Visual Sketches As Conversation Starters To Help Clients Make Better Financial Decisions: Kitces & Carl Ep 175

Video

***Editor's Note: Can't get enough of Kitces & Carl? Neither can we, which is why we've released it as a podcast as well! Check it out on all the usual podcast platforms, including Apple Podcasts (iTunes), Spotify, and YouTube Music.

Show Notes

• Your Money: Reimagining Wealth In 101 Simple Sketches
  • To download a preview of Your Money: Reimagining Wealth In 101 Simple Sketches, email "Advisor" in the subject line to [email protected].
• Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin and Joe Dominguez
• The Soul of Money: Transforming Your Relationship with Money and Life by Lynne Twist
• Steal Like an Artist: 10 Things Nobody Told You About Being Creative by Austin Kleon

Kitces & Carl Transcript

Michael: Good afternoon, Carl.

Carl: Hello, Michael Kitces. How are you?

Michael: I'm doing well. How are you?

Carl: Things are good. Yeah. Super exciting times around here.

Michael: Well, I'm excited because I know you always have interesting projects going on. You've got podcasts, you've got your secret society following of advisors. And I know now you are working on another book.

And I was genuinely curious in front of everyone, as we're on our podcast audience, to ask about what it is that you're working on. Because I know, normally, a lot of what you do is for consumers, and a lot of what you've written and created out there, we pick up as advisors. You make these awesome sketches for consumers, and then I go around the country and see advisory firms, they have your sketches on the wall. I would say clients see it and engage with it, and the images are often very powerful.

About Your Money: Reimagining Wealth In 101 Simple Sketches [01:17]

Michael: So what are you working on now? What is the next thing?

Carl: Yeah. Well, thanks for asking, of course. So the new book comes out in October, on October 21st. And I have been resisting. It's been 11 years since 1-page plan came out. And it's not more than a month that's gone by every month of the last 11 years that a publisher, or an agent, or somebody hasn't asked, "When are you going to write another book?" And I'm just like, "No, no, no, no. Leave me alone." I didn't want to write another book because, largely, I was like, "What do I have to...? What's new?" There was great books coming out. People have done incredible work.

And so I resisted until a couple of years ago, and what happened was I kept hearing stories, like what you just said. Advisors have these up on their walls. They have them in the conference room, they have them in the foyer when somebody walks in. Maybe they... Well, there was an advisor in Texas that actually did an actual billboard on the side of the freeway of one of the sketches. Of course, it's in Texas. And I started hearing...I've been hearing these stories for over a decade about them starting conversations. And so I started thinking of them as, years ago, human cloud of gaping void fame called conversation grenades. You toss them in a room, and conversations break out.

Michael: These are conversation grenades. Well, so I guess I feel like that's an idealized expression about a lot of art. I feel like we use, in general, right? You create something as an artist because you hope it sparks a conversation...

Carl: Yep. Love that.

Michael...as people view it with the asterisk, like you like money-related conversation grenades, in particular.

Carl: Well, and that was the impetus. The thing that changed my mind about putting together another book was that, pointing out the window, it doesn't seem like it's getting any better out there for people. The relationship we have globally... The global anxiety around money doesn't seem to be getting better. And I really believe that good financial advice, good financial decisions happens in conversation.

But we didn't have tools to do it. So I was like, "What if I put together 101 of my favorite sketches? Could I find a publisher that would do it in a way that felt closer?" And I'm not calling it this, but closer to a book of poetry than a personal finance book. Simple, lots of white space, a purpose-built coffee table book. Someone's supposed to be handed around and dog-eared, and used.

Michael: All I can think is so you're going to make a book that has fewer words than one of our articles.

Carl: That was the entire goal...

Michael: Got it.

Carl: ...if I... You can have a book. So, that's what I ended up doing was working really hard on every single essay. So, there's 101 here. In fact, I'll show you the cover. We can walk through some of these because I know you and I have picked out some of your favorites. So, the physical book is 7 by 7, and it's softcover map. Every detail I care about.

Michael: That's dimension, 7 by 7. So...

Carl: 7 inches by 7 inches. So, it's squarex, small, inspired a lot by Austin Kleon's "Steal Like an Artist," actually. And...

Michael: So, you appropriately stole it from Austin?

Carl: That's exactly right.

Michael: Okay, got it.

