Good morning, everybody! All right. I'm John. I'm on the Conference Planning Committee. Happy to have you guys here. I'd like to introduce our first breakout session speaker here. This is Don Sinclair. I'm pleased to introduce him. Don is a practicing financial planner who sees the exploration of viable alternatives as central to the advisory function. To that end, his primary aim is to help clients discover opportunities and create possibilities not previously conceived. Really excited about the presentation today. Without further ado, Don, please come to the stage. Give him a warm welcome, guys. Thank you. Thank you. And thank you all for being... I feel like we should let some people wander in. But thank you for being here. It's nice to see faces in the crowd. I was at FPA's retreat last week, and I know people at FPA's retreat, and so it was nice to see so many familiar faces in the crowd. But this is my first time speaking in front of this group, and so it's nice to see any faces in the crowd. So thank you for being here. Let's go ahead and get started. Speaking very quick about the learning objectives, conference organizers are always asking for these very, very early on in the process, like six months before. And I always struggle with it because when they ask for it, I haven't even really started writing the presentation. And so I want you to know that this is both a short list and a low bar. With any luck, we're going to get far beyond the learning objectives. And let's get started. So what we will talk about are the challenges associated with making good or sound financial decisions. Yes, we're bombarded with information. Yes, we live in a sea. Some might even go so far as to call it a sewer of data and information. And yes, much of it's incomplete and sometimes conflicting. And because of that, knowledge and information can only get us so far. And knowledge itself is only useful where knowing is possible. And if something is unknowable, it's unpredictable. And therein lies the problem as I see it. If all we do is keep doubling down on acquiring more knowledge, more facts, more data, more information, when doing so isn't all that useful, or at the very least, we've reached that or we, in cases where we reach that sort of plateau and it's just producing sort of diminishing returns, then we're like that drunk who's looking for his keys under the streetlight. Not because that's where the drunk lost his keys, but that's where the light is. So a while back, I did this presentation or a couple of these presentations with my friend Debbie Gross. We called it Possibility in the Midst of Disruptive Change. It was meant at the time as a response to the robo-advisor movement, but it could just as easily be repeated today in response to today's AI movement and chat GPT. But it was less of a presentation and more like a thought experiment, a thought experiment that we loosely framed as a case study, where we divided up a hundred or so advisors into groups of eight or ten, and they were around sort of roundtables and we asked them to discuss what they could see as possible, given the facts of the case study and the constraints we put upon them as part of the exercise. One of those constraints was that we didn't tell them anything about the client's goals. And we didn't tell them anything about the client's goals because we had this intuition that because client goals are informed, they're illuminated by what clients believe to be possible, and because clients lack even the basic skills and sensibilities to have a sense for what is possible, that any process that started with client goals risked constraining what was possible in the first place. We noted that every business has a sales process, and then embedded in every sales process is a, quote, discovery process. We still, we felt that still fell short. We were looking for something not constrained by our already existing thinking. We were, and discovery implied that, that it already existed. What we envisioned was something more imaginative, something not so constrained. We proposed a possibilities process or a possibilities-based framework for financial planning. And then just a couple of years later, we see this article in the Journal of Financial Planning. It's 10 questions with Mitch Anthony, and those of you who may or may not know, Anthony is one of those early contributors to the life planning movement. One of the questions he's asked is, how can we advisors have a more effective discovery process? And you know what he says? He says he's always been blown away by how advisors want to ask clients about their goals. He says, nine times out of 10, he doesn't say nine times out of 10, in the interview he says about half the time. Half the time you ask clients about their goals, you get a deer-in-the-headlights look. But here's the thing. What Debbie and I found in our presentations was that without client goals, it was advisors who were the deer in the headlights. Without something to solve, and left to their own devices, we watched as our little experiment started to unravel. At one point, I'm walking around the room and I'm listening to all these planners really struggle with the fact that we didn't tell them about client goals. I mean, we repeated this two or three times, so it wasn't just a one-off. Advisors really didn't know what to do without something to solve for. At any rate, I'm walking around the room and a woman approaches me to say that she had done something very similar with a group of brain surgeons. And I said, really? Tell me about it. And she said what she did was kind of a thought experiment where she constrained the surgeon's ability to bill insurance for how they get paid, and then asked, how are you going to get paid? And I said, really? What happened? And she said, same thing that happened here. Their heads blew off. So why is that? What is it about not knowing, not knowing in general, and in this case, not knowing about the client's goals that's so debilitating? Call it what you will, addiction to knowing, illusion of control, the seduction of certainty. I like that one. It all provides the same thing. It gives us a sense of control, even if it is an illusion, and even if we can't possibly know. A while back, I became a private pilot, and as I was going through the training, I got to thinking, you know, this is wild. Nobody would ever think that the way you learn to fly an airplane is by sitting in a classroom like this, taking a few notes, passing a final exam, and then some bloke's going to toss you the keys and say, okay, go have at it. Right? We all get that you don't learn to fly an airplane in your head. You