Episode 02: $60B Orion's Chief Behavioral Officer Dr. Daniel Crosby on Why Storytelling Works in Raising Capital | The Power of Authenticity in Business | What Qualities a Successful Salesperson Needs
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In this episode, Dr. Daniel Crosby and I discuss:
There are fewer Chief Behavioral Officers than people who have walked on the moon… so what the heck is a Chief Behavioral Officer?
Daniel’s backstory: How he combined his familiarity with financial advising (his dad was an advisor!) with his love of psychology to break away from counseling and get into behavioral finance
The science of why storytelling works:
How our energy efficient, metabolically expensive brains transform complicated decisions into easier questions
Yuri Hassan’s research on brain scans and storytelling
Are highly intelligent humans like Nobel Prize winners immune to the powers of storytelling?
Are people buying a fund or are they hiring a human?
CAIA’s research study on qualitative vs quantitative due diligence
A research study on hiring biases
Cialdini's 6 Principles of Influence
The science behind authenticity and how it helps us connect with people
How Daniel’s authentic story about his struggle with Diet Coke went viral and got retweeted by Elon Musk
Is storytelling manipulative?
What qualities a successful salesperson needs (brace yourself for this one)
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About Dr. Daniel Crosby
Dr. Daniel Crosby is a psychologist, behavioral finance expert, and New York Times bestselling author who helps organizations understand the intersection of mind and markets. He is also a father of 3, a fanatical follower of the St. Louis Cardinals, an explorer of the American South, and an amateur hot sauce chef.
Resources mentioned in this episode:
Report: CAIA’s report on qualitative due diligence vs quantitative due due diligence
Podcast: Standard Deviations | EP144 with Stacy Havener - The Power of a Story
Transcript
Below is an AI-generated transcript and therefore it may contain errors.
Stacy Havener: Hello and welcome to the Billion Dollar Backstory podcast. I am your host, Stacy Havener, and today I am joined by Dr. Daniel Crosby, psychologist, behavioral finance expert, New York Times bestselling author of many books, including my fave, the Laws of Wealth, and the award-winning host of the Standard Deviations Podcast.
Most of you will know Daniel for his work as Chief Behavioral Officer at Orion, where he shines a light on the decisions people make about money and why they make them. Or perhaps you'll know him as the finance face of Diet Coke and we will get to that. So Daniel, welcome to the show. Also, I should say, no pressure.
You're the first guest.
Dr. Daniel Crosby: No pressure, no pressure. Don't waste my time with your brand new podcast. No. Congratulations. Congratulations. Congratulations on the launch of the show. Really
Stacy Havener: exciting. Well, thank you. And thank you for being here. Um, so look, I'm gonna ask the question that I've always wanted to ask you, and we're friends and, and I think people should realize, I've never actually asked you this before.
So you are a Chief Behavioral Officer. What does that mean? What do you actually do?
Dr. Daniel Crosby: Yeah. You, you and you and my mom.
Stacy Havener: We all wanna know,
Dr. Daniel Crosby: mom, are both you and my mom are both confused. So I, the best, the best introduction I've ever gotten was by someone who did a little research and said that there have been fewer, uh, chief behavioral officers than people who have walked on the moon.
So I think it is a, I think it is a fair question. Right. That, what does a chief behavioral officer do? So if you think about behavioral finance, behavioral finance to me is just finance that accounts for the beauty and the messiness of, of humanity. And so my job as Chief Behavioral Officer is to help advisors give advice and help my company build technology that, that maximizes the beauty and minimizes the messiness.
So that's my, that's my easy answer.
Stacy Havener: Okay. I love that. That's not so easy though. What if I was in fifth grade? What would you
Dr. Daniel Crosby: say? Okay. So if you were in fifth grade training Tools and technology. Okay. Training tools and technology train. I train. You're a smart fifth grader. No, you're a gifted kid. Okay.
Stacy Havener: But I was, but I mean, you're like a ninja on why people make decisions.
Dr. Daniel Crosby: Yeah. Except Ninja, you can't use ninja or rockstar in the year of our Lord, 2022 . We're, we're beyond. We're behind.
Stacy Havener: All right, fine. All right. We're behind, we're beyond Ninja. How about magician? I don't know. There's something, we, we're gonna work on this, we're gonna have a little session. We're gonna work on this.
Yeah. Yeah. Help me with my, so with that, yeah, we'll help, we'll work on your storytelling. So with that, I'm guessing, did you come from a long line of behavioral scientists then? Like, did you just wake up, let's say in fifth grade and just know this was your
Dr. Daniel Crosby: calling? No. In fifth grade, I wanted to be the catcher for the Cardinals.
Uh, but that didn't, that didn't pan out. Of course. So, and, uh, yes. Yeah. So that, that didn't pan out. But the, the way that, that I got into it was, was very sort of roundabout, you know, a little bit, a little bit like your own story perhaps. Um mm-hmm. , my dad was a financial advisor. My dad is a financial advisor rather.
And so I grew up sort of in a home where, where you talked about investing and you really talked about stock picking a lot. And like even around the dinner table where. we're talking about how to sort of parse a good investment from a bad investment. And when I went to college, I, I very much went with an eye to doing what my dad did, right?
I'm like, I'm going to be a financial advisor. Okay, I'm gonna be an asset manager. You know, something sort of, sort of in this world. Well, I got to my first year of college and took some psychology courses just in, in fulfillment of some GE courses and, and absolutely fell in love. And then after my first year of college, I did something a little bit unusual.
I went and served a mission for my church. So I spent the, the next two years of my life, my 19 through 21 year years, uh, as a missionary in Southeast Asia. So I lived in Manila, Philippines and learned to speak Tagalog and was doing service and things like that. And so I came back with. , sort of this deep fascination with culture and this deep love of people.
And the, the psychology piece had taken root in a, in a very big way. A and at the time, Stacy, I had sort of a binary view of, of finance versus psychology. It's like, okay, so here's finance. These are the numbers people, here's the psychologist. Mm-hmm. , they're, they're helping people. This is the people profession.
