The Psychology of Money: Timeless Lessons from Morgan Housel

imagine Morgan that I've just said a whole bunch of really nice things about you uh in the in the introduction on your work and so on okay just picture that just just the Afterglow of all kinds of flattery here here we go I love it all right Morgan housel wait am I saying saying your last name right is that right that's correct Morgan hell welcome to the next big idea podcast such an honor to be here Rufus thank you so much Morgan you have a new book out called same as ever a guide to what never changes your first book was the psychology of money it sold an astonishing 4 million copies as I understand it you're not a psychologist you're not an economist but you did Park Ferraris when you had a job as of La at a fancy hotel in La uh was this your primary qualification for writing a book called the psychology of money yes and still is to this day you're right though that not only am I not a psychologist I'm not an economist I'm not a financial adviser I'm not a portfolio manager never have been I've been a writer for my entire career always a financial writer and sometimes I think if you asked me 10 years ago I would have said I'm an investor who writes and now I think I would say I'm I'm a writer who invests like I've kind of Switched the priorities there but I've always just kind of considered myself someone not not in the trenches but someone just up up in the bleachers observing what's going on and trying to figure out for myself how the world works and then trying to write a story behind it one thing that's important here that really ties into this is that I always written for an audience of one which is myself I'm just writing things that I think are interesting I'm not trying to report to an audience like like a journalist would I'm not trying to even teach necessarily I'm just trying to figure these things out for myself and tell a story that I think is interesting and then putting that out to the world and then it can do whatever it's going to do what do you think the key insights were in psychology of money that caused it to resonate as it did I mean just just for listeners out there 4 million copies of a book is totally insane like a best seller you see on the New York Times bestseller list might sell like a 100,000 copies right so so 4 million is like a 40x bestseller what why do you think I mean I understand that you were somewhat surprised by the impact that it had why do you think it resonated as it did I think it's always the case in any kind of really surprise viral success like regardless of what it is that luck is playing a a tremendous role not all of it you can't just say oh I just got lucky and leave it there like there like something happened that you did right that worked it but the first print run of psychology money was 5,000 copies because that's what we thought it would sell and so to hit 4 million you're like look something happened there that myself and the publisher and other people did not anticipate and I think that thing is luck um I mean just one example of this it was published in September of 20 of 2020 well during that period um everyone was kind of still on lockdown locked in their houses what did a lot of those people want to do buy books so the entire book industry was like a bonanza in 2020 the other thing that was happening was a lot of these people had stimulus money and because of fed policy the stock market was going crazy so a lot of these people were stuck in their house watching the stock market go straight up and wanting to learn more about it at this moment that psychology money came out well we picked that date September 2020 we picked that date in 2019 we had no idea what the state of the world was going to be that was a level of luck that came out and I think if it was published in 2018 it would not be a 20th as successful as it was so there was a lot of things like that interesting that I think that we that like are things that I cannot replicate if there is something that is I think different and unique about this book it's about it's a finance book that is just telling stories that anybody can comprehend there's no there's no formulas there's no data there's no charts it's just here are stories about how people's heads work that I can shed some light on finance and that's I I try to do that with same as as well yes and and and but it it also I think I mean there's this funny taboo isn't there around money I mean I I I had in the back of my head someday uh starting a podcast about money but you've done this so well that I feel like the the territory is covered but but it's it's because you know I I started a first online magazine about sex and then another one about parenting um 15 years ago and in both cases I was driven by a desire to talk about things that people lie about you know sex religion and money are the things that like they impact everyone but you're not supposed to talk about them everyone's got their own stories about it and it's really interesting with your very close friends once they become close enough friends to open up about their finances You' realize like God like everybody's got this incredible story incredibly good incredibly bad incredibly anxiety-provoking whatever it might be but everybody has a story and you're not allowed to talk about it there have been so many companies uh that have tried this they they they say we're going to be transparent and everyone in the company is going to know exactly how much everybody else makes we're going to publish everybody's salary every company that's done this regrets it because it leads to so much in it leads to so much infighting and whatnot that every company reverts back to you're right don't talk about how much money you make it's a secret don't tell anybody even your co-workers that I think is just is an interesting window into I mean you could you could say the same thing about politics everybody's got an opinion everybody's got their experience don't talk about it and money always fits in that category too yeah but it but it strikes me that maybe one of the things that made psychology of money resonate so much is that you kind of tell the truth about you know there's sort of this I picture like a billboard on the side of the highway that's like if only you make X dollar you're going to live in this Dreamland with the pool and the Sunshine and the and this perfect life that you imagine but behind that billboard there's nothing or or at least it's not it's not what people expect um yeah and I think that and and you had the insight to sort of call that out uh before before making money and quite Ironically in the process of calling out that kind of Mirage you actually made a bunch of money and now you're in a position to tell us whether whether that uh that point of view was true I think it's it's less about true or false yeah but I think when you make when you make a little bit of money it's you realize like look some things are better and a lot of things are the same and maybe a couple things are worse now when you are dreaming about making money you only focus on the former the thing like here's what's going to be better you're never thinking about what's going to be the same or what's or definitely not thinking about what's going to be worse so so much of your happiness my happiness your H everybody's happiness comes down it's things like your relationship with your partner your the happiness of your kids if you have them your health how well you're sleeping at night and by and large money is not going to change those at least to any significant degree particularly if you're already starting with like a healthy amount of middle class income like if you're dirt poor then it's going to change your family life of course but for a lot of these people it's like look what actually made you happy is not going to be that much people make this mistake when they're dreaming about a vacation if I sitting here today in rainy Seattle dream about going on vacation to Maui it seems incredible like that would be so much fun I'm going to sit on the beach it's perfect weather it's great but then when you actually get to Maui what's happening is uh your flight was delayed your jet lagged you got sunscreen in your eyes uh the food was late you have uh you have indigestion from the last me like all these things that you're ignoring when you're dreaming but in the moment that's actually what's happening to you and I think it's really the true the same thing with money that look if I compare myself today to four years ago I think I am more content professionally but am I happier no no do I wake up smiling more no no does my wife love me more no do are are are my kids better like no all these things that actually make a difference haven't really changed that much yeah and in fact the kid the kid area is is an area of of potential danger if to the to the extent that their downsides of making a bunch of money the kids are are one of the bigger categories potentially yeah it's it's true I have I have a good friend who made a lot of money made over $100 million a couple years ago and his kids were young teenagers at the time and we were talking on the phone and I said yeah like yeah how's this impact your kids and he said well if they want they can grow up to become Coke addicts now and and and we laughed it was a joke but it's like it one of those jokes that when you're done laughing you're like oh No actually that's like a thing like this can ruin your kids very very quickly now that was that's an amount of money that that myself and virtually no one else will ever experience but what's true like we said earlier is that when my friend 10 years ago was dreaming about becoming a successful entrepreneur I guarantee you he didn't spend one second thinking about how is this going to ruin my teenagers but when you actually hit that that zone that is what he's thinking about now it's like it's just like the difference between the dream and the actualization can be 10 miles apart well I think it's good morgan that that you didn't find after after doing very well on your first book that money actually in fact made you dramatically happier because that would have been really embarrassing that would I would I I I I would have hidden that from everybody right you would have been like oh my gosh this is amazing but I was totally wrong um and um well part of part of what I think may be going on is is that uh this this Gap we're talking about between the belief that wealth will deliver happiness and the actual experience people have uh is is you point out part of the problem and you say the first rule of happiness is low expectations I I love this can can you can you tell us why I think it's it's a TR it happens at the entire Society level that Society becomes richer wealthier higher life