don't learn to fly an airplane with knowledge and information. You learn to fly an airplane in your body with skills and with sensibilities. Don't get me wrong. It's helpful, although entirely unnecessary, to be knowledgeable about things like aerodynamics and aeronautics and meteorology and airspace and communication. I know this because I grew up with this. My father was a flight instructor on the weekends to help feed his hobby. I grew up in the right seat learning to fly, and I knew how to fly essentially the airplane long before. I knew how to spell much of the airplane's names, but knowledge alone is not enough. You need something more. You need something else, and that something else is really obvious when we're talking about something like flying an airplane or playing a sport or being a surgeon, playing the piano, doing martial arts, something like that, but it somehow gets lost in translation. It somehow gets lost when we start referring to knowledge workers or to knowledge-based professions like financial planning. And the worst part of this to me is that we do it to ourselves, or at least we've allowed it to be done to us. There's a way that we've been taught, trained, really, to orient around the unknown. We say things like, the future is unpredictable, and therefore it's random. So we trot out our dynamic stochastic equilibrium machines, come up with a probability distribution, run a few Monte Carlo analysis and say to our clients and declare to the world, we know we can't predict the future, but we're going to try really, really, really hard anyways. But the future is uncertain. It's unpredictable, not because it's random, but because what happens in the future is contingent on what emerged from the past. When Donald Rumsfeld coined the terms known-knowns, known-unknowns, and unknown-unknowns, he couldn't have possibly known who was going to be the 45th president of the United States. No one could. Notice how different that is than predicting the odds that the Cubs will win the World Series. And then notice again how different that is than the odds of being dealt a winning blackjack hand or rolling a seven on the craps table. The future is unpredictable, but not because it's random. Randomness is what happens when you roll a pair of dice. Randomness can be measured. The future, that's uncertain. But I want to emphasize, this is this place where I want to emphasize that this is cool. It's like where we should celebrate, put our flag in a stand and start embracing it because it opens up that space where our professional skills and our sensibilities, our trained instinct and our expert intuition begin to show up, make sense and matter. Skills and sensibilities are useless in a world of randomness. There's no skill to rolling dice, but in a world of uncertainty, we might be on to something. Unfortunately, this particular addiction isn't limited, isn't constrained to markets or investments or planned outcomes. We also try really, really, really hard to predict people. And now you can totally see the attraction. Behavioral economics tried to tell us that human beings were rational, utility-maximizing homo economicuses. Now you don't have to be in this business for more than 10 minutes to know what a crock that is. But behavioral economics comes along and we all think we have a partner in the race, so to speak, right? It comes along and says, we don't always act to maximize the utility and we're definitely not rational, but we're not rational in predictable ways. We're predictably irrational. According to behavioral economists, we humans are so irretrievably, emotionally flawed that we like to make, we'd like to think we make decisions based on reason and logic, but instead we suffer from countless cognitive and behavioral biases that interrupt rational decision-making and lead to poor outcomes and not only poor outcomes, but poor financial outcomes and not only poor financial outcomes, but poor financial outcomes in real life. That is today's story. I don't think that's how behavioral economics started, but that's largely where we are today, where behavioral economics tends to portray psychology as the study of irrationality and bias. Now, to be fair to behavioral economists, there are some, a very few, who have started to study how people make decisions under conditions of uncertainty. But the field's core focus continues to revolve around how our choices deviate from their theory. And what I mean by that, that is to say that how human choices deviate from rational choice theory, that theory itself presupposes, actually predefines what it is to act rationally. What you're looking at here is known in behavioral economics as the Linda question. It's a story about a woman named Linda, written in a way to suggest that she might be a feminist, and it goes something like this. Linda's 31 years old, she's single, she's outspoken, she's very bright. She studied philosophy, she maybe even went to UC Berkeley, she's concerned with social justice and discrimination, and oh my God, she participated in anti-nuclear demonstrations as a student. And the question is posed, which is more probable? That Linda is a bank teller, or that Linda is a bank teller who's also involved or active in the feminist movement? Now, like many behavioral studies, the Linda problem is primarily used to demonstrate just how predictably irrational we humans are. In a world of bankers and feminists, those who are both are obviously a smaller subset than the larger set of either bankers or feminists, right? And therefore, the probability of Linda being both a banker and a feminist must, by definition, be lower than the probability of her being just a banker. Anybody following? And because it would be logically incoherent to assume otherwise, those who think it more probable that Linda is a feminist are labeled as irrational. But hold on a minute. Who said we were talking about probability? The question asks, which is more probable? Probable doesn't just mean probability. The dictionary definition of probable includes both notions of probability and plausibility. The dictionary definition encompasses the idea of probability based on mathematical calculations and plausibility based on reason or common sense. And so just because we can find a problem or just because we can make up a problem that we can solve doesn't mean that we should. In fact, that impulse to always be solving, to be problem solvers, as it turns out, might not serve us all that well. But even if we do accept, because if you had this argument with a behavioral economist, they would say it's obvious what we were talking about was probable in this context was meant