Tony Sablan, Nika Kabiri: Money off the Table: Decision Science and the Secret to Smarter Investing

Transcript

[0:00:28] DA: A lot of people assume that the more you know about finances, the more successful you’ll be. But truthfully, no matter how well versed you are, you’re probably still leaving money on the table. Confident investing is about much more than having the right knowledge, it’s about making the right choices. In their new book, Money off the Table, Tony Sablan and Nika Kabiri will teach you how to avoid the common pitfalls that plague even the most seasoned investors. Their book draws on multidisciplinary research on human decision making to explain how investment decisions can go wrong and what you could do to make them better. No matter how volatile the market, you can succeed, you just need the right mindset. Hey listeners, my name is Drew Applebaum and I’m excited to be here today with Tony Sablan and Nika Kabiri, author of Money off the Table: Decision Science and the Secret to Smarter Investing. Tony, Nika, thank you for joining, welcome to the Author Hour podcast.

[0:01:21] NK: Thank you, thanks for having us.

[0:01:22] TS: Thank you, thanks for having us.

[0:01:24] DA: Let’s kick this off, can you give us a rundown of your professional background and how you two know each other?

[0:01:31] NK: Gosh, Tony and I have known each other for what, about 15 years, we met at the local MMA gym where we train together and I have since now, I do decision science, I run a consultancy here in the Seattle area, helping businesses grow using decision science principles. I teach at the University of Washington. Yeah, that’s pretty much just a very high level run down.

[0:01:58] DA: Tony?

[0:02:00] TS: Yeah, I’ve been an advisor in the area for several years now, about eight years and you know, like Nika said, we met at the local MMA gym and we just hit it off and I shared with her – some of the work I was doing and we decided that you know, it’s relevant information for the times and we thought people should know about how investment decisions are made and you know, what’s holding them back and what can help people.

[0:02:32] DA: Now, I have to ask since you brought it up. Who is the better MMA fighter right now?

[0:02:37] NK: It’s Tony, for sure, Tony. He is Demetrious Johnson’s training partner. At least he was before COVID anyway.

[0:02:44] DA: wow.

[0:02:45] NK: Yeah, he’s pretty badass.

[0:02:48] DA: Kudos to you Tony, I thought it would be Nika by armbar.

[0:02:51] TS: Yeah.

[0:02:55] DA: Now, you’ve known each other for, you said 15 years, so was there something that inspired you lately, was there an ‘aha’ moment, why was now the time to write this book?

[0:03:04] NK: Well, I think it was just early conversations that Tony and I had about investing and he would – I wouldn’t say complain, but be perplexed as to why certain people that he would talk to would make the investment decisions that they would make because rationally if you think about it, there’s some pretty solid strategies that work and time and again Tony would go to people and say, “Why don’t you try this strategy?” And they would say, “No, I’m going to do this thing instead.” And he and I would just sit there and go, “What are they thinking?” And I had answers, it was just so, such a nice match. It was like well, decision science has answers, behavioral economics has answers. Sociology can tell you why people are doing the things they’re doing and through those conversations, we realized that there’s a mindset problem that people have in making their investment decisions and so we just kind of paired the decision science stuff that I know and do every day with his expertise in investing and I think it’s just time for the world to make better decisions really.

[0:04:03] DA: Tony, do you have anything to add there?

[0:04:06] TS: Yeah, like Nika mentioned, you know, throughout our conversations, I would just do a digest of the conversations I’ve had with clients and potential clients in the area and you know, they’d come to me with goals and some knowledge of investing and then I’d present to them a strategy that’s in alignment with everything they shared but then, some folks agree with the strategy and others have deep rooted beliefs and you know, also given what we have in the market, there’s a lot of marketing and messages out there that are very strong towards one strategy or the other and it just kind of paints the town on a generic strategy whereas today, more than ever, you can customize your financial plan for your needs but you don’t really have to take famous people’s word for your financial plan because they don’t know your situation. Oftentimes, you’ll find folks implement strategies that will fit other people but not themselves and it’s to, in my personal opinion, to their detriment so that’s why we thought you know, we can help people with making better decisions or at least be aware of some pitfalls they might run into.

[0:05:32] DA: Now, how has this book changed the way you think and have you learned any lessons during the writing process?

[0:05:41] NK: I have to say, I, of all the things, investing was one of those things I did not really understand very deeply. I trusted Tony with my investments completely because I know him and he’s trustworthy and he knows his stuff but I didn’t know that stuff. Just in talking with him and really understanding investment strategy, I realized just how amazing his thinking is about the strategy in investing. I just learned a lot about that, I just learned a lot about defensive and offensive strategies and you know, just how to cover your bases, yeah, it was pretty enlightening and yeah enriching.

