September 3, 2025 • 56 mins
A lot of folks discover personal finance podcasts like this one after hitting a few bumps in the road – most often with debt. Maybe you’ve maxed out your credit cards, or you’re juggling more Buy Now Pay Later payments than you can keep up with. That kind of financial stress is heavy, and it often comes with a side of shame. But what if your money struggles aren’t just about willpower? What if the financial services industry is stacking the deck against you? Our guest today, John Dinsmore, is a marketing professor at Wright State’s College of Business. He studies how banks and lenders use clever marketing tactics to steer us toward debt. And he’s here to reveal the traps and show us how to spot and avoid them. Listen as we discuss how cultural attitudes towards debt can normalize harmful practices, when psychological factors like loss aversion affect debt decisions, avoiding status symbols that can lead to irresponsible spending, and much more!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to How to Money. I'm Joel, and today we're
talking built to Borrow the hidden forces behind debt with
John Dinsmore. So a lot of people find their way
(00:28):
to personal finance podcasts like this one after hitting a
few bumps in the road.
Speaker 2 (00:32):
Often the culprit is debt.
Speaker 1 (00:34):
Maybe you maxed out your credit cards causing financial and
relational problems, and you turn to a podcast like this
because you needed help. Well, that's why we do the show.
We love to help. But there's often a lot of
shame about those past mistakes as well. But maybe, just
maybe your debt problems they're not solely about a lack
of willpower or a personal vendetta against yourself.
Speaker 2 (00:55):
Right.
Speaker 1 (00:56):
My guest today takes a hard look at the financial
services industry and how they dangled debt products that lead
us astray. John Dinsmore is a marketing professor at Wright
State's College of Business. He's gonna help us spot the
marketing schemes and the nefarious traps out there so that
we can avoid them. Professor John Dinsmore, thank you for
joining me on the show today.
Speaker 3 (01:17):
Thanks for having me Joel, of course.
Speaker 1 (01:19):
Okay, first question is what do you like to Splurgeohn,
I love a good craft beer, but they can be expensive,
and so you know, we're trying to do this the
smart thing with our money, saving the best for the future.
But hey, you guys, spend some money and live life
in the here and now, what's that spurge look like
for you?
Speaker 3 (01:33):
It's probably concert tickets. I never splurge for like the
really good seats, but I like to go. I mean,
it's my probably my favorite thing to do. And now
I have a son who's he just started playing music
and he's very into seeing live music. So now I can,
you know, excuse my splurging by saying it's for the boy,
(01:55):
but really it's you know, I try to go to
as many concerts as I can go to without you know,
missing a mortgage payment.
Speaker 1 (02:03):
I was talking to someone the other night about in
certain towns or in certain spots, like those concerts start later,
then do you how do you stay awake for it?
Speaker 3 (02:11):
Man?
Speaker 1 (02:11):
That's the problem I find these days. If it's like
nine o'clock, doors open, the band starts at ten, I'm
asleep by then.
Speaker 3 (02:18):
Right right, Well, I mean, so I'm fifty three. So
a lot of the bands that I grew up going
to and I still check back in on. You know,
I was the youngest person in the audience when I
was a kid, saying, and I feel like I'm still
the youngest person in the audience for a lot of
these shows at fifty three. So you know a lot
of times the shows maybe will end earlier. But you know,
(02:41):
I'm with you, especially like you know, doing it on
any work day is especially.
Speaker 2 (02:48):
I'd be like Friday or Saturday. Yeight, yeah, for sure. Okay,
last show that you went to, what was it?
Speaker 3 (02:53):
Actually the last show we went to. So my son
is a big Bob Dylan fan and he was on
the Outlaw tour with There's Really Yeah, Yeah, Dathaniel Ratliffe,
who had heard of but had never heard he was unbelievable.
Speaker 2 (03:07):
Okay, but it was about.
Speaker 3 (03:09):
One hundred and fifty degrees outside and we were literally
just hiding under a spot of shade because we had
lawn tickets. And then some guy who I'm pretty sure
didn't get he was probably given these tickets by a client,
just came up to us and it's like, it's too
hot for me. You know, here are my VIP passes.
Why don't you and the boys go in and so
was That was awesome once we got out of the heat,
(03:32):
but it was up until then it was kind of
touch and go.
Speaker 1 (03:34):
Yeah, Oh my gosh. Those outdoor concerts can be like that.
The festivals, I just don't have the stomach for them anymore.
But I do love a good show. I don't get
out as much as i'd like, but i'd love to
hear that's your splurge. I'm okay, let's let's talk about
debt and marketing. And your book is kind of at
the intersection of these two things, both of which should
(03:55):
become kind of more precarious in our society. It seems
like in the last a dozen years or so, I'm curious.
I hear a lot of people say, well, marketing, advertising
doesn't impact me, Like I see the advertisements, they don't
have any effect. Is that just wishful thinking on their part?
Or are there really some people who are impervious to
advertising actually impacting how they think about things and their
(04:16):
purchasing decisions.
Speaker 2 (04:17):
Right?
Speaker 3 (04:18):
I think most people think marketing works on other people
but not on me.
Speaker 1 (04:21):
Yeah, my brain, it's a lock box, man, No one's
getting in here.
Speaker 3 (04:24):
Absolutely, But I mean the data does not back that
up at all. Right, you may think that you've completely
rationally and consciously arrived at the choice of judgment that
you've made, but there's just reams of research to show that.
You know, people, our preferences are not that set. And
a lot of times, because we can't be experts in
(04:45):
something we're making a decision about, a lot of times
we'll lock onto a thing, even if it's an irrelevant
thing and to make our decision. So yeah, marketing, you know, advertising,
it does work. That's why people companies pump billions dollars
into it.
Speaker 1 (05:00):
Is that because it's more like subtle and long term.
Then we give it credit for like I don't see
the billboard for a coke and then I'm like, yeah,
well one right now. But is it like just how
we view the brand and how we view the acceptability
of drinking as off drink or something like that. Is
it all those subtle things that are impacting us over time.
Speaker 3 (05:19):
There's a lot of things. So in advertising, you say
it's recency versus repetition. So the the best week for
selling TVs in the United States is the week before
the Super Bowl. So if you're Samsung you're probably planning
more ads for your TVs in that week than you
would at other times of the year. But if you
(05:42):
sell a bunch of TVs that week, it's probably not
just because the ads that you ran that week. I mean,
I think they helped, but they advertise year round, you know,
all year, every year, and because of all of the
frequent exposures to it, you start to develop a sense
of comfort and familiar already with Samsung. And then of
course you have all the other you know, if you
(06:03):
have friends who have Samsungs and you know, maybe they've
said good things about it. So it's all of these things.
So there's stuff in the moment, but you're also bringing
you know, baggage for lack of a better word, with
you. You know, your past experience is with you. That also
helps shape your outlook.
Speaker 1 (06:20):
It's also fascinating to me that like when you see
the stadium naming rights deals and I guess it's just
because of like the perpetual mentions of the stadium name
when during those TV broadcasts and stuff like that. It's, yeah,
it's more of that familiarity coming. It's like, oh, crypto
dot com arena. I guess, like crypto dot com is legit,
Like I don't know, mana. There's all these like subtle
(06:40):
things happening inside of marketing in the ways that we're
marketed too, that we're honestly not even aware of. And
I'm curious, like, for you, why is consumer debt and
the marketing of debt products? Why is that like a
particular fascination or an area of study that you've been pursuing.
Speaker 3 (06:58):
You know, I think you know, when I decided to
go back to school to become a professor and you
have to start researching things, what you find is when
people are researching psychology human behavior, a lot of times
they're trying to figure themselves out. Right. So it's I
think for me, it was okay, I've I've had so
many finance classes. I should understand. I should be in
(07:20):
the top whatever percent in terms of finance understanding and skill,
and yet I will still follow my face from time
to time. And the truth is because a lot of it,
it's not just knowing enough about finance. I mean, finance
is complicated. People generally try and avoid learning about it
if they can because it's uncomfortable. But even if you
(07:42):
know a lot, you know there's your knowledge base, but
then there's also you know, how are you feeling that day,
What is the context of the decision you're making, What
else is going on here? All of these things, and
then what is the lender telling you or how are
they presenting it? Right? That also is going to affect
your understanding or lack thereof, of what you're doing.
Speaker 2 (08:04):
You're right.
Speaker 1 (08:05):
I mean, it's amazing my psychological state can impact my
willingness to buy something or to go on a walk
or not. I mean, it's all these things. Yeah, you're right,
there's all these things to play, which makes this a
fascinating topic. And I'm curious too to hear your take
as someone who studied.
Speaker 2 (08:22):
This for a while.
Speaker 1 (08:23):
Like, marketing tactics around debt products have improved significantly over
the decades, and even to the point of.
Speaker 3 (08:30):
Making improved in what sense, in the gotcha sense, it's
better for us the consumer. Okay, so they're improved. They
get they're great at a higher rate of conversion.
Speaker 1 (08:39):
They're great at it, and they're great at making us
feel like like I was.
Speaker 2 (08:43):
You're the exception to the rule.
Speaker 1 (08:45):
If you think I'd like to avoid debt, I don't
necessarily think that, you know, more debt in my life
is a good thing. We've normalized it completely. So I'm
curious from your perspective, how good has debt marketing gotten
and how has that changed what people see as like
acceptable practice. And again, it's like that frog in the
in the in the water, and it just like we're
(09:05):
slowly turned up the temperature and then it just starts
to seem normal after a while.
Speaker 3 (09:09):
I mean, I think, yeah, the tactics continue to get better.
I mean also the tools of marketers, not just for
debt but everywhere, right, continue to improve, with you know,
all of our digital footprints being left everywhere. You know,
So we subscribe to Google TV at home, and there's
lots of commercials that I'm like, well, this is obviously
(09:29):
served just for us, right, And I mean it got
so bad that the other week it kept showing me
commercials for a drug for alternative colitis, and I started
to worry, like, do I have ulcert of class? Right?
Because marketers know so much about us that everything is
(09:50):
you know, there's very little that's random about the ads
and the messages that you receive now.
Speaker 1 (09:55):
Right, It's like that famous Target story where they sent
some marketing materials to that young lady's house because of
what she had been buying at Target, and they were like,
you're pregnant, You're gonna want some baby stuff. And they
knew before she knew that she was pregnant.
Speaker 2 (10:09):
Insane.
Speaker 3 (10:09):
You can't make it up, right, right, I mean, And
that was because I in my classes, I talk about
the Target example all the time, and that was thirteen
years ago, right, Yeah, So whatever they were doing is
now considered like archaic, right, So their tactics are probably
are not probably they are so much better now, so
they can even you know, especially when people are shopping digitally,
(10:34):
because I with my classes, we run lots of digital
campaigns all the time. I mean, you can optimize for
the right word, the right image, all of this. Everything
is completely quantified, yeah, and then optimized to get certain
types of buyers, certain types of messages and images. And
(10:55):
that's definitely going to apply to finance as well.
Speaker 1 (10:58):
So we're gonna talk a lot about marketing, deceptive marketing,
sinister marketing, even but you say that when marketing is
done right, it creates a virtuous cycle. So what does
good marketing look like on the front end? Like how
and how can we maybe maybe pointing to what good
marketing looks like and help us to identify the difference
and maybe avoid some of the worst kinds.
Speaker 3 (11:17):
Right, I mean I think you can. You know, in
my mind, when marketing is a force for good, it's
taking something that has real value to people clearly and
honestly communicates what that value is, and then the person
can make an informed decision and hopefully by it and
that person gets something that they really like and enhances
(11:39):
their life in some way. Right, And there aren't even
players in finance, and I wish I could their names
is escaping me. But there's a few companies that are
really specializing in trying to create good financial habits and
get people be more clear in their marketing so that
people can trust their source of financing. Then I think
(12:01):
it's very much a source for good. I mean, we
need loans, we need credit. I mean, you can't live
in a modern life without it. But the problem is
when people commit to things that they don't understand, maybe
because they lack understanding, or maybe they didn't put as
much effort into their searches maybe they should have. But
a lot of times it's also because things are communicated
(12:23):
in a you know, to be a nice ambiguous way, right.