to mean probability. Even if we do accept that probable in this context is meant to mean probability and therefore that the word and means the logical intersection of bankers, that's the punchline, of bankers and feminists, right? That logical intersection, that's what and means. Watch what happens when Linda decides to throw a dinner party and invite her friends and her colleagues. Now the context literally changed the meaning of the word and, right? In the first instance, in part one of Linda's story, it meant at the intersection of bankers and feminists. But does anybody really think that what Linda means to do is invite only that group of friends who also happen to be her colleagues? In the first instance, we took a very deliberate, analytical, problem-solving approach and determined probability. We ignored all the inference, all the innuendo, all the noise to arrive at a logically coherent answer to a solvable problem. In the second instance, we included all that innuendo influence or inference and noise and came to what is known as an ecologically coherent answer. Now either approach will give you an answer, but neither approach will give you the answer. Because unless you know Linda, unless you've asked, unless you inquire, unless you're curious, the question is simply unknowable. All right. The problem with probability, as I see it, is that it offers up a neat, tidy, plausible problem that we can solve and we tend to take the bait. We're literally obsessed with solving problems to the point where we'd rather create a problem that we can solve than sit with uncertainty that we can't. Now we know, and unfortunately, uncertainty doesn't lend itself to being solved. At best, what we can offer is a sort of grounded speculation, a sense for the probable. Because there simply is no algorithm, no amount of math, and no probability analysis that can predict that which is fundamentally unpredictable. Let's shift gears a little bit into making good decisions. Daniel Kahneman is considered by many in our profession to be the father of behavioral economics. In fact, he's the only non-economist, still he's the only non-economist, to have ever won the Nobel Prize in economics. Intuition and mental shortcuts, called heuristics, are the quick and easy way we make decisions in what Kahneman calls system one thinking. This is the place where we make decisions by the seat of our pants, emotionally, quickly, and using our gut. System two, on the other hand, is where reasoning happens, where we make rational decisions, where we slow down and take a deliberate, calculated, analytical approach. The problem, according to Kahneman, happens when we try to use system one to solve a system two problem. Take, for instance, the problem 25 times 10, or 2 plus 2. We can easily solve these kinds of problems without ever reaching for a calculator. That's system one. But now try 164 times 492 divided by pi times the square root of 56. Now fortunately, we all recognize that this problem takes more calculation, and so we do reach for that calculator. But watch what happens when we mistake a complex system two problem for a simple system one solution. Kahneman's famous, or maybe even favorite, example is this. A bat, like a baseball bat, a bat and a ball together cost $1.10. The bat costs $1 more than the ball. How much does the ball cost? Most of us mere mortals will say $0.10, because $1.10 separates quite naturally into a dollar on one hand and $0.10 on the other. And $0.10, it just seems about right. But it's not. The right answer takes more calculation. The question is more complex. And according to Kahneman, and researchers like Kahneman, the lesson here is clear. When it comes to complex decision-making, listen to your gut, and you will almost always be wrong. Kahneman's research, and so much of behavioral economics research, focuses on how cognitive biases and heuristics can lead to systematic errors in judgment and decision-making. And he therefore recommends that when solving complex problems, no surprise, a detached, unbiased, calculated, reasoned approach to decision-making is the best way to go. It will lead to the best outcome. Kahneman's critics, however, think that before you apply system one or system two, you should step back and apply this more fundamental question. Ask yourself, does the question that I'm trying to solve, does the problem that you're trying to solve actually have a solution? Because it turns out that that question matters deeply. And that's because under conditions of uncertainty, complex problems are better tackled by professionals using their trained instinct and expert intuition than is available by way of an unbiased, detached, rational, calculated, reasoned approach. The outcomes are simply better. It seems we humans have some sort of unique capacity to deal with life's unknown unknowns. The problem with problems is that our clients don't merely have problems. They have lives. And their lives are filled with all the contingency and emergence and unknown unknowns that are just part of being a human being in the 21st century. The unanswerable problems, those are the domain of knowledge and information. The unanswerable belong to wisdom. Now let me step back for a second and say this, admittedly, the vast majority of our decisions are not deliberated. They're not deliberate acts of will, but that doesn't mean that they are unreflective acts of irrationality and emotionality. Besides, if it's the gut that actually betrays, why look elsewhere? Why not look to retrain the gut? In some ways, there's good news here. In some ways, we've maybe already started to do some of this. If you think about what Bill Bangan did with safe withdrawal rates, what John Guyton has done overlaying decision rules, and what Elisa Bui and David Yeske are doing with financial planning policies, they've taken a very complex problem, one with no solution, and boiled it down to a few simple rules of thumb. We could call them heuristics, heuristics for better outcomes. The thing is that, as I've said, most of behavioral finance research tends to treat these heuristics as irrational, as if they're getting in the way of rational decision making. But heuristics aren't some villains conspiring against us to undermine effective decision making. We harness the power of fire. We harness the power of electricity. We ought to be able to harness the power of heuristics. For heaven's sakes, dogs do. You know how a dog catches a frisbee? Well, let me tell you. First, the dog determines the wind direction, calculates angle and trajectory, and figures out the telemetry of the frisbee scores. Then it develops a probability