NewRetirement Podcast: Money, Behavior and Happiness — Steve Chen Interviews Jonathan Clements

Hosted by Steve Chen, founder of NewRetirement, the NewRetirement Podcast offers interviews about the wise use of both money and time in retirement.  Explore ideas and great insight so that you can achieve a secure and meaningful future. In Episode 3, Chen is joined by guest Jonathan Clements — 33-year personal finance journalist and writer for the Wall Street Journal, Citibank and his own blog, the Humble Dollar — and discusses money and behavior, and how it informs and affects happiness.
marshmallow testLearn about the marshmallow test, the soda trick and get lots of commentary about the financial markets and how to prepare for a happy future.

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Full Transcript of Steve Chen’s Interview with Jonathan Clements

Steve: So welcome to the third podcast from NewRetirement. Today we’re going to be talking with Jonathan Clements about how money, behavior and happiness relate. Which aligns with the two main themes of our podcast, making the most of your money and time.

Our goal is to help people who are planning for retirement or financial independence with financial insights, stories and ideas for making the most of their lives.

Jonathan’s career spans 33 years as a personal finance journalist and writer for Wall Street Journal, Citibank and his own blog, the Humble Dollar. He wrote over 1,000 columns for Wall Street Journal alone and has authored eight personal finance books and contributed to two others.

So Jonathan, given that you started writing for the Wall Street Journal in 1990, can you just share what are the biggest changes that you’ve seen around investing and personal finance since then?

Jonathan: When I started writing about financial matters, actually it was a little before I arrived at The Journal. I had three and a half years at Forbes Magazine prior to that, what we had was a world where many people thought that they could beat the market. I mean the mutual fund industry, the money management business was dominated by active managers.

Second, it was a much more expensive world, commissions were still high, the fees on mutual funds were significantly higher than they are today and third, when you went to the advice business, so much of the advice business consisted of traditional brokers selling products in return for commissions. You fast forward 30 years to where we are today and the world has completely changed. Fee only financial advisors are eating the lunch of traditional commission driven brokers. That’s been a startling change, and a great one for consumers.

We’ve seen a collapse in the cost of investing in mutual funds, not so much because the fund industry has happily cut cost, but because investors have voted with their feet. They’ve moved large sums of money out of equity managed funds and into market tracking index funds. It’s a smart move, it has really brought down the cost of investing. And with that has come a total rejection of the traditional model where people imagine they can predict which way interest rates are headed, which way the stock market is headed, they can pick winning stocks.

That whole old fashioned world has really gone out the window. I mean certain people are still trying to keep it alive because there are fat fees to be made on Wall Street by pushing active management. But for many institutional and individual investors, the decision has been made, and the decision is I don’t need to beat the market, I don’t wanna incur the cost of trying to beat the market. If I can simply get the returns of the market at the lowest possible cost, I’m gonna be a very happy camper over the long haul.

Steve: Any predictions on how … what you think personal finance might look like in 10 years? I mean I’m seeing things like Robin Hood with zero trading costs, obviously fees are trending down, that pressure’s there. There’s more automation with robos and I think advisors are feeling the pressure as well because that’s a high remaining cost that’s out there when you look at investors. Any thoughts on that?

Jonathan: Well I think one of the things that’s come out of this change in the focus on … away from active management and the focus on driving down fees and on indexing, is a reorientation of the way people actually think about managing money.

So you go back 30 years ago and it was all about the market, picking investments. And as people have come to realize that simply picking superior investments is not a game for winners, they’ve started to think about investing, about money management in a totally different way. So not only when people think about investing, they’re not thinking about individual stocks, they’re thinking more … looking at a broader canvas, thinking about asset allocation, thinking about things like factor investing, should I tilt towards value stocks, should I tilt towards small stocks, should I have a momentum tilt to my portfolio.

So people are thinking about investing in a completely different way and they’re also starting say, “Well, okay. If I can’t add value by picking superior investments, where can I add value in my financial life?” And people are thinking a lot harder about what sort of insurance they need, what the role is of insurance in their financial life.

They’re thinking much harder about how much they should be saving, what it’ll mean if we have this sequence of return versus that sequence of returns. People are more focused on estate planning and they’re more focused on taking a holistic view of their financial lives and what I mean by that is, people are saying, “Okay. I got my portfolio here, I got my insurance here, I got my home over there and most crucially, I have my human capital, which is my income earning ability. And do all these different parts of my financial life work together? Are they in sync, or am I somehow making a mistake by looking at each bucket in isolation?”

