Episode 11: The Scientist & The Storyteller | A Collab from Dr. Daniel Crosby & Stacy Havener | The Psychology of Sales | Unpacking 3 Behavioral Biases to Help You Close More Deals
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This is the first of a 4-part miniseries with Dr. Daniel Crosby, Chief Behavioral Officer at Orion and host of Standard Deviations podcast. We are joining forces because selling successfully requires combining art and science. Right brain and left brain.
In this episode, Dr. Daniel Crosby and I discuss 3 behavioral biases:
Mere Exposure Effect: our tendency to develop preferences for things simply because we are familiar with them
Loss-Aversion Bias: a cognitive bias that describes why the pain of losing is psychologically twice as powerful as the pleasure of gaining
Status Quo Bias / Inertia: aversion to change
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:
Book: The Behavioral Investor
Book: Alchemy
Transcript
Below is an AI-generated transcript and therefore it may contain errors.
Dr. Crosby: People like it. If you're a little edgy and you're a little opinionated, and I know this is what you preach all day, what's the lesson for asset managers? Don't be afraid to have an opinion and don't be afraid to go negative to a point. Don't be afraid to compare and contrast your style with the bigs.
Stacy: Hey, my name is Stacy Havener. I'm obsessed with startups, stories, and sales. Storytelling has fueled my success as a female founder in the Toughest Boys Club, wall Street. I've raised over 8 billion that has led to 30 billion in follow-on assets for investment boutiques, you could say against the odd, yeah, understatement.
I share stories of the people behind the portfolios while teaching you how to use story to shape outcomes. It's real talk here. Money, authenticity, growth, setbacks, sales and marketing are all topics we discuss. Think of this as the capital raising class you wish you had in college, mixed with happy hour.
Pull up a seat. Grab your notebook and get ready to be inspired and challenged while you learn. This is the Billion dollar Backstory podcast.
So a scientist and a storyteller walk into a podcast studio. That's how the story goes, right? Well, that's how it goes here, my friends. I'm super excited for this four part miniseries with my B five Bestie. Dr. Daniel Crosby, chief Behavioral Officer at Orion and the host of Standard Deviations Podcast.
This is not the first time Daniel and I are teaming up, but it may be the best yet. I've been on his podcast, he's been on mine, and now we are joining forces because successful sales is art and science. It's right brain and left brain. It's Daniel's unique ability and it's mine. Together. If you want to get good at selling, you've come to the right place.
I don't know, it's kind of like two rappers in the studio, freestyling. At least that's what I'm telling myself. So stop, collaborate, and listen. Here we go. Dr. Daniel Crosby. Thank you for coming back to the Billion Dollar Backstory podcast studio for something pretty special.
Dr. Crosby: It is pretty special, and thank you for coming back to the Standard Deviations Podcast Studio for something pretty
Stacy: special.
I mean, which therein lies the magic. Daniel and I came up with this idea to do a podcast Minis series. It's basically your two favorite podcasters, you know, collabing like rap artists, two of them
Dr. Crosby: cause most wanted, if you will.
Stacy: Yeah. In all the ways and the idea. I'm gonna just kind of throw this out there.
This was the idea. Daniel, you can add to it, is that sales success is a combination of two things, art and science, left brain, right brain, and the magic of successful sales really sits at the corner of.
Narrative and behavioral, and so obviously your unique authority, Daniel, is in the science of human behavior, and mine is in the art of storytelling and together, well, obviously that's the collab of awesome sauce that we have here in front of us today.
Dr. Crosby: That's right, but what's the name? What's the name of this
Stacy: class? Oh, well the name is so good. Yeah. We've actually said the name in other promos of podcasts we've done together, which is the scientist and the storyteller.
Dr. Crosby: I love it. And it takes advantage of, uh, of a behavioral bias. It does. Yeah, it's called the Rhyme as Reason Effect.
People believe things to be more true if they rhyme or they're alliterative, so our alliteration makes people believe we know what we're talking about. There you go.
Stacy: Wait, is this why I'm successful in sales with a background in poetry? Like did you just have a major unlock for me? Like this is now also a therapy
Dr. Crosby: session?