expectancy better Technologies life improves for everybody and nobody feels any better off for it because their expectations grew in lock step with that prosperity and so everyone talks about price inflation you know like the price of your groceries going up a much more Sinister and hidden thing in the world is expectations inflation where your definition of a good life inflates over time and if you look back at the 1950s which were by and large like we remember as this prosperous period of like white picket fence dad who worked and a mother who stayed home and raised a kid it was like this you can make out this like Leave it to Beaver beautiful American life I think a lot of what happens and why the 50s felt so great at the time is because people had very low expectations and remember this period they had just they had just finished the Great Depression in World War II and their expectations of prosperity were so so freaking low at this period that any amount of prosperity that they have felt like a dream felt incredible and the other thing that was going on was for this brief period of time in the 1950s there was very little wealth inequality the gap between rich and poor was relatively very low and that made it so that your expectations of what constituted a good life was pretty low because you were not you expectations were not being inflated by billionaires driving rolls-royces and you know you know flying private jets and you get to see that on Instagram and whatnot everyone around you was probably living about the same life as you were and therefore it was easy to keep your expectations in check and I think what has happened not just in the last 80 years but really in the last 10 years is things have by and large gotten better for most people not everybody but most people but nobody appreciates it because everyone's expectations have just exploded because of social comparison on social media where what you're seeing is like the Highlight Reel of people's lives and this has been happening forever there's this great quote from monq he said this 300 years ago he said if you only wish to be happy that is very easy to achieve but everybody wants to be happier than other people and that is very difficult because we assume other people are happier than they actually are that's been he said that 300 years ago it's as true today as it's ever been yeah exactly and that right and that brings in a whole another problem which is our skewed perceptions of other people's happiness but yeah what's what what's wild about this example and I I was very interested in this section about the 1950s and you you point out that median median family income adjusted for inflation was 29,000 in 1955 now it's over 70,000 the average home was a third smaller despite having more occupants etc etc and so we have you know uh on the one hand this problem of ever increased concentration of wealth and the compar comparisons we make to the people around us are less flattering our perceptions as you say are always skewed but in addition to that we used to have more of a of a local I think perspective of you know comp if you're competing with the Joneses the Joneses were across the street now due to you know 50 years of you know mass media and more recently social media we're we compare Our Lives to the lives of like you know people in Beverly Hills right so so to the extent that comparison is the thief of Joy um and it's all about expectation management when we take our comparison set and expand it dramatically that that does us like a brutal disservice psychologically right someone explained this recently they said we went from keeping up with the Joneses to Keeping Up with the Kardashians is kind of how it worked and I thought like that's that's exactly what happened another I mean a really interesting point here that you brought up too is before the radio came about in the 191s 1920s every town in America if not the world had the town's opera singer the town's best boxer the town's best singer and it was it was individual to that town once the radio came about 99% of those singers went out of business because now everyone could listen to the best opera singer and the best in the country why would you listen to the 40th best who happens to live in your town when you can listen to the best in the country that's on the radio and I think social media has done that in a big way it used to be when I was a kid when you were a kid you had the pretty Girl in Town the prettiest girl at your high school now it's on Instagram it's going to be the prettiest girl in the world that you're comparing yourself to and now everybody relative to that person that boy that girl feels inferior so the ability to feel inferior about yourself across any metric is greater today than it's ever been yeah it's funny it's funny you say that yeah I've thought a lot I remember reading that there used to be Opera Houses in like every little town across America and theaters and you know and and this it this professionalization of the Arts has been has been a kind of terrible disservice in the long run I mean of course it's wonderful we get to you know you know uh Netflix and uh you know iTunes and Spotify offer us all sorts of delights but but it robs us of that kind of local admiration and sense of local status and and also this sense of a diversification of talents in a in in a small community right that like hey we all RB in different ways right I mean you know some you know you have the successful Banker but you also have you know the singer you have the RAC contur you have you know the the scientist you have the shoe store owner that that everyone feels a sense of of Pride uh and and has a place and and has a a kind of status inside of this this smaller environment and and quite tragically um with this sort of professionalization of all of the Arts and this uh obsession with uh mass media and social media yeah we we've lost that local admiration I think you're right now obviously the the beneficiary of that are the consumers who no matter no matter where you live you can listen to the best opera singer you can see watch the best actors and whatnot no matter where you live you have access to it but it's right that it used to be you know a hundred years ago what was the value of being the 100th best opera singer in the world 100 years ago it was it was it was pretty good like you could live you could move to a small town and be the best opera singer in that town today what's the value of being the H hundredth best in anything pretty much zero it's pretty much zero pretty close to it and so like it just made everything way more competitive now I'm I'm I I'm I'm a capitalist I enjoy when like there is like more competition that brings benefit to Consumers I think it lifts it lifts everyone in that in that zone but it's true that it's just made it way more fiercely competitive than it was and it's much more of a win or take all world than it used to be yeah so there's there's the problem of expectation management and that's and that's that's a real question how do we do better at managing down our expectations because you know if if happiness is reality divided by expectations like we we want to figure out how to uh uh it's it's it's easier to modify our expectations than it is to modify reality arguably right um and but then there's also the question of the trajectory of our expectations over time um and this reminds me of this quote from actor Will Smith that that that you have in the book becoming famous is amazing being famous is a mixed bag losing Fame is miserable right yeah so it's it's be careful what you wish for I think at the society level the only way that Society can really have low expectations relative to its success is during or after a very traumatic event so so you mentioned you know in the early 1950s the reason expectations were so low is because they just experienced the Great Depression in World War II two of the most painful traumatic events in US history that's why expectations were low you can say the same thing to lesser degrees about uh the US economy in 2009 coming out of the financial crisis expectations were very low because so many people had been traumatized right before it so this is a like part of it is careful what you wish for because if you want a society with low expectations it's going to be a society that was just bludgeon just before so it's like that's not great but like how can you have a a society that is healthy and prosperous and peaceful and have low expectations you can't doesn't exist will never exist has never existed and the most likely outcome I think is that my grandkids your grandkids will live in a world 30 or 40 years from now in which they are earning more money living longer living with way better Technologies and they're no and they're not any happier for it whatsoever yeah I think that's it's kind of a sad thing to contemplate but that's how it's virtually always existed in the world particularly once CE you live in a world where so many of the natural traumas of uh childhood mortality and whatnot have largely been extinguished in the western world it's like you know there there was there was a lot of lwh hanging fruit for families to be happier when the infant mortality rate went from extremely high to extremely low that's going to make people happier but once you live in a world where like a lot of those things have already been kind of extinguished from society if my grandkids earn twice as much money as I do will they be happier than I am probably not probably not so that's kind of I think that's just a reality of life I think at the individual level some people are are naturally more primed to it than others of being appreciative of what they have and it's a I say natural because I'm not sure there's many things that you can go out of your way to do to lower your expectations and appreciate what you have more some of it for myself has been just acknowledging the game of social comparison and when you are just cognizant of the game you see how ridiculous it is a lot of meditation is not like fixing your thoughts it's just becoming aware of your thoughts and a lot of that with social comparison once you just identify the game of like it doesn't matter how happy I am as long as I have more than that guy once you say that to yourself you're like this is absurd this is the dumbest thing and then once you observe the game it's maybe a little bit easier around the ages to not want to play it but it's hard for everybody you know I wonder it just occurred to me that maybe this you know this practice that we're all encouraged to do of expressing gratitude every morning I remember when when I was growing up my father would you know say grace before dinner you know we're for the food before us and the family around us but there was this sort of