Carl: There's actually going to be... It didn't make it in the first print, but the second print run actually has a dedication that says exactly that, that Austin, and it acknowledges Ron Lieber. He's been writing the "Your Money" column forever. And when I started choosing names, I had a list, and this was one of them. And I asked Ron, and Ron was like, "Are you kidding me? Please." So, that's the cover. And I wanted it to feel a little... I don't know, this black spine thing is a little bit like those notebooks you had in school. Do you remember those? There was a special notebook that you...at school. It had a black spine.

Michael: You mean like a composition? I think a composition notebook.

Carl: Yeah, yeah, yeah, yeah. I was trying to capture a bunch of this. Let's use it.

Michael: Well, this is going live in the fall, but we're recording this during back-to-school season. So, let's just say I've recently been composition book shopping.

Carl: Yeah. The feeling I was trying to capture was like, let's use this, right? It's meant to be used, it's not meant to sit pretty. And then we put together... There's 101 of them, and we can...these ten sections, right? Worked really hard on all the titles. But let's jump in because I know you have... We went through and picked some.

Michael: I've started flipping through. There are some cool ones in here.

Real Financial Planning [06:37]

Carl: Yeah. Well, where would you like to start?

Michael: I guess what you've got here is good. So, now I feel a couple of notes. So, this is a podcast that's also a video cast. So, those of you who are watching on YouTube see an image on your screen. Those of you who are listening, Carl, you may need to narrate the picture slightly here.

Carl: Yeah. We've...

Michael: For folks who want to see, go to the show notes on kitces.com. We'll have the excerpts, materials here. You'll find us on YouTube. You can see it there. But as I'm recognizing, we'll need to do a little bit of audio justice as best we can.

Carl: Art on the radio.

Michael: Yes.

Carl: Yeah. I used to do this all the time.

Michael: We're doing art on the radio here.

Carl: Yeah. With the first two books, I used to do this all the time with NPR. So, the description is... And my apologies to any Venn diagram police. I don't know. Don't send me long emails. You know who used to send me great emails about the images is Bill Winterberg. And he used to send me these, and he was almost always right. And he almost always made the images better. But I don't think he's part of the Venn diagram police. I don't think he cares that much. So, this is a circle sketch, is what I call it, to overlap...

Michael: Because we're trying not to say Venn diagram. I'll say it looks like a Venn diagram with two circles that partially overlap, and then the overlapping part is shaded to describe significance of where these things overlap.

Carl: Yeah. And so this is one circle labeled Your Money, the other circle labeled Your Life. And then the overlap is labeled Real. And, of course, Real is underlined, Real Financial planning. So, that's what the sketch is.

Michael: So, Financial Planning is the intersection of Your Money and Your Life?

Carl: Yeah. And this was... Do you remember Vicki and Joe's book, "Your Money or...?"

Michael: Yeah. "Your Money or Your Life."

Carl: I loved that book. Other than "The Soul of Money," it probably had a bigger impact on me than any book I've read about money, "Your Money or Your Life."

Michael: Well, because their premise is, as you work and do things to earn money, you're trading off bits of your life to get this money thing. So, make sure these are good trades.

Carl: I thought it was really well written. It's a cult classic for...or not even a cult... It's a classic for a reason. It was super impactful on me. But there was always one little thing that drove me crazy. I couldn't make sense of it. It was the word or.

Michael: You don't like the ‘or’?

Carl: Well, because it paints it as this combat, this, I have to choose between. And that's what I'm trying to get at here. And again, believe me, I think they make a compelling argument in that book. And they're probably right, I'm probably wrong, but I'm pointing to, can we integrate them? And that's what this essay was about. Can we integrate our use of...? I think real financial planning is actually your use of capital, or in other words, your money and your life, the integration of the two, right? So, that's where this idea came from. What do you think of that?

Michael: Well, so I'm grinning as I hear that because, right, I can't help but view this through my financial planner professional lens. And I'm just looking, I'm like, "Yeah, Carl, all the stuff you said, totally cool." I just want to put this in front of my clients and be like, "See, we do this. This is what I do. I'm helping you connect these things, right? Yes, you can go on the internet, or a robo, or AI, or whatever, do money things, but you're not necessarily creating meaningful intersections about your money, and your life, and your choices, and your trade-offs." That's where I come in as a financial advisor, right? Or even more simply, I'm not just a therapist because it's also about your money and not just your money person, because it's also about your life, right?

Carl: Love that. Yeah.