Yeah, no, that's, that's exactly why. And it's back, I can't remember, but in the OJ trial, the famous version of this, Was if the glove doesn't fit, you must acquit or whatever it was like, I can't remember if it does or doesn't fit, but yeah, if the glove doesn't fit, you must acquit. And people really do believe when something rhymes or it has alliteration, people believe it to be more truthful.
So the science, I mean, this is, this storyteller is so legit.
Stacy: It's so legit. Okay, so I'm kind of the host of today's podcast, if you will, of our miniseries. You know, I shared this with you in the green room, which is I've basically always wanted an opportunity to talk about my behavioral biases with someone who knows something about behavioral biases.
And so this is sort of a dream come true for me. Who better to talk about that with than you and. I've structured my questions for you, basically in alignment with the sales funnel. So the sales funnel being an inverted triangle. Top of the funnel, middle of the funnel. Bottom of the funnel. And I have three favorite biases I'd like to ask you about, if that's cool with you?
Of course. Okay. Can we start with the mere exposure
Dr. Crosby: effect?
Yeah, so the mere exposure effect says that we are more likely to buy or vote for, or select something if we have heard of it. Okay. This is why Coca-Cola advertises, right? You see an advertisement for Coke, you know, driving down some country road and you see some sign for Coca-Cola and you're like, yeah, I think we've heard of this before, right?
And you're like, why? You know, like, why are they continuing to. Spend ads on some lonely country road. I mean, it's mere exposure effect. You really see this all over the place. You know, notably, you see this in politics now I'm gonna try and not make anyone ang angry, or maybe I'll just make everyone angry.
But you know, when you think about how do we. In the year of our Lord 2024, how is it that we're going to get Donald Trump and Joseph r Biden back again? Like as our choice is most likely. I mean, we'll see, but it really is because you've heard of them and. This is why incumbents have a, a 10% advantage in elections over a newcomer, and you almost never see, you almost never see a political party displaced.
An incumbent, like, again, I'm trying to spit facts here. I'm not picking on you. Yeah, no, it's good. But like Biden's approval rating right now is about 38%, and yet the Democrats probably won't replace him because you've heard of him and he's an incumbent. And Trump has, uh, well-documented litany of problems and legal troubles and other things, but yet he has.
Spent his whole life plastering his name on anything that's not nailed down. And this is why you've heard of him. And I mean, you know, I stayed in a Trump hotel once many years ago, and I counted how many times his name was written in the, yeah, I think it was 17, right? So, oh my gosh. You've heard of him though.
And this is how we confuse what we know with what's good. And so the mirror exposure effect is super, super powerful.
Stacy: So that's fascinating. So you kind of did two things there, which is great. You broke down, what is it and why does it work? Mm-hmm. And so I have a question. If I try to take the political example you gave and pull that down into the investment world, do you think that same concept applies with like the bigs and boutiques?
In other words, if BlackRock is like a household name, Yeah, and here's this, you know, breakaway manager who's super talented, whose name no one knows, is the same effect, right? Yeah. Like everybody knows BlackRock. And now you've got this startup coming outta nowhere and it's like, who?
Dr. Crosby: Yeah. So this is where the art and science comes in a little bit.
Yeah, and I think we can give some hope to boutique managers. So I'll talk about a study. One of the early studies on mirror exposure effect looked at faces, and so they would show people faces, you know, different faces of different people that were all of sort of the same relative attractiveness. And people didn't have a strong preference for one face over another until they were shown a face.
Multiple times in a series of faces. And then over time, they tended to have a preference for the face that they had seen before. Now it's called the mere exposure effect though, and not the endless exposure effect because at about 9 19, 20 exposures, you started to get sick of that face. It's like, You like it for a while, right?
Like, so like, you know, up to a point, yes, exposure, uh, beats the lack of exposure, but there is a saturation point and we see this and again, in studies. And so to kind of make it more concrete and bring it back to the BlackRock thing, I mean, BlackRock has an undeniable advantage. And you know, the big three, the big four have an undeniable advantage.
Just by virtue of mere exposure and versus a completely unknown and unheralded boutique manager. But I think where that boutique manager can have some success. Mm-hmm. They need some level of exposure. They need to get out there Somewhat. Yeah. To get their name heard, to have some name recognition cuz BlackRock still benefits from the whole, nobody ever got fired for choosing I B M.
