Episode 262: Francisco Gomes: Consumption and Portfolio Choice over the Life Cycle

26:24And if you time it right, not too long. Okay. So we don't know how long we're going to live for. And that's a big thing. I can save gradually to make sure money lasts for a long time. But then if I die early, that money went unused. And if I run out quickly and I live longer, then it's great. I'm living longer, but I'm really suffering in those last years. So those are two important things. And then, of course, there's another maybe more complex part or more tricky part. If we think about leaving bequests for our loved ones or someone else, we have to think about what are the best vehicles for doing that in terms of tax reasons and when they're going to get access to funds and all that.

27:04That's a different type of optimization there, essentially. How important is hedging longevity risk to retirement portfolios? Very, very important. This is what we're talking about. I mean, if we just don't know how long we're going to live, if we end up thinking we're going to live until age 85, time to run everything down until age 85. Then if I live until age 90, I mean, that's five years. That's a lot to finance at a time in my life where it's very hard for me to earn any extra income. When I'm 85, I'm not going to find a job. I'm not going to be able to just earn new income. So in that sense, I want to be cautious.

27:37But if we're too cautious, again, if suppose I save, okay, let me then plan for 90. and then I end up dying at 75. You know, hey, I could have had twice as many vacations or whatever. And the money goes unused. So longevity risk is a big problem. And hedging is important. There's this financial instrument exactly designed for that, which are annuities, right? So annuities is a financial product that is exactly designed to hedge longevity risk. Annuity is a financial product that you buy it and then it pays you a regular payment every year as long as you're alive. So you exactly converted your money into a stream of payments, pays exactly while you're alive.

28:11It doesn't stop before, it doesn't stop any longer. So if you live longer, the payments continue perfectly, essentially. So annuities should be an important part of the portfolio of all retirees. And in fact, if you want to be even more financially sophisticated, I would say you probably might even want to start thinking about deferred annuities even during working life. So annuities allow you to hedge this longevity risk when you retire. So I have a pot of money. I don't know how long I'm going to live. I'm going to convert a fraction of that into an annuity. So I'm guaranteed I have that payment during retirement.

28:40So I kind of manage this allocation of wealth over retirement. But when I'm saving, when I'm 30, 40, whatever, and I need to think about how much do I need to save for retirement, I have the same problem back then. I do think how much do I need to save for retirement depends on how many years I think I'm going to live in retirement, right? So I haven't kind of hedged longevity risk yet. I can sort of do it by what is called a deferred annuity, which is basically an annuity that starts paying off at a deferred date, say the retirement date. So if I want to be even more sophisticated, I can already start investing some of my money in these deferred annuities and start kind of already hedging a little bit of that risk early in life and making financial planning easier even before retirement, essentially.

29:20We agree that all makes sense. But we have this thing, of course, that you know about called the annuity puzzle. Why do you think annuity uptake is low? A lot of reasons there. So for low-income households, it's not so much an issue because low-income households have social security. So we all have social security. Social Security is an annuity, right? Social Security is exactly that way I described it. It pays us money every year as long as we're alive. So we already have that annuity. For low-income households, Social Security has a high replacement rate relative to your previous income, meaning you get a very high fraction of your pre-retirement income.

29:50So you already have a high level of annuitization there. So you don't need necessarily more. Historically, a lot of people are also enrolled in defined benefit pension funds in most countries. In several countries, they still are, right? So that's also an annuity because that's also going to give you a payment when you're retired. So for historically and in several countries for middle income households, you're also kind of largely covered with annuities to some extent. Now, of course, again, countries are moved to defined contribution. That's no longer the case. And as you move beyond that, it's no longer the case as well.

30:21So the issue, a lot of issues, you know, relates to fees. For example, annuities are expensive and particularly variable annuities are expensive. So what do we mean by this? I can buy an annuity that is called a fixed annuity, a fixed payment annuity, which means it's just going to give me a fixed payment every year. But what gives me a fixed payment every year? Well, it's investing in a riskless bond, right? That's what gives me a fixed payment every year. So effective variable annuity is like a position in a fixed bond. It's going to give me kind of that return in a sense. That's how the annuity provider is going to price it to me.

30:51So that's effectively the return I'm getting. So if I put everything in this fixed payment annuities, I'm basically going to the equivalent of having like this low return on the riskless asset, which is, we already said, is very suboptimal and puts this huge pressure on my savings if I'm owning that low return. So ideally, when I'm retired, I want to continue having exposure to the stock market. For that, I can buy a variable annuity, variable annuities in which payments are, say, linked to a basket of stocks, for example, the S &P 500 or something like that. And it pays related to that and continues to give me that exposure.

