My First Million - The Investment Strategy To Build Generational Wealth (ft. Morgan Housel)

Episode Date: December 20, 2023

Episode 533: Shaan Puri (https://twitter.com/ShaanVP) and Sam Parr (https://twitter.com/theSamParr) talk to Morgan Housel about the psychology of building generational wealth and the one strategy that works better than any 20% return.  No more small boy spreadsheets, build your business on the free HubSpot CRM: https://mfmpod.link/hrd — Show Notes: (0:00) Intro (2:30) Strive for averageness (12:00) Financial anti-goals (14:30) Sam and Morgan argue about money and anxiety (17:30) Biggest psychological trap with money (22:00) The biggest risk no one is talking about (26:00) Worry about what doesn't change (29:00) How to action sameness (32:00) Morgan's history book diet — Links: • Same as Ever - https://tinyurl.com/2zd2u9mt • Psychology of Money - https://tinyurl.com/yc423xct — Check Out Sam's Stuff: • Hampton - https://www.joinhampton.com/ • Ideation Bootcamp - https://www.ideationbootcamp.co/ • Copy That - https://copythat.com Check Out Shaan's Stuff: • Try Shepherd Out - https://www.supportshepherd.com/ • Shaan's Personal Assistant System - http://shaanpuri.com/remoteassistant • Power Writing Course - https://maven.com/generalist/writing • Small Boy Newsletter - https://smallboy.co/ • Daily Newsletter - https://www.shaanpuri.com/ Past guests on My First Million include Rob Dyrdek, Hasan Minhaj, Balaji Srinivasan, Jake Paul, Dr. Andrew Huberman, Gary Vee, Lance Armstrong, Sophia Amoruso, Ariel Helwani, Ramit Sethi, Stanley Druckenmiller, Peter Diamandis, Dharmesh Shah, Brian Halligan, Marc Lore, Jason Calacanis, Andrew Wilkinson, Julian Shapiro, Kat Cole, Codie Sanchez, Nader Al-Naji, Steph Smith, Trung Phan, Nick Huber, Anthony Pompliano, Ben Askren, Ramon Van Meer, Brianne Kimmel, Andrew Gazdecki, Scott Belsky, Moiz Ali, Dan Held, Elaine Zelby, Michael Saylor, Ryan Begelman, Jack Butcher, Reed Duchscher, Tai Lopez, Harley Finkelstein, Alexa von Tobel, Noah Kagan, Nick Bare, Greg Isenberg, James Altucher, Randy Hetrick and more. — Other episodes you might enjoy: • #224 Rob Dyrdek - How Tracking Every Second of His Life Took Rob Drydek from 0 to $405M in Exits • #209 Gary Vaynerchuk - Why NFTS Are the Future • #178 Balaji Srinivasan - Balaji on How to Fix the Media, Cloud Cities & Crypto • #169 - How One Man Started 5, Billion Dollar Companies, Dan Gilbert's Empire, & Talking With Warren Buffett • ​​​​#218 - Why You Should Take a Think Week Like Bill Gates • Dave Portnoy vs The World, Extreme Body Monitoring, The Future of Apparel Retail, "How Much is Anthony Pompliano Worth?", and More • How Mr Beast Got 100M Views in Less Than 4 Days, The $25M Chrome Extension, and More

What matters is not necessarily what are the best returns that you can earn this year. That's what everyone chases, but that's not what matters. What matters is what are the best returns that you can sustain for the longest period of time. I feel like I can rule the world. I know I could be what I want to. I put my all in it like no days off. On a road, let's travel. Let's just get right into it.

Morgan, what's going on, man? I'm happy you're here. I'm happy to be here. Thanks for having me, guys. I read the book, your first big hit Psychology of Money a while ago. what was that four years ago? About, yep. Yeah, and then this new one just came out.

Was it called Same as Ever? That's right. Yeah, man. And people are, the good reads reviews are higher on the most recent one, I think, than the first one. So congratulations. No, thanks. It's always, I think with all books and all articles, this is probably true for

podcasts, too. You really never know what's going to work and what's not. And even I've been a writer for 17 years, and I still really don't know when I publish something, a blog or a book, how it's going to be received. and maybe you get a little bit better around the edges, but it's always like you just have to berth into the world and then just step back and watch, it's going to do whatever it's going to do.