Michael: That's why I'm a financial planner. And as you said earlier, I actually really like that you said, "Good financial decisions happen in conversation." I didn't know. If you don't have a sketch about that, make a sketch about that because I really like that one.

Carl: Like this one, right? There's a line in the essay, "Your money isn't something external to life. It's a current flowing through it. The problem isn't money versus life. The problem is forgetting that they're connected." And I think that idea of alignment really always has resonated with the work that we do, aligning our use of capital with what's important to us. In other words, aligning our money with our lives. So, that's where that sketch was coming from.

Michael: Frankly, even when I think about that over the...it's like the arc of my years in the business, I feel like it continues to move more that direction, right? I don't know. Maybe it's my own bias of just career journey and evolution, but I do feel like financial planning 25 years ago was a lot more money-optimizing, and financial planning today is a lot more life-optimizing, right?

Maybe some of that shout out to George Kinder and infusions of life's planning. Though I feel like there's just a broader societal thing that we seem to care more about this intersection and how money and life relates, right? I think that's why Vicki and Joe's book has this newfound resurgence over the past couple of years, the fire movement has erupted, right? There's so much out there right now of just rethinkings about the way money overlaps and intersects with our lives, besides the traditional...well, I guess, progenetically, you give up your life to earn money so that eventually you can have enough money to get your life back in retirement.

Carl: Completely. No, that's really well said. So, here, let's move on to another one that we picked out.

Michael: Yeah. I just look at this, I'm like, "Yeah, this is the thing I would put in my lobby to just say this." This is what we do.

Carl: Right. Yeah. That's so interesting how often that's done.

Money Isn’t Just Math [13:20]

Carl: Okay, here's one. Let's talk about this. This is for our...on the radio.

Michael: You're poking the robo bear now.

Carl: You know what's so fun is, after I was done with this essay, I spent almost a day going back and forth with chat about this. So, I want to tell you about that experience. It was very cool. But let me describe it first, because this is way a lot of what I do, right? Whenever we choose to simplify something, we are... By definition, when you distill or edit, you're leaving stuff out.

I would rather be accused of overreaching, right, than being too timid. But this one's a stretch, right? But this was first drawn probably eight years ago or ten years ago. Before, we really were just talking about algorithms. We wouldn't have used the word AI. So to describe it, there's just a hand-drawn flat line. So, it's not perfectly straight, but it's a hand-drawn flat line. And that line is labeled Advice From an Algorithm. And what I was trying to capture there was it's the same, advice from an algorithm is the same.

Michael: Straight line, A to B.

Carl: Straight line, it's easy. It's easy.

Michael: Input A on the left, get B on the right.

Carl: And you can understand why this was eight, nine years ago. And then there's another line next to it, which is, it starts out as a straight line, and then it turns into a ball of yarn. And then the straight line comes up the other side.

Michael: All twisted and squiggly mess in the middle.

Carl: Yeah. And that one's labeled Real Life. And in the essay, as you just said, humans don't fit neatly into algorithms. This is especially true when it comes to humans and their money. And here's the... So, I went and asked. So, I had drafts of all these, because a number of these originated... Part of my process is refining and refining and refining and refining. I just happened to be lucky that one of the places where I got to refine was in front of a lot of people with that column.

And so I had the column, and I had drafts, and we changed it. We sent it out newsletter, we got feedback, and we tweaked. When I finally had this draft ready, I'd sent it into chat. And I was like, "Hey, I don't even know if this is true anymore. What do you think? Is this too oversimple?"

And it actually said to me, "This is more important than it's ever been." And it was these lines, "Life, markets, and money are messy. Algorithms can analyze patterns brilliantly, but," here's the key, "they can't make you feel the anxiety of a major investment decision, or the pride of achieving a financial goal, or the responsibility of providing for your family. Your most powerful financial tool isn't math, it's your humanity."

So, it was really quite fun to have... I think that gets at my feelings about AI and money, is it can analyze a bunch of patterns really brilliantly. In fact, maybe you and I have talked about self-driving money. I'm a huge, "I can't wait." But somebody's still going to have to tell us where to go, right? And that feeling of responsibility of providing for a family or the pride of a financial goal, that's going to be a uniquely human experience.

Michael: One end, and this is also now just me editorializing about, I guess, both the AI discussion today, but again, so much of it is still paralleled in all the conversations we had about robo ten years ago when...

Carl: Yeah, exactly right.