Speaker 1 (12:27):
Yeah, and some of those products can be complex, right,
They can be difficult to understand. So I guess is
a lack of personal finance education. Part of the problem, too,
is would that help. Are we basically like failing the
next generation of young folks feeding them to the marketing
sharks because we haven't really set them up to understand
even just the basic concepts of personal finance very.
Speaker 3 (12:50):
Well, right? I mean, you know there's I think culturally
in the US, you know, we do feel like, well,
you know, buyer beware, like you are responsible for your
own decisions. And to a degree that's true. But on
the other hand, you know, you will have seventeen and
eighteen year old kids signing on for things like student
loans or their first credit card. Yeah, and a lot
(13:10):
of times it's not just being a kid. A lot
of times we don't learn about things we should learn
about until we've had some sort of mishap, Right, And
if you're talking about something like student loans or credit cards,
that can be a mishap that follows them around for years.
Speaker 1 (13:26):
Right, And we sold them the idea of something that's
that's normal, right, Like student loans are good because you're
going to get the degree and you're going to get
a good job. And what you don't realize is, yeah, maybe,
within reason, right, a certain amount of student loans.
Speaker 2 (13:41):
Could be a solid idea.
Speaker 1 (13:44):
But when you're seventeen or eighteen years old, you're not
well equipped to understand if someone's willing to lend you
the money. You must think they know better, and then
it's a good idea for you to take out the
full amount.
Speaker 3 (13:53):
No, I think that's an excellent point. I think most
of us think of lenders as kind of this omniscient
institutional power that you know, the rate you get is
just the rate, right, based on your credit score and
all these different things. But the truth is, you know,
we actually, as consumers, we do have power to shop around.
(14:15):
You know, research shows what determines our cost of debt
is not What is a bigger factor than even credit
scores is the amount of effort that we put into
shopping for and selecting these types of products. But again,
when we're talking about people who are just coming into
it at eighteen years of age, they don't know that
(14:37):
they haven't been taught it I am encouraged that. I
think twenty five of our states have made financial literacy
a requirement in high schools, including meet here in Ohio.
And you're definitely going to need that more than you're
probably going to need some of the other classes that
you take. I mean, you can't get away from personal finance.
Speaker 1 (14:56):
You're speaking my language, John, I totally agree. It's like
a it's a shame that this thing that we use
every day moving forward. Physics was great my junior year
of high school, but I haven't used it again, and
I would. I would just Yeah, having at least a
modicum of personal finance education in high schools, and you're right,
half of states now require it is at least setting
(15:18):
us up to start to ask the right questions or no,
enough to make us a little bit dangerous on that
front to protect ourselves. Just in regards to debt in general,
do you think that we have failed to question the
basic premise of whether their debt makes sense? We've just
made in so many ways right. Debt has greased the
wheels of our economy, both personal on a micro and
(15:41):
a macro level. But then we've normalized it to such
an extreme, especially especially in the United States that so
many people suffer dramatically from debt overload and not having
saved enough for retirement because they're paying off all the
different debts that they've taken out. Is that marketing at
work to really get us to take on more delays
(16:03):
or just or is it like I don't know, lacks
political infrastructure.
Speaker 3 (16:07):
I would say all of the above, right. I mean,
I don't begrudge a marketer of a finance company trying
to get more business for the company they work for, Right,
that's their job. They're going to lose their job if
they don't do that. But the devil is in you know,
are you being clear with people? Are you doing some
things that intentionally mislead folks? Right? I do think culturally
(16:31):
in the United States, we you know, we tend to
be hands as hands off as we can be. We
don't want to infringe on a company's ability to you know,
conduct business. But at the same time, if we have
a society that is too encumbered with debt long term,
it's going to be a long term drag on the
(16:52):
productivity of this country. And I think if you look
at research on you know, most people don't really understand
how interest rates work, and yet it doesn't matter. These
people have to go out there and take out loans
and negotiate interest rates anyways. Yeah, I mean it would
be all right put a bunch of six year olds
(17:14):
behind the wheel of a car and see what happens. Right, Usually,
we want to make sure people know what they're doing
before they engage with it. So I personally think there's
more room for some common sense rules to make sure
that people really understand what they're getting into.
Speaker 1 (17:31):
Yeah, I think you're right, Like, people don't understand it
in the positive direction compounding returns, like if I start investing,
even just a little bit when I'm young, how much
that can grow into And they don't understand it from
the negative perspective of a twenty two percent interest rate
on a credit card and having that revolving ten thousand
dollars balance and how that impacts them either or something
as simple as shopping or with multiple lenders for a
(17:53):
home loan. Right, and now you know, the federal government
has released statistics and they show just how much the
average person saves just by shopping with three lenders versus one,
and it's significant and so like to the two tens
of thousands of dollars over the life of the loan.
Oh yeah, you were talking about some of the worst
debt products too.
Speaker 3 (18:11):
There.
Speaker 1 (18:11):
You call them in your book, you call them booby traps,
and gosh, man, some of them are seem so incredibly nefarious.
And in some states, for instance, they've like outlawed loans
above a certain interest rate right payday loans for instance,
which trap people perpetually in debt that they just can't
get away from because it's almost impossible because of the
(18:32):
way the terms are set up. So how do you
think about the credit card versus like the scale of badness?
I guess in some of these debt products in the
way that they get marketed, right.
Speaker 3 (18:42):
I mean, there's so many credit cards and they have
so many different provisions and those it's hard to point
to because there's some good credit cards out there. But
you were talking about you had mentioned things like, you know,
payday loans and things like that, and those are products
that almost exclusively to target people in low income areas.
(19:03):
And this is both you know, low income urban centers
as well as more rural areas, and so they they
prey on people's lack of sophistication, but also lack of options. Right.
There's a study that came out like two years ago
that showed in impoverished neighborhoods, if there was a blood
(19:27):
donation center where you could sell your plasma, it reduced
usage of payday loans in that area by whatever percent,
it was a significant number. I forget the exact number, right,
So it suggests that you know, even if folks aren't
a master of you know, if they can't come up
with an amortization table or you know, their masters of finance,
they still understand that a lot of these places are
(19:49):
really pretty rough and overly expensive because they will sell
their plasma rather than have to go, you know, just
to save themselves, you know, another trip to one of
these predatory places. So, you know, there have been debates
that have come up about you know, obviously, we want
banks to be able to locate where they think makes
(20:11):
the most sense for their business, but maybe there are
opportunity where the free market can't provide. Maybe there's opportunities
for kind of a public private partnership where you know,
post offices, social security offices, DMVs, places that have locations everywhere,
including impoverished areas. Maybe these can be storefronts for market
(20:35):
rate banking services for a lot of folks. I think
it's really just getting them some options because a lot
of folks know, Hey, I'd rather not go to a
payday lender. But at the same time, you know, there's
not a Bank of America in my neighborhood, So what am.
Speaker 2 (20:50):
I going to do? No.
Speaker 1 (20:51):
I think it's very true, and especially you're right it's
urban in world. Some of the smaller rural towns I
drive through. I'm shocked at how many title loan payday
loan kind of places there are. It feels like they're
as many McDonald's as there are title loans places or
something like that. And yeah, which again that's part of normalization.
(21:11):
It feels like that's the place you turn when you
need money. We've got more questions to get to with you, John,
including I want to talk about status and how we
think about status, status, whatever, how we think about that
in terms of our financial decisions, and how that impacts
some of those important decisions we make. We'll get to
more with Professor John Dinsmore right after this.
Speaker 2 (21:39):
Our we're back.
Speaker 1 (21:39):
We're still talking about the hidden forces behind debt. And marketing,
the marketing that happens behind debt and how it catches
us in the web we make decisions maybe we wouldn't
otherwise make. With Professor John Dinsmore, I was so interested
when you were writing about prediction bias. Those super interesting then,
because you in your book you cover a lot of
(22:01):
kind of some of those behavioral elements, some of the
ways that marketing impacts us or even just like that
we're wired to make decisions, and so yeah, how there's
that intersection of marketing tactics and our own human insufficiencies
and realities that like, gosh, it feels like a right
place for us to get taken advantage of.
Speaker 3 (22:24):
Yeah, for sure. I mean, well, inherent in taking out
any debt or credit is you have to think about
what your future circumstances are going to be. And we
are as a species very optimistic, right We always we
tend to think when we think about the future, we're
not thinking about, oh, I'm going to get passed over
for this promotion and then you know, my car is
(22:45):
gonna die, And it's it's when we think about the future,
it's we're getting the promotion, things are working out, we're
making more So, a lot of people are less cautious
about taking on debt because they're very optimistic about the future.
But you know, if you live long enough, you understand
that even if things go up, it's not a straight
(23:08):
ride up, right, there's going to be some stumbles and
some mishaps along the way.
Speaker 1 (23:11):
It's like, how long I tell my wife it's going
to take me to fix something around the house, and
she knows to five.
Speaker 3 (23:17):
X that yes, no, no, absolutely, Like I definitely resemble
that remark as well. So people tend to borrow on
how much they think they're going to be making rather
than how much they make, and that you know that
can be a mistake.
Speaker 1 (23:32):
Is are there ways in which we're allowing the marketers
into our lives more than we should and maybe that's
also wearing us down. I'm just thinking about who we
follow on Instagram, the newsletters we sign up for, the
ways in which we're just like, come on in, and
I'm going to be wise enough and sane enough to
(23:52):
make the decision I want to make at the right moment.
But maybe marketers are wearing us down in a way
that's hard for us to see.
Speaker 2 (24:00):
You on the front end yeah.
Speaker 3 (24:01):
I mean I think right. I mean, the these devices
we have with us all the time, they're supposed to
make us more productive and more informed, but for the
most part, they make us more stressed and more overwhelmed.
And when we're stressed or overwhelmed, we're just not thinking
as clearly about things, so we're more susceptible. If you
are old enough to remember kind of the heyday of infomercials,
(24:24):
so you know, if you wanted to see like the
Ronco pocket Fishermen, well they you know, these odd ball devices.
You would see them on infomercials, usually in the middle
of the night, like two in the morning, when it's
pretty much only insomniacs or people who have you know,
been drinking a lot are up. And there's a reason
for that, right that they your inhibitions are down, your
(24:47):
reasoning is diminished, and so it's it's a bit easier
to get someone to, you know, to commit to something
under those conditions than they would if they had all
of their faculties about them.
Speaker 1 (24:59):
Yeah, and we're almost signing up for faculty diminishment on
of our own volition by just allowing these marketers more
free wheeling access to us. I'm curious too to hear
your thoughts on the balance, and I feel like you've
done a good job on this so far. But when
you're buying a home, you take on a mortgage, typically
(25:21):
right eventually. I mean, there's a surprising amount of percentage
of people in the United States who own their home
with no mortgage, something like thirty percent of people, which
bubbles my mind.
Speaker 3 (25:31):
It's a very different frame of reference from my own life.
Speaker 1 (25:34):
But yes, yeah, yeah, but I for one am thankful
that when it came to buying a home that there
was a debt product available so that I could buy
a home before I saved up the cash, because I've
had to save up the cash.
Speaker 2 (25:46):
Yeah, I don't know if I don't a home yet.
Speaker 1 (25:47):
You know, it's like one of those things where the
decision will get delayed forever, the can will get kicked
down the road. So how do you think about that
intersection where like, some of these debt products really do
allow us within solid parameters to live a better life.
Speaker 3 (26:02):
Oh absolutely, I mean it's and some of them are
very kind of nobly created. If you think about things
like special Veterans Administration loans for people to for veterans
to buy a house. I mean, this is a it's
a class of people who we value highly, but maybe
they haven't been compensated you know a lot, right, So
(26:24):
creating programs to make sure that people who have you know,
done this thing that we value highly will still have
access to you know, the American dream, buying a home,
going to college, all of these things. These are all
things that are still worthwhile ventures. Now you can get
into trouble with if it's not the financial products. Then
(26:46):
you know, there's some colleges out there that aren't accredited
and are really just after your student loan money and
things like that. So you need credit and debt to
Most of us do to accomplish so very key things
in our life. But the trick is to not fall
into a product that we don't understand and then it
(27:07):
might ultimately eat us.
Speaker 1 (27:10):
One of the other like psychological realities that you talk
about in your book is loss a version and how
you talk about how marketers kind of prey on that
basic human instinct. Can you can you share a little
bit about that.