Well, you told me that the first version of psychology of money, you said that the first print run was, I think, 5,000 copies, is that right? So you guys, you thought 5,000 copies is the right amount. You sold over 4 million now. So I think that proves your point of you don't really know till you know. But that number is kind of amazing, dude. Like over 4 million books sold. You're, I don't know, in the top 0.01% or something of authors.

You know, that, I don't know how much you make per book, but I think that means you've made like over $10 million as an author on a successful book. That's so hard to do. That's so rare. And, you know, congrats to you for doing that. Thanks, Sean. Yeah, I mean, I was telling someone the other day. I think the closest analogy to the book industry is probably professional sports,

where 99.9% of high school basketball players will never make the NBA. I don't know, 99.999, whatever it is. But then you have a couple of LeBron James and Michael Jordans who go on to make a billion dollars doing it. And I don't know this to be 100% sure, but adding it up in my head, I'm pretty sure there are more billionaire authors than there are billionaire athletes, even in a world in which 99.9% of books will sell, you know, a couple thousand copies or less if that. But then you have J.K. Rowling and Dave Plinky and James Patterson, who have made over a billion dollars writing books.

So it's just like extremely tale-driven in the success. I want to ask you about one of your philosophies, because you're very interested in me. You have a philosophy. It's very easy to sell a philosophy of more, right? People do that all the time. And in fact, even our podcast, I would say, falls into the bucket of the philosophy of more many times

when we say no small boy stuff, right? We're saying think big, play big, go for it, don't sit around and wait, don't be fearful, right? So more, more action, more ambition, more whatever. That's one philosophy a lot of people fall into. And some people go even crazy, right? David Goggins is like, work harder, Gary V, Alex Somozy, these guys are like, just grind harder.

So people often have the philosophy of more. And some people, Marie Kondo and others have the philosophy of way less. You need less. Minimalism, you know, escapism, just become a sort of a Zen person. Go whatever, get those vans and just like travel around the world. Right? So it's like there's the philosophy of less.

And you're in the middle, which usually is the dead zone for content. You're in the middle where you're like, no, just have enough, right? Like moderation. And I can't believe you've got moderation to sell. I'm going to read you a quote and then I want you to talk about this. So you said, more than I want big returns, I want to be financially unbreakable. If I'm unbreakable, I think I'll actually get the big. returns because I'll be able to stick around long enough for the compounding to work wonders.

I loved that quote. And in general, I find this moderation thing interesting. Tell me about that. This is where like moderation in finance is actually going to lead to the biggest returns, because what matters is not necessarily what are the best returns that you can earn this year. That's what everyone chases, but that's not what matters. What matters is what are the best returns that you can sustain for the longest period of time. And so this is why like on an annual basis, I strive for average returns in my index funds by design. Why do I do it? Because that's going to give me the endurance to hold them for 50 years. And if you can earn average returns for 50 years, you're going to end up in the top 1% of all investors and you do it with zero effort.

What's average? In the US stock market, 6% real, 6.5% real after inflation is what's been. If you can earn 6.5% returns after inflation for 50 years, I mean, you can run the calculation. of it. It's going to achieve every, it's dynastic wealth. It'll make your great grandchildren wealthy. And so that's, and you can do that with zero effort. Now look, past performance, not a negative, there's a nuclear war.

You can come up with all these scenarios in which it's not going to work out. You can come up with scenarios in which the economic conditions of the last hundred years are not going to replicate for the next hundred years. Okay, all those aside, earning average returns for an above average period of time is way more lucrative than trying to earn superior returns

for a shorter period of time. And like, as always, and I think it's so counterintuitive, the intuition for everyone, including educated professional investors is, how do I earn the highest returns this year? And it's like, of course. It's like, how could that be wrong? It's like, no, if you're just average for a long period of time, you, that's the winner. Pimco, the big bond fund, they had this phrase that I love. They called it strategic mediocrity, where in any given year, they were never going to be

in the top half against their peers. But in every decade, they'd always be in the top decile. because the peers that beat them in any given year get washed out. And I think that, I think it applies to a lot of things. It applies to a lot of businesses. It applies to relationships and marriages of like, you don't need to be a superhero. If you're just good for a long period of time,

that's how compounding works its magic. That thing you just said was excellent. I love that. So you said, I want average returns for an above average number of years rather than superior returns for a short period of time. or in any given year I'm not trying to be in the top I'm trying to be you know sort of 50 but if I do that for 30 years I'll be in the top 10 percent is so true in the kind of like