Kind of thing. But there is a point of saturation. There is a point where, you know, familiarity can breed contempt. And I think that's something that boutique managers can be aware of and take advantage of.
Stacy: I love that example. And do you think the face part of that study is relevant? Like the fact that it's an image and not say a logo, like a face, a human face. How relevant is that?
Dr. Crosby: Yeah, that's a great question. Not one I've spent much time thinking about, but yeah, I think that the same rules apply though.
Okay. Cause you see it in studies with faces. We saw it in studies with Chinese characters. You know, they show, they show Chinese characters to people in Michigan, right? So people who are not gonna have a lot of context for Chinese characters, and again, they show some preference for the familiar characters and then at some point they get sick of them.
So I think the same rules
Stacy: apply.
So I love that. That's super helpful and hopefully inspire some of our boutiques to kind of take that step to start building exposure. This is gonna sound so basic, but it's important, so I'm gonna say it. You know, when you call your a prospect and leave a voicemail message or you send an email, And you're thinking about what goes in your subject line, please don't use your new company name that no one's ever heard of.
Right? Because if I send you an email and I say, you know, whatever my NewCo name update from NewCo name horrible subject line on many levels, but nobody knows NewCo name and so they're not gonna open the email. You know the name of your new company, but no one else does. So if let's say you are a portfolio manager that maybe has a following, but you worked somewhere else before, put your portfolio manager's name in the subject line because people know that name.
So it's funny how. Little things on this mere exposure effect front can make a big difference. I wanna ask you one more question about it, and you kind of alluded to this, but I've had advisors, you know, who are friends, who will say things like, oh, you know so-and-so asset management company. Oh my gosh, that salesperson is so annoying and it made me think of what you said about saturation.
Like there's a certain point at which you gotta back the F off. Or does it actually tip into a negative effect?
Dr. Crosby: Oh, it's decidedly negative. Okay. It's not neutral, right? Like it's familiarity up to a point and then it's negative, right? Okay. Then it falls off a cliff. It falls off a cliff at that 20 faces, right?
And again, it's like there's no hard and fast rules. Because for some people it was as early as 10 faces, but you know, it was between 10 and 20, but there's at some point, and so I think salespeople have to just become adept at reading body language and other cues and saying, okay, like we're approaching the 20 faces now, you know?
Yeah. The other thing, Stacy, I'll say with your email header advice, which I think is excellent, is I think there's something that boutique managers may need to do, which is gonna be uncomfortable for some of them, but it's to court controversy a little bit. This is a form of mere exposure. And my favorite example of this comes from one of the world's great marketers, uh, PT Barnum, who.
Advertised an inverted horse. And so he said, look, you gotta come to my circus cuz I have an inverted horse. Like it's tails where its head should be and its head is where his tail should be. And what this man did is he tied a rope around its tail, like he turned the horse around. And tied the rope around its tail.
Now, people, I'm not saying you should be scammy, of course, but it is, if you look across, you know, the best marketers in the world, they're not afraid to have an opinion, right? This is one of those places where, of course you don't want too much controversy. Nobody wants bombast and outrage from their asset manager, but you should have an opinion.
Because I think one of the things that's true of larger and larger institutions is that, you know, you sort of, you sort of become neutered in your ability to talk or, or take a stance. Compliance kind of gets in the way, and so to the extent that you can be a contrarian or be sort of a voice in the wilderness or, or have a semi controversial hot take, I think that's something you should share and put that in your email header line.
Stacy: Love that. Maybe that should be one of our topics in this mini series about conviction and edge and real differentiation because that topic has come up in almost every podcast I've done. People don't necessarily want better. They're not looking for better. They're looking for different. And what an advantage for a boutique, as you said, to lean into, yeah.
All right, let's move from top of the funnel. Mirror exposure in effect. That was great. We're, let's move to middle of the funnel and I wanna talk about another of my favorite biases, loss aversion bias.
Dr. Crosby: So loss aversion is our asymmetrical, uh, weighting with loss versus gain. So, fancy way of saying we hate losing more than we, we like winning, right?
So, you know, what do we do with that though? I think asset managers know that. Good and well because they know they get more calls when the market's down than when the market's up, right? Yeah. They get more screaming emails when the market's down. Then they get fruit baskets when the market's up, right? I mean, that's kind of how that goes.