ritualize gratitude and maybe part of what that does is it just sort of reminds people like hey don't take this for granted right and and maybe that is just in a small way in 30 seconds this sort of you know gratitude journaling and this you know St stuff that people are doing a an ex a little bit of an expectation management exercise and I I think I see this in my in my own life too that I I find it easiest to be grateful right after something terrible has happened or look like something terrible happen so for in my own life it's been oh I think this family member might be really seriously ill and then you find out that no they're not the test results came back they're not you can be you are so grateful in that moment for health and for them and whatnot but the only reason is because you were just scared out of your mind about what could have happened and uh so I think that that gets back to like it's really your expectations are are usually forced lower it's hard to push them lower when things are going well it's not until they're forced lower that you're like oh so so appreciative uh I I I tell a story and same as ever about a near-death experience I had when I was a teenager of coming you know really really close to dying and one of the passages I use in that chapter was when my dad saw me later that day he said I've never been so happy to see you and it was the only time in my life that I've seen him cry and so that was a thing where just just looking at me brought him to tears because his expectations or his realiz that I could have been so easily killed that day were were were brought to light so I think that's one of the tragedies here is that our expectations are only put into view during tragedies yeah and and there may be some experiences that are so traumatic that they stay with us and and actually do have the effect of managing down expectations for a longer period of time like in this case it very you know such a moving and uh upsetting you know story that you you lost two good friends in in an avalanche and and you almost were on that same ski run that would have put you in the Avalanche and I imagine that something like that you never forget and it it kind of keeps things in check and says you know hey just to be breathing and walking and you know waking up in the morning is is a is a gift well see what's so true Rufus too is that I think in the immediate aftermath that was true waking up as just like oh I'm so I'm so grateful and maybe now if I force myself to think about it I can have that feeling but do I wake up every single day now and think that no it's like it gets back to because of you know the ski accident was 22 years ago now and so it gets back to a lot of it it's just like it's very easy to re-anchor to higher expectations until they are forced lower by a tragedy yeah well and and so but if we're going to plan to get rich and famous it seems like it would be best to do it very slowly and incremental right given given Will Smith's back uh given Will Smith's commentary um and uh because I think this this problem of the trajectory of the growth of our expectations like it's it's you know I wouldn't wish upon my children like wild success in their 20s uh that that would be very hard to sustain over time you know um and you you may have kind of screwed this up Morgan given that you sold four million copies of your first book in your 30s see I I I think about this a lot for real I mean it's the best problem in the world to have but it is a problem to acknowledge to yourself that I very likely peaked at age 36 when psychology money came out now again that's if if that's my biggest career problem like boohoo like fine but it's true it's it's a weird it's a it's it's a weird feeling I think for a lot of this what you want to avoid is attaching any kind of success to your identity and so think about an aess celebrity we talked about Will Smith who is Will Smith he is a famous actor that's his that's his job title it is his identity and if you take that away or even just aode it around the edges it really hurts because you are eroding your identity and I really admire people who have fought back against that another one aess actress who at least it looks like appears she's done a great job about this is is is Cameron Diaz who most people don't even know this but she announced years ago she's done acting and I imagine at least some of that yeah I'm put I don't want to put words in the mouth in her mouth but maybe it was I am not an actor that's not my identity it is a job that I did during a period in my life but I am not an actress I am a something else uh at a very very different level I I I don't think of myself as a writer my first identity is Father husband friend neighbor that's my first identity and I I think I I do go out of my way to do that because there's going to become a day when I don't want to or cannot be a writer anymore and I don't want to wake up that morning and say who the hell am I still want that morning wake up and say I'm a father I'm a husband that's who I've always been so keeping your identity separate from your Career Success I think is is really vital right and and and here's also I think where you know reading a lot of books and understanding as much as we can about other people's experiences pays dividends right so we can we can better manage expectations like we you know for instance if you know in advance if you decide you're going to pursue a a career uh in as a a movie star as a would be movie star if you know that that's going to be a really mixed bag um you know uh then uh then that that might help you uh manage expectations in the same way that like for parenting you know when when we started this parenting site babble.com 15 years ago part of what drove us was this view that we had just had young kids and we had this sense that you know that there's this Hallmark sort of postcard of what it's like to be a parent with like you know pushing the kid in the swing and everybody's smiling and laughing and you know you know everything's great and it turns out parenting is really freaking hard now it's also amazing right but but the problem that that we had going in and I think a lot of people have had historically is at least in this country you have a picture in your head that's like we're just going to go to Disneyland for 10 years this is going to be so much fun and in fact it's a lot more like trekking in the poll and you know trekking in the Paul is an incredibly powerful beautiful experience right that's a great experience but if you packed your bags to go to Disneyland you're in for uh some disappointment i i i as a parent now my kids are four and eight and what's changed the most for my wife and I is that we've just become much less judgmental about other parents before you have kids if you see parents with screaming kids wearing dirty clothes misbehaving it's easy to be like oh you're a bad parent you don't know what you do now when I see it I'm like hey been there I get it there's no no judging here I understand how hard it is I've been there too so once you've experienced it firsthand you just you understand you know how the sausage is made and you know how how difficult these things can be there's a great quote from Jeff EML who used to be the CEO of General Electric and he says every job looks easy when you're not the one doing it parenting definitely falls into that into that but all careers are like that when you don't understand how emotionally draining it can be how hard it can be to be so sleep deprived as a parent when until you've actually experienced it you have you have no right to judge other people who are doing it yeah yeah yeah well you know when we think about the complexity of this question you know does money make you happy um you know I mean this strikes me as a question that that that we we don't tell the truth about it and it's a problem in both directions like on the one hand it's very helpful to acknowledge like you know it it's it's it it's uh I'm G I'm going to start this again on the one hand on the one hand it's really helpful to acknowledge that hey to not to to be truly impoverished is a serious problem and and and uh and really is is is not okay we we need to solve poverty um you know making incrementally more money um makes it possible to say have children and also read the newspaper right which is you know which is extraordinary having huge amounts of money introduces a bunch of problems that that you know people don't anticipate and I've landed I'm sorry go ahead you're right if you go from poor to middle class then I think 90% of things in your life get better if you go from middle class to upper class 70% of things in your life get better if you go from upper class to Rich 40% of things in your life get or or less maybe 20% of things in your life get better it's always it's always going to be diminishing in in in that zone so um and so for a lot of people that are going from actually you're actually doing pretty well and then and then you're a successful entrepreneur those are the people who after they achieve that success are like huh not many things got better maybe like 20% of things got better in my life 60% stayed the same and 20% got worse after I got rich that's I think that's that's a standard path for a lot of people yeah yeah one one one place I've landed is I've kind of concluded that that uh I have a community is everything theory of happiness so if you ask the question like will writing a book make me happy well if writing a book will result in enhancing your community and meeting more people who become friends or who inspire you or who improve your community then yes it will if it doesn't it won't will you know will will will becoming wealthy make you happy well you know if if you look at the example of like lottery winners there are a lot of cases where making a bunch of money actually has the effect of isolating you socially right where where the people who were members of your community now all want something from you and consequently you don't have the same Dynamic you once had and and it and it has the effect of eroding relationships and your new relationships are are Hollow um you know on the other hand losing a bunch of money can cause you to lose lose connection with your community um in a way that can also be socially isolating yeah years ago I did this Consulting session with a group of NBA rookies and lot were just were just drafted that year they're 20 years old 21 years old and the point of this session was to kind of talk to them about money because everybody knows the typical path of professional athletes make a ton of money your career is three years long then you go bankrupt that's happens to a lot of them so let's talk about money and one of the one of the uh NBA rookies I think he was 19 brought at this point that