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This is The Art of Charm.
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Learn everything you need to know to crush it in business, love, and life.
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The Art of Charm is where ordinary guys become extraordinary men.
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Welcome to The Art of Charm, I m Jordan Harbinger.
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The Art of Charm brings together the best thought leaders, teachers, and exceptional individuals to teach you how to be a top performer in life, love, and at work.
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Looking forward to meeting you here at AOC.
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Today we re talking with Kabir Sehgal, the Darwin of dollars, author of Coined, the rich life of money and how its history has shaped us.
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We re talking neuroeconomics, the brain science of how our brains react to money.
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how anticipation of having more is more powerful than actually having, and how our genes even regulate how we spend money and even our credit score.
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So if you re broke, blame your parents.
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All this and more on this episode of The Art of Charm.
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Tell us what you do in one sentence.
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I m the author of Coined, The Rich Life of Money and How Its History Has Shaped Us.
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And before you wrote Coined, The Rich Life of Money, which I see what you did there, you were the vice president in emerging market equities at J.P.
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Morgan.
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What is that?
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So basically, I was advising institutional money managers to invest money in emerging markets.
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So my job is literally traveling all around the world, over 30 countries, and finding investment opportunities in China, like telecom companies in China, gold companies in South Africa.
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And then conversely, I would bring the management companies in those emerging market countries to America
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and try to source investments to try to get them to list their stocks on the New York Stock Exchange.
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So it was really sitting between very significant capital flows between U.S.
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money managers and emerging market opportunities.
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I worked on Wall Street for a while as well.
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Pardon me if this is a little insulting, but this is like part of the problem, right?
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When you re talking about finance and Wall Street and stuff like that, it s kind of like, not value from nothing like I was doing, which was mortgage-backed securities, but it s a close maybe second or third, because it seems very removed from delivery of actual value.
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Depends where you re doing it and what type of finance you re doing.
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I would be in Bangladesh, actually frontier markets in Bangladesh, in Nigeria, in Mongolia.
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We would finance construction projects and infrastructure projects.
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In one place, we were in Malaysia and we put investment work in a fishery where thousands of people were put to work.
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I got involved in investment banking almost kind of by accident.
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I didn t stay there for very long.
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I mean, I was there maybe eight years.
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I got out of it because I knew I wanted to take that skill set and do something else with it.
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But I got into investment banking for the skills because at the end of the day, you need to learn how to make money before you give it away, before you want to do charitable aspects.
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Got it, yeah, and fair enough.
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Infrastructure projects do tend to be a little bit more rewarding than, hey, let s figure out how to list a bunch of real estate properties that aren t built yet in a company, in another market.
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which is literally what we were kind of doing when I worked there.
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So I guess I probably saw some of the real downside of Wall Street instead of what you were doing, those types of projects.
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But you ve written five books, Coined, Walk In My Shoes, A Bucket of Blessings, Wheels on the Tuk Tuk.
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Did J.P.
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Morgan just not keep you busy?
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I mean, you wrote five books, what the heck?
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I wrote five books, I joined the military while I was at J.P.
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Morgan, I wrote an opera, I ve done a lot of stuff while I was at J.P.
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Morgan, and because I figured out how to do my job in a few hours a day, the company flew me all around the world to learn about different places.
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And so I said, while I m here, I m gonna use it while I can, and when the time is right for me to go, I ll go.
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And so literally, for my last book, Coined, I would wake up in the morning, I would write, and then my office was located
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just a few blocks from the New York Public Library.
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I would go to the New York Public Library at lunch, and then sometimes I just wouldn t come back, because I was one of the biggest revenue producers on my desk at J.P.
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Morgan, and my manager was cool with it.
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He used to listen, I ll judge you on results.
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And we had an agreement, judge me on results, and I ll take care of the rest.
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So I learned how to sort of make a corporate job work for me.
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Yeah, I mean, you join the U.S.
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Navy Reserve, speechwriter on the presidential campaign, counsel on foreign relations, Grammy-winning producer,
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It s like you don t sleep, you know?
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And no pressure, but this show better be pretty awesome with a resume like that, so I m looking forward to this.
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Yeah, we ll see, we ll see.
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Excellent.
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So, first of all, psychology and money are two awesome topics we love to cover on this show.
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So, psychology of money, especially when it comes down to the science of it, neuroscience, cognitive biases, I mean, you re speaking our language here, big time.
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Yeah, so I started to write this book because I started working at JP Morgan just months before the credit crisis began, and I asked myself sort of a biological question.
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What is happening in the mind?
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What is happening in the brain?
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when we think about money, when we deal with money.
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So when people are listening to this podcast, when I say the word money, when you think about money, there s likely an increase in skin conductance.
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In other words, there s an electrical current going through your skin, you re getting a jolt of excitement sent through your body, just to the mere mention of the word money.
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I looked at this further and there s indeed a field called neuroeconomics, which is basically brain scientists that study financial decision making.
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This is a pretty nascent field because MRIs really came into being in the late 90s.
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They found that they ve taken people who are high on cocaine.
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taking brain scans of coke addicts, and then they compared it to people who were about to make money, who were about to win money, and they found that the brain scans were identical.
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The part of the brain that activates is deep within the limbic system, deep within the evolutionary part of the brain.
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It fires up.
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It s called the nucleus accumbens, the nucleus accumbens.
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part of the brain just goes crazy at the thought of money.
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Not just that, in another study, brain scientists asked heterosexual men to look at pictures of naked women, dead bodies, and money.
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And what got the most activation in the nucleus accumbens?
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What got the most excitement?
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Please don t say dead bodies.
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For some people, maybe, but not for the most people.