distribution for where the frisbee might land, runs a couple of Monte Carlo simulations, and then finally sprints over the spot where the frisbee is predicted to land, leaps up, and makes the catch. Anybody think that's the way the dog catches a frisbee? The way a dog catches a frisbee is the same way an outfielder catches a baseball, by using something called the gaze heuristic. Basically the dog sets its angle of gaze, the angle of its head in relation to its target, and then the dog moves its body, changes its speed, changes its direction, to create a collision between dog and frisbee, or between outfielder and baseball. No calculations needed. So here's the thing. If you had a dog that was struggling to catch a frisbee, you wouldn't immediately think, man, what I really need to do is teach that dog calculus. Although... Elvis' priorities are clear. He has to find the minimum amount of time it takes him to get to the ball. On the beach, Dr. Pennings would throw the ball into the lake. He then watched how far Elvis would run along the shore before deciding to swim for it. When he did that, it reminded me of problems that I would always do in calculus, where I had a similar situation, and when I found the solution, it was exactly the same path that he took. Leave it to a college professor to run a perfectly good game of fetch with something like calculus. Still, Dr. Pennings was convinced he was onto something. He started taking measurements and making calculations based on Elvis' path. When I realized how close he was coming to the optimal solution, that was quite a surprise. I wasn't expecting it to be so good. Apparently no one else was either. That discovery made the name Elvis famous. Again, you can find this Elvis in newspapers, magazines, and academic journals around the world. He's a great ambassador for mathematics, and that's why it's fun to do it. And Elvis proves calculus isn't always about numbers on a board. Obviously he's not doing the calculus in his head. He just has some sort of an innate ability to find the optimal solution. An innate ability to find the optimal solution. I want you to know that in comparing Elvis' innate skills to calculus, Dr. Pennings created a model. And like any other model, he was forced to use simplifying assumptions about things like wind speed, the direction of the current, Elvis' own running and swimming speed, that kind of thing. Pennings doesn't say it here in the video, but in the paper he published, he concludes by saying that given these complicating factors and the measurement errors, it's possible that Elvis' way is not just a good substitute for calculus, it might be better than the calculated approach. Okay, how are we doing on time? Oh, we're good. We should have time for discussion. Fantastic. All right, so heuristics can provide a helpful, heuristics can provide helpful mental shortcuts to effective decision making. But I chose this particular heuristic, not just because that I like Elvis, but this heuristic called the gaze heuristic, because as Jeffrey Skiles points out, it's not so much a mathematical or a mental calculation as it is a visual or a physical one. It's not so much a mental heuristic as it is something else. In a certain way, it's not even a mental shortcut at all. You do recognize what he's referring to here, right? So I'll say this, when very early on in pilot training, as you're learning to land the airplane, you're taught to, you're taught the gaze heuristic, but nobody calls it that. You're taught this skill, eventually this skill, to pick a spot on the runway, your landing spot, and then locate that on the windscreen. And if that landing spot is crawling up on the windscreen, you're going to be too short. And if it's going down on the windscreen, your glide path is too far. This starts its way as a helpful mental heuristic. But I mentioned I was at retreat last week, and I ran into, kind of like the dog runs into the Frisbee, I ran into a United pilot. And I was giving this talk, and I wanted to chat with him about the gaze heuristic. And I said, you know that thing that we're taught very early on? And I explained I was a private pilot. And I said, that thing where we're taught that if things are moving up on the windshield, you know, we're going to be short? He said, yeah, yeah, yeah. I said, what do we call that? He said, we don't call it anything. I said, have you ever heard it referred to as the gaze heuristic? He's like, no. What's that? And I tell him a little bit about the gaze heuristic, and dogs catching Frisbees, and outfielders catching baseballs. And we got into this conversation, which also included that sort of the inverse of the gaze heuristic is also how pilots are taught to avoid mid-air collisions. Turns out that if two objects are on a collision course, whatever that collision course is, and if you are just looking at one spot, and that object is in what would be known as our blind spot, that you'll never see it, right? If it never gets out of your blind spot, you'll never see it. Now he brought this up, and he said, yeah, at night especially, right, where your vision is already constrained, that we're literally taught to move our head around, and literally taught to focus inward and outward like depth perception to avoid these things. This is the gaze heuristic in sort of reverse. But the thing that I want to say is nobody calls it the gaze heuristic. Nobody calls it anything. It's just something that you're taught that eventually makes its way into your body. So as I said, pilots are trained very early on to use this gaze heuristic. And while it may start off as a mental shortcut, it eventually becomes so ingrained, so automatic, so second nature, that it's just what a pilot does. It's just part of being a pilot, kind of like Elvis, right? Elvis isn't using some analytical approach. He's not doing calculus, and he's not employing some mental shortcut. This isn't just a heuristic. Elvis is just being a dog. And remember what Dr. Penning said, Elvis's way isn't just a good substitute for calculus. Given the uncertainty of possible variables, Elvis's way might just very well be superior, which is exactly what Bert and Stuart Dreyfus found when they were commissioned by the US Air Force years ago. The Air Force wanted to better understand how individuals, not individuals, how pilots acquire and develop skills. The service recognized that their traditional training programs, which focused primarily on the transfer of knowledge and information, on the transfer of data, et cetera, these things were insufficient for developing the high-level skills and sensibilities, the intuition and instinct required for