probably could have done it for everybody. You know, social media and technology have changed communication. Mostly it, I think it's been unleashed, but how do we navigate that? It seems like it's more of a barrier. Like I don't do social media and I got off of it because I felt it was bad for me. I don't even carry my phone around, but how do we navigate the technology that is trying to manipulate our attention in many times unhealthy ways.

Charles: It's important to note that what the Surgeon General said is he issued a warning about social media. In social media, we're not having conversations, right? In social media, we're oftentimes passively receiving information from other people. He very specifically did not say that there is a health risk associated with online communication, because online communication can actually be very, very healthy. Now, for our generation. It's probably less true, right? We didn't grow up using the internet as a way of connecting with other people, but I have teenagers at home and I see for them, online communication is actually as meaningful as telephone calls were for us, and phone calls when we were teenagers and phone calls are a good model of this because when phones first became popular about a hundred years ago. There were all these studies that appeared that said, no one will ever be able to have a real conversation on a telephone because up to that point, all conversations that happened face to face.

They said, look, if you can't see the person, if you can't hear their vocal tone really crisply, if you can't see their expressions and their gestures, you're never really going to be able to have a real conversation. What's interesting is that at that time they were actually right. If you look at transcripts from early phone conversations, people didn't know how to use them. They use them like telegrams. They would call up and they would give stock orders or grocery orders, then just, they couldn't have a conversation. Now, by the time you and I, and everyone listening was a teenager. We could have conversations for like seven hours a night on the phone, right? 

Roger: We had the 30-foot cord that we ran into the bedroom.

Charles: Exactly. Exactly. You'd go into your closet so your parents couldn't hear you. What happened was that we learned how to use telephones. In fact, there's things that we do without realizing it when we're talking on the phone. If you're talking to someone on the phone, studies show you'll over enunciate your words by about 20%. You'll put about a third more emotion into your voice than if you were talking face to face, because you know the person can't see you. We do this without thinking about it. Put differently, there are rules for using phones that we have internalized. Online communication and different forms of communication all have their own rules and their own strengths and weaknesses, and that doesn't mean that we can't have robust conversations, but it does mean that we have to be aware of those rules and abide by them. 

I have to know that sending you a text message is different from sending you an email is different from giving you a phone call, and there's different settings that I might want to use one or the other form of communication. When we get into trouble is when we forget about those rules and we don't pay attention to them. We're too busy. We're moving too fast. But when we think about them, online communication becomes a really powerful tool because we don't have a chance to call everyone we want to talk to. 

Roger: I think we've been creating these rules from scratch, just like they did with the telephone, I guess, is what you're saying.

Charles: Learned through experience, and our kids know these rules really, really well. They don't even think of them as rules. 

Roger: Yeah, I think this generation, like my kids were born in 96, 97, and so they were like the vanguard of the Wild West, nobody knew anything, but it's getting better. I can definitely say with Zoom, because literally this is where I live, communication, it can be very deep. Especially when I find two couples. Like if your wife was here, Charles, it's much better than being in a conference room in many ways when you're in a comfortable place, but the other part is when I have like a couple that I talked to when you're talking, I would be looking at your wife and if she's talking, I would look at you to look at for the nonverbal cues of is that what he said just idiotic or I disagree with it. Or is it really being a coherence there? So, what do you feel about AI and the, I mean, I could have a communication with, you know a non-human now. I mean, there's some positives to that, perhaps. 

Charles: We're at the beginning of AI. Like you're exactly right that there's sort of all these like scenarios we can imagine where you could have real conversations with AI.

Anyone who's spent a lot of time playing with chatbots knows you can't really have a real conversation with AI right now, right? Like we're kind of anticipating what's coming down the road and it's not here yet, and there's also some legitimate questions about whether it will ever get here in the way that we're envisioning it, right? There's been experiments that have done where they've taught AI systems a tremendous amount about the rules of conversation and communication and people almost universally can figure out when they're talking to AI versus when they're talking to a real person, right? Maybe not the Turing test, like maybe it's not like two or three questions, but if you spend half an hour with an AI system, you walk away being like, yeah, either that was a robot or that was someone pretending to be a robot because that did not feel like a real conversation. So, the answer to your question is, I don't know until technology matures, we're not really going to know what it's like. 

But that being said, let's say that we did have an AI system that can have great conversations with you. If you find those conversations to be meaningful, I don't know that there's anything wrong with that. I don't know if it's possible, but if it is possible, my kid uses ChatGPT. He'll read a book that none of his friends have read, and then he'll go to ChatGPT, and he'll have a conversation with ChatGPT about the book and like, when he told me he was doing this, it blew my mind. It never even occurred to me to do that, but it sort of makes sense, cause ChatGPT has access to all of the criticism of this book, all of the reviews, all of the commentary on it. So, it brings up some interesting ideas and it brings them up in a way that it's easy for him to absorb.