And so that's what I want to do. So got a, uh, finished a bachelor's, uh, went on to get a PhD. And, and, and it was only, uh, late in my PhD when I was really doing sort of full-time counseling, but I just candidly just burned out. I mean, I just kind of fell to pieces, uh, because 40 to 50 hours a week of, of talking to people who were in the depths of despair was just too much for me.
Like, I couldn't, I couldn't set up the appropriate boundaries. Like I couldn't. I couldn't not take my work home with me. And so I was just burning out and I knew there was no way, I mean, I was 23 when I started my PhD. I knew there was no way I was going to be able to do this, you know, for the next 50 years.
And so I came back to my dad and said, look, I, I love psychology. I love thinking deeply about why people do the things that they do, but I can't do it in a medical context. Like I'm just not cut out for it. And so he sort of introduced me to this idea that there was a ton of, he goes, well, there's a ton of psychology in, in my work.
And I'm like, what are you talking about? Like, you know, like you're, you're a sales guy, you're a numbers guys, you're an analytical guy. And that, you know, that near suggestion, you know, long story short, set me on a path to begin to explore what, what I now know as behavioral economics, behavioral finance.
But my dad didn't have that language. I mean, my dad didn't. know what behavioral right finance was. He just knew about market psychology.
Stacy Havener: So I, and I I love that. Thank you for sharing. And I imagine that even though you're, maybe you're not always talking to people in the depths of despair mm-hmm. in your current job, there probably are some similarities between that work and those conversations.
I can only imagine that your psychology background is super helpful in, in how you serve people today. Um, also as, as your friend, I, I, I often wonder like if you just see like behavioral biases and other things just like as flags around my head when we talk, which is probably true. That's okay. . I,
Dr. Daniel Crosby: I, I haven't wanted to bring it up, you know, I haven't wanted to say anything, but if you want,
Stacy Havener: if you want a rundown, I've got it.
Yeah, exactly. Um, that was super interesting and. what resonated for me. There was something that you said about your dad, which is he knew these phenomenon were happening, these biases were playing a role, but he didn't have the language for them. Yeah, and I relate to that very much. Kind of being more from the art side of things versus you coming from the science side of things.
And I think that's why today having you as our first guest is so important. Not just cuz you're my bff, but also because storytelling is so art and, and that's how I always felt about it until you and I started having conversations and I realized, my gosh, there is so much science behind why this works.
This isn't just like coincidence. It's not just some like magic sprinkle dust that happens. Like there's actual scientific reasons that this is happening. Um, and. . And so let's start with that a little bit because I am the storyteller. You are the scientist. Can you just tell us, is there a sci am is this true?
Does storytelling actually work from your perspective versus my anecdotal
Dr. Daniel Crosby: one? Yeah, Stacy, one of the things that, that I've observed about you and and other talented sort of psycho, psychologically minded prac practitioners is you end up stumbling onto a lot of the same things that, that scientists have, have spent their careers sort of codifying and naming.
And we really need science and, and practice to work hand in hand if we're gonna, if we're gonna have maximum impact with, with human nature. Cuz each brings their own, uh, you know, their, their own strengths and weaknesses to the party. But yeah, to, to answer your question, I I, I want to dig into this storytelling piece a little bit.
because most people think that their mind is the accounting department, right? They think that their mind is the accounting department, that it's sort of weighing things, uh, you know, making dispassionate decisions, uh, accurately filing data and experiences. Our mind is really the PR department and, and what we know is that all of the science says now that we make decisions rather instinctually, rather emotionally, and then we work backwards from that to make PR plans that, that justify those decisions, right?
And so storytelling is sort of this grand shortcut to that emotional core of a decision. And if you can touch that emotional core of a decision, then you can, you can know that that person's going to engage that PR department and start to tell the story you want to tell. So, to understand why we are this way though.
Let's, let's do dig into the science a little bit. So your brain is small, you know, relative to your body, it's like two to 3% of your body weight, but it, it consumes 20 to 25% of the calories that you expend in a given day. And so it's very energy inefficient. It's very sort of metabolically expensive.
And so one of the ways that, that we are, uh, always trying to, to bring these two things back in line and to, to think less candidly, is to answer an easier question. Okay? So if you are voting for the president, right, like if you, if you are, you know, casting your vote in the midterms, it won't be for president.
But if you're trying to pick a good political candidate at the midterms, you have to consider like, um, , you know, what's their foreign policy? What's their domestic policy? What's their economic policy? How intelligent are they? How sort of, uh, good are they with people? Yeah. How long are they likely to live?
I mean, there's, there's 2000 things you need to consider and then you've gotta wait them appropriately. It's an enormously hard decision. So what you do is you answer an easier question. And the question that most people answer when they're voting is, would I like to have a beer with this person? Right?
And so now if we like, is that true
Stacy Havener: or are you making that up? Or is that really true? It's a hundred percent true. That's unbelievable. No. So, okay, keep going. I
Dr. Daniel Crosby: love this. So, I mean, maybe it's not a beer, but it's, it's like , right? It's like how, yeah. How, how cool are they? Like how, yeah. Do I like this person?
Sure. And so think, think about your world, right? Of, of fun, select. How many, how many funds are there now? There's like more funds now than individual securities. It's crazy. There's 10,000 hedge funds or whatever, right? So when you're trying to parse what makes hedge fund number 9,500 different from hedge fund number 6,212, right?
There's no way that you can split every hair, right? So you, you weed out some of the junk, right? You weed out some of the stuff from an analytical perspective that is just not a fit or the performance is atrocious or whatever. But once you get to that final thousand or so funds, it's gonna be about the human connection.
