Brian Portnoy is the founder of Shaping Wealth, a learning technology platform transforming the human experience of money. Brian has written multiple bestselling books on the psychology of money: How I Invest My Money (2020), The Geometry of Wealth (2018), and The Investor’s Paradox (2014).
Listen now and learn:
- The difference between being rich and wealthy
- How we fail in funding a meaningful life
- Ways to bring balance to your money life
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Show Notes
Brian Portnoy is the founder of Shaping Wealth, a learning technology platform transforming the human experience of money. Brian has written multiple bestselling books on the psychology of money: How I Invest My Money (2020), The Geometry of Wealth (2018), and The Investor’s Paradox (2014).
As an investor, educator, and entrepreneur, Brian worked in the hedge fund and mutual fund industries for 20 years. He gives keynote speeches and workshops around the world on topics ranging from the relationship between money and happiness to making better investment decisions. Brian serves on the advisory board of the Alliance for Decision Education, is a CFA charter holder, and earned his doctorate at the University of Chicago.
Brian, thank you so much for joining me today. You’ve done so much interesting work, that in preparing for this interview, I wondered how we would possibly keep it under 45 minutes as I typically aim to do, so I’m not going to mess around. Instead I’m going to hit you with a big question right out the gate:
What is the difference between being rich and being wealthy?
This is an important distinction that launches financial advisors and individual investors in pretty different
Rich is the quest for more, whether it’s having a bigger bank account or bigger portfolio. Social psychology has a term, hedonic adaptation, which explains that humans become quickly accustomed to everything in life (promotion, prestigious college, etc) – those good feelings are fleeting.
Wealthy is the ability to underwrite a life that’s meaningful to you. Being wealthy is a more mindful experience. Funded contentment is a shorthand for true wealth. Happiness is fleeting. We are all seeking contentment and life is going as we hope.
Does money buy happiness? Yes, it does. You need to feel safe, have food to eat, have a roof over your head, etc. So there is some positive connection between money and happiness.
Funded contentment is the money piece to living a meaningful life. A meaningful life has lots of other parts to it besides money, but financial wellbeing is a foundational thing.
Four forms of wellbeing:
- Physical
- Emotional
- Spiritual
- Financial
We have doctors, counselors, and clergy to help us on the first three. But we’re a little bit lost as individuals and as a society as to what financial wellbeing means and how to achieve it.
How do you know if you’re financially well enough that you’ve achieved funded contentment?
We are always figuring it out. We live in a round world. The Myth of Sisyphus: we are always pushing a rock up the mountain. We are never done figuring out what we want to do or who we want to be.
The key question to answer at this moment in life, what counts as meaningful? Is it your sense of connection? Is it your sense of autonomy? Is it your hobby or vocation? What you “do” is often how people identify.
The financial industry sometimes jumps right to the investments or products, but really we should be defining what’s really important and then you move to how you can afford those things.
For people that haven’t reached this point, what should they do?
Deep thinking and do the hard work of figuring out what’s important is necessary to achieving funded contentment.
So much of our lives are driven by scripts. For example: you grow up, you go to school, you get a job, you get married, you have a family, your retire – that’s a script. You don’t have to live that way, there’s no mandate to do so, but we don’t interrogate these scripts we live by.
The other place that people often fall short is in the lack of engaging in proper financial planning that considers what you really want to do and who you want to be. Making sure that all the dimensions of money life are in balance. This isn’t just investing and your portfolio. Saving, spending, giving, borrowing – these are all dimensions of money life that contribute to our sense of funded contentment.
Some advisors that are highly skilled in technical planning issues might be a totally different mold than what makes up someone that’s a great financial coach that can address emotional issues tied to their money. Tell us a little about what you’re building at Shaping Wealth, specifically, I know you are launching your first big course, Building the Behavioral Advisor. What inspired you to start Shaping Wealth and give us an idea of what to expect in the future?
In being on the road and meeting with thousands of advisors and their clients, two big questions kept coming up.
- For advisors: How do I define and defend my value?