Steve:  Yeah. I definitely think that’s super important. I mean that’s obviously something that we’re completely aligned with and trying to facilitate with our planning tools. So hey, I have another question for you here and this is … You know I’m part of this group called FinCon, which is a group of bloggers, planned personal finance bloggers, and I asked them what I should ask you. And JD Roth, we actually had on the first podcast had a question, which was what’s the most important thing that you’ve learned since you’ve started writing about personal finance?

Jonathan: It sounds ridiculously simple, but the one lesson that’s been driven home to me year after year, is the importance of being a good saver, everything else is secondary. Over the years, both when I was at the Wall Street Journal, when I was at Citigroup and even now, I’ve spoken to thousands of every day investors who have accumulated seven figure portfolios. Many of them have modest incomes, most of them were mediocre investors but almost all of them shared one attribute in common, they were extremely frugal, otherwise known as cheap.

The way they achieved financial success was living way beneath their means and saving great gobs of money every month. If you wanna be financially successful, it is indeed as simple as that, everything else is gravy. If you have great savings habits, you could afford to buy advantage funds. I wouldn’t suggest you do it but you could take that risk and end up with market lagging returns. You can pay too much to a financial advisor and you’ll still be fine.  If you have great savings habits, good things are gonna happen, everything else is gravy.

Steve: Being able to delay gratification … I mean just on a side, I remember I gave my kids the marshmallow test when they were all younger. That’s a great test. Jonathan, do you know what that test is? I’m sure you do.

Jonathan: Sure, absolutely. The Walter Mischel test that was done at Stanford in the late 1960’s.

For listeners who don’t know about it, it’s one of those seminal tests in terms of psychology, where they put four year olds in a room and they were told, “You can have one marshmallow now, but if you wait 15 minutes, you can two marshmallows.” And what they found was the kids who were able to delay gratification, didn’t just grow up to be better savers. They grew up to have greater academic success, they were happier socially, they were more self confident.

This ability to delay gratification is hugely important. It’s right at the center of so much that we do. Of course, when you hear about the marshmallow test, it does sound a little bit quaint. Imagine offering a kid today, “All right. One marshmallow now or two marshmallows in 15 minutes.” The kid would just walk out of the room. Now to see whether a kid delays gratification, you’d probably say, “Okay. I’ll give you one marshmallow now and if you’re willing to wait 15 minutes, I’ll give you an iPad.”

Steve: Right. Seriously. That does feel like that’s what’s starting to happen now. Last question on kind of your personal tips and I’ll move on. What do you think … If you had to share kind of a top list of key lessons for kids since we’re on the topic of kids, what would they be? Do you have like a top three to five like things? You talked about saving and stuff like that. But …

Jonathan: So I think trying to instill the ability to delay gratification in your kids is hugely important and that’s 90% of the battle, and you can do it in all kinds of different ways.

When my kids were young, I used something called the soda game. So we would go to a restaurant and I would give them this choice. I would say, “You can have a soda or you can drink water and I’ll give you a dollar.” And so the kids had a choice, they could either have the immediate gratification of getting a Coke or a 7 Up, or they could have a dollar to spend later.

We teach our kids to delay gratification in all kinds of different ways and it doesn’t have to be just about financial stuff. When you tell your kids that they can’t have dessert until after they have finished their dinner, you’re teaching them to delay gratification. When you say you can’t go out and play until you finish your homework, you’re teaching them to delay gratification.

One of the problems with raising kids is there’s no incentive for them to limit their desires, because everything is free, everything is paid for by mom and dad. So what I regularly tried to do with my kids growing up, is to make them feel like they were spending their own money.

And the biggest success I had was by taking their pocket money and instead of giving it to them every week, what I would do is I’d give it to them every three months and I would deposit it into a bank account with a debit card attached, and thereafter, they never asked me for pocket money. If they wanted pocket money, they had to ask themselves and then they had to troop down to the ATM and get the cash out. What I did by doing that was to make my money become their money and make them face the tough financial choices.

