Motley Fool Hidden Gems Investing - Morgan Housel on the Forces That Drive Our Spending

Episode Date: November 1, 2025

What makes the U.S. consumer and investor unique? Are we biologically programmed to be dissatisfied? Should you want your kids to be poor? Morgan Housel answers those questions and provides insights from his latest book, The Art of Spending. Also in this episode: -International stocks have notched a 30% gain so far this year-The Fed cut rates but dampened expectations for December-The job market is always in flux, as demonstrated by a slew of recent layoffs-The most tax-efficient way to give to charities may be donating appreciated shares of stock Host: Robert BrokampGuest: Morgan HouselEngineer: Bart Shannon  Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

The forces that get us to spend our money in unfulfilling ways and international stocks continue their winning ways. That and more on this Saturday personal finance edition of Botany Full Money. I'm Robert Brokamp and this week I speak with Morgan Housel about his latest book and why we spend the way we do. But first, let's look back at last week and money. On Tuesday, international stocks crossed the 30% threshold for the year, as measured by the performance of the Vanguard Total International Stock ETF, which tracks the FTSE Global All-Cap XUS Index. That is approximately 12 percentage points ahead of the S&P 500. So far this year, foreign stocks are outperforming U.S. stocks by the widest margin since 2009. Despite this year's

excellent returns, international stocks are still much cheaper than U.S. stocks. The P.E. for the Vanguard International ETF is 14.6 compared to 22.9 for Vanguard's S&P 500 ETF, according to Morningstar. Our next item from last week is the Federal Reserve's decision to lower the target for the Fed funds rate by another 0.25%. But the real news was that Chair Jerome Powell dampened hopes for future cuts. In the press conference after the meeting, Powell said, quote, in the committee's discussion at this meeting, there were strongly differing views about how to proceed in december a further reduction in the policy rate at the december meeting is not a foregone conclusion far from it end of quote the bond market reacted by sending rates upward the

yield on the 10-year treasury popped up above four percent the largest one-day climb since july to a certain degree the fed is flying blind right the government shutdown has reduced the release of official economic numbers to a trickle one figure that was recently announced albeit belatedly the inflation numbers for September, which came in at 3% up from 2.9% in August. Stubborn inflation is one reason why an increasing number of Fed officials seem to prefer to take a pause in December, according to Powell. And now the number of the week, which is 60%. That's percentage of jobs in 2018 that did not exist in 1940, according to a study from MIT recently highlighted by market pundit Sam Rowe. And if the researchers updated their study through

2025, the percentage would likely be higher, including many new jobs related to AI. A recent Wall Street Journal article took a broader look at how the labor market has changed over America's history, pointing out that 1800, 83% of the labor force worked in agriculture and a third of the country's workers were enslaved. By 1950, manufacturing had replaced agriculture as the largest industrial sector, and the average work week was 41 hours down from 51 hours in 1910. and in both 1910 and 1950, about a quarter of the workforce were foreign-born. Manufacturing in the U.S. peaked in 1979, and today, the largest segment of the workforce works in service industries, providing healthcare, education, marketing, and accounting,

instead of actually creating tangible goods. I bring up these historical shifts in light of a slew of high-profile companies announcing layoffs recently, including Amazon, UPS, Microsoft, Intel, Target, and Meta. These are in addition to the nearly 2 million people who have been unemployed for 27 weeks or more, according to another article in the Wall Street Journal. As you might suspect, AI is partially or largely to blame. The journal article cited a company that has cut its software development team by 80% while also boosting productivity thanks to AI writing its own code. Last week, I spoke with a real estate developer who told me that the work that used to take three employees now only requires one thanks to AI. You know,

technology changes, the job market changes, society changes. It's always been this way. but that doesn't make it easy or pain-free. So if your role could be threatened by AI, tariffs, or just a slowing economy, come up with a plan B and a plan C. I know I have. After all, unless you're retired, your most important asset is your ability to earn an income. Next up, why we spend money in suboptimal ways when Motley Fool money continues. I first met Morgan Housel in the press box at the 2009 Berkshire Hathaway annual meeting when he first began writing for The Motley Fool. He worked at The Fool for many years before setting off to begin his very successful career

as an independent author, but he still occasionally returns to his Foolish roots, including recently giving a speech at a gathering of Motley Fool members. After his presentation, I joined him on stage to have a conversation about his latest book, The Art of Spending. Well, hello, Morgan. Hi, Robert. Good to see you. Good to see you, too. Excellent presentation, excellent book.

