Prof. Ulrike Malmendier iof the University of California, Berkeley on behavior and decision-making

My guest today is Professor Ulvike M&D, who is Professor of Finance and Economics at the University of California, Berkeley. Her research area of focus is the intersection of economics and finance and why and how individuals make decisions, specifically how individuals make mistakes and systematically biased decisions. Welcome Ulvike. Thank you very much for having me. Yes, so thanks for doing this. So I want to start with one of the recent papers which is very topical, Exposure to grocery prices and inflation expectations. You see that we show that consumers rely on the price changes of goods in their position of grocery bundles, then forming expectations about aggregate inflation. We sell analysis uses over representative micro data that uniquely match individual expectations, data information about consumption bundles and item available prices. This is very intuitive for me. Yeah, so inflation expectations, groceries is something that we have to always deal with. You go to the grocery store, you have some memory from the previous visit and as prices change, you use that to set expectations and I remember, I just give the paper Ulvike. I remember you saying there's some sort of gender, not biased, but gender exposure here because females tend to go see more than males and hence they have a different expectation. So what do you find from the data here? Yeah, so you're referring in that last comment to a related paper was the same data we wrote for the proceedings of the National Academy of Sciences, which has also been published since. So, you know, we are starting off from exactly the aspect that seems to be also intuitive to you that the price signals we see in our daily life as we are walking around, doing purchases and so on, they really, you know, these are really price changes that resonate with that, that get anchored in our memory and whether or not they are really big purchases or smaller ones, you know, like the milk and butter purchases in groceries, doesn't matter as much as standard economic models would say and also their predictive value for general inflation trends doesn't matter as much as maybe some rational model of belief formation would say. So what I mean is that when we look at people's bundles of purchases every day and how much the inflation in those bundles was, I mean, focusing on groceries and other items that are on our data, they are strongly predictive of how people think about inflation in general. And when we try to kind of weigh them by how big the purchase was, it was just a few cents or dollars or was it a bigger purchase, doesn't matter as much, it's just more often do you see that price and your brain notice zone that went up again, that went up again. And then the second thing what I meant was how predictive, that second thing is about you know, differences in prices in influencing general inflation trends. So you may know that, you know, groceries are in famously super volatile, they're so volatile that when, you know, the Bureau of Labor Statistics puts together the CPI that measure of inflation, we all use, they actually take out out of the core CPI, they take groceries out because they say it's just noise, it doesn't matter. Well it turns out that that noise is what really influences us. So that's the first thing we wanted to kind of show people and make people more aware of, you can talk all you want about statistics of different components of, you know, the consumption bundle that goes into inflation measures at the end of the day, whatever we see is what matters most to us, whatever we see in our daily lives. And then kind of to, to, you know, move over to the gender specific aspects you alluded to in the end, well, traditionally, you know, I think in think was traditional gender roles, it has been more the woman than the man, the wife, than the husband in heterosexual couples who has been doing the grocery shopping. And we think that helps explain this puzzle which people at the Fed have observed for decades that women are always more pessimistic about inflation. So if you do service about inflation and a lot of their data sets, women always come up, come out as having the inflation expectations up by one or two percent compared to males. And people have always been wondering why is that? Well, from the inside of our papers makes total sense. If you infer inflation from these grocery prices and also knowing that we tend to anchor more on the increases and tend to disregard the decreases, decreases, which other researchers have, I mean, many researchers have shown already, then yeah, it naturally comes out that the grocery shopping women are the ones who would have higher inflation expectations. And indeed, what we're able to show in that last paper is it's not an inherent gender bias. Once you control for who does how much grocery shopping, you see that that's driving the differences, not male versus female for any biological or that reason. Yeah, that makes a lot of sense. So it's an information issue, not a gender bias. And it makes a lot of practical sense, right? So when you look at capital goods like computers and automobiles, there's a lot of quality changes over time. So price is not necessarily a good proxy for inflation. There's groceries are, I mean, tomatoes are tomato, there is a lot of quality change in it. And then I would imagine grocery prices are really a good proxy for inflation, et cetera. Yeah, that's a good point so that we don't have to deal with that issue of where the quality changes and others observable or unobservable and how do you account for them, which you have to deal with and, you know, analyzing computer