May 5, 2020 • 44 mins
Credit card companies are making billions of dollars off of people who don’t understand the rules of the money game. Can a good coach help level the playing field?
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Episode Transcript
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Speaker 1 (00:15):
Pushkin. Welcome to season two of Against the Rules. I'm
Michael Lewis. Before we get to where we're going, I
want to go back for a moment to where we've
been a little backstory from season one. The story involves
(00:37):
a woman named Katie Highland. She's in her late thirties,
a public school teacher, wife, mother of two small children.
Her entire adult life, she'd been made miserable by student
loans she'd taken out when she was eighteen years old.
I don't see any payoff, and it just keeps getting
harder and harder, and that's soul crushing her state of mind. Well,
(00:59):
even her children could see it wasn't good. It might
be actually kind of painful for her, because all of
this counts with a bell and getting something changed to
another thing that's the same, but changing to it. I
love you if you well, it does feel kind of painful,
(01:23):
right mommy. Yeah. A lot of the papers, Yeah there,
it's a lot of paperwork. It's a lot of and
a lot of pain. Yea for doing it. This killed
me to hear, but especially this next part. It is
very good to be thoughtful for everybody, but the person
(01:46):
who's the most best person on earth is this lady
right there, This lady Jackson's mom, Katie Highland, shouldn't have
owed anybody a dime. That was the point of the story.
Katie had qualified years ago for a program that Congress
created to forgive the student loans of public servants, but
(02:09):
her student loan servicer made money offer only as long
as she still owed the money, and they had more
or less tricked her to keep her in debt. I
like to try to always find the good in people,
and when you have experiences like my experience, you get
discouraged and you start to think that people aren't as
good as you once thought they were. Sometimes you stumble
(02:34):
onto a story and you can't get it out of
your head. Katie Hyland had played by the rules, made
all her loan payments, thrown herself into being a good
mother and a great teacher, and she'd been abused by
the company that was meant to help her navigate her finances,
and the Consumer Financial Protection Bureau, the one financial referee
(02:55):
that might have stepped in to help her, was doing
nothing to help. So we decided to help on the
website go fund me to try to pay off Katie's
student loans. When I looked at the page and I
think I saw at that time that it was like
eleven thousand dollars. I was completely blown away. I was
(03:16):
at my son's baseball game. I remember I showed my mom.
We were like freaking out about it and just reading
people's responses and the encouraging words and like where people
were from. There were people from Ireland, there were people
from England. We started this campaign two months after the
show originally aired, so after most people had listened to it.
(03:40):
Even then, it took you our listeners less than three
months to pay off fifty thousand dollars, and I think
the last person that donated donated like enough to like
hit it. And it was just so I was like,
oh my god, Mom, like it happened. We did it,
and I can't even tell it's because you said to
me in one email, like just pay it forward or
just do it for someone else. And every go fund
(04:02):
made campaign that I see, I make it a point
to do the same, even if it's ten twenty whatever
I can do that. Don't you dare go get into
debt again. I thought that would be the end of
the story, but there was a lot more to it.
Of course there was more to it. I mean, Katie
had told us that financial stress had caused her to
(04:24):
grind her teeth at night, and she started losing her teeth.
She used to smile all the time, Now she avoided smiling,
and along the way she'd picked up another debt problem. Already,
I'm on a payment plan with a dentist like five
hundred dollars a week. I've spent like thirty thousand dollars.
I've lost a bunch of teeth through the grinding and
all of that. That part has been really difficult. So
(04:46):
I still have a lot, you know, remaining with that.
It's still a lot to pay off, still a lot
of dental work to get done. So you do have
credit card debt? Yeah, I have credit card. Any big
purchases that I've had to make, I've put on credit cards.
Unless you're a very lucky kind of American, you may
recognize yourself here. You try to do prudent things to
save money, well, like drop the vision card ridge on
(05:09):
your health insurance. Then suddenly your daughter needs glasses. That
was the kind of thing that Katie and her husband
did that wound up biting them. They now have five
credit cards between them, all charging high interest rates, even
though their credit score is great. Personally, I just want
to not be scared to look at my bank account.
I don't think I've looked at my bank account in years,
(05:32):
to be honest. I just, yeah, that's not a good
I know that's not healthy, but I don't know why.
It's just like terrifies me. I'm I'm not sure why.
The credit card industry already had her by the throat.
She was ashamed of it, and she had no sense
that anyone would help this time. Well, so here's my goal.
(05:55):
My goal season one, the goal was to get rid
of your student debt. In season two as they restore
your smile. So that's what we're gonna try to do,
all right, Okay, thanks Michael. I'm Michael Lewis, and this
is against the rules. Last season was about referees, the
(06:16):
attack on our societies, WHEREFS is obviously a big problem.
This season is about coaches. Yeah, what are you doing
and their rise in American life? You need to stop
being a lazy piece of shit and work for your
picture or I'm going to kick your ass. Got it.
It wasn't that long ago the coaches were confined to sports.
(06:36):
Now they're everywhere. We're going to refocus like we're training
a puppy, if we're going to train your mind like
we train a puppy. They're people who call themselves life
coaches and other people who call themselves death coaches. I
am here to guide you and making sure you grow
as a person. Every big time corporate boss has an
executive coach, but now so do new nbas starting out
(06:57):
at Wall Street banks and consulting firms. These are super
smart people who maybe just haven't heard the right strategies.
You can hire a coach to improve your online dating
performance or your career. It's a saying which is therapy
is a path of tears and coaching is the path
of lafta. And that's all great, but coaching is also
(07:17):
becoming an odd source of unfairness. Just look around and
ask yourself who gets good coaching and who doesn't. That
guy would never have gotten into Yale, but this guy
who got all this coaching did get into Yale. It
just seems like anyone who can answer these questions has
got to be coached. Oh my god, we're loving this
fucking team. Rice money is a great place to ask
(07:50):
this question about coaching and fairness. But first you have
to stop thinking of finance as a business and start
thinking of it as a competitive sport. When eighteen year
old Katie Highland took out her student loans and twenty
something year old Katie started using credit cards, she was
basically walking into an arena alone with a target on
her back. The giant company should be facing off against
(08:13):
knew more about her game than she did. That's how
they made their money from her weaknesses. You can always
make more money exploiting people's irrationalities then you can by
fixing them. Richard Taylor winner of the Nobel Prize in Economics.
He spent his career trying to understand the ways that
(08:34):
people don't act in their own self interest. And one
big thing his work suggests is that ordinary people need
coaching far more than they know. Let's think about the
people who get the most coaching. Well, professional athletes would
be one. Take Roger Federer. He's probably got ten guys,
(08:55):
coaches and physical trainers. So here's Roger feder one of
the greatest athletes in the world, and he has ten coaches.
Who else? Actors Meryl Streep has a director helping her
act now, God knows, Yeah, she doesn't need it, right,
(09:19):
Brad Pitt, You know, does he really need help? But
the richest, best performing people in the world have the
most coaching. And who's coaching the uber driver on what
hours to drive and when you should go to the
(09:39):
airport and if you get a ride to the airport,
should you wait in line or immediately leave? So coaching
just ends up making the rich richer. Yeah, it's one
of the many factors that contribute to this curve. We've
all seen about the one percent or the point or
(10:01):
one percent share of the economy. No one's coaching the
tens of millions of Americans on the wrong end of
consumer finance. No one even seems interested. I've tried, unsuccessfully
to get somebody to create what I call the good bank.
(10:22):
With this good bank look like, well, so it would
warn you when you're about to overdraw your credit card,
rather than wait until the end of the day when
you've swiped five times and they charge you twenty five
dollars penalty for each swipe, twenty five bucks a swipe.
(10:44):
It's supposed to scare you from overdrawing your account, but
you only get the warning after it's too late. I mean,
there's a reason for this. It's a subtle form of
coaching that makes the banks a lot of money. No,
the problem is people pay bad coaches and not good coaches. Right,
it's another thing, and they pay because they don't see
the charge. Right. Trip to bad coaching is never show
(11:07):
the bill, Yeah, exactly. The problem good coaching is you
have to share the bill. It goes something like this, right, So,
at the start of the month, you're paid your paycheck.
This is angela strange venture capitalists and kindoisseur of how
the financial sector exploits human nature. And so you send
your rent check out and you don't see in your
bank account that check is cleared, probably for a few days.
(11:28):
You pay a bunch of other bills. You know that
those are gonna hit as costs in your bank account,
but that also hasn't cleared. Now you're like, well, can
I pay this bill? I think so, But you're doing
some mental math around the checks that you have in
the air, like you just don't have a sense of
what is your real time cash position. And then, oh,
(11:49):
by the way, if you screw it up, it's a
thirty five dollars overdraft feach time. Right, there were thirty
four billion dollars in overdraft fees paid last year, again
reofiting from people screwing up. It's huge, it's huge. It's huge. Wait, wait,
thirty four billion dollars in overdraft fees yep is the
typical penalty thirty five bucks. Yeah, it's clem up. It
(12:10):
used to be twenty five about ten years ago. So
that means that there are a billion instances of this
a year, yes, and they tend to be concentrated where
the people they get hit with overdraft get hit a lot.
