April 16, 2025 • 50 mins
We’re joined by the Chief Economist at Redfin, Daryl Fairweather, so you know we’re talking about the current state of the real estate market today. But before she was knee-deep in housing data Daryl was the senior economist at Amazon, and before that she was a researcher at the Federal Reserve Bank of Boston which is when she was working with Freakonomics author Steven Levitt. Now, she has a new book that just came out last week, Hate The Game: Economic Cheat Codes for Life, Love, and Work. The book is all about helping folks to use game theory and behavioral science to lay out all the options in life. For example whether you should get married and have kids or not, or going for a promotion versus looking for a new job, or whether or not you should move to a new city! Basically, Daryl is wanting to help folks win at whatever game in life they’re playing and we also discuss her favorite nerdy board game, the solutions to high housing prices, and plenty 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, I'm Matt, and
today we're talking economic cheat codes for everyday life with
Darryl Fairweather.
Speaker 2 (00:26):
Yeah, we are joined today by Darryl Fairweather, who is
the chief economist over at Redfinn. Everybody knows about Redfinn.
Before that, she was the senior economist at Amazon. And
before that she was a researcher at the Federal Reserve
Bank of Boston, and she worked with Freakonomics author Steven
Levitt stepping back in time there. But now she has
(00:47):
a new book that just came out, that actually came
out last week, Hate the Game Economic Cheat Codes for Life,
Love and Work, and Man. This book is all about
helping folks to use game theory and behavioral science to
lay out all the options as we approach these inevitable
forks in the road in the road of life, like
getting married and having kids or not doing those things,
(01:08):
going for a promotion or looking for a new job,
whether or not you should move. You know, these are
like run of the mill, low stakes decisions we have
to make a Lafe Joel. Basically, Daryl is wanting to
help folks to win at whatever game in life. That
they're playing, and we're excited to talk about all of
that and more today. Darryl, thank you for joining How
to Money.
Speaker 3 (01:25):
Thank you so much for having me.
Speaker 1 (01:27):
Oh we're stoked for this conversation, Darryl. First question, though,
we ask everybody who comes on, what do you like
to suplore John? For Matt and I, it's craft beer.
I mean, we got a couple of other things in our
arsenal that we like to spend money on too, but
craft beer has been one of those mainstays. What is
it that you spend money on? Maybe egregiously, but you're
still hey, doing the smart thing, saving the investing for
your future too.
Speaker 3 (01:46):
I definitely have a lot of subscriptions, Like streaming subscriptions
is one of those where I'm like, do I really
need to be subscribed to all these different services? And
then I even have a Whoop subscription, which is like
tracking my sleep and tracking my workout. And I'm a
data junkie, so part of you know, spending money every
month to collect data on myself is definitely feeding into that.
(02:08):
But yeah, I question why I spend so much money.
I could be doing it by hand. I could just
be like paying attention more. I don't know if I
need really the Whoop, but yeah, I keep it.
Speaker 2 (02:18):
I didn't know that you had to. Yeah, is that right?
You have to set up for a year. I was
talking to a buddy and he was just like, well,
I did the Whoop thing, so I'm going to see
it to the end of the to the subscription. What
is like the timeframe there? Because Joel and I both
have garments and it's totally free, but I'm guessing that
there's additional data that you're getting with Whoop. Yeah.
Speaker 3 (02:33):
With Woop, I think it's like I think it's like
thirty dollars a month, and then they give you a
discount if you sign up for an entire year, and
then I think they give you a discount when you're
first signing up and buying the device. I had friends
who had them, and I got in with like their
little competitions, and yeah, I got roped in and now
I'm locked in. I've had it for years now.
Speaker 1 (02:52):
It's amazing how there's like a social media aspect of
fitness these days. Like I feel that with the garment,
like my friends have garments were I'll see like the
stuff that they're up to, and I just never thought,
I don't know, I guess I didn't suspect those going
to be the case. It is interesting, and then you're
kind of tied into this network effect of the whoop now,
which I don't know. Giving that up is feels like
(03:12):
more than just get relieving yourself of a monthly payment.
Speaker 3 (03:15):
Yeah, it's really easy for me to justify it too,
because it's for my health, Like I'm spending money on
my health. That's a good thing. But yeah, I don't
know when I think it's in terms of all the
subscriptions I have, that's the one that costs more than
the others and feels kind of the most frivolous.
Speaker 4 (03:31):
All right, I.
Speaker 2 (03:31):
Would have expected like the Netflix subscription or Apple Plus.
Now that severance is, Yeah.
Speaker 3 (03:37):
I'm not cutting those those are mandatory.
Speaker 2 (03:39):
Yeah, i'volous. Must have something else. Actually, on a personal
note that you're into, you're an avid board gamer. Yeah,
like it comes up a few times in your book,
So I guess another small thing here, do you have
any favorite board games? And maybe make the link between
the decision making process matrix, the gaming process and economics
kind of bridge that for us.
Speaker 3 (04:00):
Yes, I got into board games back in college and
graduate school, playing with a lot of economists all the time,
and we're very competitive with our board games because I
think that we think about the costs and benefits the
same way we think about a lot of things in life.
The games that I like the most, there's one called
Castles of Burgundy. If there are any Euro game fans
out there, you're kind of building your little, your little
(04:23):
fiefdom with tiles and you're playing against another person. I
like that game because I'm good at it. Any game
that I'm good at.
Speaker 1 (04:30):
That's try to like any game I win frequently come
in for that. I played Castles of Burgundy once, but
it's been a minute, and I just don't play as
many board games as I used to. But every year
when we take our annual How the Money family vacation,
we lond up a few board games we end. Lately,
we've been playing a lot of Acchoir. Have you ever
played that one?
Speaker 2 (04:46):
Yeah?
Speaker 3 (04:47):
I have that board game. It's actually in my stack
right behind me.
Speaker 4 (04:49):
It's a really good one. Nice. I love that she's
got a stack.
Speaker 2 (04:51):
Yeah, Like most economists have nerdy textbooks, and she's got
those two. But yeah, the predominant feature in the bookshelf
stack of games.
Speaker 4 (04:59):
It does.
Speaker 1 (05:00):
I like, I got to go to bed earlier than
ever before, and so late night board game sessions it's
very harder to come by, but I missed those days.
Speaker 4 (05:05):
They're so fun. Daryl.
Speaker 1 (05:08):
Let's talk about your book, and specifically a book that
had an influence on you before you started writing this
book was Freakonomics. It feels like, as someone who you
kind of write about this. At the beginning of your book,
you were an aspiring economist. Freakonomics pushed you further in
that direction, and maybe your family wasn't so thrilled about
that too.
Speaker 4 (05:26):
Is that right?
Speaker 3 (05:27):
Yes, Freakonomics came out twenty years ago, believe it or not,
and that was the same time that I was getting
ready to go to college. I had always been interested
in math and science, and I thought that's what I
was going to pursue. That's why I applied to MIT.
I was headed to MIT, but then on the way
to MIT, my dad hands me the book of Freakonomics
(05:47):
and just says, like, hey, this guy, you know, he
went to MIT, maybe you'd be interested in this. So
I read the book on the plane ride there and
immediately I was like, this is what I wanted to do.
I was, I felt like I was.
Speaker 2 (05:59):
I was always.
Speaker 3 (05:59):
Interested in the way that people behave, but it was
just really hard for me to wrap my head around
it without the math part, which is what I was
also interested in. But Economics really brings it together. It
applies this mathematical framework, this analytical framework, to the way
that people interact with one another, and all those interactions
make up the economy. And that book was just the
one that kind of broke it opened for me and
(06:21):
made me realize what economics is. It's not just about
the stock market or GDP, It's really about human behavior.
Speaker 2 (06:28):
Yeah. I like how you mentioned how economists are essentially
like profits and they explain human behavior and basically how
the world works, which I've never really thought about it
that way, where you're just kind of it almost allows
you to like peer into the future and make pretty accurate,
I guess predictions as to what might happen on that note. Well,
I'm not going to ask you to make a prediction,
I guess, but maybe just the current state of the
(06:49):
housing market. You're the chief economists over there at redfin
and this is a massive question. But what's going on
when it comes to housing just the current state of
things prices? Can you touch on that for a minute.
Speaker 3 (07:00):
The housing market has been distorted since at least the pandemic.
I mean, you can argue it goes even farther back
to the foreclosure crisis in the Great Recession, but I'll
start with the pandemic. During the pandemic, interest rates fell
to record lows, which made borrowing to buy a home
historically cheap, and anybody who could buy a home was
(07:21):
buying a home. People were buying multiple homes, people were
buying vacation homes, people were moving because of remote work,
and we had all us activity in the housing market.
But then by twenty twenty three, inflation was the problem,
not unemployment, and so the Federal Reserve had to raise
interest rates that sent mortgage rates high. They increased by
like the highest percentage historically, and home buying became unaffordable.
(07:45):
Like it was a very sharp turn. And now homeowners
don't want to sell because they were able to refinance
into record loan mortgage rates during the pandemic, so their
payments are still quite cheap, so they don't want to
give that up because if they got gave it up
and bought again, they would have to buy at these
really high ends. So nobody wants to sell. People don't
want to buy because interest rates are high, and it's
just more affordable to rent right now in most metro areas.
(08:08):
So we're just stuck in this place where there's very
few transactions happening. Home values are remaining high, though, because
it's both supply and demand that have pulled back. It's
not like during the Great Recession, where there was no
demand but there was still lots of supply and that
caused values to fall. Values are still propped up by
the fact that homeowners don't want to give up their homes.
So we're just kind of stuck right now, and it's
(08:29):
going to take interest rates falling or you know, new
construction really taking off in order for this to break free.
Speaker 1 (08:36):
So you say that we're kind of stuck, and I
think you're right. It does feel like just everything ground
to a halt in the housing market. But when it
comes to the and I think crisis is an overused term,
but maybe the affordability crisis in housing, Are there any
signs of relief? I'm going to look at a city
like Austin and you see pretty significant declines at least
in the amount of rent that can be asked year
(08:57):
over year. But then there are and that's due to
it seems like a cutting back of red tape. What
do you see moving forward when it comes to rent
and housing prices, and is that in a very city
of the city.
Speaker 3 (09:11):
Austin is a great example of a place that where
demand increase during the pandemic, and because building is allowed there,
it's just easier to build there than is in other
parts of the country. We saw an increase in new construction,
and that increase in supply made it possible for rents
to come back down after they had gone up in
other parts of the country, like in California, when demand
(09:32):
goes up, it just leads to higher prices because supply
can't react, and that's largely due to regulations like single
family zoning and the permitting processes that are there. So
I think the lesson from that is that you have
to make it easy to build because you know the
next time there's going to be an increase in demand,
either when rates fall or the economy is just doing
really well, it will inevitably lead to higher prices unless
(09:54):
we see an increase in supply reacting to it. So
I think a lot of states of like made progress there,
but there's still a lot of progress to be made.
Speaker 2 (10:02):
Yeah. Well, so, I mean, as you touched on supply,
I think about the wildfires out in California and even
Hurricane Helene damaged something like eighty I think around eighty
thousand homes kind of along its path of destruction. How
does something like that impact the supply of homes? Obviously
you got homes that are completely destroyed and so they're
not available, But even damaged homes, I feel like, at
(10:23):
least temporarily, it kind of takes them off the market.
Is that something that feels more localized or does that
have larger impacts on the supply of housing across the
country as well?
Speaker 3 (10:32):
It does have large impacts. We're already in a vulnerable
position because of how unaffordable housing is. So climate change
is inevitably going to make housing even less affordable because
the cost of maintenance is going to increase with changing
weather patterns. Like homes that were built for certain climates
(10:53):
and then the climate changes, they need to be retrofitted
and then it also makes insurance more expensive, and it
literally like pulls homes out of the supply of housing
if they're destroyed and then not be built. So all
of that just makes housing more expensive, and we're seeing
that in California how insurance premiums are going up. Insurance
premiums are also going up in Florida and in Texas.
(11:15):
But there are certain parts of the country where the
climate could potentially become more appealing and values will go
up as people decide to move to those places. So
it really is going to have an effect on the
entire country. There is no neighborhood that isn't going to
be impacted one way or the other by climate change,
and their housing markets are going to be impacted too.