It's gonna be about who do I like, who do I connect with, who has a resonance story? And then I'm going to work backwards to retrofit, to retrofit the data to fit that emotional narrative. . And, you know, the, the, the final thing that I'll say here for your listeners is, you know, Yuri Hassan, uh, of Purdue and Princeton has a TED talk and some research that I think is just well worth looking into.
And he looks at what happens to our brains when we hear a story. And so he hooks people up to f MRIs, like, so, uh, brain scans, and he looks at the activity in, in, uh, you know, our brain. So we look at Daniel's brain, we look at Stacy's brain, they look very different right at this, at this moment in time. But then they play a story and our brains look identical, right?
So, wow. Storytelling has this power to sync up two people in a way that facts and figures simply do not. So it's important to remember that. and it's important to remember, yes, once you've covered the basics, right? If your fund is disastrous, no one's gonna take right. You know, right. No one's gonna take the time, but, but once you've sort of ticked the, the most basic boxes, it's really gonna be about that story, that, that relational piece
Stacy Havener: that was amazing.
And we should, we could just stop and just loop that so that it really sinks in, you know, seven times to hear it once. Because something I hear from fund managers a lot is, you know, they might say, thanks, Daniel, that's great, but that's not true in the investment industry because we're all wicked smart.
And so that doesn't happen here. And what, how would you like, give me, what do I say to them when they say that? I mean, I obviously, I tell them, actually, no, this is a human thing. It's not an intelligence thing, but how would you address that? .
Dr. Daniel Crosby: Yeah. You know, one of the thing, , one of the things that, that I like, uh, about my world of human behavior is it's so pervasive.
I mean, it is a human thing. Like no one is immune to these things. Yeah. And if you look at, you know, even my sort of by guiding light here as Daniel Kahneman, right? Daniel Kahneman, who won a Nobel Prize for his research into these, into these matters about 10 years ago, you know, when they ask him like, Hey, how has your own decision making improved?
Like, uh, you know, how is your own ability to fight bias improved as a result of being like the granddaddy of behavioral finance? And he says, effectively, not at all, because like, I'm still a human. And even though I know all of these things, I still fall prey to them. So, you know, people in our industry who, who would look you in the eye and tell you that they're not susceptible to.
Narrative or that they're not susceptible to some of these behavioral things that we're talking about, and it's the height of, of hubris and it's just not true. Um, you know what's right, what's, what's even wilder. And maybe this, this will be a point for, for future conversations. When I was writing the behavioral investor, I looked at the excitatory power of different conversations on our mind.
So again, going back to our F M R I machine, you hook someone up to this, a apparatus, and then you have different conversations with them about sex and death, money and religion, you know, all these hot button topics. And the one that excites the mind the most is money. Like more than sex. Mm-hmm. more than death, more than fear, you know, more than religion or politics.
Money makes us go absolutely haywire. And so, you know, you, uh, you are never. Dispassionate about money and the fact that we work in this industry doesn't mean we're less dispassionate. It means that we're crazier. If anything, .
Stacy Havener: Thanks. Preach on that. Um, and actually this is, you know, we were talking, um, sometime back the, so CAIA, um, and I wish I could unpack that acronym, but I'm not gonna be able to, I'll have to put that in the show notes.
But CAIA, um, did this study on allocators and it was amazing because again, it started to put data around something that I felt for a very long time. And so one of the things they researched in this study about how allocators make decisions is what is the role of qualitative due diligence as compared to quantitative due due diligence.
And they did something really cool because they didn't just ask the allocators. They then turned around and asked the asset managers what they thought the allocators answered here. And no surprise there was a massive disconnect. So the first point in that study was, um, qualitative due diligence is as important, if not more important than quantitative.
So that's 0.1. But 0.2 was when the asset managers were asked how the allocators weighted things, they overwhelmingly said the allocators favor quantitative over qualitative. And you know, in my mind, I'm sort of like have this phrase that swirls around in my head, which is, I guess it's a question more than a phrase, which is, are people buying a fund or are they hiring a human?
And I would love to get your thoughts on that. The study, the whole thing.
Dr. Daniel Crosby: Yeah. So let's go back to the, the CAIA research, right, which is Chartered Alternative Investment Analyst, right? That's I think what
Stacy Havener: it's, thank, see this is why, this is why I have a friend who's a scientist, .
Dr. Daniel Crosby: So the CAIA study.
The CAIA study, right? It, it, we have to understand first of all that people are not good reporters of their own behavior. Cuz go back to this idea that your mind is a PR agency. It is feeding you plausible nonsense all day to make you move through the world in a way that doesn't, uh, sort of let you in on how, how truly emotional you are.
So there's all kinds of research. There's research on hiring, and when they say, oh, there's, there's great research on hiring. They, they created fictional, uh, police chief. Reports. Right? And so one was a man and one was a woman, right? And so this is, uh, a role that at least historically has had a strong gender stereotype with it, right?
Historically, we associate a police chief with being a man, right? And so, people, by and large wanted to hire a man for this role. So they created two different profiles. One was very sort of street smart, smart smart, street smart and experienced. The other was, uh, sort of, uh, had a great pedigree, right? Like advanced degrees, lots of criminology expertise.
And so then they presented them as a man and a woman, right? Whichever one was the man, people said was the winner, right? So they said, look, when, when the man was presented to them, when the man was street smart, they said, yep, we wanna hire the man, uh, because he's street smart. And that's better than the woman when the tables were turned.
they still wanted to hire the man because they said, oh, well he has a better pedigree. Right? They retrofit their desire to hire a man, uh, onto the facts of the case, and we see this again and again, and again and again. Right? So going to the CAIA study, right? First of all mm-hmm. , we have to understand that no allocator is going to look at their process and go, yeah, I make emotional decisions.
Right? It's not in their best interest to do that. Their PR department, it is not making them privy to that information. The best research that's ever been done on why people do what they do and why they make decisions comes from Bob Cialdini and his, his research on influence, right? If you look at the influence, like, so Cialdini isolated the six pillars of influence, and there is some analytical stuff in there.