Thirty four billion dollars in overdraft fees is really just
the start. There's more than one hundred billion in credit
card late payment fees and interest charged each year. And
(12:31):
then there's the entire credit card industry, which thrives on
the mistakes people make playing the money game. There is
now over one trillion dollars of credit card debt in
the US. People who have this debt it's been about
fifteen thousand dollars. They tend to have it across three
to four different cards. So let's say you're like, Okay,
I don't want to be in credit card debt. I
need to get out of credit card debt just going
(12:53):
through what is that process? You have debt across three
to four different cards. They likely charge different rates, they
have different due dates. So do you pay off the
highest rate card first? Oh? By the way, like what
is the highest rate card? It's just a very complicated
mess to get your way out of. Angela wondered why
no one had tried to help people who had gotten
(13:15):
into this mess. Why no one had, say, tried to
create a money coaching business, the same way that Richard
Thaylor wondered, why no one had even tried to create
a good bank. Then she realized the sort of people
with the ability to coach other people about money, or
to finance a company to coach other people about money.
Those people already had money. People who didn't have money
(13:38):
were like Martians to them. Like your investment banker is
not the person who grew up on food stamps, right,
And he's not the person who's got five different credit
cards maxed out and is paying thirty percent interest rate
to some bank. Another problem Angela saw trust Americans had
been screwed by consumer finance for so long that they
were likely to be wary when some companies sprung up
(13:59):
claiming it was actually going to be on their side,
like it takes time as an athlete or as anything
to build trust with your coach, until they'll start by
making these suggestions and you might follow them, you might
not follow them. And you know, if they're a good
coach and they know you really well, then you'll notice
that over time, as you take more of their suggestions,
you tend to perform better. The explosion of coaching, it's
(14:27):
related to the war on referees. It's what happens when
more and more of life feels like a brutal competitive sport.
The scarier it is to lose, the more people scramble
to find an edge. That's what a coach offers, an edge.
Angela Strange had noticed an absence, just as Richard Taylor
had noticed an absence of a coach who really should
(14:49):
exist in the middle of American financial life. Both were
waiting for whom or what they did not know. In
(15:11):
the Year of Our Lord nineteen seventy nine, in the
Mountains of Colorado, a woman gives birth out of wedlock
to a boy, Jason. She names him. The mom's name
is Christina Brown. She's a fundamentalist Christian and takes the
Bible as the literal truth. She doesn't know how she's
going to make ends meet, but she knows what she
wants for her child. She wants him to be well educated.
(15:34):
To make sure that happens, she'll educate him herself. When
we were studying the health unit, I had Jason cleaned
the floor on his hands and knees with an extra
fifty pound backpack on his back, so that he would
know what it would be like to be overweight. That's Christina.
She didn't want her son to be taught what was
(15:55):
taught in schools, the theory of evolution, for instance, but
mostly she just thought she could teach him better than
any school could. It was like, hey, Jason, what do
you want to learn? The world is your classroom. You
can go learn anything you want. That's Jason Brown, all
grown up now. And you know there's one time in particular,
I remember she's like, what do you want to learn?
And I said, I want to learn about taxidermy, and
(16:16):
she said, okay, fine. She goes through the Yellow Pages.
This was in the time where he had Yellow Pages,
and she calls all the taxidermists and convinces that some
guy who owns a taxidermy shop to let us go
camp out in his workplace for a week, and we
would show up there and he would he would show
us how he would take these animals and you know,
end up stuffing them and turning them into things that
(16:38):
could go on people's walls. And what was really cool
is you know, I learned about biology. I learned about
the anatomy of animals. He taught us about the chemicals
that were used. And then I would ask a lot
of questions about just the business of taxidermy, like how
much do you all these chemicals cost? How much do
you pay for this thing? What do you sell it
for the education of Jason Brown wasn't normal. It was
kinetic hands on. His mother encouraged him to ask questions,
(17:02):
but at the same time, he lived in a very
small world. It was just turn him and his little brother.
Maybe because he was so dependent on his mom, he
worried about her. Even as a little kid. He could
see that she was exposed and vulnerable, especially when it
came to money. My money was in envelopes, and each
(17:25):
envelope had a different designation and when the money was gone,
it was gone. What would have been the envelopes designations? Okay,
the first envelope was my tithe, then it was rent,
then it was groceries, miscellaneous electric gas, and you paid
(17:45):
in that order. That's right. We literally, and I'm not exaggerating,
eight beans and rice. Pretty much every day. I ground
my own wheat, made my own whole wheatbread, made my
own tortillas, made cereal in the crock pot for breakfast,
and we had peanut butter on toast. We ate very simply.
We shopped at Goodwill, even for a Christmas gift's birthday gifts.
(18:12):
Sometimes Jason snuck a peek inside the money envelopes. A
lot of the time they were totally empty. Yet, even
when she had no money, his mother insisted on staying
home and teaching him and his brother. By the time
he was ten years old, Jason was fully aware that
his mother was running huge risks. They were totally on
their own. There was no safety net. The most trivial
(18:35):
events could disrupt their lives. So we had this friend,
his name was Donnie. He's a big kid, and he
came over to the house and spent the weekend or
something like that, and Donnie ate a lot, and he
really really liked milk too. And I remember specifically in
the kitchen and Donnie was just pounding the milk and
he finished the milk, and I remember looking at my
(18:56):
mom and she looked at me, and I could just
see the dread and fear on her face because Donnie
drank all the milk. Donnie drank an envelope. Yeah, he
drank an envelope, and just like because I knew that
the envelope for food was already used up. And you know,
I could see in her eyes like, hey, what are
(19:17):
we gonna do? Like we can't go on buy more mode,
Like that's it. So they went without milk. Another memory
is the day Jason's mom told him that she needed
to take on a second job and it'd have to
go to a real school. He was in the eighth grade.
The real school was hellish. Other kids made fun of him.
(19:37):
One day, a kid just walked up to him and
punched him in the face, and no one did anything
about it. Jason felt totally loved by his mom, and
he loved her back. She'd given him real strengths. He
knew how to learn to teach himself, but she'd also
left him with a fear of money, of being one
accident away from disaster. His mother couldn't afford for him
(20:00):
to fall off his bike and break his wrist, much
less pay for him to go to college. He went
to the University of Colorado anyway. To pay for he
took out student loans, but the moment he did that,
he felt exposed and vulnerable like his mom. He was
eighteen years old. I would drive home every single weekend
(20:22):
starting in January, and I would go home to my
hometown where I grew up, and it was about two
to two and a half hour drive, and I would
spend the weekend knocking on doors, handing out flyers, say hey,
would you hire me to paint your house. Jason had
never painted a house, but then there was a time
when he didn't know how to stuff an animal, and
he'd figured out how to do that. And there's just
you know, there's six feet of snow outside, and this
(20:44):
kid is trying to convince you to paint his house.
And they're like, number one, come back to me in
the summer. Number two, how many houses have you paint out? Like?
I've never painted a house in my life. But I
promise I'm going to hire people who do know how
to paint their house. Maybe the oddest thing about Jason
Brown is he found nothing odd about any of this.
An eighteen year old convincing grown ups in the snow
(21:05):
to trust him with their homes. So I brought snowshoes,
and I would have a pair for me and a
pair for them. And now I knew as long as
I could convince the homeowner to put on their shoes
and coat and go around the house with me and
snow shoes, that they would then by the end of
that have a pretty good chance of hiring me. He
was still a kid, but pretty soon this wasn't a
kid's business. The crazy thing is, by the end of
(21:28):
the summer, I had painted something like forty or fifty homes,
and I had I think fifteen or twenty employees, and
I actually put fifty thousand dollars in my pocket for
one summer. Really, you cleared fifty one hundred and fifty
thousand dollars a total revenue, And it was fifty thousand
dollars nut to me. He wasn't done. After Jason's first
(21:48):
year in college, he set out to grow his business.
Rural Colorado wasn't a great market. There weren't that many houses.
The weather was hard on paint, but not as hard
as it was in other places. He decided to find
a better market, and so I transferred to Boston University.
And by the time wait, wait, you transferred to Boston
University specifically to pursue the business of painting houses, I did, yes,
(22:12):
Because you'd based so much money in painting houses. I didn't.
I was like, I was like, you weren't even in
the right place to paint house exactly. To pick your
school based on where there'd be the most houses to paint,
you got it exactly. At BU Jason ran his painting
business from his laptop at the back of classrooms, prepping
for the big season in the summer. When we were
painting all the houses, it was about four hundred employees,
and I think in the year that I sold the company,
(22:35):
we were doing about three million dollars a total revenue.