Michael: ...that didn't disrupt either, are like, "Yes, if you give me all the inputs and I can do the analysis, great. Technology does the analysis faster and better." Let's face it, it's not like we're doing the financial plan analysis math in our heads. We use tech also to do the same, put inputs in, and get output for the clients. The challenge very quickly becomes most clients can't give the inputs that clearly. "Mr. and Mrs. Client, on a utility scale, please tell me exactly how much you weigh the success of saving for retirement versus saving for your kids' retirement. Because my algorithm can perfectly optimize how to split the money between the two, if you could only give me a mathematical expression of your utility function. So just draw it out here on a piece of paper, and then I'll input the utility function in, and it'll go great," right? That's the economist's version of how to do it.

Carl: And don't change it.

Michael: Yeah. And it perfectly mathematically optimizes, except no one knows how to express a utility function as a mathematical output to give the algorithm. And as you know, even if they could, then we go do human things, like change our minds.

Carl: Yeah. Yeah. Yeah. And so I think that's what I was trying. And this is precisely what I'm hoping, and we'll keep moving because you and I could probably spend an hour on each one of these. But that's what I'm hoping is this idea of, can these act like they have been acting for 15 years? I think of them two ways. The sketches, I think of them as shortcuts into a conversation. And then I also think of them as souvenirs of the experience somebody had with you. And this is best in the hands of a financial advisor, right? So, shortcuts and souvenirs.

No Shame. No Blame. [18:54]

Carl: So, let me show you another one. And you've seen these because you helped pick them, but we'll pretend like it's a surprise. This one's always been really fun to me. The first time I drew this, it actually had a signpost on it, so it looked like a sign. Maybe somebody was carrying a picket sign. Or you think of a political sign staked into the ground of your neighbor's yard, and the sign, instead of a political slogan, says, "No Shame, No Blame." So, that's all the sketches, is it just looks like... It's the words "No Shame, No Blame" with a square around it. That's all it is.

And this was again driven on an experience I had, and I've had more than once. And I'm sure everybody listening has had this experience, but I have a very specific friend in mind when I wrote this, it was a couple, and there was a financial mistake made. Now we're going on 25 years ago. And every time I saw them, and especially...

Michael: It's still coming back. It's still coming up.

Carl: Especially if money came up, for sure. But even if money didn't come up, there was often one spouse saying, "Geez, if we hadn't made that mistake, if you hadn't done that," right? So much shame, so much blame around it. And that was a decade, almost two decades ago. And the point of this was really, look, shame and blame plays no role in financial decisions.

Michael: I love the text that you have in the little essay that goes with this. Shame says, "You were dumb." Taking responsibility simply says, "That was dumb." And it's a difference worth remembering, right? You can take responsibility without being stuck in the shame-blame game. But again, I know I look at all these through the lens of I'm just imagining having this in the office, putting this in front of clients.

To me, there's a power to putting this in the conference room with the clients. Just to be clear, this is a room where we're not here to judge you. We're not here to shame and blame. We're going to talk about money things, and there's probably some things that are going to come up that, in retrospect, you are not so proud that you did. And that's okay because everyone does that.

We do have to navigate them to figure out what we're going to do next. But we're not here to judge you for any financial things that have happened in the past. We're not here to shame or blame. We're simply here to figure out where we're going in the future and how we can help you get there. To me, there's both, there's a power as the advisor to communicate. These are the ground rules. These are expectations between me and my clients. And perhaps, as you noted...

Carl: Between.

Michael: ...a nice way to then bring that in when couples start doing some couple things, like surround and provide you all, we're in the circle of no shame, no blame here.

Carl: Right. I used to...

Michael: It's not just me to you, it's you two with each other.

Carl: I think the first version of that actually was... Because I used to say to clients, "Hey, let's put on our no shame, no blame hats." And I actually wanted to go...I never did, but I wanted to go make a trucker hat with a patch that said, "No Shame, No Blame."

Michael: Well, you're much better. I was thinking like a blue wizard hat for some reason. It might just be me.

Carl: Yeah. I wonder for some odd reason. Yeah. I think that's really, really important.

Michael: There was an interesting study, I'm going to forget now, who had done it worked on the research originally. But the question was, what holds back consumers from hiring a financial advisor? Right? Because there's so much inertia, right? All the people that we see are like, "You really should have come to me five, ten years ago. I could've done so much more."