But there's actually a way that we can use that in our sales process, and I think there's a few ways. One of the things that we tend not to do though, is we all grew up with these, well, hopefully most of us grew up with nice parents who told us that if we don't have something nice to say, we shouldn't say anything at all.
And so when we go in and talk about our process or our product, we emphasize upside, upside, upside, and that's fine. That's part of it. But people are two and a half times as moved by not missing out as they are moved by getting something. And just as surely as that pertains to markets, that pertains to the sales process.
And we need to become comfortable saying, Hey, I hope you'll do business with me because if you do. A, b, c, good thing could accrue to you, but if you don't, I think you could miss out on X, Y, Z benefit. And I'd hate to see you miss out on that. And that sort of one-two punch is not, not something I think you see
Stacy: much of.
So that's super interesting because in my mind, loss aversion bias, like my example that I think of when I think of that is after oh eight. Mm-hmm. If you had a good year in oh eight, basically for the next five, maybe even today, 15 years later, you were marketing the heck out of that performance. Mm-hmm.
You were like, in oh eight, the market did this and my peers did this, and I was over here. Our strategy, did you know this over here? And that to me, So loss in my mind when I thought of this bias until just now, I was thinking more around the idea that people fear losses, meaning capital losses. Mm-hmm.
More than they want the equivalent gain. Mm-hmm. But you just. Twisted things for me right there, because let me just say this back to you because another one of my favorite things is capacity constraint. And so what you're saying is that loss aversion is also sort of fomo. Like FOMO is is basically playing on loss aversion.
Is that right?
That's
Dr. Crosby: exactly right. And you're sort of, there's really like, if, if we're talking about it, I think there's almost three different ways we could take it. So let's, let's spend a minute with, with yours. Okay. Which is very good, right? If you have a product that protects against loss, you should market that like crazy, right?
And one of the most powerful things you can do for an investor is take the worst case off the table. So my favorite example of this was from the great financial crisis. And if you think back, To the gfc. Nobody's buying new cars, right? Nobody's making big purchases cuz everybody felt like they were on thin ice.
So Hyundai comes in, is having a terrible year. Hyundai comes in and says, if you buy a new car from us, And you lose your job will buy it back full price. And you think like from a probabilistic perspective, even during the financial crisis, what did you have? Like, you know, eight or nine, 10% unemployment.
You got a nine and 10 chance that whoever's buying your Hyundai is gonna get to keep it. And you know, some, some amount of those who lose their job won't take you up on it. So you gotta, you know, you got a nine and 10 chance that people won't use this. And Hyundai had one of their best quarters ever during the financial crisis.
By just putting people's minds at ease. So if your product sort of ticks that box for people, you should market that like crazy because we know that people have multiple simultaneous risk preferences, right? They don't wanna be poor, and they also wanna be really rich. And so the best, you know, the best investment product ticks one of those boxes.
Right, right. Like, I'm gonna help you shoot the lights out, or I'm gonna help you from eating cat food. Right? And so if you tick either of those boxes, you should mark it like crazy. The second piece though, is what I talked about, you said it beautifully marketing, fomo, right? Tell them what they're getting, but also tell them what they're missing.
Because what they're missing is two and a half times more likely to move them than what they're getting.
Stacy: So wait, I wanna jump in on both of those. You said there was a third one, so I don't Okay, so hold that. Hold that thought. Okay. So on the first one was my initial thought on it. And what I wanted to encourage people to realize is when you gave the example that your strategy either helps generate return, Or helps protect against, like from a risk perspective.
Mm-hmm. I really want people to hear that. Yeah. Because you don't have to be both. And that goes back to the idea of being different. Not better. A portfolio has more than one thing in it. No allocator, especially not an institutional allocator from a very large firm. They're not gonna have a portfolio with like one or two things.
They're gonna have a portfolio with a whole array of things, a whole array of funds, a whole, you know, slew of managers, and what do they want from that mix. Differentiated exposures, differentiated risks, you know, so that the hole is truly better than the sum
Dr. Crosby: of its parts.
Yeah. And the sales process gets so much easier when you can slot into the human psyche.