I don't remember the exact amount that I made from
all that. A couple questions one, are you at any
point are you conscious that you're being driven by having
grown up in an environment where money was so scarce.
I did so when I was I think I think
I was probably about ten. I really loved avocados, and
you know, money was so tight in our household. We'd
(22:57):
go to the grocery store. I'm like, Mom, can I
have amocados? She's like, I'm sorry, they're too expensive. Every
now and then we would get when it was a treat,
and I remember just savoring every bite of that buttery avocado,
and I in my mind mid I said, I will
be rich enough one day to eat as many avocados
as I want. And still to this day, I eat
an avocado almost every single day, And not a single
(23:18):
time do I ever opened an avocado and not feel it.
Just immense gratitude for being able to afford as many avocado.
You even gotten used to avocado? I've not gotten tired
of them. No. Jason went to grad school in business
at the University of Chicago. Pretty soon he knew rich people,
but they didn't seem nearly as admirable or hard working
as his mother. He was coming to see money and
(23:39):
the problems around money as its own thing, as problems
some people just had. Jason Brown started more companies and
sold them The companies all had one thing in common.
They made it easy for people to do things they
really should do. One of his companies made it easy
for people to get their home computers fixed remotely geek
(24:02):
squad before geek Squad. Another made it easy for homeowners
to switch to solar power and cut their electricity bills
in half. Jason was all about making it easy. We
did not evolve to do multi period financial optimization right
as hairless apes. We did not have this expectation that
we're going to live eighty years and be part of
(24:23):
a global economy with all this complexity. One day he
was reading a book, You've All Harari Sapiens. It was
about how humans evolved and where the species might be heading.
Evolution was a new idea did Jason. He thought it
explained a lot, almost out of corporate evolution. This entire industry,
the finance industry, has evolved to exploit every single cognitive
(24:46):
a bias, or every mistake that people make when they're
thinking about money. Exactly every little bug we have in
our brains that that you served us well when we
were on the savannah, but but now is not maybe
directly translatable to the kind of lives we live, and
every product they have, every contract they make, is designed
to exploit these bugs in our brains, getting people to
(25:07):
do things they really shouldn't do. For Jason, money wasn't
just money. At some point, he realized that every time
he thought about money, he also thought about his mom
and her three envelopes of cash for the month. I
actually need to tell you a little bit more about
about my mom. So, my mom is, so she's my hero.
(25:30):
And the reason she's my hero is she grew up
in a pretty challenging childhood. I'm not a lot of resources,
not very supportive. She ended up having me when she
was twenty one or twenty two, just a high school graduate,
no higher education. She'd overcome all that and given him
and his brother the most amazing education. She is just
(25:50):
the model of discipline. I mean the woman. She's a
rob vegan and I'm so proud of that. Hard that's
hard to be presumable. It is, it is. It is
very hard. And she's sixty two now, sixty two, and
most of her life she'd had to figure out everything
on her own, including money. But like let's say say
you graduates high school and there's like an accountant and
(26:11):
a financial advisor. They're just like, we're going to do
all your If she had a coach coming out of
high school, if she had a coach coming out of
high school, I know she'd own a home right now, properly,
she'd have a nice little nest egg, a retirement. She
would be in a good spot. It definitely was possible.
But she didn't have that. Jason could take care of
his mom, and he did, But what about all the
(26:32):
other moms. He decided to create a company specifically to
help them. He looked hard at the entire money game
before he settled on consumer finance and especially credit cards.
Because if finance is a competitive sport, the credit card
companies are undefeated. They've smashed together a payment tool and
alone into one, and they've designed the payment tool to
(26:53):
again exploit all these bugs in our brain. So you
get points for spending, you get access to lounges, It
comes in different colors and metals. You can even get
your dog's picture printed on the card. Right, So they
create all of these things that they want to use it. Yeah, exactly,
make you want to use it and make you when
you go go get a credit card, you're not thinking about, oh,
I might end up getting charged this interest down the road.
(27:16):
You're thinking about, oh, I'm going to get these points
and have access to these hotels, whatever it is. And
that allows banks to substantially overcharge everybody on the interest rates.
So they just distract you from the cost of the
interest rate exactly. So there's no one out there competing
by saying, get our card and we'll give you a
lower interest rate, because it's not even in the conversation,
(27:38):
which is insane if you stop and think about it.
I mean, our government hardly pays any interest on most
of its debt. Really risky companies can borrow at seven percent.
To think that millions of people are paying nineteen to
thirty percent interest on anything. Who other than the American
credit card borrower pays so much And that's not even
counting the billions in late fees. Once Jason homed in
(28:00):
on this particular racket, he noticed other things, like the
monthly statements these lenders send to people who owe the money.
You look at a credit card statement, the thing with
the biggest fun it's like size eighty ninety font is
your minimum payment. They're using something called the anchoring effect.
Which show you a low number and gets you to
pay relatively low amounts to the card, which means that
(28:22):
you have more debt and they charge you more money. Right,
they're trying to encourage you to go into yes, so
they're encouraging you to spend and encouraging you like bad coaching.
It is bad coaching. Right. The more Jason Brown looked
into the credit card industry, the more he thought he
might be able to get people out from under it
with an app. Do you think financial behaviors can be changed?
A hundred percent? Believe financial behaviors can be changed. Jason
(28:44):
created yet another company and called it Tally. He got
the investor Angela Strange to give him money and to
join his board. The ideas behind Tally could be traced
to a class that he had snuck into at the
Booth School of Business in Chicago, taught by Richard Thaylor.
The biggest idea was it was very hard to change
people's behavior unless you make it easy for people to change,
(29:07):
make it feel to them like no more than a nudge.
We viewed nudges as an alternative to coaching. That's Richard
Taylor again. You know, we could try to teach people
to sign up for the foe own k plan where
there's a company match and turning it down is free
money and stupid, right, Or we could just automatically enroll them, right,
(29:32):
and we knew the ladder works really well and the
former is like pulling teeth right. So so part of
nudging is a response to a sense of the limits
of coaching. Yeah, that's the point, right If you if
you really thought, well, we can we can coach all
these people up and how not to get exploited by
(29:52):
credit card companies, you would coach them up. The best
thing is to make things automatic, making good behaviors easy. Yeah.
The basis of Jason Brown's businesses that class he took
from you. It's creating our decision environment where the way
that people naturally with least friction, the least amount of
effort go is in their interests rather than against their interests.
(30:13):
So he picked that up. It's a good lesson to
have learned. Taylor has not the first memory of Jason
Brown in his class, but Jason got the gist as
Taylor's message. He hired a bunch of engineers to spend
three and a half years building the company software so
that it nudged people with credit card debt in ways
that were good for them. So if I have four
different credit cards from four different banks on my visas,
(30:37):
I do whatever I do, but but you pay them
off yeah, and I pay you yeah. So you're telling
me what I exactly. So you download the app for free,
you pass a soft credit check, and then we're saying, hey, Michael,
we're going to pay all these cards when they're due
at the exact right time, the exact right So a
couple of questions that naturally popped in mind. You're going
to charge me a much lower interest rate than the
(30:59):
credit card companies. How can you afford to do that
if they were charging me the actual correct rate given
the risk I present to them. Well, here's the rub. So,
coming back to this financial industry that's designed to make
money off of us, credit card interest rates are astronomically high,
and they do not represent the rate that you should
(31:21):
be paying. You'd save a bunch of money just by
not paying the high interest rate. Of course, you could
ruin yourself all over again by going out and buying
stuff you shouldn't. But Jason's hoping that he's nudged you
into a different state of mind, a state of mind
in which you would make wiser decisions about money. And
what we've seen is that when people invest more in
(31:41):
their debt, they actually just tend to spend less. And mentally,
it kind of makes sense because you know, if you
go out and let's say that you eat out for lunch,
somebody be like, well, maybe I don't want to eat
out for dinner because I already spent some money. So
the effect is I feel like I kind of spent
money on my debt, and now maybe I don't want
to go out for lunch. Maybe I don't want to
go out for dinner. Instead of giving people points for spending,
(32:02):
tally gives them points for saving. Instead of encouraging them
to pay off the minimum, they help them to figure
out how to pay them maximum. Instead of trying to
keep people acting on impulse, it tries to get them
to think twice. The company took off, but something was
bothering Jason. He thought a company needed both a vision
and a mission. A vision was where you were going,
(32:25):
a mission was why you were going there. Jason wanted
to understand the deeper emotional consequences of debt, and initially
my thought was that most of the emotions would be
around regret, like, hey, I spent this money in the past,
and I regret having bought that right, and regret from
the sadness family, so it's the sense of loss of
(32:48):
something in the past. He hired a team of researchers
to test this idea. They came back and told Jason
that no, this wasn't about sadness. The emotions that were
coming out were anxiety, which is a fear emotion, and
it's the feeling that there's a threat in the future
that you don't have the capacity to handle or protect yourself.