Speaker 1 (11:34):
It's like if Minnesota becomes a little more balmby here,
it starts to look a little more appealing. Oh, the
Great Lakes. I've never been up there, but it seems
quite nice now we're not frozen over half the year.
Speaker 4 (11:44):
It might be interested.
Speaker 1 (11:45):
I'm curious too, Darrell. Something else that was proposed recently,
a Trump administration proposal was to use federal lands to
build more housing supply, And is that going to make
a dent in the housing issues that we have in
this country because obviously applying demand like we just don't
have enough supply. We're millions of units short, it seems.
But on the other side, is the supply coming where
(12:08):
it's most needed.
Speaker 3 (12:09):
Federal land tends to be in parts of the country
that don't have access to amenities like city amenities. They
might not even have access to roads to begin with.
So I think developing, yeah, that kind of land, it's
not the high value land. If it was high value,
it wouldn't be federal land. It would have already there
would have already been a push to develop it. So
I think that it's not really solving the real problem,
(12:31):
which is how expensive housing is. In the most productive
cities in the United States, like New York, Los Angeles,
San Francisco, there is some federal land in those areas.
It's like post offices and federal buildings, and I think
that the idea of densifying those types of buildings and
allowing there to be mixed use housing, mixed use development
(12:51):
with like a federal building and then housing on top
of it, I think is a really interesting idea that
we should just allow. I think the default should be
that we allow housing on more lots of land, especially
if it's near places that people want to live.
Speaker 2 (13:03):
Yeah, just by default say yes, and then if there's problems,
we'll figure it out. That seems much more appealing to
me than living in an Oppenheimer like desert town that
gets erected in Utah or something.
Speaker 4 (13:13):
Like that in New Mexico.
Speaker 2 (13:14):
But right, yeah, which is what I pictured, beautiful hours
in the middle of nowhere.
Speaker 1 (13:19):
But I like the idea of the post office being
on the bottom floor of like a high rise. Like
think about that. That sounds like maybe what you're suggesting, Darryl.
Speaker 2 (13:26):
Right, yes, yes, talk to us about the rule of
thumb for a housing budget. You talk about this in
chapter five of your new book. But has your advice
on that changed as we have seen cost rise faster
than we've seen wages go up.
Speaker 3 (13:41):
The rule of thumb is that you shouldn't spend more
than thirty percent of your pre tax income on housing.
But the reality is that the majority of renters are
spending more of that on their rent. So I think
that that was the rule of thumb, you know, fifteen
twenty years ago, and people were able to meet that,
but now a lot of people just it just feels
(14:02):
like so out of reach for them. So what I
advise people to do is to go through their spending
habits on a monthly basis, like pull it up your
credit card transactions or your bank statements, or use software
that's out there, and just look at how much you're
spending on each category. And then when you're thinking about
moving somewhere new, think about how all those categories could change,
because it's not just the housing payment. If you're moving
(14:23):
somewhere with public transit, you might not be spending money
on your car or on gas anymore. Or if you're
moving somewhere that's smaller, then maybe your energy bill is
not going to be as big compared to somewhere that's larger.
So I think every category deserves evaluation and taken in
and taken in because that thirty percent rule is really, just,
like I think, more something that academics use to understand
(14:45):
how many people are struggling. But at a personal level,
you just have to make do with what options are
available to you.
Speaker 1 (14:51):
Yeah, I realized I'm asking this question of someone who
is an economist at a real estate website. But I
think in this country, at least, home ownership like this
ride of passage for a lot of people, and the
majority of individual wealth is often tied to equity in
a home, which we don't think is a good thing,
but it's a reality. Have we just overly deified home
(15:11):
ownership in the US. Is that part of the problem.
We've made home ownership seem like it's a prerequisite to
live the American dream?
Speaker 3 (15:19):
Yes, And I think it like goes back to the
founding of our country how people with property were the
ones who are allowed to vote initially. It's it's just
seen as like a step into having wealth or being
in the middle class when you own property, and the
first piece of property that people own is typically their
own home. So yeah, I think that there's really, from
(15:39):
an economic standpoint, no reason to glorify housing. It's actually,
you know, unadvisable to put all of your money into
one undiversified asset. You can see that with climate risk.
So if we reimagine like how we want people to
build wealth and look at all the different ways to
invest besides home ownership, I think we'd be a better
(16:00):
position as an economy.
Speaker 4 (16:02):
Totally agree.
Speaker 2 (16:03):
When you buy a home, though, like you're oftentimes doing
it for personal reasons, not necessarily from like a wealth
building standpoint that although that is a positive proxy results. Yeah, yeah,
but I guess when you are looking at it as
a primary residence, Like one of the problems when it
comes to especially like when you're bidding on a house
is getting emotionally attached and you say to watch out
(16:24):
for that, which is it's easier than done. But do
you have any tips for avoiding like envisioning ourselves in
a home as you're going out there as your house shopping,
because that can lead to perhaps, yeah, maybe you overpaying
for that house. Yes.
Speaker 3 (16:39):
My My first piece of advice is to do a
lot of your thinking before you even start your home search,
setting your budget, talking to a mortgage lender to understand,
like if you what you qualify in terms of your loan,
going through whatever your must haves versus your nice to havebs,
looking at homes that are available for salor that recently sold,
an understanding if your budget makes sense given what is
(17:00):
that you want, and then start your home search with
an idea in mind of like this is how much
I'm going to pay and these are the home features
that are most important to me. When you find the
home that fits all that criteria and you're starting to
fall in love, I would definitely advise you to slow down, Like,
don't start imagining Thanksgiving dinners or happy family memories there
because it's not your home yet, and there are going
(17:22):
to be other people, yeah, making offers on this home,
and you could get in a situation where you end
up overbidding because you are already become attached to it.
And there's a lot of behavioral economics research about how
once you own something, you tend to overvalue it. So
just kind of stay attached. Yeah, it's not yours yet,
that's my biggest advice.
Speaker 2 (17:40):
Okay, yeah, I think so, like a true economist, remove
the emotion, remove those feelings, right, look at the numbers.
Speaker 1 (17:48):
One of the things you just mentioned in there too
was talking to a mortgage broker. And this is one
of those things that I feel like it's so underplayed,
is to talk to a few different lenders and get
quotes because of how much it can save you. Like,
the stakes are so high, so much higher than almost
anything else we buy, than really anything else we buy.
So let's say you go to a credit union to
(18:09):
get a loan for a car instead of getting it
at the dealership. Sure, save a couple percentage points on
the APR right at the rate of the loan, But
when it comes to your mortgage loan, just because of
the balance, the amount of money you're borrowing, it can
be significant. Is that something that people From everything I've read,
it seems like people don't do that enough.
Speaker 4 (18:28):
Do you agree?
Speaker 3 (18:29):
I think that everybody should shop around. I think it's
easier now than it used to be because there are
so many websites and there's so much comparative shopping you
can do online. But I do think that there are
people who just go straight to whatever their bank is
and ask them what they can borrow, and they think that,
you know, this is my bank. They've been good to
me before. Why wouldn't I not go to them for
my home loan, not realizing that the bank is giving
(18:51):
you a much higher rate than what maybe a different
lender would give you. So I definitely advise people to
shop around. It's easy to do online, get at least
three different opinions, and then the other thing to consider,
because there are some differences between lenders, is just how
responsive they are. If you like the software in terms
of uploading your documents, and you know they are. They
(19:13):
doing a good job explaining it to you what you
can afford. I think if they're hitting all those criteria,
then the next thing is just to focus on the
price that they're giving you guys.
Speaker 4 (19:23):
Yeah, the rate.
Speaker 2 (19:24):
You also write about being smart when you are selling
at home, and you mentioned renovating, how do you think
about the ROI and whether renovations that you're considering whether
they're going to pay off when it comes to a
higher sales price.
Speaker 3 (19:39):
Not all investments have an ROI, and I think it's
kind of unfortunate, but the things that tend to have
the ROI tend to be those really visual things where
if somebody is looking at the listing online or they're
walking through the home, that are just kind of a
turn off, like old paint, for example. It's really easy
to repaint your house, but can make it just look fresher, newer,
(20:00):
and more appealing. Those hidden things like say redoing the
electrical they're really costly and they might not pay off unfortunately.
So I think just talking to your agent can help
you evaluate what investments are going to be paid, are
going to have a payoff. Also understanding the market and
really competitive markets it you don't really need to do
(20:22):
that much specialty your home to get it sold. In
weaker markets, you do have to make sure that the
home is moving ready if you want to attract a buyer.
Speaker 1 (20:30):
I'm thinking putting in on your listing. At the very top,
we just put new insulation in. It's It's true that
it'll be super sexy, yeah, next home, but they're trying
to imagine themselves at the thanksgaming dinner table in that home,
just like we don't want to imagine ourselves in that situation.
You want as a guest, as a seller, other people
thinking that about your house. And so it's when you
look at kind of the annual studies that come out
(20:53):
about what renovations make the most, offer the most bang
for the buck. The thing and I've noticed in recent
years is that it's garage doors that tend to be
to offer the biggest bang, Like that people actually make
more than what they spend on the garage door. Is
that just because it's such a big piece of curb appeal.
Speaker 3 (21:11):
Yes, I think curb appeal matters a lot in real estate.
And yeah, those newer garage doors they have, like the
windows on them, they come in different colors. I think
that they they do just make the overall home look newer,
And I think new is what people tend to gravitate towards.
Speaker 2 (21:25):
Which is why Joel I just got done not too
long ago, why I painted my garage door. Yeah, looks
like a brand new, gradual, cheaper way to get the bang.
Speaker 4 (21:33):
Yeah.
Speaker 2 (21:33):
Although, oh yeah, we won't get into this there. But
they also sell like these little window these magnet kits
where it looks like there's windows in your garage, you
like slap on it, like the fake carriage handles on there.
I was just like, Babe, we're.
Speaker 4 (21:46):
Not going to do that.
Speaker 2 (21:47):
Come on, We're not here to create the false illusion.
But Drek, we've got more to get to. We're gonna
continue to discuss just the intersection of economics and everyday life.
Speaker 4 (21:57):
Will get to that more. Right after this, we're back
from the break.
Speaker 1 (22:07):
We're still talking with Daryl Fairweather talking about we just
got done talking about the housing market. There's so much
more to discuss, though, so much more that Daryl covers
in her new book that's really worth checking out. It's
called Hate the Game. And Daryl in this book, you
really you focus on the fact that that and you
mentioned this kind of at the very beginning of our conversation.
Do you feel like economics has something to say about
(22:28):
like everything we do or and does it have predictive
powers where if we were just a little more in
tune with economic realities that we would stand to gain
an edge.
Speaker 3 (22:40):
I think economics has a lot to do with anytime
there's a limited resource and there are people who want it,
that explains that economics can explain it. And you see
that in so many different settings. You obviously see it
and say investment, you see it in the labor market,
but you also see it in romantic interactions too, that
two people want something. Maybe it's different things and there's
(23:02):
a conflict that happens. But I don't think it applies
to like nearly everything. I do try to like stay
in my lane somewhat and not pipe up on things
I'm not an expert on. But economics it touches so
many things. It gives me a lot to talk about.
Speaker 4 (23:15):
It's funny.
Speaker 1 (23:16):
I'm reading a book by Thomas soul right now, Applied Economics,
and he talks about how economics applies to healthcare, but
then also it's immigration, and he gives just like not
only first order effects, but second and third order effects.
How do you think about the role that I think
sometimes people can think of an initial reality that might
happen if we change this one thing. It's like, oh,
(23:37):
it's going to do this and it's going to be
so good. But then there are oftentimes secondary and third
like just cascading reality of impacts of economic decisions. But
I don't know, as humans, we tend to really only
be able to visualize kind of the first set of
things of consequences.
Speaker 3 (23:52):
Yes, this is the law of unintended consequences. When it
comes to incentives and economics, you can bet that people
are going to respond to incentives. So if you change
the incentives, people's behaviors will change. If, for example, you
make a product illegal, it's not just that people are
no longer going to consume that product. You can expect
some of the consumption to go underground. So I think
(24:13):
just thinking through the way that people change their behavior
when you change a law, or change a policy, or
just change anything, can help you avoid that pitfall of
not thinking through the unintended consequences.