I don't think there's anything wrong with that. 

Roger: I actually did that with your book in preparation for this. 

Charles: Oh, did you? 

Roger: Yes, with Perplexity. I used Perplexity, but yeah, just to get some different perspectives from what I read. 

Charles: I don't know that there's anything wrong with that. I mean, I'm not a big fan of Perplexity because they're basically engaging in widespread copyright theft.

But setting aside, setting aside that particular company. 

Roger: They're citing, aren't they?

Charles: No, no.

Roger: No. Okay. I respect that so I want to know.

Charles: They're getting sued left and right. So, we don't know what the copyright law should be around this, but my guess is that that was a meaningful experience for you, that you learned something about my book by having this conversation with Perplexity.

The truth is. If we are having meaningful conversations, it doesn't matter if we're doing it with a machine, it doesn't matter if we're doing it with our neighbor, it doesn't matter if we're doing it with someone who lives across the world. Conversations make our lives better, and so I'm all for anything that creates more conversations.

Roger: I think Super Communicators, which is the name of your book. We'll have links to it in our 6-Shot Saturday, this is a key having deep relationships, quality relationships. As you get older, it's even more important because you have to foster downstream to stay fresh. You know, it's similar to an old dog, a new dog, right?

Everybody keeps each other fresh. I think the techniques in your book are wonderful. I think you're a pretty cool guy too, by the way. 

Charles: Thank you. I appreciate it. This has been a wonderful conversation. Thank you so much for having me on. 

Roger: All right, Charles, we will share the book and chat with you maybe another time.

Charles: Perfect. Thanks, Roger.

LISTENER QUESTIONS

Roger: Now it's time to answer your questions. If you have a question for the show, go to askroger.me and you can type in a question, leave an audio question and we'll do our best to help you take a baby step towards rocking retirement. 

HOW TO DRAW MONEY FROM YOUR PORTFOLIO IN A DOWN MARKET

Our first question comes from Jim on how to draw money from a portfolio in a down market.

Jim says, 

"We have a 40, 000 gap to fill to meet our monthly expenses. We would like to take a million dollars. and have a 70 percent stock, 30 percent bond portfolio, withdraw 40, 000 a year, inflation adjusted, not allow the 4 percent rule. What would happen though if the market were down 35%? Do I still take 40, 000 because I need it?

Do I just draw 4 percent from whatever the value of the portfolio is and take the difference from my contingency fund?"

It's a great question, Jim. They all sound a little scary. Don't if your million dollars goes to 650, 000 and you're still taking your 40, 000 a year out, Ooh, that. It doesn't matter what the math says whether it works or not, that is not a comfortable situation to be in, and it might cause you to change your spending because of the worry, bluntly, of having this horrible market happen to you.

So, the way I'm going to answer this question, Jim, is how I would suggest that you do it, not the way that you're doing it. I wouldn't start from this top of a 70% stock 30% bond portfolio and just have this homogeneous portfolio and then figure out how to withdraw money from it. The reason I wouldn't do that is because asset allocation as we use it and have used it for decades was never designed for retirement portfolios.

Let me explain. A little history lesson to help us understand the context of why we do asset allocation. 

So back in the 1950s, Harry Markowitz created what's called the modern portfolio theory, which is essentially saying, hey, a rational person is going to maximize the return For a given level of risk or minimize their risk for a given level of return.

Why would you not have an optimal portfolio that balances those two things? So, what he did was using math and statistics said, well, if we have, let's say stocks and bonds, we know what their average return has been historically, what their risk level and risk was defined as standard deviation, which is how much do they go up and down and they know what standard deviation is. The third thing we know from history is how they move together. When stocks move up, what do bonds do? Do they move up, but they probably don't move up as much. Maybe they move down that's correlation. So, he built the statistical model with those three primary inputs and built out what's called the efficient frontier. Which says for a given level of risk, this is the mix of stocks and bonds that would optimize returns for that risk level risk being defined as standard deviation or this volatility. That was pretty cool. Then going forward, what happened in the sixties, especially in the seventies, is this structure became solidified as the de facto way to build portfolios for a variety of reasons.

In the seventies, we started to have the advent of IRAs and 401ks, ERISA was regulatory infrastructure came around and adopting asset allocation became very convenient for a number of reasons. 

Number one, it gave some structure and math to constructing a portfolio to diversify a portfolio that was backed by a Nobel laureate, Harry Markowitz.

Number two, subsequent studies said asset allocation was the primary factor that drove returns. So, we had a lot of robust academic research.

Number three Building asset allocation models and doing risk questionnaires were simple to create standard operating procedurals for advisors and for firms, which made it very scalable.