Jason paid for another study, one that tried to measure
(33:11):
the stress levels of people with credit card debt. We
had found that two thirds of individuals with card debt
have medical levels of anxiety, so meaning you're in a
doctor's office waiting for some important test results, the same
kind of anxiety that people feel there. That's what people
are feeling on a regular basis with their cards. Millions
of Americans are sick from this stress, and their illness
(33:32):
has all kinds of other effects. Oftentimes it's described as
a weight on chest, drowning, not being able to breathe.
So a lot of people experience stress is actual constriction
within the body, and sensations of tightness are acid in
the stomach. Grinding of teeth is really a common thing
(33:53):
because it manifests oftentimes while people are sleeping. At some point,
Jason realized that stress wasn't just a bug in the
American financial system. It was a feature. There's a lot
of research that suggests that it also affects cognition. So
if you're like a sinister credit card company and you're
trying to keep people trapped in a dark financial world,
(34:16):
the first thing you would do is stress them out.
By definition, the way the credit card statements are made,
especially by store cards, those cards that are associated with retailers.
The banks behind those are some of the best, and
even they do things like make it so that even
if you had wanted to set up an auto pay,
it's actually not a function that is available because they're
hoping that people will have late fees and forget about
(34:38):
balances and things like that. It took Jason three and
a half years to create his app. It took him
two minutes to create his first logo. It's a woman
reclining in a chair, her feet up on a table,
and a cup of coffee in her hand. A woman
like his mom, but freed from anxiety with the help
(34:59):
of a coach. So, if we were to use a
sport analogy, the coaches arranged for food and meals to
be delivered, so you get to eat the right thing.
They've set up the gym membership for you. They've made
so that not only are you being led for how
you can get the outcome you want, but also all
the sources of interference as much as possible or being removed.
Ninety nine percent of the people who sign up to
(35:21):
use Jason's app have stayed with it, and it's kind
of incredible what happens to people when they're rewarded for
behaving well instead of badly. They could say, oh, you know,
I'd rather buy the coffee than have it and be
set aside, But ninety percent of people are still letting
us set money aside for them. And I think it
has very much to do with the fact that every
time it happens, you get points. People would do the
(35:41):
smart thing for themselves if you made it easy for
them to do the smart thing for themselves. Make it easy,
and people would create a buffer for themselves, a margin
of safety, a thing Jason's mom had never had, and
then it kept him awake. When he was a kid.
Jason had not set out to become a coach, but
he saw that a coach is exactly what he'd become.
(36:03):
The definition of a good coach is one who makes
their players feel like they don't need the coach. Okay,
the way I think you do that is first you
take out all the hard work and all the distractions. Second,
you make it easy to have good behaviors, and third
is you make people want to have good behaviors. And
that's the thing about coaching that makes it so hard
(36:25):
to pin down. The best coaches don't leave you needing them.
You start with some fear or sense of inadequacy, They
help you get past it, then they recede. And in
the future, every single one of us is going to
have this hyper smart service that's doing all these complex
things in the background and nudging us and making us
feel really good about eating our financial broccoli, so to speak.
(36:49):
And we're going to feel great about it, but we're
not even going to see it. It's an invisible coach.
A coach that could maybe even help stop people from
grinding their teeth at night. To be honest, I think
(37:09):
I said this to you on the phone. I have
no idea what's in my bank account. Last October we
introduced Katie Highland to Jason's company Tally. She decided she
needed a coach, but her husband had to sign her
up because he was the only one with the nerve
to look at their bank account. I make Stephen chuck it,
and I ask him whether I'm good or not, and
he says yes, And sometimes I believe him and sometimes
(37:30):
I don't. But as long as I don't get a
phone call from the landlord that the rent didn't go through,
then I know that we're okay. So it scares the
bid Jesus out of me to know what's in there,
because I don't think like we don't spend frivolously, like
we even where it said like dining out. I put
(37:50):
an a like work meals, and like we don't do
those things. You can hear the anxiety in her voice, right,
But that could change. I'm betting it will change, because
a good coach can change a lot. We gave Katie
(38:15):
Hyland some time before we bother her again. All right,
So I don't know how many months ago we spoke.
There was a few months anyway. But since then, like
we set you up with Tally and just the idea
of a financial coach. So with Talie, they've been amazing.
How long was it before we introduced the two of you,
(38:36):
before you said, actually, this is a good thing. This
isn't just humoring Michael in his podcast, This is actually
a good thing. No, immediately immediately, I think, you know,
it was definitely overwhelming at first to sort of, you know,
gather all of those documents and find out what my
interest rates were, and you know, figure out what things
I was paying every month and sort of get them
(38:57):
together in one central location. That was a bit overwhelming.
But I mean they walked me and talked me through
absolutely every step of the way and made sure that
I understood what was going on. I can remember you
telling me that your view before was you didn't even
want to look at your bank account. I knew you
were going to bring that up, and I have to
(39:17):
tell you, Michael, I looked at my bank account for
the first time about two days ago, full on the
computer screen in front of me. And all its glory.
I saw my balance and you know, it wasn't as
bad as I envisioned. It wasn't as good as I
wished it would be, but it was an important step
in handling my finances. Is like actually having a realistic
(39:37):
picture of what's in there. No, it's sort of like
if you're going to get in shape, you need to
have a scale to weigh your cell phone. Yeah, it's
going to help just having the conversations, like having a
set time as a couple for myself and my husband
to sit down and say, Okay, where are we with finances?
What did we spend this month? What unexpected things came up?
You know, how are we looking for next month? And
(39:58):
what are we putting toward our you know, our goals.
It's going to help just not our just not even like,
you know, reach our goals, but it's going to help
our relationship, my husband and I because money is a
definite source of stress. I mean, is there a couple
where that's not true? Noah, there's no need here to
(40:22):
recount how many thousands of dollars she saved herself by
having herself coached, or how she's now paying six percent
instead of twenty six percent on her credit card debts,
or how she and her husband expect to be entirely
debt free inside of a year. But let's just consider
the broader effects this coach has had, this person who's
on her side encouraging her best self. Has it changed
(40:46):
the kind of tone of the conversation around money when
you're and your husband sit down and talk about it. Yeah,
it was all very emotionally charged before. And now you know,
he's really taken to Okay, I'm laying everything out on
a spreadsheet and I you know, I put in all this,
and I did all this, and come look and let
me show you. So we're much more of a team
and much more on the same page, and I think
(41:07):
we're excited about the next couple of years. You can
hear it, too, right, The sound of a voice has changed.
All the other times I'd spoken with her, I could
almost hear her teeth grinding. I could hear her stress
and the way it was killing the pleasure she naturally
took in life. I didn't hear that anymore. I found
(41:28):
Katie Hyland in quarantine in New Rochelle, New York, at
the early center of what was shaping up to be
the greatest calamity in modern American history. But she sounded
almost hopeful. You know. It's funny is that you are
now sitting like one of the hot spots of the
(41:48):
American pandemic, and you sound so much happier than you
did a year ago. I know, the irony and everything is.
You sound happy. Well, I feel confident, you know, I
feel like, Wow, I can really start to do things
and I can really to think that. You know, we
set a goal of trying to buy a house by
the summer of two three, and that's amazing. I'm Michael Lewis.
(42:20):
Thanks for listening to Against the Rules. Against the Rules
is brought to you by Pushkin Industries. The show's produced
by Audrey Dilling and Katherine Girodo, with research assistance from Lydia,
Jane Cott, and Zooe Wynn. Our editor is Julia Barton.
Mia o'bell is our executive producer. Our theme was composed
(42:41):
by Nick Brittell, with additional scoring by Stellwagon Sinphonette. We
got fact checked by Beth Johnson. Our show was recorded
by tofur Ruth and Trey Schultz at Northgate Studios in
Berkeley and James Ward at Live Oak Studio. As always
thanks to Pushkin's founders Jacob Weisberg and Malcolm Gladwell. How
(43:12):
often do you go on to go fund me and
give money to strangers? My wife and I were just
driving down the road and it just seemed like the
right thing to do. But I don't typically go in
to go fund me and donate to strangers. I think
it's more when something speaks to me and it's something
that you can easily cover, you just go ahead and
do it. It's always how I've been taught. This is
a meet Kakar, the guy who made the last donation
(43:34):
to the fund that paid off Katie Highland student loans.
He turns out to be a real estate agent in
suburban DC. Makes me wish I wanted to buy a house.