purchases, for example, that was a great contrast. So for that reason, I think they're an excellent, you know, subject of study. However, I think initially people might have deterred us from study grocery prices. For the very reason I mentioned initially, oh, grocery prices are special, they're super volatile. They don't even enter the core CPI measure. Why are you studying them? Well, it turns out that that might all be true, but it's still what people anchor, you know, the impressions on that's really what gets anchored in their memory. And we should take it seriously for that reason. If the fat, you know, in central banks around the world, um, decision makers are asking themselves how can we influence inflation expectations? All these tricks are this toolbox we have with monetary policy announcement, et cetera. They don't seem to work the way, you know, we want them to work. It's still build up inflation fears or deflationary fears and other times in ways that are disentangled from what we do. And so our message is just look at people's reality. If in their day to day life prices are going up, they will have inflationary fears. And it doesn't matter whether that's a, you know, valid component of the consumption bundle when measuring inflation or not. Their day to day life is what matters. Right. I wondered, uh, or in case a household size was a factor, so, you know, um, when the two people in the house, maybe we do shopping once a month, I don't know, um, maybe, uh, one thirty six weeks, but then you have a lot of people in the home, uh, maybe you do more frequent shopping. Is that a consideration in how people figure out expectations and inflation? Uh, yeah. So we found that the frequency does matter. We're trying to kind of disentangle it ideally from a household size. We, you know, we don't want to be confounded by are you, you know, a two people couple or a couple with four kids, like a six people household, we kind of try to control for these things, but, but you're right. They're related. That's the way, um, you're exactly right that the frequency matters and I have to admit I didn't initially anticipate the direction it would go, although it makes sense exposed. Initially, I thought, oh, these frequent shoppers, they constantly see grocery prices. And so they will be super influenced by the grocery prices. Well, that may be true, but as a result of frequency shopping, you don't see as many increases, right? So like if you go only every four weeks to a big grocery outlet, chances are they're going to be a bunch of bigger increases like day to day, it might not be so much. And since you're kind of averaging in your head, the observed percentage increases roughly speaking, um, it turns out to be the case that these infrequent shoppers tend to see larger price increases on average. And as a result, tend to be, uh, more affected or more biased upwards than that frequent shoppers. Yeah. So say what you're going to do, one of your older people is, it's a different topic. The role of manager of overconfidence. You see a large and growing body of evidence suggests that a substantial share of top corporate excels, exhibited symptoms of overconfidence in their decisions. The main measure of CEO or confidence use here has been the willingness of CEOs to keep their personal wealth. I've diversified by holding stock options under very close to the exploration and other measures to see all confidence and glory, learnings forecast, several response and even psychonetic tests. Yeah, so I can relate to that to this little bit. So I was thinking in a broad sense exercising an optionally is above optimum in a very broad sense. But if you have a lot of your wealth stuck in a single asset, it has a risk concentration and hence that may not be an optimum decision to keep it there. But that's what we find, right, typically. Yeah, exactly. At least for that succent of overconfident managers. I should maybe start one step before go to the nitty gritty you're diving in, which is right on point and say that, as you know, having been at the University of Chicago, the tradition of economics is a very rational one. And when people started to acknowledge that humans are humans and they are subject to biases and make mistakes, and the economic research opened up to that notion mostly with respect to individual consumers, individual investors kind of thinking, okay, these kind of, you know, non-professional decisions, maybe they're affected by biases. But managers, particularly CEOs, I'm studying, they can't be overconfident, they can't have some cost fallacy, et cetera. Otherwise, they wouldn't have been as successful, they wouldn't have climbed the ladder. I mean, that was the logic. And so naturally, I and in my collaborators, we had a really hard time convincing CEOs or other top managers are really overconfident. If you're just trying to look at, you know, what they say, maybe they make forecast and they turn out systematically to be over optimistic, people would say, no, no, no, no, no, they are rational, they knew, that's just this show they have to put on for the investors or the media, I mean, economists are great in finding excuses for, to me, seemingly behavioral, I mean, biases and, you know, saying, no, no, there's some rational story, I'm the line that. So, I really had to go to some indicators of overconfident where the managers kind of put their money where their mouth is. And so, I was looking at their personal financial decisions. And so, in principle, managers who are, you know, running a company, CEOs, should try to diversify, right? They are already getting a lot of stock and option. I mean, like, company value-based compensation for over the value of the human capital is tied