31:22That's great. Those, unfortunately, have fees. And actually, often have fees unnecessarily or kind of prying a little bit on or high fees and necessarily kind of taking advantage a little bit of some of our behavioral biases or fears because a lot of these annuities, for example, what they have is something like a minimum return guarantee. Say, okay, you're retired, so we're going to give you the S &P 500, but we give you a floor of, say, zero, for example. So you can't lose. The return can be less than zero. Now, return for giving you a floor, of course, we have to take a fee. That's like giving you the index plus a put option, right?

31:55So we have to charge you for that put option. which you can't have yourself because you can't manage that position. You can't buy a long day to put option anyway. So we're going to charge you a fee. And those fees, every time you kind of go and price these things, you see that the implicit value of that put option is just gigantic, basically. So to have kind of that open portfolio, continue to have that equity exposure at retirement, you typically have to pay a lot for it, essentially. So you kind of have that trade-off. Do I want to kind of annuitize more or do I want to kind of pay these fees?

32:24And then the other issue, of course, is if I annuitize everything and then something happens and I have a big expenditure shock, then I don't have money for that. So there's only so much we kind of want to annuitize. So there's a combination of these factors, but as you pointed out, it's called annuity puzzle for a reason. So when we put all these things into models, we can't fully explain it yet. So there's certainly more to it than what I'm saying. Absolutely. Interesting. I like those comments on the variable annuities with the floors and stuff like that. We did an episode not too long ago on structured products and I think made a lot of the same points.

32:56Okay. Yeah, absolutely. Who was it, by the way? That was just us. We alternate between guests and just us talking about stuff. Okay. Cool, cool, cool. So Francisco, you mentioned limited stock market participation. Can you talk about how stock market participation changes over the life cycle? Yeah. So it starts by being relatively moderate because early in life, we just don't have that much wealth. So we're not going to invest too much into the stock market just yet. Then it increases sort of rapidly until age like 40 as people start accumulating wealth and start saving for retirement. And that is even more the case if you start focusing on people who actually have defined contribution pension plans, because obviously there you typically automatically become enrolled in a pension plan that these days, most cases, the default has some equity exposure.

33:41And then it pretty much stays flat until sort of retirement. And after retirement, then it starts dropping. As people start using up their wealth or people kind of converts, are too worried about the risk of retirement and become good, more conservative portfolios, starting with people kind of decreasing their participation in the stock market. So related, how do wealth and human capital affect stock market participation? Both positively. So the more human capital we have, the more risks we can afford to take. So you find an uptick in participation when you have more human capital. But the bigger one is by far wealth.

34:16I mean, if you want to think about what's the biggest thing that explains participation in any cross-section, in any data you look at, it's just wealth. That's a variable that just jumps 100 times more than anything else. So the more wealth we have, the more incentive we have to learn about different investments or learn how to allocate that wealth, the more cost-effective it is to hire financial advisors or wealth managers or things like that. So wealth has a strong, strong positive impact on participation. Interesting. Okay. So that would support the comments you made earlier about the costs of participation being what prohibits people with lower wealth from participating.

34:51Exactly. Exactly. Interesting. Okay. I want to move on to an incredible paper that you did on automation and wealth dispersion that I think touches on a lot of the points that we've been covering. So what effect does automation at the workplace have on household wealth accumulation? So in that paper, we find that exposure to automation. So if you look at workers in industries, they have higher exposure to automation, lower exposure to automation, kind of compare differential. We find that if you say group one third highest exposure, one third lowest exposure, the difference in the growth rate of wealth is about 2.5 % per year.

35:26So that's huge. That's a very, very large difference in wealth accumulation over time for the ones who have more and lower exposure to automation. So it's a very big impact. How do you measure exposure to automation? So we have the data set that kind of sees the number of robots that get added and we kind of figure out exactly how much each industry has. So it's industry by industry, basically. So we don't have exactly kind of this occupation that's replaced versus that occupation that's replaced. But you see in this industry, more automation came in, more jobs got displaced versus that industry, which is why we're talking about grouping workers.

36:01They're working in industries with higher displacement versus workers that work in industries with lower displacement, basically. Through what channels does automation affect wealth accumulation? So the main one is income, right? As we get displaced and we end up losing jobs. But the thing we bring up, the point we bring up in this paper is sort of a novel channel people haven't looked at, which is a portfolio relocation channel, which is the idea that workers who are in industries with higher displacement risk due to automation, they're actually going to change their portfolio location. They become more conservative.

