The Knowledge Project with Shane Parrish - Morgan Housel: Wealth is What You Have Minus What You Want

Episode Date: January 20, 2026

Morgan Housel breaks down the exact framework he uses to build wealth, minimize financial stress, and buy freedom. While most financial advice focuses on how to get rich, Morgan explains why the skills needed to stay rich are completely different. You will learn why "boring" investing beats complex strategies, how to avoid the social traps that destroy wealth, and the specific equation for finding contentment. Morgan Housel is a partner at Collaborative Fund and the bestselling author of The Psychology of Money. Enjoy! ----- Approximate Timestamps: (00:00) Trailer/Introduction (00:58) What Drives You? (04:50) What Can Money Do For Us? (07:22) Happiness vs. Satisfaction (11:45) Becoming Financially Independent (14:40) Survival and Contrast (20:16) Ad Break (21:05) Investing: Can You Beat the Market? (22:32) When Is The Right Time To Buy a House? (26:45) Housing Affordability and Equity (28:39) Step by Step Investing (35:08) Eras of Life and Spending In Those Eras (43:50) Raising Kids With Money (48:46) Social Media: Expectations and Comparison (55:46) Lessons From the Vanderbilts (01:01:21) Learning From Others Spending Habits (01:07:51) Lessons From History: Depressions, Panics, Downturns (01:11:40) Net Worth in Cash (01:14:20) Passive Income and Financial Independence (01:25:58) Massive Success: Doing It All Again (01:32:27) What Should You Optimize For? (01:38:24) What Do You Splurge On? (01:40:38) What Can History Teach Us About Inflation? (01:47:46) Index Funds Allocation (01:53:36) What Is Success For You? ----- This episode of the Knowledge Project is for informational purposes only. The views and opinions expressed by Shane Parrish or our guests are solely their own. Nothing in this conversation should be considered investment advice, financial guidance, or a recommendation to buy or sell any security. Always do your own due diligence or consult with a qualified financial advisor before making investment decisions. It's time to listen and learn. ----- Psychology of Money: https://geni.us/my3K ----- Upgrade: Get a hand edited transcripts and ad free experiences along with my thoughts and reflections at the end of every conversation. Learn more @ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠fs.blog/membership⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ------ Newsletter: The Brain Food newsletter delivers actionable insights and thoughtful ideas every Sunday. It takes 5 minutes to read, and it’s completely free. Learn more and sign up at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠fs.blog/newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠------ Follow Shane Parrish: X: ⁠⁠⁠⁠⁠⁠https://x.com/shaneparrish⁠ Insta: ⁠https://www.instagram.com/farnamstreet/⁠ LinkedIn: ⁠https://www.linkedin.com/in/shane-parrish-050a2183/⁠ ------ Thank you to the sponsors for this episode: Granola AI, The AI notepad for people in back-to-back meetings: https://www.granola.ai/shane Learn more about your ad choices. Visit megaphone.fm/adchoices

It's not necessarily how much you have, it's just the contrast to what you have before. Would you rather have a net worth of a million dollars when you used to have two million? Or would you rather have a net worth of 500,000 when you used to have 200,000? And psychologically, most people would rather have 500,000. The speed at which a luxury becomes a necessity is two seconds. What advice do you have for somebody living paycheck to paycheck? I always say two things. One is that the second is affordable housing, I think, is the source.

single biggest social problem because so many other social problems that might seem bigger than that are downstream of housing. A lot of the drug problem, the fertility crisis, degradation of politics, because if you don't feel like you're invested in your community or you're invested in your country, it's much easier as being like, burn the place down. And so much, I wrote this in psychology money. If you have to serve like sum up doing well financially in one word, I think it's... You've been incredibly successful and sold over 10 million books. What drives you today? Well, you've been incredibly successful, too, Shane.

I've looked up to you for years as well. But I bring that up. I think that's an important thing to bring up because what has driven me are people like you and others. James Clear, Michael Lewis, people who have really looked up to and not been so crazy to say, I want to be that person one day, both because it's not, you know,

everyone should just do it in their own way. but I've always been, I think there's a difference between envy and aspiration. You can be really inspired by someone's success without envying them. And if I can name half a dozen people that I've really looked up to and said like, man, they're a good role model. But the important thing is I don't envy them. I can also name half a dozen people, I won't, who I've envied. And when I try to get introspective about that, why do I envy that person?

