Behavioural Science is a rapidly expanding field with new research being developed across a multitude of topics and applications. This interview is part of a series interviewing prominent people in the field. And in today's interview the answers are provided by Sarah Newcomb.
Sarah is an applied behavioral economist and Director of Financial Psychology at Morningstar. Her work combines economics, personal finance, and psychology to help people overcome internal obstacles and reach their financial life goals. She is a regular contributor to Morningstar.com, PsychologyToday, and InvestmentNews, and is author of Loaded: Money, psychology, and how to get ahead without leaving your values behind.
Who or what got you into behavioural science?
Money was a barrier, not a helper, when I was growing up. Both of my parents worked hard, but money was always scarce, so I couldn’t have or do the things that my classmates did. Because of this, I developed a deep-rooted materialism and lust for money as well as a belief that I wasn’t “supposed” to have it. I didn’t know it at the time, of course. I just assumed I was bad with money because I’d never had any.
My dream had always been to be an actress and singer. After high school, I spent a few years busking on city streets and landed a couple of jobs singing in Italian restaurants. At 21, I was accepted into a top school for opera, but of course I couldn’t afford the tuition, so that dream withered away as I reached my mid-20’s.
In the US, you have to be at least 24years old to take student loans without a co-signer. When I turned 24, I enrolled in the local college as an ‘undeclared’ major and ended up falling in love with math. It turns out I am endlessly fascinated with finding order and patterns and I love solving really hard puzzles. By age 28, I had earned a bachelor’s in mathematics with high honors, I was married, and I was expecting my first child, and I still couldn’t get my finances under control! I had to admit to myself that my issues with money were not about numbers.
I decided that I was finished being poor. I leveraged my math degree to gain acceptance to graduate school for personal financial planning. I reasoned that if I could understand the fundamental theorem on calculus, then I must be able to learn how to manage money. If I learned to do it like the pros, I could not only get a good paying job, but I could manage the money I earned wisely once I did. So, for the first couple of years of my daughter’s life, I was a mom during the day and a grad student at night.
It was at Bentley University where I met Dr. Jim Grubman. He taught a class on psychology in financial planning. The course was designed to help financial planners to understand that people with great wealth often shoulder intense emotional and psychological burdens as a result. The financial advisors who can understand and empathize with them are an invaluable resource. It was in Dr. Grubman’s class that I first faced my own financial psychology head-on. I saw for the first time how my experiences with money - or the lack of it - had shaped my world view, my identity, and my attitudes about money itself. All of these in turn affected my day-to-day financial choices. I was bad with money because I both loved and feared it. No amount of investment knowledge would cure that. If I wanted to escape the trap of intergenerational poverty, I needed to change the core beliefs and attitudes that drove me to waste what little resources I had.
I decided then that I wanted to study the psychology of financial decisions. Rather than become a financial planner, I wanted to help other people who were smart, hard-working, and trying hard, but stuck because of unexamined beliefs and attitudes that were getting in their way. I decided (against the advice of one famous behavioral scientist who was kind enough to advise me via email) to pursue an interdisciplinary Ph.D. that combined economics and psychology. My research focus was on “The Psychological Barriers to Sound Financial Management.” I wanted to systematically study what patterns of thoughts and beliefs hold people back from achieving wealth.
Now, I recognize that there are huge, systemic issues that keep a lot of people down, and I am not saying that those can be fixed by people just changing their attitudes. However, some of us (like me) do not face systemic barriers like racism, but still fail to build wealth because of internalized beliefs and attitudes that lead to problematic financial behavior. Since then, I have been searching for simple, changeable factors of mindset that contribute to financial behaviors.
I have become obsessed with solving the puzzle of financial self-sabotage.
What is the accomplishment you are proudest of as a behavioural scientist? And what do you still want to achieve?
I am most proud of my book, Loaded. It was a labor of love that distills all of the ‘aha!’ moments I had in my 10+ years of study. I’m glad it is out in the world so that other people can benefit from the bits of the puzzle I’ve been able to piece together so far.