to their company, right? If the company goes downhill and they are fired, probably their future opportunities are worse. So, there are lots of reasons to try to diversify. And it turns out that there's a significant subset among very successful managers who don't do that, who, you know, don't sell stock, don't exercise their options early, et cetera. Now, if I just use that, I would again have been in trouble because, you know, the standard brand of rational economic decision making would have said, well, of course, they don't sell stock that would give negative signals. And they are just forced to do that. And, you know, there's, of course, a little value to that. So, looking at stock option was really a great opportunity because these executive stock options we are talking about typically have something like, say, 10-year duration. And then, let's say, it's a four-year-vesting period. And then, say, after year four, at some point you have to exercise. And the market understands, yeah, the guys exercise at some point. There's no like negative inference from that. And so then I could just analyze, does this manager do what, you know, rational portfolio theory would predict, trying to take into account that they're under diversified and how high in the money the options are, et cetera. Or is there a manager which keeps holding on to the option which keeps waiting until the last moment? And can I start inferring maybe that manager thinks the stock price of my company under my glorious leadership will keep increasing. I'm just gonna exercise a little later when the market has finally understood this. And that turned out to be a really good measure. So managers who repeatedly exhibit that type of behavior of postponing, postponing is postponing. I mean, at some point you have to do it. You're right to the option expires. They tend to also, I mean, talk in another confident manner about their firm and make all sorts of decisions which are easily linked to overconfidence. I guess merger decisions, investment decisions of that manager. - But I wonder, you know, there is sort of a wealth effect issue here, there's a tax effect issue here. And so, you know, senior execs perhaps are not really worried about maybe. I mean, once you hit a wealth threshold, maybe they're not that interested. I don't know, I'm just speculating here. And there's a tax effect that the other considered too, right? - Yeah, no, no, exactly. No, these are excellent arguments. So when I first started publishing work on CEO for confidence using that measure. So I think by now I've five, at least five papers published using that type of measure, that's what I've spent a lot of time on. Let's think about the different tax treatment, how it varies depending on when you exercise the option and potentially separately when you actually sell the underlying stock. And let's try to show that the tax differential is either actually non-existent or we can control for that, it still didn't make sense. Well, the fact, let's try to calibrate as well as we can for estimates of their wealth and of their risk inversion. And let's try to fold that in. And there are other things you could bring up. So so maybe, you know, they're just not taking care of their portfolio. As you said, you know, they accumulate enough wealth and they just let it go. So let's try to find data that shows noodle. These, I'm looking at the guys who are actively managing their portfolio, they're doing business portfolio transactions in that very year and still they're not exercising that option. They're thinking about how to optimally invest. So if you look at the originally published papers, the academic papers, you see that about a third to a half of the papers are kind of dealing with each of these arguments. And I think, you know, luckily we got it published in the top journal. So ultimately we were able to convince people, it's not these reasons even though these are good arguments. Intuitively, what I find actually most convincing in that we ended up capturing something that's related to overconfidence. And I should say overconfidence, not in general, just about how much the stock price of your company will increase, how much value you are creating. That's the only thing we are looking at here. Intuitively, what I found most convincing is when I found this is highly correlated with either talking to the press or being characterized in the press as somebody who's confident or optimistic and negatively correlated with somebody who's soft voiced cautious and adjectives like this. So we did a whole textural analysis on how these people are characterized. And the markers of our confidence were highly positively related and the markers of being more, you know, conservative or cautious are highly negatively correlated. So I mean, for me personally, I think that convinces me we found a really good measure for it. Of course, the academics had to be convinced about your type of arguments. And what I think we did. - Yeah, I mean, two things I think about. One is sort of the strategic question, which is if the CEO is very strategic, he could convince the subordinates by his sort of action that they should hold on to their options. I don't know if that's a consideration, right? The other thing is more broadly, you know, when I got out of Chicago, I was told that a manager's objective is to maximize I got a value, what I find in corporations is that objective functions maximizing ego of senior managers. That's not about principal agent issue in corporations too, right? So I don't know holding on to options is sort of an ego boosting thing for agents. I'm not sure, I don't know if you've found any evidence for that. - Yeah, so I think it's actually closely related to what