How Dopamine Can Influence Wealth: Behavioral Biases & Better Financial Decisions

Speaker 1 – 00:00
Welcome to EWA’s FinLit podcast. EWA is a fee only RIA based out of Pittsburgh, Pennsylvania. We hope all listeners
of this podcast will benefit as we deep dive into complex financial topics that we will make simplified for you. And
we hope that this really serves as a catalyst so that you can make the best financial planning decisions for your
family and also save time.
Speaker 2 – 00:25
Foreign.
Speaker 1 – 00:30
Joined here by Jameson. We are talking about, I think one of the most important aspects of financial plan that’s
really, I’ve never heard talked about in the context. Financial planning is how behavior, how our brains work, and
specifically it’s kind of a buzzword now, is how dopamine can affect your financial decision making and ultimately
affect the results of your financial plan and just the happiness and peace of mind that you have, you know, during the
journey. So Jameson, give us an overview. You know, what is dopamine and why is it so important?
Speaker 2 – 00:59
So there’s a bunch of brain chemicals that are in your brain. Dopamine, serotonin, oxytocin. Oh, there’s four main
ones. I read a book called Habits of a Happy Brain. Have you read that? No, this was years, probably four or five
years ago I read this. There’s. What are, what’s the fourth? It’s, it’s dopamine. Dopamine, serotonin, oxytocin,
whatever, doesn’t matter.
Speaker 1 – 01:24
It’s a neurotransmitter.
Speaker 2 – 01:25
Yeah.
Speaker 1 – 01:25
And it’s like motivation, reward, anticipation, habit formation, learning.
Speaker 2 – 01:30
Yeah, dopamine’s the reward one. It’s the pleasure, it’s the like positive reinforcement on your brain base essentially.
So it’s released during enjoyable activities.
Speaker 1 – 01:42
So.
Speaker 2 – 01:44
A lot of different things encourages behavior.
Speaker 1 – 01:46
Some examples.
Speaker 2 – 01:49
Winning, praise, sex, eating, junk food, gambling. Gambling.
Speaker 1 – 01:54
All so like, so in how we see this show up in financial planning. Checking your portfolio every day, multiple times a
day, every time. That’s a dopamine hit. These are, by the way, these are bad dopamine hits. These are like spending,
these are ones that control you. Spending quick, like buying, trading stocks.
Speaker 2 – 02:11
Pleasure. Yeah.
Speaker 1 – 02:12
You think a stock’s gonna jump up like Microsoft stocks and go up or like. Yeah. What’s been one reason. Oh, Tesla
is down. Let’s buy, you know, Nvidia.
Speaker 2 – 02:22
It’s, it’s pleasure, it’s anticipation. It’s any type of, any kind of.
Speaker 1 – 02:27
Fomo, I would say too.
Speaker 2 – 02:28
Yeah.
Speaker 1 – 02:29
Fear of missing out.
Speaker 2 – 02:30
And we’re in a society now where I’m not a psychiatrist. So this is not science based. This is just my opinion. Makes
sense to me. I don’t know if like our dopamine is like out of whack naturally, but we’re in a society where we have cell
phones and there’s so much instant gratification 24,7 that it’s like you’re almost like you’re in like a dopamine like
overflow state all the time. You’re over stimulated. We are naturally just like way overstimulated.
Speaker 1 – 03:01
Yeah. And if you have wealth to go along with that and you see something on a newsletter you like I, you try, it’s like,
oh, I need to buy this supplement or do this. And then like, next thing you know you have Amazon boxes showing up
every day to your house because it’s, you know, those are dopamine hits. Like, I need to try this, I need to do that. It’s,
it can get out of control quickly. And that doesn’t even necessarily hurt your financial plan. I think that hurts your, the
attention and intentionality you have in your financial plan.
Speaker 2 – 03:25
Yeah, A psychiatrist told me this not long ago. Is like everybody now, maybe not everybody, but it’s kind of like it’s
almost. We’re at a state now where baseline is ADHD.
Speaker 1 – 03:42
Normal basically.
Speaker 2 – 03:43
Yeah. Because of cell phones and instant gratification and everything. And that’s just how we’re wired now. You can
buy, I can go on my phone and doordash food and have food here in 10 minutes. I can buy something on Amazon
and have Amazon delivered tomorrow. Whereas instead of like going out into.
Speaker 1 – 04:02
Society, we need to tell the story of what the doordash.
Speaker 2 – 04:06
You go for it.
Speaker 1 – 04:07
So Jameson tells me one day it’s snowing and he lived in the downtown, the strip district, and there was a Chipotle
two blocks away. So he doordashed, literally out the door to the doordash. Chipotle. You better have tipped that
gentleman so good.