Yes. Right? Like if you're trying to market some milk toast, middle of the road, you know, middle of the road product, there's no part of your brain that's looking for that. Like your brain's looking for safety and sexy, and you gotta like fit in one of those
Stacy: boxes. Okay, so that's great. Mm-hmm. So, and then on the capacity constraint, what I wanted to add there was I think fund managers are, they sort of are afraid to have.
A limit on how much assets they'll take. So like for us, when we mostly work with boutiques and startups and new funds, and we say, okay, you know, here we are, day $1 zero, what's the capacity? And the managers are like laughing. They're like, uh, it's so silly to talk about I have no money. Like, what does it even matter?
And I'm like, no, it matters a lot. Mm-hmm. Because, You know, the old kind of classic example of this was small cap. So small cap was sort of known and accepted to be capacity constrained. Mm-hmm. And if you were good, you were gonna close. Yeah. And so to your point on the fomo, we would use that to our advantage.
It's like, look, You know, there are certain times in my career where small Cap was a really tough asset class to find anyone with capacity and anyone who was good. So on day $1 zero, you could market that.
I
Dr. Crosby: have a hard time not giving you a million anecdotes. So scarcity again, is a form of this very same thing.
Marketing scarcity is a form of taking advantage of loss aversion. There's this amazing anecdote, do you know the guy, I forget his name. He has a ponytail and he sells the like gazelle, strider thing on that two in the morning. So isn't it Tony something? Tony? It's Tony something. Of course it's, yeah. Yeah.
And he's got this wild ponytail and he is doing this crazy like elliptical type thing. Okay? So early in, he is his career, he's trying to sell this thing and he's having no success. And then they consult with a behavioral scientist and they're like, you gotta market scarcity. Because what they were doing at first was saying, operators are standing by, like, if you want one of these elliptical machines, operators are standing by.
We'll be pleased to take your call. Well, they tweaked it to say, give us a call. Call volume is absolutely crazy. So like if the phone is busy, hang up and keep trying until you get us now on its face. That is a wild way to mark something because it's like you've got this weird contraption. And you're gonna make it hard for people to get it.
Yeah. But effectively what they were doing was marketing, scarcity, giving the illusion of scarcity. And it worked. It worked like crazy. They, they had massively improved sales. So those constraints, first of all, we know from the research. That, especially in certain asset classes, there are real constraints, like mm-hmm.
Smaller funds do better. So I mean, there's sort of a practical reason to do that and an evidence-based reason to do that. But also just from a marketing and a sales perspective, it's a great way to market scarcity and use this loss aversion to your benefit. Was that
Stacy: the third? That's not the third, but wait, there's another, there's more.
I can't believe all the variations and flavors of loss aversion. There's
Dr. Crosby: a lot of flavors of negativity. So the next one is negativity bias. And you of all people are gonna love this one. So negativity bias. Means a couple of things here. One thing we know is that in the political sphere and in the ad sphere, negative like attack ads work, right?
We know that it's dramatically more powerful to run a piece attacking your opponent's political record than it is a piece. To run a piece with you, you know, hugging the flag and petting a puppy, right? Like all of these, we know time and again that attack ads work, negativity works because of all the things we talked about.
What's fascinating though is we see in Amazon reviews, Amazon reviews. Let's say damn. Or hell get way more likes and way more up votes than ones that don't include sort of mild profanity. Ones that have like hardcore profanity and them don't do well. Right? Again, there's like this art and science to it, you know?
You don't wanna be the big, bad words in there, but people like it. If you're a little edgy and you're a little opinionated, and I know this is what you preach all day, what's the lesson for asset managers? Don't be afraid to have an opinion and don't be afraid to go negative to a point. Don't be afraid to compare and contrast your style with the bigs.
Again, don't go full blown like tacky attack mode, but don't be afraid to take a stand and don't be afraid to compare and contrast the way they do it with the way you do it, because that's a lot more powerful than just talking about, Hey, this is why we're great.
Stacy: So that is so brilliant. Of course. I wanna kind of plus one on two things you said there cuz.
Well, I'm sort of, I'm knocking down the attack ad, which you just said like, don't attack. Here's why. You know why like a lot of managers will do this. They'll be meeting with an allocator and they'll say, oh my gosh, you invest in that thing's a piece of crap. And it's like, okay, can we just pause on that?