I thought was so astute when we're talking about athletes going bankrupt he said look when you grew up in inner city poverty and then you sign a $10 million contract that is not your money that is Mom's money dad's money brother's money cousins money Grandma's money neighbor money that money belongs to the whole Community because you cannot just tell them hey back in the inner city poverty good luck to you all I got my money I'm going to go buy a Bentley you can't do that so he said a lot of the reasons that athletes go bankrupt is not because they bought themselves a mansion it's because they bought their fifth cousin a modest house and they felt so much Social obligation to take care of all those people and so that is like an extreme example of what can happen with a lot of fast money it's it's easy to dream about how great this is going to be and then you receive it and it's like oh actually there's a lot of baggage that's going to come with this that I did not anticipate yeah yeah and and and um I I know I know you and I both read the book the status game by Will store yeah and I've always been interested in this question of of of like you know whether it seems that in American culture status is in most communi measured with wealth with money there may be some communities where it's academic tenure or um scientific citations of your research or Instagram likes right but it it seems to have narrowed around around money as a measure of status um but it feels to me like that is not necessarily genetic or or wired in us we're capable of being uh of being less greedy potentially but status orientation does feel like something that's wired that in every society around the world people are in very concerned with their status whether it's measured by you know um you again Instagram likes or the size of the yams that you grow right might be the way your status is measured how do you think about that I think you have to separate status from admiration and Status it's it's right that if you're talking about status nothing is easier to measure and quantify than money what's my network what's yours what's your my income what's yours if mine's higher I'm I have higher SS it's so easy to quantify that that's how we measure it I think what people really want out of life though is not necessarily status although that's part of it but they want admiration and admiration is much more diverse than just measuring your net worth so think about a town where there's a doctor who makes $200,000 a year and an entrepreneur who rips people off and makes a million dollars a year he's he's kind of a scumbag which of those person has a higher status well probably the entrepreneur or because he lives in a bigger house and drives a nicer car and people knows he makes a lot of money who has admired more the doctor of course who's saving people's lives even if he makes less money and has less status so admiration can come from humor intelligence wisdom uh all these things that are not necessarily status but they're actually what people want from life and I I think if you think about that situation would you rather be the doctor making 200 Grand and everybody in town loves you or the or the scumball entrepreneur who makes a million dollars a year and you don't have any friends nobody loves you everyone kind of wines when they see you which of those people would you rather be when you frame it like that it's so obvious and to me the takeaway is like yeah you don't want status you want admiration and or if you framed it as what would you rather have would you rather make a million dollar a or let's say would you rather make a $100,000 a year and you your spouse loves you your kids admire you you everybody in town admires you or you make a million dollars a year and you're on your fifth divorce your kids don't know you you're unhealthy you're over weight you're stressed like when you frame it like that it's so obvious what you should want but what's also equally obvious is that what are people drawn to do they want to be uh humorous and wise and and loved or do they just want to make a lot of money particularly early on in their life it tends to be the latter yeah although I think it is culturally specific I learned from Adam Grant's latest book um hidden potential that apparently in the US if you ask people what's the most respected profession they answer tends to be in Finland the answer is teacher uh which is which is encouraging you know and and um it's either encouraging or really discouraging about the medical system in Finland who knows exactly right I'm you have to think they appreciate their doctors as well but no I I I like this notion that that um of thinking of status as adding value to your community right and that the the evolved desire for status you know uh it it made sense that we uh that we felt a need to feel like we were respected and admired for adding value to our local community right so it's like hey you know Morgan is really good at finding tubers like he he just like he goes out in the woods and comes back with tubers and we love that guy because he's great at nuts and berries and you know and Caleb is is is just an amazing Hunter he comes back with you know and so and so is a great Storyteller and you could have like Diversified ways of adding value to your community if you're not adding value um then you start to feel this sort of low status low self-esteem anxiety one can see why that would have uh have been selected for right uh uh but but I like this idea of of personally of thinking about a local community of people you care about your your status measured as the the value you add to that Community uh in ways that are not the same that are that are diverse there's a great idea from Warren Buffett where he talks about the reverse obituary and he says everyone should write what you want your obituary to say at your funeral and then live your life backwards to kind of live up to it and so most people in that exercise if I said Morgan what do I want my obituary to say I I hope that when I die hopefully a long time from now people will say Morgan was a good father a good husband a good son a caring friend helped his community that's what I hope it says and then you and and I think most people would want to say something similar like that it's different for everyone but something similar but then you realize what's not in there and almost nobody in that exercise is going to say that in that in their eulogy they want people to talk about how much money they made and how many cars they owned and how big their house was because intuitively you know none of that matters you intuitively know what you want is to be respected and admired even if that's even but what you're chasing on a daily basis is how can I get the bigger house bigger car more money and so what you're chasing is what you even intuitively know is not what you actually want in your life that's that's the Divergence between the status that we Chase and the admiration that we actually aspire to yeah and so I think that's again it's one of those things where it's like if you just recognize the game that's being played and you realize you look at it you're like man that's a I I understand why the game is played I think it's there's such an evolutionary backing towards I need more money than than the next guy because we're competing for spouses we're completing for mates and it's like I need to show in a very tangible way that I have access to more resources than that person so we we Chase it in a very tangible way but people are wired for status and not for happiness so if you want to be happy and satisfied then you need to realize like what's actually going to make you happy at your end of at the end of your life and what's not even going to be on the list at all yeah yeah well you you say uh at the outset of of your new book same as ever that we tend to be attracted to to change to things that are surprising and exciting because those things trigger dopamine we're wired to be attracted right to novelty but you write the behaviors that never change are history's most powerful lessons because they preview what to expect in the future so you know if we want to get smarter we need to focus on things that are that are enduring is that is that the core argument yeah and and a lot of it is just the acknowledgement of the of how bad we are at forecasting what's going to change the next recession the next bar Market who's going to win the next election even like what's the weather going to be next Friday we're not good at these things yeah we never have been and I think we never will we're always going to keep trying because the idea that we can't predict what the econom is going to do next is too painful to Bear but if you acknowledge how bad we are then I think your focus naturally shifts towards well what what do we know is going to happen in the future regardless of what the changes might be I have no idea what the econ e is going to do next but I know how people respond to Greed and fear and risk and uncertainty because that's never changed you can read about how people were doing it 500 years ago and you look at it you're like oh that's exactly how they do it today so then you know that's going to be part of your future so let's focus on what we know is going to happen versus trying to pretend and fooling ourselves into thinking that we know what's going to change yeah you you you say that there's a very common life cycle of greed and fear I'm quoting you now it goes like this first you assume good news is permanent then you become oblivious to bad news then you ignore bad news then you deny bad news then you panic at bad news then you accept bad news then you assume bad news is permanent right then you ignore good news Etc and the cycle repeats right and so when we see this and we see that okay this is a cycle that caused wise people like Warren Buffett to conclude I should be greedy when others are scared and scared when others are greedy I guess when we see these patterns we can that can help us a just be more comfortable than less afraid but B maybe make some some better decisions yeah I think when when you look at these patterns over time and you know that pattern of uh the life cycle of greed and fear that that's existed for literally thousands of years and so you can look at that and you see it across a number of cultures in a number of time periods and you're like look I know with certainty that we are going to experience that same pattern in the 2030s in the 2040s 50s 60s forever yeah um so that's like when you find something that's always been true you found something that is just particularly extremely true to pay a lot of attention to particularly when you see something that is impacted various different cultures in the same way when you see how a financial crisis that may have