- For clients: Am I going to be okay?
In these conversations that led to The Geometry of Wealth, which led to Shaping Wealth, the concern wasn’t Sharpe ratios or diversification or how many stars a mutual fund had.
What is the question behind the question? Usually it’s “Am I going to be okay?” Do people mask their insecurities about money or their desire to inquire about their financial wellbeing with more market-centric or economic questions? Why is it that people feel it’s impolite to talk about money in social settings? What’s your opinion on how that ends up being expressed in our interactions with money?
Money is such an emotional topic because it brings forth some of the deepest seeded feelings that we have about our lives. Greed, fear, envy, hope, joy, anger – these are less than a stone’s throw away from any money conversation.
It’s a quick to steps from a question about something like inflation to a question of whether I will be okay.
Part of the challenge that we have as a society is that we have these old, old brains. And money is a relatively new invention. We as a species haven’t ever figured out a way to comfortable talk about where money fits in our daily lives. That disconnect plays itself out everyday between husband and wife, parents and child, employee and boss, etc.
Trying to introduce these concepts in a way that people are given permission to talk about them where they receive real validation in the form of “everyone is grappling with these things.”
Giving a little bit of permission and a little bit of validation opens up a tiny door to a huge room where you can have really impactful conversations.
Brian’s book, How I Invest My Money, shows how 25 different advisors are all over the map on how they think about money and make decisions.
The modern advisor is a ghost writer. The modern advisor helps people tell their story. They help people write it, edit it, and publish it to the world.
The human brain isn’t naturally a calculator, it is a storyteller. We define everything through the stories we tell.
The project with Josh Brown was a fun opportunity to dig out a few money stories from voices within the financial community. In helping clients live the life they want to live, it’s important the advisor incorporates their story into the mix.
The current environment seems like an ideal one to be highlighting this sort of thinking, particularly as we think about what’s going on with “the great resignation.” How does this fit in?
We have one of the greatest social experiments in human history. So many people have given themselves the permission to envision a different life. The definition of work is being redefined.
Who do I want to be? Who do I want to work for? Is making less money more acceptable if I’m doing work I really like? There’s a bull market in funded contentment, with people asking the hard questions.
As you shift priorities, you might start redefining “enough” and rewriting the story of the life you want to live.
Current events haven’t changed the answers, but they have put bright yellow highlights on the questions.
In many surveys, people would rather make $80k/year when their neighbors are making $60k/year instead of making $120k/year when their neighbors are making $150k/year. We are social creatures. We are envious and competitive – that’s just how we’re wired socially.
Anecdotally, it seems that some people care about that a little bit less since the pandemic started. But on the other hand, social media makes everyone your neighbor. All we do is see what they are doing and it creates a momentum trade on FOMO.
We have these countervailing pressures of not caring and caring too much.
What’s exciting is that there is space for not just the great resignation, but the great reimagination. Life is written in pencil, not pen.
A lot of financial success comes down to having good habits in place. Can rewriting your story make it easier to build better habits?
Building new habits is hard. Atomic Habits by James Clear is a must-read.
Part of better habit formation is knowing what you want and need.
How do you invest your money?
Read Brian’s chapter in How I Invest My Money?
Brian takes a barbell approach between very liquid broad market exposure and private investments. But after a career in choosing great fund managers, Brian recognizes the difficulty in doing so and now utilizes index funds. Also has several private investments with different characteristics and motivations.
What does it mean to be a long-term investor?
First, it’s working in your own mind to articulate what’s really important to you and thinking about how you can fulfill those things.
But recognize that we often default to investing as our financial capital, but we have multiple forms of capital that we can grow and save and spend. There’s also human capital (investment in self and skillset), social capital (network), temporal capital (time and attention).
So there are four types of capital Brian tries to grow, inventory, and spend.
Resources
- Enter my 2022 Outlook Survey to try and win a $500 Amazon Gift Card
- Atomic Habits by James Clear is a must read.
- Read Brian’s chapter in How I Invest My Money?
- Submit your question for the show through my “Ask Me Anything” form
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