we have to write. These people who are very confident in everything they do and care about being the top manager and being featured on business weeks, cover page, et cetera, and the overconfident managers. I mean, there's a lot of overlap between them. They're not exactly the same. So I've studied the type of, let's say, ego driven or full of themselves managers, maybe a little bit in a separate paper, which is called superstar CEOs. So it's not a one-to-one connection, but I would think they're probably closely related. And if you want to reinterpret our results as saying CEOs, you call overconfident who are investing a lot of their personal wealth in their company and don't diversify. And then they do these decisions, like too many mergers, mergers where they have red flags, but they still pull through against the initial negative reaction of the market and so on. If you want to call them like ego driven managers, I think for a lot of our findings that that would make sense. There's somewhere it's a little less clear. So if you take overconfidence seriously as a concept, so somebody who always thinks, wow, this will turn out really well, this investment project, the market might not fully understand it. The banker who was trying to finance my project is asking me for giving me financing conditions that don't reflect how great my project is. Like this kind of overconfidence, you get additional implications. One is about investment cashflow sensitivity. There's a whole paper about that, how managers whenever an additional dollar comes in think, I have another great project and invested right away. So I think those don't quite I mean I'm not as easy to explain with ego but I don't you know I totally acknowledge your points and two are closely related. Yeah I mean it's really interesting I mean it has a lot of implications for I guess organization structures both composition you know do we really have a good way to measure performance or I think you talk about this you know sort of the the board and the CEO dance that we see corporations they all think alike and you know this it's unclear to me that they're really maximizing checkout of value so I want to go into another paper it's slightly different direction so investor experiences and international capital flows you say we propose a novel explanation for classic international macro puzzles regarding capital flows and portfolio investment which will some more in macro finance models of experience based belief formation. So this is also sort of intuitive so if I remember this correctly early as you know if it's like a cat that fell into hot water remembers all of that bad experiences and then all the future decisions at least on that right. Perfect this is exactly the exact well I might I might steal that from you with with with acknowledgement in future in future talks or write ups exactly so this whole I mean there were a bunch of technical terms in in in how you just describe the paper correct but with experience effects or experience based belief formation with that concept we are trying to capture the fact that circumstances risky situations we have personally lived through in our life so far tend to have a really long lasting effect on our future decision making just like your your cat in the hot water so the initial sample I started studied was not in the international capital flows context but like domestically I I looked at the so-called depression baby so people have lived to the great depression saw stock prices tumble millions of dollars lost in the in the manner of days and what people have been arguing for a while but I think nobody had shown before we did so is that those growing up during the great depression young adults or children youth even tended to be really averse to any stock market investment until the rest of their life so I've been comparing people at age mid 30s to mid 40s across different cohorts and those that experience the great depression were just always much much lower in their stock market participation and and those few invested in the stock market put a lower fraction of the liquid wells into the stock market so great depression was a great you know important example to study but it doesn't need to be as extreme so you can use data basically from the whole 20th century or now some of the of the 21st and and and look at how stock market investment relates to the ups and downs of the stock market in these people's life so far and you get amazing predictive power so that was really interesting to us and since then we've applied it to many settings you can look at inflation expectation what we talked about earlier and related to their lifetime experience of inflation you can look at bond market investment and experience in the bond market housing investment and experience and house prices and then relatively inflation and you always find that sure information I mean abstract knowledge information financial literacy education of course that stuff matters I hope we find its professors are teaching something useful but it's amazing how powerful personal experiences are so I wrote these papers you you mentioned with co-authors from Argentina and they give me an earful about inflation whenever I give them the opportunity to and so a lot of these papers I just mentioned are using domestic data and kind of showing this concept that we humans just carry our history around with that and it's like fairly anchored in our memory it's not going to go away no teaching can do that well that also applies to the international capital market context so if we are thinking about for example international investors coming in investing you know in a foreign market and they do a lot of experience with what's going on