You know, one of them is authority and. , that's part of it, right? Your fund has to be good enough. There's certain boxes that you have to tick, but if you look at the other sort of pillars of how we make decisions, you get stuff like liking, right? We get stuff like liking. So how much do I like this person?
We get stuff like social proof. What are other people doing? What are other allocators doing? Right? Nobody ever got fired for choosing I B M kind of stuff. That's social proof, that's hurting. And then there's reciprocity, right? There's, we know that people do business with people who have done nice things for them, you know?
So it's everything from, yes, the authority piece, how good is the fund, but it's also at least as much, how much did I like the, the people at the organization? What are other people doing? Were they nice to me? Did they buy me dinner? You know, I mean, you know, these sorts of things. are a bigger determinant than sort of the meat and potatoes of the fun performance.
Stacy Havener: Very well said. And, and I think, you know, so, so staying with the, the CAIA study, when you have the asset manager who thinks, oh no, the allocator only cares about the numbers, what happens is then you have, you know, a, a table proverbial table where two people are sitting there having a conversation. The allocator might wanna know things like, who are you as a human being and who are the other people at your firm, and what's your culture like?
And how do I know you're gonna stay there? And your team is incentives to stay there? And what's your process? What's your philosophy? What are your values? Like all of these qualitative things, how do you think about risk? And the asset manager is sitting there saying, here's my data. Here are some charts.
I've crushed my competition. Here's 18 different ways you can see that. , any questions? Maybe you wanna talk about my portfolio? We can do that. Wanna know what I have the highest conviction in? And that is why those conversations break. Mm-hmm. , they break down because one side wants one thing the allocator wants more about Who are you?
I'll get to the numbers. I've seen them. I don't need you to show me the charts cuz I, I have, you know, whatever research software I use, but what I can't get from those software system is who are you as people. Yeah. Yeah. And so I, I love Cini, but yeah, keep going, please.
Dr. Daniel Crosby: Yeah. And even, you know, even going to that authority piece, Cialdini found that, that even authority, like unmitigated authority is obnoxious, right?
I mean, there's a reason why, right? You read my bio and, and I didn't read my bio right? I didn't come on here and say like, oh, hey, I wrote these books and I did these things. Because people go, God, who is this? Right. So like even, you know, even the process of talking about how great our fund performance has been can be a little off-putting if it's not sort of counterbalanced by some of these relational things.
I mean there's a world in which you talking solely about how awesome your performance has been is seen as hubris or arrogance and, and is offputting to people. So not only is it not everything, it could actually work against you. You know, the research shows if you don't so true if you don't do it in a balanced way.
Stacy Havener: So true. And I think if people buy your performance, cuz maybe there are some people who are chasing performance and you know that that's all that is what they care about. Well the thing is, if they buy that, if you find someone that that's what they want, guess what they're gonna sell. Yeah. Your performance, when you're down, they're not gonna ask why.
They're not gonna give two craps about what's going on or you know, you're out of favor. They're gonna literally hit. The, the cell button. And so, you know, there's another side to it, which is not only getting somebody to choose you, but then to keep them with you.
Dr. Daniel Crosby: It's, it's a great point because, you know, you, you want to control the controllable, right?
And we know that even among the most talented managers, right? There's, there's long periods of underperformance. Even in top decile funds, we'll have 1, 2, 3 years of underperformance. And if you don't have those other sort of hooks, right, if you don't have those other points of connection, your toast, I mean, you don't wanna live and die by that first sword.
It's a, it's a hard way to run a business.
Stacy Havener: Agreed. So I wanna go to authenticity and, and we talked, um, about this a little bit when I was on your podcast. And again, I, so I think it was the pratfall effect. Is that right? Am I saying that right? Um, and if you want to, this. Yeah. So this was, it was awesome. It was one of my favorite, um, parts of that podcast.
Um, but instead of doing that one on authenticity, I wanna talk about something that I see so often in you mm-hmm. , and that's humor. So I, I actually was on the phone with a, a very large, very well-respected, uh, investment boutique. And they, and they were asking, they were sort of sharing with me, like, we get into these finals presentations and we just never win.
And my question to them was, well, how often? So my first question was, how often does anybody laugh? And I mean, they were like, what? Like, does not compute, right? And then I said, okay, forget laughing. How often does anybody. and they were like, no, no one smiles. Like this is very serious work. And, and my heart kind of broke a little bit cuz I thought, oh my gosh.
Like, just so unfun. But can you talk about humor and the power of that from a, the authenticity perspective? You're so good at it.
Dr. Daniel Crosby: Yeah. I, I appreciate it. You know, there's, there's really four things that we look at. You know, for, for a psychologist like me, we wanna operationalize everything. We want to codify it, kind of put parameters around it.
And so when people talk about authenticity in a vacuum and how likable it makes you, I just kind of roll my eyes. But if we, if we want to get into like, the science of authenticity, here it is, right? Yes, please. There's, there's four things that we look for when we want to connect with someone authentically.
So we'll start with the one that you brought up, which is humor. We consistently across cultures like people who are funny. . And if you think about some of the best, um, you know, public speakers you've ever heard, very commonly they start off their remarks with some sort of a joke to get the, the audience on their side and to sort of cre create that bond.
The other thing that we know, just from a stickiness perspective is that humor makes learning more enduring. When, when we interject, you know, say you're giving a pitch, say you're giving a presentation and you're one of, uh, you know, however many that are that are pitching that day, we know that humor makes presentation stickier, that people have far better recall for humorous information than they do.
Uh, then they do sort of draw information. So if you want to be remembered, if you wanna stand out, if you want to be likable, being humorous, being funny is, is a fantastic way to do that. The second one, we won't spend much time on, it's being attractive, right? . So we like people who are, we like people who are good looking.
Uh, which isn't super shocking, but, but we also know from the research that good looking doesn't mean you have to look like a model. I mean, it basically means you're, you know, you're, you're well put together, you're well dressed, you're clean, whatever, right? So we like people who are attractive. We like people who are funny.
