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

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