36:32They're more likely to exit the stock market. They are more likely to move to more conservative portfolios. and that means a lower return on their wealth. That lower return on their wealth means, well, less wealth going forward and it's a non-trivial component of the differences in wealth and inflation that you actually find. That's incredible. That's like the buffer stock conversation we had earlier, whether human capital gets riskier because of displacement of risk and that's why they changed their portfolio. Is that kind of the idea? Yeah, absolutely. That's why it's kind of a nice application of what we've discussed before into this context.

37:01It's kind of sort of a nice, okay, let's bring this to this channel. I think it's going to be operative here and we think can be a significant channel. And it was there in the data, we found that it was, and we're happy to discover that. So in one sense, it makes a contribution to this particular study, this particular literature, and it also goes back to kind of making a contribution in terms of kind of providing evidence of these background risks in this context. So it kind of, you know, sort of if you want, sheds light on both literatures. So how much of the effect is explained by changes in household portfolios in response to the automation?

37:32We find it's about one sixth of the fact, which is big enough to be important. And of course, you'd expect income to be the major one. So if it was more than that, we would probably look at it for much more than that. We'd certainly look many, many times at the data and see, okay, we must be missing something. But yeah, it's large enough to be quite important. That's incredible. So people more exposed to automation, they're going to be affected by their income being reduced or lost. But one sixth of the difference in wealth accumulation is explained by changes in portfolio allocation as opposed to changes in income.

38:04Exactly. Exactly. That's incredible. That's an incredible finding. Thank you. Really interesting and surprising. How does education level affect the interaction between automation and wealth? So we talked before about how this is a world where it's becoming harder and harder to know about a lot of things, where if we want to be good at our job, we have to keep specializing and specialize because every task, everything just becomes more and more complex. So workers are becoming more and more specialized. And unfortunately, that means we're becoming more and more vulnerable to displacement shocks.

38:36You know, some new technology comes, automation affects a particular industry or a particular job, and suddenly some tasks become obsolete, or sometimes even the whole sectors can become obsolete. And so that's a bigger risk that we're facing these days, essentially, as we become much more and more specialized. And so that's exactly what we find, that workers that have human capital is less transferable across industries as proxied by having education is above the average within your industry. And those are less affected because they can sort of reallocate more easily to another job, to another industry when automation comes.

39:10Those that have less transferability of human capital, those that get hit the most, essentially. So education makes human capital more transferable. What makes it less transferable? Is it just lack of education or are there other factors there? Lack of education. I mean, I guess the type of industry that you're in, you know, the certain industries by the way have knowledge that is more transferable than others. So in that sense, I mean, it depends on the tasks and depends on the industries. And if you're a secretary, you can be a secretary in many different industries. You know, if you're a secretary in IT, IT disappears, fine.

39:43You can only be a secretary in a bank. So it depends a little bit on the tasks, basically, that you're on. Given this information, how should households respond to automation at work? So we talked before about investing in a broad, diversified stock market index, diversifying financial wealth. Well, this says that we should diversify our professional skills as well. Try not to have all our eggs in one basket. You know, it's great to be coming better and better and better at our job, but it's always good to broaden our skills, to keep refreshing our skills and to keep our options open, to keep our human capital valuable and resilient to these shocks.

40:17So, you know, if it's too costly to continue taking, you know, courses, of course, in terms of either money or time or whatever, just read books, tutorials, listen to fantastic podcasts like the one you guys have. Just try and get knowledge on different areas more and more and get ourselves more resilient to all these shocks. I'd say that's a strong message that comes across. That's a huge takeaway and having empirical support. That's kind of a thing that I think a lot of people recognize that is probably a good thing to do, but having this type of empirical support for it. I find this paper to be mind-blowing personally.

40:51Thank you. I appreciate it. This next paper is actually also mind-blowing. This one, you looked at how household expectations change based on changes to finance. How do changes in someone's financial situation affect their expectations about the future? We have evidence in many different concepts. People tend to be what we call extrapolators. If you see too much of something, you think that that's going to continue. I mentioned before the mutual fund case. You know, people see mutual fund doing well for two, three years, then the money pours into it because they think it's going to continue doing well.

