In this episode, we discuss how it is essential to have some stakehold in an activity so that you care about the outcome.
Full Transcript
Hi Everyone, welcome to the You’re Daily Cup of Joe Podcast, with your host Joe Bautista. In this podcast, my goal is to give you quick lessons on how to grow yourself physically, mentally, emotionally, and spiritually so you can have better careers, better relationships, and better personal finances.
I’m also the author of the book “More You Know, More You Grow: How to Get Better Every Day”. In this book, I wrote down over 30 tips to help you grow in those four cornerstones. I’m also the founder of Grow With Joe, where I combine self-development coaching and financial planning for Latino Professionals.
In today’s episode, we’re are going to talk about having skin in the game. Having skin in the game is a great way to keep you accountable and to prevent moral hazard. If you don’t know what moral hazard is, it’s when people have an incentive to indulge in riskier behavior because they know they won’t have to pay for the full cost of the activity.
An example of a moral hazard is driving really fast in a car that has the best crash rating. You know that you have insurance and that you won’t seriously get hurt because the car provides so much protection. This doesn’t apply to everyone but is an example of how someone can take part in riskier behavior because they won’t have to pay for everything.
If you have skin in the game, then you won’t indulge in that riskier behavior. This is why auto insurance companies have deductibles and offer to monitor your driving so you can get a lower rate so that people have an incentive to drive safer.
Also when you have skin in the game, it means that you’re going to care more about the outcome. If money is coming out of your pocket, then you are probably going to care more about the outcome than if you didn’t. If you bought a house, you’re more likely wanting to take care of that house than if you rent it because you have this huge mortgage that you have to think about. If you’re a renter, you probably don’t want to lose your security deposit but losing your security deposit is not as bad as losing your home.
There are always going to be exceptions to the rules but having skin in the game tends to lead to the good behaviors we want to see and get rid of the bad behaviors that we don’t want to see. So if there is a goal that you want to accomplish, try to figure out a have skin in the game. This will help motivate you to stick with the goal when times get tough. There are a couple of websites out there that you put money into a deposit and if you don’t reach your goal, then you lose your deposit.
For example, you might have a goal where you don’t have dessert for a month, then you put $500 into an account that you will get back if you don’t have dessert for a month. Since you’re feeling motivated by not losing $500, you’re going to be more likely to say no to dessert when it is offered or you come across it. The thing with this method is that the pain of losing the money has to be greater than saying yes to the desert. If you only bet $10, then most likely losing that $10 is not going to make a difference in your life, but losing $500 might.
I’ve also heard people also add another component to the $500 where the money is donated to a place that they don’t agree with. If you’re a republican, then that might mean that your $500 would do to the Democratic presidential election and vice versa. I got this idea from a podcast where someone was trying to lose weight and if they didn’t stick to the healthy routine, then he would donate money to Oprah, whom the person didn’t like.
If you’re in an organization, then you want to make sure that people have skin in the game so that they pay attention and care about the outcome. For me, I’m pretty ambitious and when I was working in the Federal Government and in the Marine Corps, I felt that I could work pretty hard and put in long hours, but that didn’t really mean I was getting what I deserved. I just had to wait my time to get promoted, which meant I had to wait for a position to open up, which then meant I needed to wait for someone to retire or for them to transition to another job. There are exceptions to this but from what I was, it was pretty much waiting for something to happen.
I like to stay busy and that’s why I like having my own business. I have an incentive to go out and find people to help with financial planning. I enjoy it because I get to help people overcome financial hurdles while giving them a plan to help them reach their goals, so I feel that I’m not wasting my time by spending the majority of my days on my business. Plus I get paid to help out clients, so the more clients I get, the more I get paid. The more I get paid the closer I can get to my bigger goals down the line of starting my endowment fund and preparing for my retirement. I have a lot of skin in the game when it comes to Grow With Joe and is a big reason why I spend a lot of time on this company.
So if you’re struggling with accomplishing something, try to figure out a way where if you don’t accomplish the thing, then there is going to be a painful penalty for not doing it. For me, I never want to go back to working for a big organization because I love working for myself and the thought of going back to working at a place like the Pentagon just gives me the shivers. So I’m going to make Grow With Joe success and I really do believe that Latinos need more help with financial planning and having the thought if no one steps up, then Latinos are just going to fall further behind financially.
That’s it for today’s episode, and to summarize it, you want to have skin in the game when it comes to your goals and to help you avoid bad behaviors. Skin in the game could be moral, social, or financial ones. Financial ones are the simplest ones to implement, but the strongest skin in the game would be a moral one. If you can figure this out, then you’re going to accomplish a lot of great things and be a pretty amazing person. I know my goals and the type of person I want to be today and in the future and you need to start here first. Once you get this, then you can start to figure out the incentives to help you reach those goals and be the person you want to be.
Thanks for listening today! To get a free copy of my book “More You Know, More You Grow: How to get better every day” just go to my website growwithjoe.me/book and just pay for shipping and handling.
I have a quiz on my website that grades your inner circle, so if you want to find out if your inner circle is an A, B, C, D, or F, you can take that quiz at growwithjoe.me/quiz
I’m also trying to do a feedback Friday episode, so if you have a question that you would like to have my answer on the air, just e-mail me at [email protected]
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Thanks for joining me today and remember if you go with Joe, you can grow with Joe, cause Joe knows Dough.
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