[0:06:23] DA: Tony, did you learn anything during the writing process in writing this book?

[0:06:28] TS: Not so much during the writing process but more just before you know, I share a little bit about my story in the book about how I came about to be an advisor and it was all just – it almost seemed like fate that I would be an advisor because I was one of those people that just adhered to the – what was popular in the media and what you should invest in and what not to invest in. When in reality, it comes down to having a strategy that protects your money and also grows your money and people often focus too much on the growth part, knowing full well, and history has proven it time and time again, that protecting your money is just as important. You know, the question becomes, what does protection look like? But it comes also down to what did you grow up learning about money? What was passed down to you from your family, your grandparents, you parents and then what are you implementing in today’s world? Things change so quickly these days that do you have the right financial plan to withstand whatever the market gives you? I think more than ever, you know, it was ‘97 or you know, in the early 2000s, it was 2008, you know, these corrections come through time and time again and it’s interesting to see that you know, a lot of people still don’t have the defense part of their strategy or when they do have defense, it’s a false sense of defense. What I try and educate folks is, having something that protects your money and grows your money and forget about what the tool is, the tool is there for a reason and you know, a lot of people that are much smarter than me and people who are wealthy, implement these tools to their effect and you know, the masses could really take advantage of these tools and also just the way professional money managers think about their assets.

[0:08:41] NK: You know, I could just add to that, it’s interesting because as we were writing this book, Tony and I talked a lot about how the right approach to investing is a lot like the right approach to MMA fighting or competing in the ring in that you can go in and you can react to what’s happening and you can freak out and you can let your fight or flight brain take over or let your – The human brain is a very efficient, it makes decisions very quickly but it takes a lot of shortcuts that can be – can lead you in the wrong path and that happens in the ring all the time if you are thinking too quickly and not strategically but if you kind of detach from that brain, from that kind of, let’s freak out and react to brain, and slow down and just have a game plan and have a strategy and have faith in that strategy, not react when things don’t seem to go the way that you feel like they should, you know, just kind of ignore the feeling a little bit and just implement the strategy and over the long term, you’re going to win the fight and you’re also going to have a much better chance at having some really great returns on your investment and more income.

[0:09:52] DA: Yeah, I’d love to touch on mindset a bit and you talk a lot about this in the book and Nika, what is the wrong mindset for decision making in particular?

[0:10:02] NK: Well, it’s starts for me anyway, I like to start talking about the wrong mindset by saying it has nothing to do with the mind, it has to do with the gut. I think a lot of us like to believe that we have gut instincts that are more accurate than our rational brains and you know, we use our instincts or gut and we talk about this a lot but you know, instinct isn’t quite the same as like impulsive behavior. I think we use that word really incorrectly and a lot of times, people act impulsively or they act by feeling or to manage their emotions rather than to be rational and when it comes to investing, you kind of have to be rational, you can’t really go with your gut because there’s so much uncertainty. That’s really the first step to the right mindset is letting go of the gut and then also, just embrace it, own the fact that your brain is going to play tricks on you, it’s going to lead you down the wrong path, it’s going to force you to take mental shortcuts that might feel right or seem right, but you kind of have to doubt yourself a lot so that’s the other major step is let go of that overconfidence bias, just try to fight that because we all have it, we all think we know more than we really do or that we’re right more often than we are. Just doubt your decisions a little bit more.

[0:11:21] DA: Now Tony, you and Nika developed five mindset practices that can lead to more confident investing and a better life. It’s a ‘mindset reset’ as you call it, can you go over a few of those?

[0:11:32] NK: The first step is, okay Tony, I’m going to give you, the first step is to really have your goals in mind, like a lot of us think when we invest, that the objective is to get as much money as possible, we just want money but we don’t know what to do with it and if you don’t tie it to something that you want to do with it then it doesn’t have any value to you and you don’t really know how much you need or how to get it or what to do with it. The first step is like, well, what do you want in your life, you know, what would happiness look like for you? And then what’s the price of that happiness in dollars? Starting from there is the first step.