What holds consumers back? Or is it the time it takes, how hard it is to pick advisors were hard to discern from one another, and it was a lot of that in there. And then the number one thing that popped up to the top was, "I've got shame about prior financial mistakes I've made," because basically everybody's got some, because humans are human. "I've got shame about prior financial mistakes that I've made, and I'm afraid I'm going to be judged." Not even as a negative to advisors, just if I have to walk into a room...

Carl: Human. Right.

Michael: ...and confess to another human, all the dumb things I did, I'm intrinsically fearful that I will be judged for the things that I've done. And the awesomest way to avoid being judged is to never hire anyone, and then you don't have to have that conversation.

Carl: Right. Yeah. No, super good.

Range Of Outcomes [24:25]

Carl: Here, let's keep going because I want to... This is really, really fun for me to see your feedback on this. So, this one's called "Range of Outcomes," and it basically just looks like a relatively simplified version of a Monte Carlo graph. Is that how you describe it?

Michael: Oh, I was going to say this looks exactly to me like a Monte Carlo graph. But not just if you write 92%, if you actually have the software graph out, all the different squiggles of all the different paths that it might be, and you chart all the different Monte Carlo squiggle lines graph, that's what you get here with this image.

Carl: Yeah. So, it's just labeled. Left, it says Now, right side of the piece of paper, it would say The Future. And there's eight squiggly lines that vary in their squiggleness, right?

Michael: I feel like there's a subtle Rorschach test thing going on here, right, where they hold up the abstract prints and say, "What do you see?" And you're like, "I see a butterfly." "What do you see?" True. This is just a page with a bunch of squiggly lines that move to the right, and a few of them move up to the right. And my response of, "What do you see as a Monte Carlo projection?"

Carl: That's exactly right. Exactly right. Exactly right. This, I was trying to get across here because the essay is called "Range of Outcomes." This sketch is called "Range of Outcomes." And what I was trying to get across was, what we all really want is a straight line from now to the future, this beautiful, perfect line. If you could just tell me what the future would look like. But that's not reality. The reality is, there's a whole bunch of range of outcomes, and there's probabilities assigned to each one. And I was trying to get all of that.

Think of all the nuance that goes into just that idea, right? Down to one simple idea that...and then avoiding...just trying to start the conversation around avoiding the chasing of certainty. Be careful of people selling certainty to you. And then even point out, "Hey, this can feel scary, but it could also feel dynamic, full of possibility, and exhilarating, right?" It could feel like an adventure. So, that's what that one was about.

Michael: Yeah. This one's interesting, man. So I look at the prior ones, Your Money, Your Life, the intersection is Real Financial Planning. I want to put that in my lobby. No Shame, No Blame, I want to put that in the conference room. I want to set the tone for the client meeting. Advice From an Algorithm, Real Life is Messy. It's probably like marketing on my website somewhere. Reminder, this is why you're talking to me, a human financial advisor that can relate to all this and not a robo tool.

This Range of Outcomes one, I struggle with, because, to me, the essence of this, right, the future is not a clean line. Ideally, up into the right, we have this infinite set of potential outcomes. And I'm looking at this, I'm going, "Yes, that's right. You're true, and I'm having anxiety looking at this graphic because you're reflecting reality to me." But I still want it to be this way.

This is aggravating. And there's a self-aggrandizing thing from the financial advisor. And I'm like, "Well, this is why you hire me because you don't know which of the squiggles you're going to get, and I'll be here with you along the way." I'm like, "Okay. I can self-promote that a little bit," but I don't know. I look at this, I'm like, "I don't know, I don't want to promote this. I just want to send it to a client who's having a really bad day because one of the really unexpected things happened." And just remind them, unfortunately, this is life sometimes.

Carl: Yeah. I think there are some in here that are very useful tools. They are reminders. There are some that are just meant to start a conversation. And this is one of those conversations that I think a lot of people have the same experience you did. We just hosted another one of the retreats here at the house last week. And we were talking a lot about this. And one person, her name was Lisa, she said, "I don't like that," right? "I know it's correct...

Michael: Yeah, I know.

Carl: ...I really don't like it. Yeah. But I really don't like it."

Michael: I have a job because it's true.

Carl: Yeah. But we don't...

Michael: If it wasn't, it would all be straight line, then I wouldn't have a lot to talk about because there wouldn't be a lot of uncertainty to navigate and plan around. So it would just be, now you'd be back to solve the straight line that an algorithm could do. So, there's even a part of me that's like, "I have a job in part because this. And it still doesn't feel good."