A particular concern of mine, it’s something I’ve thought a great deal about … My kids are somewhat older than yours. I have two step children who are younger, but from my first marriage I have a 29 year old and a 25 year old. And I found it fascinating and alarming to see what has happened with their peers as they’ve come into their 20’s. I mean all of these kids grew up in comfortable, upper middle class households and one of the things that happens if you grew up in an upper middle class household, it’s tendance to deaden financial ambition.

There’s just not that same incentive to go out and make money and I think at some level, that’s fine. What really concerns me is kids entering the adult world with no ambition. So I have no problem if my kids or any other kid in their 20’s wants to go off and do work that they think is important, even if it doesn’t earn them a whole lot of money.

What really concerns me is the kids who don’t do anything. They just sort of meander out of college, they travel, they do odd jobs here and there. They may never leave home and I find it sad. I find it concerning because one of the things that you learn as an adult is this great pleasure in working hard at something that you care deeply about.

That is the stuff of life. Doing meaningful work every day is so important and I fear that a lot of these kids who grew up in affluent, upper middle class households are missing out on that, that they just don’t have that ambition. It doesn’t have to be financial ambition, just ambition in general to make their mark on the world.

Steve: The data out there, I tell this to my friends, it’s like 20% of young adults, kinda 20, 25 are moving back home and living at home for some period of time. 60% rely on their family for financial aid and what do the kids have to say for themselves? I mean these young adults and are they … What are they thinking?

Jonathan: That’s a good question and I think their sense is there’s always time later. And I think the parents tend to be on the one hand concerned and on the other hand, relatively indulgent. Maybe that’s fine, but maybe …maybe … But maybe they … That is the point at which the purse strings should be tightened so that the kids do have to stand on their own two feet.

Steve: You know one of the thoughts I’ve had from these discussions is the sense of accomplishment is sometimes being taken away from kids, because they’re being given things, too many things early on. They don’t have to go through the effort of earning it and then maybe they get to a point where they see, “Oh, this is really hard to do.”

So if that’s like hey, they’ve been all over the world by the time they’re 18 versus … Like when I grew up I didn’t go to Europe until I was backpacking through it on my own, when I was in college on a super low budget. They don’t have that sense of like, “Okay. I’m gonna work, make money and then pursue something that I really want, ’cause I’ve already gotten all these great experiences. And I’m not really sure how hard I wanna go after these future things ’cause I already so many peak experiences at a young age.”

Jonathan: That is certainly an issue. If you start out life in first class, it doesn’t get any better. If you start out in economy and you later get upgraded, it’s a real treat. That said, I try not to fall into the trap of saying, “Wow, my kids have stuff that I never had.” Because reality is we are wealthier as a society than we were 30 years ago.

Standard of living has risen, it’s only reasonable that not just kids but everybody should have more. The question in my mind is not whether they have more, but whether they have a sense of purpose to their lives. That I believe is crucial and money I think can be detrimental in that regard, and it’s a great challenge for parents to try to help kids figure out what it is that excites them. And then try to point them in the right direction so they go off and do something with their lives. When I think about happiness and things that we can do with our money to improve our happiness, certainly designing a life for ourselves where we can spend each day doing what we love and what we think is important, what we find challenging, what we find fulfilling is crucial to happiness.

But I would say there are two other pillars. The second pillar is we should use our money to buy experiences rather than possessions. It’s a commonly told story at this point, but you buy possessions, you think they’re gonna … the best thing to spend money on ’cause they offer lasting value. But the problem is possessions become burdensome, the shiny new car breaks down, it has to be repaired and it goes from being a source of happiness to a source of unhappiness. By contrast, experiences don’t hang around. If anything our memories of them grow fonder over time. If you have a great vacation, a year later you might think it was a super great vacation ’cause you forget all the incidents or annoyances and instead focus on the highlights. So yes, have a purpose, second spend money on experiences rather possessions and then third, really crucial to happiness is having a robust network of friends and family.

One of the … There was a study done of 909 working women in Texas trying to figure out which part of the day they enjoyed the most and which part they enjoyed the least. And at the top of the list of happy moments was what the researchers delicately labeled intimate relations, which I’m not gonna talk about because it’s not my area of specialty. But the second happiest moment in the daily lives of these 909 working women was the time they spent socializing after work.

Happiness research tells us that spending time with friends and family gives an enormous boost to happiness, and it doesn’t just help happiness. A separate study found that having a robust network of friends or family provides a boost of longevity … a boost of longevity equal to the impact of not smoking. So the question naturally rises, well what if you do smoke and I think the lesson is this, never, ever smoke alone.