Speaker 2 – 04:19
It was cold. I was working and you know, I was in the like, well, my time’s better, start working, I can spend the extra
$5, get the DoorDash delivered. So, you know, I gave him clear instructions. You come up to the door, you type the
code and you go up to the 10th floor, leave it right at the door and yeah, you better tip that.
Speaker 1 – 04:35
You tipped them. Really?
Speaker 2 – 04:35
Yeah, I tipped him well. Yeah, always tip well.
Speaker 1 – 04:37
Good, good. That was a dopamine decision right there.
Speaker 2 – 04:39
I actually have deleted doordash because that’s dopamine.
Speaker 1 – 04:42
Good. Dopamine is like the good dopamine is the anticipation. It’s the journey. Right. So the walk over there would
have been a good thing.
Speaker 2 – 04:49
Yeah, yeah, yeah.
Speaker 1 – 04:50
I think your dopamine center just took over for you there.
Speaker 2 – 04:52
Yeah. So anyways, anyway, so let’s just. Let’s just round out some background on dopamine. And then. So reward
and pleasure. Yeah, it’s your motivation and drive. Higher dopamine levels are linked to motivation, focus, pursuit of
goals. Not just about pleasure. It’s about wanting or seeking a type of behavior, which that can be really bad.
Learning and reinforcement reinforces actions with rewards and habits.
Speaker 1 – 05:17
So some of the way it can hijack good planning is if you’re chasing fad. So example, this would be like crypto meme
stocks. You know, you’re overtrading, increasing your lifestyle to think that’s going to make you happier. You know,
you act emotionally, trying to time the market. Those are literally textbook examples of, like, how dopamine can
hijack your good planning. If your dopamine is an unhealthy level, there are ways to make your dopamine a
superpower in your financial plan, which we’ll talk about next.
Speaker 2 – 05:42
Okay, I was wrong. Actually, this is interesting. ADHD means you have too little dopamine, you’re distracted, and you
have low motivation. Oh, so then you take a drug to stimulate dopamine.
Speaker 1 – 05:54
Interesting.
Speaker 2 – 05:55
Yeah.
Speaker 1 – 05:56
Either way, concept’s the same.
Speaker 2 – 05:57
Yeah. Yeah. So I think let’s we hit on this a little bit. We were talking about this earlier just to like, bring this why this
is relevant for wealth. Like I said before, wealth is a new thing for humans. Accumulating wealth is new. So, like, our
brains and our dopamine haven’t caught up to what wealth is today. Like, if were to rewind back a couple hundred
years, there was no way you couldn’t. I mean, we literally had gold. Like, people had coins as currency. So if you were
to accumulate a billion coins, like, what were you going to do? Carry them around in bags? Like, no, it’s just not
practical. There’s nowhere to store wealth. So, you know, back then we didn’t have this wealth accumulation.
Speaker 2 – 06:36
Our brains are wired to how do we get people to like us and fit into the community and the tribe? And then fast
forward, now we have this wealth accumulation, and so we use wealth to do that same thing. We use wealth to get
that dopamine reward of. I’m going to buy this car because my community is going to like, you feel relevant and we
haven’t been, we haven’t caught up yet to what to do with this accumulated wealth. And then technology has just
accelerated that the last like 100 years.
Speaker 1 – 07:02
Yeah.
Speaker 2 – 07:04
Anyway, I think that’s a good overview on what dopamine is.
Speaker 1 – 07:07
And I think the dopamine is motivation, it’s not the reward. It spikes when we anticipate something good, not when
we get it. That’s important to understand. So if the outcome’s better than expected, it rises. If it’s worse than
expected, dopamine crashes. And once you have a baseline level, it’s really hard, it’s hard to reset that. We’re always
going to want to go there or above. So there’s all, there’s the crash after the spike. Example of that would be like
gambling, drug use, something like that. And so I think the most healthy dopamine is the effort based where you
have to, you know, create something. You basically it’s creation over consumption. Right. So you create something,
you’re building a relationship, you’re saving money. It, your hard work leads into a good financial plan that’s effort
based dopamine, that’s really healthy. It’s enjoying the journey.
Speaker 1 – 07:56
And so how that shows up in a financial plan is sticking to a diversified portfolio, even when you see one stock just
tripled. Sticking to sticking, staying in the market even during the ebbs and flows, the downs and the ups and the
downs, having tough conversations, you know, in a relationship, when you disagree about finances, that’s all the
effort. And if you can make the effort, that is the reward. If that’s the anticipation, then you can keep your levels from
hijacking you essentially and enjoy a happy life as you go. But this is literally through addictions or gambling,
through, you know, trading, trying to get rich. It is literally, we’ve seen it ruining people’s lives. And it’s more prevalent I
think with the younger society like Gen Z Millennials, because of the, you know, of these, yeah.
Speaker 1 – 08:45
Of the, of the phones and the scrolling and all the information overload.