piloting advanced aircraft. The study itself led to something called the Dreyfus skill model, or the Dreyfus model of skill acquisition. And that has since been applied to a wide range of skill domains, including obviously aviation, the military, medicine. If you want to see it applied all over the place, check out nursing, and no surprise, it's been applied to sports. But to my knowledge, not financial planning. So let's talk through this. So the model proposed a series of stages individuals go through as they acquire and develop skills. And as you'll see as we go through this, it emphasizes the importance of experiential learning, embodied know-how and mentorship. So I probably need my glasses for this, but yeah. So starting at the bottom, and the most basic skill level that they called novice. Notice that what a novice exhibits is some very rigid adherence to rules or plans or procedures. Think about training somebody in your office, right? You give them sort of step, rote, step-by-step instructions. And they really have, they don't exercise any discretionary judgment because, first of all, we tell them, don't think, just do, right? But secondly, because they don't have any sense for what they're doing. And as they advance to something called advanced beginner, they begin to build that, a limited situational awareness. But still, all the various parts of the work are treated separately and with equal importance. They don't have some sense of how to prioritize things. You get up to competent, and they start to have some sense, some perception of what they're doing in relation to the desired outcome. They're able to cope with crowdedness, which is sort of multiple, multiple things coming at them in different moments and interruptions, et cetera. But they're still doing very deliberate planning, and they benefit from formulated routines. Now, if they're lucky enough, or if they're in your office and you're lucky enough for them to advance to proficient, they start to develop this holistic view of the situation. They prioritize the importance of the various aspects that they're dealing with. They start to perceive deviations from the norm. And they start to employ their own maxims with meanings that adapt, right? That they start to adapt what they're doing as they're doing it. Now, to graduate to expert, and I should tell you just for completeness, that the original study for the Air Force had these five. The latter only had five rungs of expertise. Mastery was developed a couple years later. But as an expert, experts begin to transcend their reliance on those rules and the guidelines and the procedures. They begin to develop an intuitive grasp of situations. They start to have a sense for what is possible. They might engage in, they might fall back, if you will, and engage in deliberative and an analytical approach when they come across something that doesn't seem familiar, right? In novel situations, or when they're trying to refine something, right? When they're not satisfied with what they have so far. And mastery starts to exhibit this deep understanding of the underlying principles and the concepts that govern the skill in the first place. They're no longer bound by established norms, rules, conventions. They have the ability to create and to innovate. They have developed the capacity to perceive patterns and connections that others of lesser skill simply don't see. They've got a deep passion and dedication to continue learning and improvement. And to be fair, one of the things that happens at mastery is they can't explain themselves. Right? They're like, some people are laughing like, like you've had trouble doing this yourself at times. The mental picture that I have when I see this is one of a golfer standing over his or her putt. And the moment that that golfer gets in their head and starts thinking is the moment that their skills deteriorate. And that's what the Dreyfus has found about the most expert, the aces in the Air Force. So the Air Force approached, the Dreyfus has already had a reputation for this sort of thing. And the Air Force approached them sort of with the story that went something like, we train the best pilots in the world. We know how to do that. And yet we have six, and I really do think the number was six. Six pilots who are better than our training. I remember having a futures professor once and we all struggled with his test and nobody ever was getting an A in the course. And he said, I haven't taught you A work yet. You don't have any business getting an A. The best you're going to do is get a B. And it kind of reminds me of that same thing. The Air Force didn't teach these guys and they wanted to know how in the world do these guys, how do they, how did they get this good? And so mastery was sort of the observations that came out of that. All right. So experts and masters are not bound by established norms, rules, standards, or conventions. And they're also not just engaged in pattern recognition either. That's what the machines do. Remind me during our discussion, our Q&A to share with you a response to a question that I post to chat, chat GPT about what it is that machines do that is so not unique compared to humans. Human expertise literally uses a different memory system than is used by either system one or system two. The Dreyfus brothers call this system zero, but cognitive scientists refer to it as the procedural memory system. Now this throws a lot of people, it threw me for a long time because it's called the procedural memory system, but this isn't about memorizing some procedure. It's in, it's in reference to knowing how sort of intuitively knowing how to proceed, right? Procedural to proceed rather than confusing it with knowing what, as in knowing what procedure to follow. It's a system that's pre contemplative, pre deliberative, it's embodied, it's reactive, it's instinctual, and it's so ingrained, so authentic, so embodied that it's a stretch. For me, it's a stretch to even call it a decision or making. It doesn't seem to me we're making it and it doesn't seem to me that it's a decision at all. I want to tell you, because we have a little bit of time, that I've given versions of this talk for probably, I don't know, five or six years, and inevitably after this talk there are people who will come up to me and say, this was great, I really enjoyed it, but I'm really curious, I'm struggling, how do you apply it? How do you apply it to financial planning? And I see some heads nodding, right? All right, you're not going to like this. You don't, right? It's not a can of paint, it's not a can of epoxy, you don't turn it around and see application