It's usually, it's because they achieved a level of success, but I did. didn't like how they did it. And that's a subjective thing. Maybe they're all, they're all good people in their own right. I don't want to be too judgmental, which I won't name them. But I think it's an important distinction of people in your life who inspire you versus you envy them. And I think everyone, if they're honest, probably has some of both. But I really, I like looking up to people where it's like, not only do I appreciate what you did professionally and think you did it with a high level of integrity and you look like you're having fun doing it, but at least from my appearance, I like the whole package of the life that you're living.

And that's really important. Because there's also a lot of people, particularly in finance, who I can say, man, career-wise, you did amazing. But as I get to know you, I realize that your home life isn't that great and your health isn't that great. Or maybe you don't actually enjoy your life.

And so do I actually want to chase what you've achieved? Like, no, maybe not. And so you ask what inspires me. I think it's that. Having people in your life that you look up to and you can use as a North Star is important. The other that I think is really important, I think this was a Buffett line. He said, it's really good to have people in your life who you don't want to disappoint.

Nothing is a bigger motivator in life than having a couple people, rarely more than that, that you really don't want to disappoint. I really desperately do not want to disappoint my wife and kids. I really don't want to disappoint my parents. That's fundamental. I think most people will have, they'll have their own version of that, but something like that. And nothing is more of a motivator than that to want to live, live a good life. But if you look back 30 years ago and you could see what you've accomplished today, the financial success, the status success that you've had, you've blown away any goal that you would have had, why keep going? I think in a healthy way, I can have a very split personality of on one hand, I can say, man, I'm really good at what I do.

And I'm achieving a lot. And this is amazing. And then I can very quickly flip a switch and say, I'm a nobody. And I've done some really bad work lately. And I think on balance, that's a pretty healthy personality. Because if you only have the ego side, you're going to run yourself off a cliff. And if you only have the humble slash depressed side, you're never going to get anywhere. And so I've been pretty good at being able to toggle back and forth sometimes, you know, within the same hour, certainly within the same day.

And so what keeps you going. Hey, I really enjoy what I do. Writing has never felt like work to me. and I think it's the same for you. It's just an extension of kind of who you are. It's never felt like work. And so I enjoy doing it. But also what keeps me going is like the healthy side of me.

Part of me says like, I can keep doing this and do good work. And then a minute later, the other bird on the shoulder being like, you suck. You suck at this. And again, on net, I think it's a very healthy personality, even if it's just the two extreme sides. What can money do for us and what can it do for us? it can do a list of positive things for everybody. What I think is true is that on average, people who have more money tend to have fewer bad days, but I don't know if they have more better days.

I think it is more likely that when you have more money, you are less likely to wake up and be like, man, things are not going well. But that doesn't necessarily mean that you're going to wake up grinning ear to ear. Now, that's a lifestyle improvement. If you have fewer bad days, that's like great. Your life is better. That's obviously better than the alternative, but it's not happening. It's a very different thing. And I think it can throw some people off when they are, when they aspire to happiness,

or they think that what they're achieving and the money they're making should make them happy. Sometimes it does. Very often it doesn't. And they wake up and they're like, what happened? Like I thought this was going to make me happy, but I'm not. So I think there's a level of expectation setting where it's like, I think money can be more like a vaccine where like it can prevent a lot of misery, which is great. Actually, it's so wonderful.

Like we don't have polio. Like it's a great thing. But maybe that's a good analogy. because you and I don't wake up in the morning being like, oh, I'm so glad I don't have polio. So grateful for the facts. We don't do that. We don't, we don't think about it. And I think that's a lot of what money can do.

It is a lifestyle improvement, but don't think it's going to make you waking up ear to ear, grinning ear to year to year. It's kind of like oxygen in a way, I guess, right? When you have it, you never think about it. But the minute you're lacking it, it's all you can think about it. But we want to think of it like it's a performance enhancing drug. We want to think of it as like, we're going to take it and just be like, oh, I'm on fire now. This is great. And I think for short periods of time, it can do this.

Happiness is always a fleeting emotion. Like most people are rarely happy for more than a couple minutes at a time. And I think it's very similar to humor where if I tell you a very funny joke, you don't laugh for 10 years. You laugh for a couple minutes. Humor is a fleeting emotion. And happiness is the same. Most people, you have moments of it. And you can situate your life.