Speaker 2 – 08:48
So I think, you know, you get, it’s, it’s almost like this, like there’s never enough. Like you’re always chasing something
and you’re, you know, that’s kind of what, there’s just like a cycle of dopamine. Right. It’s just continue, continue.
Speaker 1 – 09:04
Yeah.
Speaker 2 – 09:04
And so this, and I think that, and this is, I think will speak to the people that listen to our podcast. Is these really
successful, higher net worth people that they kind of get stuck in that loop of like, I have to constantly chase, chase,
accumulate wealth, do things for, you know, what I. What my version of successful is. And someone told me about
this poem that. That really, like, puts us into perspective. It’s like, when is when and what is ever enough? And the
answer is like, it’s never going to be enough. And so there’s this poem, it’s called Ithaca, not. Not the place in New
York, but it’s the Odyssey, you know, mythology stuff. And so the point of the poem, if you look it up and read it’s
great, is it’s not about you.
Speaker 1 – 09:51
Want to read it to us right now? I’d like to hear it.
Speaker 2 – 09:52
Okay. As you set out for Ithaca, hope your road is a long one, full of adventure, full of discovery. I don’t know how to
say some of these words. They’re Greek gods. Laestrenogens. Cyclops. Angry Poseidon. Don’t be afraid of them.
You’ll never find things like that on your way. As long as you keep your thoughts raised high. As long as you. As long
as a rare excitement stirs your spirit and your body. Cyclops, Wild Poseidon. You won’t encourage them unless you
bring them along inside your soul. Unless your soul sets them up in front of you. I hope your road is a long one.
There may be. There may be many. May there be many summer mornings when with what pleasure, what joy you
enter harbors you’re seeing for the first time. May you stop at Phoenician trading stations to buy things.
Speaker 2 – 10:45
Fine mother of pearl and coral, amber and ebony. Sensual perfume of every kind. As many sensual perfumes as you
can. And may you visit many Egyptian cities to learn and go on learning from the scholars. Okay, almost done. Keep
Ithaca always in your mind. Arriving there is what you’re destined for. But don’t hurry the journey at all. Better if it
lasts for years. So you’re old by the time you reach the island. Wealthy with all you’ve gained on the way. Not
expecting Ithaca to make you rich. Ithaca gave you the marvelous journey. Without her, you wouldn’t be set out. She
has nothing left to give you now. And if you find her poor, Ithaca won’t have fooled you. Wise as you will have
become so full of experience you’ll understand by then what these Ithacas mean.
Speaker 1 – 11:37
So it’s all about get a bunch of perfume. Is that the takeaway?
Speaker 2 – 11:40
Yeah, it’s all about the journey. There is no end goal you know, it’s like, don’t chase this dopamine reward of the
destination.
Speaker 1 – 11:45
And I wrote three things down, like, just high level. If I were to tell, you know, my child, like, here’s what to do with
dopamine. Like, so, one, use anticipation to your advantage. Set goals, enjoy the chase. Exactly what that poem, you
know, was referring to. Second, avoid any kind of fast hits. So, you know, gambling, day trading, anything like that.
Checking your portfolio every day. Instead, get dopamine from exercise, sunlight, you know, novelty paired with
effort, and then completing hard things with a purpose.
Speaker 2 – 12:16
As I said, let’s talk about what you can do to, like, dopamine detox.
Speaker 1 – 12:23
What? Yeah. What are the, what are the biggest ways.
Speaker 2 – 12:26
No notifications on your phone.
Speaker 1 – 12:29
Check mark. I’ve done that.
Speaker 2 – 12:30
Cold plunge. You do that, right?
Speaker 1 – 12:32
Every day.
Speaker 2 – 12:32
Yeah, I don’t do cold plunges. That, that resets your whole.
Speaker 1 – 12:35
Yeah, it’s called. It’s so cold, though, and it’s tough.
Speaker 2 – 12:40
Yeah.
Speaker 1 – 12:40
Like I said, at like, 39 degrees.
Speaker 2 – 12:42
So sports. Get. No sports gambling.
Speaker 1 – 12:44
Yep.
Speaker 2 – 12:45
I just stopped, you know, I was say this out loud. I was addicted to the nicotine pouches. I stopped the zebs because
I just realized I started it with the intention.
Speaker 1 – 12:54
You had those during meetings. That, that was where I was like, whoa. It probably helped you focus.
Speaker 2 – 12:57
Yeah, it is. It’s a. It helps you focus, but you have to. You can only do like two a day. And I was doing way more than
that, so I was like, well, this is not healthy. It became an addiction. So stop that. That cleanses your dopamine.
Speaker 1 – 13:09
Are you on a, like a detox right now of Zins?
Speaker 2 – 13:12
No, I’ve been off. It’s been two weeks, so I’m good.
Speaker 1 – 13:15
Okay.
