5 minutes with psychologist and behavioural finance expert Daniel Crosby
It is with great pleasure that we, at QUAKE Books, invite Daniel Crosby, a psychologist, behavioural finance expert and author of The Laws of Wealth to our headquarters to talk wealth, its laws and any obstacles our readers need to be aware of in order to obtain and maintain it. The Laws of Wealth is a dense book with a lot of considerations to take into account, and so to unpack it a little we have devised a few questions.
1. Daniel could you first tell us a little about yourself and what motivated you to write The Laws of Wealth?
I’m a psychologist by training and an asset manager by profession and so I wanted to marry the world of behavior and finance in a practical way. There is so much great academic work out there around behavioral finance, but most of it exists in places that provide little access to the investing public and little direct application to asset management. I wanted to write a book that had just enough theory but was heavy on application and specific to investing.
2. You now have three children, which is arguably the biggest investment any person can make. How did they change your perspective on financial behaviour and if you could only teach one law of wealth to each of them, which would you choose and why?
I would give them the advice from Chapter Two which is, “You Cannot Do This Alone.” I honestly hope that my children will pursue careers outside of finance and if that’s the path they choose, they will need to work with a professional to ensure that their assets are managed appropriately. As I discuss in that chapter, the greatest value added by a financial advisor comes from constraining behavior rather than picking stocks. I hope that my kids will work on curing cancer or writing great novels and leave the financial stuff to someone else.
3. What is the one piece of non-financial wisdom you wish you had received fresh out of university?
The best advice I have ever gotten from my Dad is to “put first things first.” Basically, to put matters of true value, especially family, before the accumulation of wealth. The research on wealth and happiness shows that once your basic needs are met, making more money does very little to improve wellbeing. I wish that schools would teach about the interplay between money and happiness rather than simply how to maximize profits.
4. What would you say to someone who has just read your book and realised they are doing all the wrong things to gain wealth? What advice would you give to someone who has lost a lot of money on the stock market? Should they try again?
I think that the first thing they need to do is resist the urge toward explaining away all of the mistakes they are making. Cognitive dissonance is real and when we realize that we’ve made a mistake, especially with something we care about as much as money, our first impulse can be to convince ourselves that we were right all along. Once they had owned those mistakes I would counsel them to refer to the section of the book on finding a good financial advisor and to go enlist some help!
5. If you could look into the future and know exactly what will happen to you and your family (not just your stocks) would you want to?
Absolutely not. As much as we dislike uncertainty as a human species, imagine a world in which there was no spontaneity and no element of surprise. Knowing everything about the future is the only thing more debilitating than knowing nothing at all!
6. Seeing as this is QUAKE Books, what is your QUAKE book and what does this book say about you?
I’ve actually created a list of my favorite books on behavioral finance since I get asked so often where people should start reading. Enjoy!
Thank you Daniel for taking time to talk to us. It is great that you emphasise the importance of family and happiness over wealth accumulation. Your book certainly changed my financial behaviour and consequently my life. I have already recommended your book to various people and I really hope QUAKE Books Agents strongly consider adding it to their collection.
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