Modern Wisdom - #222 - Morgan Housel - How To Become Wealthy, Stay Wealthy & Be Happy

Episode Date: September 21, 2020

Morgan Housel is a writer and investor. It doesn't matter if you earn £10m a year, if you spend £11m then you're not creating any wealth. How can people who are so rich be so stupid with money? Cue Morgan, the no-BS finance guy. Expect to learn Morgan's golden rule of becoming wealthy, why luck & risk are the same thing, why buying a Ferrari is often a terrible idea, what the stock market was thinking in 2020, whether we'll have a mud wrestling match and much more... Sponsor: Get 20% discount on Reebok’s entire range including the amazing Nano X at https://www.reebok.co.uk (use code MW20) Extra Stuff: Buy The Psychology Of Money - https://amzn.to/2xAHWXD Follow Morgan on Twitter - https://twitter.com/morganhousel Get my free Ultimate Life Hacks List to 10x your daily productivity → https://chriswillx.com/lifehacks/ To support me on Patreon (thank you): https://www.patreon.com/modernwisdom - Get in touch. Join the discussion with me and other like minded listeners in the episode comments on the MW YouTube Channel or message me... Instagram: https://www.instagram.com/chriswillx Twitter: https://www.twitter.com/chriswillx YouTube: https://www.youtube.com/ModernWisdomPodcast Email: https://www.chriswillx.com/contact  Learn more about your ad choices. Visit megaphone.fm/adchoices

Oh, hello friends, welcome back. My guest today is Morgan Housel. You should be familiar with him, considering he's been on twice already in 2020, but it's a year of financial instability to say the least. And Morgan's new book, The Psychology of Money, is everything you need to know about how to become wealthy, stay wealthy, and be happy.

It doesn't matter if you earn 10 million pounds a year, if you spend 11, then you're not creating any wealth It's a little bit weird that people can be so rich and yet so stupid at the same time But thankfully Morgan is here to help us through with his no BS finance advice So today expect to learn Morgan's golden rule of becoming wealthy I look and risk of the same thing. I'm buying a Ferrari is often a terrible idea What the hell, the stock market was thinking in 2020, whether he'll mud wrestle me and much more, I love having Morgan

on the show. Hopefully there won't be any more global crises to talk about, but for as long as he's giving personal finance advice, I am all ears. It's time to upgrade our finances with the wise and wonderful Mr Morgan Housel. So if we could go for it, we can talk about investing and then have a cage fight after that and see what happens. That would be like viewers would like that. If the people of the internet want to watch me and you mud wrestle for money, there is a there is a pay-per-view audience out there. There's a, there's, I, I have a price for everything.

There's a price. There's a price on everyone's head. Look, man, let's get started. So, ladies and gentlemen, welcome back. This is the third time on the show this year. So to everyone on the internet who is wondering, things are getting pretty serious between me and Morgan now. Welcome back, mate. Thanks for having me. I'm happy to be here. I always enjoy our conversations. So I'm happy to come back for a third and hopefully more times after this. We'll see if I don't screw it up here for the third time. And hopefully there'll be a fourth coming later this year. That's a plan, man. That's a plan. So before we get started, you've got a new book out,

Psychology of Money. Why should anyone listen to you on finances? What are your credentials? Well, here's the thing about money. I don't think that credentials necessarily move the needle That's not true in a lot of fields if I wrote a book about medicine or aerospace engineering or dentistry You should not listen to anything that I have to say Finance though is very different because finance what matters in finance is not necessarily what you know It's not about how smart you are or the education that you have or the sophistication the credentials that you have We're doing well with finances whether it's investing or personal finances is overwhelming, overall, it has to do with how you behave.

It has to do with your relationship with greed and fear, how you think about long-term thinking and who you trust, how gullible you are. Those kind of soft topics that is not necessarily what you know. It doesn't matter if you want to Harvard and you want to go to Goldman Sachs, if you lose your head during March of 2020 or in 2008, none of that stuff matters anymore. So it's important about investing. I'll give you my credentials. I have been a full-time investing analyst and writer for 13 years. I've been researching and focusing on kind of the intersection of investing history and behavioral finance. The history of how we think about money, what we can learn from

those lessons and how we can think about finances in a more productive way. That's what I've done, and this book is kind of a combination of the 20 most important things that I learned during that period. I try to wrap it in with a bunch of stories. I have nothing to do with investing, but they all have a really important takeaway about how we can think about risk with our money in a more coherent way.

I think that the way that you've written this book, you're my mate, so I'm allowed to, I'm always going to gas you up anyway, I'm always going to say that it's good. But this particular style of writing, especially a nonfiction book, short sentences, very snappy short sentences that sounds a lot like a dialogue, I think makes things easier to read. It's not a superbly a jump about like read chapter one, then read chapter 10, pick it up, put it down as you want, but you could. And just I think coming out of that blogosphere, coming out of the internet writing where holding attention is your primary currency,

right? You just don't want people to click off the page. I really think that that is, come to the forefront in a very successful way, man, this book is phenomenal and everyone that is listening, if you want, it's the Rich Dad Poor Dad of 2020 with a better-looking author. I think that's the way.

I was putting it on. Well, thanks, I appreciate that. I'll tell you what's important to me. I read a lot of books. I know you do as well, but I rarely finish books. Like how often do I read to the last page? Probably like one in ten books. Even books that I really enjoy and books that I recommend to people. A lot of them I didn't read past chapter five or something like that.

And I think the reason is, very few topics require 250 pages of explanation to get your point across. It's just not the case. So even a lot of very good books after chapter two, chapter five, whatever, you say, look, I get the point. It's a great point. I learned a lot from that point, but I don't need the rest of this. Like, you've made your point, don't like quit rambling on here. It was really important to me that I wrote this book in a way that, hey, it's 20 short chapters. Well, the book itself is not that long, and each chapter is not very long either.

And every chapter can kind of live on its own. And that was important to me because rather than making one point that I rambled on about for 250 pages, I wanted to make 20 points where I made my point quickly and then out of respect for the reader's time, I got out of your way. Nothing more. There's actually a book that is one page. It's not even one page. It's like half a page. And when I turned that in the publisher said, what's, is there something, what, what happened here? Are you missing something here?

And I said, no, that's, I said, no, that's all I have to say. And they said, well, you know, this is a book. Do you want to go in a little bit deeper? Do some more reason. And I said, no, that's all I have to say on the topic. Out of respect for the reader, I'm done here. You move on to the next chapter. And what is important to me, I don't think there's any way to track this. But the metric that I wanted to maximize for when writing this, is how many people finished the book. Not only do people bought it, not only do people open the first page,

how many finished it. Now, not everyone will, it's not for everyone. I'm not, you know, that's a different topic. But if it's easy to read and you make your way through because there's no, there's minimal rambling, that's, that's what I'm aiming for. That is a lesson that so many authors should learn. I think that we're kind of out of that, the particular example that you're giving now, the blog post that could have been a tweet that somehow ended up being a book. Like that shouldn't. That's not the way that it should be. Look, keep it to 360 characters. I'll read it on Twitter.

That's great. Fleshing out to that. And you kind of thirst trap everyone, because all of the lessons are in the final few pages. Like the main, main, like your synopsis of what the actionable takeaways of what you can do get re-put together in the last few pages. So there's like a little carrot to dangle. So it's called the psychology of money. Why should we be bothered at all about the psychology of money? Money's just numbers in and numbers out, isn't it?

See, that's what people get thrown off, I think. I think that's the root of a lot of financial problems for amateurs and professionals. Is that we want to think of finance like it is physics and in physics there are very clean formulas there are there are precise answers with precision that never change over time so if you roll a ball down a hill we can we know exactly how fast it's going to roll and that answer is the same today as it was 200 years ago very precise investing is just not like that at all it's a human endeavor it's much closer to I think you, I think, I think the best analogy is probably medicine.

Look, in medicine, there are facts. There are formulas. There are precise things that we know about how the body works. But people's relationship with medicine is very personal and very nuanced and very behavioral. A lot of what matters in medicine in the modern world is how healthy are you?

