Stupid ways people think about money.

AKA Behavioral Economics 😊

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After the main article, you'll also find some health information about protein intake. Kind of like a "bonus feature." My regulars know I geek out on health-related stuff… Hopefully, you find it useful, too.

I consider myself lucky because in my early twenties, while attending Leeward Community College in Hawaii, I happened upon a class on personal finance. I figured I should know how to balance my checkbook. I never had one prior to arriving stateside. Bulgarians keep their money in hidey-holes around the house, assuming they have any left after paying the bills and putting food on the table. You may say the banks were kind of unsophisticated??

Back in the personal finance class, I learned the concept of money making money on its own. Thanks to my paternal grandmother, who always found a reason to shove a few bucks in my little hand when I visited, I liked free money! So, naturally, my attention focused on the idea of my money making more money than me even while I was napping on the beach. The professor said everyone should know how to invest, which meant I had to learn how to save and not spend stupidly.

Now I think money matters should be taught in school before teenagers learn how to use a credit card. But even the most rational of us sometimes do dumb things with money just because things can get emotionally tricky.

Behavioral economics studies precisely these emotional connections and responses people have regarding money and the behavior that follows them. Some of them are pretty silly. After you read this, I hope you'll never be "that" person again.

The Endowment Effect
Say you inherit a collectible car from a generous relative. You do some research and find out it's worth $50,000. Will you keep it? How about you dug up a Tiffany vase in your old grandma's apartment, worth $5000? Most people will keep the objects because they are worth so much money! Except… maybe they shouldn't. How would you know if you should, or shouldn't?

To find out, flip this around. Say you walked by this fancy old car offered for sale at a car show. Do you love it enough to pay $50,000 for it? Same with the Tiffany vase. What if you saw it in a shop for $5000, would you buy it? If the answer is "Hmm, no!" you shouldn't keep the items either. Money is money, and it will be the same amount you will give up when you purchase an item and when you choose to keep it. But the endowment effect makes it feel like the items we already own are more valuable than the things we could own if we paid for them.

Now go clean your garage and storage unit and make some money 😊

The Sunk Cost Fallacy
Every time you decided to keep eating something you didn't like, or finish watching a movie you didn't enjoy, or a concert you hated, or drive a car that keeps giving you problems… because you PAID for those things and want to get your money's worth, you are experiencing the sunk cost fallacy. It makes you feel as though you have to continue with something just because you paid for it, regardless of how much you enjoy it, or if it continues to cost you more money.

Hey, this goes for bad relationships, too. People often overstay because they feel like they've invested so much time and resources that they just have to make it work.

But the truth is once you spend the money (and/or the time and resources) they are gone. Forever! Why throw more good money after bad, more good time after bad, and/or more life after bad money… Just asking for a friend. You can walk out of a bad movie and enjoy a walk in the park. You can leave behind a bad meal and possibly avoid an upset stomach. The sooner you end a bad relationship, the sooner you can start a better one.

People worry excessively about sunk costs, keeping a mental balance sheet of what they spend and what they think they are getting for the money. Sadly, it's all emotionally based, not rational. Many retailers use this against you. They sell memberships and loyalty programs because they know people will buy more stuff than they need just to "get their money's worth" from their membership.

I've been keeping track of my Amazon and Costco memberships to see if I am getting my money's worth. I was questioning if, after Amazon discontinued the 2-day Prime delivery some time ago and changed its focus from "value" to "convenience," no longer being the most cost-effective option, I was getting enough benefits to rationalize the $156 annual cost. Also, I wanted to ensure I was not overbuying stuff I didn't need. So far, so good. I am keeping the Prime, and it's working for me. But it may not be working for you.

As for Costco, I am giving up my Executive membership and downgrading to the regular because the extra 2% I was getting on Costco purchases only earned me $58-$61 in the last 2-3 years. Clearly, I should only pay $60/year instead of $120 for the Executive. Lulu and I don't eat enough spinach to make it work. If things change in the future, it's an easy switch back!

Transaction Utility
Let's keep going with Costco… Would you drive for 15 min to save $10 on a cake from Costco? It would cost you $30 at the local grocery store and $20 at Costco. What if you need a computer that costs $1010 at Best Buy but only $1000 at Costco, 15 min away? Most people love to get a deal! That cake is 30% cheaper at Costco, but the computer is barely 1%... Chances are you'll drive to Costco to get the cake and buy the computer at Best Buy. That's because your mind forgets that regardless of the circumstances, you're really only talking about $10 and 15 min. Both decisions should have the same outcome.

And what is your time worth? Let's not go down the rabbit hole of how many hours the average person spends "shopping for a better deal."

Stores know how you think, so they post their MSRP and their own "Low Price Guarantee" right next to it, which is usually below that, making you feel like you're getting a deal. They'll even say, "We price match any offer," just to ensure you'll spend your money under their roof.

So, make sure you don't fill your house with stuff you don't need just because things are on sale and you can't pass up a great deal!

And speaking of filling up your house (and your storage), chances are you own many times more stuff than you need or use. I get it; some things have sentimental value. Others please your aesthetic senses. I own art, books, a dog, and 20 pairs of tango shoes. It's OK to live a little. But live a little BELOW your means and consider the opportunity cost.