Think about what you just said. Either this allocator or someone on their team thought that that strategy or fund was good enough to put in their portfolio. So by attacking that fund, you've actually just attacked them. So just so don't do that. Right. Which is the advice that you gave. But do talk about not what you stand for, but what you stand against.
Not morally, just what is the thing or things that your peers do that you don't do, that you don't think works that you do differently. That's such a powerful way to get to your differentiator and your edge. When you say like what you stand for, you can very easily kind of fall into truisms. When you say what you stand against, you can really get your edge.
Go ahead.
Dr. Crosby: That's exactly right. And you know, the psychological term for that is relative framing the world writ large, and then the world of finance in particular is just so expansive, so large, the decisions are so multifaceted and difficult. Sometimes, again, be hard to know what we're benchmarking against.
Be intentional about your benchmark. Pick the frame or the competition that you want, and then frame the competition on your terms. Again, don't be ugly, don't be negative. But don't be afraid to have an opinion, to take a stand and to use other approaches as a foil for, for comparing your process.
I love that.
Stacy: There was one other thing I wanted to say about that, which just flew right out, so it'll come back to me. And that was all just loss aversion.
Dr. Crosby: Yeah, that's all just flavors of loss
Stacy: aversion. See, behavioral biases are fun. I
Dr. Crosby: still got more flavors of me exposure.
Stacy: Well, we could go back to those.
All right, so let's go to, going back to the funnel. We just did top of the funnel. Now we did middle of the funnel. Now I wanna go to the bottom of the funnel, which by the way, can be kind of the most difficult part. Mm-hmm. Because now we're talking about closing and I wanna talk about status quo bias or inertia.
Dr. Crosby: One of the truisms about human behavior. Is that we are what the Nobel Laureates called cognitive misers, which is basically just saying we're lazy. Our brains, uh, account for two to 3% of our body weight, but they account for 20 to 25%. Of the energy that we expend in a given day. So we're always looking for ways to kind of go into cruise control mode, to go into energy saver mode and to do less, right?
There's also, there's sort of a related concern that we regret sins of commission more than sins of omission too. So if I do nothing and things don't go well, It feels less bad than if I make a change. Mm-hmm. And things don't go well. And so that's sort of another current that you're swimming against and so you really are up against, you know, you, you were right to say this is one of sort of the toughest.
Nuts to crack here. I'll introduce a framework here that I think is really useful. This is from the British Nudge Unit. The British government had sort of a behavioral science unit, and they have this framework for sort of compelling action that I find super useful. And it's east, so it's, uh, easy, attractive, social, and timely.
Right. So the first thing that you wanna do to close this deal is to make it as easy as possible. I mean, from the paperwork to the personnel, to the switch to everything you can do to make that a seamless process. Never underestimate how lazy the person sitting across the desk from you is, right. You gotta make this.
Wicked. Wicked. Easy to speak in the language of Stacy's people. That's right. Yeah. Attractive. You've gotta show them what's in it for them. Right? I mean, salespeople have a very obvious incentive in making this transaction happen. The incentive is less obvious perhaps for the person you're talking to. So how do you make this personally meaningful to them?
How is this gonna make them look good? How is this gonna make them shine? Social is effectively just like, what are other people doing? You know, go back to this idea that our brains are, are sort of hungry and lazy, and one of the ways that we go into cruise control is just doing what other people are doing.
Right. So if we can say to a prospect like, Hey, you know, we met with fund X, Y, Z across the street, and allocator A, B, C down the road is doing this, and we're excited and we hope you're on board too. You know, looking to other people. It's why nine outta 10 dentists choose crests. All this stuff is just social proof.
It's why football players drink this brand of beer over that brand of beer. It's because they know people are gonna see that and base their decision on that. And then timely is just be aware of timing factors, right? Be aware of when you ask how you ask. Timing is sort of critical in these matters, and so just keep that in mind as well.
So make it easy, make it good for them, make it attractive, make it social, and give some thought to the timing as well, and you're gonna have an easier time making that
Stacy: close. That is, gosh, again, I go back to our other podcast where I asked you, why aren't you in sales? But if you wanna hear Daniel's answer, which was very interesting, you gotta go back to first
Dr. Crosby: podcast.