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For most people, it was money.
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And so I found that there s indeed a biological, not just psychological, but our psychology is often governed by what s going on in our gene pool.
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I think it s because people know that if you have lots of money, you can buy both dead bodies and naked women.
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You could, it s a weird fetish.
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If the movies, yeah, not at the same time, but you never know, according to the movies I ve been watching.
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You know, the interesting thing about the study, and it maybe applies even to podcasts, is it s a nuanced finding, which is not just the receiving of money, the winning of money, or the touching of money, it s the anticipation of gain, right?
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So when you are hosting a podcast, and you can say, oh, coming up we have Kabir,
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that may be more exciting than the podcast itself.
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I hope that s not the case for me.
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We ll see, right?
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The anticipation of having you on the show was better than actually having you on the show.
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That s true for many guests, however.
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That s very true.
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But you re right.
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And why do you think that is?
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I mean, it seems like having would be better than anticipation.
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Do we know why that is?
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Because, I mean, I d rather have money in my pocket than look at it through a window.
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Yeah, I think it s part of the reward circuitry is that the idea of winning, the idea of a prospect of gain, somehow in our evolutionary wiring is the idea of winning something, something that you don t have.
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It s probably like a survival mechanism, to be honest with you.
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Yeah, it has to be.
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Motivating or something like that?
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Yeah, I think so.
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You know, I went to over 25 countries in researching this book, and I started my quest in the Galapagos Islands to look at the origin of money.
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And why did I do that?
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Because I was looking at, sort of,
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And that s for Charles Darwin, not to get too scientific on.
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I was going to say you re like the Darwin of dollars.
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Yeah, I like that.
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Man, I should write an op-ed on that.
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You should.
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Just link back to the Yard of Charm, no big deal.
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It s all yours.
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Yeah, we ll copyright it.
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So I went there and I went with a couple of marine biologists and we studied different ecosystems.
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And why did we do that?
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Because we studied how different species, how different animal species have symbiotic relationships with each
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Like right now, you have a symbiotic relation with the 100 million intestinal bacteria in your intestinal tract.
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You re breathing out carbon dioxide.
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You re having an exchange with a plant.
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And so sure enough, I found that there s actually genes that we have that regulate how we spend money, how we deal with money.
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There s actually one gene that we have.
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It s called the COMT gene, the scientists sometimes call it.
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And there s two variants of it.
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and that are sort of evenly dispersed within the population.
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And if you have one variant of it, you re more likely to be risk-averse, to have a higher credit score, to have fewer credit lines.
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And if you have the other variant of it, it s just the opposite.
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To the tune of about 97 points on your credit score, about 20% of your credit score is influenced by your genetics.
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And they control for all kinds of things like your financial literacy and demographics and so forth.
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Make sure enough that your genes are manifesting themselves in your financial decision making.
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They ve even found this to be true.
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in twin studies.
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Identical twins have the same genotype, have the same genes, and when they ve separated them over long periods of time, they found that even identical twins invest in a similar manner.
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Really?
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Yeah.
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So your genetics influence your financial decision-making.
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So there s like a businessman gene, and then there s like a rapper gene.
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Exactly.
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There s a risk-averse gene and a risk-taking gene.
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You probably know who you are.
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I mean, you probably know your own proclivities, but I guess the moral of the story is if you re not a very good investor, if you re not very good with money, you can always blame your parents because it s their gene pool after all.
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Wow.
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Well, good.
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I mean, I guess I should blame my parents for giving me good investment and financial decision-making genes because I m basically a wimp when it comes to that kind of thing.
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I have a higher risk tolerance elsewhere.
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Otherwise, I wouldn t be running my own business here.
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I think obviously things can override that, because my parents are much more conservative in terms of risk than I am, but when it comes to what we do with our money, I guess it s similar, we re similar there.
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So it s not the only factor, but the fact that genetics influence anything with financial decision making is kind of incredible, because typically we would think this would be a matter of nurture, not nature, where, oh, your parents were foolish with money, that s where you get it, because you saw that, it was a bad example, but it could actually be
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Yeah, absolutely.
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It s not the only thing.
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In some of these studies, you can triumph over your genetics.
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You can learn.
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If you think you re risk-averse, you can learn different hacks to make yourself better.
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You can make lists and follow all kinds of how-to advice to be better with money, but it is definitely a tendency.
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There s all kinds of things that affect our genetics over the course of time, even if you look at the weather.
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On a cloudy day, when you re sitting outside at a restaurant, for example, studies have found that you tip more money because the weather puts you in a better mood.
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You re more likely to be thankful for the service that you got.
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A lot of waiters are picking up on this trend.
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Yeah, and so if you re seated inside, you don t tip as well.
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So that s why when you go to a restaurant, waiters oftentimes will want to seat you outside.
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Those that listen to this show will now do that no matter what.
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Yeah.
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Yeah, there you go.
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But they ve actually found this study, Jordan, shows up in the markets.
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One thing we have really good data on over the last 80 years are stock market returns.
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And we also have really good data on weather patterns.
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And so they looked at 26 markets around the world, 26 markets have stock exchanges, New York, London, so forth.
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And they found on sunny days, the market outperforms about 25% annualized versus cloudy days, which is about 12%.
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So I never once heard a portfolio manager say to me, Kabir,
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The sun made me buy that stock, but it s having an effect.
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If you want to get a sense of what the market sentiment, just look outside your window.
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I don t want to boil it down too much and be too reductionist, but it s a good business barometer.
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The sun is a good business barometer, and it shows you that there are things affecting your subconscious, things that are sort of like working on your gene pool and manifest your money-making decisions.