Do you eat proper diet? Do you exercise? Do you smoke? how healthy are you? Do you eat proper diet? Do you exercise? Do you smoke? How stressed are you? Those are behavioral things that feed into the process of modern medicine, but not in a really precise scientific way. It's this mushy, nuance, sociology driven thing.

And I think with medicine too, if you take two people with identical cancers, they might come to completely different conclusions on what is on what is worth it for them. One person might take chemotherapy, throw the kiss, sink at it. Another person might say, just give me some pain meds, let me be comfortable, and I just want to let nature take its course. And those answers might be right for that for those two different people.

There's no one right answer. Finance is totally the same where I can tell you what I do with my money. Here's how much I save, here's how I invest it, here's how I spend it, and that answer might work perfectly for my wife and I, and it might be nuts for you or someone else. Everyone's going to come to different conclusions just like we do with medicine. So that's why I think the psychology of money is so important. The other thing is like we know how finance works. We've made a lot of progress in terms of the technical side of finance over the last 100 years.

If you go back 100 years ago, we didn't understand things like discount and cash flows and dividend discount models. That information wasn't in the social sphere, but we do now. We've made academic finance has figured out how finance works and it was left for us to exploit What is left for us to get better at is the psychological side of money got you. So what does money get us? Obviously that what it would clearly gets us is stuff It's it's a thing that you can use to buy stuff That's that's the obvious answer and look. I like stuff as much as anyone else

I mean this is not a plea to live like a monk, but there's a lot of us that money does for people. And to me, it took me a while to figure this out, but once I kind of realized it, it was so transformational just for me personally, that what money does is it gives you options over your future and it lets you control your time. And I think the highest dividend that money pays,

the best thing that I can do with my money, is ability to wake up every morning and say, I can do whatever I want today. It's a sense of independence and a sense of freedom, a sense of controlling my calendar that lets me do stuff. And it's not to say that I don't like Ferraris and Bentley's as much as anyone else. Of course, I do.

But what I really want out of my money that's gonna make me happier than any of those things is enough savings, enough wealth that I've built up and saved over time without spending, so that I have control over my future. If I want to quit my job and go do something else, I can do that. I've got the savings work. If I want to move, I can do that. Take six months off.

I can do that. If I were to get sick or there's an emergency, it's fine. It's not going to force me into anything I don't want to do financially. I've got savings to keep me going. It's that level of independence that I want. Charlie Mungard years ago, who's in Charlie Mungard is a multi-billionaire and he once told someone he said, I have no desire to get rich. I just always wanted a glorious independence. And as soon as I read that, it was like, that's me too. Like, do I want to be rich? Like, sure, do I want, you know, the huge house on the lake, of course, like

anyone else, of course, but what I really want is a glorious independence. That's what that's what I want money to do for me. And I think a lot of people want that as well without knowing it, without having that point clarified to them, it's like they want to explicitly say that. But if you introduce that to them, an independence to do whatever you want. A lot of people would say, yeah, that's actually what I want in life. It's just the freedom to do what I want. It's strange how people's desires get so conflated, right? Like the same as when you ask people what would make you happy and they think it's the house, they think it's the car, they think it's the new expensive bag or whatever it might be. But when you strip it back and you listen to some super, Eckhart Tolle remind you that it's to do with being present and being in the moment or spending time with people that

you care about, etc, etc. But it does require a Morgan Housle and Eckhart Tolle, whatever, to cut through the kind of the social norms and what people expect. And I think that's definitely one of the main takeaways. Everyone that's listening needs to go back, because Morgan's been on twice already this year. Go back to listen to episode one, that's the prequel. Then we did a special COVID edition just as the market was going absolutely berserk, kind of late March.

That's a DVD extra, director's cut, and then this is the, this is the, what's the third one, the sequel sequel, the third. This is the Netflix special. This is the Netflix special, that is correct. So yeah, go back and listen to those,

but what I can do, because you've been on so much, is I can quote you, back to you, of all of my favorite stuff that you've said. So my favorite one is, money allows you to do what you want, when you want, for as long as you want, with whoever you want, without anyone telling you otherwise. That is what it does for you. So what does it not get you?

What doesn't it get you? I mean, I mean, look, money gets you a lot. So what does it get you? I think the better way to frame that is, what are you likely to overestimate getting from money? And a lot of it, the physical things, and I have to reiterate, like, I like nice things too, but the physical things you just get used to over time.

A lot of it is because if you were to get a nice car or a nice house, you kind of move the goal post of your social economic status. So let's just use extreme examples. Let's say you go out and buy Ferrari. You're probably going to start hanging out with other people who have Ferrari's and Lamborghini's and Aston Martin's and I'll send your goalpost to shifted. So if you're driving, if you're driving the Honda Civic, then the Ferrari level looks amazing.

But once you get to the Ferrari level, you're, you, you just adjust your expectations to that level and then, and then the joy that you get from it, the Ferrari level, you're just adjust your expectations to that level. And then the joy that you get from it, the social status, it's not that it's not there, it's less than you would think it was. What's important about controlling your time is this. A lot of what makes people happy is not adding positive things, it's removing negative things. And if you don't have control of your time, so let's flip this around, people who do not have control over the time.

People from whom, and they have to wake up at a certain time and go to work at a specific hour and do things that work that they don't want to do, but their boss makes them do it. Your whole day is structured by someone else's priorities. That is a kind of thing that is likely to bring negativity to your life permanently. If you never have control over your time, that is something that is statistically correlated with people who are less happy than other people. So it's not that controlling your time adds happiness, necessarily. It's that it removes displeasure. And in a way that if you were to do it, so people who have control over the time, it's not that they have more good days. Is it that they have few and days than people who are don't have control over the time? So that's, it's an

important way to keep that in the context too. And this is why people who are, don't have control over the time. So that's, it's an important way to keep that in the context too. And this is why people who are very wealthy are not just walking blobs of happiness, like exuding, like pleasure. They're normal people just like everyone else because having that money, it doesn't necessarily make you, it just removes a lot of the bad things in life. So that's, I think that is what money does not bring us. We are, I think, programmed to over does not bring us it we are we are I think Program to overestimate the pleasure that we get from stuff and even the pleasure that we get from controlling our time

It's a little bit more nuanced in the sense that it's just removing bad rather than adding good Being rich might not make you happy, but being poor will make you miserable I think that's it my mother. I actually brought this up on your show. So I don't want to. I love it. I love it. It's the it's the camping analogy, which I love. Get it out there. Tell us.

That's up. My mother and law brought up this thing years ago, where she said camping is fun, but being homeless is miserable. You know, the same thing. You're sleeping outside in a tent, but one is in your control. One, you are doing on your own terms and one, you're not. That's the only difference that it makes, but it makes all the difference in the 10. But one is in your control, one you are doing on your own terms and one you're not. That's the only difference that it makes, but it makes all the difference in the world. So that's, I think that's the same. Look, for controlling my time, most days I will,

when I wake up, what I want to do, even if I have control over my time, what I want to do is go to work and do good work and be productive, like everyone else. But I'm being on my own terms, on my own time, with people who I like, for a company that I want to work for, and that makes all the difference in the world, makes all the difference. So that level of independence is all that I'm going for with money. That's all that I want to put, it's all that I've really striving for in terms of my financial goals, is just incrementally with every dollar of savings being less reliant on others that I have, that I otherwise would would be if I were in debt

or had no savings and was relying on the kindness of others to make it through my life financially. Talk to us about how luck and risk are related. I know that you bring it up in the book and I think it's very interesting. The observation selection effect that we have of success or failure with finance and the total, the total blind blinkers that we have on either side don't allow us to see how luck and risk were involved. So there's two points here. The first is that luck and risk are actually

like the exact same thing, just opposites. But they're cousins. It's just, you know, one's a brother, one's a sister. They're very similar. Both luck and risk are this idea that there are things that can happen in the world that are outside of your control that have a bigger influence on outcomes than anything you did intentionally.