Speaker 2 (24:26):
Yeah, I like this higher level of thinking. Like on
that note one line that you write in your book,
the decisions you make in one game often impact your
ability to attain your objectives in other games. And that's
when you were talking about finding balance in life. Can
you talk about that, just like the trade offs of
let's say, balancing career, success and family, and how that
(24:46):
can have an impact on some of the other areas
of life, sometimes without intending to.
Speaker 4 (24:51):
Of course, Yeah, there's this.
Speaker 3 (24:52):
Trope with women, right having it all means having the family,
having the career, and doing all the things at the
same time. But the reality is that you have to
make trade offs. And I think one of the most
important things you can do in your life and career
is figuring out what is that you value most and
then being okay with making a trade off to get
what you really want. And I think, I mean, at
(25:15):
least in my life I have, I feel like struck
that balance with family and career, but I have had
to have strong boundaries in both because I'm not going
to be able to like be everything to everyone all
the time. But that's again it goes back to economics.
There are constraints, there are trade offs that you have
to make and you have to know what you value
to really optimize.
Speaker 2 (25:35):
Small personal follow up there, So you say that you
feel like that you've found that balance yourself, do you
ever doubt that, Like, like, when you're it sounds like
you know, you're incredibly successful. It sounds like you've got
nice family life as well. Do you ever look at
your life and you're like, wait a minute, it almost
seems like things are going too well.
Speaker 4 (25:52):
I guess I'm just curious.
Speaker 2 (25:53):
They're just a little peak at your personal life and
whether or not that's a doubt that maybe comes to mind.
Speaker 3 (25:58):
I think that I'm not immune to things that could
happen in the economy or just like the randomness of life.
So all those things are going well for me now,
Like I could definitely get like, you know, knocked off
my horse at any moment. I feel like that's kind
of the anxiety of being in the economy that a
lot of people go through, is like you never know
if it's enough, because you could always imagine some scenario
(26:19):
where it's not going to be enough. Here you wish
you didn't spend that money on you know, something today
because you wish you could have saved it for that
bad scenario in the future. But you can't live your
life just only planning for bad scenarios, because then you
end up missing out on all the good, all the
on all the luck and all the good things that
could happen to you. So I think that's just another
thing that requires balance and also being able to take
(26:42):
an l when you lose, just realizing that, like, sometimes
you're gonna lose, and as long as you're you know,
keep making choices that align with your values. In the end,
you'll get to the place that is optimal for you.
Speaker 1 (26:52):
Yeah, I think that's that's good advice. And also just
kind of keep tuning in because your desires and your
priorities shift and change too over time. Right, It's like
once you have a two or three kids or something
like that, like your family life becomes more important than
when you were single, and you could dedicate more time
to work. I'm curious on that topic. You characterize marriage
in your book as a financial strategy, which I think
(27:14):
is interesting. I don't I wonder how my wife would
react to that. Quite I need asked when I get
home it was a business decision, but you say that
it can produce happiness and intimacy, So you put that
part in there, but there's a trade off between those
two objectives. So how do you think about the mix
of love and the essential intertwined economic reality that tying
(27:35):
yourself to another individual for the rest of your days?
Like what that entails?
Speaker 3 (27:40):
Yeah, I mean, obviously marriage, there's a lot of purposes
to marriage, but I think the financial aspect shouldn't be downplayed.
I mean, you're teaming up with another person, combining your finances,
and from that point on, whatever decision you make, it's
going to impact the other person. So you have to
talk about these financial decisions or else you know, you
might end up like not not with the outcomes that
(28:04):
you want. I'll just put it, I guess I'll put
it that way. But one thing that's shown in economic
research is that when two people have negatively correlated incomes,
like say one person they both work in real estate,
but one person focuses on luxury and one person focuses
on foreclosures, there they have better economic stability and actually
a lower chance of divorce because they don't have the
(28:26):
same volatility and income that you know, two people who
work on luxury real estate might feel because when housing
markets doing well, the couple's fine. With the housing markets
doing bad, the couple's fine. And it's just interesting to
see that play out like across different different industries and
different careers that couples might have. I think it's something
(28:47):
to be aware of because you know, if you're signing
up for more financial hardship because of the kind of
careers that you and your partner chose, that is going
to be a strain on the marriage and on your life.
Speaker 1 (28:59):
So for how of money listeners out there in the
dating pool, what would you suggest to them? What sort
of conversations should they be having when they're kind of
getting to know somebody and they're saying, I don't know,
I think I might want to sign on the marriage
certificate with you and do life together. Are there certain
kind of conversations around economics and personal finance they should
be having ahead of time to make sure that's a
(29:20):
wise decision.
Speaker 3 (29:21):
I think the most important thing to establish is whose
career is prioritized when it's it's not necessarily that one
person's career is prioritized over the other, but at different
moments you're going to have to make decisions about you know,
who picks up the kids after school, or who is
going to go on a business trip versus who's going
to stay home with the kids, And it might be
(29:42):
like you trade off on a weekly basis, or you
trade off on like on the amount of years where
for a certain amount of time, one partner is dedicated
to kids and the other partners doing the career, but
then later it might switch. But I think just talking
through that part of it is super important and can
also help you plan for downturns in the economy, Like
you're going to prioritize your career now, but if ever
(30:04):
you lost your job, then that's when I would step
up or something like that. So just understanding like who
is the primary earner at any moment in time, or
not primary earner but primary career person at any moment
in time, I think can avoid a lot of hard
fights later on.
Speaker 2 (30:19):
Yeah, yeah, I mean what I hear you speaking to
and you write about this as well. It's just essentially
aligning your goals. But there are ways, I guess of
doing that as opposed to jumping straight to the negatively
correlated careers and incomes.
Speaker 4 (30:32):
I guess. I mean that's a part of dating.
Speaker 2 (30:34):
Right, likely you just talk about what you're looking forward
to in life, and then that's like a soft way
of aligning those goals. And if you hear somebody say
something that, oh wow, I've never thought about that and
nor do I ever want that, it's.
Speaker 1 (30:46):
Like I'm looking forward to traveling every week for the
rest of my life on and maybe for work trips.
Oh yeah, And you're like, wait, no, that's not good.
Speaker 4 (30:53):
It's just funny.
Speaker 2 (30:53):
I guess hearing in economic terms as opposed to kind
of how that plays out in real life. But Darryl
talk about career implications, like how should economics impact our
job and career decisions the work that we decide to do.
Speaker 3 (31:07):
Well understanding your strategy for earning more money within your career,
I think it's just important to like to go to
think about how you're going to advance your earnings. You
can advance your earnings by gaining skills. You could advance
your earnings by getting promotions or changing jobs. But I
think for people just starting out their career, their biggest
(31:28):
anxiety is just like I'm in a job. Like the
entry level jobs aren't create jobs, they're not as enjoyable
as those higher level jobs. Of figuring out how you're
going to get there is really important, and there's so
many there's so many different ways that economics can impact that.
I talk in the book about understanding the principal agent
model in terms of understanding what your boss might want
(31:49):
out of you as an employee. I talk about backwards
induction to understand how to get promoted, like understanding who
is in control of promotion processes. But also there's like
more macro stuff, like understanding how the unemployment rate in
different industries is going to impact your own likelihood of
going through about of unemployment, Like it's both the micro
(32:11):
level but also this macro level is in the backdrop
at all times.
Speaker 1 (32:15):
Yeah, I'm curious. Can you talk about that just a
little more? And what should we as individuals be paying
attention to so that we can realize what we can
push for and what's not possible. I guess in a
current economic climate, when you think, is it just like
the headline unemployment rate, is it we even look you
look back to COVID and the there was just some
(32:36):
employers were willing to offer so much money for job switchers.
That has declined significantly. What should we be paying at
attention to from a macroeconomic perspective to kind of know
are what our value might be worth in the market
we're currently in as an employee.
Speaker 3 (32:51):
Yeah, the kind of metrics I would pay attention to,
or how many job openings are in your career sector,
how many peopleeople are unemployed looking for work in that
career sector, because that can kind of tell you how
how much competition there is, how how many people are
going to be willing to take a lower income to
get the same job that you want. You generally want
(33:14):
to gravitate towards those jobs where there are lots of
openings and not that many people who have the skills
in them yet. Then you can be one of those
early people when it's still rare for you to have
those skills, and that's often when you can get the
most raises and get them like the best career trajectory.
You know everybody is going to be trying to do that,
figure out what the next big thing is, But oftentimes
you can kind of look at the data to give
(33:35):
you a hint. Healthcare is one where like it's good,
they're going to need to be more healthcare workers. Like
if I was advising somebody who didn't who who only
wanted job security and they were entering into college, I
would say, pick something in healthcare because you're definitely going
to be employed in the coming decades in.
Speaker 4 (33:52):
That aging population. That kind of thing.
Speaker 3 (33:54):
Yeah, aging population. The spending just keeps going up on it.
So yeah, and then it's a kind of job but
can't be replaced by robots at least not across the board,
because it's manual, it requires a human touch. There's bedside care.
I think that there will continue to be plenty of
healthcare jobs.
Speaker 2 (34:10):
And then for folks who are so let's say they
already have a career and you mentioned this, right, just
the ability to increase your earnings either by like let's say,
upping your skills, maybe opting for a new job, or
kind of angling for that promotion. How would you recommend
for someone to maybe decide between those two or even
all three of those? Right, But I guess I specifically
(34:31):
want to drill down on, like, Okay, I'm looking to
either get promoted internally here or when should someone know
that they should be looking just to a different company
outside of who they're currently with.
Speaker 3 (34:42):
The First thing to assess is how likely are you
to get promoted? Like are you already do you already
have everything you need to get promoted, and it's a
matter of pushing your promotion documents through and getting them approved,
or are there more skills that you need and more
evidence that you need to provide in order to get promoted.
If it's in the latter category, there's more that you
need to do. I think looking around at your peers
(35:04):
and looking at how they have gotten promoted. And then
if you're already at that stage where you have all
the skills, I think the stage to go to is
who is actually in charge of the promotion decision. Your
manager probably has some control of it, but your manager's
manager probably has to say and maybe even the executives
have a say.
Speaker 1 (35:21):
So.
Speaker 3 (35:21):
Making sure that people who are making these decisions know
who you are and know the value you bring is
going to be really important to getting a promotion approved.
Speaker 1 (35:30):
Do you feel like people like great jobs have become
more widely geographically available given work from home. It seems
like some of the some employers are calling back work
from home a little bit, and other employers are saying,
oh cool, well you lived in Silicon valley and you
made a ridiculously high salary, But if you're going to
move to the middle part of the country, we're going
to pay you less. Is there still an opportunity for
(35:50):
people to live in a lower cost area of living
and benefit from a higher paying job that might be
headquartered in a more expensive place to live.
Speaker 3 (35:59):
I think that's definitely a lot easier to find those
remote opportunities now than it was before the pandemic. But
there is starting to be a bit of a reversal
on the trend where more corporations are wanting their employees
in office. We've seen that at Amazon. I think Apple
and Facebook have also done this, and the federal government
has called people back into work too. So I think
(36:21):
that if you are trying to cast that y net,
I wouldn't rule out in office for you, because that
if you're still in that early part of your career,
it could be detrimental to completely rule out in office work.
But I think it is something that is worth aspiring
to if that's how you feel most comfortable working, it's
something that you value. I've set up a situation where
(36:42):
I can work remotely, but you know, earlier in my
career I didn't have the ability to do that. I'm
lucky that I have it now. But I think it
is something similar to your salary or similar to your
vacation time or your healthcare. It's one of these features
of your job that is going to impact your well being.
Speaker 4 (36:57):
Yeah, for sure.
Speaker 1 (36:58):
Or we've got more to get to, just a few
more questions. Is with Darryl Fairwell. Featherwa with Darryl Fairweather
about how economics impacts every area of our lives. We'll
get to that right after this.
