I had the chance to listen to Dan Heath recently. He’s the coauthor, with his brother Chip, of Switch, a new book about making changes. I’d read their last book, Made to Stick, and thought their conclusions were valuable, so I was looking forward to Dan’s talk.

As I considered the factors he said kept people from altering their behavior, it was almost impossible not to associate them with investing behavior. It doesn’t matter whether you’re talking about smoking, driving too fast, or chasing investment performance. Heath’s message—that knowledge by itself is not nearly enough to instigate change—resonates loudly.

According to Heath, all the detailed spreadsheets in the world won’t get us to change because we face a doing problem, not a thinking problem. As he sees it, we may know the right thing to do (with investing, for example, it’s building a well-diversified, low-cost portfolio). But many of us won’t act.

We’re missing the emotional connection or revelation that will cause us to act. According to Heath, our rational understanding must be aligned with an emotional, motivating message before we’ll make a change. Even then, if our environment throws up a roadblock, like a recession or media hype that says investing is complicated, change will still be difficult, although not impossible.

Switch is worth checking out. Its approach and examples for effecting change, particularly when change is hard, make for interesting reading. I’m going to put in one last piece of advice: Ignore the roadblocks, and act on the principles that costs matter, diversification is critical, and investing is long term. Then couple this action with an emotional sense of why you should care, and you (and your portfolio) will probably be a lot better off.


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