That is what risk is, that is what luck is as well. Things that can happen outside of your control that have a big influence on your outcomes. And what's interesting is that as investors, purely in finance, we are keenly aware of risk. Investors talk about risk all day long, and they hire risk managers, and they adjust the returns for risk.

Everything about investing is, I'm going to manage risk, manage risk, manage risk. But no one talks about luck. Very few people. No investors hire luck managers. You're never going to see any investor who says, look, I earned 50% last year, but you have to adjust that return for luck. No one says that.

You're going to be a real man of risk. Here's the thing, if someone loses 50% in the stock market, they will say, oh, really risky year. If someone makes 50% in the stock market, no one says, oh, really lucky year. Didn't know, I didn't have anything to do with that. So luck and risk are the same thing, but we treat them so differently.

A lot of this is, look, if I am ascribing to someone else, I look like a jerk. If I say, look, Chris, you've done really well, but you just got lucky. That's a mean thing to say. I don't want to say that to you. Even if we know with certainty that luck exists in the world, I look mean if I'm ascribing it to you.

And if I'm ascribing luck to myself, if I say, look, I've had this level of success, but it was just lucky. I didn't have anything to do with it. It's hard for me to look myself in the mirror every morning. I don't want to admit that to myself. So that's why luck just kind of goes away. Whereas, look, if something really unfortunate happened to me, if my industry collapsed, if the company I worked for went out of business, then I would say, oh, it was a risk.

Like I just, I got caught up in a risk in life. But luck is just a very different thing. So even if we know it exists, it's just much harder to identify in real life. I mean, just go through life kind of ignoring it. Systematically, everyone does. I do this too. The other point about luck and risk is that particularly for extreme success, who are the people that we tend to study, the people who tend to idolize, the ones who have had

extreme success or extreme failure. Those are the people who we pay attention to. The line between huge success and huge failure is very thin and it's usually only known in hindsight. People who are very successful tend to have taken a lot of risk. It's only, and people who are very unsuccessful took a lot of risk too. This ended up on the different sides of that equation. So it's very difficult to really know,

like if you have a hedge fund manager that really swings for the fences, and let's say it works out for them. Let's say because they swung for the fences, there was a 10% chance that they would have done really well. And a 90% chance that they would have failed. Well, if they do really well, they ended up on the fortunate side of the 10% odds,

and then we say, that guy is a genius. He's a billionaire, one of the great investors, because he ended up on the correct side of the 10% odds. If that person fails, like they will 90% of the time, and they go bankrupt, then we say, this person has no idea what they're doing. Even if they made the exact same bet, if they just end up on different sides of the time and they go bankrupt. We say this person has no idea what they're doing. Even if they made the exact same bet,

if they just end up on different sides of the luck versus risk equation, like totally changes how we think about them. A really good example that I use from this is a hedge fund manager named Monish Pagry, who is one of my favorite investors. He's not a household name, but he's really a great investor.

And years ago, he made an investment in a company called Delta Financial that went bankrupt. He invested a lot of money in it, and a company went bankrupt. And he did an interview with a financial magazine afterwards, and they asked him about them, like, what happened with Delta Financial? And he said, oh, that was a smart investment,

it just didn't work out. And they said, something along the lines of, how can you say it was a good investment if it went bankrupt? And he said, he said, I would make the same bet again. The odds were in my favor to do well on this investment. I just ended up on the unfortunate side of risk. If you are making an investment that has a 90% chance of success, then there's a 10% chance

it's not going to work. That's what he was saying. It's thinking about the world probabilistically is a smart way to do it. But it's so hard to do that because we want to think in a deterministic way. We want to think the world is just black or white. Were you right or were you wrong? When it's not like that, odds are really nuanced and they're much harder to wrap your head around. So that's the hard dynamic with luck and risk that's easy to ignore. The problem as well is that in retrospect, you have no idea what the other outcome could have been. It's always brilliant for people to post-hoc their way through it.

I can't remember who the quote is from. Someone said, you never get fired for hiring IBM. Right. And the same thing is true of my friend Rory Sutherland from Ogle the advertising where he talks about you never get fired for following the formula when it comes to advertising. If this advert is just the same brand icon, the little meerkat or the little teddy bear or the big pirate or whatever it is in a new scenario and it doesn't land. But look, we followed the formula. Like we did the same thing, we've done all the rest of the time, But look, we followed the formula. We did the same thing,

we've done all the rest of the type, hey man, pat on the back. Sometimes it just doesn't work out, dude. Maybe we'll go again, maybe the illustration was a little bit off our detime, and it's just a little bit, but if you come in and you do something really innovative, and it works, you're a genius, but if it fails, you're out the door. Why didn't you follow the formula? Were the formulas working anyway? I would much sooner fail safely than be successful riskily. And this...

Yes, and I understand why people do that. People are trying to maintain their careers. It's not, I don't thought them for doing that, but it's a really important thing. To me, one of the takeaways from the luck risk dynamic is that we need to be careful in terms of who we admire. And making sure that the people who we admire, we're not taking lessons away from those people that are too specific. If I say I really admire this investor, this person, but I'm unable to ascribe how much

of their success was luck versus skill, then I need to make sure that I'm taking away the broadest lessons for them. If I say this person invested in this company in this way, so if I do that too, I'll be as successful as them. If you take a hyper-specific lesson from them, that's where you're most likely to get caught up. Versus a really broad lesson that applies to a lot of number of people, that is where we can be sure that there is something there that we can hold on to versus the hyper-specific. So a lot of people who idolize Warren Buffett, Benjamin Graham, all these people will take

hyper-specific lessons from them and try to apply it to their own finances. What is the exact formula that Warren Buffett used 40 years ago to pick stocks and how can I use that today? That I think is a really dangerous way to go about learning from anyone in any field. I think the more broader it is, the more likely you are to find something that is something that you can replicate yourself. I think that is why I resonate with your particular approach to financial advice. There's an undercurrent at the moment in the online fitness world.

We had this period between 2005 and probably about now, where people were able to put out crazy diets where it's the 48 hour fast or the carnivore diet or the keto or the this, this and this. And it's kind of all come back around to, it's just calories man, like it's just calories in and calories out. Like are you eating more than you expend? Are you expending more than you eat?

And that's what it is. And it's this beautiful simplicity that I'm really enjoying us all coming back to, both with podcasting as well. Like this show is a good example. I'm filming on an absolute logitech piece of shit, C220 something. Same, same, I'm not the same.

I'm filming on. We're both doing it. But I think now the glitz and the glamour and the fancy stuff, people are kind of through that. And you might even see this, I've not even thought of this before. Perhaps this is the same reason Trump got elected. That everyone was sick of the glitzy, very complicated lies. They just want kind of the thought,

you know, like that I'm not, that is no way an analogy between physically Donald Trump and Thor, but the idiot, the blunt instrument, you know, that comes in. Like, I can see through the simple lines. I know, yeah. I want to know what I'm going to expect. The same thing is true with finances.

The same thing is true with stockpicks and investing advice. The same thing is true with getting lean or losing weight. You've touched on Buffett there. I didn't know, first off, I didn't know you had 2000 books written about him, which you drop in the book, which is like ridiculous. What can we learn from his wealth and from compounding? What's interesting about Buffett, like he, okay, so he's the greatest investor of all time, he's one of the richest men in the world. And if you dig into his wealth, though, I think something is really interesting, is that Buffett started investing when he was 11 years

old, and today he's 90 years old and he's a full-time, he's still going at it full-time. That fact, the fact that he started so young and so late into his elderly years, is so fundamentally important to his success. His average annual returns over his life have been about 22% per year, which is phenomenal, of course. But if you were to say, okay, let's assume hypothetically that Buffett earned the same returns during his lifetime. But instead of starting at age 11, let's say he started at age 25, like a normal person. And instead of continuing through age 90, let's say he retired at 65 to play golf with his kids, just stopped investing, like a normal person, retired at 65, and earned the same average annual returns during that period. His net worth today hypothetically would not be 90 billion.