Steve: I actually wanna touch a little bit more on this topic of work. Having worked in technology now for 25 years, I can view what we’re doing in general and technology is automating things and getting rid of kind of menial labor. But it does lead to kind of less work to be done by humans and I see this accelerating, especially sitting here in Silicon Valley, and I’ve also read up on this idea of universal basic income. Do you have any views on where you think work is going and what you think the future looks like around that, and also tying it back to what you were saying about the social side of work? Any commentary on that?

Jonathan: First of all, we have things in our daily lives that we enjoy doing and things in our daily lives that we don’t enjoy doing. And one of your objectives should be to spend more time doing the good stuff and less time on the stuff that you don’t enjoy. And technology’s doing a great job of eliminating the burdensome tasks. I get to spend more and more of my day doing what I enjoy and less and less time on a lot of the boring, routine stuff that I would have to had to have engaged in 20, 30 years ago.

A very simple example, before I hopped on Skype in order to record this with you Steve, my wife and I, we cooked the latest meal that was delivered by Plated. So we don’t have to go to the grocery store anymore. All the ingredients are delivered in the quantities that are required, there’s a menu card there that tells us exactly what to do. So we get to spend 45 minutes in the kitchen together cooking this meal.

The only bummer this evening was I couldn’t have a glass of wine ’cause I was gonna talk to you Steve. But other than that, I got to do something I enjoyed, which was cooking with my wife and I got to avoid something that I really dislike intensely, which is going to the grocery store. Technology did that for me, so that’s one aspect.

The second thing I would say is this whole notion of work and then retirement is completely ridiculous. I mean the idea that we bust our chops for four decades at a job that we may not like in order to spend 20 or 30 years sitting around doing nothing is absurd. This distinction between work and retirement needs to disappear. I think that retirement needs to be redefined not as a chance to relax and put up your feet, get away … get away from it all. Instead, retirement needs to be redefined as a chance to continue doing what you’re passionate about, without worrying so much about whether it comes with a paycheck.

Steve: This is good. I wanna shift gears a little bit and talk about the market. One thing that’s notable about this market is kinda the record low volatility. And I was curious, do you think that the market dynamics have fundamentally changed due to kind of like the automated paths of investing we talked about earlier.

Our investors getting onboard with this like long term view and the market tends to come back. Have they kind of gotten rid of the emotion cycle of kinda the Fear, Greed dynamic that kind of used to drive the market up and down? Do you think that is happening? Contributing to this?

Jonathan: It’s a great question, Steve. I think one of the things that has certainly happened over my investing lifespan, is that valuations in the market have risen substantially. And we now have a far more expensive market than we had three decades ago, and I believe that that reflects a number of things.

One, we view the world as a less risky place than we did 30 years ago. Second, because the cost of investing has come down so much, we find the financial market’s a more appealing place to our money. We also … As an increasingly prosperous world, have a lot of excess savings. Those excess savings are seeking investment opportunities and that is helping to bid up the price, particularly of stocks, but also we bid up the price of bonds. That’s why yields are so low and this is a dangerous thing to say and I probably will live to regret it, but I don’t think we’re going back. I don’t think we’re gonna go back to a world where stocks trade at 10 times earnings or stocks have a dividend yield of 4%.

I think if you’re sitting around waiting for the market to return to those sorts of levels, you may wait forever. That said, I do … I am concerned that people are too complacent about the market at current levels of … from two points of view. One, that it’s entirely possible that we get another 30 or 40% decline in stock prices. The past nine years of rising share prices have I think lulled people to a sense of complacency and they need to be cognizant of the fact that markets go down as well as up. But second, even if the market doesn’t drop 30 or 40%, or you have to realize that from current valuations, long run returns are going to be modest.

We can’t expect valuations to perpetually rise and instead, what’s gonna drive stock prices are the growth in earnings, and that in turn is gonna reflect the growth of the economy. In a world where the civilian labor force in the U.S. is only growing by half the percentage point a year and productivity might be increasing by an additional one and a half percent, you’re talking about 2% real economic growth, which means that we’re likely to see only 2% real growth in earnings per share.