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You hear that, Alaska?
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That s why California s more affluent.
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Honestly, I mean, is there such a direct correlation?
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I mean, are there like hedge funds that are based on the weather?
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There s certainly trading patterns that are.
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Some people do trade around the, some people do trade around weather patterns, absolutely.
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There s one startup fund I know about that s trying to launch money with a trading strategy like this.
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Look, when there s a hurricane coming into town, you ll see all the financial news networks going, oh, these are the stocks you should buy.
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So there are different ways to play the weather.
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I should say, one thing interesting, I brought,
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One of the leading neuroeconomists, a guy from Stanford University to Wall Street, and I set up a bunch of meetings with some of the top hedge funds in the world.
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Sometimes you meet with the top hedge funds, there s one or two analysts.
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I had 25, maybe 30 analysts, billion-dollar hedge funds coming to this meeting to meet this one professor and me.
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They realized pretty soon that, okay, maybe there s not an immediate impact from neuroscience and reading the markets, but almost everyone was asking the same question.
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Everyone was wanting to know, can we take brain scans of potential candidates when we re hiring them to isolate whether they have risk-taking or risk-aversion genes?
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And I know of two hedge funds,
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that have already started applying MRI scans, brain scans, to hiring candidates.
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So it s coming, folks.
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You didn t get personality tests, but there will probably be, in the coming future, more people, more funds, using brain scans to figure out who they should hire.
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Interesting.
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We actually had Dr. Paul Zak on the show many years ago.
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He s a neuroeconomist.
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Yeah, one of the best, one of the best.
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His research has been really foundational.
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There s another guy, the guy I brought out of Stanford, his name is Brian Knudsen with a K, K-N, Knudsen, and he studies a lot of stuff about consumer preference, so a lot of stuff that you may be interested in about like he did an interesting study about loans, for example.
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15,000 pictures on the website of Kiva, which is basically a microfinance website He analyzed all these pictures and he found that pictures of people who were smiling and
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They re more likely to get their loans funded by, I guess, people loaning out money on Kiva to the tune of about, I think, five or six bucks.
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The average loan amounts aren t very big on Kiva.
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It s about $400.
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The research shows that the part of the brain that activates, again, is the nucleus cummins.
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When someone smiles and we see a positive image of someone, the part of the brain that
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of the nucleus of Cummins, you re more likely to maybe loan them out money.
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So he s doing fascinating research on the connection between smile, facial expressions, and soliciting loans.
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All right, back to Kabir Sehgal.
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Let s talk about a little bit of the cognitive biases that we find when dealing with money because money in psychology, we just did a show with Adrienne Dorison and she talked about belief systems and money and things like that.
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and psychology and money go hand in hand.
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There s almost no way to stop the interaction between the two, because money is such an intimate thing for people, even when it s in business and it s just numbers on a spreadsheet, and especially when it s your own.
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And that, unfortunately, is when we are the most susceptible to cognitive biases.
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And if you ve ever known somebody who gambles a lot,
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or at all, you can always find the biases in their rationalizations for why they re doing it and why people buy things that they want and then rationalize that they need.
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I would love to hear more about some of the biases that you ve come across in your research on the subject.
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Well, this shouldn t be so surprising.
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It almost seems like common sense that psychology is involved in financial money making.
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But Alan Greenspan, in his book, he was like, I made a big mistake.
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I didn t realize this.
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It was almost incomprehensible how one of the smartest economists
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thought that markets are always rational and people who make financial decisions are always rational.
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So, one of these biases that constantly manifests itself with my father is the availability bias, or another word for this is the heuristic.
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My father always plays the lottery.
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And I say, why do you always play the lottery?
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The chances of you winning are like one in a million, if that.
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He says, well, I see it on the news, they have a big check with some guy winning $5 million.
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That could be me one day.
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I said, well, the odds are not very good because our brain is not equipped to do large statistical observations or probability sets.
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Instead, it does sort of a mental shortcut.
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And the more likely you can remember something, you start to inflate the probability of it actually happening.
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So the more oftentimes you see someone winning the lottery on the news, you say, oh, that could be me.
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That could be me.
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And so the availability bias is not obviously not just the money, it s all sorts of things.
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And the reason is why is that is because evolutionary, it s like, well,
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If you re on the Savannah hunting for food, if there s a lion nearby and your friend died as a result, you re going to remember all those bad times that happened.
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It s kind of like a coping mechanism to survive.
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Your memory helps you get through your life.
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The brain is not equipped, again, to do these large math problems.
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SPEAKER_00
Another one, I think, is one you probably have, but you ve probably triumphed over, Jordan.
2
SPEAKER_00
You said you run your own business, and it s extremely irrational to start your own business.
2
SPEAKER_00
It s the over-competence bias.
2
SPEAKER_00
And most entrepreneurs will, again, it s sort of on the tree of the availability bias.
2
SPEAKER_00
So Uber, Facebook, Mark Zuckerberg can do it.
2
SPEAKER_00
wait a second, you aren t the same as these guys.
2
SPEAKER_00
Every business case is different.
2
SPEAKER_00
And so to paraphrase Steve Jobs, here s to the irrational ones.
2
SPEAKER_00
We do need entrepreneurs to take those irrational sort of crazy risks with their life because most of us are sort of benefiting at their expense.
2
SPEAKER_00
But it is irrational and most entrepreneurs are way too overconfident.
2
SPEAKER_00
Eight out of 10 new startups fail in the first
2
SPEAKER_00
18 months, most of the Y Combinator companies that graduate from Y Combinator and some of these elite startup accelerator programs do not survive.