So maybe you have more moments of it than others and more than you used to. But it's momentary. And so I think what people actually want to get to, what they, aspire to whether they know it or not is contentment, which is not happiness. It's a different emotion. You'd want to get to a point where you're just like, I'm good. Like, I'm very grateful for everything that I have and I have everything that I need and most of what I want. And I'm totally cool with that. And if there's more to come above this, that's the cherry on top, but I'm really cool here. I'm great right here. And I think most people can realize that with a lot of work and constant upkeep, you can get to that level at a lowered income than you think.

I remember talking to Daniel comment about this and he had a distinction between happiness and satisfaction. And the distinction was happiness is an emotion. Most people think they want to be happy, but it turns out that most people want to be satisfied. Yeah. And satisfaction was more based on the story

that you can tell about your life. So it actually had to do with how much money you had, how much status you had, how much you, how many promotions you, you had, you were able to tell yourself the story that I did. I sacrificed all these things, maybe my relationship with my partner in order to achieve them. Yeah.

And I think it's when you daydream about having more success or more money or more stuff, when you do that daydream and it feels good, you're like, oh, if only I had that house, if only I had that car, if only had this income, by and large, what you are doing is imagining yourself having those things and being totally content with them. And that's what feels good. That's why the daydream is fun to do. But by and large, when you imagine that good feeling, it's not happiness. You imagine yourself in the house being like, this is it.

It's all I need. I don't need. This is this is the peak of what I need. More often what happens is if you are in that house, you're like, oh, man, look at my neighbor. Like, their yard's a little nicer, isn't it? Or like, oh, like, I got this kitchen, but like I saw this picture on Instagram. What if we remodeled it? Like, what actually happens is you don't have a level of contentment.

And I don't think contentment is a dirty word. It's not a bad thing. particularly overall in the economy. I want to live in a world where most people, particularly smart people, wake up every day and they're like, this isn't enough. We need more innovation. We're going to start more successful businesses. That is the root of all progress, is that the majority of people wake up every morning and say,

this is not enough. And the people who are monstrously successful, that Elon Musk and Jeff Bezos and Marks, they wake up still, I guarantee you Elon Musk wakes up every day, worth $400 billion saying, this isn't enough. not even necessarily financially, although there might be that element, but like the technology is not good enough. The products aren't good enough. We need more, more, more. And so the lack of contentment is the seed of progress.

So it's not a bad thing. But you can see in the individual life where if you feel like there's a hole in your soul and you just not, you just feel like you haven't done enough, you just want more, that the idea of like, oh, well, if I just keep shoveling money in that hole, then I'll get to a place where I'm good. It's actually very difficult to do that. That makes sense sort of evolutionarily because you think about it. Evolution cares about survival of the species, not the happiness of the individual.

Give a damn how happy you are. And the other thing about with evolution is like, it doesn't matter how much money I have. What matters is that I have more than you. It doesn't matter how fast I can run. It's got to round faster than you. And so in a world where we are lucky enough to live in relative prosperity and abundance relative to previous eras, I'm going to measure my success relative to you. and the size of my house relative to yours.

So even if the size of my house, by historical standards, is enormous, if my neighbors is bigger, then suddenly it feels tiny. And there's like, there's no end to that. You can easily imagine a world where our kids and our grandkids have technology and abundance that you and I cannot fathom. I mean, the most, what I think is like the highest odds is that our kids, maybe our grandkids will live in an era which being diagnosed with cancer is not, not that big a deal.

Maybe that's still a pipe dream, but like it's not inconcise. to imagine that. And the other thing about that world is you can imagine that they won't feel any better for it. That the speed at which a luxury becomes a necessity is two seconds. And I think that was true for a lot of the infectious diseases of the 20th century, scarlet fever, yellow fever, polio, all those. If you had told them, if you had told a parent in 1952 that there was a vaccine coming that would just effectively eradicate polio and your grandkids would never have to worry about that. They would have said, like, I can't imagine how happy you're going to be that you don't have to deal with this. And we're not, of course. It's not, it's just not how people's heads just instantly

calibrate to the standards of what everybody else has. And that is the seed of saying it's not enough. We're very, like, almost never going to get to a point where we're like, no matter how good the technology is, how good the medicine is, about how big the houses are, never get to a point where at a broad scale in society, everyone wakes up and says, all good, this is enough. I remember when I was 17 and I overheard a conversation with my parents and their financial advisor that the military had provided. So both my parents worked for the military full time. And they were trying to decide whether to fix the roof or fix the car. And they couldn't afford to do both.