Carl: Yeah. I agree. And that was...

Michael: I don't like it for me, and I feel bad on behalf of my clients.

Carl: Well, and I think that's part of the conversation that I really want to keep. I find myself in this conversation maybe more frequently than any other right now, around navigating uncertainty and risk. And I was trying to get this across here in the essay, there's another way of seeing this infinite range of outcomes, another way other than scary, uncertain, and messy. It can feel dynamic. We embrace mystery. We read mystery novels because of the mystery. We seek... I don't go into the mountains because I know what's going to happen every time, right? We welcome surprises. When we go to the art museum, you don't go because you know how you're going to feel. So, some days the future feels scary. On other days, it feels exciting. Both are true, both are human. Just to start having this conversation, right?

Michael: So, I really feel like this is what I send a client having a bad day about the range of uncertainty in life. I mean that positively, right? There's a, "Mr. or Mrs. Client, you may be in a not great place right now because thing happened and life has thrown you a curve ball, but there's another way to look at our range of outcomes, positive, dynamic, full possibility, exhilarating." Obviously, there's some level of bad, scary stuff that is really serious stuff that probably wouldn't be appropriate. But I'm envisioning, I don't know. My client has called and they just found out that they're getting laid off and income's going to zero, and I don't know what I'm going to do next. It's like, "Hey, let's just maybe come at this from another mindset for a moment."

Carl: Yeah, especially after the hug.

Michael: "Could this turn out to be the positive turning point in your life when you look back in the future?"

Carl: Yeah. And especially after the hug of, "Yeah, I totally get it. That's scary." But I think some of these are the kind that just sit on the coffee table and simmer a bit, and it helps.

Days Or Decades [31:42]

Carl: Let's go one more because I think we got two or three more. I'm curious about this one. I'll just tell you about the art behind it. So this one's... There's two lines. One's up and down, up and down, up and down, and it's labeled Days.

Michael: And basically looks like a volatile stock market chart.

Carl: A daily volatility chart. And then there's one labeled Decades that looks like a 30-year stock market chart. This one's super interesting to me because I was trying to get across, we know. You want a way to guarantee your unhappiness? Check your account every day. Fifty-two percent, or 53%, or 54% of the time, you'll be...sorry, 46%, let's just call it 40% of the time, you're going to be unhappy if you check your account every day. That's what I was thinking about when I wrote this. I remember where I was when we were living in London, is when I came up with this. So, this is relatively new. This was never in the column. And I had first five days and five decades. And I got a bunch of feedback, and it reminded me I never put numbers on these things, because the moment you put a number... And this is just an editorial thing.

Michael: And the people are like...

Carl: Everybody wants to debate.

Michael: ..."Well, Carl, I've done analysis of the rolling returns over 50-year time periods, and your chart is not fully accurate."

Carl: Or that's not five days, that's... So, as soon as you put...and this is just, I don't know, something I've learned, it may be useful to people. If you try to get really clear about what the point is, and then remove anything that distracts. And one of the things that distract, gender will certainly distract, unless it's the point. I don't shy away from a gender thing if it's the point, right? Politics will certainly distract. So, unless it's the point, avoid it. Religion. And guess what? Numbers. Unless they're the point, numbers will distract. So that's why I changed this.

And I remember exactly the coffee shop I was in in London when I took out the iPad, and I erased the fives, and it was like, "Oh, my gosh, it's so much better." So much better, right? So, that's the idea behind that one was just, "You want to feel bad? Look at your account every day." And it turns out you have a choice.

Michael: Yeah. Again, I think about this from the client lens, right? This is the conversation we all have every time markets start getting volatile, right? Can we keep the longer-term perspective? Let's look at what happens over years, over decades. The average recovery after 3 years is this, or after 30 years, is that. So it's that work we all do so much of the time of trying to get clients to stay focused on the long term instead of not.

This is one that I... Again, for what you have here, the graphic, I'm like, "Yes, we spend lots of time telling clients to do this, asking clients to do this, inviting clients to do this." And some are good at it, and then some are not, and still look too often, and then call and email too often. I like the essay text that you have with this. So, again, for those folks who can't see, basically it's graphic on the left of these book displays. I'm assuming this is literally like you open the book, it's left page, right page.

Carl: Exactly right.