We like people who give us compliments. And the, the research here is really funny, right? Um, we actually like people who give us compliments, whether or not we perceive them to be sincere . So, um, there, there's actually this advisor, there's this advisor who I hope is, hope is not listening to this. I hope he is not a Stacy fan, because, you know, every, every time I go home and, uh, you know, I'll be out with my wife, you know, getting dinner or whatever, we inevitably run into this guy.
I'm from a pretty small town and, uh, we, we'll run into this guy and he'll, you know, he'll come up to my wife and he is like the consummate southern guy, you know, and he'll say, oh, you know, you look so beautiful. Like, I can't believe, you know. Can't believe you look so beautiful. You're so smart. You're so funny.
You're so great. You know, how'd you have three kids? Just like on and on, like Rapid fire compliments. And the, the last time he did this, I was like, oh my gosh. Like that guy is so full of crap. Like, you know, like as he was, as he was walking away, you know, to my wife, I'm like, chase. I'm like, that guy is so full of it.
And she goes, yeah, so why do I love it so much? And, you know, we're all, we're all my wife, right? We like people Yeah. Who pay us compliments, whether or not we perceive them to be sincere. So I, I would tell you don't give insincere compliments, but, but we know that that compliments work. And then the final thing, Stacy, is the, is the least utilized and it's, we like people with whom we share a common struggle that is like authenticity, you know, that is like black belt level authenticity.
If you can connect with someone over. Shared interest. Right? You, you both like golf for you both like the same football team or something. That's okay, that's good. But if you can connect with someone over a shared struggle, that's incredible. Right? This is stuff like, you know, uh, this could be anything.
Right? I've connected with a lot of people over raising kids, like raising kids is fraud. Sure. Right? Raising kids is tricky. It's scary, it's uncertain Sometimes even when you have happy, healthy kids, that's a point of connection. You know, having started a business like the early years of starting a business, right?
A lot of these folks will have been there and, and be honest about your struggles and look for common commonalities and common points of connection. This is the one where I think we leave a lot of value on the table cuz our, you know, our parents told us that, that if we don't have something nice to say, we shouldn't say anything.
And so we don't want to be candid about our struggles or, or our shortcomings or our pains. But here on, on National Mental Health Day, which is today, I think we should, we should own these things and, and just be candid about this and look for points of connection where, where someone we're trying to connect with may have been through a similar thing.
Stacy Havener: Gosh. Well, a masterclass on authenticity. Thank you for that. That is so good. And then I would say like, for additional homework, go watch the podcast we did, where you unpack Pratt fall effect too. Yeah. Um, the struggle thing is so good. I mean, all of it is good, but that struggle because it's so inter integral to a good story.
If there's no struggle, if there are no stakes, no one cheers. . So if you think that you're gonna like polish your story and it's just gonna be this really neat, like everything's rainbows and unicorns and look at all the great stuff I did, guess what? We're a story ever. You have no fans because that's not real life and you haven't given the person you're talking to anything to hang onto and the middle is messy and that has to be there in your storytelling.
So I love that you said that it's super hard for people to do in general, but very difficult I have found for investment managers to share. I had one manager who was asked like, tell me about a mistake you made and sort of, you know, what you did with it. And they literally refused to answer. Refused to answer.
Needless to say they did not get the allegation, but like they don't wanna share. Yeah.
Dr. Daniel Crosby: Yeah. I mean there's too much sort of bravado and masters of the universe stuff, but you know, think, okay, so we, we'll take it from. Um, sort of a literary perspective, and then we'll go to the, the psychological perspective.
I mean, from a literary perspective, a story with no conflict and no struggle, like you said, would be the worst story ever. And you are telling a story, it would be a completely useless story without something you've overcome from a psychological perspective on the authority front. Chal dini's research shows that your authority is at its absolute peak.
When you are candid about something you don't do well or you're candid about a weakness, and you follow it up immediately after with your greatest strength to say, look, this thing was tough, but now we're doing this. Right? The, the easy example, this is a silly example, but it's, it's one that I think we've all been through, is when you go to a restaurant, right, and you, you ask the, the server, you know, what's good here?
And they go, oh, everything's great. Like, everything we do here is great. And you're just like, that is the worst. That is the worst answer. And you know, when, when, when they say to you like, look, don't get the fish, do get the steak, or, you know, whatever. You go, oh, okay, thank you. Like, you know what I mean? We, we trust that person More research shows, we tip them better when they are honest about like, look, this is not good.
Like, this is not great. So true. This is great. Just be honest about it and own it.
Stacy Havener: That is so true. And I'll give an an investment example. So this is one of our, our former clients. He was amazing. Um, all our clients are amazing. I guess you can't have a favorite client, right? But, but there are, there are favorite pieces from all, all different clients.
But this one was, um, a red flag's checklist and anybody can implement this. So basically what this, um, founder, portfolio manager did was for every mistake he made, he would say, I am gonna put this on a list that I will check. For every investment I make so that I won't make that mistake again. I will for sure make other mistakes, but I'm gonna try to sort of mitigate the bias of making that particular mistake again.
And so this checklist grew over time and it was literally part of his process. And I thought, what a simple but brilliant way to kind of a, to just get better at your craft, but also to just show how you respond to mistakes because we all make them. Yeah. Checklist, red flag checklist. I love it. I love it.
So good. Yeah, I think we should all have that. Um, alright, I wanna switch gears a little bit because I said at the top that people might know you as the finance face of Diet Coke. . And if people haven't seen this, because maybe they're, they're like me and they don't love Instagram, which is where maybe you're sharing a lot of your Diet Coke stuff, even though I know it started on Twitter.
Can you give us the backstory of this?
Dr. Daniel Crosby: Yes. So a few months ago, um, I decided to quit drinking Diet Coke, right? So I, uh, I drank a ton of Diet Coke. I would, you know, we won't talk about the specific numbers, but it was a lot. I was drinking, I was drinking a lot of Diet Coke, and it just wasn't, you know, it wasn't good for me, right?