Speaker 3 (27:24):
The example that pops to mind, so, you know, my
wife's car a couple of years ago rather spectacularly just died.
Like we went out to lunch and we looked out
the window we were about to leave, and we could
see just this huge pool of oil laying under the car.
And you know, then we it was officially pronounced dead
(27:44):
at the shop an hour later. So we had to
go get a car. And so we we bought a
car knew that had a you know, a strong reputation
for reliability. And you know, the whole sales pitch was
this thing, you're going to drive this thing, you know, forever,
and it's super safe, it's super reliable. And then as
(28:05):
soon as you commit, then they start telling you. But
you know, even reliable cars fail, right, so you're gonna
want to get this extended warranty, or you're gonna want
to pay a thousand bucks for the coding of all
these things.
Speaker 2 (28:18):
Nothing's going to happen, but it could, right, I.
Speaker 3 (28:21):
Mean, And so that's part of that is loss of version.
Speaker 1 (28:23):
Right.
Speaker 3 (28:23):
We're afraid of losing more than we love winning. So
when we're in a position to say we don't want
to make a bad decision, sometimes we end up taking
on things that you know objectively aren't in our best interest. Right,
So paying the extend, you know, buying the extended warranty
on the car, or paying for these other things because
(28:46):
you don't want to buy this car and then have
a low probability thing happened to you down the line, right,
So yeah, I think there is. I mean, you could
see a lot of credit and insurance is based on
that kind of fear appeal, right that you know, you
don't want to look like you made a bad decision here,
so let's, you know, give us a bunch of money
and we'll make sure that doesn't happen.
Speaker 1 (29:07):
And some of those products make sense, right, like term
life insurance, Like the truth is, if you're dyeing your
income stops like that could significantly impact your family.
Speaker 2 (29:16):
But then when you're buying a.
Speaker 1 (29:18):
Two hundred and fifty dollars laptop and they're like, do
you want this fifty dollars extended warranty because that laptock
could croak in the next two years and you want
to be safe, Like that's not a great product. And
so I think for for individuals trying to figure out, well,
I think some of these products are helpful and they
really do protect my family, They really do give me
peace of mind. Then there's others that are just you know,
(29:38):
a complete you know, it could come out to benefit me,
but if you look at the numbers, it's unlikely to
be the kind of insurance that helps.
Speaker 3 (29:45):
Yeah. I mean, these things are structured to guarantee a return,
and the return is we're not going to have to
pay out that many claims on this for sure.
Speaker 1 (29:54):
Talk about mental accounting, because that's one of those things
too where I think we you say in the book
your internal bookkeeper is heavily concussed, and which is just
a funny line, but it just makes me think. I
think we think we're smarter than we are sometimes and
that we can do some quick mental accounting and we're like, yeah,
I know which way to go. But that maybe that's
(30:16):
not true.
Speaker 3 (30:17):
Right, I Mean, the truth is, as smart as any
of us may be, we are still probably more emotional
than we are rational and our feelings. We take our
feelings as information in a lot of cases. So how
does this apply to mental accounting and money? Well, different
contexts or how we pay for things feels differently, right,
So if you're paying cash for a bunch of things,
(30:40):
there is some amount of internal conflict or pain We'll say,
when you pay for something right, you're pulling the cash out,
you're acutely aware of how much you've put out, how
much you have left. Maybe you have to go to
the ATM again because you run out of cash. So
psychologically that's a more difficult thing to do than swiping
a credit card. Right, studies of swiping a credit card
(31:02):
very little calculation that goes on. It does not hurt
or create much conflict. And there's a recent study that
just came out showing that paying by phone right, just
the tap to pay, actually feels good. People get like
a little feeling of pleasure from it, I guess the
same way front like you would getting you know, winning
(31:23):
a bonus on a video game or something like that.
So you know, that probably spells trouble for some folks
if you're actually deriving feelings of pleasure just by this
particular method of payment.
Speaker 1 (31:36):
Yeah, that's scary. So so does that change how like
what how you pay? First off, for how you talk
to your students about paying for things. Because if there's
a simple pleasure to the tap to pay, and I
gotta say, it is nice.
Speaker 3 (31:50):
And it's like crazy convenient, right, not having to remember
your wallet.
Speaker 2 (31:53):
And yeah, yeah it is.
Speaker 1 (31:54):
And sometimes yeah, if I'm like, if I'm going for
a run and don't have my wallet, like and I
need I can I can pop in somewhere and use
my phone that's in my pocket, which is which is convenient,
But are convenience also costing us? And it seems like
maybe that added convenience is like a marketer or a
lenders dream.
Speaker 3 (32:13):
Right, I mean they're watching these things, right, so they
if you're a marketer, you're gonna look at, okay, is
how people pay for things? Like are they making different
decisions based on this? Right? And so they're definitely gonna
ask that question, and they're definitely gonna see, oh wow,
through these methods, you know, you look at how when
(32:34):
people have downloaded a retailing app for the retailer, they
spend more than if they're in store or just buying
through traditional web browser. So for people who offer credit,
they're gonna look at the branding of cards, right, the
method of cards is that a digital card or you know,
(32:54):
in all of these things, and so they're gonna they're
gonna have some sense of what gets some of the
best return.
Speaker 1 (33:00):
Buy now, pay later is the perfect example of this
right where it's like a new way to pay and
you would think as a business model it doesn't really
make that much sense. And as an individual, the only
way it makes sense is because it allows me to
get the thing I want in the most painless way
without actually having to pay upfront. And the studies do
seem to point to the fact that when people buy
(33:21):
things using buy now, pay later at checkout, their carts
are bigger, which is why the big retailers are like, sure,
come on, we'll take by now pay later on our site.
And it's just because they make more sales.
Speaker 3 (33:34):
Yeah, they're just optimizing, right for revenue for sure. Yeah.
I mean something else that plays in a mental account
of accounting and what you were talking about. If you
look at things like tax refunds. Okay, so the week
before the Super Bowl is where you sell the most TVs,
But one of the big times is and you're gonna
see lots of ads in April and May for TVs
(33:57):
is because of tax refunds. Right now, we all look
at our pay stub and we probably complained bitterly about
the taxes being taken out. I need that money to
pay bills now. But you know what, you may file
your taxes and then get that money back to use
it to pay bills. A lot of people don't, right,
because it feels like found money. It's like you've had
this windfall, and so they go out and buy TVs
(34:18):
and other things because the money feels different, right.
Speaker 1 (34:21):
It's the way the money comes to you. It feels different,
feels different too. I'm curious about status and status whatever,
like when people you talk about kind of credit cards
and how certain branding of certain cards can make people
feel a certain way. I mean, there's a reason credit
our companies have even made some of the credit cards
like black and heavier, right, because then you feel like
(34:41):
a baller.
Speaker 2 (34:42):
I guess it doesn't.
Speaker 1 (34:43):
It doesn't feel the same way when you're tapping it
because it's in your Apple wallet versus when you pull
it out of pull it out of your actual wallet.
But how how do they these retailers, these marketers use
status games to kind of get at us and get
us into making financial decisions that might sound smart on
the front, but really are against our own best interests.
Speaker 2 (35:03):
Right.
Speaker 3 (35:03):
I mean when you mentioned status, you know, I think
of the American Express Gold card, which was a card.
That was when it came out in the fifties. I
want to say it was legitimately targeted towards people with,
you know, very high level incomes. But because of that,
it quickly became a status symbol and everyone wanted one.
(35:24):
And then after a while, other credit card offerers would
start it, would issue cards with these status branding platinum, diamond, whatever,
and they What studies have shown is people of lower
incomes when they have these status branded cards, they use
them more, and they use them more specifically in like
(35:45):
publicly visible ways. People can see them using the card,
then they want to use it more. Right now, as
a marketer, you're probably just thinking, well, I'm just here
to get the most business possible. But this is something
that is you know, once you've seen the behavior, you
know that this particular branding is getting lower income consumers
(36:07):
into hot water.
Speaker 2 (36:08):
Yeah.
Speaker 1 (36:08):
Well, luxury goods have kind of a similar element too, Right.
It's where the branding or even if it's not and
sometimes they are superior products, but sometimes they're not. And
it's literally just signaling and we're spending money that we
don't necessarily have to signal to people that we are,
(36:31):
whether it's the car you drive, or the shirts you
wear or the handbag you carry, like that we are
somebody or are trying to be to be somebody, maybe
is a better way to put it, right.
Speaker 3 (36:42):
Yeah, I mean, and it goes back to I mean
when we're in caves, right, I mean, if you think
of cave people, you don't think of being socially conscious.
But the truth is these were people who had to
band together to not get eaten by dinosaurs, to find food,
and all of these things. So the group dynamics quickly
(37:02):
would confer status onto people, but back then probably mostly
based on physical stature, strength. Yeah, and to that person
resources would flow, right, So maybe you don't have to
go out and pick or kill your own food like
people are bringing it to you. Well, in today's age,
you know, money is behind all of these signals of
(37:24):
status that we want to that we want to demonstrate
to people. So we take on similar behaviors to achieve
status with others, whether it's you know, the things we
own or just doing things that are conspicuous signs of
status or wealth.
Speaker 1 (37:42):
We've all heard you get what you pay for, and
sometimes that's true. Right, I have fallen victim to the
deal mentality, it's like, oh, yeah, I think it's the
best price possible, and you know, the quality quality be damned.
I just don't care that much because this is I'm
all about paying the least amount. But how do we
maybe determine as when we're being marketed to, Hey, this
(38:06):
thing is superior, this is the thing you want. There
is some truth to that on occasion the quality might
be superior.
Speaker 2 (38:13):
How do we know.
Speaker 1 (38:14):
And do our own due diligence. I just think of
something like consumer reports when buying a car, right, that
would help you say, well, the branding says this, but
the data says this. But how in the moment do
we make better decisions about the purchases we make when
we're being told a story that might might or might
not be true.
Speaker 3 (38:32):
Right, It's tough. I mean, we typically have to find
something that we can trust, whether it's consumer reports or
a good friend's advice or things like that. When it
comes to debt, there's you know, there's the advertised upfront
price or interest rate, but usually in the fine print
there's a lot of other things like escalation causes or
(38:56):
a clause excuse me, or you know, find dance charges
that come on, if you don't behave in certain ways.
So what's really difficult is and because math and finance
makes people anxious, so it's hard for them to embrace
diving into the details. Is yeah, you have to read
(39:16):
the fine print. If you have a friend who works
in finance, obviously that would be great too, because financial
literacy is important. But you know, if you're not doing
it all the time, is dealing with credit and finance,
that knowledge does fade over time, So you need to
(39:39):
reacquaint yourself with these things. And you also need to
if you have a friend who is an expert who's
living and breathing that stuff, get help.
Speaker 1 (39:46):
Maybe crowds or I don't know. How do you feel
about Reddit as a place? I feel like Reddit is
a decent place to turn, although I did see recently
that there's the companies paying for people to post on Reddit,
because that's the last bastion of kind of company free
advice that people have where it's literally just humans talking
about the product or the service or whatever and there's
(40:09):
no company intrusion or advertising. But it seems like companies
are trying to infiltrate that, almost like what happened with
Amazon reviews back in the day, or interviews on Yelp
reviews get people being paying people for certain positive reviews
to make yourself look better.
Speaker 3 (40:23):
Yeah, no, I mean they absolutely are right, and same
with I don't know if you go on korra. Core
is bigger outside the US than inside, which is supposed
to be the expert only kind of version of Reddit.
But you know, there's still plenty of things that are
being posted on there that are clearly promotional or clearly
have an agenda.
Speaker 2 (40:41):
Yeah.
Speaker 3 (40:42):
I mean, if someone's too overtly commercial, I think you
can tell that you know it's a biased message. But
the trouble with Reddit is not that there aren't knowledgeable
and well intentioned people on there. I think it's there
are so many people of varying levels of expertise or
(41:03):
intent that it's hard to tell who you know, who
are the knowledgeable, well intentioned people, and who are the
people who are just trying to get me to, you know,
buy something.