It would be 12 million. 99.9% less than it actually is. 99.9% of his success can be directly tied to the fact that he started investing when he was a kid and he continues at age 90. That's what his secret or his skill is that he's a great investor. No doubt about it, 100% full stop. But his secret that has created this level of wealth is that he's been a good investor for 75 years. And I think as you bring up in those 2000 books that are writing about Warren Buffett, how did he do this? What is his strategy? How does he think about business models and modes and markets? None of those books will just point out that we know as a amount of simple math, that the reason he's been so successful is just

the amount of time he has been investing for. Yes, he's been a great investor. So you can dig into the business strategies, how he's dealt with insurance flow and debt, how he thinks about management teams. That's all really important. But what really moves the needle in terms of the dollar amount of the wealth he's been able to build is just the amount of time he's been doing it for. And that is very often not mentioned because it's too simple. It is too simple. If you are a PhD in finance and you're trying to ascertain how he did this and trying to use

your brain power, use your knowledge to pick apart how to invest like Warren Buffett, you don't want to just say, oh, well, he's been doing it for 75 years. So that's it. The other reason is that a lot of people can't do this. If you are 60 years old and you're trying to invest like Warren Buffett, then telling you, oh, well, you need to invest for 75 years to achieve these returns. Well, if you're already 60 years old and you don't want to hear that. So it's both too simple an explanation.

And I think it's a painful explanation for people wanting to hear. It's a painful reality that the reason he has achieved This is because he has done something that a lot of us just Mathematically cannot do we don't have that much time in front of us to do that Which of course for that kind of success of course he has done something that most of us cannot do That's why he's six that's why he's worth 90 billion and you and I are not like of course He's done something that is extraordinary And I think so that's it's just too simple in this idea.

The other thing is that Berkshire Hathaway, his company, does not charge fees. There's no fees attached. If you own Berkshire Hathaway, there's no fees in charge. Buffett's total compensation is $100,000 per year. It's been that way forever. Just that single fact alone,

if you are to compare that to a mutual fund or a private equity firm, just that fact alone that he doesn't charge fees accounts for a lot of his outperformance over time. He's outperforming the market, by it depends on what benchmark you use if you're looking at private equity funds by something like 5 percentage points per year. Well, if you just fees alone accounts for 2 to 4 percentage points of that outperformance, but that too, if you were to write a for two to four percentage points of that outperformance But that too if you were to write a book about how Warren Buffett has done it No one wants to write in that book. Oh, we know that the majority of outperformance came from the fact that it doesn't charge fees It's too simple an explanation

Charlie Munger his longtime business partner was once asked kind of how Buffett and Munger did this. And Buffett said, quote, if you were an observer, you would see that Warren did most of it by sitting on his ass and reading. And that's it. But that too is just too simple an explanation for people to take seriously. So there's always this thing where, again, if we are to think about finance like it is physics or like it is something really complicated, then the answers have to be really complicated, but it's not. So it's not intuitive to think that the most important answers are really, really simple

and basic, because we want to use our brains to figure out the secret sauce. Even if it's just right there sitting in front of you, you want to say, well, okay, that's cute and all, but let's really try to figure out what's going on. But neither is losing weight. Losing weight is very, very simple. Eat less than you expand for a consistent period of time, building a podcaster on an online audience post content that resonates or produce content that resonates and do it consistently for a very, very long period of time.

100%. I wrote an article a couple of years ago called Useful Hacks. And I wrote this because years ago, and it said at a different employer, my company hired a social media consultant to come in and gave a talk about, here's how to really maximize Twitter, here's the time of day you should publish

and how hashtags and how you interact with them, all these like hacks to increase your social media presence. He did not mention, at one point, during this consulting session, that the key to doing well on social media presence. He did not mention at one point during this consulting session that the key to doing well on social media is to write good content. That's it. You want to do well on social media? Write a good tweet that people are interested in. That's it. But you don't want to say that because people want the simple strategy. They want the hack. They don't want to put in the elbow grease. They don't want to grind it out. In a way, just like Buffett,

like what is Buffett's secret? Invest for 75 years. That's his secret. No one wants to hear that. Everyone wants to say, everyone wants to say, well, okay, that's great. But how can I do this tomorrow?

How can I do it tomorrow? That's a lovely idea. But how would you do it in 35? And it's like that first off, especially doesn't allow for understanding how compounding works. So it seems like with everything that we've brought up actually with building your social media

or building a good podcast or becoming wealthy, long-term time horizons is a bit of a, the ability to suffer discomfort, long-term, is a skill that everyone should acquire. For a lot of industries, health is another one. You want to be healthy over the long term. You got to grunt and sweat in the gym in the short run. That's the cost of it.

You want to be healthy over the long run. You got to push away the twinkies and eat the broccoli. There's a lot of things where the short-term cost of admission is the price of long-term returns. It's true and investing as well. I think that's a lot of things. I said, you know, you should, for money, you should save like a pessimist and invest like an optimist. Be an optimist in the long run in terms of,

hey, if we invest in the economy, invest in capitalism, invest in businesses, you can do very well in the long run. But you have to save like a pessimist and realize that the short-term is gonna be a constant, never-ending chain of recessions, bear markets, pandemics, uncertainty, these things that we did not see coming up, were at the personal level, job losses, divorces, medical issues. Like, you have to be able to survive the short term, enable to achieve and benefit from the long run. I love it. Is getting wealthy a different skill to staying wealthy? What are the principles to keep

in mind there? There they are it seems like they should be the same thing like wealth is just a single topic, but as I just mentioned saving like like a pessimist investing like an optimist that is getting rich versus staying rich. Getting rich getting wealthy requires optimism swinging for the fences doing really well being optimistic about the future. Staying rich requires a pessimism about the short run, where you're saying, ah, I don't know what's going to happen over the next three months.

I got to make sure I have a lot of savings. I got to reduce my debt because I don't know if I'm going to be able to keep my job. I got to plan for unexpected expenses that might come up. You have to, those are two separate skills that you have to nurture and think about separately. And if you don't have one of the other, people are just optimistic about the future, and they're so optimistic that they're really, that they're, they're willing to push it in the short run in terms of no savings, lots of debt, because they're so optimistic. Those are the people that end up running in the sales off a cliff.

And on the other hand, if you are pessimistic about the long run, if you're just going to save your money and cash and CDs, then you're never going to get rich to begin with. So you have to foster both of those and they are conflicting skills, which is why a lot of people don't necessarily have them. There's a lot of turnover on the Forbes list of billionaires, not because they're old people who die. It's because they're people who became very rich, but had no skill at staying rich. And a lot of it is the skills that will get you to be

come rich, actually counter the ability to stay rich. A lot of people who get rich aren't got rich because they are so willing to swing for the fences. They're so willing to take a huge risk to bet everything on this one big crazy idea. That's the skill you need to get rich. Stay rich is the exact opposite. Stay rich requires paranoia, diversification, pessimism. That's what you need to get rich. Stagrich is the exact opposite. Stagrich requires paranoia, diversification, pessimism.

That's what you need to stay rich. And if you don't have those at the same time, then if you are fortunate enough to get rich or whatever word you want to use, just well off, doing a little bit better than you are, it's probably going to be a temporary endeavor. So I'm interested because I'm interested in compounding I want to I want to make sure that I can maintain the level of financial You know, you know wealth that I have right now for the longest period of time I'm not interested in doing something for the next year or even 10 years I want to remain invested remain compounding for the next 50 years and the only way that I can do that is if I am

Paranoid about the short term in a sense that it's gonna make me have the high savings rate, lots of cash, no debt, in a way that is almost completely counter to my long-term optimism. Cultivate your paranoia, Morgan Housel 2020, that's the synopsis that we've got. That's trademark. But 2020 is actually the perfect example

of the continuous chain of breaking disappointments that happens to all of us that we need to manage for. No one thought that 2020 was going to end up this way. No one saw this coming, but if you look historically, I think the world breaks about once per decade, not on that exact timeline, but on average once a decade, the world falls apart. COVID-19, 2008 financial crisis, September 11th, 7-7, for the UK, every 10 years something bad happens. Go back, great depression, World War II,

GFK assassinated, on and on and on. So if you just use that as your historical baseline, I don't know when it's going to break or what is going to be the cause. It's not a prediction of specific events, but the world is prone to breaking. And if you view that, then it just pushes you towards more safety, security, room for error in your finances for the short term.