Michael: So, little left page is the graphic, little right page is just a one-page snippet, essay, poem, whatever you want to call it.

Carl: Super short. Super short essay. Yeah.

Michael: Yeah. Super short. It fits on one 7-inch by 7-inch page, right? So, it's a handful of lines. And this one highlights Warren Buffett's shocking admission, "Benign neglect, bordering on sloth, remains the hallmark of our investment process."

Carl: So crazy. Every time I hear it, I'm like, "That is so crazy."

Michael: Right. "Some call it lazy. I call it focusing on decades. Remember, you always have a choice. Days or decades."

Carl: Yeah. So, yeah, it's really fun. Yeah. I've heard Jason Zweig say, so whatever that's been, 30 years, he's been writing that column at "The Wall Street Journal." I've heard him say, "My job is basically to say the same thing in new ways over and over and over." And I think it's...

Michael: I've heard him say it. I heard a version of that as well. I have to figure how to say the same thing over and over in different ways in a way that my editor doesn't notice.

Carl: Exactly. That's exactly...yeah.

Michael: It's the version I heard.

Carl: That's even better. That's even better.

Less Wrong Tomorrow [36:28]

Carl: Okay. Here, let's share it. Let's talk about the last one.

Michael: I was going to say, do we have time for one more?

Carl: Yeah. This is the last one.

Michael: Let's squeeze in one more.

Carl: This is all in an excerpt, by the way. For all of the listeners, if you email [email protected], we will send you this excerpt. So everything you've seen on the screen so far, we put together specifically for this experience. So, this is all in that excerpt. So, this is "Less Wrong Tomorrow." So, you try to describe, tell me what you want to talk about here.

Michael: Well, first thing is we got to describe it. So, there's a squiggly line that moves up into the right. Maybe roughly think of it like we're charting clients' progress towards something. It says, Current Reality at the lower left and Goal at the upper right. But it's not a straight line getting there. And it's not a total yarn ball of craziness getting there. It's a wavy line. It's moving in a sign wave, a sound wave up and down. And the closer you get to the goal, the narrower the waves get, right? And you think of a wave dissipating, and the bumps get smaller and smaller. So, you're moving from lower left to upper right in this wavy thing. And as you get closer and closer, the waves are getting smaller, and you're attenuating in on the goal.

Carl: Love that. I love that you managed to get the word attenuating into that description. That was perfect.

Michael: Was that intended? Is that the point here?

Carl: I love it. No, no. What I...

Michael: Carl, draw attenuating.

Carl: I've always thought about this, is when I... This one is probably the most commonly used image by advisors. And just to be clear here...

Michael: Oh, really?

Carl: Yeah.

Michael: Because you have all these available as artworks. So you can literally measure what they bought the most.

Carl: Well, yeah, it is the one I hear the most because it's the easiest to describe. And by the way, feel free to draw these yourself. I don't care if you buy the... Yes, of course, I care if you buy the book, but the point here isn't buy the book. The point is have more meaningful conversations with clients. This one is one that people use all the time. Because what you do is you start with current reality, you write current reality down the bottom. You talk about what it means. How do we get clear about where you are today? This is the process of navigating a complex adaptive environment. The first step is get clear about where you are.

So, let's talk about that. Well, yeah, it looks like a balance sheet, an income statement. Oh, turns out there's a bunch of feelings inside that balance sheet. I didn't realize that. So, we talk about that, and then we say, "Okay, where is it that you think you want to go?" And we start using language like, "Just guess," "It's okay. It doesn't need to be precise." And then you say, "And my job is to draw you a line to get there." And you draw this straight line between the two. And then you say, "And I'm going to do the best in the world."

In fact, this is partially what the essay's about is I live in a town where there's lots of pilots, and I've met a fair number of them. And I always ask them, "How often do you have a detailed flight plan?" And they say, "Every single flight." So, that straight line is the detailed flight plan. And guess what? This audience is the best line drawers in the world. So, that's all that's on the piece of paper so far, with the client or on the whiteboard, is current reality goal with a straight line. And you're like, "Guess what? I'm super good at this. I got the biggest computers. I'm going to Kitces it to death. I will draw this perfect straight line."

Michael: Can you actually use that as a verb? I'll go for that.

Carl: I'm using that. I've been using it as a verb all over the world lately.

Michael: Fantastic.