played out in France in the 1800s the similarities to how the financial crisis in the United States played out in 2008 then you're like look we've just uncovered something that is just innate to how humans work it's not even a cultural thing it's not a Time specific thing this is just we found how humans work that's something to pay the most attention to and that's what I've tried to do as a financial writer is I've never been interested in saying or even paying attention to like what's the stock market going to do next because I can't do it and nobody else can too I've always been very interested as a student of history of just what can I read about how the world works from the 1800s or the 1200s and be like oh that's exactly how works today that's always been the most interesting thing to me about history yeah yeah no it's it's and this is part of what what I've loved in my own journey of of uh you know in business and in investing is that it's a place where we can study you know human behavior and the nature of reality and ask these really basic questions like what can we know to be true and the answer is very very little right there like you know we're really bad as you point out like no one predicted the Great Depression no one was predicted it even even like a year or two into it which is incredible yeah um but it does seem like there's some things there's some very small things we can know to be true which obviously are what you're you're laying out in this book but one when when we're talking about the stock market it seems like we can be conf confident in saying that at least for more than a 100 years the stock market generally goes up driven by some some fundamental forces of you know increasing productivity increasing population but even that it comes with the asteris of in the United States that's generally what's happened um you look at the stock markets in Russia uh most of Europe during World War II they did they were wiped out they went to zero um so something that even is is has been historically true in the United States even comes with an asterisk of like yes but not a predictor of the future true true yeah we had we had Ray doio on the show and of course he's written a lot about debt cycles and and the big cycles of changes of the global Reserve currency so you can see these multi hundred-year cycles of of you know uh Global Reserve currencies being replaced by other ones which tends to be disastrous for the for the country whose currency was replace um and even something like that it's interesting of like so what was the reserve currency that was replaced 100 years ago well it was a switch from the from the pound to the dollar yeah and so okay well let's look at the the the economy and the life style of the UK over the last 100 years by and large not that bad not that bad so this there's all these examples of companies that like lost their lost their Crown lost their Reserve currency status lost their Crown as a perch and some of them actually when you look back you're like look if that's if that's the nightmare we're facing it's actually not that bad Japan is another one of like the Japanese economy has more or less stagnated for 35 years yeah but look at life in Japan for the last 30 years not perfect not that bad not not that bad so it doesn't it's not always the boogeyman people make it out to be yeah these are these are nice places Japan and the UK yeah yeah not that bad the uh so among things that we can know to be true um I guess one of them would be that we that we that we humans have a tendency to underestimate the power of compounding interest right which Einstein called The eth Wonder of the world um but is that do you put that in the category of like the power of slow of slow growth that compounds is astounding yeah and it goes way far beyond compound interest in your bank account or in your investing account I mean covid was most people's first blunt force experience with exponential growth of how something can go from infecting two people to 100 million people in like seems like the blink of an eye and that's that's compounding in action in a very forceful way um and there's a lot of things that compound like that I write in the the book that most most good news is slow compounding over time so it's easy to ignore uh but most bad news happens very very fast so bad news is September 11th it's the financial crisis it's covid happens very fast Pearl Harbor happens literally overnight whereas good news is like the Improvement in heart disease mortality over the last 80 years which has saved literally tens of millions of lives but you by and large never hear about it never even think about it because what happened was heart disease mortality got 1 and a half% better every year for 80 years now if you compound 1 and a half% for 80 years you get a miraculous result but in any given year to say nothing of any given week in the news cycle nobody's talking about it you're never going to see like breaking news on CNN heart disease mortality improves by 0.01% no like you're never going to see that but over the course of a lifetime it's it's the it's the most incredible thing that we've experienced here and so the discrepancy between how quickly bad news happens very fast and forceful versus good news is slow compounding so it's easy to ignore is a big part of of like the the dynamic between optimism and pessimism interesting yeah yeah yeah and and so when it comes to financial decisions about how to manage your money I understand that you're invested exclusively in index funds personally is that is that right that's pretty true with the exception of uh shares of Marquel where I'm on the board of directors okay okay and and and so and would those be broad like S&P 500 I mean so this this would be correlated with your Bel your your point of view that that hey it frankly it's somewhat informed by a humility about what we can and cannot predict right I mean that that stock picking is very difficult uh but we can have some degree of confidence that the broader Market will will rise over time is that that's true of what I believe around the edges but the majority of why I'm a passive Index Fund investor is not because I think nobody can beat the market I think there are smart people who can do that not many but there are people who can do it I'm not one of the passive zealots who's just like nobody can do it don't even try that's not me but for two reasons why it works for me personally one is because I want to use all of my bandwidth that I can focusing on what I think I'm good at which is writing I don't want to spend any time trying to pick the right manager trying to pick the right stocks because I have no ability to do that other people do I don't the other thing is that I know that if I can earn average market returns for an above average period of time if I can hold on to index funds for 50 years I will literally be in the top 2% of investors over time my parents have kind of done this too my parents are smart educated people but they have no Financial background no Financial education but they have owned Vanguard index funds for about 40 years now uh without doing they've never sold anything yeah and if you look at their results relative to professional investors they're in the top at least 5% if not one or two% and they've done nothing they didn't do anything for it they just focused on their professions uh so I think like when you look at that if like the bet that I want to make I want to focus all my bandwidth on endurance and Longevity because if I can be average for 50 years that puts you in the top 1% that's why I do it yeah and well and there's also right so so if we understand the power of compounding that having a strategy that that is enduring and and effective for long periods of time will enable I mean compounding requires the lever of of the passage of time and consistent returns right and so right and so that that uh and as we all know tend tends to produce uh you know these index funds tend to outperform you know most of the sort of mutual funds and sock Pickers but I think that's true for a lot of things too if you look at like like the like a professional athlete are they just way more gifted to other people to some extent yes but most of why they are there why they're so successful is because they practiced every day for 20 years they it was just more grit and endurance than other people and so I think that's I think this shows up in a lot of areas in life where it's like if you can be pretty good for a long period of time the results tend to be extraordinary yeah i' I've personally come to the conclusion that um that it is reasonable to conclude that that the NASDAQ 100 which has been meaningfully outperforming the you know the broader market for I don't know 10 or 12 years now will continue to do so right uh and that there are some forces like Moore's Law and just just acceleration of Technology uh and increase of productivity through technology that that would appear to be uh trends that are accelerating not decelerating um I would say here's my C would you go that far or or you wouldn't agree with that I would not disagree with that but I would point out some anecdotal uh uh you know counters to it the most successful stock over about the last 70 years a very long period of time it's not a Technology stock it's not Apple it's not Google it's not Microsoft it's Philip Morris Altria the cigarette company which has had zero technological innovation has had zero Improvement is a is a company that obviously ruins people's lives and whatnot but here's what's interesting about it the fact that people hate Altria that there is this moral disgust towards the company and a lot of people don't want to invest in it has kept its valuation very low when you have a valuation that's very low and you reinvest the dividends into a company that has a low valuation compounding goes crazy compounding goes and that's why Altria is so successful because people hate it which makes the reinvestment rate of dividends supercharged over time so there are a lot of things that are just so counterintuitive um the the the other like some of the top stocks over the last 30 years are like Kansas City Southern Railroad this compan like no nobody's ever heard of it nobody cares about it it's no technology but it's like for all these various factors it was like low valuation mixed with pretty good growth and you get ridiculous returns that come from it so a lot of the biggest Returns come from boring old industrial companies that can just keep something going as outra has for 70 years and so it would not surprise me if we look back 30 years from now and the total stock market index versus the NASDAQ 100 are actually very close to each other that that would actually not surprise me interesting interesting you write about in same