Speaker 1 (41:10):
I think that's a great point. I've got a few
more questions to get to with you with you, John,
including kind of AI's impact on all this. It seems
to be mudding the waters even more. Well, we'll get
to a few more questions with Professor John Dinsmore. Right
after this, I we're back still talking with Professor John
(41:33):
Dinsmore about debt and marketing, the nefarious forces that get
us to sign up for products that might not be
the best for us. I want to talk about AI
in just a second, John, But the when we're talking
about the Internet, the Internet, it certainly seemed like, oh,
this is going to demystify pricing, This is going to
(41:53):
take some power out of the marketer's hands. I can
comparison shop in an instant, but that has a quite
been the case, Like how have companies been able to
actually see almost make it more difficult for us to
make good decisions in the Internet age?
Speaker 3 (42:08):
Right? I mean when it comes to AI, I mean
what I'm saying today may may not apply tomorrow because
it is moving so fast. But I mean, as someone
who's a heavy user of these platforms. Yes, AI is
different than what we know is traditional computing. But it
seems to as a form of intelligence, struggle with the
same thing that we struggle with as humans, which is
(42:30):
what sources should we believe? You know, what is valid information?
You know? So all that I've seen really on AI.
It is, and you can see in like analytics on
websites that you know, chatchypt and similar services are replacing
Google when you're looking at referral sources for traffic. Right
so search traffic is slowly evolving into AI traffic. So
(42:55):
AI is going to be really powerful for that reason.
But at the same time it struggles with as far
as I've seen, separating good information from misinformation. And then
it's also for phishing, scammers and other forms of cybercrime.
It's been this major blessing for people who want to
(43:17):
misrepresent themselves as being from your bank or being a
lender and things like that. So I mean, right now,
I haven't seen it as a big force for good,
but you know, hopefully as the platforms get better and
we get more sophisticated about using those platforms, hopefully it
will become that.
Speaker 1 (43:38):
I'm not against dynamic pricing for the most part, although
it's gotten more sophisticated. But it is interesting that you know,
you might try to buy an airplane ticket in the
morning and then you go you're like, ah, I'll do
it later, and then you go back the afternoon and
you're like, it's one hundred and fifty dollars more for
the same flight, Like, how did that change so quickly
and by that much? But that's that's dynamic pricing, and
(43:59):
guess what the price might be cheaper again the next day.
So you have to be a thoughtful consumer. But it
seems like with artificial intelligence, those decisions are going to
become even more fraught and maybe more individually targeted. So
how do you think people can or should protect themselves
when it comes to marketing of products where pricing is
(44:21):
even more ambiguous than it is now.
Speaker 3 (44:23):
I think you have to And it's tough, right because
I know people have accused, like Amazon serving different prices
to people and other online retailers because they have a
search history, and they'll say, okay, well Joel, you know
he's this big deal podcaster, so we think he'll pay
twenty percent more, right, So how do you protect against that?
I mean, I think again it goes into the amount
(44:45):
of effort you're willing to do and all the different
sources you're willing to check, you know, on these things.
You know, airlines insist that they aren't jamming you when
you search for an airfare and you come back and
it's gone up a little bit, which not only makes
them more money, but it's going to increase your sense
of urgency to buy that ticket.
Speaker 2 (45:01):
Oh man, prices are going up.
Speaker 3 (45:03):
Better get it now, right, right? But I mean, so
it is again it comes in you check multiple sources
for everything, you know. I remember the CEO of Wendy's
randomly in an earnings call, said well, we're going to
play with dynamic pricing, and people lost their minds, right,
And I think mostly because you know, it's food, right,
(45:25):
and this is not you know, this isn't going to
some you know, Michelin start whatever. It's These are working
people who go to Wendy's for food and now they're
going to have to pay, however much more because they
want to eat lunch at lunch time. So I think
that's part of it too, which is being able to
just you know, go across the street to someone who's
not doing that, doing that.
Speaker 2 (45:45):
That's a good point. Be willing, be willing to walk.
Speaker 1 (45:48):
And I think that's part of what's changing some of
the policies that these companies have is they're getting the
pushback and they're realizing that it's it's unpopular with the masses, right,
I don't.
Speaker 3 (45:59):
Know if you. One of the most famous examples of
dynamic pricing, Coca Cola experimented with vending machines that would
charge more for sodas the hotter it was outside, and
people were furious. I mean they quickly pulled the plug
on it because people got so angry. Yeah so, yeah, yeah,
so it's you know, your business is valuable, don't be
(46:21):
afraid to take it elsewhere if someone is misbehaving.
Speaker 1 (46:24):
Do you think individuals should be responsible for their own
behavioral shortcomings, like, hey, you signed on the dotted line,
you pay the price. You should have done more due diligence,
or do you think that the government should step in
to eliminate some of the more vile marketing approaches. I'm
even thinking of recent attempts to rein in chunk fees.
(46:46):
There's different people who think different things, and in some ways,
like one person's junk fee is another person's opportunity to
save the way part of it. You know, sometimes the
airlines annoy me by how they charge for everything, But
I also can fly frontier with a backpack and get
the place I want to go way cheaper than I
could if everything was all included. Uh so, yeah, what
(47:08):
what's your what's your take on individual choice versus government
involvement on this stuff?
Speaker 3 (47:14):
You know, there's there's a balance in there, and of
course probably most people think there is a balance, but
we're all probably going to disagree on you know, where
where that line is. So like alluding to things like
baggage fees, I mean actually there was what on tickets,
There was an executive order that took effect recently where
(47:37):
now you're seeing all in prices for tickets for concert tickets. Yeah,
which I really like as a consumer because once you
commit to buying something and then you start having these
fees come in, small enough fees to where they're making
good money off of you, but not so big that
you walk away. You know, I would I personally think
(48:01):
it's more ethical to have all of the fees up front,
because studies have shown that, you know, the further people
go through the process, the less likely they're willing to
walk away, you know, regardless of how many fees come in.
There was a study about you know, baggage fees and airlines,
and they gave consumers a chance to say, hey, look
(48:22):
this other option here that you passed up actually is
going to have a lower total cost, and people refuse
to consider it just because I think they were kind
of resigned to getting jammed by the airlines. But I
think also they were just they were committed. Yeah, they
didn't want to dedicate any more energy to it.
Speaker 2 (48:38):
No, that makes sense.
Speaker 1 (48:39):
Yeah, there's a line somewhere, and at some point, you know,
selling snake oil becomes not okay, like so and people
get held accountable for that, or the burnie mateofs of
this world selling investment products that aren't real, like, there's
a problem there, and we hold those people accountable.
Speaker 2 (48:57):
So you're right.
Speaker 1 (48:57):
I'm curious too, as someone who's dug into these sorts
of debt marketing practices. How how has that changed your
approach to debt in your life? And how do you
think differently when you're considering taking out a mortgage or
considering a credit card in your life and how you
use that credit card.
Speaker 2 (49:17):
How has all the.
Speaker 1 (49:18):
Research you've done and everything that's in that incredible brain
of your sean, how's that? How's that impacted your actions?
Speaker 3 (49:24):
Oh? Wow, it's a shine of my apples here. So
the uh, I think what I do differently it's probably
two things. Well one, you know, the first house that
my wife and I bought together. You know, we were
referred to a mortgage broker through my boss, and the
guy uh had us all set up. We were all
(49:45):
ready to close on the house, and about a week
before closing, he calls up and says, well, there's a problem.
You know, you can't get a regular loan. We have
to do what you call like a no doc loan
if you're familiar with those, with a much higher interest
rate and all these things. Well, you know, we needed
a place to live and felt like, you know, at
this point, we couldn't walk from it, so we took
(50:05):
on the bad mortgage and refinanced a couple of years later,
actually ended up getting a check from the state because
some of the fees they were charging were actually against
the law. Wow. But you know, some years later we
were refinancing our house here in Ohio and you know,
(50:25):
went to lending Tree or a site like it, and
a lot of those folks it's really about getting to
someone first, get him to commit first, and then you
know you're going to get the business. So this guy
got to us, we said, you know what sounds good
we're going to do it, and then he would say, oh,
there's there's this thing about your background, so there's going
to be an extra charge. It's just going to be
like fifteen hundred bucks. Don't worry, we'll roll it into
(50:47):
the loan, right, you know, regardless of the fact that
you're paying the fifteen hundred bucks at one point or another.
So if you're not paying it up front here, you're
well probably paying interest on it in the loan, and
then you're also probably paying it, you know when you
sell your house, taking it out of the proceeds.
Speaker 1 (51:02):
But then initial quote that sounded great one and so great.
Rather he baked in some other fees.
Speaker 3 (51:06):
And this time we you know, we walked very easily, right,
because it's easy to think sometimes you don't have options,
or that you know, we're too far along now or
that sort of thing. But usually if you start to walk,
either that person will come into line with what you're
looking for or I mean, in our case, you know,
(51:27):
we found an even better deal. So you know, that's
the biggest thing. I think shopping around and being willing
to walk if you have to.
Speaker 1 (51:35):
Okay, love it pressor John Dinsmore, thank you so much
for joining me work in how do money listeners find
out more about you and about your new book.
Speaker 3 (51:44):
So the book is the marketing of debt, How they
get you. So you can find it on any kind
of online outlet, or you can go to my website
Dinsmore Research and you'll find links there as well as
I guess if you need anyone needs on market research consultant,
you know you can find information there too. But thanks
(52:06):
very much, Jo.
Speaker 1 (52:07):
Of course, yeah, thanks for joining me. Appreciate it. Oh man,
all right, that was a great combo with Professor John
Dinsmore and just in Lightning. Just in Lightning, I think
so so many of us tend to think that we
are we're not as susceptible as others to the traps
(52:28):
of marketing and specifically marketing in the form of debt
products that are tossed our way. And we're just in
a modern environment where it feels like we're being pelted.
We're being assaulted from all sides, and at some point
we relent whether it is just a purchase, whether it's
a retailer coming after us, or whether it's you know,
(52:49):
more nefarious types of debt what Professor John called booby traps,
even for that were aimed at low income consumers. There
are small booby traps that are bigger booby traps out
there for us, and if we are not careful, we
can fall prey. And so there is you know, I
(53:10):
don't want to weigh in necessarily on the political what
I think makes sense from political perspective, although maybe we
talked about that on Friday flights on occasion, but there's
little ability we have in the political sphere. What we
have the ability is over our own personal actions and
how much time we shop around and what sort of
(53:31):
buffer periods we include in our lives so that we're
not knee jerk making decisions that are not in our
best interest. And this makes me think, I think. My
big takeaway from this conversation was when John was talking
about being overly optimistic and how that leads us to
being less cautious. And the first thing that popped into
my mind is one of my favorite quotes from Morgan Housel,
(53:54):
which is to save like a pessimist and to invest
like an optimist. The reason we save like pessimists is
because you don't know what's coming down the bike, and
you know, hopefully life is better tomorrow for you than
it is today, but none of us are guaranteed that.
And I think the same is true here if we
are looking at our future through rose colored glasses. Just
(54:19):
even talking to my parents about how they made some
decisions when it came to buying a house or buying
a car, and some of the advice they were given, well,
it's like, well, you're going to get that promotion eventually,
so yeah, you can afford to stretch your budget just
a little bit. And it's those those little things that
we do that maybe or yeah, that fifteen hundred dollars
(54:39):
extra fee that John referenced, Sure attack that end.
Speaker 2 (54:42):
Of the loan. It'll be okay.
Speaker 1 (54:43):
And it seems like small potatoes because over the life alone,
it's you know, four dollars a month on your payment.
But it's when we when we're not paying strict attention
to those things and we allow for people to pull
the wool over our eyes or we are just yeah,
two po positive, you know, in our thoughts about what
the future holds for us, it can cause us to
(55:05):
take on financial products, to take on debt that becomes
like a millstone around our next especially especially if things
in our life do worsen. Boy, it's nice if you
do get the promotion and then the mortgage feels like
pretty reasonable, but what if you don't, and actually what
if you get laid off? And so going through I
think not letting those feelings act as data, which is
(55:28):
I think another thing he said, like that we have
feelings and there's no way around it, but don't let
it act as this data to help us make a decision.