slow and steady wins the race I think you had a stat that like if Warren Buffett has I don't know what it is like let's say $85 billion net worth like 81 billion of those 85 came after his 65th birthday right and I think he said something like if Warren had just retired when he was 60, nobody would even talk about him. Because the compact, like, obviously he is a great investor, of course. But the whole secret, what's literally 99% of his wealth is that he's been a great investor for 80 years. That's what he started investing when he was 11 and he's 93 today, still going as hard as ever. And that's where all the money comes from. And yes, like, so his average returns are 20% per year, which is phenomenal, of course. But if you earn 20% per year for 20 years,

it's really good. You're in 20% a year for 40 years. It's great. You're in 20% a year for 80 years. You're worth $100 billion. That's where all the returns come from. Did you hear this time? They're giving that shirt away.

Buffett's given away this year at the Berkshire Conference. Just hard as ever. Still going hard as ever. Is that real? Are you being serious? Oh, because that would be hilarious. Dude, but we joke about Or Buffett where he talks about, you know, like,

I forget how he phrases it, but he talks about the, you know, it's all about the future. It's all about the future. And we were like, dude, you're 93. Like, there is no future. Like, bail and enjoy life. And you could argue like, well, he likes what he does. So, you know, it's cool.

He's enjoying life. But I've always, like, when I think about long-term stuff, I'll, like, map out my life. And I'm like, man, like, if I only live to be 80, I only have, you know, 40 or something, summers left. Like, I don't know if I want to be, I'm not willing to pay the price of if that's what's considered great is doing 30 or 20% returns for 80 years, I'm not willing to pay that price because life's too short. And when I think about like what it requires to be one of one, to be one of the greats, that's what freaks me out is I don't want to be that old and not

have enjoyed it. You know, that's why it's like the converse to all this is Bill Perkins' book, Die with Zero of like, spend it while you're here, enjoy it while you're here, because when you're gone, it's pointless. You know what I mean? Yeah. Yeah. Now, I think there's a couple. I think I agree with every word you said, particularly for ordinary people like us.

I do think Buffett's DNA is just he gets more pleasure from anything in life. The most pleasure he gets is from compounding. There's nothing that makes him happier. The other thing is even though he's worth $100 billion today, he's given away $100 billion already. And with the rest of his net worth effect, you know, go into the Bill and Melina Gates Foundation, I imagine, I don't know this to be true, but I imagine when he, when he, he lays in bed pondering his life, he's like, I put my skill to use and I'm going to give away a quarter of a trillion dollars for the betterment of society.

I was just in Omaha a couple months ago where he's lived his entire life. And in downtown Omaha, one of the tallest buildings says the Buffett Center for Cancer Research or something like that. I imagine when he drives past that. And this is the building that he drove past when he was five years old. It gives him a ridiculous amount of pride and pleasure. And so I actually think if he were on his deathbed tomorrow, Charlie Munger just died last month. I think he would look back and say, like, I live the best life that I could have.

It wasn't perfect by any means. But I think there is a difference between the Bill Perkins philosophy, which is true for 99% of people. And then there's 1% of people who actually get so much pleasure out of compounding and thinking about what that money is going to do to society after they die. Dude, there's this crazy story about Buffett where his daughter had just had a baby and she's living in a shit apartment. and a mutual friend of Warren and the daughter went, it was actually the CEO of Washington Post, went to the house and was like, Warren, her kitchen sucks, man. And so the daughter eventually goes to Warren and goes,

hey, can I get like a $20,000 loan in order to redo my kitchen? And he was like, yeah, just go to the bank. And so she eventually goes to the bank. And then a few months later, the CEO of Washington Post goes back to her house and the daughter's sitting in bed, but she has a really small TV where she would sit and nurse her child in front of. And Washington Post lady goes to Warren, she goes, Warren, give her 500 bucks for a new TV, man. She could barely see this TV and she's in bed like eight hours a day. Can you just give her a new TV? And Warren was like, no, compounding's more important

for that $500 TV. I can't, I'm not going to take the money out. And so Catherine, the CEO of Washington Post, ended up buying her a $500 TV. But that's how like tight this guy was about following his code, which I guess I appreciate that someone has a code, but that ain't, that ain't my code. Wait, so Warren Buffett's just an asshole. Is that the Is this a real story? Because I hate War. Well, yeah. So War Buffett gets, he gets a pass for having this all-shucks attitude.