It wasn't good for me. So, so I quit for a period of about, uh, about four months. And so I put this sort of sarcastic tweet out on Twitter that said, Hey, you know, you see these sort of, um, these threads on Twitter that are like, Hey, I did this thing and it worked for me. Let me tell you how to do it. So I said, Hey, you know, whatever.
Three months ago I stopped drinking Diet Coke. , uh, I want to talk about some of the changes in I've seen in my life and I said something like, you know, my one reason for for living is gone. I've lost no weight and I've seen no differences in my health. Or, you know, something sort of snarky like this. Well, it went kind of crazy.
Um, it had gotten about 8 million interactions. Um, as of about, you know, the time I went to bed, I was actually in, in Utah visiting family at the time. And so I went to bed and I'm like, yikes, this thing is really, you know, really doing numbers . And so, you know, I, I wake up the next morning though. We, we are on vacation and so I go to a, a minor league baseball game.
I'm a big baseball fan. I go to a minor league baseball game with, with my family, and I start getting texts that said, you know, omg. Elon Musk. Elon Musk. And I'm like, what is, like, what is going. . And so figure out that Elon Musk had retweeted my tweet and then had commented on it a number of times, talking about how much he loved Diet Coke.
And Elon's mom retweeted it. And so it just went crazy. And I was getting calls. Um, you know, uh, Buzzfeed did an article on it. All these sort of other aggregators did articles. It was the number one trending topic, uh, in the world on Twitter for, for a day. And it was just this really strange, surreal thing.
Like 35 million people interacted with it. I mean, that's like one in 10 Americans, right? I mean, it was just, it was incredible. But then, you know, there's sort of all the peripheral weird stuff that happens too. People were fighting in my comments about, I mean, literally, uh, e everything, right? Like how Koch was, you know, part of the new World order and trying to like, bring about Armageddon and like conspiracy theories and.
And health nuts. And I just had to sort of tune it out. So it ended up just being this funny thing, but in the moment it was actually really kind of anxiety provoking. Like it was really strange to be like, all of these people are sort of looking at me. And it was, it was really sort of strange. Now I just sort of laugh about it, but it was doing such numbers and it got so many kind of weird people in my sort of social media front yard that it was strange for a moment.
So
Stacy Havener: thank you for sharing that. And I would like to take another side to this and it goes back to authenticity because everything you described when you unpacked the sort of four principles of principles of authenticity you sort of had in that tweet. If you think about it, there was a struggle, right?
There was a little bit of humor. Um, and. , I'm sure it was incredibly surreal, but also it made you really human. Yeah. Like that is something, right. And, and for, it may be hard for you to believe, but there's a lot of people who, you know, see you up here and you know, you're wicked smart and you have this big job and you're, you know, luminary or all these things that you are, and this made you a real person.
And one of the things I know that happened since is like, people now when you're at a conference, they're not just coming up to you with their favorite Daniel Crosby book. They're coming up to you with a can of Diet Coke and asking you to sign it. And like that's really amazing.
Dr. Daniel Crosby: It, it's really funny.
Like, so first of all, great, great connection you just made, you know, I had never thought about it in those terms, but you know, this, um, this ad agency in, in England. actually did a breakdown of my tweet and sent me their white paper on, I mean, it was wild. This thing was so strange, but it went, so, it went cool.
It was so nuclear. But they, one of the things that they identified, they were like, how did this go so viral? And they said it was sort of self effacing, right? It was, it was humorous. Mm-hmm. and sort of poking fun at myself. It's like I did, I didn't get healthier. I didn't lose weight. Like I didn't, you know, I didn't feel better.
Like, and, and sort of the, the honesty about that in a world full of threads about how everyone's crushing it, uh, I think was, was refreshing to people. Yeah. So I think, you know, and,
Stacy Havener: and agreed and a simple joy
Dr. Daniel Crosby: mm-hmm. . So yeah. Now, now I'm back on. Now I'm back addicted, but I'm, I, I'm happy to say I'm about 50% of, I'm drinking about 50% as I mu as much as I was before, but still enjoy one.
Enjoy one every now and then, especially with Mexican food or a burger or something. You got to,
Stacy Havener: yeah, it's, it's too good. Well, I love that. It's actually a great case study of authenticity in my opinion. Um, now when I first saw you speak, this is before we were friends, it was a Schwab conference, so no, this is a little bit of a, um, a walk down memory lane.
Like this is your life, Daniel Crosby. I think, actually you're gonna hate me, but I think you were talking about this book here. Yeah. Personal benchmark probably. So do you remember what year that was?
Dr. Daniel Crosby: I mean, I think, I don't even remember when that book came out. I think that book came out in 2013, so 2014.
Okay. Yeah, it might've been a while ago.
Stacy Havener: So that was a very long time ago. Um, but I remember it distinctly because here you are on this stage, obviously, you know, with all this incredible knowledge and expertise you're sharing with us. Yes. Um, and not to keep that humor thread going, but it, you were funny and you told stories and so, and, and, and since I've known you in everything you do, you, you, you tell us the bias or the effect or the kind of the scientific part.
You explain it in a way that we can understand and then you bring it to life with a story. And I'm assuming that's intentional, but to me it's an example of the power of storytelling. And I just wanted you to explain like is, I'm sure it's intentional, but is it intentional? And, and why do you do
Dr. Daniel Crosby: that? So it's, it's a hundred percent intentional and I'm, I'm in the very early stages of, of working on a new book, right?
I was scarred by writing three books in five years and I needed a little break. But , I'm getting, I'm, I'm, I'm getting back on the horse. And you know, when, when I've been talking to my research assistant about, about putting this together, I said, look, here, here is the formula. , we're gonna begin every chapter with a story, which is your hook, right?