And I remember just thinking in that moment, I never want to be in this situation where I have to choose between two necessary things that I have to fix and I have no money. And at this point, you know, we weren't, I wouldn't say, you know, I never lacked a meal, but I didn't have a lot of sort of extras. And it changed how I think about money from that moment on. I was like, I need to become independent. And for me, independence meant I don't need a paycheck in order to fix the roof or fix the car. How do you think about money and independence? I think what you described is a level of independence, but independence is always a spectrum. So there is a high level of independence in which you don't need to work anymore.

But I would call that, you know, making this up, that's like level 13 independence. And below that are several different levels of like, even if you have $100 in the bank, that is a higher level of independence and if you had zero. And certainly if you had negative, if you were in debt. And so you realize that literally every dollar that you save is a little claim check on your future that you control that somebody else doesn't. I think it's an important mindset like redefining independence like that, that it's on a spectrum, and every single dollar is an independence claim check. For me, I've always viewed it, like, I've always been a big saver for my whole career,

and I've always viewed it as not saving money for delayed gratification. I viewed it as purchasing independence for which I get value out of right now today. There's nothing delayed about saving this money because I like waking up tomorrow morning and being like, there's a big cushion here. And so not if but when something bad happens in my life, whatever it is, whether it's a personal life or the macro economy or, you know, pandemics, whatever it might be, like there's a big gap. There's a wide channel of outcomes that I can endure. And the less independent, the less savings, the more debt you have, the narrower that channel

of endurance becomes. And so within that channel is like all the ups and downs of life, individual and macro, and the wider the channel is the more that you can endure. And so much about compound interest, not just with money, but with relationships and careers and friendships, comes down to what can you endure. How much, how many unknowns and the depths of those unknowns can you endure and survive? And so much, I wrote this in psychology money. If you have to serve like sum up doing well financially in one word, I think it's survival. That's true in your career. That's true for savings. It's true for investing, absolutely. It's just survive. It's just what can you endure? What can you put up with? And when you view it like that, you realize that like every dollar that you save is a claim

check of independence that will serve you, not just in the future, but today. Is it or a sharp the founder of Four Seasons has this excellent quote, which is excellence, is the capacity to take pain. And when we think of that, our minds just instinctively go to physical pain, but we don't think of psychological pain. We don't think of financial ups and downs and being able to just survive because you can't compound if you don't survive. And then the other thing about compounding, I think people misunderstand is that all the advantages come at the end. and not at the beginning. They're very slow at the beginning,

but it's that last double that makes a huge difference. Yeah, I mean, in terms of the dollars accumulated, that's true. So I wrote about this in psychology money, 99% of Warren Buffett's net worth was accumulated after a 65th birthday. That's just how compounding works. The numbers get nuts at the end.

I think what can be true psychologically, though, it's just the psychology of doubling your net worth. You know, I think the truth is, I felt the richest I ever have when I had like a thousand in the bank when I was a teen. I remember just being like, that's, like, I can't even fathom that much. Because the gap between, you know, a year earlier, I'd probably never had more than $20

in my banks. And I have a thousand, like, what? I can't even fathom that much money. And so, like, psychologically, it's just the gap between, this is true for a lot of things. You get pleasure out of contrast. It's just how much, what do you have now and what are you doing now relative to what you were doing before?

And so I write about in the art of spending money. I know a guy who has a private chef, and he's basically getting. getting Michelin Star meals, three meals a day. And it's easy for me and you to look at that and being like, that is amazing. What a life. Like, that is nuts. Guarantee you he does not feel that much from it because he has no contrast. He's not eaten taco.