I checked this morning, number 19 on Amazon on the list of bestsellers. So congratulations. You mentioned in the book that a good question to ask of people is, what have you experienced that I haven't that makes you believe what you do? So what have you, Morgan, experienced that has led you to the successful career thinking and writing about money, but in a way that is unique and is clearly resonating with people? Now, I don't know if this is too personal to me, but I think one thing that's interesting with investing is I think it's easy for us to overlook how unique the American investing culture is and that other Western rich countries do not share it. So about 55% of Americans own stocks.

It's the highest it's ever been. Most of those are in their retirement accounts. But if you look at other countries, the UK, Germany, Australia, South Africa, other countries, it's nowhere even remotely close to that. And if you were to ask them, if you were to go to Germany and ask them about their investing culture, they view it so differently than we do. We view it as like owning a slice of capitalism. They view it as participating in a bunch of scams and frauds. Like that's not much of an exaggeration.

And I think you can ask us like, why is that? And here's what's very interesting about it. The German stock market, the South African stock market, the Australian stock market have done about as well as the American stock market over the last hundred years. So the answer to the question, why do they think differently, is not because their markets have performed worse. It's almost identical. There could be a lot of reasons for that, but I think one of the big ones is this. Particularly for Europe, at the end of World War II, the countries were absolutely devastated, completely bombed into rubble. And I think by and large, in broad strokes

here, they came together and said, we want our downside capped going forward. We want a very strong social safety net. We don't really care about upside potential. America was almost the opposite at the end of the war. It had all this opportunity in front of them. They had like a monopoly on global manufacturing. And so Americans more or less came together and said, we don't want much of a social safety net, but I want the sky to be the limit. And I think that has held literally across generations. It's compounded over time. And so if you were looking at investors in Germany or France or the UK, it's very common for Americans to look at them and say, you're not taking enough risk. You're not optimistic. You're not doing this. I think a lot

of that is just cultural. And if I or you or any of you were in that situation growing up in those countries, you might very well think the same thing. You called your book The Art of Spending, not The Science of Spending, but you do mention some science in the book. In particular, you mentioned a book called The Molecule of More and talk about the role of dopamine in creating desire in us. So to what degree do you think we're just sort of biologically programmed to be somewhat dissatisfied, discontented, constantly craving? I learned this thing from another great modern philosopher, Will Smith, the actor, he once talked about, he said, becoming famous is the most amazing feeling in the world. Being famous is merely okay, and losing fame is one of the great agonies of

life. But I think you can apply that, even if it's not fame, you can apply that model to so many things in life, particularly money. Getting wealthy is awesome. Being wealthy, I think, is often just merely okay, and losing wealth can be agonizing for people. And so what's inherent in that is like what you actually want is the change. What you actually want is growth. You just want the number going up over time. That's true for a lot of things in life. And that's just dopamine talking. Dopamine doesn't care what you have. It just wants you to pursue more of what you already have. And we're so, what's important about this is that you cannot read a book or look at a spreadsheet or come up with a chart that's going to change the amount of dopamine that you have rushing

through your head. And so we're all kind of beholden to it. Some people more than others, But I think that's really what you want is not necessarily more money. You want to partake in the process of getting more money. You wrote in the book that one of the solutions is just learn to be content. And you mentioned another book from more than a century ago, The Quest of a Simple Life, written by William Dawson, an Englishman. And I just want to read the way you summarize the book. You wrote, people who are trying to get more money are actually held captive by it. what they intended to be a strategy for a better life became an ideology they are beholden to

like an invisible dictator yeah and that phrase invisible dictator really stuck with me and it reminded me of a couple of lines from one of my favorite philosophers tyler durden from the movie fight club one of his lines is the things you own end up owning you yeah and another line is advertising has us chasing cars and clothes working jobs we hate to buy crap we don't need so we have these forces right some internal some external that are trying to get us to spend our money in ways that are ultimately unfulfilling so how do we fight against that i think it's much easier said than done so let's not pretend that this is just an easy thing to do but i think going back to the idea that we always overestimate how much attention and admiration we're getting from

other people that can really put a cap on your material aspirations in a great way in a wonderful way because once you have to, once you feel less desire to insert yourself on any kind of social hierarchy, then you can use money for what I think is its best purpose, which is independence and autonomy. Just being able to live the life that you want to live. Once you come to terms with the fact that nobody's paying attention to where you live or what you're driving or how you're dressing. I think that could be a wonderful thing. It's not an easy thing though, too. I think it's close to, like, I think a good analogy here is meditation. If you learn meditation, you don't get to a point where you can just stop. You have to do it continuously forever. And even the best