[0:12:07] TS: I would agree, I mean, it really comes down to the meaning to your money and all too often, people focus on returns, but then you know, what does the return mean to you, what does an extra 10%, 30% really mean to you? When you look at people’s budgets, they’d be fine with less return, right? But if you have a lifestyle goal, then you have to tie that into the money as well. Because you know, with retirement, it’s not about the pile of money, it’s about what that money generates to pay expenses, to continue your lifestyle. You might realize that you don’t need as big a pile as you thought you needed. It comes down to the other right tools that you’re investing in, the right investments and are they generating what you need to support your lifestyle, to provide for a legacy? We also talk about you know the ‘more is better’ investor and that is really where that ROI return focus is, is that is more really better, right? And then also there’s the, thinking long term is really important because what you find today is people are – you know, we have access to information at our fingertips, right? So we are so used to that, “Oh I want it now,” whereas, you know the most successful investors out there, they’re thinking the long term, right? They are thinking, you know, “I am going to put my money to work because 10 years from now this is what this could look like,” and then the other important thing is putting the money in the right places. You wouldn’t put short term money in a retirement account. If you need some money today, put some money aside. If you need some money later, make sure that that later money is the right amount that is comfortable for you without sacrificing too much the short term. If you can sacrifice the short term for long term gain, then you know retirement buckets might be the way to go and also the other key thing is you know what worked for our parents may not be today’s right mindset. You know, we can’t save money in a savings account and expect to get 5 or 8% like interest rates were back in, you know, many years ago. So it’s really just, make your goals clear, tie meaning to your money because otherwise you just spend frivolously and you’re just throwing paint to the wall.

[0:14:55] NK: I have to say as an add to that, as a non-investment expert learning from Tony, I think two key points that really stuck out for me that we really do discuss in this book, is that it is not just money you need now and money you need in retirement. There are goals that you have, financial goals we all have in the interim, like there are mid-term goals we have. Like in 10 years, I want to buy a house or I want to go on vacation next year and your investment strategy can help you plan for that, it can help you get there too. So I think a lot of times the wrong mindset thinks in terms of when I’m 70 and that’s it. Like, “I’ll just put it in a 401(k), I will set it and forget it and hopefully one day when I retire I have enough,” but you know what about investing in the interim? And there is also the offensive and defensive kind of approach, where you want to be aggressive and earning but you also kind of want to be a little bit more protective. There is much more in the book on that but I thought that was really cool.

[0:15:53] DA: Yeah, I really like the breakdown of the types of investors out there that you two put in the book and I’d love you to dig into one just a little bit further. You talked about it a few minutes ago but the ‘invest in what’s hot’ investor. I feel like there’s a lot of those folks out there. Tell us about the mindset of this investor and what they’re doing wrong.

[0:16:15] NK: I have to say it’s, I mean shame on investment blogs and shows for preying on this person because I mean there is a lot of FOMO going on when it comes to investing. You don’t want to miss out on a possible opportunity and so you kind of jump on the bandwagon without thinking about what is right for you or what your money means in the long term or the mid-term but that kind of bandwagon behavior of just doing what the majority does, just for no other reason than the majority is doing it or no other reason than an expert says that they are doing it. You know if it is not tied to your goals then you could make mistakes and unfortunately, you’ll never know it because you won’t know what would have happened if you went the other way but yeah, you could go down the wrong path. Tony?

[0:17:04] TS: Yeah, I mean I think that that goes on a lot these days because of you know, the apps that are out there that encourage folks to sit at home and just trade, right? And there’s professional traders out there that deploy hundreds of millions of dollars in the market and these guys can move the market up or down, right? And what you find is that folks feel really smart about what they’ve done because you know this current market has presented opportunities that a lot of folks don’t realize that some of these companies have been around for 20 years and that stock did nothing for the better part of 20 years. And then boom, this market just lent itself for that type of business and you know, people are feeling great. They are buying into a very expensive market. Now, we don’t know what next year holds for us but if something is expensive, it might go on sale but we don’t know that but if that’s all you had to work with then to me, as a mix martial artist, it’s like being a kickboxer and you don’t have a jiu jitsu game, right? So as an everyday investor investing in what’s hot, are you betting the family farm because you want that return without tying meaning to the return? Then are you investing the right dollars for this market, this play money right? So what I always share with folks is look, I am not here to tell you not to trade. I am here to say, “You know what? Let’s make sure we have a strong foundation because you wouldn’t build the roof over your house first,” and what a lot of people are doing with their money today is building that roof before they build a solid foundation and if that roof goes down, what’s protecting your home, right? So that’s really what it is and you know like I said, we have access to so much information. We are on social media, we can see news everywhere and there’s just all of these messages that say you are missing out. “You are missing out, this investor made this much money doing crypto, you missed out,” and then people go throw their son’s college fund at crypto currency because they don’t want to miss that so.