We're gonna, we're gonna hook the reader with a story. Then we're gonna move on to the specifics of the science, right? What does the science say about the principle that we tried to illustrate with the story? And then we're going into like bullet point specifics, right? You know, we're going to, we're gonna talk about, you know, the, basically the why, what, and how.
And so there's the idea that you're not a storyteller. I just, I just, uh, I, I push back on that, right? Because if people are meaning seeking creatures born into a world where meaning is not always easy to find. And so religion, government, art, money, economies, all these things are stories about why we're here.
how the world works, what the good life looks like. All of these things are stories and, and storytelling is just about taking chaos, right? The chaos that the world presents us and packaging it and presenting it in a way that's, that's pleasing and memorable to the human mind. And so you, you cannot help but be a storyteller.
You can be a bad storyteller. Like you can tell like sloppy, haphazard, unintentional stories , right? But you cannot, like, you cannot keep from being a storyteller. So like, you're at that crossroads the minute you were born, you were born into a storytelling universe. And so it's like, do you wanna, do you wanna follow Stacy Havener on, on LinkedIn and, and listen to her, you know, the Gospel of Stacy and become a good storyteller?
Or do you wanna be, uh, you know, sloppy with it? Uh, you're gonna tell stories. Yeah, you might as well tell the good. .
Stacy Havener: Oh, that's so good. That's a quote right there. That's amazing. Um, okay, so what about the other side of storytelling? Can we talk about, talk about the dark side of stories. Mm-hmm. . Mm-hmm. . Um, and I've had more than one person say this to me, oh, lipstick on a pig.
You know, you tell stories when you've got, I don't know if you can say a bad word on podcast, so I won't, I don't know. I'm learning. So if you've got a crap product, you know, you, you tell a story about it and you're basically, it's basically manipulation. That's the knock. And how do you respond to
Dr. Daniel Crosby: that?
Yeah. So with all of the things that we've talked about right there, there's certainly the potential for that, right? I mean, there are certainly people mm-hmm. who tell stories with the intent to, to mislead or or to lie. I'm gonna assume, though, for the average, you know, For the average like boutique fund manager, they're just trying to tell a story to get people, you know, to, to take, take a look at them in a world where it's hard to get a look.
So we have this weird obsession, you know, kind of going back to our authenticity conversation. We have this weird obsession with being sort of off the cuff or impromptu in our communications, right? Like, you would never show up to an important meeting with your boss completely unprepared and just go like, this is me.
Like, you know what I mean? , you would ne , you know, you would not, um, you would not fail to prepare to run a marathon because that's an inauthentic accounting of your athleticism, right? You wouldn't, you wouldn't have a child and go, well, I'll just wing it because that they should get the real me. And yet, like we show up to our communications all the time.
with little or no preparation because it feels, you know, manipulative or, or stilted or something. If, if we prepare too much. No. Like again, we are walking bundles. My whole, my whole shtick, right? My whole area of study is we are walking bundles of values and bias and preference and psychological scar tissue.
And that's true of us, and that's true of every person with whom will interact. And so the process of telling a well-crafted story is not a manipulation. It's an opportunity for us to reflect on those biases and those values and to be thoughtful and intentional about the story that we're telling instead of just going an autopilot, which is where the nasty parts of, of those biases and those, those values can sort of rear their head.
So again, you don't show up to other parts of your life and just wing it. because that's, that's what it takes to be authentic. Why are you carrying this bad idea to your communication and your storytelling efforts?
Stacy Havener: Agreed. It's so dangerous. It's so dangerous for people to think that if they prepare or if they tell a good story, that it's going to be received as negative or manipulative or spin or inauthentic.
And there that perception is, is real. Yeah. Um, being a good storyteller doesn't mean you're some like slick sleazy car salesman hawking, like fund products, right? I mean, that's not what this is about. Um, so I have a question for you. I know I started with a a, a real question, and this is another real question, , so I know a little bit about behavioral bias and how powerful that is.
in the sales process. Like literally it's something we track. I mean, it's super predictive in closing a deal. Mm-hmm. . And so I, I sit here as your friend and I see all this amazing work that you're doing, and I have one really big question that always pops into my head, which is, why are you not in sales? I mean, you would literally crush it.
Dr. Daniel Crosby: So, so I would make more money if I were in sales. I'm confident of this. So thank you for your concern. I think if I had spent my career in sales , I, I definitely would've made more money. But, you know, I'll, I promised, uh, to tell you sort of a funny story. I, my, my first job after getting my PhD was in, um, pre, pre-employment assessment of bank executives.
So they would bring me in at the ripe old age of, you know, 27 to sit down with sort of the future CEO of a bank. And I would give, you know, him or her, A personality assessment, an IQ assessment in like a four hour interview to sort of try and assess the fit between them and, and the organization. See how smart they work.
So if you look at the, the psychological literature on job success, right? The, the two things that are the most predictive are first intelligence, like iq, general intelligence is the most predictive of job success, uh, in, in almost every job. And then the second is, um, sort of how organized you are. You know, if you get someone who's smart and organized, that's a formula for success in just about every endeavor except for sales.
And so the thing that we found is that salespeople, you didn't wanna hire the smartest person in the world to be a salesperson, and you actually didn't even want them to be. All that organized. The relational stuff was far more important. , you know, the EQ stuff was, was far more important when we were hiring salespeople.
So I'm probably too stuffy. I'm probably too nerdy to be as successful as all that in sales. So I appreciate the vote of confidence. I probably should have done it, but here I am. I love my job and I love my work. So we're gonna have to leave it to people who are, well wait a
Stacy Havener: minute, wait a minute. Time out, because you're being really southern yourself right now.
So basically, let me just say back to you what you just said. Um, you're too smart for sales. And also not that I'm gonna be like, you know, sort of see myself in this conversation. But you did just say true or false, that actually good sales people are, are, are not that intelligent. . No,
Dr. Daniel Crosby: not I basic. Okay. I think I did credit.