He's not eating stale bread for breakfast the day before. And so when everything is great, nothing feels great. It's all what you want is contrast, contrast, contrast. And so I think about that a lot in terms of like it's not necessarily how much you have. it's just the contrast to what you have before. Related to that is that people are very psychologically triggered by downgrades because you're still contrasting it to what you used to have. And everyone has probably heard the studies of like,

what would you rather have? Would you rather have a net worth of a million dollars when you used to have two million or would you rather have a net worth of 500,000 when you used to have 200,000? And psychologically, most people would rather have the former. Like the contrast of being like, I used to have two, and now I only have one, that leaves you feeling much poorer than if you had 500, but that's your all-time high. And so I think people, the people is very sensitive to the psychology of downgrades. So how do you deal with that when you have $1,000? That's your baseline. This is the

most I've ever had. But now all of a sudden, that's my contrast. That's the point of which, that's the reference point for how I think about all future bank account balances. Part of this is like the reason that there's opportunity in the economy is because the market, the world, the free market is going to make you pay a price to get something good. It's not just going to hand you wealth for free. You have to do something for it. And by and large, what you have to do in capitalism is put up with a never-ending chain of uncertainty and volatility and things you didn't see coming. And so it's never fun to deal with that, a recession, a job loss or stock market go down 30%. It's never, it's not fun, but that's the cost of admission for doing it. And I think once

you view it as the cost of admission and not a punishment for what you're doing, it doesn't necessarily make it more palatable, but it makes it a little bit more easier to contextualize of like, yes, the market goes down 20%. You're like, ah, this hurts. It sucks. And it does. But you're like, this is why I'm going to do well over time is because I'm willing to put up with and endure the appetite for pain, the capacity to endure pain is everything.

Now, I think it was Nassin Talib talks about everyone has their uncle points where at some point you're going to cry uncle. At some point, you're going to say, it's too much. I can't handle that anymore. Everybody has that level somewhere. But I think it's actually difficult to know where that is looking ahead, looking for it. I think very few people know their tolerance for pain, looking, just trying to be, like, prospective about it.

I think you have to experience it in the trenches, so to speak, before you actually know how you're going to feel. I went through this with COVID of like, I'm someone who wrote about the frequency of volatility, how to think about the psychology of volatility. And COVID, March 2009, a lot of it because it was not just a stock market crisis, it was not even an economic crisis. It was a health emergency and like my kids' schools are shut down and whatnot. Like I and, you know, billions of other people at that point had like sleepless nights of just waking up to me in being like, man, what's going to happen here? And so it's one thing to say, I will be greedy when others are fearful. It's way different to actually do it.

And most people, if you ask them the question, how would you feel psychologically, right? now if the stock market fell 50%. In that exercise, what they do is they imagine a world where everything is exactly the same as it is today except stocks are half the price. And in that context, you're like, that's great. It's wonderful. But the reason that there is volatility is because there is something going on in the world for which nobody knows what's going to happen next, that probably nobody saw coming, that probably is a legitimate threat to you and your family's well-being, if not your health well-being and whatnot. And in that context, it's much, more difficult to be like, oh, take the long term and buy. You can do it. The good people do it.

The good investors do it. But it's much easier said than done. You're in meetings all day. You're trying to stay present, but you're also worried you'll forget the decision, the action item, the important next step. That's where Granola comes in. Granola is an AI powered notepad for meetings. You jot down rough notes like you always do. And in the background, Granola transcribes and turns them into clear, useful notes when the meeting ends. There are no bots joining your calls, no distraction, just a clean notepad that helps you focus. During your after the call, you can chat with your notes. You can ask Granola to pull out action items, help you negotiate, make a decision,

write a follow-up email, and so much more. I even use it when I'm listening to podcasts. Once you try it on a first meeting, it's hard to go without. Head to granola.a.ai slash Shane. And get three months free with the code Shane. That's granola.com.a.com slash Shane. I remember talking to one of the world's more successful investors, a name everybody would recognize around 2012, 2013. And the idea of Buffett and how we handled the financial crisis came up.

And he said all the, you know, I'm paraphrasing here, but he's like basically all the Buffett want to be sat on the sideline. Yeah, yeah. And they've been waiting for this moment and they told their investors about it. They're written about it. And then all of a sudden it happened and they were paralyzed. 10% of them were able to accomplish it. But that's why it should be that way. It should not be the case where everyone who reads the intelligent investor can go out and exploit the deepest opportunities.

Of course, it's hard. And I use this analogy a lot of like, what percentage of college athletes make it to the NBA, let's say? I don't know the number, but I bet it's like 1%, maybe 3%, something like that. And people like, yeah, it's how it should work. Like there's no world in which everyone who wants to be a pro basketball player can do it. it's supposed to be the tippity top of the best. And it's the same in investing. Like, there should not be a world in which every ambitious stock picker can beat the market.