Speaker 2 (37:16):
All right, we are back from the break with Darryl Fairweather,
her book Hate the Game Economic cheat Codes for Life,
Love and Work. And I will say they're not necessarily
cheat codes. Like what you're doing in the book is
you're essentially you're like laying out the rules of these
different games so that we can quite clearly identify how
to actually win in these games. So it's not like
I don't know, sometimes folks here cheat code no game Genie, Yeah, yeah,
(37:39):
game Genie is like totally cheating, like you're not playing
the game at all. You've like short not shortcut, like yeah,
like hot wired the game, as opposed to clearly focusing
on the pieces of data that are going to move
the needle of the most Daryl. But in the book
you discuss obviously these different major life changes like moving
to a new city, and and essentially it seems like
(38:01):
you're saying that folks on the fence are typically better
off getting off the fence making the change. Can you
explain why that is.
Speaker 3 (38:07):
Yeah, there's a bias in behavioral economics called the status
quo bias, which is that it's been well documented that
people tend to stick with whatever situation they're in. I
talked about this a little bit before. How when you
feel like you own something, you value it more. Well,
the same is kind of true for the neighborhood that
you live in. If you grew up in a certain neighborhood,
you live in a certain neighborhood, you might think it's
(38:29):
better than other neighborhoods out there, but you wouldn't really
know unless you make the leap of faith and make
a change. So I think if you're even if you're
even contemplating moving cities, it's definitely worth exploring. And if
you're on the fence, just go for it, because for
most people, they are subconsciously holding themselves back from better
(38:51):
opportunities because of that fear of the unknown and the
status quo bias.
Speaker 2 (38:55):
So not just moving, but would you say that applies
to I guess a lot of the diferent decisions in
our life, the fact that status quo or the endowment
effect that that is maybe weighing heavier on people's decision
making processes than to even realize.
Speaker 3 (39:07):
I think for the average person, yes, you know, I
know that there are people out there who maybe struggle
with impulsivity and they feel like this is the exact opposite.
They need to stop making so many changes. But I
think the average person is resistant to change and it's
holding them back from better opportunities.
Speaker 1 (39:26):
You also highlight in the book the concept of permanent income,
which is the assumption of future earnings, and you say
that that also impacts our money decisions how so well.
Speaker 3 (39:36):
The permanent income hypothesis is this idea that if you
knew how much income you're going to live over your life,
then you would be able to borrow against your future
income and smooth out your consumption. So instead of eating
ramen noodles as a poor college student, you would recognize
that in the future you're going to be making more money,
so why not you know, spend money on an actual
(39:58):
meal instead of like making things harder for yourself. The
part about the permanent income hypothesis is that I think
people are afraid of that worst case scenario where they
didn't end up, you know, getting the job after college
that led to higher earnings, and they wish they really
didn't spend or go into debt earlier on. But the
idea is that you know, on average, people do earn
(40:19):
more money over their lifetimes, and they should spend more
when they're young, they should save when they're older, and
then they have to spend down that retirement savings when
they're in their later years.
Speaker 1 (40:30):
You just don't know, though. It was only we knew
knew the future? Was it the white paper from Yale?
Was it James Troy? Maybe they wrote that about kind
of how how he was advocating for people to spend
more early on and be willing to take on more
debt because of this kind of permanent income hypothesis, saying
that like hey, no, no, no, you just smooth out the
ride a little bit in your living standard and it's
(40:52):
it's all going to be okay. But yeah, when you
factor in the realities of life that layoffs happen, or
you know, even something like a hike in interest rates happen,
and your credit card debt now is worse than it was,
or your home equity line of credit payment has gone up.
Like those are the kind of things that are harder
(41:13):
to predict. So there, I think there are second order
consequences to just assuming future income too, or assuming future races, right.
Speaker 3 (41:20):
Yeah, I think that the downsides can be quite severe,
especially for people who don't have good safety nets. If
you know, losing income would mean that you're out, you
can't pay your rent, and you have nowhere to go,
then like you have a different risk tolerance and somebody
who can rely on their parents or can move back home.
So I think for people who are worried about spending
(41:41):
a lot when they're young, those those fears can be founded.
And if it's having the psychological toll on you not
having enough in savings, then I think that in and
of itself is justified. Like if if you just feel
better having money in your savings account, then like, go
for it. You don't know, nobody should be telling you
to spend more.
Speaker 2 (41:57):
Well, that feeling in your gut like that in and
of itself should be a data point that you pay
attention to. It's not just about like these external factors.
It's just also and it's hard to quantify. But how
how do you feel about this asision?
Speaker 4 (42:09):
Yeah?
Speaker 2 (42:10):
Because if you constantly are at feel like you're at
odds with what your gut's telling you, then I don't
think that's necessarily any way to live either, Darrel. You
also admit, like you're talking about spending or saving up
for retirement, you talk about stock picking, and you basically
compare it to like a beauty like a beauty contest game.
Can you share the correlation here between the two.
Speaker 3 (42:29):
Yeah. So there was this old game that used to
appear in newspapers like kind of like just a fun thing,
like a lottery kind of game, where you'd write in
your answer and maybe win a prize. And the idea
was to pick the picture of the woman that everybody
else was going to select as the most beautiful. So
instead of picking the picture that you personally thought was
(42:50):
the most beautiful, you're trying to pick the one that
everybody else is going to pick. But everybody else is
also going through that same exercise of what else is
everybody going to pick? I want to align on that.
And it's very similar to the stock market because you're
not necessarily picking the stock that you like the best.
You're picking in the stock that you think everybody else
is going to like in the future, and it's going
to go up in value. What happens in the actual
(43:11):
beauty contest game is that you know people the best
answer is not like the one that kind of goes
through too many lines of logic. If you reduce the
there's a way to reduce the problem to like something
mathematical and basically economists have shown that ideally, you just
want to think about like two degrees of separation, like
what does my opponent think about me, and then just
(43:34):
end it there. You don't want to keep going on
and on forever, like well, if this happens, or if
that happens, or what are they think exactly? Sometimes overthinking
can be too much, and I think that's also just
a great reason to maybe not play the stock market
because it's just requires too much thinking and just kind
of play the averages and pick an index fund instead.
Speaker 1 (43:53):
With you on that, Darryl on that Wise notes, we'll
lend this conversation. Thank you so much for taking the
time to join us work in how to money listeners
find out more about you and find out more about
your new book.
Speaker 3 (44:03):
Well, you can buy my book in any bookstore or
on any of the online platforms, and you can find
me on all the social media. I'm at Fairweather PhD
on Instagram and that's my handle pretty much everywhere.
Speaker 2 (44:15):
Nice, we'll link to all of that, Darryl, Thanks so
much for making the time for us today. Thank you
all right, man, that was a good combo with old
Darryl Fairweather. Yeah, it was. And she's not old. She's
younger than us.
Speaker 1 (44:25):
Man, She's young, she's smarter, and I thought I thought
her book was really insightful.
Speaker 4 (44:30):
What was your big takeaway from this conversation.
Speaker 2 (44:32):
It said, the whole first segment or first section, we
talked about housing and when it comes to first time
home buyers and how it is that they should be
thinking about buying a home. She put the two parts
of home buying in the right order, which is that
what needs to happen first is you need to be
thinking about it a whole lot before you get out there,
before you go shopping. Then you can start looking. But
(44:53):
the problem is most people start because of the ease
that the apps make it. Unfortunately, and just like the
wander lust that takes place with just oh, let's go
let's see what houses are for sales browse first. Yeah,
and I think there is a lot less of that
going on than obviously there was over the past four
years during the pandemic, but there does seem to be
this sort of holdover, this kind of carryover effect of
that where folks are looking, they're falling in love with
(45:15):
a property with a house before they even know what
it is that they can afford. They haven't looked at rates,
they haven't decided how long that they're going to actually
stay in that house.
Speaker 4 (45:24):
I don't know what the average price per square foot
is for a house in an oh No.
Speaker 2 (45:27):
And so she is trying to deemotionalize the conversation from
square one. Let's get analytical about it and then let's
get out there and start looking. And I think that
that can be just a helpful matrix and decision making
process when it comes to especially for some home buyers
who are getting out there for the first time looking
at housing.
Speaker 4 (45:44):
Yeah. Yeah, that was my big takeaway how about you.
Speaker 1 (45:46):
Okay, so that was potentially gonna be mine, so oh sorry,
ill here. And I like when she was talking about
marriage and kind of the the economic reality of marriage
and how you have to kind of talk about the
things planned for those things ahead of time, and that
is something as someone who's very interested in personal finance
and saw personal finance as an issue in my parents' marriage,
that was something I was a little more proactive about,
(46:08):
largely just because I'd seen the way I can bite
you in the butt if you're not. And also, let's
be honest, even if your plans, you can't always. Sometimes
things that are worse than your plans come to pass
and you can't necessarily prevent that. But I was just
thinking too about the prioritization of careers. I think that's
a really especially in today's environment, a lot of two
(46:30):
income households. You have to talk about that with your partner. Hey,
for right now, like my job's on the front burner,
yours is on the back. You're dealing with more house duties.
And right now Emily and I are in this position
of flip flopping where her career is kind of taking
front and center role in our family. And that's a
good thing. And I'm glad we've been able to have
this conversation. And it's not that I'm bowing out of
(46:51):
how to money or I'm completely uninterested in doing this
podcast anymore, but it's just I love that I get
to be in a little bit more of a hands
on supportive role at the house too, and so that
that will be something that I think ebbs and flows
for a lot of couples over their career lifetime, in
their marriage lifetime. Yeah, but it's something that having I
think those conversations proactively and saying, hey, what whose era
(47:13):
is this right now? And then when does my era
kick in? Where I get to kind of put the
pedal to the metal. I think I can prevent a
lot of arguments or hard feelings.
Speaker 2 (47:21):
I love it, dude. Yeah, I feel like y'all have
demonstrated that well. The beer that you and I enjoyed
during this episode was an argyle. This is the Raspberry
Key Lime Sour by Contrast Artists and Ales. What your thoughts, buddy,
So still get a little more in here on a port.
Speaker 1 (47:36):
I think this is my favorite beer I've had from
Contrast to this point. Oh yeah, I really like this one.
It's because it's raspberry.
Speaker 2 (47:42):
It's because it's raspberry. So I pick this one's up specifically.
And I saw that I had raspberry, I was just like,
there's no way that Joel's not gonna enjoy it.
Speaker 1 (47:50):
I mean, I love love raspberry beers and raspberry key lime.
I gotta say it's my jam, Like I dig this
so I like the combo of flavors in this one,
and it's it's pretty tart, not overly tart, but very
very fruity.
Speaker 4 (48:05):
I dug it.
Speaker 2 (48:05):
It's got the I think more beers need to have
lime in them. Lime, I think is a highly underrated citrus. Lately,
I've been putting more lime in my cocktails. You know.
Speaker 4 (48:15):
The that beach Fire cocktail that.
Speaker 2 (48:16):
I created started out as made his own cocktail people.
Started out as a whiskey sour, but which is typically
you make that with a lemon, and I'm like, I
don't like the lemon sour though, and that you start tweaking,
and I'm like, oh, wait a minute, what if I
switch it to lime? All of a sudden, I love
it so much more. Make some other changes, as some
smoky scotch and boom. You know, you get yourself a
own signature cocktail. Yeah, but no that the raspberry in
(48:40):
this actually kind of remind me of Cantitione. And I
know that you're gonna cry. Here's the that this is
not something that should ever be said. But something about
that funky raspberry, man, it makes me think of those
some of the greatest beers in the world. I'm not
going to say it's I'm not your friend anymore. You
can't compare any beer to Canti because it's its own.
I guess I think of that anytime I have a
(49:00):
raspberry sour because of the fact that so many of
the beers that you've shared with me that were either
Trefontaine or Katie Yone, they were raspberry.
Speaker 4 (49:09):
That was the fruit, raspberry, cherry.
Speaker 1 (49:11):
Gosh, any fruited sours that those guys make, they're literally
the best beers in the world.
Speaker 4 (49:15):
Yeah, I mean quite literally.
Speaker 1 (49:17):
I throw down the collin to the American Brewery to
do better than those guys do.
Speaker 2 (49:20):
But this is great, a total summertime sour kind of
style beer that's super easy to drink.
Speaker 4 (49:25):
Most stuff really delicious. Right.