Remember that $5000 Tiffany vase? If you sold it and invested the money at the average 8% annual returns the markets deliver, in 10 years it would have grown to $10,795 thanks to the miracle of compounding. If you added another $100/month instead of chasing deals you don't need, you would have $28,923 instead of a house full of stuff you can't remember where you put. Now, how do you feel about keeping that vase?

These may seem like small potatoes, but making small bad decisions with your money every day, over time, amounts to a pile of cash you could've put to some good use – like parking it in your retirement account!

People really start to feel the consequences of their silly financial choices when they get up to around 50 and have no money saved, no pension, and no way of retiring ever. That's when they start bitching loudly about the government spending social security money. And drinking because drinking helps them relax and unwind. Add pot, and you'll be set! No worries. None! All good! Totally chillin'.

And now, as promised, some health stuff.

I donated my DNA to this guy, David Sinclair, for his research on aging. He's a famous Harvard Ph.D. Check him out. He looks like he's 30 but is in his 50s. A couple of years ago, he and his team and other interested parties started a joint venture called Tally Health. He's big on epigenetics and believes 90% of aging is not genetically predetermined. That's a lot. That's everything you do and don't do for yourself.

Long story short, they came up with a way of testing your chronological aging vs. your phenotypic aging and then devising a plan to help you reverse it (improve your health) by producing an actionable plan for you to follow. That's because they think people will hurry up and give up the pizza and the daily gallon of Coke. Also, it's expensive! It's a bummer, but it looks like their target market is rich, white people who don't want to die.

Anyhow, their health-related newsletter is great and free. I get it. The following is from it:

Protein: friend or longevity foe?

While protein is an essential nutrient for building and repairing tissue, making hormones, and maintaining healthy bones and muscles, the tradeoff to a higher-protein diet may be accelerated aging and an increased risk of chronic disease. So, do we want to minimize our protein intake if we want to live longer? We dive into the science for answers.

✅ The pros of protein

A study published in The BMJ in July 2020 found that high total protein intake was associated with a lower risk of all-cause mortality and that intake of plant protein was significantly associated with a lower risk of all-cause mortality [1]. Furthermore, an additional 3% of overall plant protein intake a day was associated with a 5% lower risk of death from all causes.

The reason plant protein provided additional longevity benefits for participants may be due to inhibition of mTOR, a master regulator of cell metabolism, growth, and survival. Compared to animal proteins, plant proteins contain fewer branched-chain amino acids (BCAAs), such as leucine, which are known to activate mTOR [2]. mTOR inhibition is associated with slower aging, while activation is typically associated with accelerated aging.

This study provides powerful evidence suggesting that protein may provide some health benefits and that perhaps it's the type of protein (plant-based vs. animal-based) we consume that plays a more impactful role in our healthspan and longevity than the amount.

⏱️ Does protein accelerate aging?

While it's true that protein triggers mTOR and inhibits AMPK (an enzyme that regulates energy metabolism), which are associated with accelerated aging, another main concern is that high-protein diets may contribute to age-related diseases.

A study published in the journal Cell Metabolism found that high protein intake among individuals age 65 or younger was associated with increased levels of a hormone called insulin-like growth factor 1 (IGF-1), which has been linked to an increased risk of cardiovascular disease, stroke, and cancer. Interestingly enough, this association was not found in adults over age 65 [3].

Note: It may not be the activation of mTOR alone that's the problem (for example, mTOR activation via exercise is good for you); it could be excessive mTOR activation that's the concern for longevity. By consuming more plant proteins, which are lower in branched-chain amino acids (BCAAs) and methionine, you may prevent excess activation.

How much protein is enough?

We understand that protein needs will fluctuate based on metabolic health, age, and daily activity. The Recommended Dietary Allowance (RDA) of protein is currently 0.8 grams of protein per kilogram of body weight per day (or 0.36 grams per pound) for sedentary individuals; however, some pro-protein experts say we should consume around 1.2-1.8 grams per kilogram of body weight (0.54-0.82 grams per pound of body weight) per day.

Here are some things to consider to determine the type, quality, and amount of protein that's right for you:

If you're age 65 or over, research suggests that between 1.2-2.0 grams/kilogram of protein per day (or 0.5-0.9 grams per pound) is optimal for protecting against sarcopenia, or muscle loss [4].

Physical activity also plays a role in determining recommended protein consumption. Endurance athletes like runners should consume around 1.1-2.0g of protein per kilogram of body weight (0.5-0.9 g per pound), while strength training athletes may ingest around 1.5-2.0g of protein per kilogram of body weight (0.68-0.91g per pound) [5, 6].

If you choose to mostly get your protein from plants, make sure you consume high-quality protein from whole foods such as beans, legumes, and soy rather than processed powders and plant-based meat substitutes.

If you choose to eat meat, do so sparingly and opt for a palm-sized amount of grass-finished (grazing feeding only), pasture-raised, and wild-caught options.

For those who choose to keep animal protein in their diets but are concerned about excessive mTOR activation, resveratrol and fisetin (two molecules in our longevity supplement, Vitality) are known to inhibit mTOR, which may offset some of the effects of BCAAs on lifespan (even though more research is needed before making this claim). Glycine can also clear excess methionine, an amino acid found in animal protein that is associated with accelerated aging [8, 9].

Sorry, the reference won't work since I just copied and pasted the text. But you can sign up for their newsletter and get this stuff yourself, probably less than once per month.

Thank you for reading.

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Yours truly,

V.