Of course, whenever you hear the statistics about 95% of mutual funds underperform their benchmark, I'm like, yeah, what would you expect? Do you expect it to be 100%? Like, everyone who tries just prints money? Of course, it's hard. And so a lot of that. But, of course, in that situation, everybody thinks they're part of the 1% who can do it. But it shouldn't surprise anyone that very few people.

people can. For most people, one of their largest purchases is their house. When does it make sense to purchase a house and when doesn't it make sense to purchase a house? It makes sense if it's the right neighborhood for you and your family, where you want to live for a long period of time, and is within reason of your household budget. Now, that's a completely different topic of what percentage it should be. That's a different thing. But you should not do it because you have, even if you don't define it like this in your head, because you have some level of phoma. of man, housing prices have gone up a lot and like, oh, that house looks so nice and things would be and we can't really afford it.

Or it's going to be a huge stretch. But, oh, life will be so much better in there. That's the worst reason to own a house. Part of this that I have a lot of empathy for, and I think actually explains a lot of the fertility crisis in the Western world, is that most parents, even if they don't actually vocalize this, want to check a couple boxes before they have a child, the first child. One of the biggest one is own a house. And as housing becomes more unaffordable, all of those.

over the Western world. It's like this in the UK. It's like this in Canada. It's like this in Australia. The more unaffordable it gets, the more you're going to have good people with good jobs and solid marriages and they're 28, 29, 9 years old. And in any other era would start having a family. And today they say, no, I really want the stability and the feeling of having made it into adulthood of owning a house before I do that. And in the absence of that, it causes like tremendous problems. So housing, affordable housing, I think is the single biggest social problem. certainly in America, probably in Canada right now, because so many other social problems that might seem bigger than that are downstream of housing. A lot of the drug problem, the drug crisis,

is downstream from unaffordable housing. The fertility crisis is downstream from unaffordable housing. The degradation of politics is downstream from affordable housing. Because if you don't feel like you're invested in your community or you're invested in your country, it's much easier to be like, burn the place down. Who cares if politics is melting now? You're not invested in it.

You're kind of transient. in the system. You can move to another city. But as a homeowner myself, I know that, like, I care deeply about local politics. I care deeply about the local parks and the schools. Like, I am very invested in this community. But if you're not, you don't really care. And so I think a lot of what's going on in politics can be tied to on affordable housing. Tucker Carlson, who I don't often agree with, said something I thought was very profound and true recently. He said, like, a good, I'm paraphrasing it, but he said, a good proxy for the health of a country is whether or not a 28-year-old can purchase a house. And I was like, that's great. That's a very

good rule of thumb for how well things are going. And of course, people know in U.S. and Canada and you're like, by and large, you can't right now. Yeah, it's really difficult. It's something that needs to be solved on multiple levels, right? Like, teachers should be able to live in the neighborhood that they teach in. Firefighters should be able to live in the neighborhood they teach in. Somebody working full-time, I think, you know, even younger than 28, you know, 24, 25, should be able to support a mortgage. And, you know, I would love to see that problem solved. What should be so aggravating about this

and why this should be like a pitchforks and torches issue is that I don't think it's an oversimplification to say the problem is A, very easy to solve and B is literally just a choice. That virtually all of the reason that housing is so unaffordable is because we don't build enough. And the reason we don't build enough is zoning. I don't think that's an oversimplification.

There's plenty of land. There's plenty of capital. There's plenty of demand to get this done. And there are examples of cities that do build that are very large, dense cities that have very affordable housing. Tokyo. Gigantic city. Bigger than the city you and I are in right now in New York.

Very affordable housing relatively. Because they build. They build and build and build and build and build. And the fact that we don't, especially relative to previous generations, if you went back to the 1950s and 60s in America, you would have seen construction everywhere. Yeah. Everywhere you look, there would have been a new community. And because of that, we added supply and housing was relatively affordable.

And we don't anymore. And it's a choice. It's cynical to say that people want the choice, that people want unaffordable housing. It is a choice to not build as much as we need. Well, there's a weird incentive because anybody who owns a home, when you think of affordability, it's like, how does that affect my equity and my, if house prices go down 10% and we're leveraged here, right? So a 10% drawdown in a house price might wipe out 75% of my equity.