So who's the idea? Was it yours or your wife's
to go and find the go fund me page and
finish off the campaign? It was me, but she obviously
it is used to me doing stuff like that, and
kind of co signs it. But you know, I almost
(43:56):
assume it was over. And I heard about the go
fund me, I was intrigued to see where it was
at and when I saw the level, it was a
no brainer to finish it off, and the the
Pushkin. Welcome to season two of Against the Rules. I'm
Michael Lewis. Before we get to where we're going, I
want to go back for a moment to where we've
been a little backstory from season one. The story involves
(00:37):
a woman named Katie Highland. She's in her late thirties,
a public school teacher, wife, mother of two small children.
Her entire adult life, she'd been made miserable by student
loans she'd taken out when she was eighteen years old.
I don't see any payoff, and it just keeps getting
harder and harder, and that's soul crushing her state of mind. Well,
(00:59):
even her children could see it wasn't good. It might
be actually kind of painful for her, because all of
this counts with a bell and getting something changed to
another thing that's the same, but changing to it. I
love you if you well, it does feel kind of painful,
(01:23):
right mommy. Yeah. A lot of the papers, Yeah there,
it's a lot of paperwork. It's a lot of and
a lot of pain. Yea for doing it. This killed
me to hear, but especially this next part. It is
very good to be thoughtful for everybody, but the person
(01:46):
who's the most best person on earth is this lady
right there, This lady Jackson's mom, Katie Highland, shouldn't have
owed anybody a dime. That was the point of the story.
Katie had qualified years ago for a program that Congress
created to forgive the student loans of public servants, but
(02:09):
her student loan servicer made money offer only as long
as she still owed the money, and they had more
or less tricked her to keep her in debt. I
like to try to always find the good in people,
and when you have experiences like my experience, you get
discouraged and you start to think that people aren't as
good as you once thought they were. Sometimes you stumble
(02:34):
onto a story and you can't get it out of
your head. Katie Hyland had played by the rules, made
all her loan payments, thrown herself into being a good
mother and a great teacher, and she'd been abused by
the company that was meant to help her navigate her finances,
and the Consumer Financial Protection Bureau, the one financial referee
(02:55):
that might have stepped in to help her, was doing
nothing to help. So we decided to help on the
website go fund me to try to pay off Katie's
student loans. When I looked at the page and I
think I saw at that time that it was like
eleven thousand dollars. I was completely blown away. I was
(03:16):
at my son's baseball game. I remember I showed my mom.
We were like freaking out about it and just reading
people's responses and the encouraging words and like where people
were from. There were people from Ireland, there were people
from England. We started this campaign two months after the
show originally aired, so after most people had listened to it.
(03:40):
Even then, it took you our listeners less than three
months to pay off fifty thousand dollars, and I think
the last person that donated donated like enough to like
hit it. And it was just so I was like,
oh my god, Mom, like it happened. We did it,
and I can't even tell it's because you said to
me in one email, like just pay it forward or
just do it for someone else. And every go fund
(04:02):
made campaign that I see, I make it a point
to do the same, even if it's ten twenty whatever
I can do that. Don't you dare go get into
debt again. I thought that would be the end of
the story, but there was a lot more to it.
Of course there was more to it. I mean, Katie
had told us that financial stress had caused her to
(04:24):
grind her teeth at night, and she started losing her teeth.
She used to smile all the time, Now she avoided smiling,
and along the way she'd picked up another debt problem. Already,
I'm on a payment plan with a dentist like five
hundred dollars a week. I've spent like thirty thousand dollars.
I've lost a bunch of teeth through the grinding and
all of that. That part has been really difficult. So
(04:46):
I still have a lot, you know, remaining with that.
It's still a lot to pay off, still a lot
of dental work to get done. So you do have
credit card debt? Yeah, I have credit card. Any big
purchases that I've had to make, I've put on credit cards.
Unless you're a very lucky kind of American, you may
recognize yourself here. You try to do prudent things to
save money, well, like drop the vision card ridge on
(05:09):
your health insurance. Then suddenly your daughter needs glasses. That
was the kind of thing that Katie and her husband
did that wound up biting them. They now have five
credit cards between them, all charging high interest rates, even
though their credit score is great. Personally, I just want
to not be scared to look at my bank account.
I don't think I've looked at my bank account in years,
(05:32):
to be honest. I just, yeah, that's not a good
I know that's not healthy, but I don't know why.
It's just like terrifies me. I'm I'm not sure why.
The credit card industry already had her by the throat.
She was ashamed of it, and she had no sense
that anyone would help this time. Well, so here's my goal.
(05:55):
My goal season one, the goal was to get rid
of your student debt. In season two as they restore
your smile. So that's what we're gonna try to do,
all right, Okay, thanks Michael. I'm Michael Lewis, and this
is against the rules. Last season was about referees, the
(06:16):
attack on our societies, WHEREFS is obviously a big problem.
This season is about coaches. Yeah, what are you doing
and their rise in American life? You need to stop
being a lazy piece of shit and work for your
picture or I'm going to kick your ass. Got it.
It wasn't that long ago the coaches were confined to sports.
(06:36):
Now they're everywhere. We're going to refocus like we're training
a puppy, if we're going to train your mind like
we train a puppy. They're people who call themselves life
coaches and other people who call themselves death coaches. I
am here to guide you and making sure you grow
as a person. Every big time corporate boss has an
executive coach, but now so do new nbas starting out
(06:57):
at Wall Street banks and consulting firms. These are super
smart people who maybe just haven't heard the right strategies.
You can hire a coach to improve your online dating
performance or your career. It's a saying which is therapy
is a path of tears and coaching is the path
of lafta. And that's all great, but coaching is also
(07:17):
becoming an odd source of unfairness. Just look around and
ask yourself who gets good coaching and who doesn't. That
guy would never have gotten into Yale, but this guy
who got all this coaching did get into Yale. It
just seems like anyone who can answer these questions has
got to be coached. Oh my god, we're loving this
fucking team. Rice money is a great place to ask
(07:50):
this question about coaching and fairness. But first you have
to stop thinking of finance as a business and start
thinking of it as a competitive sport. When eighteen year
old Katie Highland took out her student loans and twenty
something year old Katie started using credit cards, she was
basically walking into an arena alone with a target on
her back. The giant company should be facing off against
(08:13):
knew more about her game than she did. That's how
they made their money from her weaknesses. You can always
make more money exploiting people's irrationalities then you can by
fixing them. Richard Taylor winner of the Nobel Prize in Economics.
He spent his career trying to understand the ways that
(08:34):
people don't act in their own self interest. And one
big thing his work suggests is that ordinary people need
coaching far more than they know. Let's think about the
people who get the most coaching. Well, professional athletes would
be one. Take Roger Federer. He's probably got ten guys,
(08:55):
coaches and physical trainers. So here's Roger feder one of
the greatest athletes in the world, and he has ten coaches.
Who else? Actors Meryl Streep has a director helping her
act now, God knows, Yeah, she doesn't need it, right,
(09:19):
Brad Pitt, You know, does he really need help? But
the richest, best performing people in the world have the
most coaching. And who's coaching the uber driver on what
hours to drive and when you should go to the
(09:39):
airport and if you get a ride to the airport,
should you wait in line or immediately leave? So coaching
just ends up making the rich richer. Yeah, it's one
of the many factors that contribute to this curve. We've
all seen about the one percent or the point or
(10:01):
one percent share of the economy. No one's coaching the
tens of millions of Americans on the wrong end of
consumer finance. No one even seems interested. I've tried, unsuccessfully
to get somebody to create what I call the good bank.
(10:22):
With this good bank look like, well, so it would
warn you when you're about to overdraw your credit card,
rather than wait until the end of the day when
you've swiped five times and they charge you twenty five
dollars penalty for each swipe, twenty five bucks a swipe.
(10:44):
It's supposed to scare you from overdrawing your account, but
you only get the warning after it's too late. I mean,
there's a reason for this. It's a subtle form of
coaching that makes the banks a lot of money. No,
the problem is people pay bad coaches and not good coaches. Right,
it's another thing, and they pay because they don't see
the charge. Right. Trip to bad coaching is never show
(11:07):
the bill, Yeah, exactly. The problem good coaching is you
have to share the bill. It goes something like this, right, So,
at the start of the month, you're paid your paycheck.
This is angela strange venture capitalists and kindoisseur of how
the financial sector exploits human nature. And so you send
your rent check out and you don't see in your
bank account that check is cleared, probably for a few days.
(11:28):
You pay a bunch of other bills. You know that
those are gonna hit as costs in your bank account,
but that also hasn't cleared. Now you're like, well, can
I pay this bill? I think so, But you're doing
some mental math around the checks that you have in
the air, like you just don't have a sense of
what is your real time cash position. And then, oh,
(11:49):
by the way, if you screw it up, it's a
thirty five dollars overdraft feach time. Right, there were thirty
four billion dollars in overdraft fees paid last year, again
reofiting from people screwing up. It's huge, it's huge. It's huge. Wait, wait,
thirty four billion dollars in overdraft fees yep is the
typical penalty thirty five bucks. Yeah, it's clem up. It
(12:10):
used to be twenty five about ten years ago. So
that means that there are a billion instances of this
a year, yes, and they tend to be concentrated where
the people they get hit with overdraft get hit a lot.