Speaker 1 (49:26):
We'll put links to Daryl's book and a few of
the other resources we mentioned in this conversation up on
our website at how tomoney dot com. You can find
them in the show notes there, along with some other
helpful resources to give you advice and encouragement in your
money journey. They all live there all the time on our.
Speaker 2 (49:42):
Website, you know what. So until next time, buddy, best
friends out, Best Friends Out.
Welcome to How to Money. I'm Joel, I'm Matt, and
today we're talking economic cheat codes for everyday life with
Darryl Fairweather.
Speaker 2 (00:26):
Yeah, we are joined today by Darryl Fairweather, who is
the chief economist over at Redfinn. Everybody knows about Redfinn.
Before that, she was the senior economist at Amazon. And
before that she was a researcher at the Federal Reserve
Bank of Boston, and she worked with Freakonomics author Steven
Levitt stepping back in time there. But now she has
(00:47):
a new book that just came out, that actually came
out last week, Hate the Game Economic Cheat Codes for Life,
Love and Work, and Man. This book is all about
helping folks to use game theory and behavioral science to
lay out all the options as we approach these inevitable
forks in the road in the road of life, like
getting married and having kids or not doing those things,
(01:08):
going for a promotion or looking for a new job,
whether or not you should move. You know, these are
like run of the mill, low stakes decisions we have
to make a Lafe Joel. Basically, Daryl is wanting to
help folks to win at whatever game in life. That
they're playing, and we're excited to talk about all of
that and more today. Darryl, thank you for joining How
to Money.
Speaker 3 (01:25):
Thank you so much for having me.
Speaker 1 (01:27):
Oh we're stoked for this conversation, Darryl. First question, though,
we ask everybody who comes on, what do you like
to suplore John? For Matt and I, it's craft beer.
I mean, we got a couple of other things in our
arsenal that we like to spend money on too, but
craft beer has been one of those mainstays. What is
it that you spend money on? Maybe egregiously, but you're
still hey, doing the smart thing, saving the investing for
your future too.
Speaker 3 (01:46):
I definitely have a lot of subscriptions, Like streaming subscriptions
is one of those where I'm like, do I really
need to be subscribed to all these different services? And
then I even have a Whoop subscription, which is like
tracking my sleep and tracking my workout. And I'm a
data junkie, so part of you know, spending money every
month to collect data on myself is definitely feeding into that.
(02:08):
But yeah, I question why I spend so much money.
I could be doing it by hand. I could just
be like paying attention more. I don't know if I
need really the Whoop, but yeah, I keep it.
Speaker 2 (02:18):
I didn't know that you had to. Yeah, is that right?
You have to set up for a year. I was
talking to a buddy and he was just like, well,
I did the Whoop thing, so I'm going to see
it to the end of the to the subscription. What
is like the timeframe there? Because Joel and I both
have garments and it's totally free, but I'm guessing that
there's additional data that you're getting with Whoop. Yeah.
Speaker 3 (02:33):
With Woop, I think it's like I think it's like
thirty dollars a month, and then they give you a
discount if you sign up for an entire year, and
then I think they give you a discount when you're
first signing up and buying the device. I had friends
who had them, and I got in with like their
little competitions, and yeah, I got roped in and now
I'm locked in. I've had it for years now.
Speaker 1 (02:52):
It's amazing how there's like a social media aspect of
fitness these days. Like I feel that with the garment,
like my friends have garments were I'll see like the
stuff that they're up to, and I just never thought,
I don't know, I guess I didn't suspect those going
to be the case. It is interesting, and then you're
kind of tied into this network effect of the whoop now,
which I don't know. Giving that up is feels like
(03:12):
more than just get relieving yourself of a monthly payment.
Speaker 3 (03:15):
Yeah, it's really easy for me to justify it too,
because it's for my health, Like I'm spending money on
my health. That's a good thing. But yeah, I don't
know when I think it's in terms of all the
subscriptions I have, that's the one that costs more than
the others and feels kind of the most frivolous.
Speaker 4 (03:31):
All right, I.
Speaker 2 (03:31):
Would have expected like the Netflix subscription or Apple Plus.
Now that severance is, Yeah.
Speaker 3 (03:37):
I'm not cutting those those are mandatory.
Speaker 2 (03:39):
Yeah, i'volous. Must have something else. Actually, on a personal
note that you're into, you're an avid board gamer. Yeah,
like it comes up a few times in your book,
So I guess another small thing here, do you have
any favorite board games? And maybe make the link between
the decision making process matrix, the gaming process and economics
kind of bridge that for us.
Speaker 3 (04:00):
Yes, I got into board games back in college and
graduate school, playing with a lot of economists all the time,
and we're very competitive with our board games because I
think that we think about the costs and benefits the
same way we think about a lot of things in life.
The games that I like the most, there's one called
Castles of Burgundy. If there are any Euro game fans
out there, you're kind of building your little, your little
(04:23):
fiefdom with tiles and you're playing against another person. I
like that game because I'm good at it. Any game
that I'm good at.
Speaker 1 (04:30):
That's try to like any game I win frequently come
in for that. I played Castles of Burgundy once, but
it's been a minute, and I just don't play as
many board games as I used to. But every year
when we take our annual How the Money family vacation,
we lond up a few board games we end. Lately,
we've been playing a lot of Acchoir. Have you ever
played that one?
Speaker 2 (04:46):
Yeah?
Speaker 3 (04:47):
I have that board game. It's actually in my stack
right behind me.
Speaker 4 (04:49):
It's a really good one. Nice. I love that she's
got a stack.
Speaker 2 (04:51):
Yeah, Like most economists have nerdy textbooks, and she's got
those two. But yeah, the predominant feature in the bookshelf
stack of games.
Speaker 4 (04:59):
It does.
Speaker 1 (05:00):
I like, I got to go to bed earlier than
ever before, and so late night board game sessions it's
very harder to come by, but I missed those days.
Speaker 4 (05:05):
They're so fun. Daryl.
Speaker 1 (05:08):
Let's talk about your book, and specifically a book that
had an influence on you before you started writing this
book was Freakonomics. It feels like, as someone who you
kind of write about this. At the beginning of your book,
you were an aspiring economist. Freakonomics pushed you further in
that direction, and maybe your family wasn't so thrilled about
that too.
Speaker 4 (05:26):
Is that right?
Speaker 3 (05:27):
Yes, Freakonomics came out twenty years ago, believe it or not,
and that was the same time that I was getting
ready to go to college. I had always been interested
in math and science, and I thought that's what I
was going to pursue. That's why I applied to MIT.
I was headed to MIT, but then on the way
to MIT, my dad hands me the book of Freakonomics
(05:47):
and just says, like, hey, this guy, you know, he
went to MIT, maybe you'd be interested in this. So
I read the book on the plane ride there and
immediately I was like, this is what I wanted to do.
I was, I felt like I was.
Speaker 2 (05:59):
I was always.
Speaker 3 (05:59):
Interested in the way that people behave, but it was
just really hard for me to wrap my head around
it without the math part, which is what I was
also interested in. But Economics really brings it together. It
applies this mathematical framework, this analytical framework, to the way
that people interact with one another, and all those interactions
make up the economy. And that book was just the
one that kind of broke it opened for me and
(06:21):
made me realize what economics is. It's not just about
the stock market or GDP, It's really about human behavior.
Speaker 2 (06:28):
Yeah. I like how you mentioned how economists are essentially
like profits and they explain human behavior and basically how
the world works, which I've never really thought about it
that way, where you're just kind of it almost allows
you to like peer into the future and make pretty accurate,
I guess predictions as to what might happen on that note. Well,
I'm not going to ask you to make a prediction,
I guess, but maybe just the current state of the
(06:49):
housing market. You're the chief economists over there at redfin
and this is a massive question. But what's going on
when it comes to housing just the current state of
things prices? Can you touch on that for a minute.
Speaker 3 (07:00):
The housing market has been distorted since at least the pandemic.
I mean, you can argue it goes even farther back
to the foreclosure crisis in the Great Recession, but I'll
start with the pandemic. During the pandemic, interest rates fell
to record lows, which made borrowing to buy a home
historically cheap, and anybody who could buy a home was
(07:21):
buying a home. People were buying multiple homes, people were
buying vacation homes, people were moving because of remote work,
and we had all us activity in the housing market.
But then by twenty twenty three, inflation was the problem,
not unemployment, and so the Federal Reserve had to raise
interest rates that sent mortgage rates high. They increased by
like the highest percentage historically, and home buying became unaffordable.
(07:45):
Like it was a very sharp turn. And now homeowners
don't want to sell because they were able to refinance
into record loan mortgage rates during the pandemic, so their
payments are still quite cheap, so they don't want to
give that up because if they got gave it up
and bought again, they would have to buy at these
really high ends. So nobody wants to sell. People don't
want to buy because interest rates are high, and it's
just more affordable to rent right now in most metro areas.
(08:08):
So we're just stuck in this place where there's very
few transactions happening. Home values are remaining high, though, because
it's both supply and demand that have pulled back. It's
not like during the Great Recession, where there was no
demand but there was still lots of supply and that
caused values to fall. Values are still propped up by
the fact that homeowners don't want to give up their homes.
So we're just kind of stuck right now, and it's
(08:29):
going to take interest rates falling or you know, new
construction really taking off in order for this to break free.
Speaker 1 (08:36):
So you say that we're kind of stuck, and I
think you're right. It does feel like just everything ground
to a halt in the housing market. But when it
comes to the and I think crisis is an overused term,
but maybe the affordability crisis in housing, Are there any
signs of relief? I'm going to look at a city
like Austin and you see pretty significant declines at least
in the amount of rent that can be asked year
(08:57):
over year. But then there are and that's due to
it seems like a cutting back of red tape. What
do you see moving forward when it comes to rent
and housing prices, and is that in a very city
of the city.
Speaker 3 (09:11):
Austin is a great example of a place that where
demand increase during the pandemic, and because building is allowed there,
it's just easier to build there than is in other
parts of the country. We saw an increase in new construction,
and that increase in supply made it possible for rents
to come back down after they had gone up in
other parts of the country, like in California, when demand
(09:32):
goes up, it just leads to higher prices because supply
can't react, and that's largely due to regulations like single
family zoning and the permitting processes that are there. So
I think the lesson from that is that you have
to make it easy to build because you know the
next time there's going to be an increase in demand,
either when rates fall or the economy is just doing
really well, it will inevitably lead to higher prices unless
(09:54):
we see an increase in supply reacting to it. So
I think a lot of states of like made progress there,
but there's still a lot of progress to be made.
Speaker 2 (10:02):
Yeah. Well, so, I mean, as you touched on supply,
I think about the wildfires out in California and even
Hurricane Helene damaged something like eighty I think around eighty
thousand homes kind of along its path of destruction. How
does something like that impact the supply of homes? Obviously
you got homes that are completely destroyed and so they're
not available, But even damaged homes, I feel like, at
(10:23):
least temporarily, it kind of takes them off the market.
Is that something that feels more localized or does that
have larger impacts on the supply of housing across the
country as well?
Speaker 3 (10:32):
It does have large impacts. We're already in a vulnerable
position because of how unaffordable housing is. So climate change
is inevitably going to make housing even less affordable because
the cost of maintenance is going to increase with changing
weather patterns. Like homes that were built for certain climates
(10:53):
and then the climate changes, they need to be retrofitted
and then it also makes insurance more expensive, and it
literally like pulls homes out of the supply of housing
if they're destroyed and then not be built. So all
of that just makes housing more expensive, and we're seeing
that in California how insurance premiums are going up. Insurance
premiums are also going up in Florida and in Texas.
(11:15):
But there are certain parts of the country where the
climate could potentially become more appealing and values will go
up as people decide to move to those places. So
it really is going to have an effect on the
entire country. There is no neighborhood that isn't going to
be impacted one way or the other by climate change,
and their housing markets are going to be impacted too.
Speaker 1 (11:34):
It's like if Minnesota becomes a little more balmby here,
it starts to look a little more appealing. Oh, the
Great Lakes. I've never been up there, but it seems
quite nice now we're not frozen over half the year.
Speaker 4 (11:44):
It might be interested.
