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April 10, 2017 at 12:03 PM
The New York Times investigative reporter Charles Duhigg, a Pulitzer Prize winner for his series on Apple, “The iEconomy,” knows more than a thing or two about being sharply focused and super-productive. He shares these in an interview with ThinkAdvisor.
The business writer, several of whose recent articles examine the Trump White House, spent years culling productivity insights from neuroscience and behavioral economics research, and CEOs’ personal experiences to pen his 2016 bestseller, “Smarter Faster Better: The Transformative Power of Real Productivity” (Random House), just out in paperback.
Author of the earlier bestselling “The Power of Habit,” Duhigg, who worked in private equity before becoming a journalist, argues that greater productivity is a skill that can be learned, and he identifies eight key drivers for that, ranging from motivation to decision-making.
In the interview, he discusses six of these concepts and how they can help financial advisors and their clients plan better and invest more wisely; one example is to break up a long-term retirement goal into smaller, shorter-term goals.
Duhigg maintains that people who are most successful at learning use a process that “transform[s] what life throws at them rather than just taking it as it comes.”
In writing “Smarter Faster Better,” the business reporter drew on research and interviews with neurologists, business executives, psychologists, FBI agents and expert poker players (that’s right!).
ThinkAdvisor recently chatted with Duhigg, a New Mexico native, who was phoning from his home in Brooklyn, New York. Here are excerpts from our look at how FAs, in particular, can benefit from his in-depth analysis of the science of productivity:
THINKADVISOR: One key driver of increased productivity is improved decision-making, you write. Please discuss.
CHARLES DUHIGG: For financial advisors, this is probably a natural because they’re accustomed to thinking probabilistically, particularly as related to a risk-reward relationship and the potential outcomes that could occur. The key is to teach your clients to think probabilistically because, since we measure risk in terms of volatility, there’s a tendency to just focus on either: My portfolio is going to go up or go down and either it will lose money or it won’t. But that’s not how life works. Things happen along a probability curve.
How do advisors help clients look at their investments that way?
The primary objective is to get them to think in terms of potential outcomes and then discuss which are more or less likely to occur and why.
That means coming up with a spectrum of possible outcomes?
Yes. Relating to retirement, for example, one outcome is that you’ll work till you’re 65, and your pension will do great. Another is that you’ll get to 63, have a stroke and all the funds you were counting on start getting consumed by long-term care. Another is that you’ll live to 95, and your retirement savings will have to last another 30 years. So you need to think of a bunch of different potentials. Which do I need to plan for? Which do I need to protect myself against? Once you have a sense of the probabilities of different outcomes, it’s: How does that inform your choices, or what information do you need before you can make those choices?
It’s critical to envision potential failures too, you write.
We tend to disproportionately focus on success. So thinking about and exposing ourselves to people who have failed is really important. If you want to train your instinct to predict the future more accurately, you have to expose yourself to both the good and the bad. Our instincts get trained by sampling data. So if you’re only sampling positive data, you’re creating a bias.
Another key driver of productivity that you identify is goal-setting. Please elaborate.
One of the hardest things for people to do is to link a short-term goal to a longer-term goal. This is particularly important with regard to delayed gratification, or a delayed reward like savings: Unless they think, “This is how I’m going to put my kids through college,” people say, “Why should I save $5 today?” But if you get in the habit of finding [a] connection, you can habitually generate motivation much more easily than others.