2
SPEAKER_01
Right, so that s almost like, just to put that in perspective for people who don t know what the heck that is, that s like graduating from Harvard after Harvard recruits you and then not being able to get a job afterwards.
2
SPEAKER_01
It s just like, wait, if you came out of Y Combinator, you should survive.
2
SPEAKER_01
So if 80% of startups at large, if you will, are failing, it looks like 93%, and this is an older stat, it s June 2013, 93% of Y Combinator s businesses have failed, which is actually less, less successful.
2
SPEAKER_00
The overconfidence bias.
2
SPEAKER_00
Even with these harsh odds, people still make the plunge to start their own companies, and it s like, man,
2
SPEAKER_00
Do you wanna do something where you have like a five or a 7% chance of making a success?
2
SPEAKER_00
And yet people sort of are dogging and go ahead with it.
2
SPEAKER_01
Right, yeah, and the reason, just to put a personal spin on it, the reason I did is because Wall Street was winding down, I was doing mortgage-backed securities, they basically laid everyone off, I had the choice between getting another job I didn t want and working on a
2
SPEAKER_01
I guess a hobby that had since become a business and was starting to make money, which my confidence level was, we can probably make a living doing this, and if not, I have a ton of money saved from Wall Street, whereas I think a lot of folks, they have it even harder.
2
SPEAKER_01
They re at a nice job, they ve got a cushy existence, and then they go, you know what, screw it, I want to do something else, and they start off.
2
SPEAKER_01
And I think that s why it s so much easier to join a startup when you re 24 and you just got out of college, and not when you re 44 and you ve got two kids waiting for food.
2
SPEAKER_00
Yeah, although they say that...
2
SPEAKER_00
People who start companies now, they re much older.
2
SPEAKER_00
We have this sort of idea that there are people who are kids in the garage in the college dorm starting their own company, but I think the media age of folks starting their own companies is well into their 30s now.
2
SPEAKER_01
That s good, yeah.
2
SPEAKER_01
I mean, I live in Silicon Valley and I lived in San Francisco and everybody was in their 20s and early 30s generally, but we are a tiny microcosm of people starting businesses and entrepreneurship in general.
2
SPEAKER_01
We just happen to get the most press because we re in Silicon Valley and it s tech.
2
SPEAKER_01
Right.
2
SPEAKER_01
Sure.
2
SPEAKER_01
So and that s where the money s here.
2
SPEAKER_01
So availability bias, which in a nutshell is, well, other people are winning big, so I can do it.
2
SPEAKER_00
Yeah, well, availability bias is, the more often you can remember something, you start to inflate the probability of it actually happening.
2
SPEAKER_00
The overconfidence bias is kind of, it s taking action toward it, saying like, look, there s 95% chance I won t do it, that the odds are against you, but I d do it anyway, because I m better than that, I m the hero in my own story, I ll be a triumph.
2
SPEAKER_00
You re overconfident in your own talents, when it probably won t happen, yeah.
2
SPEAKER_01
Ironically, both a requirement of entrepreneurs and also
2
SPEAKER_01
something that you should avoid.
2
SPEAKER_00
Mathematically speaking, you should avoid anyway.
2
SPEAKER_00
The biggest bias that has been discovered, and this really originates with Danny Kahneman s work, who was the only psychologist
2
SPEAKER_00
to win the Nobel Prize in Economics with his co-researcher, they came up with a theory called prospect theory.
2
SPEAKER_00
That s a fancy way of saying loss aversion, which is the most well-known and documented cognitive bias.
2
SPEAKER_00
For example, consider I gave you a coin toss in which you could either lose $20 or win $22.
2
SPEAKER_00
The payoff is in your favor,
2
SPEAKER_00
And the rational model of human behavior would suggest that you should take this opportunity, you should take this bet.
2
SPEAKER_00
But most people would reject this gamble.
2
SPEAKER_00
And that s because Danny Kahneman, in his research, he found that when people are given an opportunity, they want to get twice as much in a game before they take that risk.
2
SPEAKER_00
In other words, I would have to offer you
2
SPEAKER_00
$40 for winning and $20 for losing in order for people to get comfortable in taking that bet.
2
SPEAKER_00
People value losses twice as much as they do gains.
2
SPEAKER_00
The evolutionary logic for that is, well, sure, if I lose something, I can hurt from that.
2
SPEAKER_00
I can suffer from that.
2
SPEAKER_00
I could die from it.
2
SPEAKER_00
We tend to value losses far more than our gains.
2
SPEAKER_00
And they ve studied this in all kinds of different ways.
2
SPEAKER_00
For example, even on the golf greens, for example, they found that when people are putting for birdie, when you re going to go down a stroke, basically, you re winning something.
2
SPEAKER_00
And they ve compared that to people putting for par.
2
SPEAKER_00
I mean, if you putt for par and you lose a shot, that means you go down on the score.
2
SPEAKER_00
They found that people are much more accurate.
2
SPEAKER_00
People are much more willing to make their shots when they re shooting for par instead of for birdie, because there s more to lose.
2
SPEAKER_00
If you lose a shot on par, you re going to go down on the scores.
2
SPEAKER_00
They found that this mechanism, these are all psychological things, like these biases,
2
SPEAKER_00
What s interesting to kind of overlay from the beginning part of our conversation is the neuroscience of it.
2
SPEAKER_00
There s a part in our brain, so you can actually do brain scans and isolate it.
2
SPEAKER_00
There s a part of the brain called the amygdala, which is sort of the fear center of the brain, that fires at some of these decisions.
2
SPEAKER_00
So if I gave you that opportunity to take a coin toss, I could see, oh, you re not going to take it because your amygdala is firing because you can win $22, but you can also lose $20.