But even though the world breaks every decade, there's been tremendous progress over the long term. So to acknowledge the constant breakages, I'm pessimistic about the short term. But to exploit the long-term optimism, optimistic about the long run. So those are, since those are not, they seem like opposite, it's hard to put those two together, but they're both necessary to do well over time. I love that. There's a really good example from mutual friend Shane Parish, Mr. Phanum Street, where he talks about signal versus noise, and the example, the first

every example that he used, or the first every example that I heard to about signal versus noise, and the example, the first ever example that he used, or the first ever example that I heard to explain signal versus noise as a mental model is this one. And he says, imagine you're an investor and you put your money in the stock market and you were tracking where your investment had gone. And you looked once a year at what your investment had done.

He says, imagine that you get 50% useful information and 50% totally useless noise. And he says, now let's increase that frequency. Let's check every one month, 12 times a year. Well, now you're getting towards like 90% noise, and only 10% signal. Because there's a lot of little wiggles around, anyone that's ever looked at the graph on a stock market, looks like a spider going for a walk. He says, and now imagine that you're going to check every day. And that is 99.99% noise and only 1% signal.

And that ability to, first off, the luxury that you don't have to feel like you need to check it, I don't know how often you check your Vanguard fund, but I'm going to guess it's just when you want, not when you feel compelled to. It's not every morning when you wake up. You wake up and crap your pants because like, where's the Vanguard fund gone? I check it when the market's gone up and I don't check it when it's gone down. It's only a useful skill to making me believe that I'm only going up over time.

I'm only half kidding about that. But here's the thing, I don't make any actions when I check. I like checking it because it's fun to watch, but I don't change anything. So I think it's fun, I think it's fine to check your portfolio often, as long as you're just checking it. It's dangerous if you check it,

and every time you check it, you are tempted to say, oh, maybe I should sell this, maybe I should buy that, turn the levers, do this. That's when I think it gets dangerous. And back to your shame parrots, your shame example, an example, checking your portfolio every day, let's talk about the Robinhood traders. It might be checking it 47 times a minute. Like we're in a different world here.

And that is of course back to luck and skill, the short of the time period that you're looking at, the more likely that the results are the result of luck or risk. And it's not until we've, the longer we look, the more you can say, okay, this is skill, longer period of time, through a variety of different environments. Recession, boom, bust. If you can do well through all those periods, that is something you can say, okay, there's a skill there.

But the more you shrink the time rising, it's just going closer, closer to luck, risk, noise, that you're looking at. Tell me that you've seen the Wall Street bets subreddit. I've heard of it. I think I checked it once, but I'm not a frequent observer. Dude, this is like softcore porn to you. This is just the most entertaining. So everyone that's listening and you once were done Morgan, go to YouTube and search Wall Street bests, dankest trades. Oh my God, they put together the highlights of this subreddit

where people just make outrageous. They bet their entire lives savings on the fact that Apple's gonna go up by 10% by the end of the week or down by this. And dude, it is, it makes your bum hole, like sort of do this, like clenching thing a little bit. And you know those videos of free climbers and they'll be on it, doing a handstand on the top of a skyscraper, still a building site. That sweaty palm sensation is precisely the same thing that you get when you

watch these videos. Dude, it is, it's so compelling. So I urge everyone to go and do it. And if the guys from Wall Street bats are listening to your heroes, you're crazy, but you're also, you're also heroes as well. If you were to write a golden rule of becoming wealthy, what do you think it would be? Live below your means and be patient. That's it. That's 90% of finance. That is 90% of finance. That's not even like the simplified version. If you can actually do that, you have a PhD in finance. That's not really the case. You see what's the thing. Let me walk through this. Living below your means. It does not matter how much money you earn. You can earn $10 million a year. If you spend $11 million, it doesn't matter. You're not building any wealth. Obviously, it's an obvious statement. But we need to say that. How wealthy you grow

is not about how much money you make, how much money you save. So living below your means at any income level, whether you make $10,000 a year, $10 million a year, is the key that you need for finance to build wealth over time. And being patient, again, is just putting the odds of success in your favor. The shorter the period of time, the more you're relying on luck to fuel your success, whereas the longer period of time, the more you're putting your odds in your favor. So if you can liberal your means and be patient in your investment, it's it. You're done. Game over. Anyone who's got finances PhD that's listening, I'm very sorry.

Had Josh Koshman on recently who said anyone who's gone and paid 20 grand for an MBA doesn't need to, just read my book. So there we go, we've saved people across the entire world hundreds of thousands of dollars. What were some examples that you found of rich people doing crazy things? Oh, I mean, they're endless. I mean, the thing that you brought up with Wall Street bets, a lot of those people have money and they just can't... My wife and I often remark whenever we see someone doing something, we say something like that, we say, people hate money.

People that cannot stand money. They think they want it, but as soon as they get it, they're like, how can I get rid of this as quickly as I can doing the most ridiculous thing that I can? They hate money. So I think there's a lot of that. I opened the book with the story about when I was in college, I worked at a very nice fancy hotel in Los Angeles. I was a valet.

And there was a guy there who was very smart, very successful. He was a technology entrepreneur. He had built and sold several companies. He was filthy, filthy rich. But his relationship with money was unlike anything I had ever seen. He was the quintessential of what I just said, could not get rid of money fast enough. And one day he was, I mean, he was, he was a drunk too. He was always, he was a very colorful guy. And he came to us when we were always

running these crazy errands for him as valets. And he came to one of my colleagues one day and he said he carried around this thick stack of $100 bills and he peels off like half an inch $100 bills and he says go to the jewelry store down the street and get me some gold coins. My friend the valley goes out and does this comes back with the gold coins. And this technology entrepreneur and his friends stand at the edge of the Pacific Ocean on at this hotel and they take these gold coins and they start skipping them like rocks. See who's can go the farthest and they're cackling.

They're just laughing at who's can go the farthest. As far as I know, as far as I know, the coins are still there and maybe we should go get them. But anyways, at the time I was young and I didn't really understand, but I remember watching this guy, I mean, how long can this last? How sustainable is that relationship with money?

And I learned years later that he went bankrupt. It's a surprise. Surprise. As everyone should assume. So this gets back to, the thing that I was so asserting about it is that he was a genius. He was a technology entrepreneur that created these incredible products, but his relationship with money just completely blew it off. So let's get back to you.

You can be the smartest person in the world and have all the analytical skills, but if your relationship with money is not well-honed, none of it matters, it all goes away. So you see a lot of people do similar things, now. I hypothesized, and one of our episodes at the beginning of this year, I proposed that people have a materialism set point. Kind of like you have this hedonic adaptation, you have like a materialism set point, which is inbuilt somehow into you. I didn't know if it was psychological or if it

was genetic, and it would have been influenced heavily by were you in a family that gifted very heavily around Christmas time and birthdays, was it very much keeping up with the Jones' sort of environment? And my prescription was, if that is the way that you are, that you show love in the world, that you feel a claim and success, you'd better hope that you get a good job. Like you'd better hope that you are, the director of some huge company,

or your investments go well, or you get into angel investing or whatever it might be. And I had a psychologist on the show very recently called Fiona Merton who wrote a book called Mirror Thinking about the Mirror Newer. And I brought this up with her because it sounded like what she was talking about. And she says that is precisely what people have. They have a materialism set point. The same way as we have a hedonic set point, the same way as we have a happiness set point, there is an amount of spending that we are used to. And that is kind of a little bit of an immutable truth. What we're talking about, what we're trying to do here is uncouple someone's ability to create wealth from where they started. Look, if you follow this particular process, you can achieve some respectable

returns. This, the materialism set point and the, this hedonic set point that you have as well, that is a little bit less meritocratic. That is something that's kind of either a blessing or a curse, depending on which side of the coin you fall on and where your life ends up. And for that as well, I think that's really important for people to realize they should do some internal work. Think, look, do I need to actually work this hard? For me, I think the same as yourself. I'm happy just, I like a nice coffee.