But he's definitely an asshole. He's definitely an asshole. Depending on how you define an asshole, I would define him as a wonderful. What do I say? All great men are also bad men. The way he handled his family, I think, was not wonderful. The way he handled business associates was wonderful. So, you know, like, there's tradeoffs to being great.

I think, as someone who, like, I have so much respect and admiration and reverence for him. But I would also put him in the camp with someone who was like, I'm so glad he exists, but I don't think I would want that for my own life, which is not a criticism against his life. It's just like to each their own. And let's not pretend that everyone should want the life of the five standard deviation success. It's like there's a cost to all of that. I was just trying to imagine like his daughter just like, you know, at the bus stop, trying to get a bus ride to wherever she's going. She's looking up at the Buffett Cancer Research Center and just being like, God damn it. There's some other parts of the story. Buffett's,

first wife, Susie, you know, had billions of dollars of her own. And she was much more freewheeling with money. So I think the Buffett children, and they did just fine. But yeah, there's plenty of stories about Warren. He always described it as he was like, capital is my tool. I'm not going to give, like these are the tools of my business. This is how I make money. I'm not going to be willy-nilly with it. And even when Buffett was in his 20s, when he was a kid, this was back in the 50s, he was already worth tens of millions of dollars when that was real money in the 50s. And you could easily imagine a world in which he's worth the equivalent of $100 million when he's 30 years old or whatever it was. And everyone would be like, you need to give all this away. You're never going to

be able to spend this. And his philosophy was like, his philosophy has always been, people in the future will be just as needy as people are today. So if I have an above average ability to compound it, it actually makes sense for me to hold on to this money for as long as I can before I give it away, which I think is actually pretty rational. You said a few things that I thought were contradictory in different interviews that I watch. And I think in the book, I forget, I'm mixing up the book and interviews that I watch, but you talk about financial goals and you're like, I don't look at my portfolio. I think you said I don't set goals, or at least that's the vibe that I got in an interview. But then I've also read a little bit where you do have some type of

goals. So for financial goals, do you like have a number in your, oh, sorry, I remember what it was. you said whenever you hit your goal, you're always going to double it. Therefore, I don't have goals. I think that's what you said. It's such a, the reason it's hard for me, the answer is I'm sure I've said things that are contradictory because I like everyone else. It's like, it depends on the mood. Yeah, I'm not trying to call you out. No, no, no, depends on, but I'm probably the mood that I'm in that day. Do I, if I'm sitting here today and I think, do my wife and I have financial goals? Not really. It's not like, oh, we're trying to hit X. And once we hit X, we're going to go by Y. Like, not really. But I like everyone.

else, think about like, oh, if my income stays the same, we'll have this much money. What kind of life could we live with that much money? And one thing, too, like, we have two young kids, and we are pretty hell-bent on not spoiling them. They live an amazing life, and we live in a great house. They'll have a great education. They'll live the top 0.01% of lives, but we don't want to raise spoiled little pricks. And because of that, we often, when we have goals, it's not like, oh, how can we buy a bigger house, another house, nicer cars? It's kind of like, we want to live a good, but not extravagant life because we don't want to spoil our kids. But even that, sometimes I can talk to other people who are like,

no, actually you can live the big high life without spoiling your kids. Here's how to do it. So I feel like I say, I think a lot of the contradictions come from humility of just like, I haven't really figured it out yet for myself. I tend to not have goals. For years, I had a goal of once my net worth is X, I'm not going to work much anymore because I could easily live for the rest of my life off of that net worth.

And I've exceeded that number. and I'm working harder than ever. But I don't regret that at all. Maybe that is some version of moving the goalpost. But I think more of it is after I hit some level of financial independence, after I wrote books, it was like, okay, I'm only going to do the work that I enjoy now. And it's not really work. It's just like I really enjoy writing these books.

I only speak at conferences in cities that I want to go to. It doesn't feel like work. And I don't think I really understood that 10 years ago. 10 years ago, work was by and large a means to an end. I need to do this to feed my family. And now that I've reached kind of the artistic level, I'm like, oh, I want to keep doing this forever. And in that world, goals kind of go out the window.