in that market as soon as one crisis hit is if their first experience is oh the market in this country is as tooling prices are going down they become very adverse because all the experiences about that and so that explains some of the puzzles which we have been trying to understand why they withdraw so quickly so these puzzles of fickleness and then the different terms formed for that also the whole buy is an equity can be linked to that because though the domestic investors I mean they don't like the crisis I mean they react to that but maybe if I'm a 50-year-old investor I've seen other times I'm not so much moved by that but if the forler comes in just seeing that crisis that's 100% of this experience is just you know the hot water of the cat the crisis the downturn of course they are immediately reacting to it withdrawing so this whole concept of experience effects which is you know catching on I think in economics in many many fields right now is highly relevant I think also for international finance yeah this really interesting or because I was thinking that I mean we had two major stock market shocks maybe three 1987 2008 and more recently in 2020 in 1987 I don't have any money to invest but I remember you know my managers you know talking about this as a major thing and I had no clue what you know I didn't know what stock markets but I was an engineer so I don't know what stock markets were I didn't know you know what this really meant in 2008 I was investing really bad and in 2020 my daughter has a very small 401k you know a few thousand dollars and she was affected by that too you know and so I was wondering in your data do you have to be personally affected for example I have I don't think my behavior changed at all post 1987 stock because I wasn't investing right so it's not really seeing what happens it's really what what happened to you right that affects you yeah so that's exactly right and if you go to the biology of our body and the newer biology of our brains that makes a lot of sense so one thing is to have information passed by right there's stock market up and down and you you know update your beliefs of what can happen in the stock market but you're not emotionally affected by it as soon as you are taking in that information and you are emotionally affected in those cases you mentioned negatively this information gets much more strongly anchored in our in our brains and there's really cool scientific evidence on how you know say the firing between whatever neuron is firing in response to negative stock market news and and and the connection to another you know neuron this the synapse how if that's repeatedly happening how that connection gets strengthened strengthened and they are this concept of long-term potentiation explaining why these effects are so long lasting and emotion really matters for that so as a result we can totally understand why you're acted much more to the more recent financial crisis and then your daughter recently as she started building up her own for 1k now it doesn't exclude though that events that don't affect you personally also leave an imprint so for example when I looked at how unemployment experiences affect consumers so they tend to scar consumers so somebody who has gone through unemployment and difficulties earning money even years later say when he or she is at the stage race earning the same as some other person who didn't have that experience that that one with the experience will remain the more cautious more you know careful spender compared to that second hypothetical person and it is the personal experience that matters most exactly as you said really are personally affected and lived through fear or positively actually so joy in in good circumstances but what happens around you can matter too so if you live in an area that's a lot affected regionally by high unemployment rates I remember the financial crisis 2078 here in Berkeley a lot of shops were closing I knew people who are having difficulty you know that can also affect you emotionally so you can see how that matters even if you're not yet personally investing in the market and I do think by the way that's true for the famous depression babies example I mean it was all over the news and I think a lot of people were fearful even if they weren't investing yeah I mean it's really interesting I mean I think you talk about either this paper somewhere else that your brain actually changes little bit so we had a lot of neuroscientists on the show and you know I think this is a very interesting cross section intersection I should say I should say of economics and neuroscience right you know the cycles your neurons go through [BLANK_AUDIO] have a reinforcing effect and you know in some shows we talked about neurons having a personality in itself right you know then you fire how do you fire what what do you fire by all really sort of makes that neuron not think per se but act in a way that is sort of predictable in the future right so there's a hysteresis sort of loop in there and so so in your data do you see do you see if you went through multiple cycles unemployment is a good good thing so you went through multiple cycles of unemployment are you a different person can't be somebody who just lost a job in a nurse job and you know found another job yes exactly so I I would say even a person who runs this is a job is a different person after that I think having gone through that you got the papers you had to leave a go through that experience changes you so even for that one person I would say that we economists who would say oh let's look at the income stream pretty good pretty good he got laid off but immediately found a new job pretty good pretty good again everything