Speaker 2 – 13:16
Meditation. I’d meditate every morning. That resets. Exercise, any type of exercise. Sunlight, like you said, time with
pets helps. Walking a dog.
Speaker 1 – 13:27
It’s the simple things. I think that all those things are so important because it’s simple things that will lead to the
happy life and in financial plans. The simple things that will lead to a good financial plan.
Speaker 2 – 13:37
Yeah, we should probably talk a little bit more about the financial plan. We were kind of going off on a tangent.
Speaker 1 – 13:41
Yeah, no, those are all good things. I, I. But no, we’ve touched on it. You know, bad dopamine.
Speaker 2 – 13:45
Don’t check your. Don’t check your portfolio every day.
Speaker 1 – 13:47
Don’t day trade. Don’t chase stocks.
Speaker 2 – 13:49
Spend on things that are rewarding and fulfilling to you. Don’t go for quick hits.
Speaker 1 – 13:55
Yeah. I would say in general, like build wealth, don’t build riches. Like, riches are what people see. Wealth is what
people don’t see. Build that brokerage account, build that 401k, build that. But more importantly, like, do it because
you know what that money is going to get you, that’s going to get you autonomy of your time, autonomy of peace,
you know, for peace of mind. It’s going to provide for your family, the next generation, your kids, their college. Those
are all the important things. Trying to get rich quick, it’s, it’s going to teach a bad habit. And then if you don’t know
what that’s for, why put, you’re putting everything on the line just for the sake of, you know, dopamines, like hijack
your brain. So pretty simple stuff, almost impossible to execute.
Speaker 1 – 14:31
And I think that’s why, you know, studies have shown if you work with a personal trainer, if you work with an advisor,
if you work with Note, maybe the advisor is not going to beat the market. But if they just keep you on track because
it’s so hard in today’s society to. And we have clients, their plans change every year. It’s like, oh, set it on autopilot.
No, you change jobs, you want to change a house, you need to renovate your house, your kid gets sick, you’re. And
the list goes on. It’s like, oh, we just met that person six months ago. Do. We didn’t. Yeah. Every time we’re
addressing really important stuff because life is tough and it can hijack you really quick. And having a, an advisor
that understands all the nerdy stuff but also understands like the motivation and the action.
Speaker 1 – 15:11
What’s most important to you is crucial to get this, the financial plan on track and stay on track. That’s the, that’s the
most difficult part is getting a plan to start because it’s that inertia. It’s really hard to start it. And then once it’s there,
it’s just not getting sidetracked. It is the second most important, hardest thing to do. So. Any closing thoughts?
Speaker 2 – 15:31
I’m just looking at my notes here that we didn’t talk, we didn’t go through the notes, which is fine. I would make sure I
hit on a couple of these.
Speaker 1 – 15:38
I think we hit on most of them.
Speaker 2 – 15:39
I was just say the one. It creates an overconfidence bias. Dopamine surges contribute to feelings of confidence and
perceived control so that’s big on, you know, if you’re trading your own account, you’re checking all the time, you can
get overconfidence in your investment strategy.
Speaker 1 – 15:58
Yeah.
Speaker 2 – 15:59
Creates addiction, like behavior. We talked about that. Social status. We talked about that.
Speaker 1 – 16:06
I like these final thoughts you have here. So build systems automation that bypass emotional decision making such
as reverse budgeting, automatic dollar cost averaging, you know, having a set, you know, distribution system if you’re
retired, what’s safe, you know, how are we distributing during, you know, down market so we’re not ever experiencing
a lot actual loss. The second one you put here is huge. So what is that?
Speaker 2 – 16:26
Create cooling off periods before you make a big decision, a big purchase.
Speaker 1 – 16:30
So I think that applies to like if you have like in a tough conversation and you’re like upset or if you’re like thinking
about making a big purchase, that’s going to be obviously a detriment to your cash flow. Like a big car, a house
renovation, like think about it. Make sure it’s not dopamine making the decision, making sure it’s your financial plan
and logical part of your brain making that decision. Yeah, that’s a, that’s, I can’t tell you. That’s, that’s a huge one.
Speaker 2 – 16:51
Last one. Focus on your long term goals.
Speaker 1 – 16:54
Yeah. Visualizing, you know, financial independence and saying that we’re going to enjoy the journey, we’re going to
enjoy life. Now we’re not going to stress about, you know, being on track or off track, but we’re going to maximize
and make sure we have no regrets and make sure that we have financial security in the future. And good luck not
letting Dopamine hijack your financial plan. Without a support group, whether that’s an advisor, a study group,
friends, you got to have some accountability. I think here is key so. But thanks for joining us and look forward to
catching everyone next week. Thanks for tuning in to our podcast. Hopefully you found this helpful. Really hope this
is as beneficial and impactful to as many people across the nation as possible.
Speaker 1 – 17:37
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