I immediately regretted that answer. Go hear it.
Stacy: But it was so good. It was so good. Yes. Okay, so East is a great framework. I wanna add a little art to that science. As the storyteller, which is to say the social proof piece is super powerful. Mm-hmm. And it's a great way to have stories and they're continuous.
So I wanna explain one of the stories in our framework is called the impact story. And it's essentially designed to hit the S in the east framework, which is the social proof. And so basically what you do is anytime you get a new investor, You have just, you've just received the gift of a new impact story.
So you write the story of, okay, who's the investor, not their name. You can leave the name out. How large are they? Maybe, where are they based, if that's relevant to your dream client, d n definitely. What's the problem that they had for which you are the guide with the solution. So you kind of tell the whole story like, you know, we met this.
Billion dollar firm, and here's what their situation was, and you describe it so that the person receiving this story is like, gosh, this sounds a lot like me, right? I see myself in the story. I can see myself as the hero in this story. So you go from, here's the dream, the client we helped, here is the problem, here's the solution, and you know, here's the end result.
Every time you get a new client, you have a new impact story. And what do you do? You pick up the phone and you call everyone on your funnel and you tell this impact story. And this is part of our sales process. Why do we do this? Because, a, it works from the science side, and B, this is information that a prospect cannot get anywhere else.
They can't go to mornings. Star and say, tell me about the new investors that this fund has just, you know, received. So it's information that they can't get from anyone but you. What a great way to use
Dr. Crosby: storytelling. I'm gonna not tell the story again. I'm gonna send people back to our podcast. Yeah. But we talked about some research out of Princeton about how telling stories in the way that Stacy's just talked about quite literally sinks to people's brains.
Oh, that's, go back and check out.
Stacy: Yeah, that's great research. So I wanna just see if there's anything else. You know, I think the challenge, and I don't know if you'd have anything to add to this, but when I really think about status quo and inertia, I guess this probably is more relevant when it's a larger sort of more enterprise type of sale, where you have many stakeholders and so you have a champion.
So let's say Daniel's our champion and Daniel is bought in. To using us as the new solution. The challenge though, is that Daniel, as the champion, has to go and convince everybody else at his firm on his ic, whatever, his boss, other people that weigh in on this decision that it's worth it to make the change.
It's worth the effort. It's worth all the clients they have to call. It's worth it, and that's really challenging. And so I wonder if you have multiple layers to a sale from the science perspective, how can you arm that champion? Is it through story, like maybe it's more of an art thing? I mean, how do you give the champion?
How can you control that when you're really at an arm's length? Yeah,
Dr. Crosby: I just think you have to arm that champion with things that actually. Move the needle. Right. So I can't resist one more anecdote. Yeah. So if we go back to 2003, the the Iraq War, right? So we're, uh, we have our soldiers out in Iraq and they're looking for Saddam Hussein, right?
And they're looking for Saddam Hussein and all sort of his lieutenants. And so they had a couple of problems. So first of all, they had like 50 something guys. They were, were trying to nab. Well, how were they gonna get the boots on the ground soldiers to know what these 50 guys look like? Secondarily, you have a lot of American soldiers who are unfamiliar with Iraqi names, and so they were like having a hard time connecting faces with names and all this.
And so the original idea was, We're gonna publish a white paper, right? Like we're gonna publish a big sort of intelligence document and we're gonna hand it out to all the soldiers and they're gonna read it, and then they'll be on the lookout. Well, we know how white papers get consumed, don't we, Stacy?
They don't get consumed, right? And so what they did instead, Was they put the faces of these badies on a deck of cards and they handed this deck of cards out to, to all of these soldiers, uh, throughout Iraq. Now they caught, so Saddam was the A of clubs and his sons were the other ACEs, and then it was kind of on down through that.
They caught all but six. Of the cards and when they caught them, they didn't have to know their name. They would say, Hey, we've got the Jack of Diamonds, or whatever. Right? Because oh my gosh, they had seen these people through, again, the mirror exposure effect. The Army had armed them with a tool that they would use already when they were sitting around the barracks playing cards.
And so what does this have to do with the champion? I think a lot of times we arm our champions with the lames stuff, right? Some lengthy, esoteric white paper that no one's ever gonna read. You know, some talking points that are indistinguishable from other talking points and opinion. That's as vanilla as can be.