Number Four, there was a lot of legal cover as it was adopted as a prudent standard by ERISA and the public as, hey, if we do this from a compliance standpoint, we have. taking care of our obligations. So, there's a lot of compliance cover there, so a variety of reasons.

Here's the important part. Now that you have some history is that modern portfolio theory, which is portfolio optimization, never accounted for cashflow because they were using just a mathematical model. It never accounted for consistent withdrawals over time in retirement. That wasn't how the model was built. So, in the eighties and nineties, as we started to get baby boomers getting older, we essentially duct taped on ways to withdraw money from a portfolio construction model that was never actually designed for portfolio decumulation, a la the 4 percent rule guardrails, and we continue to do it today.

I think there's a better way of doing this. What we have to remember with retirement, I think Jim is the outcome. This 40, 000 that you or you and your spouse need represents the spending goals that you've set that represent the kind of life that you want to live that represent ultimately the values and what you want to leave as a legacy.

It's not just money. This is your life, and so we need to solve more for that than. The optimal portfolio on some efficient frontier. Let's look at building this in a different way. Jim, we have your million dollars. I'm just going to assume your contingency is part of the million dollars. I'm going to make some simplifying assumptions here.

First, we want to have a contingency fund or an emergency fund. Why? Because there's a lot of unexpected things that happen. That car that you're going to buy four years from now may have to be bought this year. A family member may have a need. Maybe your spending estimates were bad, so we need to have some extra money around in case your spending estimates were too low.

So, let's use as a default 50, 000 for this contingency fund. Okay, so now we have 5 percent invested essentially in cash. We just need that money to be there, and we want to earn a little bit of interest. 

Next, you need 40, 000 a year plus inflation for simplicity sake. I'm going to ignore inflation for now, just for example. Well, I would say as a default, you should have the first five years of your spending prefunded, meaning that you have it invested in something that's going to mature at or the time that you are going to need to spend that money. So, in this case it would be like a five-year bond ladder or CD ladder or what have you.

That is 200, 000 because you need 40, 000 a year, and you have five years, which is the target. So, 20 percent of your assets would be invested in a five-year ladder of bonds, CDs, that mature so you can have the money to spend because you want to spend it. Those two layers, that income floor, we call it and contingency fund, the primary concern there is the return of our money. Yeah, we want to earn interest, but we need that money when we're going to need it. Now we're left with how much we're left with 750, 000 that won't be needed for at least five years. I say at least five years because you're going to change your estimates, et cetera. 

Now that portfolio, you can invest a little bit more like you would a traditional asset allocation. Let's assume this goes into that 70/30 portfolio, Jim. So that's invested in a 70/30 portfolio, which would be considered a growth portfolio. That's not a conservative portfolio by any means. It's more of a growth portfolio. So now let's look at the aggregation in total. We have 50, 000 in cash. 200, 000 in your income floor and then the 750, 000 invested as a 70/30 portfolio, which is a growth portfolio.

If we aggregate all that together, what is the aggregate allocation of those three different portfolios based off of the purpose of the money? Well, it's about what 52 and a half percent stocks, 42 and a half percent bonds and 5 percent in cash instead of taking the optimal portfolio via modern portfolio theory, which has nothing to do with the need of the money. We built it from the ground up in order to give you clarity of at least how the next five years are going to work life wise and also position your upside portfolio for growth with a little bit more time frame in order to allow you to participate in markets through some cycles. I would suggest doing it that way.

Now, not these specific numbers, Jim, you can decide for yourself on that, but this makes a lot more sense to me. Why would you have that much more in bonds? I'm going to miss out on returns. I know, maybe, but it's going to put you in a much more powerful position to react to life. If year one, the markets go down by 35 percent in theory, you wouldn't have to change your life for five years because you have that income floor plus you have contingency and that gives that other portfolio, the upside portfolio, time to adjust. Now, obviously you're going to update this on a consistent basis. That's why you have to be agile and use that type of structure. Also, it gives you not just statistically better odds, but It gives you more flexibility to adjust when your priorities change, because all these spending estimates you have been estimates about the future, and they may be well informed, they may be swags, but you're going to be off. All the numbers are wrong. So, it gives you some liquidity to respond and recalibrate as you get more information. It also gives you a lot more liquidity when a year from now, your priorities are much different than they are today, meaning your goals, and this happens all the time.

This I think is a better way to do this in terms of structuring a portfolio from the ground up to provide for your life. rather than to optimize a mathematical model that doesn't even consider your life.

WHEN TO SWITCH TO DECUMULATION MODE IN YOUR PORTFOLIO

So, our next question comes from Mark, which is somewhat related to when to switch to a decumulation mode.