Like, would I pay if I was a millionaire, would I get a slightly nicer coffee? Well, yeah, maybe. But, you know, I just don't spend tons of money. I like a nice car, but I don't need an inset. Would it be fun to have a helicopter? Yeah, of course, it would be fun to have a helicopter, but I don't need a helicopter, but there are people out there who have to have the Le Vu Tom bag, they have to have the red bottom shit, they have to have everything. And for those people, they need to look at themselves very, very carefully

and think, right, how can I curb the areas of my psychology which aren't aligned with long-term wealth accrual? And how can I service those in the most prudent way possible? Yeah. That brings up two points and I think are really important. One is that, I think the most important financial skill is getting the goalpost to stop moving. If you are fortunate enough to be someone whose income and wealth is growing over time,

if your expectations grow in lockstep or if your expectations grow higher than your income, none of it matters. It's not gonna feel that great to you. And I think a lot of the reason why people are somewhat disappointed with the wealth that they might be luckily enough to create, when they get there, they say, oh, this doesn't feel like I thought it would.

It's because if you are at a low level of wealth and you dream about what it would be like to have a million dollars, you are using your current expectations and then transplanting yourself into someone who has a million dollars. So there's a big gap between your current expectations and a million dollars.

But once you get to a million dollars, your expectations go up to a million dollars too. And then it doesn't feel that great anymore. You start looking at people who have 10 million, 20, and a million dollars. But once you get to a million dollars, your expectations go up to a million dollars too. And then it doesn't feel that great anymore. You start looking at people who have 10 million, 20, 50 million, and that never ends. So getting the goalposts to start moving is the single most important skill because being happy with your money

is just the gap between what you have and what you expect. So if those two things move at the same level, you're never gonna feel that great with your money. And keeping your expectations low and having a sense of enough, it's not to say that you don't want more, but you need to have a well-honed ability to say, okay, this is enough, this is all that I need.

If I get more than that, like, great, that's a cherry on top, but my expectations are not gonna exceed this level. That level might be different for everyone and even different at different points of your life. But if you don't know where that level is and if you're not trying to keep your expectations below it, going out of your way to keep your expectations below it, you're going to have a hard time with money. No matter how successful you might be lucky enough to be in your life.

So, earn rich think poor, I suppose, is one of the other little maxims that we can pull out of so far. We need financial role models, though, right? We need someone to aim for, an example to follow. And that's someone has to be properly financially smart and not just like with the flashy displays of wealth, like the fellow with the gold coins. But also, you had this story about a Janet who's saved four million. That really, to me, that's not a poor, that's a poor role model as well because it's not a life I would find very exciting. It doesn't really fire me up.

Oh yeah, I'm going to live in a tiny flat for all my life and then give away $3 million to charity after I'm dead. So who should we try and emulate? Is there a perfectly balanced financial role model that you know of that everyone can just go and follow on Instagram or something? No, because the point that I want to make is that it's very different for everyone. There are people, not you, and not necessarily me, although maybe I'm closer to it, who would not aspire to be someone like Ronald Reid, the janitor who gave away $4 million.

There are people who would be like, that's exactly what I want to do. I don't know if you saw the news just yesterday. The guy who started duty-free stores in airports, his name is Chuck Fieny. His net worth at one point was $8 billion from starting duty-free stores. He gave away every, he kept 2 million for, for, he and his wife, 2 million with an M and gave away the other 7.999 billion. And just as of yesterday, as of the, the, the news story came out yesterday, he has officially given it all the way. His net worth is now $2 million.

He lives in a small apartment. He flies coach, he drives like a Volvo. So for him, that is the dream. He never had any material aspirations above $2 million. And other than that, he was like, just get all, I want to give everything else away to charity. Other people are not like that. So it's different for everyone. And that's why there's no one financial role model that we can all look to because what is what I want might be very different

from what you want, very different from what Chuck Feney wants, and other people. So this gets back to the idea that personal finance is more personal than it is finance. Everyone is different. And what I want to do might make no sense to you and you might criticize it and say how can you? How can how does this make sense and seeing that I'm doing with my money? How does it make sense? How does it make you happy? Well for me it does and then and for my wife it does So and like you you can do your own thing and that's fine too. I think health is really similar. I Run I don't lift weights, but I run but I'd almost I've increased it a little bit Recently, but I'd never But I've almost, I've increased it a little bit recently,

but I'd never run more than three to five miles. Could I run, could I train for a marathon and do that? Probably, I think I'm capable of doing it, but I don't necessarily aspire to do it, because my goal for running is not to become the greatest athlete to push the limits as hard as I can to do well on a marathon. My goal with running is to keep my health adequate enough

that I don't gain a lot of weight over time. That's full stop, that's my goal. Same like if I do lift weights once in a while, it's not like how can I get huge, how can I get ripped? It's like how can I make sure that my bones are staying strong enough over time that I'm not just a total couch potato. And that's it, I don't aspire for anything more than that.

So I think people have the same thing with money. What my goal is might be totally different from yours, just as my health goal is probably different from yours as well. We're out of the safe zone now. We're no longer in your book, and I'm going to ask you some questions I've had planned since our earlier episodes this year. What is your response to the people that say that Morgan House will can't pick stocks? Name me one big stock pick that Morgan's got right over the last 10 years. Index funds aren't financial advice. Morgan doesn't know what he's on about.

Well, the index funds that I own have big positions in Amazon, Google, Netflix, Apple. So the odds are that I have owned more great stocks than you, Mr. Stockpicker, have. So take it. Look, over a long period of time, over a long period of time, I'm happy to compare my returns to anyone else's, because look, we know statistically that people who try to beat the market, 90% of them will fail, which is how it should be. That's of course that's how it is.

Like what kind of world do people expect to where everyone who tries to make a fortune in the stock market can? That's crazy. Like I use this example before of, if you look at college sports players, what percentage of them make it to the pros? It's like two to five percent,

depending on what you're looking at. No one says that's wrong. No one says that's bad. No one says college sports is a fraud. People would say, look, it shouldn't be hard to make it to the pros. That's exactly what you would expect. The pros are the pros because it's the best of the best.

And beating the stock market is the same, which is why 90% of people who try it over the time fail, which means that myself as an index fund investor, I almost, almost certainly, by definition, will end up the course of my life in the top 10% of money managers, which is just to say, like, people can criticize it all they want. But over a period of time, I'm happy to compare our returns, especially because the index investor probably has the highest odds of leaving it alone and actually letting it compound for 50 years versus the fund manager who might, you know, fund managers retire or they're going to do something else or they, you know, they reach a

rough patch and their clients take out all their money. I think I have the highest odds of just keeping this and letting it compound for 50 years than I would if someone could then in active strategy. That does not to say, and this is where I differ from a lot of index fund investors. Do I believe that some people can outperform the market over time? Yes. Do I believe that there are people who can pick winning stocks better than I was? Yes. 100%.

A lot of index fund investors will tell you, no, it's just impossible. I won't tell you no. I just think it's hard. I think just like, are there college basketball players who will go on to be better than LeBron James? Yes, it's hard. Not very many of them. Of course, it's hard. But yes, of course, it's possible and it exists. So that's where I land on the investing strategy. I also make this important point. It's probably the most important point, that the way I invest works for me. It might not work for you. And I don't mean that in a dismissive, passive, aggressive way.

If something works for you, then do it. This works for me. This is how I keep my head on straight and be happy and go to bed at night saying like, I'm really happy with my finances. If you have a different strategy that works for you, 100%, that's someone that you should pick.

Another thing to consider is that your particular setup financially permits you to not have to do work. Once it's in, it's in, which I guess is also a good strategy for sex. That, you know, it's just there, it's in, we leave it there. We don't take it out, not until the time is right. I was going to say, there is some conclusion, but yeah, that's fine.