Stacy Havener: Don't worry. I, I'll .
Dr. Daniel Crosby: I think I did say I'm too smart for sales. I'm gonna give you that one. Dr. Dr. Havener. It was a good observation. I did say that, but it's not like you want an unintelligent person. It's just not, it's not like you don't necessarily want the one 60 IQ in a sales job. They get bored. You want someone intelligent, right?
You do want someone intelligent. But in almost every other endeavor, intelligence is like an unmitigated good. Like the more the better. And in sales it's like you want an above average level of intelligence, but not so much that, that they may find it boring. or that intelligence, I mean, we've seen very consistently that sometimes high levels of intelligence and high levels of emotional intelligence don't go together, uh, in the wild very often.
Yes. And so you, you, you do want someone with the high levels of, of emotional intelligence as well, but Yes. No,
Stacy Havener: and you got, and I was more, I mean, that was really good. And, and look, we've all seen it, right? We've all been as salespeople in this biz. We've all been with sort of the, the brilliant mind, um, on the investment side.
And you bring them to a meeting and if you just let them go, it's gonna be a disaster, right? Mm-hmm. , you need both. And so, um, but yeah. Okay, so that's fine. I'm gonna, I'll do some like mantra and some, some work after this to try to build myself back up, but I really appreciate your candor and your authenticity around that topic.
Thank you. Um, okay. I have a fun thing I wanna end with, but before we get there, given everything we've talked about today, And given, you know, your journey, I'm not gonna ask you what advice you'd have for yourself, like the younger you, I really want to know what's the advice you have for founders? What's the advice you have for founders in finance and investment?
Um, I just tell us what, what you, what you'd share with our listeners around building in this space.
Dr. Daniel Crosby: Yeah, so keeping with our behavioral finance theme, I think I have two sort of primary areas where I think that could make you stand out in your business. The first is everything that we've talked about today, just designing and building your sales approach with an eye to storytelling, with an eye, to a deep understanding of how people actually make decisions.
Not how they account for those decisions, but how they actually make decisions. And I think that your go-to-market strategy, right, the way that you hire, The way that you tell your story, the way that you incentivize people. All of that I think will be materially impacted by your study of human behavior.
The second in sort of a more nuts and bolts way. Stacy, this is something that you and I have talked about. I think there is a lot of opportunity for sort of behaviorally focused product for, for sort of behaviorally focused bonds. Yeah. I think that human behavior is the only source of enduring alpha.
You know, you look at every, you know, every time sort of a new, uh, market anomaly gets discovered and publicized, it quickly gets arbitraged away except for the ones that have human behavior at their root. So, you know, we can count reliably on people to make the same dumb mistakes a hundred years from now that they're making today
And so like, I think, I think we need product that is explicitly behavioral in nature. Uh, so I think it can inform not only the way that you. Go to market and the way you build your business, but it could actually underpin the very essence of
Stacy Havener: your product. Oh, I love that. The last great inefficiency. Um, that is so good.
Thank you for that advice. Okay, so now I don't wanna say this is my favorite part, but I have always wanted to do this. So this podcast may or may not be, just so I can do this, and I've asked you this before, um, about whether or not you ever watched inside the Actors studio with James Lifton, and thankfully you had, so that's good.
Um, and so if, if anybody listeners remembers this, it's was basically, um, about, is about actors and about the people themselves, right? Their journeys, their careers, things they'd worked on. And in every episode, James Lipton would end with 10 questions. Yes. And the idea is that it give these questions, um, are modeled after Proust's questionnaire.
Did I get that right, Daniel? Because, you know, I struggle with that one Prust questionnaire, and so I came up with a version of it. Some of 'em are direct lifts from James Lipton. And so I'm gonna ask you the questions and you just answer them, um, without explanation. Okay.
Dr. Daniel Crosby: No editorializing. Are you ready?
Just, just quick
Stacy Havener: answers. No editorializing. Okay, go ahead. Just the answer. And then if we have time, we'll, you know, maybe we'll pick one or two and have you unpack it a little bit. But this is so we can get to know the real Daniel even more than we have. Okay. Are you ready? Ready. Okay. What is your favorite word, ostensibly.
Oh, love it. What is your least favorite word? Und.
I'm not supposed to laugh. I don't think I'm supposed to laugh. Hold on. . Okay. That was a great answer. I don't, okay. What book inspires
Dr. Daniel Crosby: you? Uh, man. Search For Meaning by Victor Frank? Mm.
Stacy Havener: What person inspires you? My mom.
What is your walk out Anthem?
Dr. Daniel Crosby: Diet Coke by Pusha Tea, of course. Oh
Stacy Havener: my gosh. What is your happy place?
Dr. Daniel Crosby: My office with a book.
Stacy Havener: Ooh. What makes you uncomfortable?
Dr. Daniel Crosby: People who have a poor awareness of how their actions impact the people around the. .
Stacy Havener: Hmm. What profession, other than your own, would you like to attempt
Dr. Daniel Crosby: fund manager or catcher for the Cardinals?
Stacy Havener: What profession would you not like to do?
Dr. Daniel Crosby: Uh, anything that requires me to two do physical labor.
Stacy Havener: And the last one is the epie question. What do you want people to say after you're gone?
Dr. Daniel Crosby: I want to leave, uh, a legacy of leading people to ask themselves hard questions.
Stacy Havener: Perfect. That was perfect. Thank you so much, Daniel, for your time, your candor, your authenticity. I think this is the exact way I envisioned starting this podcast series.
With the science behind why storytelling works and even more to let people start to see that behind all these products and behind all these, uh, philosophies and portfolios, there are real humans. And you've done an amazing job of sharing yourself with us today.
Dr. Daniel Crosby: Well, Stacy, your voice is a gift to the industry and I'm proud of you and I'm so excited to be, uh, a regular listener to your podcast.
So congratulations.
Stacy Havener: Thank you. Thank you so much.
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