And in fact, we want to kind of step away
from those in the moment feelings at least to a
certain extent, so that we can make wise decisions. So yeah,
I hope this episode was helpful, and please do pick
(55:50):
up John's book as a professor, tell him before we
started that his book to me feels it felt very approachable,
even though it was written by an academic. So and
there's a lot of if you're a behavior your old
finance enthusiast, there's a lot of really interesting stuff in
there as well. So thanks as always for listening to
the show. Hope to see you back here on Friday
for a fresh Friday Flight episode. Until next time, Best
(56:13):
Friend Out
Welcome to How to Money. I'm Joel, and today we're
talking built to Borrow the hidden forces behind debt with
John Dinsmore. So a lot of people find their way
(00:28):
to personal finance podcasts like this one after hitting a
few bumps in the road.
Speaker 2 (00:32):
Often the culprit is debt.
Speaker 1 (00:34):
Maybe you maxed out your credit cards causing financial and
relational problems, and you turn to a podcast like this
because you needed help. Well, that's why we do the show.
We love to help. But there's often a lot of
shame about those past mistakes as well. But maybe, just
maybe your debt problems they're not solely about a lack
of willpower or a personal vendetta against yourself.
Speaker 2 (00:55):
Right.
Speaker 1 (00:56):
My guest today takes a hard look at the financial
services industry and how they dangled debt products that lead
us astray. John Dinsmore is a marketing professor at Wright
State's College of Business. He's gonna help us spot the
marketing schemes and the nefarious traps out there so that
we can avoid them. Professor John Dinsmore, thank you for
joining me on the show today.
Speaker 3 (01:17):
Thanks for having me Joel, of course.
Speaker 1 (01:19):
Okay, first question is what do you like to Splurgeohn,
I love a good craft beer, but they can be expensive,
and so you know, we're trying to do this the
smart thing with our money, saving the best for the future.
But hey, you guys, spend some money and live life
in the here and now, what's that spurge look like
for you?
Speaker 3 (01:33):
It's probably concert tickets. I never splurge for like the
really good seats, but I like to go. I mean,
it's my probably my favorite thing to do. And now
I have a son who's he just started playing music
and he's very into seeing live music. So now I can,
you know, excuse my splurging by saying it's for the boy,
(01:55):
but really it's you know, I try to go to
as many concerts as I can go to without you know,
missing a mortgage payment.
Speaker 1 (02:03):
I was talking to someone the other night about in
certain towns or in certain spots, like those concerts start later,
then do you how do you stay awake for it?
Speaker 3 (02:11):
Man?
Speaker 1 (02:11):
That's the problem I find these days. If it's like
nine o'clock, doors open, the band starts at ten, I'm
asleep by then.
Speaker 3 (02:18):
Right right, Well, I mean, so I'm fifty three. So
a lot of the bands that I grew up going
to and I still check back in on. You know,
I was the youngest person in the audience when I
was a kid, saying, and I feel like I'm still
the youngest person in the audience for a lot of
these shows at fifty three. So you know a lot
of times the shows maybe will end earlier. But you know,
(02:41):
I'm with you, especially like you know, doing it on
any work day is especially.
Speaker 2 (02:48):
I'd be like Friday or Saturday. Yeight, yeah, for sure. Okay,
last show that you went to, what was it?
Speaker 3 (02:53):
Actually the last show we went to. So my son
is a big Bob Dylan fan and he was on
the Outlaw tour with There's Really Yeah, Yeah, Dathaniel Ratliffe,
who had heard of but had never heard he was unbelievable.
Speaker 2 (03:07):
Okay, but it was about.
Speaker 3 (03:09):
One hundred and fifty degrees outside and we were literally
just hiding under a spot of shade because we had
lawn tickets. And then some guy who I'm pretty sure
didn't get he was probably given these tickets by a client,
just came up to us and it's like, it's too
hot for me. You know, here are my VIP passes.
Why don't you and the boys go in and so
was That was awesome once we got out of the heat,
(03:32):
but it was up until then it was kind of
touch and go.
Speaker 1 (03:34):
Yeah, Oh my gosh. Those outdoor concerts can be like that.
The festivals, I just don't have the stomach for them anymore.
But I do love a good show. I don't get
out as much as i'd like, but i'd love to
hear that's your splurge. I'm okay, let's let's talk about
debt and marketing. And your book is kind of at
the intersection of these two things, both of which should
(03:55):
become kind of more precarious in our society. It seems
like in the last a dozen years or so, I'm curious.
I hear a lot of people say, well, marketing, advertising
doesn't impact me, Like I see the advertisements, they don't
have any effect. Is that just wishful thinking on their part?
Or are there really some people who are impervious to
advertising actually impacting how they think about things and their
(04:16):
purchasing decisions.
Speaker 2 (04:17):
Right?
Speaker 3 (04:18):
I think most people think marketing works on other people
but not on me.
Speaker 1 (04:21):
Yeah, my brain, it's a lock box, man, No one's
getting in here.
Speaker 3 (04:24):
Absolutely, But I mean the data does not back that
up at all. Right, you may think that you've completely
rationally and consciously arrived at the choice of judgment that
you've made, but there's just reams of research to show that.
You know, people, our preferences are not that set. And
a lot of times, because we can't be experts in
(04:45):
something we're making a decision about, a lot of times
we'll lock onto a thing, even if it's an irrelevant
thing and to make our decision. So yeah, marketing, you know, advertising,
it does work. That's why people companies pump billions dollars
into it.
Speaker 1 (05:00):
Is that because it's more like subtle and long term.
Then we give it credit for like I don't see
the billboard for a coke and then I'm like, yeah,
well one right now. But is it like just how
we view the brand and how we view the acceptability
of drinking as off drink or something like that. Is
it all those subtle things that are impacting us over time.
Speaker 3 (05:19):
There's a lot of things. So in advertising, you say
it's recency versus repetition. So the the best week for
selling TVs in the United States is the week before
the Super Bowl. So if you're Samsung you're probably planning
more ads for your TVs in that week than you
would at other times of the year. But if you
(05:42):
sell a bunch of TVs that week, it's probably not
just because the ads that you ran that week. I mean,
I think they helped, but they advertise year round, you know,
all year, every year, and because of all of the
frequent exposures to it, you start to develop a sense
of comfort and familiar already with Samsung. And then of
course you have all the other you know, if you
(06:03):
have friends who have Samsungs and you know, maybe they've
said good things about it. So it's all of these things.
So there's stuff in the moment, but you're also bringing
you know, baggage for lack of a better word, with
you. You know, your past experience is with you. That also
helps shape your outlook.
Speaker 1 (06:20):
It's also fascinating to me that like when you see
the stadium naming rights deals and I guess it's just
because of like the perpetual mentions of the stadium name
when during those TV broadcasts and stuff like that. It's, yeah,
it's more of that familiarity coming. It's like, oh, crypto
dot com arena. I guess, like crypto dot com is legit,
Like I don't know, mana. There's all these like subtle
(06:40):
things happening inside of marketing in the ways that we're
marketed too, that we're honestly not even aware of. And
I'm curious, like, for you, why is consumer debt and
the marketing of debt products? Why is that like a
particular fascination or an area of study that you've been pursuing.
Speaker 3 (06:58):
You know, I think you know, when I decided to
go back to school to become a professor and you
have to start researching things, what you find is when
people are researching psychology human behavior, a lot of times
they're trying to figure themselves out. Right. So it's I
think for me, it was okay, I've I've had so
many finance classes. I should understand. I should be in
(07:20):
the top whatever percent in terms of finance understanding and skill,
and yet I will still follow my face from time
to time. And the truth is because a lot of it,
it's not just knowing enough about finance. I mean, finance
is complicated. People generally try and avoid learning about it
if they can because it's uncomfortable. But even if you
(07:42):
know a lot, you know there's your knowledge base, but
then there's also you know, how are you feeling that day,
What is the context of the decision you're making, What
else is going on here? All of these things, and
then what is the lender telling you or how are
they presenting it? Right? That also is going to affect
your understanding or lack thereof, of what you're doing.
Speaker 2 (08:04):
You're right.
Speaker 1 (08:05):
I mean, it's amazing my psychological state can impact my
willingness to buy something or to go on a walk
or not. I mean, it's all these things. Yeah, you're right,
there's all these things to play, which makes this a
fascinating topic. And I'm curious too to hear your take
as someone who studied.
Speaker 2 (08:22):
This for a while.
Speaker 1 (08:23):
Like, marketing tactics around debt products have improved significantly over
the decades, and even to the point of.
Speaker 3 (08:30):
Making improved in what sense, in the gotcha sense, it's
better for us the consumer. Okay, so they're improved. They
get they're great at a higher rate of conversion.
Speaker 1 (08:39):
They're great at it, and they're great at making us
feel like like I was.
Speaker 2 (08:43):
You're the exception to the rule.
Speaker 1 (08:45):
If you think I'd like to avoid debt, I don't
necessarily think that, you know, more debt in my life
is a good thing. We've normalized it completely. So I'm
curious from your perspective, how good has debt marketing gotten
and how has that changed what people see as like
acceptable practice. And again, it's like that frog in the
in the in the water, and it just like we're
(09:05):
slowly turned up the temperature and then it just starts
to seem normal after a while.
Speaker 3 (09:09):
I mean, I think, yeah, the tactics continue to get better.
I mean also the tools of marketers, not just for
debt but everywhere, right, continue to improve, with you know,
all of our digital footprints being left everywhere. You know,
So we subscribe to Google TV at home, and there's
lots of commercials that I'm like, well, this is obviously
(09:29):
served just for us, right, And I mean it got
so bad that the other week it kept showing me
commercials for a drug for alternative colitis, and I started
to worry, like, do I have ulcert of class? Right?
Because marketers know so much about us that everything is
(09:50):
you know, there's very little that's random about the ads
and the messages that you receive now.
Speaker 1 (09:55):
Right, It's like that famous Target story where they sent
some marketing materials to that young lady's house because of
what she had been buying at Target, and they were like,
you're pregnant, You're gonna want some baby stuff. And they
knew before she knew that she was pregnant.
Speaker 2 (10:09):
Insane.
Speaker 3 (10:09):
You can't make it up, right, right, I mean, And
that was because I in my classes, I talk about
the Target example all the time, and that was thirteen
years ago, right, Yeah, So whatever they were doing is
now considered like archaic, right, So their tactics are probably
are not probably they are so much better now, so
they can even you know, especially when people are shopping digitally,
(10:34):
because I with my classes, we run lots of digital
campaigns all the time. I mean, you can optimize for
the right word, the right image, all of this. Everything
is completely quantified, yeah, and then optimized to get certain
types of buyers, certain types of messages and images. And
(10:55):
that's definitely going to apply to finance as well.
Speaker 1 (10:58):
So we're gonna talk a lot about marketing, deceptive marketing,
sinister marketing, even but you say that when marketing is
done right, it creates a virtuous cycle. So what does
good marketing look like on the front end? Like how
and how can we maybe maybe pointing to what good
marketing looks like and help us to identify the difference
and maybe avoid some of the worst kinds.
Speaker 3 (11:17):
Right, I mean I think you can. You know, in
my mind, when marketing is a force for good, it's
taking something that has real value to people clearly and
honestly communicates what that value is, and then the person
can make an informed decision and hopefully by it and
that person gets something that they really like and enhances
(11:39):
their life in some way. Right, And there aren't even
players in finance, and I wish I could their names
is escaping me. But there's a few companies that are
really specializing in trying to create good financial habits and
get people be more clear in their marketing so that
people can trust their source of financing. Then I think
(12:01):
it's very much a source for good. I mean, we
need loans, we need credit. I mean, you can't live
in a modern life without it. But the problem is
when people commit to things that they don't understand, maybe
because they lack understanding, or maybe they didn't put as
much effort into their searches maybe they should have. But
a lot of times it's also because things are communicated
(12:23):
in a you know, to be a nice ambiguous way, right.
Speaker 1 (12:27):
Yeah, and some of those products can be complex, right,
They can be difficult to understand. So I guess is
a lack of personal finance education. Part of the problem, too,
is would that help. Are we basically like failing the
next generation of young folks feeding them to the marketing
sharks because we haven't really set them up to understand
even just the basic concepts of personal finance very.