41:21So that's what we call kind of extrapolation. It doesn't happen in all settings. Actually, in our setting, it doesn't happen always. But it's sort of fairly common in our general rule. Here, we look at individuals' expectations of their financial situation. And we find that although individuals extrapolate when income increases, so they expect it to increase again, or extrapolate when the expenditures increase, they expect it to tend to increase again or the expenditures decreased expect them to decrease again when it comes to income drops when the income falls is the opposite people actually expect a reversal expect income to recover which to some extent is fine because that's typically the nature of things you know we get unemployed can't get any lower typically so income should rebound the problem that we find is that people expect it to happen too quickly and too much so So people expect that recovery to take place too quickly relative to what it's observed in the data.

42:15Essentially, that's the concern. So what characteristics affect how an individual responds to a change in their finances? So basically, it's the type of shock and the nature of the shock. So if you think about this two-by-two matrix, it's like income expenditure and an increase decrease. So we find extrapolation across all except in that box of income and decrease. There, we find this expectation of reversal, basically. How accurate are the expectations that individuals form based on their current experience? Well, unfortunately, they're all exaggerated. Take any point on this box, and it's all too much.

42:49When they expect extrapolation, they expect it too much. If your income increases, people tend to expect to increase too much relative to, again, in the future, relative to what we're actually observing the data. As I mentioned, when the income drops and people expect to revert, they expect to revert too quickly or too much relative to what is in the data. They exaggerate in all dimensions, basically. And how do personal experiences affect optimism or pessimism about the future? There's this strand of research that shows that kind of suffering or going through some real salient events kind of stays with us and sort of shapes our beliefs going forward.

43:23So for example, if you live through a big recession and you tend to be more pessimistic about employment outcomes, if you live through a period of high inflation, you tend to be more worried about hedging increase in inflation. If you live through a stock market crash, you're less likely to participate in the stock market. And here we find the same. We find people who lived through long recessions, periods in the past, and they're more pessimistic about changes in income going forward, essentially. Beliefs kind of run employment spells and so on. They tend to on average, compared with everybody else, they tend to have more pessimistic beliefs, essentially.

43:54Interesting. So households have these expectation errors. What are the impacts on their future finances? So that's basically where we kind of take the second part of the paper, because focusing on this idea that if your income drops you expect to revert too quickly how bad is that well when if our income drops what are supposed to do what a normal optimization model say well that's why we save that buffer stock of wealth that's why you had it to ensure this drops in income so tap onto it use that money to kind of smooth your consumption so you don't have a big drop in consumption or maybe in some extreme cases you know even borrow a little bit and then repay that later on on your income rebounds but how much should you borrow and how quickly should you deplete that buffer stock depends of course on how long your income is going to stay low for if it's a small period then you can deplete a lot because you're going to be back or you can borrow and you're going to pay quickly if that's what households think that's what they do and that's what we observe basically them decreasing their savings and increasing their borrowing but since income doesn't rebound that quickly then you might easily find yourself in a situation next year again you need to deplete your savings but you don't have them anymore, or you need to repay your loan, but you can't afford it.

45:06And in worst cases, that can lead to the usual concerns of debt spirals, or now you have to repay your debt plus the interest and just get in a really bad situation there. What are the lessons from this research for households thinking about the future after a change in their financial situation? Well, the main lesson I'd say is don't take the future for granted. That's basically, don't think income is going to grow until it actually grows. Don't take that promotion, that new job, coming out of the unemployment spell, the reduction in mortgage payments, whatever it is. To use the old expression, don't count your chickens before the eggs are hatched.

45:40Be prudent before you got thinking about how the future is going to be great and so on. Incredible. All this stuff is so relevant to financial planning. Although in finance, you call it household finance, we call it financial planning, but they're the same thing in a lot of ways. Why is it important to the study of finance to understand all the stuff we're talking about, how households make financial decisions? So households are key to any economy. We can think of economies where banks don't really matter. We can think of economies where capital markets don't really matter. We can think of economies where pension funds don't really matter.

46:15But you can think of an economy where households are not there and they're not key. So they're not the lifeblood of any economy. You know, two-thirds of GDP is private consumption. So households save more or less or consume more or less. Recession, expansion, follow. So, you know, how households allocate their savings determines who gets capital, who gets funding in the economy. So it determines the cost of borrowing for governments, determines the cost of capital for firms. So all of that comes from that's a supply of funds for anybody in the economy. So understanding that is obviously very important.

46:44That's kind of from a macro side. But then, of course, you can think of, you know, micro side and like what determines wealth inequality? How much risk sharing is there? We talked about retirement savings. Are households saving for retirement? which percentage is saving well, which percentage is not saving enough. If not, should we do something about it? And what's the best way of changing that? Are households prepared in case interest rates go up or have they borrowed too much and borrowed too much at floating rates? Are households prepared if a recession hits or have they have enough buffer stock that we talked about?