Like we need to arm them with things that are gonna move the needle, that are gonna be consumed and that are relevant, that are relevant, differentiated, and sort of pertinent to the people's lives they're trying to influence because. The world doesn't need another white paper. And I thought that was a brilliant example.
A brilliant example of how they met him, where they were. That
Stacy: is unreal. That anecdote. So I'm gonna tell a story. See now this is what happens when we get on the phone. We just start trading stories. Yeah. And I don't know if people probably couldn't see that, but I just like threw my arms in the air like I was raising the roof when you said that we are the people with like the worst.
Material. And it's so true. And I think part of that is because we tell ourselves a story about what the real problem is. And I wanna explain what I mean by that because I have an example in my back pocket, which is there was a, an advisor who has a very large allocation with a boutique. Not only is the allocation large, it's also a large percentage of that funds a u m.
Now, normally, Allocators are very thoughtful about this because they don't wanna get themselves in this situation. But what happened here is the fund is not doing well, and so people are redeeming, which has left this allocator with a high percentage of total assets. Now, they're also, by the way, not in love with this fund anymore.
Because obviously, I mean, people are redeeming for a reason, so they know that there is a better option out there for them. They know there's a better solution. The real problem in this scenario is not that they need to be convinced that there's a better solution. The real problem, and it came out in little tidbits here and there, is that the founder of the firm, that's the allocator and the fund manager have become friends.
Hmm. Right, and the allocator doesn't actually wanna pick up the phone and tell this fund manager that they're redeeming. And so that's actually the real problem. That's the real thing that's in the way. It's not that there's a better fund there, already know that. Right? So I mean, isn't that amazing? And you would miss that because you're telling yourself a story.
I. That. Why is this allocator in this, you know, fund that no one wants anymore? Why the heck won't they invest in ours? And the real reason is people do business with people and this person feels bad. They feel bad.
Dr. Crosby: Great example. You gotta solve the right problem, right?
Stacy: You gotta solve the right problem.
And I think part of it is acknowledging that that's a really hard situation to be in. It also tells you behavior, at least to me, I'm not a scientist, the, that what's important to this allocator is the relationship between the founder and the fund manager. So if you can become friends with this allocator mm-hmm.
You're probably tapping into something there. This is fun. I love our miniseries already and this is only episode one. In closing, I have three questions for you. I'm not gonna do PRUs questionnaire, which also was a very hilarious, I had to change my questions actually after that first, cuz you were the first guest.
Dr. Crosby: I changed the question. I ruined it for everyone.
Stacy: Yeah, well, you kind of, uh, again, if you wanna hear those, you gotta go to episode one. Okay. So, in closing, if people wanna dive in on more of this behavioral magic, the science piece, what book of yours should they read? Because this is, I mean, again, this is your unique authority.
Dr. Crosby: Yeah, so the book of mine I'd recommend is The Behavioral Investor. If you're interested in these things in the Behavioral investor, I take the universe of sort of biases and break it down into the four primary biases. All the ones we talked about today would fall under what I call conservatism in there.
So yeah, go check that out. You'll see a lot of this stuff in there.
Stacy: It's my fave of your book, so that's great. What about a book that you have not written, so someone else's book? If people wanted to geek out on behavioral, what would you
Dr. Crosby: recommend? Rory Sutherland is a behavioral marketing genius, par excellence, and his book Alchemy is just fantastic.
It is such an engaging read, and Rory is like the funniest speaker. He's got some great TED Talks, so go look up his TED Talks. You'll be dying, laughing and learning a lot at the same time.
Stacy: Okay, that's perfect. What a great place to end. I have not read this book, so I'm adding it to my list. That's good.
Daniel, thank you for being here and I can't wait to see what we do for episode
Dr. Crosby: two. I'm excited. Thanks so much.
Stacy: This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. The information is not an offer, solicitation, or recommendation of any of the funds, services, or products, or to adopt any investment strategy. Investment values may fluctuate and past performance is not a guide to future performance.
All opinions expressed by guests on the show are solely their own opinion and do not necessarily reflect those at their firm. Manager's appearance on the show does not constitute an endorsement by Stacy Havener or Haven or Capital Partners.
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