Speaker 3 (12:50):
Well, right? I mean, you know there's I think culturally
in the US, you know, we do feel like, well,
you know, buyer beware, like you are responsible for your
own decisions. And to a degree that's true. But on
the other hand, you know, you will have seventeen and
eighteen year old kids signing on for things like student
loans or their first credit card. Yeah, and a lot
(13:10):
of times it's not just being a kid. A lot
of times we don't learn about things we should learn
about until we've had some sort of mishap, Right, And
if you're talking about something like student loans or credit cards,
that can be a mishap that follows them around for years.
Speaker 1 (13:26):
Right, And we sold them the idea of something that's
that's normal, right, Like student loans are good because you're
going to get the degree and you're going to get
a good job. And what you don't realize is, yeah, maybe,
within reason, right, a certain amount of student loans.
Speaker 2 (13:41):
Could be a solid idea.
Speaker 1 (13:44):
But when you're seventeen or eighteen years old, you're not
well equipped to understand if someone's willing to lend you
the money. You must think they know better, and then
it's a good idea for you to take out the
full amount.
Speaker 3 (13:53):
No, I think that's an excellent point. I think most
of us think of lenders as kind of this omniscient
institutional power that you know, the rate you get is
just the rate, right, based on your credit score and
all these different things. But the truth is, you know,
we actually, as consumers, we do have power to shop around.
(14:15):
You know, research shows what determines our cost of debt
is not What is a bigger factor than even credit
scores is the amount of effort that we put into
shopping for and selecting these types of products. But again,
when we're talking about people who are just coming into
it at eighteen years of age, they don't know that
(14:37):
they haven't been taught it I am encouraged that. I
think twenty five of our states have made financial literacy
a requirement in high schools, including meet here in Ohio.
And you're definitely going to need that more than you're
probably going to need some of the other classes that
you take. I mean, you can't get away from personal finance.
Speaker 1 (14:56):
You're speaking my language, John, I totally agree. It's like
a it's a shame that this thing that we use
every day moving forward. Physics was great my junior year
of high school, but I haven't used it again, and
I would. I would just Yeah, having at least a
modicum of personal finance education in high schools, and you're right,
half of states now require it is at least setting
(15:18):
us up to start to ask the right questions or no,
enough to make us a little bit dangerous on that
front to protect ourselves. Just in regards to debt in general,
do you think that we have failed to question the
basic premise of whether their debt makes sense? We've just
made in so many ways right. Debt has greased the
wheels of our economy, both personal on a micro and
(15:41):
a macro level. But then we've normalized it to such
an extreme, especially especially in the United States that so
many people suffer dramatically from debt overload and not having
saved enough for retirement because they're paying off all the
different debts that they've taken out. Is that marketing at
work to really get us to take on more delays
(16:03):
or just or is it like I don't know, lacks
political infrastructure.
Speaker 3 (16:07):
I would say all of the above, right. I mean,
I don't begrudge a marketer of a finance company trying
to get more business for the company they work for, Right,
that's their job. They're going to lose their job if
they don't do that. But the devil is in you know,
are you being clear with people? Are you doing some
things that intentionally mislead folks? Right? I do think culturally
(16:31):
in the United States, we you know, we tend to
be hands as hands off as we can be. We
don't want to infringe on a company's ability to you know,
conduct business. But at the same time, if we have
a society that is too encumbered with debt long term,
it's going to be a long term drag on the
(16:52):
productivity of this country. And I think if you look
at research on you know, most people don't really understand
how interest rates work, and yet it doesn't matter. These
people have to go out there and take out loans
and negotiate interest rates anyways. Yeah, I mean it would
be all right put a bunch of six year olds
(17:14):
behind the wheel of a car and see what happens. Right, Usually,
we want to make sure people know what they're doing
before they engage with it. So I personally think there's
more room for some common sense rules to make sure
that people really understand what they're getting into.
Speaker 1 (17:31):
Yeah, I think you're right, Like, people don't understand it
in the positive direction compounding returns, like if I start investing,
even just a little bit when I'm young, how much
that can grow into And they don't understand it from
the negative perspective of a twenty two percent interest rate
on a credit card and having that revolving ten thousand
dollars balance and how that impacts them either or something
as simple as shopping or with multiple lenders for a
(17:53):
home loan. Right, and now you know, the federal government
has released statistics and they show just how much the
average person saves just by shopping with three lenders versus one,
and it's significant and so like to the two tens
of thousands of dollars over the life of the loan.
Oh yeah, you were talking about some of the worst
debt products too.
Speaker 3 (18:11):
There.
Speaker 1 (18:11):
You call them in your book, you call them booby traps,
and gosh, man, some of them are seem so incredibly nefarious.
And in some states, for instance, they've like outlawed loans
above a certain interest rate right payday loans for instance,
which trap people perpetually in debt that they just can't
get away from because it's almost impossible because of the
(18:32):
way the terms are set up. So how do you
think about the credit card versus like the scale of badness?
I guess in some of these debt products in the
way that they get marketed, right.
Speaker 3 (18:42):
I mean, there's so many credit cards and they have
so many different provisions and those it's hard to point
to because there's some good credit cards out there. But
you were talking about you had mentioned things like, you know,
payday loans and things like that, and those are products
that almost exclusively to target people in low income areas.
(19:03):
And this is both you know, low income urban centers
as well as more rural areas, and so they they
prey on people's lack of sophistication, but also lack of options. Right.
There's a study that came out like two years ago
that showed in impoverished neighborhoods, if there was a blood
(19:27):
donation center where you could sell your plasma, it reduced
usage of payday loans in that area by whatever percent,
it was a significant number. I forget the exact number, right,
So it suggests that you know, even if folks aren't
a master of you know, if they can't come up
with an amortization table or you know, their masters of finance,
they still understand that a lot of these places are
(19:49):
really pretty rough and overly expensive because they will sell
their plasma rather than have to go, you know, just
to save themselves, you know, another trip to one of
these predatory places. So, you know, there have been debates
that have come up about you know, obviously, we want
banks to be able to locate where they think makes
(20:11):
the most sense for their business, but maybe there are
opportunity where the free market can't provide. Maybe there's opportunities
for kind of a public private partnership where you know,
post offices, social security offices, DMVs, places that have locations everywhere,
including impoverished areas. Maybe these can be storefronts for market
(20:35):
rate banking services for a lot of folks. I think
it's really just getting them some options because a lot
of folks know, Hey, I'd rather not go to a
payday lender. But at the same time, you know, there's
not a Bank of America in my neighborhood, So what am.
Speaker 2 (20:50):
I going to do? No.
Speaker 1 (20:51):
I think it's very true, and especially you're right it's
urban in world. Some of the smaller rural towns I
drive through. I'm shocked at how many title loan payday
loan kind of places there are. It feels like they're
as many McDonald's as there are title loans places or
something like that. And yeah, which again that's part of normalization.
(21:11):
It feels like that's the place you turn when you
need money. We've got more questions to get to with you, John,
including I want to talk about status and how we
think about status, status, whatever, how we think about that
in terms of our financial decisions, and how that impacts
some of those important decisions we make. We'll get to
more with Professor John Dinsmore right after this.
Speaker 2 (21:39):
Our we're back.
Speaker 1 (21:39):
We're still talking about the hidden forces behind debt. And marketing,
the marketing that happens behind debt and how it catches
us in the web we make decisions maybe we wouldn't
otherwise make. With Professor John Dinsmore, I was so interested
when you were writing about prediction bias. Those super interesting then,
because you in your book you cover a lot of
(22:01):
kind of some of those behavioral elements, some of the
ways that marketing impacts us or even just like that
we're wired to make decisions, and so yeah, how there's
that intersection of marketing tactics and our own human insufficiencies
and realities that like, gosh, it feels like a right
place for us to get taken advantage of.
Speaker 3 (22:24):
Yeah, for sure. I mean, well, inherent in taking out
any debt or credit is you have to think about
what your future circumstances are going to be. And we
are as a species very optimistic, right We always we
tend to think when we think about the future, we're
not thinking about, oh, I'm going to get passed over
for this promotion and then you know, my car is
(22:45):
gonna die, And it's it's when we think about the future,
it's we're getting the promotion, things are working out, we're
making more So, a lot of people are less cautious
about taking on debt because they're very optimistic about the future.
But you know, if you live long enough, you understand
that even if things go up, it's not a straight
(23:08):
ride up, right, there's going to be some stumbles and
some mishaps along the way.
Speaker 1 (23:11):
It's like, how long I tell my wife it's going
to take me to fix something around the house, and
she knows to five.
Speaker 3 (23:17):
X that yes, no, no, absolutely, Like I definitely resemble
that remark as well. So people tend to borrow on
how much they think they're going to be making rather
than how much they make, and that you know that
can be a mistake.
Speaker 1 (23:32):
Is are there ways in which we're allowing the marketers
into our lives more than we should and maybe that's
also wearing us down. I'm just thinking about who we
follow on Instagram, the newsletters we sign up for, the
ways in which we're just like, come on in, and
I'm going to be wise enough and sane enough to
(23:52):
make the decision I want to make at the right moment.
But maybe marketers are wearing us down in a way
that's hard for us to see.
Speaker 2 (24:00):
You on the front end yeah.
Speaker 3 (24:01):
I mean I think right. I mean, the these devices
we have with us all the time, they're supposed to
make us more productive and more informed, but for the
most part, they make us more stressed and more overwhelmed.
And when we're stressed or overwhelmed, we're just not thinking
as clearly about things, so we're more susceptible. If you
are old enough to remember kind of the heyday of infomercials,
(24:24):
so you know, if you wanted to see like the
Ronco pocket Fishermen, well they you know, these odd ball devices.
You would see them on infomercials, usually in the middle
of the night, like two in the morning, when it's
pretty much only insomniacs or people who have you know,
been drinking a lot are up. And there's a reason
for that, right that they your inhibitions are down, your
(24:47):
reasoning is diminished, and so it's it's a bit easier
to get someone to, you know, to commit to something
under those conditions than they would if they had all
of their faculties about them.
Speaker 1 (24:59):
Yeah, and we're almost signing up for faculty diminishment on
of our own volition by just allowing these marketers more
free wheeling access to us. I'm curious too to hear
your thoughts on the balance, and I feel like you've
done a good job on this so far. But when
you're buying a home, you take on a mortgage, typically
(25:21):
right eventually. I mean, there's a surprising amount of percentage
of people in the United States who own their home
with no mortgage, something like thirty percent of people, which
bubbles my mind.
Speaker 3 (25:31):
It's a very different frame of reference from my own life.
Speaker 1 (25:34):
But yes, yeah, yeah, but I for one am thankful
that when it came to buying a home that there
was a debt product available so that I could buy
a home before I saved up the cash, because I've
had to save up the cash.
Speaker 2 (25:46):
Yeah, I don't know if I don't a home yet.
Speaker 1 (25:47):
You know, it's like one of those things where the
decision will get delayed forever, the can will get kicked
down the road. So how do you think about that
intersection where like, some of these debt products really do
allow us within solid parameters to live a better life.
Speaker 3 (26:02):
Oh absolutely, I mean it's and some of them are
very kind of nobly created. If you think about things
like special Veterans Administration loans for people to for veterans
to buy a house. I mean, this is a it's
a class of people who we value highly, but maybe
they haven't been compensated you know a lot, right, So
(26:24):
creating programs to make sure that people who have you know,
done this thing that we value highly will still have
access to you know, the American dream, buying a home,
going to college, all of these things. These are all
things that are still worthwhile ventures. Now you can get
into trouble with if it's not the financial products. Then
(26:46):
you know, there's some colleges out there that aren't accredited
and are really just after your student loan money and
things like that. So you need credit and debt to
Most of us do to accomplish so very key things
in our life. But the trick is to not fall
into a product that we don't understand and then it
(27:07):
might ultimately eat us.
Speaker 1 (27:10):
One of the other like psychological realities that you talk
about in your book is loss a version and how
you talk about how marketers kind of prey on that
basic human instinct. Can you can you share a little
bit about that.
Speaker 3 (27:24):
The example that pops to mind, so, you know, my
wife's car a couple of years ago rather spectacularly just died.
Like we went out to lunch and we looked out
the window we were about to leave, and we could
see just this huge pool of oil laying under the car.