Speaker 1 (11:45):
I'm curious too, Darrell. Something else that was proposed recently,
a Trump administration proposal was to use federal lands to
build more housing supply, And is that going to make
a dent in the housing issues that we have in
this country because obviously applying demand like we just don't
have enough supply. We're millions of units short, it seems.
But on the other side, is the supply coming where
(12:08):
it's most needed.
Speaker 3 (12:09):
Federal land tends to be in parts of the country
that don't have access to amenities like city amenities. They
might not even have access to roads to begin with.
So I think developing, yeah, that kind of land, it's
not the high value land. If it was high value,
it wouldn't be federal land. It would have already there
would have already been a push to develop it. So
I think that it's not really solving the real problem,
(12:31):
which is how expensive housing is. In the most productive
cities in the United States, like New York, Los Angeles,
San Francisco, there is some federal land in those areas.
It's like post offices and federal buildings, and I think
that the idea of densifying those types of buildings and
allowing there to be mixed use housing, mixed use development
(12:51):
with like a federal building and then housing on top
of it, I think is a really interesting idea that
we should just allow. I think the default should be
that we allow housing on more lots of land, especially
if it's near places that people want to live.
Speaker 2 (13:03):
Yeah, just by default say yes, and then if there's problems,
we'll figure it out. That seems much more appealing to
me than living in an Oppenheimer like desert town that
gets erected in Utah or something.
Speaker 4 (13:13):
Like that in New Mexico.
Speaker 2 (13:14):
But right, yeah, which is what I pictured, beautiful hours
in the middle of nowhere.
Speaker 1 (13:19):
But I like the idea of the post office being
on the bottom floor of like a high rise. Like
think about that. That sounds like maybe what you're suggesting, Darryl.
Speaker 2 (13:26):
Right, yes, yes, talk to us about the rule of
thumb for a housing budget. You talk about this in
chapter five of your new book. But has your advice
on that changed as we have seen cost rise faster
than we've seen wages go up.
Speaker 3 (13:41):
The rule of thumb is that you shouldn't spend more
than thirty percent of your pre tax income on housing.
But the reality is that the majority of renters are
spending more of that on their rent. So I think
that that was the rule of thumb, you know, fifteen
twenty years ago, and people were able to meet that,
but now a lot of people just it just feels
(14:02):
like so out of reach for them. So what I
advise people to do is to go through their spending
habits on a monthly basis, like pull it up your
credit card transactions or your bank statements, or use software
that's out there, and just look at how much you're
spending on each category. And then when you're thinking about
moving somewhere new, think about how all those categories could change,
because it's not just the housing payment. If you're moving
(14:23):
somewhere with public transit, you might not be spending money
on your car or on gas anymore. Or if you're
moving somewhere that's smaller, then maybe your energy bill is
not going to be as big compared to somewhere that's larger.
So I think every category deserves evaluation and taken in
and taken in because that thirty percent rule is really, just,
like I think, more something that academics use to understand
(14:45):
how many people are struggling. But at a personal level,
you just have to make do with what options are
available to you.
Speaker 1 (14:51):
Yeah, I realized I'm asking this question of someone who
is an economist at a real estate website. But I
think in this country, at least, home ownership like this
ride of passage for a lot of people, and the
majority of individual wealth is often tied to equity in
a home, which we don't think is a good thing,
but it's a reality. Have we just overly deified home
(15:11):
ownership in the US. Is that part of the problem.
We've made home ownership seem like it's a prerequisite to
live the American dream?
Speaker 3 (15:19):
Yes, And I think it like goes back to the
founding of our country how people with property were the
ones who are allowed to vote initially. It's it's just
seen as like a step into having wealth or being
in the middle class when you own property, and the
first piece of property that people own is typically their
own home. So yeah, I think that there's really, from
(15:39):
an economic standpoint, no reason to glorify housing. It's actually,
you know, unadvisable to put all of your money into
one undiversified asset. You can see that with climate risk.
So if we reimagine like how we want people to
build wealth and look at all the different ways to
invest besides home ownership, I think we'd be a better
(16:00):
position as an economy.
Speaker 4 (16:02):
Totally agree.
Speaker 2 (16:03):
When you buy a home, though, like you're oftentimes doing
it for personal reasons, not necessarily from like a wealth
building standpoint that although that is a positive proxy results. Yeah, yeah,
but I guess when you are looking at it as
a primary residence, Like one of the problems when it
comes to especially like when you're bidding on a house
is getting emotionally attached and you say to watch out
(16:24):
for that, which is it's easier than done. But do
you have any tips for avoiding like envisioning ourselves in
a home as you're going out there as your house shopping,
because that can lead to perhaps, yeah, maybe you overpaying
for that house. Yes.
Speaker 3 (16:39):
My My first piece of advice is to do a
lot of your thinking before you even start your home search,
setting your budget, talking to a mortgage lender to understand,
like if you what you qualify in terms of your loan,
going through whatever your must haves versus your nice to havebs,
looking at homes that are available for salor that recently sold,
an understanding if your budget makes sense given what is
(17:00):
that you want, and then start your home search with
an idea in mind of like this is how much
I'm going to pay and these are the home features
that are most important to me. When you find the
home that fits all that criteria and you're starting to
fall in love, I would definitely advise you to slow down, Like,
don't start imagining Thanksgiving dinners or happy family memories there
because it's not your home yet, and there are going
(17:22):
to be other people, yeah, making offers on this home,
and you could get in a situation where you end
up overbidding because you are already become attached to it.
And there's a lot of behavioral economics research about how
once you own something, you tend to overvalue it. So
just kind of stay attached. Yeah, it's not yours yet,
that's my biggest advice.
Speaker 2 (17:40):
Okay, yeah, I think so, like a true economist, remove
the emotion, remove those feelings, right, look at the numbers.
Speaker 1 (17:48):
One of the things you just mentioned in there too
was talking to a mortgage broker. And this is one
of those things that I feel like it's so underplayed,
is to talk to a few different lenders and get
quotes because of how much it can save you. Like,
the stakes are so high, so much higher than almost
anything else we buy, than really anything else we buy.
So let's say you go to a credit union to
(18:09):
get a loan for a car instead of getting it
at the dealership. Sure, save a couple percentage points on
the APR right at the rate of the loan, But
when it comes to your mortgage loan, just because of
the balance, the amount of money you're borrowing, it can
be significant. Is that something that people From everything I've read,
it seems like people don't do that enough.
Speaker 4 (18:28):
Do you agree?
Speaker 3 (18:29):
I think that everybody should shop around. I think it's
easier now than it used to be because there are
so many websites and there's so much comparative shopping you
can do online. But I do think that there are
people who just go straight to whatever their bank is
and ask them what they can borrow, and they think that,
you know, this is my bank. They've been good to
me before. Why wouldn't I not go to them for
my home loan, not realizing that the bank is giving
(18:51):
you a much higher rate than what maybe a different
lender would give you. So I definitely advise people to
shop around. It's easy to do online, get at least
three different opinions, and then the other thing to consider,
because there are some differences between lenders, is just how
responsive they are. If you like the software in terms
of uploading your documents, and you know they are. They
(19:13):
doing a good job explaining it to you what you
can afford. I think if they're hitting all those criteria,
then the next thing is just to focus on the
price that they're giving you guys.
Speaker 4 (19:23):
Yeah, the rate.
Speaker 2 (19:24):
You also write about being smart when you are selling
at home, and you mentioned renovating, how do you think
about the ROI and whether renovations that you're considering whether
they're going to pay off when it comes to a
higher sales price.
Speaker 3 (19:39):
Not all investments have an ROI, and I think it's
kind of unfortunate, but the things that tend to have
the ROI tend to be those really visual things where
if somebody is looking at the listing online or they're
walking through the home, that are just kind of a
turn off, like old paint, for example. It's really easy
to repaint your house, but can make it just look fresher, newer,
(20:00):
and more appealing. Those hidden things like say redoing the
electrical they're really costly and they might not pay off unfortunately.
So I think just talking to your agent can help
you evaluate what investments are going to be paid, are
going to have a payoff. Also understanding the market and
really competitive markets it you don't really need to do
(20:22):
that much specialty your home to get it sold. In
weaker markets, you do have to make sure that the
home is moving ready if you want to attract a buyer.
Speaker 1 (20:30):
I'm thinking putting in on your listing. At the very top,
we just put new insulation in. It's It's true that
it'll be super sexy, yeah, next home, but they're trying
to imagine themselves at the thanksgaming dinner table in that home,
just like we don't want to imagine ourselves in that situation.
You want as a guest, as a seller, other people
thinking that about your house. And so it's when you
look at kind of the annual studies that come out
(20:53):
about what renovations make the most, offer the most bang
for the buck. The thing and I've noticed in recent
years is that it's garage doors that tend to be
to offer the biggest bang, Like that people actually make
more than what they spend on the garage door. Is
that just because it's such a big piece of curb appeal.
Speaker 3 (21:11):
Yes, I think curb appeal matters a lot in real estate.
And yeah, those newer garage doors they have, like the
windows on them, they come in different colors. I think
that they they do just make the overall home look newer,
And I think new is what people tend to gravitate towards.
Speaker 2 (21:25):
Which is why Joel I just got done not too
long ago, why I painted my garage door. Yeah, looks
like a brand new, gradual, cheaper way to get the bang.
Speaker 4 (21:33):
Yeah.
Speaker 2 (21:33):
Although, oh yeah, we won't get into this there. But
they also sell like these little window these magnet kits
where it looks like there's windows in your garage, you
like slap on it, like the fake carriage handles on there.
I was just like, Babe, we're.
Speaker 4 (21:46):
Not going to do that.
Speaker 2 (21:47):
Come on, We're not here to create the false illusion.
But Drek, we've got more to get to. We're gonna
continue to discuss just the intersection of economics and everyday life.
Speaker 4 (21:57):
Will get to that more. Right after this, we're back
from the break.
Speaker 1 (22:07):
We're still talking with Daryl Fairweather talking about we just
got done talking about the housing market. There's so much
more to discuss, though, so much more that Daryl covers
in her new book that's really worth checking out. It's
called Hate the Game. And Daryl in this book, you
really you focus on the fact that that and you
mentioned this kind of at the very beginning of our conversation.
Do you feel like economics has something to say about
(22:28):
like everything we do or and does it have predictive
powers where if we were just a little more in
tune with economic realities that we would stand to gain
an edge.
Speaker 3 (22:40):
I think economics has a lot to do with anytime
there's a limited resource and there are people who want it,
that explains that economics can explain it. And you see
that in so many different settings. You obviously see it
and say investment, you see it in the labor market,
but you also see it in romantic interactions too, that
two people want something. Maybe it's different things and there's
(23:02):
a conflict that happens. But I don't think it applies
to like nearly everything. I do try to like stay
in my lane somewhat and not pipe up on things
I'm not an expert on. But economics it touches so
many things. It gives me a lot to talk about.
Speaker 4 (23:15):
It's funny.
Speaker 1 (23:16):
I'm reading a book by Thomas soul right now, Applied Economics,
and he talks about how economics applies to healthcare, but
then also it's immigration, and he gives just like not
only first order effects, but second and third order effects.
How do you think about the role that I think
sometimes people can think of an initial reality that might
happen if we change this one thing. It's like, oh,
(23:37):
it's going to do this and it's going to be
so good. But then there are oftentimes secondary and third
like just cascading reality of impacts of economic decisions. But
I don't know, as humans, we tend to really only
be able to visualize kind of the first set of
things of consequences.
Speaker 3 (23:52):
Yes, this is the law of unintended consequences. When it
comes to incentives and economics, you can bet that people
are going to respond to incentives. So if you change
the incentives, people's behaviors will change. If, for example, you
make a product illegal, it's not just that people are
no longer going to consume that product. You can expect
some of the consumption to go underground. So I think
(24:13):
just thinking through the way that people change their behavior
when you change a law, or change a policy, or
just change anything, can help you avoid that pitfall of
not thinking through the unintended consequences.
Speaker 2 (24:26):
Yeah, I like this higher level of thinking. Like on
that note one line that you write in your book,
the decisions you make in one game often impact your
ability to attain your objectives in other games. And that's
when you were talking about finding balance in life. Can
you talk about that, just like the trade offs of
let's say, balancing career, success and family, and how that
(24:46):
can have an impact on some of the other areas
of life, sometimes without intending to.