As for future achievements, I want to teach a generation of kids like myself - those with ambition, talent, and financial barriers - how to make the most of the resources they have so they can strategically build lives of purpose and freedom. I want to help others skip the decades of wandering blind that I went through.
If you weren’t a behavioural scientist, what would you be doing?
Probably still singing opera on the streets of Portland, Maine. Maybe I would have found a way to Broadway by now. Maybe I’d still be blaming the economy for my own mistakes.
How do you apply behavioural science in your personal life?
I catch myself in motivated reasoning. I push myself to think further ahead than I naturally do. In my own research, I’ve seen that short-term thinking is perhaps the greatest source of financial self-sabotage, at least for me. I have to constantly tackle my own impatience, biases, and materialism in order to make strategic decisions with my money. Turning my habits from spending to saving has been no easy feat, but I continue to turn over the stones of ‘why?’ so that I can make clear-eyed decisions that make me happy today while simultaneously setting me up for success in the future.
With all your experience, what skills would you say are needed to be a behavioural scientist? Are there any recommendations you would make?
The skills needed in the private sector are different than those needed in academia. If you want to be a behavioral scientist in the private sector, you need to be able to communicate with non-specialists, which is extremely difficult for most academics. The precision and rigor that marks academic research is impractical in most business settings. Learning how to distill the rigorous work that others have done into language that anyone can understand is very valuable in the marketplace.
Another skill that is needed in the private sector is the ability to translate lab studies into real-world applications. What works in a carefully controlled experiment does not necessarily work in the noisy environment of our daily lives. It is extremely challenging to get executive buy-in (read: money and a realistic timeline) to research and develop behaviorally informed products. I have seen a few companies do it successfully, but very few. If you can use your skills to help bridge the gap between academic research and business applications, you will be richly rewarded. These are the unicorns that the business world is searching for.
How do you think behavioural science will develop (in the next 10 years)?
I think that we will go through a period of disillusionment and skepticism with respect to biases and nudges. This has already started, and I expect it will continue for some time as practitioners wrestle with the practical and ethical limits of the discipline. From this, I hope to see a few things emerge.
First, I hope that the field expands its view beyond biases and nudges to include rigorous research into the social and emotional aspects of spending, borrowing, saving, and investing.
Second, I hope to see more focus on practical solutions for middle and low income populations. Millions (probably billions) have been invested in understanding how to help people make better investment decisions, but most people don’t have significant assets to invest. The psychology of personal finance is messy and complex, but I hope there will be more research into how we can develop healthy mental habits from a young age that will set a strong foundation for building prosperity throughout our lives. This is different from math-based financial education. It’s more about uncovering what foundational concepts, beliefs, and attitudes contribute to long-term financial health, and then making those the basis of financial education. It’s a pipe dream, but it’s my pipe dream.
What advice would you give to young behavioural scientists or those looking to progress into the field?
If you have academia as a career goal, there is a clear path. Just follow it. Find the best mentors, champions, and co-authors you can. Learn from them. Publish with them, and follow the path marked out.
If your goal is the private or public sectors, the field is getting crowded, and the need for practical solutions is stronger (I believe) than the need for more observations about how we are irrational. We need to know WHY we are irrational and how to correct it when it is necessary and possible to do so. 100+ named biases are more than enough. We need proven solutions that can correct for, or circumvent, our biased decisions. So, I would say that my advice is to focus on revealing solutions rather than problems.
Which other behavioural scientists would you love to read an interview by?
Gerd Gigerenzer, Gal Zauberman, Abigail Sussman, and those working in the area of climate change and behavior (like my friend Stacia Dreyer J)
Thank you so much for taking the time to write down these amazing answers Sarah! And as hyperlinked, I have been fortunate enough to have interviewed Abigail Sussman already :)
As I said before, this interview is part of a larger series which can also be found here on the blog. Make sure you don't miss any of those, nor any of the upcoming interviews!
Keep your eye on Money on the Mind!