2
SPEAKER_00
doesn t fire as much because there s more opportunity for gain and it triumphs over the amygdala.
2
SPEAKER_00
So there s actually neurological mechanisms that are happening when we re making these psychological decisions.
2
SPEAKER_00
And this is loss aversion?
2
SPEAKER_00
Loss aversion, correct.
2
SPEAKER_01
I m not sure if I got all that.
2
SPEAKER_01
So we re more likely to avoid loss than we are to go for gain, because we want to avoid pain rather than seek pleasure.
2
SPEAKER_00
You got it.
2
SPEAKER_00
You said it better than I did.
2
SPEAKER_00
You said it better than Danny Kahneman did.
2
SPEAKER_00
You should have won the Nobel Prize.
2
SPEAKER_00
Yeah, well, I m on the waiting list for that one.
2
SPEAKER_00
No, but that s exactly right.
2
SPEAKER_00
That s exactly right.
2
SPEAKER_00
And I think there s neurological mechanisms that regulate this, and it really governs a lot of sort of risk-taking in the world, that you have to make it extremely
3
SPEAKER_01
It s extremely appetizing for people to take a risk in order to get most people to jump at it.
3
SPEAKER_01
Interesting.
3
SPEAKER_01
And of course, casinos are kind of masters at this.
3
SPEAKER_00
Yeah, well, casinos are good because, well, they do a lot of things.
3
SPEAKER_00
So first of all, when you re playing, what do they do?
3
SPEAKER_00
They give you drinks.
3
SPEAKER_00
And so that kind of dulls your sensibility.
3
SPEAKER_00
Then they put pretty women around you, and that activates your nucleus accumbens.
3
SPEAKER_00
I mean, in some of these studies, they ve shown pictures of women, and they ve asked people to make a financial decision.
3
SPEAKER_00
And people are much more risk-seeking, make a lot more financially risky decisions when they see pretty women around them.
3
SPEAKER_00
And so, even looking at traders on Wall Street, they swabbed the cheeks of traders on Wall Street and traders in the London trading pit, and they found that
3
SPEAKER_00
Testosterone was not only just correlated with market risk, but it was a cause of market risk.
3
SPEAKER_00
They would actually get people to inhale testosterone in their noses, and then they watched their trading performance, and sure enough, people were making outsized bets at the wazoo.
3
SPEAKER_00
So it shows you that maybe the market performance is really attesting to how much testosterone is being manifested on Wall Street.
3
SPEAKER_01
Yeah, because you see the bravado spill over into the real world.
3
SPEAKER_01
Yeah, you got it.
3
SPEAKER_01
Now, getting back to sort of practical terms here, one of the things I found interesting was you d mentioned how giving gift to somebody is actually a way to control them.
3
SPEAKER_01
Can we dig into that a little bit?
3
SPEAKER_00
Sure.
3
SPEAKER_00
I traveled again to over 25 countries in researching my book, and I found that in every single country I went to, people think about money
3
SPEAKER_00
in almost the same way in that they think about money as a way to measure and settle debts.
3
SPEAKER_00
Measure and settle debts.
3
SPEAKER_00
Just as you think about a mile as a measurement of distance or a kilometer as a measurement of distance, think about money as a way to measure debts.
3
SPEAKER_00
What I mean by that is every single country has its own peculiar and local way of settling debts.
3
SPEAKER_00
I went to Japan.
3
SPEAKER_00
I was staying with a buddy and I got him some really delicious grapes.
3
SPEAKER_00
These grapes, it was one strand of grapes.
3
SPEAKER_00
They were delicious.
3
SPEAKER_00
$35 for one strand of grapes because they re custom blend and they look like they re massive.
3
SPEAKER_00
I gave them to him.
3
SPEAKER_00
I said, here you go.
3
SPEAKER_00
This is a present for hosting me.
3
SPEAKER_00
He said, Kabir, I cannot accept this present from you.
3
SPEAKER_00
I said, well, why not?
3
SPEAKER_00
He said, well, I ll never be able to repay you.
3
SPEAKER_00
And he told me in Japanese culture, the word arigato, which means thank you, translates to this difficult burden, this difficult burden.
3
SPEAKER_00
There s another word in Japanese, which is called sumimasen, which means I am so sorry, I cannot accept this.
3
SPEAKER_00
When you go to a Japanese department store, and I m going to come to America in a second, when you go to a Japanese department store, when you buy a present, they will not let you wrap your own presents.
3
SPEAKER_00
Because if you do a poor job, it will reflect poorly on the department store.
3
SPEAKER_00
Interesting.
3
SPEAKER_00
When you go to a Japanese wedding, you have to tie the ribbon on the gift precisely.
3
SPEAKER_00
Because if you give it to the newlyweds, and they can easily undo the ribbon, you re implying that you don t think the marriage will last.
3
SPEAKER_00
Valentine s Day, 80% of women buy chocolate for men that they feel personally obligated to, not people who they feel romantically involved with.
3
SPEAKER_00
They call it obligation chocolate, choco and giri, obligation chocolate.
3
SPEAKER_00
So why do I bring all this up?
3
SPEAKER_00
Because that s kind of weird and quirky Japanese culture.
3
SPEAKER_00
Okay.
3
SPEAKER_00
Well, here in America, we also have a more transactional way
3
SPEAKER_00
of dealing with people.
3
SPEAKER_00
My former CEO, Jamie Dimon, CEO of JP Morgan, he keeps a list in his suit pocket, and on that list is basically a favor bank.
3
SPEAKER_00
People who own something is on one side of the list, and on the other side, it s just the opposite, people who he owes.