instructions, okay? That's not what goes on here. Notice though how quickly we are to run back to that system two, deliberative, analytical, we need to solve, right, for this thing. What I will tell you, I won't leave you there, right, with you don't, and that's it, thanks for coming to my TED talk. So the way I explain this is that it's not a can of paint, but that it's not without the can of paint, and it's not without a paintbrush, right? And it's kind of like I'm going to tell you, take the can of paint and the paintbrush and go over to that old wooden broken down fence over there, and for about a half a day or maybe a day, paint on and paint off, and paint on and paint off, and after that I'm going to give you an old car and some wax and a rag and I'm going to go over there and wax on and wax off and wax on and wax off, right? Now I get enough chuckles that everybody knows, at least most of the room knows what I'm talking about, right? And you don't do this so you can become a better painter, you don't do it so you can learn how to apply paint better, you don't do it so you can wax a car better, you do it so that when Mr. Miyagi throws a punch, you don't think, got it? System zero. Any questions about what system zero is? All right, okay, at this point if you haven't already started to envision it, take note of how system one, two, and zero map to the Dreyfus skill model, and in particular how system zero, how I've drawn it here on both ends of the spectrum, most of our adult life is spent doing, or better said, it's spent exhibiting forms of expertise that are so effortless that they're just taken for granted. Tying your shoe, opening doors, right? This construct that we make emotional or rational decisions drives me nuts. When you walk through the door, when you go back there to walk out the door, is it an emotional decision or a rational one, right? It's not, it's just a terrible construct. How about walking? You know how difficult walking is? Can you imagine walking without something like system zero? So system zero at the bottom of the scale is meant to show how all new skills are developed on the basis of already existing expertise, of expertise that we already have, and we already have it within everyday situations. You might think of it, again, as already existing expertise. Burt Dreyfus calls it background skills and practices. Of course, system zero is at the top as well, indicating that the same memory system is being used at those more advanced skill levels as well, but if you start to sort of intuit this, you get the notion that as you're building these advanced skills and you go through these processes, that if you use them enough, they become so ingrained that they are like tying your shoe, right? And then it also becomes difficult to teach somebody to tie their shoe. Imagine teaching somebody to walk through a deliberate analytical process. Good luck, right? How many have taken a golf lesson, right? And the deliberate analytical approach, how does that work? Do this, do that, this, that, the other thing. Memorize, oh, it's just, it's terrible. All right. Also take note of the red dashed line between competent and proficient because this is where our emotions actually do come into play. It's not so much that our emotions matter because they're getting in the way of rational decision making. Under conditions of uncertainty, rational decision-making is overrated anyways. The challenge is that emotional engagement is required, it's essential to skill development. You don't get to progress past competent and on to proficient until it matters to you. It has to matter to us that we can fail. We have to put ourselves at risk. And that leaves us vulnerable to life's vicissitudes, to life's uncertainties. Emotions arise in response to a particular stimulus or situation. We simply can't escape them. And because of that, we need to cultivate a certain predisposition to our learning, to our skill development. Today there's a lot of talk around mindset and how our attitudes, beliefs and our assumptions shape our behavior and influence our perceptions of the world. How it literally shapes our emotions. No doubt this is true, but I want to talk a little bit about moods and see if we can't tease out the difference between emotions, mindset and this thing that I'm calling moods. Mood isn't just a state of mind, it's more like a state of being. And unlike emotions, which are individual, episodic and they're felt from within, moods are social, they're shared and they're contagious. This is my first time at a NAPA conference and as I've said a couple times as I was at a retreat conference last week, anybody been to those two conferences? Yeah. Is there a different mood between those two conferences? All right. Is that mood yours? It's not ours, right? It's shared and it's contagious. You become part of it in some way. Think about going to a concert and the electricity, that's kind of the effective response, right? That sense that I'm trying to drive out. But moods are also sort of predispositional, they set you up for how you see the world. They quite literally shape the space of possibility and by shaping the space of possibility for what we can see as possible, they quite literally shape what is possible. Unfortunately, or maybe I'll just say and, and like the proverbial fish in water, we're often gripped by our moods without ever recognizing it. In a way, it's appropriate to say we have emotions, but moods have us. So I want you to be aware of this book, Learning to Learn in the Navigation of Moods. But full disclosure, it's written by a friend of mine named Gloria Flores. She's the CEO of a company called Pluralistic Networks, and she's the daughter of my coach Fernando Flores. The Dreyfus brothers wrote the foreword to Gloria's book, and in it they point out that, put simply, in order for us to acquire new skills, it has to matter to us how we're doing in our learning. Again, we have to put something on the line. And so, in the foreword, they also, I don't know if this is fair, I see it, I see that they try to tease out, so it's there in some sense. They try to tease out that cultivating a mood or moods conducive to learning might just be the meta-skill to all of this, right? So they've been talking about for 30 years this skill development, but in more recent times, and now it's just Stuart who's left, but in more recent times they have been incorporating this notion of mood as the ultimate predisposition to our learning. And what I'll say about that in sort of conclusion is because, ultimately, our feelings, our emotions, and our moods, they aren't getting in the way. They are the way. I'll leave