Figure in 2% inflation, so we’re talking about 4% nominal growth in earnings per share. That’s a reasonable number for the rate at which share prices should rise each year. On top of that, you get dividends, currently close to 2%. So you’re talking about a total return of six, 6% and a 2% inflation environment. That’s the sort of number you should be using at … if you’re thinking about … if you’re projecting how much you need to save for retirement and it’s also the sort of number you should be … have in the back of your mind. You should say, “Well how much can I reasonably spend each year once I am retired?”

Steve: Right. So do you think people should continue though then to stay invested in equities ’cause that rate of return is still far above what they’re seeing in fixed income? I mean we may see … I mean I think the market’s calling for three interest rate increases this year. What’s your view on kinda equities versus fixed income?

Jonathan: You’re not gonna get a short term market prediction out of me, Steve. What I will say is that whether you … how you have in stocks should reflect where you are in the life cycle. For my kids who are in the 20’s, 90, 100% stocks is just fine if they have the stomach for the risk and they have reasonably secure jobs.

For me at 55 in this state of semi-retirement, something like 65 or 70% stocks is more reasonable.

Steve: When I was talking earlier, it kinda sounded to my … I was like, “Oh, it sounds like this time it’s different.” Right? The market … Maybe we will see a little volatility and a friend of mine who’s a hedge fund guy, he’s like, “Yeah. I bought low volatility and it’s like basically I’ve doubled my money in the past whatever … five years.” But I do think that personally, the cycle’s not gonna completely end here. Any thought on if it does end, what makes it end or what it looks like if it does come back a little bit?

Jonathan: There are interesting cross currents in the market that I pay attention to, but not in a serious way that I actually think I know what’s gonna happen, but more as the observer who finds the markets fascinating. I mean right now we have seen surprising weakness in the dollar over the past year or so, and that seems to have accelerated in 2018.

We are seeing interest rates finally rise and that’s gonna provide more competition for investor dollars, vis-à-vis stocks, so that’s worth watching. One of the things I think about is if you are a U.S. investor and you are investing abroad, this has been a great period. Not only have foreign stocks been outperforming U.S. stocks, but that’s been driven in part by the decline in the dollar. Those foreign stocks that you bought are worth more once they’re converted back into U.S. dollars.

By contrast, if you are a foreign investor and you’re invested in U.S. stocks, yeah you’ve been seeing share prices go up but you’re being given back a lot of that with the decline of the dollar. And so if you’re an investor who’s sitting in Japan or sitting in Europe, is there gonna be a point at which you say, “Oh, maybe I don’t wanna be invested in U.S. stocks anymore. Sure the U.S. economy looks good, but I keep losing money on the exchange rate.” And then we do see a little bit of speculation out there, most famously as … it’s epitomized by bitcoin and the crazy up and down that we’ve seen in the price of bitcoin over last couple of months. That says to me that people’s appetite for risk is getting pretty high and that’s normally a dangerous sign.

Steve: Yeah. Yeah, I’m gonna ask you a question about that later. All right. I’m gonna ask you a couple more finance questions and then I wanna switch topics one more time. But from our user base, one of the most common questions we get is when should I claim social security? And I know it’s pretty … kind of basic question, but I would love to get your opinion on that.

Jonathan: I think that if you’re a single individual in good health or you’re the main breadwinner in a couple, and at least one of you is in good health, then you as breadwinner or you as the single individual in good health should delay social security until age 70.

Social security is the best income annuity available. It’s indexed to inflation, it’s government guaranteed, it’s at least partially tax free and you will get it for the rest of your life. It is such an attractive stream of income that you wanna get as much of that income as possible, and the way you do that is by delaying until age 70. I’m probably telling listeners nothing they don’t already know. But the reason the main breadwinner of the couple should delay till age 70, even if he or she is bad health just because the life expectancy of that benefit is not your life expectancy, but whoever between you and your spouse lives the longest. So even if you drop dead tomorrow, your benefit will live on as a surviving benefit for your spouse.

Steve: Yeah. I think that’s a great point. One of our advisors Bud Hebeler, he once told me that the other great thing about social security is that it’s like buying a life … government backed lifetime income stream with the COLA like you said, at a 30% discount to what you would pay in the private market for the exact same thing, and it has no risk in it.