47:13So that's going to determine what happens if we change taxes, if we change government expenditures. So for all of those things, you know, households are crucial. You know, and understanding households is, I would say, the number one thing we should do as economists, of course, I'm biased. But that's my take, basically. Yeah. So why has household finance taken off as a field of study in relative recent history? So I'd say a combination of three reasons. One is data. We can write models, whatever we want. But if we really don't have data, we're writing models mostly for the sake of writing models.

47:48So now we have a lot of data. We're studying more and more and more and more data that allows us to look at a lot of issues we couldn't look at before, allows us to learn new things that we hadn't learned before. So that's been a major revolution in household finance, the amount of data available in the last couple of decades or so. The second is the fact that households have become more and more important in the economy. Talking about this transition from defined benefit to defined contribution links exactly to what I was talking about before. Now households are much more directly responsible through their decisions about how capital gets allocated in the economy.

48:20and so the cost of capital companies boring for governments etc and the third one is kind of related to that you know now households care more you know if i have a social security if i benefit pension fund then 80 of people don't need to think about how to save just a little buffer stock of wealth that's how much you're going to have throughout your life that's it you know just rich people need a wealth manager and that's it now all of us need to think about oh my god how much do i need to save for retirement where do i put my money in addition to of course other things We always had thought about how to get a mortgage and things like that, but there's just more and more financial decisions that we have to do as individuals.

48:55In a way, houses are now more important, both for policymakers and for regulators. There's just a lot of data out there, basically. This combination just made the field explode, and that's fantastic. We talked earlier about simplifying down the lifecycle model to make it more practically useful for people. How do you think that the study of household finance more generally is best applied to improving outcomes for households? Oh, I think kind of exactly what you touched. So on one hand, we're going to need to be solving more and more complex models all the time because we want to incorporate all the different things.

49:25But we have to translate them into these simple rules of thumb that people can understand and people can follow. Otherwise, it's just not going to work. Otherwise, we're just writing these models. I know maybe they can get published, but it's not going to have an impact. So I have to understand most people know a little about finance, just like most people know a little about law, about engineering, about plumbing, about whatever it is. So we have to be able to convey these messages in a way that they're simple rules, simple guidelines that one can understand. And I think we haven't – some people are amazing at that.

49:59There are several academies I totally admire because they're really amazing at that and they've been doing a fantastic job in that. But in general as a profession, I think we're lagging. I think we're not doing a good job of that. And I think we need to do better. That's so interesting. So it's like, there are a ton of bad rules of thumb out there made by non-economists, I guess, but now economists have to make some good rules of thumb that are actually useful for people. We talked to James Choi recently and he called this - Oh, he's one of those I was thinking when I was thinking that I admire.

50:26James, James is amazing. James is fantastic. We had a great conversation with him, but he called this practical finance. He wants to make that into a field. Yeah, absolutely. I mean, James, yeah, I always love reading James's papers and seeing what he's doing. He's now started teaching this amazing personal finance course at Yale that he's a fantastic guy. Yeah, absolutely. How do peer effects influence household financial behavior? So peer effects, that's one of the great things that we can now study with all this data. Now we have data, no one tells us how people are connected on Facebook and neighbors and coworkers and so on.

51:00And we found strong evidence that peer effects matter quite a bit, that people learn a lot or copy a lot in their peers. So if your co-workers are more likely to take on that default 401k allocation, you're more likely to do the same. If your neighbors are more likely to invest in the stock market, you're more likely to invest in the stock market as well. So we see copying kind of from all these channels, neighbors, co-workers, social connections, and just explains a lot of effects. It's not second order. Which comes in line with this idea that people are not experts in all these things. So you kind of follow different rules, you know, and okay, these people are doing this and it seems to make sense for them.

51:39And of course, sometimes in the right way, sometimes in the wrong way, sometimes, you know, this person is not saving for retirement. It seems happy. Let me do the same. Well, of course you haven't seen what's going on when that person retires. So sometimes the copying is good. Sometimes it's bad. So I'm not saying it's good, but it's in line with this idea that people are kind of grasping at getting information from anywhere pretty much. What about culture? How does that affect behavior? It also matters. So naturally, we kind of carry our culture with us in many settings. And now we have evidence that financial decisions are also impacted by our culture.