Well, we've interviewed a bunch of, I mean, we've had a bunch of wealthy friends. We've had a bunch of people on here. You're like a financial historian. So you've like read about all these people. You also know a lot of them and you're written about them. And you probably run in even a more elite circle than we do. But a question that I've always wondered is, is there a threshold where I'm not going to worry anymore?

So far, I've not found that threshold. And we had Scott Galloway on here recently. was like, I'm worth like over 100 million liquid and I still freak out. Have you found any type of thresholds to where the average person changes where they feel more relief? I don't know. I don't know if the average person, I can tell you myself, though, that number that I was talking about before where for years it was like, once I hit this number, I'm not going to work anymore. Once I hit that number, I still work. Can you say that number? I don't know. I don't know if I want to get too, too into details. Maybe I'll tell you off camera. It's not, it's not a ridiculous. I like because some people don't know how,

how should I think about what that number is? For me, for example, I was like, oh, if my life annual burn rate was X, and I wanted a certain amount of money where, you know, 4% or 5% withdrawals of that would mean I'm sort of setting neutral. Let's assume I'm getting 6% real returns in the market. If I was to withdraw 4% out to pay for lifestyle, you know, that number of the bank accounts is never going to go down. It's only going to go up.

That's how I calculated. Years ago, Sean, you said yours was $6 million. But if I had to guess, that has changed as you've had a family. Yeah. No, to be honest, can I say the honest answer is kind of ridiculous sounding? But like, it's not that, oh, I had kids and, oh, man, I really under us. These diapers are expensive. That's not actually what happened.

I literally, I remember one day, I was like, okay, so I've done this. I was like, I kind of feel like a guy who should have $100 million. And I literally had to come to face with myself. I was like, I think I'm, I think I'm worth that. I think I should be like, you know. I don't have to have it, but like, if I didn't have it, something would feel a miss. Something would feel a little wrong. And then I was like, okay, cool.

I think I should do that. It didn't become my like north star of like, I'm going to do this. But what I did do was I made sure that I would only, I would only work on things that either I was doing purely for the joy of it. It didn't have to bring in any dollars. Or if I was doing it because I thought it was going to be financially rewarding, the finance reward had to be big enough to make it to be like on that path, not a path, not a smaller path. Yeah. I came up with my number exactly as you did, Sean. It was like, if I have a 4% withdrawal rate,

what is the annual income that I know is going to be like easily, comfortably all that we're ever going to want to spend? And I just backed into the number. And Sam, to answer your question of like, once I hit that level, A, I kept working as I am now. And I don't think I was any happier, but I have less financial stress, less career stress. But that's happiness, dude.

That's happiness. That's such a cop out. I hate when people say money doesn't make you happier, but it just gets rid of money problems. And I'm like, yeah, when I worried about rent, I was unhappy. Now I'm more happy. I'm not necessarily happy, but I'm happier. I think we probably agree. This is like arguing over the definition of words.

But I would say there's a big difference between happiness and a reduction of anxiety. I think those are very different things. Happiness is like you wake up grinning ear to ear. Or it's like if you're watching the funniest comedy you've ever seen. and you're just laughing on the floor, that's a happy moment. But it's always fleeting. But to me, the reduction of anxiety or contentment, that is something that money can buy, and that is worth chasing.

It's great. So, like, when people say money can't buy happiness, what they're implicitly saying is it's not worth chasing. I think it absolutely is worth chasing, but it's not going to give you happiness per se. It's going to give you contentment and a reduction of anxiety, which is wonderful. It's a massive increase in the quality of your life.

But in my definition, it's not necessarily happiness. But I feel like I hit that. I feel like I'm, my wife and I were talking about this last night. I feel like I'm in a better mental state of like less anxiety than I've had relative to, you know, five or ten years ago, which is great. You know, you wrote the psychology of money. You've studied this a lot.

