For Goodness’ Sake
Focus on Finance by Christopher Gallo
by Ken Saxon Ken Saxon’s second act – following his business career – has been building a leadership network to empower, elevate, and connect Santa Barbara County’s nonprofit leaders. He enjoys the opportunity to engage in civic life and leadership locally, especially through the nonprofit leadership organization he founded, Leading From Within.
Thank You for Your Service
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hen I committed to write a regular column for the Montecito Journal about our local community and the people who care for it, I could never have imagined COVID-19 and how it has overtaken our collective world. But here we are in this moment of fear and “social distancing” and the crushing of livelihoods, and it’s actually a great time to talk about the people who tend to the common good in our community as so many of us shelter in place. Have you ever noticed that there are certain people who seem compelled to serve and to lead in their community? My second career, here in Santa Barbara, has been working with people like this – those who can’t not
and their canyon nets, and “Cash Mobs” that hit the streets to show support to our local merchants. And now comes COVID-19. This insidious virus has turned so much more upside down this time around than our natural disasters of two years ago. It’s gone right at the social and economic beating hearts of our community, with no end in sight. And it’s global, so we can’t expect the world to come to our rescue. We will get through this pandemic crisis, but not without a lot of pain and disruption. And that pain will be spread widely and quite unevenly. Many that launched efforts to address community needs in our natural disasters – the Foodbank,
The very least the rest of us can do is step up and do anything we can to help cushion the blow – donating, checking on neighbors, finding ways to support local businesses, volunteering as able, and certainly listening to our health professionals
step up when there is a need. Some do this from nonprofit organizations. Some work for government. Some are philanthropists. Many are everyday citizens who just get an immense amount of satisfaction by chipping in. We saw these public servants out in force during the Thomas Fire and the January 9 debris flows that followed them. Typically, they operate behind the scenes. But those daily 4 pm press conferences made some of them household names. Remember Cindy Ponce of the California Highway Patrol? Dave Zaniboni from County Fire? And Suzanne Grimmesey from the County’s Department of Behavioral Wellness, helping us deal with our trauma? And for each person who popped up in our livestreams, there were thousands more working behind the scenes to help our community recover. Philanthropic and government initiatives stepped up and made a massive contribution to recovery and renewal here after the mountain came down. But what most inspired me were the many self-organized citizen-to-citizen efforts that emerged – like the Santa Barbara Bucket Brigade, the Santa Barbara Support Network, the Project for Resilient Communities,
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Bucket Brigade, the 805Undocufund, United Way, and the Santa Barbara Foundation – are stepping up again in this crisis. And schools and health centers and government are being forced to adapt all their services on the fly. While many of us have been asked to retreat to our private domains, there’s a whole universe of people stepping up to care for so many who need help right now – those losing their employment, the sick and the soon-to-be-sick, and our elderly and our children. The very least the rest of us can do is step up and do anything we can to help cushion the blow – donating, checking on neighbors, finding ways to support local businesses, volunteering as able, and certainly listening to our health professionals. This is what community should be about – reaching beyond our private interests to invest in one another’s welfare. In an essay last week in Politico, Villanova professor Mark Lawrence Schrad wrote of his hope that this pandemic crisis would ultimately lead to what he called a new kind of patriotism. He noted that we are not fighting this particular battle with soldiers. “Those on the frontlines against coronavirus... are our doctors, nurses, pharmacists, teachers, caregivers,
Since graduating from UCSB in 1992, Christopher has worked with local individuals and families as a financial planner. He is a Vice President with UBS Financial and holds the CFP, CIMA, and CPWA credentials. He can be reached at christopher.t.gallo@ubs.com or 805-730-3425.
Emotions in Personal Finance
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Westmont College-hosted talk in February by Nobel Prize winner Daniel Kahneman spoke to the increasing awareness of behavioral economics. Kahneman won the prize in 2002 for his creation of the prospect theory: the concept that investors feel the pain of losses much more than the joy of gains. This echoed a similar sentiment from Adam Smith 200 years earlier but overturned the ruling theory of economics at the time – that humans act rationally in economic decisions. The fascinating results of the prospect theory have reshaped financial thought and provided some good lessons for investors. Since the pain of loss is twice as pronounced as the satisfaction of gain, Kahneman finds that our actions are dictated by loss aversion. That is, we engage in risky behaviors to avoid the reality of a loss. As investors, the most obvious example is when we routinely sell stocks that have risen to lock in a gain and conversely when we hold losing stocks to avoid the reality of a loss. The cure for this particular damaging behavior is to remove the emotion and for investors to weigh each decision on economic merit. Anchoring, the concept that we make economic choices influenced by data that is irrelevant, is another emotional behavior that causes problems for investors. For most of us, this bias shows up with recent information. For example, the price we paid for an investment often outweighs the potential return of an investment when it comes to action – if we pay $50 for something, many of
us will be loath to sell it for less even if it eventually becomes worthless. One way to mitigate this bias is to pretend you don’t already own the investment and ask yourself if you would purchase it at this price with cash. If not, you are likely holding it for non-economic reasons.
Since the pain of loss is twice as pronounced as the satisfaction of gain, Kahneman finds that our actions are dictated by loss aversion.
Another bias, availability bias, is especially appropriate in the information age when we face a deluge of information on every topic. Studies have found that we tend to latch on to the information that has the most impact or is the most recent. For years after 2008 stock market meltdown, researchers found that a majority of respondents said the market was flat or down in 2009 and 2010, even though it was up 40% during those years. This skew of taking recent negatives (and positives) and extrapolating forward often leads to missed opportunities and poor decisions – think cryptocurrency and cannabis as well. Here the most common cure is to put everything in context: the newest information or great story is just one data point amongst many for your successful and rational decisions. •MJ
store clerks, utility workers, small-business owners, and employees.” When this is all over, Schrad expressed a hope that “perhaps we will finally start to understand patriotism more as cultivating the health and life of your community... Maybe the de-militarization of American patriotism and love of community will be one of the benefits to come out of this whole awful mess.” Yes, it’s important to honor the members of our armed forces and to appreciate their service. But shouldn’t we do the same for those on the frontlines back at home? Those cultivating the health and life of our community – teachers, nurses, caregivers, nonprofit employees, and many more – are not amply compensated in our society. And given the cost of housing locally, their life in Santa Barbara is challenging when there’s no crisis at all. That’s just a fact of life here. As you interact with those on the frontlines of the battle to preserve and protect our community – people working at a grocery store, spending long hours in the County’s Emergency Operations Center, picking up our trash, creating online lessons for our children, or preparing food for takeout as they work to keep a local restaurant afloat – consider inquiring as to how they are holding up. And ask, “How can we help?” And before you are done, you might add, “Thank you for your service.” •MJ
“With the right kind of coaching and determination you can accomplish anything.” – Reese Witherspoon
2 – 9 April 2020