52:11So if you look at sort of immigrants from countries with high savings culture, they'll typically save more than the locals. If you look at immigrants from countries which have a bigger trust in the financial system, they're more likely to invest in the stock market. So we find that actually this cultural phenomenon actually matter also in the financial domain, which is sort of another cool set of results that people have been able to kind of identify with this in more recent times. That is very cool. What role do you see for financial advice in improving the finances of households? So the potential is huge for the reasons we discussed before.

52:43So, you know, we don't fix our plumbing. We have the plumber. We don't learn medicine. We have the doctor. So a lot of people don't know about finance or don't care or don't want to learn about finance. They want to be able to delegate to somebody. So the financial advisors can have an important role. Traditionally, of course, problems there is, you know, a lot of them are not independent financial advisors. There's issues of conflict of interest. Those things have been improved in terms of what they have to disclose and the fees they have to charge. So things are getting better. But the potential in general for advising individuals is huge.

53:12But in fact, I'll go even one step further. I would say, you know, we should even start at even an earlier stage. which one thing I've always argued is that we should be teaching personal finance at high school. You know, high school is the point where everybody can learn about these things very easily. I mean, these are not complicated things if you explain them in a course, these simple rules. And just think about what it means if you teach people already when they start their life about the importance of saving for retirement, how much is to save for retirement, what's a mortgage and how you handle a mortgage, how you manage your credit card debt, the different types of insurance.

53:48I mean, the difference that it can make to people's lives is just huge. I think everybody should be learning these things in high school. That's one thing that I know I've been arguing for a long time, basically. Interesting. When did you start teaching a personal finance course? The personal finance course actually is something I only started teaching about five years ago because I'm in a business school where we don't have an undergraduate degree. So we only have MBAs in business education courses. So personal finance traditionally was not part of that curriculum in pretty much any business school.

54:17but actually now even in business schools you actually start having more and more business schools or personal finance courses are actually part of the curriculum there as well so and at lbs we also started having one so yeah so that's been a good development interesting yeah we've talked to a lot of john campbell's doing one at harvard james choy at yale anna maria lusardi has one this seems like a lot of people we're talking to are teaching these courses now really interesting what are you most excited about in your research right now everything just kidding but you know so one of the advantages of being an academic is that you know we choose what we work on so we better be excited about it otherwise we chose something wrong so i'm excited about different things so and so for example i have this project that i think is quite cool with pgc of mine oxana smirnova where we we address actually a long-standing problem in household finance which is an empirical problem in household finance which is basically finding out what's kind of the shape of stock market participation over the life cycle or risky share of the life cycle which we would think is kind of one of the basic things we need to kind of get right to get to calibrate the models and figure out what things do but there's some technical problems in estimating these things and so therefore people have struggled with kind of coming up with precise answers and we have sort of a somewhat technical contribution there to kind of address this question that has been there kind of since i started getting interested in this topic so that's quite something quite excited about another one that it's actually quite excited about because maps into this idea we talked about having impact and talking about things that actually matter to people's real lives is not a project with a former phd student of mine nuno clara who's at at Duke University and Michael Botros is actually at Bank of Canada, where we look at simple modifications to student debt contracts and that you can implement, which we find generate welfare gains that are pretty much on par with the welfare gains that you get from the current debt forgiveness proposed by the Biden administration without having any fiscal implication at all, and while actually also reducing default rates on student loans.

56:09So a simple set of modifications that we just proposed, run for the models, look at all the simulation outcomes, do the whole evaluations and come up with that. So that's another one that I'm quite excited about. A few others now. I have two others which are now at the NBR meetings are like the main meetings. So actually right now I have a bunch of stuff going on, which is cool, but it's a little bit overwhelming, but good. Our final question for you, Francisco, how do you define success in your own life? Success in my own life? i guess the same as everybody else you know like being happy whatever whatever happy means you know you kind of have you know family love have great friends have a job that you like and do that i mean that's those are i guess the things you know it's too late to ask for hair so you know so the rest i guess those are i guess it's probably the same for everybody i'd imagine oh it's always a different answer i think that was a good answer though what's the most unusual answer you've gotten?

57:02Oh, geez. The most unusual. One that stood out, I can't remember who gave it to us, but they said that they take stock every day of whether they were happy. So they have like an empirical approach to their own success. I was like, wow, that's impressive. Every day. Wow. Okay. Yeah. That was good. All right. Well, Francisco, this has been a fantastic conversation. We really appreciate you joining us. Thank you very much, guys. I really appreciate the opportunity. This has been great. Really appreciate it.

57:32Thank you.