as ever the tendency of success to have its own gravity and the tendency for large organizations to become less efficient lose their Mojo um and this has been true historically um you may be familiar with you know a bzar you know makes a case he's probably not the only one that the law of large numbers that has historically slowed down the largest companies doesn't seem to be uh working in the same way as with big tech companies you know why because of you know the power of network effects and and arguably you know Moors law and Tech acceleration um and so because we have we have seen now for for a couple decades not for 60 years but for a couple decades like a different kind of a different kind of growth of of you know these massive multi- trillion dollar companies continuing to grow at 10 you know uh you you know over 10% year-over year um you see this as as as not a new uh law or or not a not a change in in in the what has been the same as ever but maybe something that's temporary how how do you see it I don't know I mean like my response is going to be anecdotal maybe his response is much more analytical he has better data than this but just thinking about what he just said if I were to say like look look let's go back 20 years ago not that long ago what were the top tech tech companies AOL Yahoo yeah Intel yeah uh you know you can name these companies that either like barely exist or are shells of their form of cells and that's within technology um I mean there was no greater there was no greater tech company in 1999 than Yahoo and of course yaho is still around but it's a shell of its former self so the idea that tech companies can be I know this is not his argument can be somewhat immune from that comp that competition I don't know if that really I I don't know if there's much evidence of that that that that I've seen um and so you know it's definitely true that when you become large enough you can build up some sort of moat around you the company that has surprised me the most or that I think is the most impressive that is a big tech company that is stayed not only relevant but dominant for almost 50 years now as Microsoft and what's so incredible about it is that and I I think Amazon Falls in this company too this category is that they have done it doing very different things Microsoft went from you know windows an office to now cloud computing like a very different thing Amazon went from just a bookstore to an everything store to AWS like they're doing very different things that's that's what's incredible and for a lot of the companies that are eventually going to fail it's because they were very good at one thing that's right but just that one thing just that one and then once that thing becomes either obsolete or less important like poof you're out Kodak was that Kodak was extremely good at one thing making film they were not good at anything else whatsoever and so when that one thing became obsolete there's the whole company goes to zero um so I think that's that's always been the case the other thing that's interesting here is that the word technology uh you know varies throughout history too so there was a period when what technology meant was like cash register companies or plastic companies or you know companies that were like car companies used to be Hightech you know if you go back 100 years ago and so now what what we consider high- Tech today is just going to be considered boring normal old industrial companies 20 years from now so like that definition is always shifting over time too that's a good point yeah you know you mentioned that that the power of compounding applies potentially to other aspects of Our Lives um you say the most important things come from compounding but compounding takes a while so it's easy to ignore um H where where else in our lives do you think compounding is present I think if you look at like again if you were to make a list of like what is the best news of modern history I would put maybe at the top of the list if not certainly top five the massive decrease in infant in childhood mortality um across the entire world so hard to think of a better thing of like the world is getting better than saying fewer kids are dying like it's hard but it happened slowly it was not you didn't wake up one morning and opened the newspaper and said hey we've made massive leaps it was every year it got a couple percentage points better and so that is something that you would literally put at the top of the best news of humanity and by and large I think most people don't even know about it because it happens slowly versus if you would say what is like something that has happened that's like pretty bad it's not the worst thing that's ever happened that but it's pretty bad that would be something that everybody is aware of you know some sort of um you know even Co I would say is co one of you know probably one of the top 10 bad things that's happened in the last 100 years but it's definitely not the worst you had put the Holocaust or the world wars at the top of that list it's not the worst Co is not the worst thing that happened though but everybody knows about it everybody's aware about it because it happened so fast you could not ignore it so the good things like child mortality you're like I I I don't even think about it the bad things you cannot look away from so I think I that's something too like that's always been the case same in the economy of like you know since the 1950s average incomes adjusted for inflation have doubled incredible the average household adjusted for inflation is earning twice as much as they did back in the 50s but by and large people don't know about that because it happened slowly Happ it took 80 years for it to pan out versus the bad news Leman brother goes goes bankrupt the stock market Falls 20% everybody knows about that and you can't look away from it yeah yeah one of my favorite sections of the book is when you talk about the power of stories uh and you say a consistent truth is that the best story wins um you you you also make this interesting case at one point that if something is true you only have to say it in one sentence if something might be true it requires a lot of explanation I love that this explains why you write short books so maybe all we need to say is the best story wins right that's it's true this is why like this is why poetry is the most powerful like written medium is because when poetry is done right in three sentences or three lines you can convey like a really powerful truth I think this is why people love aphorisms too is because in one line you say something that is obviously true and profoundly true that a lot of books that are trying to go into great detail in depth like fail to convey so when something is is really when it's a great story you can just have a oneliner and put it out there a lot of politicians understand this as well make America great again um it's mour in America uh yes we can all these like political slogans that in three or four words you can get people to be like yes that's it that's what I that's what I'm for if your political slan was like read this Manifesto you're like no like I don't I don't have time for that so it's always true that like a really powerful sentence can move can change the world in ways that a lot of long books can can cannot even hope for yeah well and and and you you do this again and again in your writing right all these wonderfully pithy kind of aphoristic statements so so one you one one thing you say that sort of expands on the storytelling theme is um if you have the wrong answer but you're a good Storyteller you'll probably get ahead for a while if you have the right answer and you're a good Storyteller you'll almost certainly get ahead right so so it's like you know get it getting the answer to the question right is important telling the story right is essential is BAS is basically your case I think and I think you see this a lot with academics who by and large you hope at least have the right answers at least some of them at least to a high degree than than lay people they have the quote unquote right answer but a lot of them if not the majority of them are very poor storytellers because they came up in Academia so their ability to write for a lay audience is zero they can only write for other academics they're terrible terrible writers and then so I think you compare that to someone who maybe has the wrong answer or the sort of right answer but they're a great Storyteller a great writer a great documentary filmmaker that's who gets people's attention so I use the example in the in in that chapter of Ken Burns who makes the who is the best documentary filmmaker who's ever existed his document are just like staggeringly good you can't you can't not watch them and I think a lot of historians will look at Ken Burns and say he did not uncover anything new everything that he wrote about the Civil War the Holocaust World War I everybody already knew that and you have all of these academic historians who are like spending their lives uncovering legitimately new information and they look at Ken Burns and they're like why does he get all the attention because he's a good Storyteller because he writes it in a captivating way he tells a story that is better than anything else that's ever been written about the Civil War or whatnot the the statistic I love about Ken Burns is that when his documentary on the civil war came out in 1990 more Americans watched it that year than watched the Super Bowl and like and this is for an event the Civil War that W everybody always it's like the most documented event in American history you know you know how it ends but you but everybody was captivated by this 10-hour documentary because it was such a good story Ken Burns tells this anecdote that I think is so telling he says when he is making the background music for his documentaries he will literally change the script that the narrator is saying to make it so that a specific word aligns with a specific beat in the background music so that when the narrator says a powerful word there's a powerful beat in the background music and that's I remember hearing that and being like this is why this is what the academic historians don't get they think that if they just find the right answer and tell it to you in boring academic jargon that they will convey a new truth and you don't you only convey truth to people when it's a good story that they can latch on to and and and capture the emotional side of what they're doing another example of this is comedians I think are literally the smartest people who understand human behavior that exist I make this this statement that I think is like 80% true I'm being tongue and- cheek here that George Carlin understood human behavior better than Daniel conman like comedians they understand