So essentially it’s a good deal and the way you pay for it is by bridging till 70. So you delay the claim, delay gratification. You have to pay for that time period in between, but you get all these upside benefits and you get it at a lower cost. So another quick question here. Any metrics in your mind that … for when people “have enough to retire” like a multiple of income or … And I know this is all tied up with, “Will I work part-time? What are my expenses gonna look like?” But any kinds of rules of thumb, ’cause that’s another thing. It’s like people are … that talk to us, many of them are like, “Well I’d like to retire. I don’t know if I can. I don’t know if I should keep working for another year.” Even though they really kind of like to get out of the next phase of their life or shift gears a little bit.

Jonathan: So it’s … To my mind, it’s very simple. Whatever sum of income you feel you need from savings, you should look to have 25 times that amount saved by the time you retire. So if to supplement social security and whatever traditional company pension you might have, you wanted $40,000 a year of income. In order to generate that $40,000 over a retirement that might last 30 years, you probably need something like $1,000,000 saved. So 25 times your $40,000, it gives you the million dollars.

Steve: Nice. That’s great. All right. I’m gonna shift gears to biking because I know you’re a biker and so am I. So are you a mountain or road biker?

Jonathan: I’m a road biker. I don’t own a mountain bike. There are some trails around here that you can ride, but I find that I can do more than enough damage to myself on the roads. I don’t need trails to make it even worse.

Steve: Nice. And what’s the longest ride you’ve ever done?

Jonathan: I’ve done a couple of centuries, nothing longer than that. I in the past have done some multi-day trips with my older brother Nicholas. We’ll do six days and do 60 or 70 miles a day. I’m normally part of organized tours. Those are fine ’cause that way you ride all day and then at the end of the day, you get a good meal, a couple glasses of wine, a comfortable bed. That combination of duty and rewards is I think the best combination in the world.

Steve: That’s sounds pretty good. Have you done … Is that … Have you been doing that in the U.S. or in Europe or somewhere else?

Jonathan: Here in the U.S. There are some great touring companies on the east coast that you can sign up with. It’s cheaper ’cause my brother and I will share the room and they do all organizing and they carry your bags from one Inn to the next hotel. It’s great.

Steve: That sounds pretty sweet. I’ll have to check that out. Have you ever had any big crashes or been pretty safe out there?

Jonathan: I’ve had a period of six years where I had four emergency room visits, and three of them were triggered by biking, and the last one and the biggest, was in 2011. It was March 6, 2011, it was the first really beautiful day in New Jersey, beautiful spring day.

I’d spent the entire winter on my … having my bike up on the trainer in the basement pedaling a couple hours at a time. I was in great shape, headed out, it was this beautiful, and it turned out that AccuWeather was not so accurate. It started to rain but I was committed. I was gonna do 60 miles, I was gonna stick to the plan, and I went across this bridge, and it was … turned out to be a metal bridge and the bike just slid out from under me, and I landed on my left shoulder. I broke my scapular, which is the shoulder blade.

Steve: So not the clavicle, ’cause clavicle is like the common injury, right?

Jonathan: Yeah. No, it was the scapular. They were quite impressed in the emergency room. They said it’s really tough to break that, I must’ve hit it pretty hard. And my head hit the deck and my sunglasses broke and ran down my face, and so I needed 12 stitches on my face. But the biggest problem was I didn’t quite get my hand completely off the handlebars when I went down, and small finger got ripped away and it ripped all the tendons in my hand. I had to have my hand surgically repaired, my left hand. It’s still not quite right. So ever since that happened, I’ve been a little bit more careful on the bike.

Steve: Yeah. I’m mostly mountain bike. I do a little road biking but I’ve heard enough of these horror stories now and I feel like there’s a legitimate, significant danger out there. And then recently, I was with my oldest son, we were in La Jolla visiting my brother and coming down towards the beach ’cause we were gonna go surfing, and a guy who was probably 55, I think had been going down with his wife … Anyway, we came around the corner, there was a guy in the middle of the road laid out, tangled up in his bike. We pull over. I was a … I did some medical stuff like when I was younger, so I was like, “Alright. Let’s go help this guy out.” And it was pretty scary. His helmet was smashed up, he was unconscious, blood is coming out of his ear.
There are no cops or medical people there and so we’re like trying to stabilize him, then he’s starting to have convulsions.