Carl: Yeah. So, when it Kitces it to death, we will draw a straight line. It's the best line ever. And then you get to say, "And guess what?" And it will be wrong. It'll look more like this. And then you draw this sine wave over the top of it, and then you get to circle, and on the people who are watching, I'm using the... Can you see the cursor?

Michael: Yeah, I can see your cursor on video.

Carl: It's these peaks where I will be the most valuable, right? It's these course corrections where I'll be the most valuable. And the punchline is financial planning is not about being precisely correct today. It's about being a little less wrong tomorrow.

Michael: So, it's funny, I know you have it framed as "Less Wrong Tomorrow," right? And the whole nature of the wave being really broad and narrowing an amplitude over time is you're honing in on your goal the same way that the pilots makes midcourse flight adjustments to get to where they're going. But from the advisor... And I don't look at this and think, "Less wrong tomorrow," because I don't really want to say I was more wrong yesterday or anything.

I just look at this and think, "Look, life's going to do uncertain things to you. Me with you on the path is why we're narrowing and honing in over time." I suppose, in some parts, it's why I feel better about this one than the one we did a few slides back, about the Range of Outcomes, because they're both basically expressions of the same thing. You think life's going to go from here to there, and instead it gets messy and does all these squiggly things, but the range of outcomes finishes... The end is more diffuse than the beginning, right? Because the Monte Carlo pass can go on lots of different veins.

This one, it doesn't get more diffuse as time goes on. It hones into the goal as time goes on, which I almost... There's a part of me that feels like my job is to make the range of outcomes not look like two slides ago, where life just happens, and you find out wherever you're going to land across this range of outcomes in the future. My job is, as you identify what the goals are that you want to go after, I'm going to help you make the midcourse adjustments that it takes to get there.

Carl: That's really well stated. I love that. It seems like I spent a five, six, seven-year period thinking about what you just put, the inverse of that chart. Because we always talk about risk...we talk about risk decreasing over time when we talk about investments. But in terms of uncorrected terminal value, the range is actually way... It's broadening every year, of course, right, because of uncorrected terminal value. I've always thought about... We have that idea that risk goes down over time, well, yeah, if we talk about volatility of an investment. But if we're talking about the range of potential outcomes of your life uncorrected, right, your risk actually widens.

Michael: Right. Well, to your example earlier, if I fly from D.C. to San Francisco and the flight plan's one degree off, I think I land in Los Angeles instead. Someone with piloting background can correct my compass adjustments there, but when you fly a couple thousand miles from east to west, one degree off in your direction produces a wildly missed target at the end. It hardly seems like it's a big deal at the beginning when you're taking off and you fly the first 100 miles, but by the time you get to the other side of the country, it's like, "Oh, I am very far from where I was supposed to be."

Carl: Yeah. And I think that's the really important piece that we're trying to get across in these conversations, is that financial planning, I think this is one of the... You and I have lived through the time when...and it's still more common than I wish, not among art, not among this, not among our audience, that's for sure, but still more common that a financial plan is thought of as a one-time event or a product that we sell you, and then it acts as a door stop.

And I think that's where some of the dissatisfaction with financial planning came from was, "This never turned out the way..." Well, of course, it did. Think of how many beautiful life insurance illustrations have you seen? I've seen a lot of really beautiful ones. I've never seen one work out the way it was illustrated. So, it's the process, the ongoing... A financial plan is worthless without the ongoing process of planning.

Getting A Preview Of Your Money [44:59]

Michael: So we should wrap up. We already been a little bit longer than our usual episode here, although I appreciate getting to go through and peek at a lot of the sketches that are coming. So, I guess just a reminder, again, so for folks who want a copy of these, it's email [email protected].

Carl: Or wherever else we say in the show notes. But, yeah. Let's just hello, just so we can take care of it. You email and put ‘Advisor’ in this subject line, and we'll send you this. And the last page of it has a QR code for bulk purchases with an additional 5% off. So, it's more than…

Michael: So, if you want to coffee table this for your office, or send it as a coffee table book for a lot of clients to read and ponder.

Carl: It's all there. And if all you do is use these seven to have better conversations, please do it. That's the whole point.

Michael: Have better conversations by launching grenades.

Carl: Precisely. Precisely.

Michael: Fantastic.

Carl: Cheers, Michael.

Michael: Thank you, Carl.

Carl: Okay. Bye.

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To download a preview of Your Money: Reimagining Wealth In 101 Simple Sketches, email "Advisor" in the subject line to [email protected].