3
SPEAKER_00
So the head of a major bank keeps basically a favor bank in his suit pocket.
3
SPEAKER_00
And so it goes to show you that he understands the psychology of gifts, is that when you give a gift to someone, when you give a gift to someone, you re not just wrapping the gift with wrapping paper.
3
SPEAKER_00
You re tying the recipient to an obligation.
3
SPEAKER_00
You re saying that
3
SPEAKER_00
You owe me, buddy, and you will have to remember that.
3
SPEAKER_00
And so even our language is like that.
3
SPEAKER_00
Like, for example, the word thank you.
3
SPEAKER_00
Thank you.
3
SPEAKER_00
The word thank comes from the term think in ancient English.
3
SPEAKER_00
And it basically means, I will remember what you did for me.
3
SPEAKER_00
That s basically what you re saying.
3
SPEAKER_00
And then you re constantly tying people.
3
SPEAKER_00
It s a constant psychology of who owes me something.
3
SPEAKER_00
And this gets back to like caveman days, because if you got something and you caught some big game like a bison and he did not invite your friends to the hunt, well, the day would come when you would be super hungry and they would not invite you.
3
SPEAKER_00
So this idea of reciprocity is such a powerful currency in the world.
3
SPEAKER_00
That s why, yeah, they conquered the city of Troy.
3
SPEAKER_00
How did they do it?
3
SPEAKER_00
They conquered it, not with Brad Pitt, you know, but a Trojan horse.
3
SPEAKER_00
Had they had Brad Pitt, though.
3
SPEAKER_01
I mean, had they had Brad Pitt.
3
SPEAKER_00
You can get in anyone s heart, right?
3
SPEAKER_00
But no, they opened those doors and they let that Trojan horse in, which is basically a gift, an obligation.
3
SPEAKER_00
And so oftentimes, we think about gifts as like, it s something nice, it s something generous, but in many ways, this can be a way to control other people.
3
SPEAKER_00
In Japan, no one asks for cigarettes on the side of the street.
3
SPEAKER_00
No one wants to be held to the account of strangers.
3
SPEAKER_00
It s super difficult.
3
SPEAKER_00
When you go to a Starbucks here in America, when you pay for your latte and leave, the relationship is over.
3
SPEAKER_00
Let s say the barista is like, no, no, no, it s on me today.
3
SPEAKER_00
You may feel an obligation to go back there in the future because not paying, basically a gift to sustain the relationship.
3
SPEAKER_00
If you want to build bonds with people, it s a very Machiavellian way of thinking about it.
3
SPEAKER_00
you have to deposit into that social bank account.
3
SPEAKER_00
And this even has historical ramifications because the first type of money that was ever invented, it wasn t paper or gold or coins, it was loans.
3
SPEAKER_00
People loaning out things to each other.
3
SPEAKER_01
All right, back to Kabir Sehgal.
3
SPEAKER_01
But how does it actually control us, right?
3
SPEAKER_01
I mean, it seems like, do we automatically, you can see in the brain that we feel that sense of obligation, has that been studied extensively?
3
SPEAKER_00
Yeah, reciprocity has been studied in the brain.
3
SPEAKER_00
And sometimes the insula, so the insula is a part of the brain that activates when you re feeling fear or anxiety.
3
SPEAKER_00
And so there have been some early indications that in gift giving, that the insula activates, that you feel more obligated, you re feeling kind of anxiety when someone gives you a gift.
3
SPEAKER_00
because you know that there will be a day of reckoning, there s no free lunches.
3
SPEAKER_00
So neurologically, there is like neurological evidence to support that gift giving is a way of creating anxiety.
3
SPEAKER_00
In fact, in some cultures, particularly Native American cultures, people would shame other folks by lavishing them with gifts.
3
SPEAKER_00
There s a ceremony, it s called a potlatch, you basically invite all your friends and you say, look, look at you.
3
SPEAKER_00
I m inviting you to my feast.
3
SPEAKER_00
I m going to shame you in my generosity.
3
SPEAKER_00
I m so much more wealthier than you, but you ll never be able to repay me.
3
SPEAKER_00
So gifts giving has historically also been a way of shaming other people to hold them under their influence.
3
SPEAKER_00
Interesting.
3
SPEAKER_00
Like if you go to a bar and someone like screws you over, I did this once actually.
3
SPEAKER_00
There was like a fuss about someone had a table or something.
3
SPEAKER_00
We decided to buy them a bottle of liquor and we sent it to their table and they were just shocked.
3
SPEAKER_00
So we re sort of sending the message that look, we were arguing over something so nebulous.
3
SPEAKER_00
Here s an act of generosity.
3
SPEAKER_00
But I think implicit in that was kind of like, you know, screw you guys.
3
SPEAKER_00
Like, we want to be above this.
3
SPEAKER_00
Yeah, you like making it rain.
3
SPEAKER_00
Yeah, exactly.
3
SPEAKER_00
Which yeah, there s actually a money culture that actually comes from ancient African traditions in Nigeria, when literally people get
3
SPEAKER_00
buried with money, and people then throw money on other people in order to control them and show how much bigger they are in their culture.
3
SPEAKER_00
This comes from the Tiv people in Nigeria.
3
SPEAKER_01
Interesting.
3
SPEAKER_01
Right, so making it rain has an ancient African connection?
3
SPEAKER_01
Yes, yes.
3
SPEAKER_00
When you go to a Nigerian wedding, you have to go up to the bride and groom and throw money on them.
3
SPEAKER_00
And when people die, you have to bury them with money.
3
SPEAKER_00
And so the idea is that they re gonna be wealthy when they re married, and then they re gonna take the money with them to the afterlife.