you with this from Einstein, and I'll open it up for some discussion. Can somebody tell me, do we have until 1045 or 11? We don't just have until 1030, right? That should have been my first question, all right, 1045, perfect, okay, questions, concerns? Yes? Do we need to do some mic action, or I can repeat it too, I'll just repeat it. So if, I can explain why it's not, and then I'll back into, I think you'll see it at that point, right? That if a bat and a ball together cost $1.10, and the ball cost $1 more, I'm sorry, the bat cost $1 more than the ball, and the ball was $0.10, you got it, right? The answer's $1.05. The answer is, it's an algebra question, right? Okay, anybody else? Yeah? Yes, well, you know, when I first was watching this, I thought this would be, this last slide would be applicable to the Schwab epoch, the Schwab forms, because usually there's a lot of question marks about what they weren't on before, and they're exchanging their forms, and after a while, you get used to how Schwab thinks, and so even though they're not clear, you know, and what questions to ask them, and who to ask at Schwab to get the right answer. And so I was thinking, too, you know, I'm still involved in this practice, I have been a field and financial planner, and we have some really good people that also are very good at figuring out the mindset of Schwab when they're filling out the forms, but everyone's probably end up having three of us check, I do this, I have a look over, and so what I'm trying to see is how to accelerate the training of somebody who maybe has a different mindset, and maybe even impossible, because it's just like me, I never learned how to snow ski well, I just can't do it right, but I like it, but I always do it wrong, and so maybe there's that same thing with this, where some people are just more confident at this, but I told them there's ways to change, train new people coming in, so they wouldn't even have to use me as a third level check, that's what I was thinking. Okay, you gave me everything I could have wanted for this discussion in that one question, but for the tape, let me try to surmise it a bit. Ironically, and I think we all got some chuckles about this, that ironically, we're sitting here talking about skills and sensibilities, and the question is posed from a very deliberative form, right, there shouldn't be any question about what is meant by the word and, right, in some ways, and yet, we all have experienced this, that we fill out the form the way we anticipate it, and Schwab kicks it back, and it's not just Schwab, or TD, or anybody else that kicks it back and tells us, no, that's not what we meant by that question, it actually does depend on who you get at Schwab, or TD sometimes, as to, you can get four different, I mean, I don't know about you guys, but I can call six different times and get eight different answers. Sorry, Schwab and TD, they sponsor these sorts of things. So, the other thing you brought up was likening it to something that's obviously more skill-set, like snowskiing, and ultimately, your question is, how do I teach these people, or at least get them started well enough that they can do this without me, and I don't know, I think I get to tell you, you don't. I think, you know, there was a time, I'm sure you guys remember this, that there was a time where you could just take on a new employee and say, okay, your job for the next three weeks is to call Schwab and just start talking to people about their forms, right, and now you can't get anybody on the phone at Schwab or TD Ameritrade, it doesn't exist, and if you do, you get a fair, oftentimes, a beginner themselves, and so they end up figuring it out together. Now, as I'm talking through this, I don't know that that's a bad thing, like, the other thing that you brought up for me in this space is, and I had it and I lost it, it was in line with this, with moods, and now I've lost it, so scratch that from the tape. Amy? I want to speak to what she was saying, too. It kind of, in my mind, goes to that whole 10,000 hours thing, like, you're going to get really good at something if you do something for 10,000 hours, however, what he also said was, you actually have to be interested, you have to be emotionally involved in order for those innate things to, one, in order for you to want to engage for 10,000 hours, although I question those exact numbers all the time, but I think the answer is, these people may never actually get to that state of innate because they're not interested in being that way, and you have to have, also, like, immediate repetition over and over and over. Yes. Can you create gaps between the times you're doing stuff? Not merely immediate repetition, but immediate feedback. He was next. Time is an important part, it appears, in this, various stages, but I don't think there's an X factor between becoming a master. You may still have the interest, you may put in the time, and you may still not have whatever it took to be that way, or the Air Force would have so many more pilots that were better than they could train, and just showing how many people in a professional, organized system could not create those, they could offer opportunities, but there are so few that can actually get there, and so that X factor, or whatever it may be called, I don't know how you identify that, besides just passion, dedication. I can see more in athletes than I can, you know, Steph Curry. I could never be that, even in my practice. Yeah, I don't doubt that. Sorry, me neither. What I was going to say was, I like water skiing, I like water skiing a lot, but I'm only this tall, right? And when you get to the elite levels of water skiing, a slalom course, it turns out that the rope, directly sideways, perpendicular to the boat, and the buoy that I would have to ski around, and my body length, won't get me there. It can't get there. Right, so, yeah, no doubt, and no doubt there's some X factor in all of that, but I'd encourage you to, everybody, to sort of, come back to, do you need to have an office full of experts? Or do you just need to be able to distinguish? There's a real, what I like about both your points, Amy, and your point, is that, you know, just being able to see the difference between competent and proficient. There's miles of usefulness in those differences, and there is a distinction there that Amy was getting at, right? They actually have to care. And so that can be a clue to whether you're, whether to continue and invest in them to go up the ladder, or leave them in a role until they're ready. I never want to suggest that people are fixed, and rigid, and permanent, and they can't