I want to ask you, what are the most, what are the biggest or maybe the most common leak? Instead of most common, I would say the most impactful psychological leak, meaning a psychological trap or mistake people make around money. And I want you to answer it for somebody who is kind of on the come-up, so somebody who isn't totally financially independent yet. And then for rich people who still have a bunch of weird psychology and weird relationship with money, I want you to tell me what you've seen or what you believe

is kind of maybe the biggest psychological mistake people have around money in each of those buckets. I think there's two. I'll start with one that's probably the biggest, which is social comparison, which is always, Sean, you just mentioned, you know, you want to be a guy, you should be a guy with $100 million. I'm willing to bet if you told 17-year-old Sean that figure, you would faint. But it doesn't seem that ridiculous to you now because I bet you know people who are worth $100 million. And so who you compared yourself to when

you're 17 or 25 is different now. And I think there's no end to that. If, and I hope you are worth $100 million someday, I guarantee you you're going to start comparing yourself to people who are worth $200, $500 a billion. And that never ends. Never ever ends. The point I always make is like the minimum wage in the MLB is like 500,000 a year, whatever it is, 400, whatever it is. A shitload of money by any definition if you're making half a million dollars a year. And I guarantee you there's not a single minimum wage professional baseball player who thinks they're doing well because they're comparing themselves to their teammates who are making 10 million a year.

And so there's no end to that. But you always think there is, which is why I for myself had this idea, once my net worth is X, I'm never going to work ever again. But now that I'm here, maybe it is because I'm comparing myself to other people, other authors. Maybe that's at least part of it. So I think even if I can write these philosophies and made a living talking about these, like I'm still susceptible to that as anyone else. I think everybody is. So I think it's such a natural thing. I mean, in all of evolution, what matters is not how much success you have. It matters that you have more success than the other person.

Because in a competition for resources, that's all that matters. It doesn't matter if you're worth a billion dollars. If somebody else is worth a billion in one, they have more resources than you. And from an evolutionary perspective, they're going to win and you're going to lose. So that always chasing no matter how much you have is a big psychological underpinning to people's anxiety. The second that I would mention that's probably equally as important is realizing that there is not one right answer for everybody. And everyone in finance is always seeking as seeking the right answer, like quote unquote the right. It doesn't exist. I think it's much closer to like your taste in music.

There's no such thing as the best music. You like this. I like that to each their own. And a lot of times when you have a financial debate of people are like, I can't believe you manage your money like that. Why don't you do it like me? You're not actually debating. It's people with a different risk tolerance, different social aspirations, different family dynamics who are talking over each other. And I think it's like it's hard for people to come to terms of like, look, that works for you, this works for me, to each our own. People don't want to settle on that because it's easier to think that there should be a right answer like there is in math. you had this quote, I think it was from the book, but it could have been from a blog post that you wrote where he said,

the biggest risk and important news story of the next 10 years will be something nobody is talking about today. But you're in this weird position where you work at a VC where you actually do have to predict the future a bit, or at least you're around people who are trying to predict the future. What do you think, are there any trends or topics today that you think in 10 years are going to be a lot more common and popular? Well, the good news for me is that since I'm not involved in the deal side of VC, that it doesn't really rest on my shoulders to make those predictions. Of the risks that we know of, which is obviously very distinct from the surprises that are going to be more important, but of the risks that we know of, I've been saying for years that the biggest by far in the global economy is demographics, the terrible demographics that almost the entire industrialized worlds has. outside of India and Africa, almost the entire world is shrinking population-wise. And the biggest economies, China, Japan, all of Europe are shrinking very, very fast.

China's working-age population, age 16 to 64, will decline by 200 million people between now and 2050. It's just like there's no precedent outside of like the black death plague. There's no precedent for that in all of human history. It's always been the case that economic growth was driven by the fact that there was massive population. growth, and we just don't have it anymore. And in the United States, we have about the best demographics relative to our peers, but it's still way less we've had for the last hundred years. And all economic growth is either population growth or productivity growth. All economic growth comes from those two things. And so when you take half of the equation of economic growth,

and for the last hundred years, it's been really good. And now it's at best, poor, if not a headwind, it's a very different world, totally different world. And maybe like the takeaway from that is, it used to be that 4% economic growth was like, oh, good, you're running at full capacity. Now maybe it's 2% just because we've taken away so much of that. So of the things that we know are going to be at risk, that's probably the most prominent. Can you explain that one a little more? I've heard Elon talk about this too, that like, you know, the big risk is that we're not having enough babies. And at first I thought he was just saying it to cover his ass because he was like, you know, knocking everyone up.

But then I was, no, no, he's serious about this. He actually believes this to be true. But I don't fully get it. I'm maybe just kind of dumb about this. So maybe just explain like I'm a five-year-old. So if economic growth goes down but the population shrinks, is it kind of like, isn't there kind of like a per capita type of thing where it's like, yes.