3
SPEAKER_01
I did not see that coming.
3
SPEAKER_01
That s amazing.
3
SPEAKER_01
That s amazing.
3
SPEAKER_01
I mean, of all the things that I thought would have ancient roots, making it rain was not one of them.
3
SPEAKER_00
Wow.
3
SPEAKER_00
There s different ways of saying thank you in the world, like the French say merci, basically begging for mercy, symbolically placing yourself in your benefactor s grace.
3
SPEAKER_00
The best thing you can say to people, if you re looking at the credit of language, when someone does you a favor, you can say thank you, or you can say my pleasure.
3
SPEAKER_00
And my pleasure is a way of reversing it on them and saying, oh, it s not a debt, it s a credit that you gave me.
3
SPEAKER_00
The language of credit, yeah, exactly.
4
SPEAKER_02
You re welcome to say my pleasure.
4
SPEAKER_02
And there s a constant, how many times during the day do you say yes, thank you, you re welcome?
4
SPEAKER_02
You think about what you re doing with those words.
4
SPEAKER_02
It s always become this kind of like a polite fiction.
4
SPEAKER_02
But if you can kind of be more artful in how you use the words, you can sort of subtly adjust people s psychology.
4
SPEAKER_01
We re programming you by saying you re welcome and my pleasure.
4
SPEAKER_01
It s a conspiracy.
4
SPEAKER_01
Yes.
4
SPEAKER_01
One of the things I talk about in one of my keynote talks is that money is less efficient than barter, which is essentially debt.
4
SPEAKER_01
And I know you talk about this a little bit in your book as well, debt being the first, kind of the first currency, really.
4
SPEAKER_02
Yeah, so Adam Smith, Newsflash, I mean, those of you who ve taken economics, Adam Smith, Aristotle, turns out they weren t exactly right when they came up with their theory of money.
4
SPEAKER_02
They said that bartering,
4
SPEAKER_02
I have an apple, you have an orange, let s exchange it, that s bartering.
4
SPEAKER_02
Bartering led to money.
4
SPEAKER_02
And so the anthropologists have gone back, there s a University of Cambridge anthropologist who s gone back and she studied this, actually a lot of anthropologists have studied this, and they felt, wait a second, there s actually never been a society in the history of the world that s ever existed that has relied on bartering as its principal means of exchange.
4
SPEAKER_02
She says bartering is what you do with someone that you don t know.
4
SPEAKER_02
If you and I are in a tribe, and someone else from another tribe comes over, yeah, we ll barter with them.
4
SPEAKER_02
But within our own tribe, we do favors for each other.
4
SPEAKER_02
We create social obligations, we create debt.
4
SPEAKER_02
And so it goes to show you that debt, social debt,
4
SPEAKER_02
is the first type of currency in the world and probably the most powerful type of currency.
4
SPEAKER_02
So when people talk about what s the most powerful currency in the world, the dollar, the yen, the euro, it s really favors because evolutionary, that s what bonded our societies together is the theory of money comes from
4
SPEAKER_02
that was ever used were – look at that.
4
SPEAKER_02
So there was social debt and then right around 4,000 years ago, the ancient Mesopotamia, they started to use financial loan documents.
4
SPEAKER_02
They basically took social debt and transfigured it into financial debt.
4
SPEAKER_02
Something very pernicious happens when that happens is you can start to enforce all kinds of crazy things on people.
4
SPEAKER_02
In ancient times, it was illegal to sell your wife or family into slavery.
4
SPEAKER_02
unless you are settling a debt.
4
SPEAKER_02
Unless you re selling a debt.
4
SPEAKER_02
And so, it goes to show you, even today, let s say you have your kids in a nice school, your kids had to get some healthcare or something.
4
SPEAKER_02
The right and nice thing to do is say, okay, I m here for you.
4
SPEAKER_02
But let s say you owe me a bunch of money.
4
SPEAKER_02
Now, I can be kind of a jerk and be like, look, you owe me the money, I m gonna start to enforce this contract on you and tell you not to spend healthcare on your kids, not to spend a good educational service on your kids.
4
SPEAKER_02
So what happens is when you take a social debt and start to introduce
4
SPEAKER_02
financial obligations onto it, it becomes very awkward, very fast.
4
SPEAKER_02
You re seeing that happening all around the world with these protests in Greece around the Euro debt crisis.
4
SPEAKER_02
People are making social demands on other people because there s a financial loan obligation there.
4
SPEAKER_02
You would never do it with your family, but because there s a contract, people are enforcing it now.
4
SPEAKER_02
That s why it always feels so weird and awkward.
4
SPEAKER_01
That s true, right, anytime we talk about, and we talk about this concept on the show, people are more willing to talk about the details of their sex life than they are about their finances.
4
SPEAKER_02
Yeah, the next time, like Thanksgiving s coming up, after Thanksgiving, meal has been cooked, and let s say you re at your in-laws, your friends, like take out your wallet and say, how much do I owe you?
4
SPEAKER_02
You see how awkward it gets really fast.
4
SPEAKER_01
Oh man, yeah, yeah, absolutely.
4
SPEAKER_02
And that s what we call introducing market rights or rituals of the marketplace into the familial sphere.
4
SPEAKER_02
And so, one of the examples I use in my book, when you go out for drinks with a friend, I did sort of a silly experiment.
4
SPEAKER_02
Everyone knows they got to pay for their own round of drinks, but I decided I was not going to.
4
SPEAKER_02
And all of a sudden, it came my turn to cover a round of drinks, and I said, well, I m not going to do it, guys.
4
SPEAKER_02
They re like, what are you talking about?
4
SPEAKER_02
It was a complete gross violation.