is good we economists should be careful we should be much more actively take advantage of the fact that we have such good data on their past experiences by now and use it I think even for that person it will matter but surely the second person hypothetical person who has experienced it over and over again will have this connection like strengthen that oh job fear unemployment there's some news about unemployment you hear about somebody else using the job it will immediately trigger you know like emotions of fear and your decision-making will be affected your happiness will be affected and that's not something we economists should be ignoring in some sense the traditional economic model is very much one where you know you're born with certain preferences let's say in certain brain structure if you want to to stay in euro and then you kind of you know you learn information you observe things around you so you're updating your beliefs your views of the world and no Chicago style you might do that in a very rational manner but even you know behavioral economists who is like me would say still true you're born with that brain and you're updating and maybe you're making systematic mistakes you're overconfident and so on but but that's it you are who you are and that's of course so untrue right biology neurobiology tells us the brain is a you know I think as new psychologists say use dependent organ a cultural organ it evolves in response to what we see and if we see it repeatedly certain reactions will be strengthened and you tend to go to them immediately and there's nothing to do with abstract we learned information so we could change economics into a science that incorporates that in every single analysis we are doing I think it would make us better predictors of human behavior yeah I really like this uh or a case I want to take a quick policy detour um and so I'm a big fan of minimum guaranteed income and I wonder if there is sort of a foundational um safety net and I'm thinking um you know the Scandinavian countries um and and other systems where the safety net is pretty robust um they're the psychological scars that you talk about in the brain I would imagine is are not lower and and I wonder you know what the what sort of the long term implications in the US we have the other extreme right I mean everybody is for himself or herself so to speak right and you know there's a real psychological scars that build up in your brain that changes you over time so what's the what's the policy uh you know that beginning back here wow so the policy with respect to uh having a guaranteed minimum income level that's really interesting I hadn't thought through that um I would subscribe to everything you just said so when we economists thinking from a more traditional neoclassical perspective deal with um um the question of you know how about guaranteed at minimum income then we you know we think about things like well it will lower incentives to look for a job on the other hand you know there's you know there are uncertainties or you might be hit with a big shock that may completely throw you off so it might be good to bring we have a trade of these traditional kind of economic considerations but the fact that living through one of the really severe scenarios of how your life could turn out if you lose your job you don't have enough money to put you know food on the table and and deal with basic needs of yourself and of your family that this makes you into a different person is something that hasn't quite entered the debate I mean at least on our you know economist side I think maybe the sociologist so ahead of us the psychologist but on the economic side I've not seen much of it and you are entirely right um we would predict that a person was lived through these kind of scarring experiences of losing a job not being able to get it not being able to you know um provide for their family uh they become very risk averse they might not take advantage of career and job development opportunities maybe opportunities related to um applying somewhere else even voluntarily leaving your job um which say a clearly dominant hypothetically right suppose you're in a dying industry and you should rest switch but you may become this very risk averse person who's just holding on to what they have for now and are not able to you know be the most productive member of society they could be and clearly not the happiest member of society um they could be um so uh yeah I completely embrace your your point here I have to think through that much more about this has very strong implications for basically the social safety whether it's minimum income or otherwise we want to provide to people so that this stress level never builds up to this almost traumatic experience um they have yeah so so we have a few more papers or we may not get to the I don't know if you have a card uh star so so I just want to push push on this uh just a little bit um and maybe we can come back for another session if it's scheduled to allow so it's a going back to what we're talking about there's also some initial conditions questions so if you start at a point where the probability of going through these cycles are higher because you just don't have good initial conditions uh we had a recent prison who said I was given just a few million dollars and look what I have done uh is a total lack of understanding right of of society functions so with bad initial conditions then that also has a huge impact right on very enough exactly um so there are some aspects um which have been studied a lot by economists I think not quite with the awareness of this uh how you know notion of how experiences scarier which we have been discussing but for example if