What's the big deal? Like why is that disastrous if economic productivity slows down? If there's also less people to share, the pie shrinks, but there's less people eating pie, does that matter or is that the wrong way to think about it? No, I think it's not the wrong way to think about it because you could look at Japan for the last 30 years, which Japan for the last. 30 years has had abysmal demographics, but I think it's safe to say that by and large, it's been a fairly pleasant place to live. It has not led to economic collapse.

But their version of an index has been shit, yeah? From our money perspective. Yes. That's a slightly different topic because the reason it's been shit is because it was so preposterously overvalued in 1990. Got it. So that's like the two separate different stories. But by and large, it has not led to economic collapse. The one thing I would say, though, is like what it does lead to is when you don't have a growing economy, you have a growing economy, much less investment. You're not investing in new businesses, new homes, new factories because you don't need them. You're fine with what you have. Whenever you have less investment, you have less innovation. And so in those situations, like when was the last incredible tech company to come out of Japan?

I'm sure one or two exists, but I can't name it off the top of my head. Versus if you and I were talking in 1990 and we said, what was the last tech company, we'd be like, oh my gosh, Sony, Tashiba going like Mitsubishi, going down the list, they're everywhere. Because when Japan had a booming population, it was investment up the yin-yang of like new technologies. And so once you remove that from the equation, you can still have a pleasant society that's in some form of stasis, but you're not going to have growth, not just economic growth,

but technology growth, medical technology growth, like all the things that we associate with like a better life kind of grows out the window. So maybe it is the case that for a lot of the developed world over the next 50 years, it's still a pleasant place to live. But the idea of like every generation is going to live 30% better than their parents.

Like that idea might kind of go out the window. Sam just asked you about like trends or prediction. What is going to come in the future? But actually your new book is actually about the opposite. It's about what's not going to change, same as ever. So can you explain the premise of the book? I like the Buffett story that you kind of lead with. Maybe start with that one.

But give us the teaser of like what are some of the, like I buy the premise that some things don't change. What are some of the big still-wats that come out of that? But start with the Buffett story. Yeah, so I had lunch last summer, maybe two summers ago with a guy who's very close friends with Warren Buffett. And this guy was driving around with Buffett in 2009 in Buffett's car in Omaha. There was driving around town together.

In 2009, the economy was a wreck. And there was like businesses boarded up and it was like the economic apocalypse. And this guy says, Warren, like, how do we ever recover from this? Like, how is the world ever going to be the same? And Warren said, do you know what the best selling candy bar was? in 1962? I said, no. Warren Buffett.

Warren says, Snickers. And Buffett says, you know what the best selling candy bar is today? He says, no. He says, Snickers.

And that's the end of the story. The premise being like, don't worry about, like, how are we going to change? Like, find something that does not change and bet on that. And I've also thought, I've been a financial writer

for 17 years, and it's always bothered me how bad the whole industry is at predicting. The next barry market, the next recession, the next pandemic, the next technology,

nobody's any good at it. that's like a little bit too harsh, but that's directionally true. Nobody's any good at it. And so there's two things you could do with that. One, you could become more of a cynic and just say nobody knows anything, don't even try. Or kind of the Buffett approach of like, find something that is never going to change and put your weight on that. And so that was one observation.

The other was as a student of history realizing when you're reading about the economy from 100 years ago or a 500 years ago or 1,000 years ago, there's some things that you read about and you're like, oh, things were very different back then. But there are even more things that you can read that make you stop and think that's exactly how it is today. The way that people responded to greed and fear and risk and uncertainty is the exact same today as it was 100 years ago. And so putting those two things together, if you can find things of human behavior that are never going to change, then you know something that is going to be part of your future. So stop pretending that you know when the next recession is going to happen. but study how people respond to recessions when they do happen because that's never changed,

so it's going to be part of our future. And so that's kind of the premise of the book. It's just a bunch of little stories of things that facets of human behavior that have always been with us and I think always will be. And regardless of what is going to happen in our future, you know that these little bits of behavior are going to be a part of it. And so what's something where when you studied how people, let's say, respond to greed or fear or change or whatever, and you looked at these patterns of human behavior,

what's something that you, like, the best research or books or insights that I get, I'm like, oh, I feel like I have a superpower, like almost like I could read people's minds now, right? So it sounds like by studying what doesn't change or how human behavior works, did you come out with anything that you're like, did you change anything that you do? Or did you have a new strategy or a new plan or any new like, could you action that? Because I could, I guess my skeptical view would be, I feel. I feel like I could understand how people behaved in the past, but attaching that to what the hell am I supposed to do today is not so easy of a leap. What's one that you made yourself doing this?