But I think that is flawed thinking too. I'll tell you why. Let's say just keep the number simple. You buy a house for 100,000. Let's say one million, make it more. You buy a house for a million bucks. And the price doubles. Great.

In your mind, you're like, I just made a million dollars. Yeah. But no, because if you sell that house for two million, you need to buy another house to live in. And the next house you're going to buy, the price also doubled in the last two years. And so it's this fandom kind of thing where it's like, the equity that you build isn't really wealth because when you sell that house, you probably have to buy another one that went up in value just as much.

And unless you are moving to a cheaper city, which of course that happens, you're not getting any benefit out of that. My wife and I experienced this where we live in the last year. The house that we lived in previously doubled in four years, which is not like shouldn't happen, but it did. The house doubled we lived. And then we sold it about a year ago, bought a new house. And the new house that we bought was also, we bought it for.

for twice as much as it would have sold for four years before. So did we actually make money on that? Like we could have, it didn't really help us that much. And if we lived in a world where home prices never went up, you would, of course, have a lot of crowing from homeowners who'd be like, I used to build equity and now I don't. But the truth is, is that they're actually just as well off because the homes that they could buy if they sold now cost less as well.

I've seen reports, at least in Canada, that 30% of the price of a new home, is basically government fees. I believe it. And it's insane, right? It's slowing things down. Anyway, we can get off this. But I want to switch to how exactly do you invest your money?

Walk me through step by step. Well, it's not going to be a long conversation because it's easy. I dollar cost average into index funds. I hope to own them for 50 years. And that's it. My entire net worth is a house, cash, vanguard index funds, and shares in Markell where I'm on the board of directors. And that's it. And I don't, I don't think it needs necessarily to be more complicated than that.

I think it is very intuitive in finance to be like, I will do the best if it's, if my net worth looks like a Rube Goldberg machine. And it's just so complicated. And there's so many levers and strategies and this. And it's not, I don't discount that smart people can do well financially with complicated transactions. I just don't think it's necessary at all. And maybe there's an analogy to health in this. There are the well-known biohackers out there who are just trying, they view their body as a Rube Goldberg machine and they're like, I got to maximize this and do this and take these pills and this diet, whatnot. I don't think that's necessarily bad, but without being any bit of a health expert at all myself, I'm like, look, if you just eat

a balanced diet and sleep eight hours and exercise a couple times a week, that's probably good enough. That's probably getting you 90 or 95% of the way, or maybe even 100% of it. the way to the results that the biohacker is going to get. I think that's by and large true. And I view finances very similarly where my just painfully simple finances, I bet over the course of a lifetime, not in any given year, but over a lifetime, if you compared it to someone whose finances were very complicated and had all kinds of transactions, not only would I be likely to match those, but probably exceed them.

And I did it with virtually zero effort. And that's why I do it. I don't recommend other people do it. It fits my personality, and it allows me to focus on the variable that I want to, which is endurance. The simpler it is, the easier it is, I think the higher the odds that I can just stay with it. Whereas if it was very complicated, I might get to a point in the economy or my career or my cognitive capacity, we're like, I can't keep it going. And so I think the higher the odds that I can just leave it alone for 50 years, the higher the odds that you will actually maximize wealth doing it. I love that thinking.

Walk me through $100 comes into your house. How does it get allocated? I do a lot of mental accounting, by which I mean of like money is fungible. One dollar is the same as any other dollar. But I have a lot of mental accounting where in my own life, you know, I sell books. I speak at conferences. I do some other stuff like that. And it's very much like in my head.

I'm like, okay, the book money goes here. The speaking money goes here. I spend this and that. I have a lot of like mental accounting that is not really rational, but it's just how I, how I tend to think about it. And so I've saved all. my book money. I haven't spent a single penny of the money that I made from books. And again, I don't view that as delayed gratification. It's made me financially independent and in a way that I

gave value from today. And so that's, that's really helpful. My wife and I, this would have been true 10 years ago, and it's true today, that my wife and I buy anything we want, but particularly 10 years ago, we didn't want that much. We've loosened up a little bit now that we have kids and like, you know, a little more experience with life. But there's really no budget. there's no, but I've been like that since I was a teenager. I never found it hard to save money. It was always just seemed like the obvious thing to do, I guess. Where have you loosened up the most?