And you know, then we it was officially pronounced dead
(27:44):
at the shop an hour later. So we had to
go get a car. And so we we bought a
car knew that had a you know, a strong reputation
for reliability. And you know, the whole sales pitch was
this thing, you're going to drive this thing, you know, forever,
and it's super safe, it's super reliable. And then as
(28:05):
soon as you commit, then they start telling you. But
you know, even reliable cars fail, right, so you're gonna
want to get this extended warranty, or you're gonna want
to pay a thousand bucks for the coding of all
these things.
Speaker 2 (28:18):
Nothing's going to happen, but it could, right, I.
Speaker 3 (28:21):
Mean, And so that's part of that is loss of version.
Speaker 1 (28:23):
Right.
Speaker 3 (28:23):
We're afraid of losing more than we love winning. So
when we're in a position to say we don't want
to make a bad decision, sometimes we end up taking
on things that you know objectively aren't in our best interest. Right,
So paying the extend, you know, buying the extended warranty
on the car, or paying for these other things because
(28:46):
you don't want to buy this car and then have
a low probability thing happened to you down the line, right,
So yeah, I think there is. I mean, you could
see a lot of credit and insurance is based on
that kind of fear appeal, right that you know, you
don't want to look like you made a bad decision here,
so let's, you know, give us a bunch of money
and we'll make sure that doesn't happen.
Speaker 1 (29:07):
And some of those products make sense, right, like term
life insurance, Like the truth is, if you're dyeing your
income stops like that could significantly impact your family.
Speaker 2 (29:16):
But then when you're buying a.
Speaker 1 (29:18):
Two hundred and fifty dollars laptop and they're like, do
you want this fifty dollars extended warranty because that laptock
could croak in the next two years and you want
to be safe, Like that's not a great product. And
so I think for for individuals trying to figure out, well,
I think some of these products are helpful and they
really do protect my family, They really do give me
peace of mind. Then there's others that are just you know,
(29:38):
a complete you know, it could come out to benefit me,
but if you look at the numbers, it's unlikely to
be the kind of insurance that helps.
Speaker 3 (29:45):
Yeah. I mean, these things are structured to guarantee a return,
and the return is we're not going to have to
pay out that many claims on this for sure.
Speaker 1 (29:54):
Talk about mental accounting, because that's one of those things
too where I think we you say in the book
your internal bookkeeper is heavily concussed, and which is just
a funny line, but it just makes me think. I
think we think we're smarter than we are sometimes and
that we can do some quick mental accounting and we're like, yeah,
I know which way to go. But that maybe that's
(30:16):
not true.
Speaker 3 (30:17):
Right, I Mean, the truth is, as smart as any
of us may be, we are still probably more emotional
than we are rational and our feelings. We take our
feelings as information in a lot of cases. So how
does this apply to mental accounting and money? Well, different
contexts or how we pay for things feels differently, right,
So if you're paying cash for a bunch of things,
(30:40):
there is some amount of internal conflict or pain We'll say,
when you pay for something right, you're pulling the cash out,
you're acutely aware of how much you've put out, how
much you have left. Maybe you have to go to
the ATM again because you run out of cash. So
psychologically that's a more difficult thing to do than swiping
a credit card. Right, studies of swiping a credit card
(31:02):
very little calculation that goes on. It does not hurt
or create much conflict. And there's a recent study that
just came out showing that paying by phone right, just
the tap to pay, actually feels good. People get like
a little feeling of pleasure from it, I guess the
same way front like you would getting you know, winning
(31:23):
a bonus on a video game or something like that.
So you know, that probably spells trouble for some folks
if you're actually deriving feelings of pleasure just by this
particular method of payment.
Speaker 1 (31:36):
Yeah, that's scary. So so does that change how like
what how you pay? First off, for how you talk
to your students about paying for things. Because if there's
a simple pleasure to the tap to pay, and I
gotta say, it is nice.
Speaker 3 (31:50):
And it's like crazy convenient, right, not having to remember
your wallet.
Speaker 2 (31:53):
And yeah, yeah it is.
Speaker 1 (31:54):
And sometimes yeah, if I'm like, if I'm going for
a run and don't have my wallet, like and I
need I can I can pop in somewhere and use
my phone that's in my pocket, which is which is convenient,
But are convenience also costing us? And it seems like
maybe that added convenience is like a marketer or a
lenders dream.
Speaker 3 (32:13):
Right, I mean they're watching these things, right, so they
if you're a marketer, you're gonna look at, okay, is
how people pay for things? Like are they making different
decisions based on this? Right? And so they're definitely gonna
ask that question, and they're definitely gonna see, oh wow,
through these methods, you know, you look at how when
(32:34):
people have downloaded a retailing app for the retailer, they
spend more than if they're in store or just buying
through traditional web browser. So for people who offer credit,
they're gonna look at the branding of cards, right, the
method of cards is that a digital card or you know,
(32:54):
in all of these things, and so they're gonna they're
gonna have some sense of what gets some of the
best return.
Speaker 1 (33:00):
Buy now, pay later is the perfect example of this
right where it's like a new way to pay and
you would think as a business model it doesn't really
make that much sense. And as an individual, the only
way it makes sense is because it allows me to
get the thing I want in the most painless way
without actually having to pay upfront. And the studies do
seem to point to the fact that when people buy
(33:21):
things using buy now, pay later at checkout, their carts
are bigger, which is why the big retailers are like, sure,
come on, we'll take by now pay later on our site.
And it's just because they make more sales.
Speaker 3 (33:34):
Yeah, they're just optimizing, right for revenue for sure. Yeah.
I mean something else that plays in a mental account
of accounting and what you were talking about. If you
look at things like tax refunds. Okay, so the week
before the Super Bowl is where you sell the most TVs,
But one of the big times is and you're gonna
see lots of ads in April and May for TVs
(33:57):
is because of tax refunds. Right now, we all look
at our pay stub and we probably complained bitterly about
the taxes being taken out. I need that money to
pay bills now. But you know what, you may file
your taxes and then get that money back to use
it to pay bills. A lot of people don't, right,
because it feels like found money. It's like you've had
this windfall, and so they go out and buy TVs
(34:18):
and other things because the money feels different, right.
Speaker 1 (34:21):
It's the way the money comes to you. It feels different,
feels different too. I'm curious about status and status whatever,
like when people you talk about kind of credit cards
and how certain branding of certain cards can make people
feel a certain way. I mean, there's a reason credit
our companies have even made some of the credit cards
like black and heavier, right, because then you feel like
(34:41):
a baller.
Speaker 2 (34:42):
I guess it doesn't.
Speaker 1 (34:43):
It doesn't feel the same way when you're tapping it
because it's in your Apple wallet versus when you pull
it out of pull it out of your actual wallet.
But how how do they these retailers, these marketers use
status games to kind of get at us and get
us into making financial decisions that might sound smart on
the front, but really are against our own best interests.
Speaker 2 (35:03):
Right.
Speaker 3 (35:03):
I mean when you mentioned status, you know, I think
of the American Express Gold card, which was a card.
That was when it came out in the fifties. I
want to say it was legitimately targeted towards people with,
you know, very high level incomes. But because of that,
it quickly became a status symbol and everyone wanted one.
(35:24):
And then after a while, other credit card offerers would
start it, would issue cards with these status branding platinum, diamond, whatever,
and they What studies have shown is people of lower
incomes when they have these status branded cards, they use
them more, and they use them more specifically in like
(35:45):
publicly visible ways. People can see them using the card,
then they want to use it more. Right now, as
a marketer, you're probably just thinking, well, I'm just here
to get the most business possible. But this is something
that is you know, once you've seen the behavior, you
know that this particular branding is getting lower income consumers
(36:07):
into hot water.
Speaker 2 (36:08):
Yeah.
Speaker 1 (36:08):
Well, luxury goods have kind of a similar element too, Right.
It's where the branding or even if it's not and
sometimes they are superior products, but sometimes they're not. And
it's literally just signaling and we're spending money that we
don't necessarily have to signal to people that we are,
(36:31):
whether it's the car you drive, or the shirts you
wear or the handbag you carry, like that we are
somebody or are trying to be to be somebody, maybe
is a better way to put it, right.
Speaker 3 (36:42):
Yeah, I mean, and it goes back to I mean
when we're in caves, right, I mean, if you think
of cave people, you don't think of being socially conscious.
But the truth is these were people who had to
band together to not get eaten by dinosaurs, to find food,
and all of these things. So the group dynamics quickly
(37:02):
would confer status onto people, but back then probably mostly
based on physical stature, strength. Yeah, and to that person
resources would flow, right, So maybe you don't have to
go out and pick or kill your own food like
people are bringing it to you. Well, in today's age,
you know, money is behind all of these signals of
(37:24):
status that we want to that we want to demonstrate
to people. So we take on similar behaviors to achieve
status with others, whether it's you know, the things we
own or just doing things that are conspicuous signs of
status or wealth.
Speaker 1 (37:42):
We've all heard you get what you pay for, and
sometimes that's true. Right, I have fallen victim to the
deal mentality, it's like, oh, yeah, I think it's the
best price possible, and you know, the quality quality be damned.
I just don't care that much because this is I'm
all about paying the least amount. But how do we
maybe determine as when we're being marketed to, Hey, this
(38:06):
thing is superior, this is the thing you want. There
is some truth to that on occasion the quality might
be superior.
Speaker 2 (38:13):
How do we know.
Speaker 1 (38:14):
And do our own due diligence. I just think of
something like consumer reports when buying a car, right, that
would help you say, well, the branding says this, but
the data says this. But how in the moment do
we make better decisions about the purchases we make when
we're being told a story that might might or might
not be true.
Speaker 3 (38:32):
Right, It's tough. I mean, we typically have to find
something that we can trust, whether it's consumer reports or
a good friend's advice or things like that. When it
comes to debt, there's you know, there's the advertised upfront
price or interest rate, but usually in the fine print
there's a lot of other things like escalation causes or
(38:56):
a clause excuse me, or you know, find dance charges
that come on, if you don't behave in certain ways.
So what's really difficult is and because math and finance
makes people anxious, so it's hard for them to embrace
diving into the details. Is yeah, you have to read
(39:16):
the fine print. If you have a friend who works
in finance, obviously that would be great too, because financial
literacy is important. But you know, if you're not doing
it all the time, is dealing with credit and finance,
that knowledge does fade over time, So you need to
(39:39):
reacquaint yourself with these things. And you also need to
if you have a friend who is an expert who's
living and breathing that stuff, get help.
Speaker 1 (39:46):
Maybe crowds or I don't know. How do you feel
about Reddit as a place? I feel like Reddit is
a decent place to turn, although I did see recently
that there's the companies paying for people to post on Reddit,
because that's the last bastion of kind of company free
advice that people have where it's literally just humans talking
about the product or the service or whatever and there's
(40:09):
no company intrusion or advertising. But it seems like companies
are trying to infiltrate that, almost like what happened with
Amazon reviews back in the day, or interviews on Yelp
reviews get people being paying people for certain positive reviews
to make yourself look better.
Speaker 3 (40:23):
Yeah, no, I mean they absolutely are right, and same
with I don't know if you go on korra. Core
is bigger outside the US than inside, which is supposed
to be the expert only kind of version of Reddit.
But you know, there's still plenty of things that are
being posted on there that are clearly promotional or clearly
have an agenda.
Speaker 2 (40:41):
Yeah.
Speaker 3 (40:42):
I mean, if someone's too overtly commercial, I think you
can tell that you know it's a biased message. But
the trouble with Reddit is not that there aren't knowledgeable
and well intentioned people on there. I think it's there
are so many people of varying levels of expertise or
(41:03):
intent that it's hard to tell who you know, who
are the knowledgeable, well intentioned people, and who are the
people who are just trying to get me to, you know,
buy something.
Speaker 1 (41:10):
I think that's a great point. I've got a few
more questions to get to with you with you, John,
including kind of AI's impact on all this. It seems
to be mudding the waters even more. Well, we'll get
to a few more questions with Professor John Dinsmore. Right
after this, I we're back still talking with Professor John
(41:33):
Dinsmore about debt and marketing, the nefarious forces that get
us to sign up for products that might not be
the best for us. I want to talk about AI
in just a second, John, But the when we're talking
about the Internet, the Internet, it certainly seemed like, oh,
this is going to demystify pricing, This is going to
(41:53):
take some power out of the marketer's hands. I can
comparison shop in an instant, but that has a quite
been the case, Like how have companies been able to
actually see almost make it more difficult for us to
make good decisions in the Internet age?