Thirty four billion dollars in overdraft fees is really just
the start. There's more than one hundred billion in credit
card late payment fees and interest charged each year. And
(12:31):
then there's the entire credit card industry, which thrives on
the mistakes people make playing the money game. There is
now over one trillion dollars of credit card debt in
the US. People who have this debt it's been about
fifteen thousand dollars. They tend to have it across three
to four different cards. So let's say you're like, Okay,
I don't want to be in credit card debt. I
need to get out of credit card debt just going
(12:53):
through what is that process? You have debt across three
to four different cards. They likely charge different rates, they
have different due dates. So do you pay off the
highest rate card first? Oh? By the way, like what
is the highest rate card? It's just a very complicated
mess to get your way out of. Angela wondered why
no one had tried to help people who had gotten
(13:15):
into this mess. Why no one had, say, tried to
create a money coaching business, the same way that Richard
Thaylor wondered, why no one had even tried to create
a good bank. Then she realized the sort of people
with the ability to coach other people about money, or
to finance a company to coach other people about money.
Those people already had money. People who didn't have money
(13:38):
were like Martians to them. Like your investment banker is
not the person who grew up on food stamps, right,
And he's not the person who's got five different credit
cards maxed out and is paying thirty percent interest rate
to some bank. Another problem Angela saw trust Americans had
been screwed by consumer finance for so long that they
were likely to be wary when some companies sprung up
(13:59):
claiming it was actually going to be on their side,
like it takes time as an athlete or as anything
to build trust with your coach, until they'll start by
making these suggestions and you might follow them, you might
not follow them. And you know, if they're a good
coach and they know you really well, then you'll notice
that over time, as you take more of their suggestions,
you tend to perform better. The explosion of coaching, it's
(14:27):
related to the war on referees. It's what happens when
more and more of life feels like a brutal competitive sport.
The scarier it is to lose, the more people scramble
to find an edge. That's what a coach offers, an edge.
Angela Strange had noticed an absence, just as Richard Taylor
had noticed an absence of a coach who really should
(14:49):
exist in the middle of American financial life. Both were
waiting for whom or what they did not know. In
(15:11):
the Year of Our Lord nineteen seventy nine, in the
Mountains of Colorado, a woman gives birth out of wedlock
to a boy, Jason. She names him. The mom's name
is Christina Brown. She's a fundamentalist Christian and takes the
Bible as the literal truth. She doesn't know how she's
going to make ends meet, but she knows what she
wants for her child. She wants him to be well educated.
(15:34):
To make sure that happens, she'll educate him herself. When
we were studying the health unit, I had Jason cleaned
the floor on his hands and knees with an extra
fifty pound backpack on his back, so that he would
know what it would be like to be overweight. That's Christina.
She didn't want her son to be taught what was
(15:55):
taught in schools, the theory of evolution, for instance, but
mostly she just thought she could teach him better than
any school could. It was like, hey, Jason, what do
you want to learn? The world is your classroom. You
can go learn anything you want. That's Jason Brown, all
grown up now. And you know there's one time in particular,
I remember she's like, what do you want to learn?
And I said, I want to learn about taxidermy, and
(16:16):
she said, okay, fine. She goes through the Yellow Pages.
This was in the time where he had Yellow Pages,
and she calls all the taxidermists and convinces that some
guy who owns a taxidermy shop to let us go
camp out in his workplace for a week, and we
would show up there and he would he would show
us how he would take these animals and you know,
end up stuffing them and turning them into things that
(16:38):
could go on people's walls. And what was really cool
is you know, I learned about biology. I learned about
the anatomy of animals. He taught us about the chemicals
that were used. And then I would ask a lot
of questions about just the business of taxidermy, like how
much do you all these chemicals cost? How much do
you pay for this thing? What do you sell it
for the education of Jason Brown wasn't normal. It was
kinetic hands on. His mother encouraged him to ask questions,
(17:02):
but at the same time, he lived in a very
small world. It was just turn him and his little brother.
Maybe because he was so dependent on his mom, he
worried about her. Even as a little kid. He could
see that she was exposed and vulnerable, especially when it
came to money. My money was in envelopes, and each
(17:25):
envelope had a different designation and when the money was gone,
it was gone. What would have been the envelopes designations? Okay,
the first envelope was my tithe, then it was rent,
then it was groceries, miscellaneous electric gas, and you paid
(17:45):
in that order. That's right. We literally, and I'm not exaggerating,
eight beans and rice. Pretty much every day. I ground
my own wheat, made my own whole wheatbread, made my
own tortillas, made cereal in the crock pot for breakfast,
and we had peanut butter on toast. We ate very simply.
We shopped at Goodwill, even for a Christmas gift's birthday gifts.
(18:12):
Sometimes Jason snuck a peek inside the money envelopes. A
lot of the time they were totally empty. Yet, even
when she had no money, his mother insisted on staying
home and teaching him and his brother. By the time
he was ten years old, Jason was fully aware that
his mother was running huge risks. They were totally on
their own. There was no safety net. The most trivial
(18:35):
events could disrupt their lives. So we had this friend,
his name was Donnie. He's a big kid, and he
came over to the house and spent the weekend or
something like that, and Donnie ate a lot, and he
really really liked milk too. And I remember specifically in
the kitchen and Donnie was just pounding the milk and
he finished the milk, and I remember looking at my
(18:56):
mom and she looked at me, and I could just
see the dread and fear on her face because Donnie
drank all the milk. Donnie drank an envelope. Yeah, he
drank an envelope, and just like because I knew that
the envelope for food was already used up. And you know,
I could see in her eyes like, hey, what are
(19:17):
we gonna do? Like we can't go on buy more mode,
Like that's it. So they went without milk. Another memory
is the day Jason's mom told him that she needed
to take on a second job and it'd have to
go to a real school. He was in the eighth grade.
The real school was hellish. Other kids made fun of him.
(19:37):
One day, a kid just walked up to him and
punched him in the face, and no one did anything
about it. Jason felt totally loved by his mom, and
he loved her back. She'd given him real strengths. He
knew how to learn to teach himself, but she'd also
left him with a fear of money, of being one
accident away from disaster. His mother couldn't afford for him
(20:00):
to fall off his bike and break his wrist, much
less pay for him to go to college. He went
to the University of Colorado anyway. To pay for he
took out student loans, but the moment he did that,
he felt exposed and vulnerable like his mom. He was
eighteen years old. I would drive home every single weekend
(20:22):
starting in January, and I would go home to my
hometown where I grew up, and it was about two
to two and a half hour drive, and I would
spend the weekend knocking on doors, handing out flyers, say hey,
would you hire me to paint your house. Jason had
never painted a house, but then there was a time
when he didn't know how to stuff an animal, and
he'd figured out how to do that. And there's just
you know, there's six feet of snow outside, and this
(20:44):
kid is trying to convince you to paint his house.
And they're like, number one, come back to me in
the summer. Number two, how many houses have you paint out? Like?
I've never painted a house in my life. But I
promise I'm going to hire people who do know how
to paint their house. Maybe the oddest thing about Jason
Brown is he found nothing odd about any of this.
An eighteen year old convincing grown ups in the snow
(21:05):
to trust him with their homes. So I brought snowshoes,
and I would have a pair for me and a
pair for them. And now I knew as long as
I could convince the homeowner to put on their shoes
and coat and go around the house with me and
snow shoes, that they would then by the end of
that have a pretty good chance of hiring me. He
was still a kid, but pretty soon this wasn't a
kid's business. The crazy thing is, by the end of
(21:28):
the summer, I had painted something like forty or fifty homes,
and I had I think fifteen or twenty employees, and
I actually put fifty thousand dollars in my pocket for
one summer. Really, you cleared fifty one hundred and fifty
thousand dollars a total revenue, And it was fifty thousand
dollars nut to me. He wasn't done. After Jason's first
(21:48):
year in college, he set out to grow his business.
Rural Colorado wasn't a great market. There weren't that many houses.
The weather was hard on paint, but not as hard
as it was in other places. He decided to find
a better market, and so I transferred to Boston University.
And by the time wait, wait, you transferred to Boston
University specifically to pursue the business of painting houses, I did, yes,
(22:12):
Because you'd based so much money in painting houses. I didn't.
I was like, I was like, you weren't even in
the right place to paint house exactly. To pick your
school based on where there'd be the most houses to paint,
you got it exactly. At BU Jason ran his painting
business from his laptop at the back of classrooms, prepping
for the big season in the summer. When we were
painting all the houses, it was about four hundred employees,
and I think in the year that I sold the company,
(22:35):
we were doing about three million dollars a total revenue.