Mark says, 

"Hey, Roger, I currently have 80 percent of my retirement assets in mutual fund index funds, 99 percent stocks from my 401k and my IRAs and plan to retire in two years. The other 20 percent is in short term CDs. So that's about a 80/20 mix. At what point should I get more conservative with my 401k and IRAs? How many years before I change my allocations to a more conservative portfolio? 

At this point, I don't plan to draw from my 401k. IRAs until four years from now. Should I change the mix now?" 

This is a very similar question, but it's more about how you make that transition. 

So, Mark, first question. So, let's just think through how to navigate this decision. I want to give you a framework here.

Number one, I want you to build a feasible plan of record, which is these are my goals and the timeline of my goals over my lifespan. Here is the timing of my income flows from social security, other sources, and here are my resources and do a feasibility test.

Meaning, is this plan feasible, the spending plan feasible from a long-term perspective? You can do that with the software in the club. This is how we teach it in the club, and we give you the software so you can do a Monte Carlo scenario analysis. To get an idea of the probability of success on a long-term basis, the feasibility. You could use new retirement calculator. I think Fidelity has one, Schwab has one. They all have different calculators, lots of different methodologies, but use software to take a long-term view to get an idea of how funded you are for your retirement. We categorize people in three ways. Number one is we're underfunded. Meaning when I do this long-term feasibility test, It says I don't have enough resources for the lifetime of spending that I want to do. Then you're set with getting to a feasible plan that's underfunded. 

Number two is constrained, meaning, oh, it looks like I have enough resources. depending on how life unfolds.

The third category is overfunded, meaning it's very clear that I have a lot more resources than I'm going to need over my lifetime, which means that you could afford to take some investment risk because even if you have market drawdowns or you have all this buffer of excess assets, you got to get this in place and understand where you fall on the spectrum Mark, because that's going to influence some of the decisions downstream.

Once you have that, now we have to make the plan resilient. That is the portfolio construction of what should the allocation be, we talked about that with Jim, and then when should I do it? 

So, in this case, you retire in two years, you know, you're not going to need any of these retirement assets for at least four years. That's good. You have got a four-year timeline and when you're going to need these assets. If you're constrained, and it would at least with the software used, that's going to be anything below 90 percent and above 75 percent from Monte Carlo analysis standpoint, we would call that constrained. If you're constrained, I would suggest going through the exercise we talked about with Jim and get your first five years prefunded, knowing that you have at least a five-year window prefunded. If you have to use some of your IRA assets to reallocate, then that would be one of the decisions. 

If you're constrained, I think you should also consider maybe doing five years from the date of retirement and getting that prefunded, right? Even though that's like seven years in the future going out that far. 

Now, why would I say that? Well, if you're constrained, and you're very aggressive now, and the markets are at crazy all-time highs, why not put it in place now? Take some winnings off the table, secure your retirement for the next five years from the date of your retirement, or seven years from today, why not take some of those chips and secure that? It's not like we would be doing it at lows, we're at all-time highs. Plus, you can earn five-ish percent on CDs or bonds rather than the hope of eight to ten percent in stocks. Don't be greedy. That would put you in a position that, ooh, what if life happened to you and either you chose or it was chosen for you that your retirement became accelerated? Maybe there's a layoff. Maybe somebody has a health issue and you want to have more time early. Why not go from the position of power if you're constrained? If you're overfunded, you probably don't need to make any changes for now. It would be a matter of how overfunded you are because you have so many excess assets that you can handle market downturns.

Now, 99 percent stocks, that's, you know, through October 07, March to March of 08 or 09, the peak to the bottom from an equity standpoint, that would go down by 50%. So, you may want to moderate that a little bit, but I would definitely start with where you at in terms of feasibility are, underfunded, constrained, overfunded. What's your philosophy on this? If you're constrained, you might want to just start securing this stuff because we're at all-time highs.

We're going to get to a lot more of your questions this month, but for now, let's go set a smart sprint. 

TODAY'S SMART SPRINT SEGMENT

On your marks, get set,

and we're off to set a little baby step we can take in the next seven days to not just rock retirement, but rock life. 

So, in the next seven days, I want you to practice identifying the type of conversations other people engage with you. Is it emotional? Is it social or is it practical? Start to be aware of what it is they're coming to and see if you can synchronize with them and ask questions that will solicit a deeper connection.

I think it'll be a fun skill to practice. I'm interested to hear how that goes for you.

CONCLUSION

Next week on the show, we are going to have a security expert who is actually a member of the Rock Retirement Club come on and talk about how to begin to navigate securing yourself from data leaks. Identity theft, et cetera. In the wake of this AT&T data breach that happened, we had some other comments as well.

So, looking forward to that for now. I hope you have a wonderful day.

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.