how people work in a profound way and what makes them great is that they convey it in the best medium possible which is humor and so like this's this George Carlin skit where he says everybody driving faster than you is a maniac and everybody driving slower than you as a [ __ ] a a it's hilarious it's so funny but B nothing nothing teaches like the value of relative perspective than something like that so you see the like you're done laughing you're like wow that's actually really profound and so that that to me is a perfect example of best story wins it's not what you know it's how you convey it to people right exactly we we laugh we laugh for 10 seconds gasp for air and then we realize like wait a second maybe everyone who drives slower than me is not a [ __ ] right and you see like and you see it with yourself if I'm on the freeway and someone blows past me I'm like Maniac or everyone driving so it's just the value of Relativity that I am measuring the world relative to me and they are too that person who that Maniac who blew past me thinks I'm an idiot cuz Everything's Relative to what you're doing and if we want to navigate the world successfully we we basically all have to become great storytellers right and it's and a lot of our frustrations with what we perceive to be the irrationality of the world you point out you know is uh it's not you know it's that it's that you know we are we're wired to love stories we're bored we're impatient we you know uh and so understanding this harnessing this power can be can be great for all of us I think people see it firsthand most starkly in in politics where regardless of which side it's on they say that guy is saying some really dumb false terrible things but everyone's lining up behind them happens on both sides this is not a partisan thing um and it's because of the power of Storytelling if you tell people what they want to hear you can say whatever you want and get away with it because it's what they want to hear you're telling them a story that gets them to nod their head even if what you're saying is wrong or a terrible idea if you tell them what you want to hear and you say it in a captivating way they will line up behind you yeah you say optimism and pessimism should coexist why why should they coexist I think most people are either optimists or pessimists they're one of the other and if you think if you look at people who who not only become successful but stay successful over the course of their life they get both of those things to really coexist with each other you need to be an optimist on one hand and a realist on the other same as ever is actually dedicated to what I call the reasonable Optimist which as in my definition I'm making this definition up but it's if you are somebody who thinks that the world is going to be great that everything in your life is going to be great the world that's complacency that's not optimism you're not optimistic you are just complacent to me reasonable optimism is things are going to be better in the future things are going to get better for myself and for the entire world but the path to get there between between now and then is going to be a constant chain of setback and surprise and Calamity that we need to endure in order to get to a better world that's going to exist at some point in the future that's reasonable optimism so that is getting optimism and pessimism to coexist I use the example of of Bill Gates in this where when he started Microsoft in the 70s he took the biggest optimistic swing that any entrepreneur has ever taken of saying every desk in the world needs to have a computer on it that was the most optimistic swing anyone's ever taken at the the same time he managed Microsoft in the most pessimistic way you possibly could which is he said Microsoft always needs to have enough cash in the bank to make payroll for one year with no revenue and asked why he did that he would say because because there's no guarantee that we're going to exist tomorrow you need to have that kind of pessimism in your budget in order to survive the realities of technology and so that was a perfect example crazy optimistic and very pessimistic at the same time that's I think at least one of the reasons why because Microsoft has done so well over time it's if you're only optimistic you're gonna run yourself over a cliff if you're only pessimistic you're never going to get out of bed in the morning you need both of them to coexist I love it I love it reminds me of the great Winston Churchill line success consists of going from failure to failure without loss of enthusiasm very hard to do right it's hard to do um you say inefficiency is good why is that me I talk about at the individual level yeah if you want to be have an efficient calendar a lot of people what that what that means to them is every minute of your day from the moment you wake up to the moment you go to bed is scheduled as soon as I wake up I'm going to do X Y and Z at 12:05 I'm going to do this at 1:52 I'm going to do this that looks like an efficient schedule that's actually one of the least helpful and most harmful schedules that you can have because so much of what is most productive in your day is unstructured time where you give yourself you give your mind permission to wander you give yourself permission to think and to for a lot of people for most people their best ideas their most productive work is going to happen when they're in the shower or going for a walk or laying on the couch or chitchatting with a friend that's when you're actually going to come up with your best ideas and when you have a perfectly efficient schedule you are removing all of that from your life so a lot of the most successful entrepreneurs and whatnot their schedules look more or less empty that is by Design is so that they can let their mind wander and focus on a single problem I think you see this in businesses too where the pursuit of efficiency backfires you see this in manufacturing over the last 20 years where there was such a push for more efficient efficient efficient Just in Time Manufacturing no slack it's just like we're just running this thing down to the wire and then what happens in 2021 when Supply chains break is all those businesses just crumble they had no room for error whatsoever and as soon as there was any hiccup in the supply chains they all just like they're their their uh their assembly lines just stopped like they no slack and now you look back in hindsight and it's like if you had held more inventory if you looked a little bit more quote unquote inefficient you guys would have done so much better so a lot of this is understanding the power of room for error that look what looks like it's it's it is efficiency is actually just weeding out room for error that's going to come back to bite you yeah and and do you apply this to your life I imagine your your schedule posting I I don't know roughly a blog post a week or have you built this into your schedule I think it it used to be better than it is now I I look back and I think I think some of the best writing I ever did was 2020 and 2021 the reason why is because I like everyone else was on some form of lockdown I was not traveling I wasn't I wasn't traveling for work I wasn't going to restaurants with friends I was I sat in home and I thought about writing and I think because my schedule was so quote unquote inefficient my schedule was empty during those periods I did some of my my best work I think there was a counter to this too of like when I look back at periods of my life where I was doing my worst writing where I look back I'm like man what was happening then what was happening then is I was really busy doing other stuff I was traveling I was my my kids were I I had infants and what not it's like it's it's always true that I I like I do my best work when I have the most slack in my schedule and I think that's true for a lot of people and and and by the way it also it also is more fun right I mean I think I think it's like if you can if you can try to try to schedule your life uh and do your work in such a way that there's as you say time for um you know for creativity and Discovery and Serendipity and conversations with people that you might not have had um it it's a higher quality of life and it probably also is is more efficient and you you you quote amamos tki is saying you waste years by not being able to waste hours there's another great quote from uh Nasim talb where he says my only definition of success is how much time you have to kill and I love that if like if you meet someone and they're always just like oh too busy too busy too busy too busy that is a form of poverty that exists it's a unique form of poverty but that's really what I would consider it the person who I want to be and the person who I want to become is a person who when if a friend calls me up and says can you go do this I can always say yes or or my kids or my spouse says can you do do this I never want to say no I'm too busy I'm too busy that's that's again that's a form of poverty that I want to avoid on the other hand you you say that a subset of the inefficiency argument is you have to be able to put up with a certain amount of [ __ ] and suboptimal de developments and it makes me think of uh Jeff Bezos saying I'm sorry I want say this again makes me think of of Jeff Bezos uh saying if you can get your work life to where you enjoy half of it that's amazing very few people ever achieve that so so we should assume that there's going to be a meaningful percentage of our work maybe 50% that is just a pain in the rear probably true for marriages true for being a parent that these are all very rewarding things that are worth pursuing but like anything else in life anything that is rewarding comes with a cost attached to it and the cost for a lot of things in life is just the willingness to put up with and endure uncertainty hassle nonsense pain all of it I I tell a little story in the book of I was I was flying several years ago and our flight was delayed and then after it was delayed that we had to switch Gates and there was a guy there who let everybody in the terminal know that he was a CEO I remember he was wearing a pinstripe suit which kind of gives away who this guy is or at least his personality and he was and he came up and cursed out very vulgarly the gate agent and I remember thinking to myself how is it possible that you have become a CEO without the ability to put up with Petty annoyances and like like how how have you made it this far in life without the ability to put up with a with a 1H hour flight delay like like that's I I don't understand I don't it's like the ability I think in anyone's life you should give yourself a 20% [ __ ] allowance that 20% of the time and 20% of the days 20% of the things that happen are going to be things where