I don't remember the exact amount that I made from
all that. A couple questions one, are you at any
point are you conscious that you're being driven by having
grown up in an environment where money was so scarce.
I did so when I was I think I think
I was probably about ten. I really loved avocados, and
you know, money was so tight in our household. We'd
(22:57):
go to the grocery store. I'm like, Mom, can I
have amocados? She's like, I'm sorry, they're too expensive. Every
now and then we would get when it was a treat,
and I remember just savoring every bite of that buttery avocado,
and I in my mind mid I said, I will
be rich enough one day to eat as many avocados
as I want. And still to this day, I eat
an avocado almost every single day, And not a single
(23:18):
time do I ever opened an avocado and not feel it.
Just immense gratitude for being able to afford as many avocado.
You even gotten used to avocado? I've not gotten tired
of them. No. Jason went to grad school in business
at the University of Chicago. Pretty soon he knew rich people,
but they didn't seem nearly as admirable or hard working
as his mother. He was coming to see money and
(23:39):
the problems around money as its own thing, as problems
some people just had. Jason Brown started more companies and
sold them The companies all had one thing in common.
They made it easy for people to do things they
really should do. One of his companies made it easy
for people to get their home computers fixed remotely geek
(24:02):
squad before geek Squad. Another made it easy for homeowners
to switch to solar power and cut their electricity bills
in half. Jason was all about making it easy. We
did not evolve to do multi period financial optimization right
as hairless apes. We did not have this expectation that
we're going to live eighty years and be part of
(24:23):
a global economy with all this complexity. One day he
was reading a book, You've All Harari Sapiens. It was
about how humans evolved and where the species might be heading.
Evolution was a new idea did Jason. He thought it
explained a lot, almost out of corporate evolution. This entire industry,
the finance industry, has evolved to exploit every single cognitive
(24:46):
a bias, or every mistake that people make when they're
thinking about money. Exactly every little bug we have in
our brains that that you served us well when we
were on the savannah, but but now is not maybe
directly translatable to the kind of lives we live, and
every product they have, every contract they make, is designed
to exploit these bugs in our brains, getting people to
(25:07):
do things they really shouldn't do. For Jason, money wasn't
just money. At some point, he realized that every time
he thought about money, he also thought about his mom
and her three envelopes of cash for the month. I
actually need to tell you a little bit more about
about my mom. So, my mom is, so she's my hero.
(25:30):
And the reason she's my hero is she grew up
in a pretty challenging childhood. I'm not a lot of resources,
not very supportive. She ended up having me when she
was twenty one or twenty two, just a high school graduate,
no higher education. She'd overcome all that and given him
and his brother the most amazing education. She is just
(25:50):
the model of discipline. I mean the woman. She's a
rob vegan and I'm so proud of that. Hard that's
hard to be presumable. It is, it is. It is
very hard. And she's sixty two now, sixty two, and
most of her life she'd had to figure out everything
on her own, including money. But like let's say say
you graduates high school and there's like an accountant and
(26:11):
a financial advisor. They're just like, we're going to do
all your If she had a coach coming out of
high school, if she had a coach coming out of
high school, I know she'd own a home right now, properly,
she'd have a nice little nest egg, a retirement. She
would be in a good spot. It definitely was possible.
But she didn't have that. Jason could take care of
his mom, and he did, But what about all the
(26:32):
other moms. He decided to create a company specifically to
help them. He looked hard at the entire money game
before he settled on consumer finance and especially credit cards.
Because if finance is a competitive sport, the credit card
companies are undefeated. They've smashed together a payment tool and
alone into one, and they've designed the payment tool to
(26:53):
again exploit all these bugs in our brain. So you
get points for spending, you get access to lounges, It
comes in different colors and metals. You can even get
your dog's picture printed on the card. Right, So they
create all of these things that they want to use it. Yeah, exactly,
make you want to use it and make you when
you go go get a credit card, you're not thinking about, oh,
I might end up getting charged this interest down the road.
(27:16):
You're thinking about, oh, I'm going to get these points
and have access to these hotels, whatever it is. And
that allows banks to substantially overcharge everybody on the interest rates.
So they just distract you from the cost of the
interest rate exactly. So there's no one out there competing
by saying, get our card and we'll give you a
lower interest rate, because it's not even in the conversation,
(27:38):
which is insane if you stop and think about it.
I mean, our government hardly pays any interest on most
of its debt. Really risky companies can borrow at seven percent.
To think that millions of people are paying nineteen to
thirty percent interest on anything. Who other than the American
credit card borrower pays so much And that's not even
counting the billions in late fees. Once Jason homed in
(28:00):
on this particular racket, he noticed other things, like the
monthly statements these lenders send to people who owe the money.
You look at a credit card statement, the thing with
the biggest fun it's like size eighty ninety font is
your minimum payment. They're using something called the anchoring effect.
Which show you a low number and gets you to
pay relatively low amounts to the card, which means that
(28:22):
you have more debt and they charge you more money. Right,
they're trying to encourage you to go into yes, so
they're encouraging you to spend and encouraging you like bad coaching.
It is bad coaching. Right. The more Jason Brown looked
into the credit card industry, the more he thought he
might be able to get people out from under it
with an app. Do you think financial behaviors can be changed?
A hundred percent? Believe financial behaviors can be changed. Jason
(28:44):
created yet another company and called it Tally. He got
the investor Angela Strange to give him money and to
join his board. The ideas behind Tally could be traced
to a class that he had snuck into at the
Booth School of Business in Chicago, taught by Richard Thaylor.
The biggest idea was it was very hard to change
people's behavior unless you make it easy for people to change,
(29:07):
make it feel to them like no more than a nudge.
We viewed nudges as an alternative to coaching. That's Richard
Taylor again. You know, we could try to teach people
to sign up for the foe own k plan where
there's a company match and turning it down is free
money and stupid, right, Or we could just automatically enroll them, right,
(29:32):
and we knew the ladder works really well and the
former is like pulling teeth right. So so part of
nudging is a response to a sense of the limits
of coaching. Yeah, that's the point, right If you if
you really thought, well, we can we can coach all
these people up and how not to get exploited by
(29:52):
credit card companies, you would coach them up. The best
thing is to make things automatic, making good behaviors easy. Yeah.
The basis of Jason Brown's businesses that class he took
from you. It's creating our decision environment where the way
that people naturally with least friction, the least amount of
effort go is in their interests rather than against their interests.
(30:13):
So he picked that up. It's a good lesson to
have learned. Taylor has not the first memory of Jason
Brown in his class, but Jason got the gist as
Taylor's message. He hired a bunch of engineers to spend
three and a half years building the company software so
that it nudged people with credit card debt in ways
that were good for them. So if I have four
different credit cards from four different banks on my visas,
(30:37):
I do whatever I do, but but you pay them
off yeah, and I pay you yeah. So you're telling
me what I exactly. So you download the app for free,
you pass a soft credit check, and then we're saying, hey, Michael,
we're going to pay all these cards when they're due
at the exact right time, the exact right So a
couple of questions that naturally popped in mind. You're going
to charge me a much lower interest rate than the
(30:59):
credit card companies. How can you afford to do that
if they were charging me the actual correct rate given
the risk I present to them. Well, here's the rub. So,
coming back to this financial industry that's designed to make
money off of us, credit card interest rates are astronomically high,
and they do not represent the rate that you should
(31:21):
be paying. You'd save a bunch of money just by
not paying the high interest rate. Of course, you could
ruin yourself all over again by going out and buying
stuff you shouldn't. But Jason's hoping that he's nudged you
into a different state of mind, a state of mind
in which you would make wiser decisions about money. And
what we've seen is that when people invest more in
(31:41):
their debt, they actually just tend to spend less. And mentally,
it kind of makes sense because you know, if you
go out and let's say that you eat out for lunch,
somebody be like, well, maybe I don't want to eat
out for dinner because I already spent some money. So
the effect is I feel like I kind of spent
money on my debt, and now maybe I don't want
to go out for lunch. Maybe I don't want to
go out for dinner. Instead of giving people points for spending,
(32:02):
tally gives them points for saving. Instead of encouraging them
to pay off the minimum, they help them to figure
out how to pay them maximum. Instead of trying to
keep people acting on impulse, it tries to get them
to think twice. The company took off, but something was
bothering Jason. He thought a company needed both a vision
and a mission. A vision was where you were going,
(32:25):
a mission was why you were going there. Jason wanted
to understand the deeper emotional consequences of debt, and initially
my thought was that most of the emotions would be
around regret, like, hey, I spent this money in the past,
and I regret having bought that right, and regret from
the sadness family, so it's the sense of loss of
(32:48):
something in the past. He hired a team of researchers
to test this idea. They came back and told Jason
that no, this wasn't about sadness. The emotions that were
coming out were anxiety, which is a fear emotion, and
it's the feeling that there's a threat in the future
that you don't have the capacity to handle or protect yourself.