you look at people who started off their um their experience as as as a wage earner their experience in in work-life at times that that were really crisis experiences for example graduating into that great recession of 2007 to 2008 you mentioned earlier um people have found that kind of for years after they are kind of not catching up they're making different job choices they just tend to be different people than the type of people who graduated into a boom and so that's exactly to your point that this initial conditions one said seem to have a huge influence on you and um alter pretty much the life path you're taking um from then on and um I think that um the way to think about it is that as you're entering um whether it's the labor market in my case or the financial the world of financial investment as you're earning money um the first experience is coming in at this point 100% of your experience so they will super strongly affect you I mean a 50 year person is also not happy when the financial crisis hits right but that person has seen you know 49 other years or whenever when they start being away of it which were different and knows that's not all of how the world runs and and that young person said it's just being seen this and as a result in all of my empirical applications all of my data analysis I found exactly what you said earlier that it's particularly the young people who haven't seen much else who seem to be most shaped by these types of shocks yeah we are just thinking of reggae there's um humans homo sapiens are about downside risk management right um we don't want to be eaten by a tiger or a lion for 100,000 years and in the last few thousand years we had other objective functions so automatically it's about downside risk management and when you go through the shocks you you really you know sort of rewinding time back to say I don't want to be there anymore so so so you you are risker words you're much more risker words as you mentioned when you get a job, maybe there's a sub-optimum job, you don't want to switch jobs because the last experience was really bad. And so we have potentially a population who are sub-optimally deployed because of the shocks that we have gone through, right? I mean, COVID is another good example of this. Now, you know, when we come out of this, they never come out of this. I wonder how society is going to be? Yeah, so that's a very good point. So one of the messages I always like to convey when I talk about experience effect is that they provide an additional angle or perspective on the effects of crises. So as policymakers, we may often think, okay, we're in the crisis and let's get out of it. But, you know, we're maybe willing to pay up to certain costs and beyond that's not worth it. We're not going to save Lehman Brothers, but we're going to save some other bank. And, you know, in terms of pure monetary calculations, that may make sense at the time. However, what I feel is often not taken into account is by letting these crises be stronger or letting it go on, you're going to strongly affect whole sets of the population. In the long run, even when, you know, five years later, it's fixed. We're in the same state. We were prior to the crisis. It's wrong to assume that these people are the same people. They make different choices now. And, as you suggested, might potentially be employed suboptimally. So in other words, this notion of experience effect gives an additional justification for pouring in money when crisis hits, for providing additional safety nets, et cetera. Because if you don't, you're going to alter people severely. And they may make choices that will harm, I mean, even pure monetary terms, harm the economy much more than the alternative. So I hope this will enter people thinking much more. Now, I do want to say though that sometimes, you know, this notion of experience effects can be a little bit fatalistic, fatalistic. If you want, you know, you're hit with these crisis experience. Now you're an altered person too bad for you. You know, you're going to make these suboptimal decisions from now on. Well, the good news is that, you know, today's decision and choice is tomorrow's past experience. So once we have, you know, gotten awareness of, okay, these are the kind of people we are, we're very adverse to taking risks, et cetera, like, say the depression babies, you know, I know everything about the equity premium puzzle. I should invest in the stock market, but the kind of person who doesn't do that at this bad experience. Well, if you want to change it, you can. I mean, don't put immediately all your money in the stock market, but maybe take $100, see how it feels, you know, such a little touchy feeling here, but literally, as a finance professor, I would say, you know, do that. See how it feels, get, you know, mentally, emotionally on board with it and accumulate, you know, experiences which are bound to be less negative than the great depression experience and slowly build up a more positive outlook. So I hope that this increased awareness of how past crises can scars also give us the tools to kind of try to actively address it and kind of work around it and a little bit like cognitive behavioral therapy, you know, in psychology. So you confront yourself at the same situation again, but make more positive experiences and, you know, you can shape yourself if you like to. Yeah, we can have a whole another show on that one. So I know that you have to go. So I hope you can come back and we can talk about your other papers, but this has been great. Thanks so much for spending time with me. You're welcome. I had a lot of fun and great points, which I will also keep mulling over, so I really enjoyed it. Thank you. Bye. Bye.