people in the world, you don't like, oh, I mastered it. Now I can stop doing it. I think that's true with a lot of things with money and psychology as well. You have to remind yourself of this stuff daily because your intuition and the amount of dopamine that you have is always going to be pulling you in directions that are not necessarily going to lead you to a happier life. It's a daily reminder sometimes to fight these urges. Part of what I think your message is, is being very mindful of how you use your resources, money, but also time and attention. You were recently on Derek Thompson's podcast, Derek Thompson being the journalist for the Atlantic. And he had this interesting metaphor. I'm going to kind of paraphrase it, but it's like every day you wake

up and you have a pitcher of water and you can choose to distribute that water throughout your day. You can fill your wife's glass, your kid's glass, your job's glass, or social media's glass, sports team's glass, Netflix glass. And he said, you'd be astonished by when you reach the end of day how much time you spent filling the glasses of people you don't really care about. Meanwhile, as you pointed out, your wife and kids are over here getting increasingly dehydrated. Right. Yeah. And I think that's always been true. And social media just makes it true by 10 orders of magnitude because everything of like how well you're doing in life and how wealthy you feel, again, is relative to other people. It doesn't matter how much money you have, how much

money do you have relative to others. That is always true for everybody. And it used to be, when I say used to be, I mean like 10 years ago, that when you say other people, you met your neighbors, some of your co-workers, maybe your siblings, that was your comparison group. And now because of social media, your comparison group is 8 billion people who are curated by an algorithm that is designed to give you the most anxiety and FOMO. And so no matter how well you're doing, how much money you have, how well you're living, no matter how happy you are, you can open up Instagram and there is someone who is richer, happier, prettier than you are. And particularly for young people, it's a very pernicious trap to get sucked into. And so that idea that your

comparison group is literally a thousand times bigger than it was for the ages. So Richard Dawson wrote that book in 1907, I think it was. And he wrote about it in 1907, how so many of his rich friends in London were just trying to chase each other as well. It was just an arms race, a positional race of how they can do. That was true 110 years ago. I think if he had seen what was going on now, he wouldn't have been able to fathom. It is just so much harder now. And you see that in the statistics of like Gen Z's mental health, of their anxiety and depression and suicide attempts. It is way higher than it was in any generation that came before them. And there could be a lot of reasons for that. But I think one of the obvious, the big ones is no matter how

well they're doing, there is an infinite, endless scroll of people who appear to be doing better than they are. But appear is the right word there. Because everyone knows that social media is a performance. You don't post on social media, you perform on social media for other people. So there's a great quote from the philosopher Montesquieu, a real philosopher this time. And he said this like 300 years ago, whenever he was alive, he said, if you only want to be happy, that is very easy to achieve. But people want to be happier than other people. And that is much more difficult because we overestimate how happy other people are. That was true 300 years ago, it is way truer today.

so we only have a few seconds left but i just wanted you to talk very briefly about you you have a couple of kids you write letters to your kids and you say in that letter i don't want to be harsh but i hope you're poor at some point why are you such a horrible father no i think there's the only way to learn the value of a dollar is to experience the power of its scarcity there's no other way to learn about so i i don't hope they struggle i hope they're happy i hope they fall flat on their face but being poor at some point in your life is a very important experience there's no other way to value it other than that that was why i wrote that and i'll try to be less of a horrible father you wrote that uh one measure of success you get is from warren buffett and that is

you hope that in your life the people that you hope that love you do love you yep so just to allay your concerns morgan i do love you thank you and i think everyone here loves you too so congrats on the book thank you time to get it done fools and it's november which means it's time to start thinking about some end of the year financial strategies i'll highlight a few over the coming weeks this week let's talk about a tax efficient way to make charitable contributions instead of donating cash donate appreciated shares of stock from your brokerage account that way you pass the capital gain on to the charity but they don't care because a qualified charity doesn't pay taxes then with the cash that

you would have donated to the charity, you can just buy back the shares and reset your cost basis to today's higher price. And you can do it immediately. You don't have to wait 30 days like you have to with tax loss harvesting. If you itemize your deductions on your tax return, you can also deduct the contribution up to a certain limit. Like all things with taxes, do additional research to make sure you do this right and it's appropriate for you. But if you're charitably inclined and have some big winners in your taxable brokerage account, I think you'll find that donating profitable shares is the most tax-efficient way to help make the world a better place. And that's it for this week. Thanks so much for listening.

And thanks to Bart Shannon, the engineer for today's show, who had to put this together while moving to a new house. As always, people on the program may have interest in the investments they talk about, and The Motley Fool may have formal recommendations for or against. So don't buy or sell investments based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. I'm Robert Brokamp. Fool on, everybody!