Jason paid for another study, one that tried to measure
(33:11):
the stress levels of people with credit card debt. We
had found that two thirds of individuals with card debt
have medical levels of anxiety, so meaning you're in a
doctor's office waiting for some important test results, the same
kind of anxiety that people feel there. That's what people
are feeling on a regular basis with their cards. Millions
of Americans are sick from this stress, and their illness
(33:32):
has all kinds of other effects. Oftentimes it's described as
a weight on chest, drowning, not being able to breathe.
So a lot of people experience stress is actual constriction
within the body, and sensations of tightness are acid in
the stomach. Grinding of teeth is really a common thing
(33:53):
because it manifests oftentimes while people are sleeping. At some point,
Jason realized that stress wasn't just a bug in the
American financial system. It was a feature. There's a lot
of research that suggests that it also affects cognition. So
if you're like a sinister credit card company and you're
trying to keep people trapped in a dark financial world,
(34:16):
the first thing you would do is stress them out.
By definition, the way the credit card statements are made,
especially by store cards, those cards that are associated with retailers.
The banks behind those are some of the best, and
even they do things like make it so that even
if you had wanted to set up an auto pay,
it's actually not a function that is available because they're
hoping that people will have late fees and forget about
(34:38):
balances and things like that. It took Jason three and
a half years to create his app. It took him
two minutes to create his first logo. It's a woman
reclining in a chair, her feet up on a table,
and a cup of coffee in her hand. A woman
like his mom, but freed from anxiety with the help
(34:59):
of a coach. So, if we were to use a
sport analogy, the coaches arranged for food and meals to
be delivered, so you get to eat the right thing.
They've set up the gym membership for you. They've made
so that not only are you being led for how
you can get the outcome you want, but also all
the sources of interference as much as possible or being removed.
Ninety nine percent of the people who sign up to
(35:21):
use Jason's app have stayed with it, and it's kind
of incredible what happens to people when they're rewarded for
behaving well instead of badly. They could say, oh, you know,
I'd rather buy the coffee than have it and be
set aside, But ninety percent of people are still letting
us set money aside for them. And I think it
has very much to do with the fact that every
time it happens, you get points. People would do the
(35:41):
smart thing for themselves if you made it easy for
them to do the smart thing for themselves. Make it easy,
and people would create a buffer for themselves, a margin
of safety, a thing Jason's mom had never had, and
then it kept him awake. When he was a kid.
Jason had not set out to become a coach, but
he saw that a coach is exactly what he'd become.
(36:03):
The definition of a good coach is one who makes
their players feel like they don't need the coach. Okay,
the way I think you do that is first you
take out all the hard work and all the distractions. Second,
you make it easy to have good behaviors, and third
is you make people want to have good behaviors. And
that's the thing about coaching that makes it so hard
(36:25):
to pin down. The best coaches don't leave you needing them.
You start with some fear or sense of inadequacy, They
help you get past it, then they recede. And in
the future, every single one of us is going to
have this hyper smart service that's doing all these complex
things in the background and nudging us and making us
feel really good about eating our financial broccoli, so to speak.
(36:49):
And we're going to feel great about it, but we're
not even going to see it. It's an invisible coach.
A coach that could maybe even help stop people from
grinding their teeth at night. To be honest, I think
(37:09):
I said this to you on the phone. I have
no idea what's in my bank account. Last October we
introduced Katie Highland to Jason's company Tally. She decided she
needed a coach, but her husband had to sign her
up because he was the only one with the nerve
to look at their bank account. I make Stephen chuck it,
and I ask him whether I'm good or not, and
he says yes, And sometimes I believe him and sometimes
(37:30):
I don't. But as long as I don't get a
phone call from the landlord that the rent didn't go through,
then I know that we're okay. So it scares the
bid Jesus out of me to know what's in there,
because I don't think like we don't spend frivolously, like
we even where it said like dining out. I put
(37:50):
an a like work meals, and like we don't do
those things. You can hear the anxiety in her voice, right,
But that could change. I'm betting it will change, because
a good coach can change a lot. We gave Katie
(38:15):
Hyland some time before we bother her again. All right,
So I don't know how many months ago we spoke.
There was a few months anyway. But since then, like
we set you up with Tally and just the idea
of a financial coach. So with Talie, they've been amazing.
How long was it before we introduced the two of you,
(38:36):
before you said, actually, this is a good thing. This
isn't just humoring Michael in his podcast, This is actually
a good thing. No, immediately immediately, I think, you know,
it was definitely overwhelming at first to sort of, you know,
gather all of those documents and find out what my
interest rates were, and you know, figure out what things
I was paying every month and sort of get them
(38:57):
together in one central location. That was a bit overwhelming.
But I mean they walked me and talked me through
absolutely every step of the way and made sure that
I understood what was going on. I can remember you
telling me that your view before was you didn't even
want to look at your bank account. I knew you
were going to bring that up, and I have to
(39:17):
tell you, Michael, I looked at my bank account for
the first time about two days ago, full on the
computer screen in front of me. And all its glory.
I saw my balance and you know, it wasn't as
bad as I envisioned. It wasn't as good as I
wished it would be, but it was an important step
in handling my finances. Is like actually having a realistic
(39:37):
picture of what's in there. No, it's sort of like
if you're going to get in shape, you need to
have a scale to weigh your cell phone. Yeah, it's
going to help just having the conversations, like having a
set time as a couple for myself and my husband
to sit down and say, Okay, where are we with finances?
What did we spend this month? What unexpected things came up?
You know, how are we looking for next month? And
(39:58):
what are we putting toward our you know, our goals.
It's going to help just not our just not even like,
you know, reach our goals, but it's going to help
our relationship, my husband and I because money is a
definite source of stress. I mean, is there a couple
where that's not true? Noah, there's no need here to
(40:22):
recount how many thousands of dollars she saved herself by
having herself coached, or how she's now paying six percent
instead of twenty six percent on her credit card debts,
or how she and her husband expect to be entirely
debt free inside of a year. But let's just consider
the broader effects this coach has had, this person who's
on her side encouraging her best self. Has it changed
(40:46):
the kind of tone of the conversation around money when
you're and your husband sit down and talk about it. Yeah,
it was all very emotionally charged before. And now you know,
he's really taken to Okay, I'm laying everything out on
a spreadsheet and I you know, I put in all this,
and I did all this, and come look and let
me show you. So we're much more of a team
and much more on the same page, and I think
(41:07):
we're excited about the next couple of years. You can
hear it, too, right, The sound of a voice has changed.
All the other times I'd spoken with her, I could
almost hear her teeth grinding. I could hear her stress
and the way it was killing the pleasure she naturally
took in life. I didn't hear that anymore. I found
(41:28):
Katie Hyland in quarantine in New Rochelle, New York, at
the early center of what was shaping up to be
the greatest calamity in modern American history. But she sounded
almost hopeful. You know. It's funny is that you are
now sitting like one of the hot spots of the
(41:48):
American pandemic, and you sound so much happier than you
did a year ago. I know, the irony and everything is.
You sound happy. Well, I feel confident, you know, I
feel like, Wow, I can really start to do things
and I can really to think that. You know, we
set a goal of trying to buy a house by
the summer of two three, and that's amazing. I'm Michael Lewis.
(42:20):
Thanks for listening to Against the Rules. Against the Rules
is brought to you by Pushkin Industries. The show's produced
by Audrey Dilling and Katherine Girodo, with research assistance from Lydia,
Jane Cott, and Zooe Wynn. Our editor is Julia Barton.
Mia o'bell is our executive producer. Our theme was composed
(42:41):
by Nick Brittell, with additional scoring by Stellwagon Sinphonette. We
got fact checked by Beth Johnson. Our show was recorded
by tofur Ruth and Trey Schultz at Northgate Studios in
Berkeley and James Ward at Live Oak Studio. As always
thanks to Pushkin's founders Jacob Weisberg and Malcolm Gladwell. How
(43:12):
often do you go on to go fund me and
give money to strangers? My wife and I were just
driving down the road and it just seemed like the
right thing to do. But I don't typically go in
to go fund me and donate to strangers. I think
it's more when something speaks to me and it's something
that you can easily cover, you just go ahead and
do it. It's always how I've been taught. This is
a meet Kakar, the guy who made the last donation
(43:34):
to the fund that paid off Katie Highland student loans.
He turns out to be a real estate agent in
suburban DC. Makes me wish I wanted to buy a house.
So who's the idea? Was it yours or your wife's
to go and find the go fund me page and
finish off the campaign? It was me, but she obviously
it is used to me doing stuff like that, and
kind of co signs it. But you know, I almost
(43:56):
assume it was over. And I heard about the go
fund me, I was intrigued to see where it was
at and when I saw the level, it was a
no brainer to finish it off, and the the
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