Speaker 4 (24:51):
Of course, Yeah, there's this.
Speaker 3 (24:52):
Trope with women, right having it all means having the family,
having the career, and doing all the things at the
same time. But the reality is that you have to
make trade offs. And I think one of the most
important things you can do in your life and career
is figuring out what is that you value most and
then being okay with making a trade off to get
what you really want. And I think, I mean, at
(25:15):
least in my life I have, I feel like struck
that balance with family and career, but I have had
to have strong boundaries in both because I'm not going
to be able to like be everything to everyone all
the time. But that's again it goes back to economics.
There are constraints, there are trade offs that you have
to make and you have to know what you value
to really optimize.
Speaker 2 (25:35):
Small personal follow up there, So you say that you
feel like that you've found that balance yourself, do you
ever doubt that, Like, like, when you're it sounds like
you know, you're incredibly successful. It sounds like you've got
nice family life as well. Do you ever look at
your life and you're like, wait a minute, it almost
seems like things are going too well.
Speaker 4 (25:52):
I guess I'm just curious.
Speaker 2 (25:53):
They're just a little peak at your personal life and
whether or not that's a doubt that maybe comes to mind.
Speaker 3 (25:58):
I think that I'm not immune to things that could
happen in the economy or just like the randomness of life.
So all those things are going well for me now,
Like I could definitely get like, you know, knocked off
my horse at any moment. I feel like that's kind
of the anxiety of being in the economy that a
lot of people go through, is like you never know
if it's enough, because you could always imagine some scenario
(26:19):
where it's not going to be enough. Here you wish
you didn't spend that money on you know, something today
because you wish you could have saved it for that
bad scenario in the future. But you can't live your
life just only planning for bad scenarios, because then you
end up missing out on all the good, all the
on all the luck and all the good things that
could happen to you. So I think that's just another
thing that requires balance and also being able to take
(26:42):
an l when you lose, just realizing that, like, sometimes
you're gonna lose, and as long as you're you know,
keep making choices that align with your values. In the end,
you'll get to the place that is optimal for you.
Speaker 1 (26:52):
Yeah, I think that's that's good advice. And also just
kind of keep tuning in because your desires and your
priorities shift and change too over time. Right, It's like
once you have a two or three kids or something
like that, like your family life becomes more important than
when you were single, and you could dedicate more time
to work. I'm curious on that topic. You characterize marriage
in your book as a financial strategy, which I think
(27:14):
is interesting. I don't I wonder how my wife would
react to that. Quite I need asked when I get
home it was a business decision, but you say that
it can produce happiness and intimacy, So you put that
part in there, but there's a trade off between those
two objectives. So how do you think about the mix
of love and the essential intertwined economic reality that tying
(27:35):
yourself to another individual for the rest of your days?
Like what that entails?
Speaker 3 (27:40):
Yeah, I mean, obviously marriage, there's a lot of purposes
to marriage, but I think the financial aspect shouldn't be downplayed.
I mean, you're teaming up with another person, combining your finances,
and from that point on, whatever decision you make, it's
going to impact the other person. So you have to
talk about these financial decisions or else you know, you
might end up like not not with the outcomes that
(28:04):
you want. I'll just put it, I guess I'll put
it that way. But one thing that's shown in economic
research is that when two people have negatively correlated incomes,
like say one person they both work in real estate,
but one person focuses on luxury and one person focuses
on foreclosures, there they have better economic stability and actually
a lower chance of divorce because they don't have the
(28:26):
same volatility and income that you know, two people who
work on luxury real estate might feel because when housing
markets doing well, the couple's fine. With the housing markets
doing bad, the couple's fine. And it's just interesting to
see that play out like across different different industries and
different careers that couples might have. I think it's something
(28:47):
to be aware of because you know, if you're signing
up for more financial hardship because of the kind of
careers that you and your partner chose, that is going
to be a strain on the marriage and on your life.
Speaker 1 (28:59):
So for how of money listeners out there in the
dating pool, what would you suggest to them? What sort
of conversations should they be having when they're kind of
getting to know somebody and they're saying, I don't know,
I think I might want to sign on the marriage
certificate with you and do life together. Are there certain
kind of conversations around economics and personal finance they should
be having ahead of time to make sure that's a
(29:20):
wise decision.
Speaker 3 (29:21):
I think the most important thing to establish is whose
career is prioritized when it's it's not necessarily that one
person's career is prioritized over the other, but at different
moments you're going to have to make decisions about you know,
who picks up the kids after school, or who is
going to go on a business trip versus who's going
to stay home with the kids, And it might be
(29:42):
like you trade off on a weekly basis, or you
trade off on like on the amount of years where
for a certain amount of time, one partner is dedicated
to kids and the other partners doing the career, but
then later it might switch. But I think just talking
through that part of it is super important and can
also help you plan for downturns in the economy, Like
you're going to prioritize your career now, but if ever
(30:04):
you lost your job, then that's when I would step
up or something like that. So just understanding like who
is the primary earner at any moment in time, or
not primary earner but primary career person at any moment
in time, I think can avoid a lot of hard
fights later on.
Speaker 2 (30:19):
Yeah, yeah, I mean what I hear you speaking to
and you write about this as well. It's just essentially
aligning your goals. But there are ways, I guess of
doing that as opposed to jumping straight to the negatively
correlated careers and incomes.
Speaker 4 (30:32):
I guess. I mean that's a part of dating.
Speaker 2 (30:34):
Right, likely you just talk about what you're looking forward
to in life, and then that's like a soft way
of aligning those goals. And if you hear somebody say
something that, oh wow, I've never thought about that and
nor do I ever want that, it's.
Speaker 1 (30:46):
Like I'm looking forward to traveling every week for the
rest of my life on and maybe for work trips.
Oh yeah, And you're like, wait, no, that's not good.
Speaker 4 (30:53):
It's just funny.
Speaker 2 (30:53):
I guess hearing in economic terms as opposed to kind
of how that plays out in real life. But Darryl
talk about career implications, like how should economics impact our
job and career decisions the work that we decide to do.
Speaker 3 (31:07):
Well understanding your strategy for earning more money within your career,
I think it's just important to like to go to
think about how you're going to advance your earnings. You
can advance your earnings by gaining skills. You could advance
your earnings by getting promotions or changing jobs. But I
think for people just starting out their career, their biggest
(31:28):
anxiety is just like I'm in a job. Like the
entry level jobs aren't create jobs, they're not as enjoyable
as those higher level jobs. Of figuring out how you're
going to get there is really important, and there's so
many there's so many different ways that economics can impact that.
I talk in the book about understanding the principal agent
model in terms of understanding what your boss might want
(31:49):
out of you as an employee. I talk about backwards
induction to understand how to get promoted, like understanding who
is in control of promotion processes. But also there's like
more macro stuff, like understanding how the unemployment rate in
different industries is going to impact your own likelihood of
going through about of unemployment, Like it's both the micro
(32:11):
level but also this macro level is in the backdrop
at all times.
Speaker 1 (32:15):
Yeah, I'm curious. Can you talk about that just a
little more? And what should we as individuals be paying
attention to so that we can realize what we can
push for and what's not possible. I guess in a
current economic climate, when you think, is it just like
the headline unemployment rate, is it we even look you
look back to COVID and the there was just some
(32:36):
employers were willing to offer so much money for job switchers.
That has declined significantly. What should we be paying at
attention to from a macroeconomic perspective to kind of know
are what our value might be worth in the market
we're currently in as an employee.
Speaker 3 (32:51):
Yeah, the kind of metrics I would pay attention to,
or how many job openings are in your career sector,
how many peopleeople are unemployed looking for work in that
career sector, because that can kind of tell you how
how much competition there is, how how many people are
going to be willing to take a lower income to
get the same job that you want. You generally want
(33:14):
to gravitate towards those jobs where there are lots of
openings and not that many people who have the skills
in them yet. Then you can be one of those
early people when it's still rare for you to have
those skills, and that's often when you can get the
most raises and get them like the best career trajectory.
You know everybody is going to be trying to do that,
figure out what the next big thing is, But oftentimes
you can kind of look at the data to give
(33:35):
you a hint. Healthcare is one where like it's good,
they're going to need to be more healthcare workers. Like
if I was advising somebody who didn't who who only
wanted job security and they were entering into college, I
would say, pick something in healthcare because you're definitely going
to be employed in the coming decades in.
Speaker 4 (33:52):
That aging population. That kind of thing.
Speaker 3 (33:54):
Yeah, aging population. The spending just keeps going up on it.
So yeah, and then it's a kind of job but
can't be replaced by robots at least not across the board,
because it's manual, it requires a human touch. There's bedside care.
I think that there will continue to be plenty of
healthcare jobs.
Speaker 2 (34:10):
And then for folks who are so let's say they
already have a career and you mentioned this, right, just
the ability to increase your earnings either by like let's say,
upping your skills, maybe opting for a new job, or
kind of angling for that promotion. How would you recommend
for someone to maybe decide between those two or even
all three of those? Right, But I guess I specifically
(34:31):
want to drill down on, like, Okay, I'm looking to
either get promoted internally here or when should someone know
that they should be looking just to a different company
outside of who they're currently with.
Speaker 3 (34:42):
The First thing to assess is how likely are you
to get promoted? Like are you already do you already
have everything you need to get promoted, and it's a
matter of pushing your promotion documents through and getting them approved,
or are there more skills that you need and more
evidence that you need to provide in order to get promoted.
If it's in the latter category, there's more that you
need to do. I think looking around at your peers
(35:04):
and looking at how they have gotten promoted. And then
if you're already at that stage where you have all
the skills, I think the stage to go to is
who is actually in charge of the promotion decision. Your
manager probably has some control of it, but your manager's
manager probably has to say and maybe even the executives
have a say.
Speaker 1 (35:21):
So.
Speaker 3 (35:21):
Making sure that people who are making these decisions know
who you are and know the value you bring is
going to be really important to getting a promotion approved.
Speaker 1 (35:30):
Do you feel like people like great jobs have become
more widely geographically available given work from home. It seems
like some of the some employers are calling back work
from home a little bit, and other employers are saying,
oh cool, well you lived in Silicon valley and you
made a ridiculously high salary, But if you're going to
move to the middle part of the country, we're going
to pay you less. Is there still an opportunity for
(35:50):
people to live in a lower cost area of living
and benefit from a higher paying job that might be
headquartered in a more expensive place to live.
Speaker 3 (35:59):
I think that's definitely a lot easier to find those
remote opportunities now than it was before the pandemic. But
there is starting to be a bit of a reversal
on the trend where more corporations are wanting their employees
in office. We've seen that at Amazon. I think Apple
and Facebook have also done this, and the federal government
has called people back into work too. So I think
(36:21):
that if you are trying to cast that y net,
I wouldn't rule out in office for you, because that
if you're still in that early part of your career,
it could be detrimental to completely rule out in office work.
But I think it is something that is worth aspiring
to if that's how you feel most comfortable working, it's
something that you value. I've set up a situation where
(36:42):
I can work remotely, but you know, earlier in my
career I didn't have the ability to do that. I'm
lucky that I have it now. But I think it
is something similar to your salary or similar to your
vacation time or your healthcare. It's one of these features
of your job that is going to impact your well being.
Speaker 4 (36:57):
Yeah, for sure.
Speaker 1 (36:58):
Or we've got more to get to, just a few
more questions. Is with Darryl Fairwell. Featherwa with Darryl Fairweather
about how economics impacts every area of our lives. We'll
get to that right after this.
Speaker 2 (37:16):
All right, we are back from the break with Darryl Fairweather,
her book Hate the Game Economic cheat Codes for Life,
Love and Work. And I will say they're not necessarily
cheat codes. Like what you're doing in the book is
you're essentially you're like laying out the rules of these
different games so that we can quite clearly identify how
to actually win in these games. So it's not like
I don't know, sometimes folks here cheat code no game Genie, Yeah, yeah,
(37:39):
game Genie is like totally cheating, like you're not playing
the game at all. You've like short not shortcut, like yeah,
like hot wired the game, as opposed to clearly focusing
on the pieces of data that are going to move
the needle of the most Daryl. But in the book
you discuss obviously these different major life changes like moving
to a new city, and and essentially it seems like
(38:01):
you're saying that folks on the fence are typically better
off getting off the fence making the change. Can you
explain why that is.