you're like H all right I guess I got to put up with this my flight's delayed my toilet's leaking my car broke down I'm sick my kids are sick whatever it is 20% of your life is going to be some form of BS and if you are not willing to put up with that you're constantly going to be like this guy at the airport where you're just like you are blown apart by the by the tiniest Petty annoyance in your life yeah and this is back to the managing expectations point right which the the um you know I I I love the uh I think I once heard a comedian uh which as you say are the great psychologist of our day who had a great line about um people complaining about you know you know airplane delays and just the discomfort of air travel and he talks about like what it was like to go across the country in a wagon train 150 years ago right you just imagine people going across the country in a wagon train just all the kind of extreme discomfort and near-death experiences and just like brutal experience and to think that their great great grandkids would be in luxurious airports complaining about gate changes right right it's so that that was that was Louis C K when he says everything is amazing and nobody's happy and but here here's what's here's the other thing that's I think equally true you cannot expect people flying on Delta today to when they board the plane say man at least this is better than a wagon train that's it's just not how people's heads work everyone is going to compare themselves to what they expect and what they expect now is that my flight should be on time and you can even say the people going across by wagon may have said like man at least we we didn't have to walk at least we have a wagon and some oxen to pull us across for most of it like everything is by like everything is by comparison and you become like the new technologies very quickly become Necessities um you know new technology starts as a luxury and then becomes a necessity it's true for for everything and so even if it's funny to talk about like oh everyone in their spoiled little first class plan it's like yeah but that's that's kind of how our mindsets just naturally work that's right that's right I I loved your section on incentives and there are a few different kinds of incentives you identify they're obviously Financial incentives and you say that in professions like law medicine and investing doing nothing is often the best answer but doing something is the career incentive right uh and you say self-interest is a freight train of persuasion um yeah so you know in those professions medicine law investing a lot of times for your patient or your client the answer is don't do anything you're fine your portfolio is fine there's nothing you do but if you're a financial adviser and you always telling your client oh you're fine there's no changes need hard to make a business out of that hard to charge exactly what what you want to do I think this is true innocently for doctors lawyers where it's very hard to say no you're fine don't do anything it's much easier to say let's order some tests let's go do let's go do something that's a cleer incentive and the other thing that's really true about incentives is that people underestimate the boundaries of their morality by when they don't understand how powerful incentives are so after the financial crisis of 2008 it was very common for a lot of Americans to say those greedy evil son of a [ __ ] Wall Street Bankers who ruin the economy yeah and look maybe there was there was some truth in that I'm not saying that was the wrong view what almost every one of those people underestimated was that if you were offered a $7 million bonus by Leman Brothers to package subribe bombs you would have done the same damn thing you would have done the same thing too and you can even take these more extreme examples of like how does an entire Society become so politically violent uh and so racist to commit something like the Holocaust well if you dig into a lot of the social incentives that occurred at the time it's crazy and hard to think about this and like nobody wants to think about this but if you or I were a 20-year-old in Germany in the 1930s would we have gone along with it would we have belied the same things I hope the answer is no I want to believe the answer is no but when you think about social incentives to fit in to believe what people are telling you you understand again like the boundaries of your of your morality are very much shaped by your incentives and some of that and it goes in both ways people are can underestimate how good the world can be when you have incentives to do something great and a lot of I think one of the best cultural aspects of the United States that is not like this in many other Western Nations is that we think so highly of Charity and philanthropy and we praise the people who are doing it in a way that doesn't is is not exactly for reasons I don't understand is not exactly recreated so we are the most charitable nation in the world by far because we have this cultural like oh giving money away is great so once you have a social incentive to do something good it's it's easy to underestimate like how much good can come from that and so this goes in both ways but I think it's just the understanding that the boundaries of what you believe can be heavily influenced and shaped by your incentives around you yeah no I think it's a great Insight you know that really it's these as you what I think you call like cultural and tribal incentives are incredibly seductive and the tendency of humans to do the same thing the group is doing is overwhelmingly powerful it's so easy for us to have this kind of moral superiority complex over other groups uh um or whether it's historically or other groups you know living today um and obviously we want you know we need to judge people who are doing bad things and convince them to to act differently but but the um but but understanding the power of this drive you know there all these study showing that like you know you you'd have people in a room um or you have somebody walk into walk into an elevator and everyone in the elevator turns to face the wrong direction and you know the person who walks in will do the same thing right or or or you have I mean you could literally get people in a room and and and and uh give them a very simple math problem or some some very simple thing to solve and once the size of the group gets over six or eight or 10 uh an individual will agree with a group that's clearly concluding something that's patently false right simply because of group thing so so this is just and it's not just like the other people who behave that way All Humans behave that way right this is just human it's a human instinct on the one hand it's it's kind of discouraging obviously right that we that like group think is just is just like frighteningly powerful but on the other hand there's a silver lining to this isn't there you know which is that like okay so belonging Trump's rationality right this is the takeaway but what that means is there's not just sort of a class of morally inferior people who cannot be understood and are destroying the world and will never change it's just that it's all about incentives and the incentive to belong is overwhelmingly powerful of course so of course there are there are morally inferior people there are evil people who as you said should be called out but I think when you see somebody or a group of people doing something that you vehemently disagree with rather than saying like or rather than just concluding like oh they are evil and leaving it at that I think a better question is to say what have you experienced that I have not that makes you that makes you believe that and then the secondary question is if I experienced what you have would I believe the same thing myself and I think that's there are a lot of things in life that are like this almost everybody who you see who's doing something very different than you has experienced something different than you have and that's what's causing their beliefs I heard this recently I'm not an expert on this I have no idea if this is I I I haven't fact checked this that you know if you look at like serial killers what is nature versus nurture what was it that they were just born with versus like they they learned had to become evil and from what I heard from what I understood is that um it has to be both it has to be someone who was born with a couple of screws loose to because I can't come up with any more articulate term and they have to experience something in their childhood that's going to lead them some sort of trauma that's going to mix with that nurture that's going to cause them to do something so that's when it's like I always think about when I you see something whether it's like Nazi Germany or people who invest differently than you whatever the behavior that is it's like I don't understand how you could possibly think that you should immediately ask whether you would actually believe that if you experienced what they had in their own life I think it's a it's a profound insight into how people justify their own beliefs right exactly the the experience of having having lived the entirety of the life of this other individual how how would that how would that shape your experience shape your perception um well we we have I think the hope is that we can use some of these constants in in the world and inhuman behavior for good and to and to fight uh some of these uh you know uh horrible outcomes that we've been talking about the power of belonging the power of Storytelling right hope hopefully we can employ these things uh to to make the world better I I I hope so too I mean I I wrote this book just trying to understand the world for myself and there are a lot of things where it's like I don't know if we can change any of these things that's why they're in the book they've been the case forever but just acknowledging how work I think is a huge step into trying to understand how this crazy human machine works well thank you Morgan howel uh fascinating conversation really appreciate your taking time to be with us today thanks so much appreciate you having me

Channel: Next Big Idea Club

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Keywords: next big idea club, transformative ideas, world’s great thinkers, life-changing insights, next big idea app, nonfiction, next big idea podcast, morgan housel, psychology of money, the psychology of money, the psychology of money book, psychology of money morgan housel, the psychology of money book review, the psychology of money summary, personal finance, morgan housel book, the psychology of money morgan housel, the psychology of money by morgan housel, Same as Ever

Id: hSjzLASMkjQ

Length: 83min 8sec (4988 seconds)

Published: Thu Dec 14 2023