Speaker 3 (42:08):
Right? I mean when it comes to AI, I mean
what I'm saying today may may not apply tomorrow because
it is moving so fast. But I mean, as someone
who's a heavy user of these platforms. Yes, AI is
different than what we know is traditional computing. But it
seems to as a form of intelligence, struggle with the
same thing that we struggle with as humans, which is
(42:30):
what sources should we believe? You know, what is valid information?
You know? So all that I've seen really on AI.
It is, and you can see in like analytics on
websites that you know, chatchypt and similar services are replacing
Google when you're looking at referral sources for traffic. Right
so search traffic is slowly evolving into AI traffic. So
(42:55):
AI is going to be really powerful for that reason.
But at the same time it struggles with as far
as I've seen, separating good information from misinformation. And then
it's also for phishing, scammers and other forms of cybercrime.
It's been this major blessing for people who want to
(43:17):
misrepresent themselves as being from your bank or being a
lender and things like that. So I mean, right now,
I haven't seen it as a big force for good,
but you know, hopefully as the platforms get better and
we get more sophisticated about using those platforms, hopefully it
will become that.
Speaker 1 (43:38):
I'm not against dynamic pricing for the most part, although
it's gotten more sophisticated. But it is interesting that you know,
you might try to buy an airplane ticket in the
morning and then you go you're like, ah, I'll do
it later, and then you go back the afternoon and
you're like, it's one hundred and fifty dollars more for
the same flight, Like, how did that change so quickly
and by that much? But that's that's dynamic pricing, and
(43:59):
guess what the price might be cheaper again the next day.
So you have to be a thoughtful consumer. But it
seems like with artificial intelligence, those decisions are going to
become even more fraught and maybe more individually targeted. So
how do you think people can or should protect themselves
when it comes to marketing of products where pricing is
(44:21):
even more ambiguous than it is now.
Speaker 3 (44:23):
I think you have to And it's tough, right because
I know people have accused, like Amazon serving different prices
to people and other online retailers because they have a
search history, and they'll say, okay, well Joel, you know
he's this big deal podcaster, so we think he'll pay
twenty percent more, right, So how do you protect against that?
I mean, I think again it goes into the amount
(44:45):
of effort you're willing to do and all the different
sources you're willing to check, you know, on these things.
You know, airlines insist that they aren't jamming you when
you search for an airfare and you come back and
it's gone up a little bit, which not only makes
them more money, but it's going to increase your sense
of urgency to buy that ticket.
Speaker 2 (45:01):
Oh man, prices are going up.
Speaker 3 (45:03):
Better get it now, right, right? But I mean, so
it is again it comes in you check multiple sources
for everything, you know. I remember the CEO of Wendy's
randomly in an earnings call, said well, we're going to
play with dynamic pricing, and people lost their minds, right,
And I think mostly because you know, it's food, right,
(45:25):
and this is not you know, this isn't going to
some you know, Michelin start whatever. It's These are working
people who go to Wendy's for food and now they're
going to have to pay, however much more because they
want to eat lunch at lunch time. So I think
that's part of it too, which is being able to
just you know, go across the street to someone who's
not doing that, doing that.
Speaker 2 (45:45):
That's a good point. Be willing, be willing to walk.
Speaker 1 (45:48):
And I think that's part of what's changing some of
the policies that these companies have is they're getting the
pushback and they're realizing that it's it's unpopular with the masses, right,
I don't.
Speaker 3 (45:59):
Know if you. One of the most famous examples of
dynamic pricing, Coca Cola experimented with vending machines that would
charge more for sodas the hotter it was outside, and
people were furious. I mean they quickly pulled the plug
on it because people got so angry. Yeah so, yeah, yeah,
so it's you know, your business is valuable, don't be
(46:21):
afraid to take it elsewhere if someone is misbehaving.
Speaker 1 (46:24):
Do you think individuals should be responsible for their own
behavioral shortcomings, like, hey, you signed on the dotted line,
you pay the price. You should have done more due diligence,
or do you think that the government should step in
to eliminate some of the more vile marketing approaches. I'm
even thinking of recent attempts to rein in chunk fees.
(46:46):
There's different people who think different things, and in some ways,
like one person's junk fee is another person's opportunity to
save the way part of it. You know, sometimes the
airlines annoy me by how they charge for everything, But
I also can fly frontier with a backpack and get
the place I want to go way cheaper than I
could if everything was all included. Uh so, yeah, what
(47:08):
what's your what's your take on individual choice versus government
involvement on this stuff?
Speaker 3 (47:14):
You know, there's there's a balance in there, and of
course probably most people think there is a balance, but
we're all probably going to disagree on you know, where
where that line is. So like alluding to things like
baggage fees, I mean actually there was what on tickets,
There was an executive order that took effect recently where
(47:37):
now you're seeing all in prices for tickets for concert tickets. Yeah,
which I really like as a consumer because once you
commit to buying something and then you start having these
fees come in, small enough fees to where they're making
good money off of you, but not so big that
you walk away. You know, I would I personally think
(48:01):
it's more ethical to have all of the fees up front,
because studies have shown that, you know, the further people
go through the process, the less likely they're willing to
walk away, you know, regardless of how many fees come in.
There was a study about you know, baggage fees and airlines,
and they gave consumers a chance to say, hey, look
(48:22):
this other option here that you passed up actually is
going to have a lower total cost, and people refuse
to consider it just because I think they were kind
of resigned to getting jammed by the airlines. But I
think also they were just they were committed. Yeah, they
didn't want to dedicate any more energy to it.
Speaker 2 (48:38):
No, that makes sense.
Speaker 1 (48:39):
Yeah, there's a line somewhere, and at some point, you know,
selling snake oil becomes not okay, like so and people
get held accountable for that, or the burnie mateofs of
this world selling investment products that aren't real, like, there's
a problem there, and we hold those people accountable.
Speaker 2 (48:57):
So you're right.
Speaker 1 (48:57):
I'm curious too, as someone who's dug into these sorts
of debt marketing practices. How how has that changed your
approach to debt in your life? And how do you
think differently when you're considering taking out a mortgage or
considering a credit card in your life and how you
use that credit card.
Speaker 2 (49:17):
How has all the.
Speaker 1 (49:18):
Research you've done and everything that's in that incredible brain
of your sean, how's that? How's that impacted your actions?
Speaker 3 (49:24):
Oh? Wow, it's a shine of my apples here. So
the uh, I think what I do differently it's probably
two things. Well one, you know, the first house that
my wife and I bought together. You know, we were
referred to a mortgage broker through my boss, and the
guy uh had us all set up. We were all
(49:45):
ready to close on the house, and about a week
before closing, he calls up and says, well, there's a problem.
You know, you can't get a regular loan. We have
to do what you call like a no doc loan
if you're familiar with those, with a much higher interest
rate and all these things. Well, you know, we needed
a place to live and felt like, you know, at
this point, we couldn't walk from it, so we took
(50:05):
on the bad mortgage and refinanced a couple of years later,
actually ended up getting a check from the state because
some of the fees they were charging were actually against
the law. Wow. But you know, some years later we
were refinancing our house here in Ohio and you know,
(50:25):
went to lending Tree or a site like it, and
a lot of those folks it's really about getting to
someone first, get him to commit first, and then you
know you're going to get the business. So this guy
got to us, we said, you know what sounds good
we're going to do it, and then he would say, oh,
there's there's this thing about your background, so there's going
to be an extra charge. It's just going to be
like fifteen hundred bucks. Don't worry, we'll roll it into
(50:47):
the loan, right, you know, regardless of the fact that
you're paying the fifteen hundred bucks at one point or another.
So if you're not paying it up front here, you're
well probably paying interest on it in the loan, and
then you're also probably paying it, you know when you
sell your house, taking it out of the proceeds.
Speaker 1 (51:02):
But then initial quote that sounded great one and so great.
Rather he baked in some other fees.
Speaker 3 (51:06):
And this time we you know, we walked very easily, right,
because it's easy to think sometimes you don't have options,
or that you know, we're too far along now or
that sort of thing. But usually if you start to walk,
either that person will come into line with what you're
looking for or I mean, in our case, you know,
(51:27):
we found an even better deal. So you know, that's
the biggest thing. I think shopping around and being willing
to walk if you have to.
Speaker 1 (51:35):
Okay, love it pressor John Dinsmore, thank you so much
for joining me work in how do money listeners find
out more about you and about your new book.
Speaker 3 (51:44):
So the book is the marketing of debt, How they
get you. So you can find it on any kind
of online outlet, or you can go to my website
Dinsmore Research and you'll find links there as well as
I guess if you need anyone needs on market research consultant,
you know you can find information there too. But thanks
(52:06):
very much, Jo.
Speaker 1 (52:07):
Of course, yeah, thanks for joining me. Appreciate it. Oh man,
all right, that was a great combo with Professor John
Dinsmore and just in Lightning. Just in Lightning, I think
so so many of us tend to think that we
are we're not as susceptible as others to the traps
(52:28):
of marketing and specifically marketing in the form of debt
products that are tossed our way. And we're just in
a modern environment where it feels like we're being pelted.
We're being assaulted from all sides, and at some point
we relent whether it is just a purchase, whether it's
a retailer coming after us, or whether it's you know,
(52:49):
more nefarious types of debt what Professor John called booby traps,
even for that were aimed at low income consumers. There
are small booby traps that are bigger booby traps out
there for us, and if we are not careful, we
can fall prey. And so there is you know, I
(53:10):
don't want to weigh in necessarily on the political what
I think makes sense from political perspective, although maybe we
talked about that on Friday flights on occasion, but there's
little ability we have in the political sphere. What we
have the ability is over our own personal actions and
how much time we shop around and what sort of
(53:31):
buffer periods we include in our lives so that we're
not knee jerk making decisions that are not in our
best interest. And this makes me think, I think. My
big takeaway from this conversation was when John was talking
about being overly optimistic and how that leads us to
being less cautious. And the first thing that popped into
my mind is one of my favorite quotes from Morgan Housel,
(53:54):
which is to save like a pessimist and to invest
like an optimist. The reason we save like pessimists is
because you don't know what's coming down the bike, and
you know, hopefully life is better tomorrow for you than
it is today, but none of us are guaranteed that.
And I think the same is true here if we
are looking at our future through rose colored glasses. Just
(54:19):
even talking to my parents about how they made some
decisions when it came to buying a house or buying
a car, and some of the advice they were given, well,
it's like, well, you're going to get that promotion eventually,
so yeah, you can afford to stretch your budget just
a little bit. And it's those those little things that
we do that maybe or yeah, that fifteen hundred dollars
(54:39):
extra fee that John referenced, Sure attack that end.
Speaker 2 (54:42):
Of the loan. It'll be okay.
Speaker 1 (54:43):
And it seems like small potatoes because over the life alone,
it's you know, four dollars a month on your payment.
But it's when we when we're not paying strict attention
to those things and we allow for people to pull
the wool over our eyes or we are just yeah,
two po positive, you know, in our thoughts about what
the future holds for us, it can cause us to
(55:05):
take on financial products, to take on debt that becomes
like a millstone around our next especially especially if things
in our life do worsen. Boy, it's nice if you
do get the promotion and then the mortgage feels like
pretty reasonable, but what if you don't, and actually what
if you get laid off? And so going through I
think not letting those feelings act as data, which is
(55:28):
I think another thing he said, like that we have
feelings and there's no way around it, but don't let
it act as this data to help us make a decision.
And in fact, we want to kind of step away
from those in the moment feelings at least to a
certain extent, so that we can make wise decisions. So yeah,
I hope this episode was helpful, and please do pick
(55:50):
up John's book as a professor, tell him before we
started that his book to me feels it felt very approachable,
even though it was written by an academic. So and
there's a lot of if you're a behavior your old
finance enthusiast, there's a lot of really interesting stuff in
there as well. So thanks as always for listening to
the show. Hope to see you back here on Friday
for a fresh Friday Flight episode. Until next time, Best
(56:13):
Friend Out
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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