I’m like, “Oh my God. This guy’s gonna freaking die right in front of me with my son here and all these people around.” And … Anyway, we’re trying to stabilize him, not move his neck but kind of … He was all kind of tangled up but kind of … get him untangled a little bit and the … Ultimately the firefighters and the ambulance showed up. They took over and I actually … I saw them later when we were coming off from surfing and I checked in and I said, “How’s that guy?” And they said, “Actually, he’s gonna be okay. It looked a lot worse than it was.” But seeing first hand … If you go down … right, on a road bike at whatever … anything over 20 … whatever …20, 30 miles an hour, you can get really hurt and it was pretty scary to see that. Yeah, I was like, “Wow, this could be anybody including myself.” So anyway, that’s my recent bike story.

Jonathan: Yeah. That is scary and the older you get, the more scary it is. In fact, Bill Bernstein who many of your listeners may know, he’s a great financial writer. He’s done a number of superb books, including ‘The Four Pillars of Investing Wisdom’ and ‘The Intelligent Asset Allocator’. Anyway, Bill was trying to dissuade me from biking saying, “You shouldn’t be road biking at your age because it’s just too dangerous going at high speed on those skinny tires.” But I try to avoid rainy days now, but there is …

There’s still a thrill in going fast on a bike. It is a chance to feel like a kid again at some level and I’m really reluctant to give it up.

Steve: Yeah. I think that’s a great point. I mean living out here in Northern California, there’s so many active people especially in the town I live in. I remember when I moved in here, I was looking in garages and it’s like everybody had like literally five to ten bikes and I was like, “What is with these people?”

And now in our garage, there’s literally like eight bikes inside of here. It’s ridiculous. But people are staying active for much longer. It’s like I play soccer, I’m 40 years old. I’m out there playing soccer, which I know is super risky. But I also have the sense that if I stop doing this, I’m not gonna go back to it and that part of my life will be over. And I see more and more people doing this, staying active for longer and longer and kinda not hanging it up and it’s a race with time, but also the technological advances that are happening around healthcare are amazing. I think we may see some pretty amazing stuff in the next five, ten years that allow us to essentially keep functioning at a pretty high level, much deeper into our lifespans than our parents.

Jonathan: So talking about … thinking about your financial holistically, I mean you should really think about your entire life holistically. If you’re saving for a long and active retirement, if you’ve got enough money to get you through 30 years, you wanna make sure that your body lasts almost as long. I mean I exercise every day. I probably do 15 or 20 minutes of stretching and lifting and then I do 40 minutes of something aerobic every day.

Steve: Nice. You’re making me feel guilty. I gotta … I’ve been working too much even though I’m working out of the garage. All right. Well that’s good. Well hopefully we’ll keep each other inspired. Are you on Strava?
Jonathan: I am not, my brother is. In fact, he just posted to Facebook that according to Strava he’s done 58,000 miles on his bike.

Steve: Wow. That’s impressive.

Jonathan: Yeah, it’s … I don’t know. I think it-

Steve: Wow.

Jonathan: Makes me think a little bit of Forrest Gump. He’s like Forrest Gump on the bike. He just keeps going and going and going.

Steve: I mean that is hard to do. I mean you have to be … I think when I was commuting into San Francisco on my bike, I put up 2,500 miles, which I thought was a fair amount. And then I would meet these bikers and I’m doing 5,000 miles. Right? But to do 60,000 miles, you are riding all … I mean that’s like a car you know. That’s like eight years in a car or something, so.

Jonathan: Yeah. Well my brother had one year where he did 11,000 miles, which I thought was a little nuts and I think even he is starting to back off from that because it’s … It is starting to take a toll.

Steve: Sure. Well I’m glad he’s still going at it though and safe out there. All right. I’m gonna ask you two more questions and then we’ll wrap it up, unless you have any questions for me and these are kind of silly questions. So one is, Bitcoin. Do you think it sees 20,000 or 2,000 next?

Jonathan: I would be … less surprised if it went to $2,000. But at this point in the cycle where there’s so much speculation, it could go either way. But long term, I don’t see why bitcoin should prove to be valuable given that the creation of virtual currencies, the supply is unlimited. People can just keep creating new and more virtual currencies and in a world of limitless supply, why should something have any price?