Speaker 3 (38:07):
Yeah, there's a bias in behavioral economics called the status
quo bias, which is that it's been well documented that
people tend to stick with whatever situation they're in. I
talked about this a little bit before. How when you
feel like you own something, you value it more. Well,
the same is kind of true for the neighborhood that
you live in. If you grew up in a certain neighborhood,
you live in a certain neighborhood, you might think it's
(38:29):
better than other neighborhoods out there, but you wouldn't really
know unless you make the leap of faith and make
a change. So I think if you're even if you're
even contemplating moving cities, it's definitely worth exploring. And if
you're on the fence, just go for it, because for
most people, they are subconsciously holding themselves back from better
(38:51):
opportunities because of that fear of the unknown and the
status quo bias.
Speaker 2 (38:55):
So not just moving, but would you say that applies
to I guess a lot of the diferent decisions in
our life, the fact that status quo or the endowment
effect that that is maybe weighing heavier on people's decision
making processes than to even realize.
Speaker 3 (39:07):
I think for the average person, yes, you know, I
know that there are people out there who maybe struggle
with impulsivity and they feel like this is the exact opposite.
They need to stop making so many changes. But I
think the average person is resistant to change and it's
holding them back from better opportunities.
Speaker 1 (39:26):
You also highlight in the book the concept of permanent income,
which is the assumption of future earnings, and you say
that that also impacts our money decisions how so well.
Speaker 3 (39:36):
The permanent income hypothesis is this idea that if you
knew how much income you're going to live over your life,
then you would be able to borrow against your future
income and smooth out your consumption. So instead of eating
ramen noodles as a poor college student, you would recognize
that in the future you're going to be making more money,
so why not you know, spend money on an actual
(39:58):
meal instead of like making things harder for yourself. The
part about the permanent income hypothesis is that I think
people are afraid of that worst case scenario where they
didn't end up, you know, getting the job after college
that led to higher earnings, and they wish they really
didn't spend or go into debt earlier on. But the
idea is that you know, on average, people do earn
(40:19):
more money over their lifetimes, and they should spend more
when they're young, they should save when they're older, and
then they have to spend down that retirement savings when
they're in their later years.
Speaker 1 (40:30):
You just don't know, though. It was only we knew
knew the future? Was it the white paper from Yale?
Was it James Troy? Maybe they wrote that about kind
of how how he was advocating for people to spend
more early on and be willing to take on more
debt because of this kind of permanent income hypothesis, saying
that like hey, no, no, no, you just smooth out the
ride a little bit in your living standard and it's
(40:52):
it's all going to be okay. But yeah, when you
factor in the realities of life that layoffs happen, or
you know, even something like a hike in interest rates happen,
and your credit card debt now is worse than it was,
or your home equity line of credit payment has gone up.
Like those are the kind of things that are harder
(41:13):
to predict. So there, I think there are second order
consequences to just assuming future income too, or assuming future races, right.
Speaker 3 (41:20):
Yeah, I think that the downsides can be quite severe,
especially for people who don't have good safety nets. If
you know, losing income would mean that you're out, you
can't pay your rent, and you have nowhere to go,
then like you have a different risk tolerance and somebody
who can rely on their parents or can move back home.
So I think for people who are worried about spending
(41:41):
a lot when they're young, those those fears can be founded.
And if it's having the psychological toll on you not
having enough in savings, then I think that in and
of itself is justified. Like if if you just feel
better having money in your savings account, then like, go
for it. You don't know, nobody should be telling you
to spend more.
Speaker 2 (41:57):
Well, that feeling in your gut like that in and
of itself should be a data point that you pay
attention to. It's not just about like these external factors.
It's just also and it's hard to quantify. But how
how do you feel about this asision?
Speaker 4 (42:09):
Yeah?
Speaker 2 (42:10):
Because if you constantly are at feel like you're at
odds with what your gut's telling you, then I don't
think that's necessarily any way to live either, Darrel. You
also admit, like you're talking about spending or saving up
for retirement, you talk about stock picking, and you basically
compare it to like a beauty like a beauty contest game.
Can you share the correlation here between the two.
Speaker 3 (42:29):
Yeah. So there was this old game that used to
appear in newspapers like kind of like just a fun thing,
like a lottery kind of game, where you'd write in
your answer and maybe win a prize. And the idea
was to pick the picture of the woman that everybody
else was going to select as the most beautiful. So
instead of picking the picture that you personally thought was
(42:50):
the most beautiful, you're trying to pick the one that
everybody else is going to pick. But everybody else is
also going through that same exercise of what else is
everybody going to pick? I want to align on that.
And it's very similar to the stock market because you're
not necessarily picking the stock that you like the best.
You're picking in the stock that you think everybody else
is going to like in the future, and it's going
to go up in value. What happens in the actual
(43:11):
beauty contest game is that you know people the best
answer is not like the one that kind of goes
through too many lines of logic. If you reduce the
there's a way to reduce the problem to like something
mathematical and basically economists have shown that ideally, you just
want to think about like two degrees of separation, like
what does my opponent think about me, and then just
(43:34):
end it there. You don't want to keep going on
and on forever, like well, if this happens, or if
that happens, or what are they think exactly? Sometimes overthinking
can be too much, and I think that's also just
a great reason to maybe not play the stock market
because it's just requires too much thinking and just kind
of play the averages and pick an index fund instead.
Speaker 1 (43:53):
With you on that, Darryl on that Wise notes, we'll
lend this conversation. Thank you so much for taking the
time to join us work in how to money listeners
find out more about you and find out more about
your new book.
Speaker 3 (44:03):
Well, you can buy my book in any bookstore or
on any of the online platforms, and you can find
me on all the social media. I'm at Fairweather PhD
on Instagram and that's my handle pretty much everywhere.
Speaker 2 (44:15):
Nice, we'll link to all of that, Darryl, Thanks so
much for making the time for us today. Thank you
all right, man, that was a good combo with old
Darryl Fairweather. Yeah, it was. And she's not old. She's
younger than us.
Speaker 1 (44:25):
Man, She's young, she's smarter, and I thought I thought
her book was really insightful.
Speaker 4 (44:30):
What was your big takeaway from this conversation.
Speaker 2 (44:32):
It said, the whole first segment or first section, we
talked about housing and when it comes to first time
home buyers and how it is that they should be
thinking about buying a home. She put the two parts
of home buying in the right order, which is that
what needs to happen first is you need to be
thinking about it a whole lot before you get out there,
before you go shopping. Then you can start looking. But
(44:53):
the problem is most people start because of the ease
that the apps make it. Unfortunately, and just like the
wander lust that takes place with just oh, let's go
let's see what houses are for sales browse first. Yeah,
and I think there is a lot less of that
going on than obviously there was over the past four
years during the pandemic, but there does seem to be
this sort of holdover, this kind of carryover effect of
that where folks are looking, they're falling in love with
(45:15):
a property with a house before they even know what
it is that they can afford. They haven't looked at rates,
they haven't decided how long that they're going to actually
stay in that house.
Speaker 4 (45:24):
I don't know what the average price per square foot
is for a house in an oh No.
Speaker 2 (45:27):
And so she is trying to deemotionalize the conversation from
square one. Let's get analytical about it and then let's
get out there and start looking. And I think that
that can be just a helpful matrix and decision making
process when it comes to especially for some home buyers
who are getting out there for the first time looking
at housing.
Speaker 4 (45:44):
Yeah. Yeah, that was my big takeaway how about you.
Speaker 1 (45:46):
Okay, so that was potentially gonna be mine, so oh sorry,
ill here. And I like when she was talking about
marriage and kind of the the economic reality of marriage
and how you have to kind of talk about the
things planned for those things ahead of time, and that
is something as someone who's very interested in personal finance
and saw personal finance as an issue in my parents' marriage,
that was something I was a little more proactive about,
(46:08):
largely just because I'd seen the way I can bite
you in the butt if you're not. And also, let's
be honest, even if your plans, you can't always. Sometimes
things that are worse than your plans come to pass
and you can't necessarily prevent that. But I was just
thinking too about the prioritization of careers. I think that's
a really especially in today's environment, a lot of two
(46:30):
income households. You have to talk about that with your partner. Hey,
for right now, like my job's on the front burner,
yours is on the back. You're dealing with more house duties.
And right now Emily and I are in this position
of flip flopping where her career is kind of taking
front and center role in our family. And that's a
good thing. And I'm glad we've been able to have
this conversation. And it's not that I'm bowing out of
(46:51):
how to money or I'm completely uninterested in doing this
podcast anymore, but it's just I love that I get
to be in a little bit more of a hands
on supportive role at the house too, and so that
that will be something that I think ebbs and flows
for a lot of couples over their career lifetime, in
their marriage lifetime. Yeah, but it's something that having I
think those conversations proactively and saying, hey, what whose era
(47:13):
is this right now? And then when does my era
kick in? Where I get to kind of put the
pedal to the metal. I think I can prevent a
lot of arguments or hard feelings.
Speaker 2 (47:21):
I love it, dude. Yeah, I feel like y'all have
demonstrated that well. The beer that you and I enjoyed
during this episode was an argyle. This is the Raspberry
Key Lime Sour by Contrast Artists and Ales. What your thoughts, buddy,
So still get a little more in here on a port.
Speaker 1 (47:36):
I think this is my favorite beer I've had from
Contrast to this point. Oh yeah, I really like this one.
It's because it's raspberry.
Speaker 2 (47:42):
It's because it's raspberry. So I pick this one's up specifically.
And I saw that I had raspberry, I was just like,
there's no way that Joel's not gonna enjoy it.
Speaker 1 (47:50):
I mean, I love love raspberry beers and raspberry key lime.
I gotta say it's my jam, Like I dig this
so I like the combo of flavors in this one,
and it's it's pretty tart, not overly tart, but very
very fruity.
Speaker 4 (48:05):
I dug it.
Speaker 2 (48:05):
It's got the I think more beers need to have
lime in them. Lime, I think is a highly underrated citrus. Lately,
I've been putting more lime in my cocktails. You know.
Speaker 4 (48:15):
The that beach Fire cocktail that.
Speaker 2 (48:16):
I created started out as made his own cocktail people.
Started out as a whiskey sour, but which is typically
you make that with a lemon, and I'm like, I
don't like the lemon sour though, and that you start tweaking,
and I'm like, oh, wait a minute, what if I
switch it to lime? All of a sudden, I love
it so much more. Make some other changes, as some
smoky scotch and boom. You know, you get yourself a
own signature cocktail. Yeah, but no that the raspberry in
(48:40):
this actually kind of remind me of Cantitione. And I
know that you're gonna cry. Here's the that this is
not something that should ever be said. But something about
that funky raspberry, man, it makes me think of those
some of the greatest beers in the world. I'm not
going to say it's I'm not your friend anymore. You
can't compare any beer to Canti because it's its own.
I guess I think of that anytime I have a
(49:00):
raspberry sour because of the fact that so many of
the beers that you've shared with me that were either
Trefontaine or Katie Yone, they were raspberry.
Speaker 4 (49:09):
That was the fruit, raspberry, cherry.
Speaker 1 (49:11):
Gosh, any fruited sours that those guys make, they're literally
the best beers in the world.
Speaker 4 (49:15):
Yeah, I mean quite literally.
Speaker 1 (49:17):
I throw down the collin to the American Brewery to
do better than those guys do.
Speaker 2 (49:20):
But this is great, a total summertime sour kind of
style beer that's super easy to drink.
Speaker 4 (49:25):
Most stuff really delicious. Right.
Speaker 1 (49:26):
We'll put links to Daryl's book and a few of
the other resources we mentioned in this conversation up on
our website at how tomoney dot com. You can find
them in the show notes there, along with some other
helpful resources to give you advice and encouragement in your
money journey. They all live there all the time on our.
Speaker 2 (49:42):
Website, you know what. So until next time, buddy, best
friends out, Best Friends Out.
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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