I know this is an answer that people will find inadequate, but to me, it's incredibly powerful and important. And I think the main plea in the book is for humility. It's not even about the examples of things that are never going to change. That's obviously the core of the book. But the reason we're doing that is because we have humility and not fooling ourselves to thinking that we know what's going to change. What are the three biggest economic stories of our adult lives? By far, by an order of magnitude, it's September 11th, Lehman Brothers collapsing and COVID. By an order of magnitude, nothing else matters more than those three things. And the common denominator is nobody saw them coming. They're not in any economic outlook, no analyst forecast, unless you had inside

information, you were part of those things, nobody saw them coming. And it's always been like that, Because you can go back another generation, and it was Pearl Harbor, collapse of the Soviet Union, all these things that even if in hindsight, you're like, oh, you should have seen those coming. Great Depression, of course. The fact is that very few people did. If anybody, in something like Pearl Harbor, you could not have seen it coming. But think about how that changed the entire fabric of society, not just the economy, but everything. And going forward, it will be like that too.

You can state with so much certainty that the biggest economic story of our lifetimes in the future, or even the next 12 months is something that you and I are not talking about today. I mean, what's the biggest global news story of 2023? This is subjective, but I would say it's Israel Hamas, which is something that even if you were an expert in Middle East politics, you did not see coming on October 6th, let alone people like us. So that's, and I think it's always been like that. It'll be like that next year.

And the reason that we, that view, like we tend to ignore that is because I think coming to terms of it is too painful. Come to terms of the idea and admitting to yourself that we don't know what's going to happen next is a really uncomfortable level of uncertainty. It's much easier and more comfortable to just say, to pretend that we do, which is why the market for punditry is always going to exist no matter how poor the results are. And so I think that's the biggest actionable takeaway for me is I don't forecast. I think it's much healthier to read more history and fewer forecasts.

And when you read history, you start focusing on the indelible behaviors that never change. and you become more humble in your ability to fool yourself and the thinking that we do know is what is going to change. Morgan, I know you got to leave. You have a hard stop in two minutes. So I want to ask a very takeaway, an actionable question, which is what two or three or four, however many you want, history books can I go and read over the next month

that do the best job of me, not a book like yours that aggregates a bunch of them, but literally a specific era or a specific book that I can go and read. that does a good job of showing this where I'll read it and I'll be like, oh, this is exactly what I'm experiencing now or things won't change. I think one of the best World War II books, because it's not only a book about the military operations, but also the human element on the ground, is Eric Larson's book, The Splendid in the Vial, which is a pretty recent book. I think it came out four years ago, and it's about the London blitzbombing in World War II. Eric Larson, I think, is the greatest living storyteller, period. And he's so good.

His book on the Lusitania is wonderful. It's absolutely epic. So that book is incredible. Doris Kearns Goodwin's book No Ordinary Time, which is about how FDR managed World War II. It's not about the ward itself. It's about how he managed the politics and the emotions of it. It is absolutely stunning.

I also use that book as an example of, I think the book is 700 pages and every single word needs to be there. There's not a single wasted word in the 700 pages. She's just like such an extraordinary writer. Those are two that really stick out as like some of the best. And you're doing an excellent job of giving into the stereotype of 30 or 40-something-year-old white guys, obsessing over World War II. This is what we're supposed to do.

Yeah, everyone talks about the Roman Empire. Fuck the Roman Empire. World War II, that's where it's at, man. It's so true. I can't get enough of it. I will say the last thing I say, because I do have to jump. I think the reason World War II is so interesting is because it was the most documented major event. And therefore, like, the emotions on either end of the spectrum,

from despair to elation, there's more documented examples of that during that six-year period than have ever existed in all of human history. So it's not just understanding the military and the politics. It's like if you want to understand human emotions, there's no better spotlight and magnifying glass than studying World War II. Well, we appreciate you coming on, man. This is awesome. We're big fans of your first book.

I know I'm in the middle of reading the second one same as ever. And you're badass. We appreciate you doing this. Thanks, guys. It's been fun. Thanks, Morgan. All right, that's the pod.