4
SPEAKER_02
this code of rights we all live by, but you always have to buy your round of drinks.
4
SPEAKER_02
Why does everyone know that?
4
SPEAKER_02
Because if you don t do it, you ll be ostracized from the community.
4
SPEAKER_01
Yeah, and nobody wants to be ostracized from the bar.
4
SPEAKER_01
You got that right.
4
SPEAKER_01
That s for sure.
4
SPEAKER_01
Now, let s talk about a couple of practical exercises for the audience.
4
SPEAKER_01
Let s talk about a couple of practical exercises here.
4
SPEAKER_01
One of the things I thought was funny that you brought up beforehand is that money is extremely dirty.
4
SPEAKER_01
I think that s hilarious because it s so random, but it s true, and I think most people know it, but the fact is you know that there s really gross stuff on there through your studies.
4
SPEAKER_01
What is on money besides cocaine?
4
SPEAKER_02
Yeah, money is a public safety hazard.
4
SPEAKER_02
They found money circulating in Manhattan.
4
SPEAKER_02
They found 3,000 different microbes on the money involved in acne, staph infections, and pneumonia.
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SPEAKER_02
In fact, in money circulating, I think in London, they found amounts of E. coli in greater amounts on the money than in public toilets.
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You always want to wash your hands.
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I found particularly interesting that, again, money circulating in America, in New York,
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There s 1.5 billion DNA markers on money.
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15% of it was non-human, traces of dogs, horses, even traces of white rhinoceros on money.
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Wow.
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Wash your hands, ladies and gentlemen, wash your hands.
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Wash your hands, yes, definitely.
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You know what s funny, though, is the other thing we talked about off air is paying with cash.
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So don t touch money, but pay with cash.
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Yeah, and that s because you become more conscious of your money usage.
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So when you, again, let s say you go to Starbucks, you buy your latte or whatever, and you swipe your credit card,
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There s actually less activation in your anterior insula, meaning that you re getting less anxiety, you re getting less pain when you use a credit card.
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Your credit card dulls your pain.
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You don t feel the pain as much.
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Right, dulls the pain of your imminent death from white rhino E. coli.
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Yeah, so the idea is if you spend cash, you feel more pain when you part with your money.
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But the flip side is it s very dirty, so you kind of want to bring a bottle of Purell around with you wherever you go.
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Wear gloves, bring your cash gloves.
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Yeah, exactly, exactly.
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We ve talked about the idea of paying with cash before.
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I usually only recommend it when people have trouble curbing the spend.
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Do you really pay for everything with cash, or are you using American Express like everybody else in banking?
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Yeah, I use credit cards for sure.
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But look, 85% of transactions in the world are still based in cash.
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The highly cash economy.
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And that s because like, look,
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Even places like Germany, Germany has 85 million people, only 10 million credit cards, because there s kind of weird cultural reasons for that.
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The word for debt in German is Schuld, which means like sin or guilt.
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Yeah, cultural hang-ups.
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So in America, we re pretty unique in that there s more than two or three credit cards per person.
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in here in America.
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So we love our credit cards here in America, but we re pretty unique in the world.
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Yeah, geez, at that rate, I ve got enough credit cards for the entire city where I went to high school in Germany.
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Probably do.
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So thanks so much for coming on the show, my man.
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My pleasure.
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Interesting stuff, never saw the gene thing coming.
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That s pretty cool.
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Genes influencing your credit score, how you spend money.
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I mean, I figured your parents were there as an example, but I never saw the nature argument.
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That s pretty cool.
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The whole thing of the debt, you know, you re welcome versus my pleasure.
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Super subtle, not sure I totally buy into the persuasive.
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aspect of that, because, you know, yes, reciprocity, but is it really more overpowering?
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I don t know, I ll leave that up to you, but I think his research is fascinating, and nobody can argue that he is not a very, very smart man.
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And the book was good, Jason, you read the whole thing, cover to cover.
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Yes i did i read it in like two settings it was really fascinating because if i m not a big money guy because i got the wrong gene i don t have the jordan harbinger gene so the money side of it was it was fascinating but more the history aspect of it just like going through like the beginnings of money to modern day and then the psychology of money it s a great read i highly recommend that he just hit me up and he said thank you for the opportunity and i responded my pleasure and all caps.
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You re not gonna get me this time, Kabir.
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Show feedback and guest suggestions.
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This show s a fanarchy, it s run by you.
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We rely on you to help keep our finger on the pulse, so if you know someone who s a good fit, let us know, guests at theartofcharm.com.
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And if you enjoyed this, don t forget to thank Kabir on Twitter.
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We ll have that linked in the show notes as well as the other resources mentioned on the show, including his book Coined.
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You can tap our album art in most mobile podcast players to see the show notes right on your phone.
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I m also on Twitter, I m at The Art of Charm.
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Follow me there or just miss out on life generally.
4
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Bootcamp details, bootcamp.theartofcharm.com, remember, which sold out a few months in advance.
4
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SPEAKER_01
We don t do the hard sell.
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We re sold out already, for God s sake.
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Subscribe at iTunes, write us a nice review, and of course, check out the blog where we discuss a lot of this stuff even more.
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more in-depth.
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Special thanks to the Jasons for their help on production of the Art of Charm podcast.
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Go tell your friends, because the greatest compliment you can give us is a referral to someone else, either in person or shared on the web.
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Now have a great week, and leave everything and everyone better than you found them.
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And don t touch any money, for God s sake, you filthy animal.
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Thanks for listening to the art of charm.
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Get more confidence, relationship skills, life hacks, and everything for the extraordinary man at the art of charm podcast.com.