Yeah. Whereas, what's the cost we talked earlier on about like unseen costs of money? If you're investing strategy, if you're scalping, and you've got to wake up and have a line of cocaine and five coffees before you begin your work day and sit down at your seven Seven screen Supercomputer that you've got set up in your in your office or whatever that is a very different sort of life now for some people

There is there are some people out there who are built for that. They love the adrenaline They love the anxiety. They love the the rush of just picking it perfectly deploying the trades It all the the take profits, trigger at the right blah, blah, all this stuff. And then there's other people, and there's everyone in between. And for me, my particular lifestyle is anything for an easy life. I want as much passive investment as properly. Here's something that haven't even said.

I know a lot of people ask, I own a few houses in the UK that are biterlets, I rent them out to students and to young professionals. I'm going to pivot to become managed from probably later this year. And that is simply for this situation. I've done another round of move-ins, June, August and September. And the tenants are lovely, but it's just too much of a headache. I can't be asked to do an inventory again. I can't be asked to tell them how to work the washing machine or where the stopcock is or why the this like the banisters are a bit wobbly or any of that. I don't want to

deal with it anymore. And I'm happy to give away 8% a year of that to make it someone else's headache, right? But that's the only reason that I know externally what I want is because internally I've done the work. I've aligned my financial setup with my psychological makeup and that's what everyone needs to do. And look, someone could say, Chris, why don't you want to earn an extra 8%? Do you just not like the wealth?

Do you not like the money? You don't want to earn, you don't think you can earn extra money? And your response is like, no, of course I could. It's just not worth it to me, given the risk and the amount of effort that I want. It's the headache. It's the headache. I've always said, do I know investors who can outperform the market? Yes. Why don't I invest with them? A lot of it again is because the odds that I would not be able to maintain that strategy over time are higher than they are for me right now. But the other thing is like, look, I could earn higher returns, but I put that in the

same bucket as saying, I could also double my salary if I got another job and worked until 4 a.m. every day. I'm not interested in that. There's a cost to all of this. There's a cost to trying to beat the market. And I think for me, that cost is not necessarily worth it, given the goals that I have and keeping the goalpost pretty low that I have, where it's like, if I can stay invested in index funds

for 50 years, I will achieve every goal that I have in them some. So I'm gonna take more risk, risk that might put me below my goals to try to get there. There's this great quote from Warren Buffett that I use in the book where he says, if you risk something that is important to you, in order to gain something that is unimportant to you, that is foolish. There's no reason that you should something that is important to you in order to gain something that is unimportant to you

That is foolish. There's no reason that you should do that risk something that is important to you to gain something that is not important to you Why would you want to do that? So why am I gonna risk the money that I have that I need in order to gain money that I don't need because it's above my goals Why would I do that? The reason that that happens again, and this is why the psychology of money Does make sense as a title is because people think that that's what they want. I don't think people do it. Some people do it, perhaps, unthinkingly, but most people are fairly obsessive about money, especially when it comes to investment, spending, they can be frivolous, investment, they tend to be obsessive, especially if they're type A. And for this, that's what I want, that's what I need.

It's like, if you spend, before anyone gets a Robin Hood account, they should have to do six months of mindfulness meditation, because their investing strategy would be so much different. Journal for your meditation 15 minutes a day for six months and your investing strategy will change far more than if you read Like the 2000 books on Warren Buffett. I need to bring this up. No, that would do to Robin Hood's business model They they they they might lose some that might increase their customer acquisition costs a little bit

But yeah, I agree it would be totally different. I mean a lot of things with Robin Hood is that It's primarily it's primarily young men doing this look, you know how the story is gonna end. They're all gonna lose money. You don't know when, you know exactly how long it's gonna last, but you know they're all gonna lose money. 100%, 100% odds. A lot of that is a good lesson to learn. To learn that the hard way is actually a great way

to learn it. And if they can learn that lesson when they're young versus when they're 47 and trying to put their kids through college, then, okay, great. Like, maybe that's a good thing. There's also a thing with Robin Hood, where we can't just pretend that this is a game. This is real people's savings that can really script your life. There's a story in the United States, maybe some of you have heard of it, of a guy, a

Robin Hood trader, I think he was 20 years old. He logged on to his account, maybe this was two months ago, and there was a glitch in the UI. It wasn't reporting things accurately. And he had, he put $10,000 into a Robin Hood account, and he logged into his account, and his account balance was negative 700,000. It was just a glitch in the UI. It wasn't that actual, it wasn't a real number, but he killed himself the next day because he thought he owed this much money, 20 years old, which is just to say, like, again, this is not a game. We can't just say, buy or be aware, maybe you lose your whole life savings, like best of luck.

We can't just gamify this and say, buyer beware. I think there is a sense where it's like, no, we need to be able to, we need to be teaching people the right way to do this. But there's also a sense of, I'm glad in some way that they're learning these hard lessons through real experience, versus just reading about it, someone else going through it, they're learning it, they're going to burn their own fingers doing this. Maybe there's something positive about this, even if we should really have this idea that

it's not a game, these are real people's lives and real people's emotions that are being toyed with. I'm telling you, short cut to success, Dankus Trades of Wall Street Bets on YouTube, it'll teach you all that you need to know. That's a DVDX. First you read Psychology Money, then you watch Danka Straits of Wall Street bets. The most hilarious thing to do with the Wall Street bets sub four. Remember that this subreddit is everyone is trading on Robinhood, right? Robinhood have their own, as many brands do, they have their own Reddit account. And they joined and they tried to be a part of the conversation, instantly banned by the moderators, never until we let back. They were like, we don't want you here. Fuck you. We're going to use your system. Did you hear about the guy who found the infinite money glitch by moving it between

Robin Hood's, Robin Hood cash and Robin Hood gold? So that was part of Wall Street bets as well. And this guy turned like $1,000 into $50,000 then managed to get himself into like half a million, and it went, it was on Bloomberg, like, business and all this sort of stuff. It made national press. Dude, it is phenomenal. Speaking of phenomenal trades, can we talk about Bill Ackman this year? Yeah. Holy shh, shit.

Yeah. He's swung for the fences a lot. I don't know a lot of the details about it. If I recall right, so I might be getting this wrong, but he was, you went on CMBC in March and was talking down the economy. We're all going to the Great Depression and then it was revealed that he was short the market. Is that good than just of what it was?

He put a very specific type of insurance onto his trades. I think, I don't necessarily think that he's shorted the market. I think he put a very specific, very expensive type of insurance on his trades that protected him against this exact thing. And he, the returns that he made was in the billions. So they're calling it the new big short,

which obviously the movie made about, but the difference is that Ackman's short took six weeks. It took six weeks to happen. Not five years like the actual big short with the Auxing Mark. Exactly. Exactly. Bill Ackman, for all the, he tried to take down her some sort of he's one of these guys who's super prevalent, very, very prominent as well, like high visibility when it comes to, especially short, like short investing, but fucking hell, man. What do you say to that? What do you say to a guy who makes his investors like billions in weeks? You only need to do that once or twice in your career. And the rest of the time, you can do whatever you can go buy whatever

Manchin you want go to every club that you want get on all the trouble that you want if you have one of the if you have two of those in your career And yet that's your free pass, but I think that it's like let me make a serious comment about this a lot of no not a lot every one of the best investors over time their career success is tied to a handful of trades and time. Their career success is tied to a handful of trades. And what they do in the other years don't necessarily matter. They don't move the needle. It's like once every 10 years or once every 20 years, they completely knock it out of the park. And then the other 19 years, they're just kind of meddling along. That's always how it works. So I think the Bill Atman story is instructive because that's how it works forever. Berkshire Hathaway, Warren Buffett. But you know, Munger has said, if you take birks your top five investments out, they've

made dozens of investments. Take out five, they're birks your long-term track-haters average. It's just five big investments, guy-co-general read, that have really moved the needle. And, you know, Apple is the other one. Birks your's may now, something like $100 billion in profit. If birks your makes $100 billion in profit, all the other little investments that people look at and the other failed investments, none of that matters.