change, but maybe they're not ready for the change, just yet. Yeah? Do you have a chat GPT anecdote? Ah, thank you. So, I wish I would have captured the actual question that I asked chat GPT, so let me try to remember what I was getting at. I was checking sort of my work around Dreyfus skill model, and trying to tease out this difference, you know, what's so unique to humans? And I basically asked some version of, what's missing from artificial intelligence? And chat GPT said this, you'll get what it's, that it's referring to my question. It says, yes, you could say that the non-conscious intuitive process that the Dreyfus brothers refer to as system zero, are missing, sorry, you could say that the non-conscious intuitive processes that the Dreyfus brothers refer to as system zero, are missing from my programming. And that this is one of the key differences between human expertise and machine intelligence. While AI models, like myself, can be trained on large data sets of text, and can recognize patterns and generate responses based on those patterns, we do not have the same kind of non-conscious intuitive sense of the situation that is characteristic of human expertise. This is because our decision-making processes are based on rules and algorithms, rather than on the kind of non-conscious intuitive processing that characterizes, it just repeated itself. I wish it would have started talking about experience, right? Experiential and a sense that those experiences generate. If we were to get down to sort of the cellular level, we'd be talking about sort of the coupling of dendrites, right? And the recoupling of those dendrites. That's what's developing this. And it's even weird to call it a memory system. They've done work to demonstrate this with amnesiacs, people who have amnesia, on one hand, where they demonstrate that people with amnesia can build skills, but they can't remember the procedure that helped them build the skills, right? Different memory system. And in reverse, they've done it with Parkinson's and Alzheimer's patients to demonstrate that they can't build the skills, but they can remember the heck out of things. All right. There was... I just came up with a colleague of mine, and he's more junior in the firm and has not been doing... I've been doing this for like 20 years. He's been doing it for around... And he's really great, really smart. And he kept asking me, and we're going through the same piece over and over again, where I can just look at it and say, something's off. He's like, well, how do you do that? And so we go through spreadsheets and we do all this. But he's also a very... I mean, he has a doctorate in Trump. I can't read music to save my life. I can't play music. And my thought was like, is it a fluency? Because he can look at music and just play and be amazing. I see dots on a page. But I look at a tax return. I look at the Monte Carlo production, Cash Flow, and it's like, I read that in an intuitive manner and can just play it, quote, unquote. Is that kind of what you're getting at? I think so. When you were narrating this and said he's got a doctorate in, and I was about to cringe like a doctorate in some scientific thing. And I'm like, oh, I'm sorry. But a doctorate in music, fantastic. This is really where this needs to play. It doesn't mean... Don't anybody walk out of here and say, St. Clair says we don't need all these analytical skills. That's not what I'm saying, right? I'm saying they only go so far. And when we get that far, when we notice that none of these analytical skills can do what we really need them to do, which is fundamentally predict the future. That's what we're trying to do. Then we can begin to put them in their place. And when we begin to put them in their place, we put them in a place that it's more like, ah, yes, Monte Carlo, it can illuminate some things. What did I say earlier? It can give us a sense for the probable, the not probability. Don't go there, right? But if you get that far, then you can also begin to appreciate other domains that can give us a sense of the future. Like as far off as poetry and certainly philosophy, right? And you remind me that you may not know why you remind me this, but because I can't tell you why you remind me of this. But at retreat, I started talking to my friend, Rick Kahler. I think Rick has been around this community. And Rick and I do a lot of this largely because I think of him as this psychology guy. And I'm like, I can't stand this, right? But to be fair, Rick's not. He is, but we can have good conversations. Let's just say it that way. But what I said to Rick was, have you ever thought about how similar existentialism is to financial life planning? Have you guys ever thought about that connection? And if you haven't, maybe go home and just look up the definition of this. Or better yet, ask chatGBT to list the similarities between existentialism and financial life planning. And this is, of course, me ribbing Rick about this because the zinger was, he said, oh, yeah, I guess, yeah, maybe a little bit like that. You can see him tinker. I said, that must be why we're so busy studying the world's, the greatest existentialists of our time, right? We don't. We study psychology. And part of what I'm trying to bring forward here is the need to go beyond, right? Even in Dick Wagner's book, Financial Planning 3.0, he cited sort of two epochs, so to speak, of the financial planning profession. The first 25 years where we developed our skills around products and the relationship with Wall Street and et cetera. And then somebody looked up and said, hey, wait a minute. The people we deal with have emotions and brains. And we started developing our psychological skills. But in that same book, he encouraged us to move beyond financial life planning, which he located in Financial Planning 2.0. He located it with all that other stuff. And I'm in agreement. There's something next, right? And that next is maybe to get out of sort of the, and this will be hard because it's very ingrained in our Western culture, sort of this inwardly focused, psychologically centric, individualistic way of having the world show up to us. We only have one body. It's only going to show up to us that way. But that doesn't mean that individuals are the center of the universe, right? Any more than, we need sort of a Copernican moment. Now, you really let me get on my soapbox. And I appreciate that. But it is time and I'll be around for questions individually. But really, really, really, I want to thank you for being here. I had this vision that nobody would show up. And so, thank you.

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