[0:19:40] DA: So you are saying that you shouldn’t join Reddit and go into the Wall Street Tip subReddit and just take all of the advice you see there?

[0:19:48] NK: Yeah. You can go there to drink beer, sit back and enjoy the entertainment but no.

[0:19:57] DA: That is probably really good advice.

[0:20:01] TS: Again, one of the books that I am reading right now is a math, this mathematician and he is just downloading data, tons of data into a computer and even he gets the market wrong, right? So it comes down to having an overall strategy because the investments are out there and you are going to make money if you do the right things but you can also lose a lot if you don’t have the protection that’s needed to sustain a prolonged recession or whatnot.

[0:20:37] DA: Now going back to mindset, somebody takes this book, they read the book, they understand the questions they need to ask themselves before making these decisions but what is the real first step to start making changes you speak about in the book, mindset wise?

[0:20:55] NK: So changes to mindset and then there are changes to what you do with your investing but the changes in the mindset, it’s basically what I mentioned before, is it is almost like, imagine that you are driving a car and it has poor alignment but you can’t see the road and you can’t tell. You can’t tell that it is pulling to the right and so you just go off the road and you’re wondering how you got there and that’s really how we kind of go through life as human beings, all of us not, you know there is – It is a human thing to do. And that misalignment is the overconfidence. It’s this kind of natural tendency to believe that we know more than we actually do or that we are making better decisions than we actually are. It has helped us survive but it also kind of veers us towards one direction or the other and gets us going off the road but when you realize that, “Hey, you know I have this tendency to maybe assume that I am right when I might not be because I am human,” it’s like looking up at the road and seeing that you are kind of veering off and that way you can pull the steering wheel in the right direction a little bit and that pulling is the first step, which is okay, assume that you don’t know it all. You are not on the right track, you could be making mistakes. It is kind of a scary place to be. It is not a comfortable place to be but growth doesn’t come from comfort and it is better to be right than it is to feel right.

[0:22:22] DA: You know you open saying that knowledge doesn’t correlate with success in the investment world, which is a pretty powerful statement and I just want to thank you Nika and Tony for writing this book even though we just touched on the surface. I think it will really help and empower many people and it is no small feat to put your words down on paper. So congratulations on finishing this book.

[0:22:47] TS: Thank you.

[0:22:47] DA: Now, if readers could take away just one thing from the book, what would you want it to be?

[0:22:53] NK: I’ll let Tony go.

[0:22:56] TS: So the one thing that readers should really focus on, or at least takeaway, is give meaning to your money because that’s going to drive the decisions you make and also think of your money as a tool that funds life in terms of the short term, the mid-term and the long term because just going with what your company provides for you, you know these days companies have, are furthering their responsibility to you by not providing pensions and guarantees. So it is more and more on the individual to focus on their financial security and provide for themselves. So really, find meaning in your money and then that will help you drive the decisions to design a financial plan that’s defense focused and offense focused.

[0:23:58] NK: And I think for me, the one thing to takeaway isn’t a message that’s explicitly written in the book but it’s the spirit behind the book, which is, the more you understand about how human beings make decisions, the more empowered you are to make the right choices and you can handle pretty much any situation with a better chance of success, because there is never a guarantee, but you can always increase your chances if you understand and learn about the decision making process, which I think is very hopeful, for me anyway it is a very hopeful message especially these days when things seem a lot more dire than they have in the past but I do see hope in that.

[0:24:42] DA: Well this has been a pleasure and I am really excited for people to check out the book. Everyone, the book is called, Money off the Table, and you can find it on Amazon. Tony, Nika, besides checking out the book, where can people find you?

[0:24:53] NK: They can find me at nikakabiri.com. You can access more information about decision science there for all aspects of life.

[0:25:02] TS: And you can find me at tonysablan.com where you can find more information about myself and the folks I help.

[0:25:10] DA: Awesome. Nika, Tony thank you so much for coming on the show today.

[0:25:12] NK: Thank you Drew.

[0:25:13] TS: Thank you Drew.

[0:25:14] DA: Thanks for joining us for this episode of Author Hour. You can get Tony Sablan and Nika Kabiri’s new book, Money off the Table, on Amazon. Also, you can also find a transcript of this episode and all of our other episodes on our website at authorhour.co. For more Author Hour, subscribe to this podcast on your favorite subscription service. Thank you for joining us, we’ll see you next time. Same place, different author.