You make $100 billion from Apple, what wipes everything else away. So that like tail-driven success that we see with Ackman, that's you dick with us across all very successful investors. What's happened with Tesla and Apple this year? Is the market sentiment and the price just become completely unhinged from the real world? What's going on? Yes, completely, but then but that really important question is how long can that last?

It's like just because you found something that is unsustainable does not mean you know when it's going to become more sustainable. Like things can so if it isn't crazy today. Yes, I I joked with a friend. I wasn't joking. I said, I feel like there are as many Tesla's as Honda's on the road these days. I see Tesla's, I live in Seattle, they're everywhere. And he said, okay, you're wrong. Honda sold 10 times as many cars as Tesla. But let's assume you're right. Let's assume Tesla sales are equal to Honda sales. Honda is worth one tenth of what Tesla is, one tenth. If their sales are 10 times higher and the company's worth 10 times less. So yes, you look at something like that

and it's like of course it's ridiculous. But that does not mean you know when it's gonna turn or it does not mean that Tesla cannot increase another 10 fold from here. Like just because something is crazy does not mean you know the boundaries of insanity. Ha, ha, ha. It's what it comes down to.

So that's, I don't have any bets or on where it's gonna go, betting against Elon Musk has never worked out for anyone. There are a lot of people who are totally convinced that Tesla was a short at $100 a share and then it went to $3,000 or whatever it was. So it's fascinating to watch, but I don't place any wagers on where it might go from here.

Never underestimate people's ability to fuel crazy things for longer than you might think. And never underestimate Elon Musk. That's definitely something to say. Any man that can drill holes under the ground and then fly cars along it, you just don't want to you don't want to mess with him. So we're finished. When he was like 29, he made a life bet to colonize Mars. You're going to bet against someone like that. What were you doing at 29? You were colonizing Mars, are you? Colonizing Mars at all. No way, exactly. So of course he doesn't. Of course this is a guy who does not think the normal rules of Corporate boundaries and innovation boundaries apply to him.

Didn't he get taken or he doesn't? Didn't he get taken off the board of Tesla after he got accused of taken off the board of Tesla after he got accused of stock manipulation through tweeting. So he got taken off the board of something and then just kept tweeting. And that's again, if you have the personality that you think at age 29, you think I'm going to colonize Mars and actually built a rocket ship that is legitimately making progress to do that. Of course, you don't think that the boundaries of social decorum around tweeting apply to you.

If you think you can colonize Mars, of course, you think you can tweet whatever the hell you want without repercussion. Of course, you don't, if you think that you can take on GM and Toyota and build a car company, it's going to be worth them then, of course, you don't think that you need your lawyers permission to send out a tweet. Like that person out, the things that people love about Elon Musk is the fact that he does not think the rules apply to him. That's what we love about him.

So we should not be surprised when he does things that look bad because he didn't think the rules apply to him. Like you have to take the negatives with the positives. What people love about Elon Musk is the fact that he does does not care about what you think about him or what lawyers or regulators think about him. He's going to do whatever he thinks is right. And there are positive attributes to that and negative attributes to that. So if you are a Tesla investor saying, I don't like him tweeting, he's going to

keep tweeting. He's getting this is the same for Donald Trump. It's just integral to who we are. And the reason people like Trump is because he tweets like he does. So you should not be mad at him when he tweets like it does. That's part of the package. Who's going to win the election in November? In January, I did a conference and someone asked the same question and I said, I'm going to give you the worst answer that any pundra can give, which is 50-50. That's the worst answer.

No one wants to hear that answer, but I think it's the truth. I don't think it's any more than that. I wish I had more to give you than that, but anyone who thinks Biden is a slam dunk, and he's way ahead in the polls, I think is obviously overlooking what happened in 2016. Because of the electoral college system, the Republicans have a legitimate head start advantage in this. So even if Biden is ahead in the polls, Hillary Clinton had almost the same odds to win that Joe Biden does today.

And anyone who thinks Trump is a slam dunk is probably overestimating the idea that what happened in 2016 was low odds. It happened, it occurred, and it can happen again. But if you say, oh, well, Trump won in 2016, so he's gonna win in 2020, but that's not how we're. I'm gonna give you again the worst answer that no one wants to hear, which is 50-50.

Douglass Murray, a contributor associates director or whatever he gives us the spectator. I asked him the same question, and he thinks which is 50, 50. Douglass Murray, a contributor associate's director or whatever he gives us the spectator. I asked him the same question and he thinks, kind of the same outcome as you, but in a totally different way, he thinks it's gonna be so contested because of accusations of mail-in fraud.

And if the Dems win, no one's gonna win by a landslide, I think it's gonna be tight. And if the Republicans win, it will be accusations of Trump's manipulated the Post-Gull thing and do this. Yes. And it's the same in reverse, right? So that is a... And I only learned this on a podcast.

And I've had like a... I'm so glad that I have no sort of horse in this race because that's a real existential threat, man. Like, you know, given how inflammatory everything is in the states at the moment, and then add on top the fact that no one really trusts anyone, especially partly to party. And everything's been primed for November. It would almost be best if it was a landslide. If it's a 55, 45, a 60, 40, great. If it's a 50 point, 49 point.

Yes, holy sh. No, you're right. I think the odds that look in the scenario that Biden wins. The odds that Donald Trump says, Hey, we tried our hardest, but congratulations to President Biden. I'm going to see myself out now.

The odds that that occurs are 0.0%. Not 0.1, 0.000%. No chance of that, that, that occurs. And in any scenario with Biden wins, I think you're right. The odds that it's going to be dragged out in the courts as it was with George Bush and Al Gore 20 years ago are, are extremely high. I don't think anyone expects to wake up the day after the election and know with certainty all around who the president is. But that is a very important part of our democratic system. In 2016, from what I understand, Barack Obama called Hillary Clinton the night of the

election and said, you need to concede. I know this is not the outcome that any one of us wanted, but is integral to the democracy of the United States that the loser concedes. And Hillary Clinton did. At the start of her press conference the next morning, the day after the election, she stood in front of the microphone and said Donald Trump will be our next president. You know how much that had to rip her to shreds inside, but she said it because it is so important. And what's crazy that you that you reference here, and I think it's totally right, is the odds that occurs this year?

Virtually zero, virtually zero. So you take something that has been so important to our democracy, and you think well, there's no way it's gonna happen. And it's a big threat, big threat. If you know what it is like 2020 is some history for you. If nothing else, we were kind of missing a bit of history. 2010 to 2019, we just had social media and like TikTok stuff. There's no history. And then this, we just had latent, latent history all caught up to us and gave us fucking whiplash.

And then came charging. This is great quote from Nassim Teleb, it says, history does not crawl. It leaps. That's what it is. History is not something that moves slowly over time. History is something that flatlines and then boom comes out of you from the middle of nowhere. And you're right, that's what 2020 is. Some history for you.

Look Morgan, man, psychology money will be linked in the show notes below. I implore you to go and check it out if there was a year where you need some financial advice. It would be this one and you know, it's everything that we've been through today plus more. James Clear, Daniel Pink, Annie Duke, who is coming on the show next week for her new book and Howard Marx. Like, you've just got the biggest, the biggest swinging dicks of risk and of psychology just on your butt. So why not, why not do it? Morgan Housel, At Morgan Housel on Twitter.

That's where you live. Anything else that people, oh, collaborative fund. Collaborative fund blog, that's where it is. The book, you got the Twitter, you got the blog, that's it. Well, that's the thing. After three episodes, man, I can just do, if you need me to drive the kids to school or any other things

Like you know, I just know what I'm doing. So man, it is you're part of the family now. I appreciate it It's the way it works and we've got a little visitor just behind you have a look Is she is she here? That's part of the family. You're gonna be driving her to school soon That's the plan. Um, man. It is always such a pleasure to speak to you I'm looking forward to the next one already. Thank you so much. Thanks again, Chris. This has been fun, as always.