Steve: Yep. That’s true. I mean I think it’s interesting how to some degree like the idea of, “Hey, I wanna have a completely independent currency that’s non-fiat, government backed currency.” I think people like that idea, but yeah, you’re right anybody could create these. I mean I could create my own and you see these kind of … even coin … there was a coin called Dogecoin that was created as a joke. Anyway, I think it had like a few hundred million or billion dollar market cap. I don’t remember what it was but it was significant. All right, next question. If you had to live on a desert island with Trump or Theresa May, who are you taking?

Jonathan: That’s a terrible question Steve.

Steve: That’s a great question.

Jonathan: I know as we all do in the U.S. a lot about Donald Trump and despite having been born in England, I don’t know that much about Theresa May. So at least, the first couple of weeks might be more interesting as I learn more about her. So I think I would probably take Theresa May, not because I think she’s necessarily a better person but I think it just might be a more interesting couple of weeks.

Steve: Right. Yeah, it was just a random question. I don’t know much about Theresa May either but I thought it was a … Since you’re from England, I thought maybe you’ll have an interesting opinion on that. All right. Well I think that’s it. I’m … Well Jonathan, any questions for us?

Jonathan: Let’s see, any questions for you. So Steve yeah, if you were not spending your days writing, what would you be doing?

Steve: That is a great question, and by the way I’ve never … we’ve never flipped this … flipped the script like this. I think I definitely could see … well a couple things. I mean I could definitely see doing a little bit more traveling, taking advantage of this point of my life where I’m relatively active and healthy with my family and kids, for some period of months but not years or anything like that. And then there’s several other ideas that I’m interested in pursuing.

I mean I definitely … I’m an entrepreneur, there’s no shortage of ideas inside of New Retirement and outside of it as well. But I think there’s so many kind of interesting opportunities to build great products or help the world and leverage technology to do it and do it at scale that … Yeah. I would probably do some traveling and be back at building stuff in relatively short order.

And I just … I do feel like there’s this … Even like this podcast, I mean we’re three … This is our third podcast. The … We’re less than a month into this. The first couple we’ve had over 10,000 downloads, which is kinda shocking. You’re sitting here recording this out of your garage and you’re like, “Oh, imagine having 10,000 conversations like this, right?” It kind of … You’re like, “This is kind of interesting.” And we’re not even … We don’t know a lot about it, right? We’re learning as we go but the age of super empowered individual and like how you can … If you have good ideas and good execution, like you’re doing with your blog and your writing, you can touch so many people at scale, so.

Jonathan: So I get one follow up question and then we can wrap it up. So my follow up question is this, if looking around the world of websites and apps, is there one website or app that you wish you had built? Not because it’s necessarily a super valuable property, but because you think that it is particularly well done.

Steve: So for sure. I mean there are definitely things that I wish I had executed on. So for instance, Linkedin. I had a similar idea before that was ruled out and didn’t execute on it. So I think … And I kind of like … I mean I don’t think …

I think Linkedin has built a good service. I actually don’t think they’re fully taking advantage of the opportunity in front of them. But I think it’s … They’re definitely adding a lot of value and I think the core network has obviously a ton of value, ’cause you’re getting visibility to … the human capital across the world. So I think that’s a site in business that I think is pretty interesting. Yeah. I like network affected companies. I like Salesforce a lot. So I’m actually not a user but what they’re doing around SAS is obviously amazing.

Jonathan:  What about the purely financial realm?

Steve: The purely financial realm. Well I like some of the … I like … I’m not like a user of like Venmo and things like that. I do use PayPal. I like some of the payment mechanisms that are getting introduced and I like idea of lower friction payment products. But is that … I don’t have a huge amount of color commentary. I mean I think they’re … I just think in general across the board, I do like the fact that Silicon Valley and technology is going hard now at financial services.

So I would say I’m excited about that because I think a lot of the trends that we talked about in the beginning are lower costs, better education are super helpful to consumers and just more efficient for the economy overall. So I think … I guess broadly I’m excited that technology is getting applied in a very real way now to financial services and education.

Steve: Okay. Well good. Well look, I’m gonna just wrap this up real quick. So I’ll do the close here. So thanks Jonathan for being on our show and thanks Davorin Robison for being our sound engineer. Anyone listening, thanks for listening, hopefully you found this useful.

Our goal at New Retirement is to help anyone plan and manage so they can make the most of their money and time. We offer a powerful retirement planning tool and educational content that you can access at and we’ve been recognized as the best of the web, by groups like the American Association of Individual Investors.

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