Probably our house. We have a cool house. We bought a year ago. And what's great is that I work from home. My wife is at home. And so we're there 99% of that. That is the core of our life. Like you might as well enjoy it.

And also what I think is great about the house is that by and large, other people don't see it. it's not a car that I'm showing off around town. It's not clothes that I want people to notice when I'm at the airport. It's like, this is just for us. This is internal benchmark. Like, I enjoy this. And I love the feeling of like, I'm an earlier. I wake up three hours before my wife and kids, which I really value that in my life, too.

And I love coming downstairs alone by myself in the dark and sitting on the couch with a cup of coffee and just looking around and being like, yeah, this is cool. I like this. But what's important is that like, no one else sees me do that. I'm not trying. I'm not putting on a show for strangers. It's not a status thing. It's not a status thing. It is total internal benchmark.

And so even if we have, you know, I don't want to say over-invested in that. But I feel like that's the one thing where we're like, oh, this is worth it for us, totally worth it to spend a lot of money here. I was talking to Barry Diller a few weeks ago and he mentioned something about housing that stuck with me. And he said, you know, growing up, I looked at all these houses. And he said the inside is rarely as beautiful as the outside. Yeah. Because the outside you want strangers. you want people to drive bass and pie and be like, oh, look at that person.

I think it's true that, you know, how many people have gardeners, landscapers relative to how many people have like interior designers or whatnot. And I would venture, we're talking first world problems here, of course, but I would venture that many more people have landscapers, part of which because they don't want to get dirty. But part of which is like, I think whether you know it or not consciously, you want people, including strangers, to drive by and be like, oh, that's a nice house.

I wonder who lives there. But the inside of your house might be a dump, at least in relative terms. Yeah. Because the internal stuff, like you are more external benchmark focused than others. I think that's probably right. One of the other ways to interpret that. And I think the way that I went when I heard it at first was like, oh, there's marital problems.

There's problems with the kids. There's like these people who we grow up going like, I want to live in that house and I want that life. And if you open that door and walked into that life, you know, it's kids who don't talk to parents. Yeah, yeah. I remember this one's is a very specific example. P. Diddy, who has his own host of legal issues and moral issues. Of course, everyone knows them.

As part of his criminal process a couple years ago, the police released pictures of the inside of his house. I think it was his house in L.A. It may have been Miami, though. And this is P. Diddy's house. So on the outside, it is a freaking mansion, as you would expect. The inside of the house where the pictures were released, these crime scene photos, place is a dump. Place is a dump. Oh, gosh.

And that was so interesting. I was like, I think from the outside, particularly a celebrity like that, is like the people who drive by are going to see a mansion. But inside, when it's just me and the kids and what I'm just like, you know, who cares? It's a dump. And I thought that was very interesting. If we divide life into four major eras, the 20s, 30s, 40s and 50s, how should people think about. acquiring and spending money in those eras. I think it's so different for everybody because a lot of people find their way when they're 14

and other people find it when they're 40 if ever. So I hesitate to give like a formula for it, but I think it tends to broadly be true in a gray way, not in a black and white way, that like probably age birth to 20, you're forming an identity. You're just trying to figure out who you are and you're trying to make sense of how you're wired and whatnot. You're just figuring out your identity. 20 to 30, I think by and large, you are learning a skill. Hopefully, again, this is gray. This is a shade of gray here. You're learning a skill. In your 30s, you can put that skill to work. And in your 40s and 50s, hopefully you can

really exploit that skill and make some money doing it. I think as a very broad, broad stroke formula for life, that can be great. Now, I can think of a million examples of people who did not follow that path and ended up great and ended up happy. And so that's not, but I think in general, that tends to be true. I think it's, it's hard to meet someone who is very successful, didn't have something like that. Once in a while, you'll find someone who again found their way when they were a teenager and were making a fortune when they were 23 and could basically retire at 28. Like, those people exist. But I think it's, it's very difficult to know who you are before you are, you know, I hesitate to say 25, 30, 30, 35. Someone was asking me about this the other day about

what do I think of Gen Z? Because there is so much written about Gen Z as a drift and wayward and lacks the work ethic and whatnot. Those articles and commentaries exist everywhere. And it reminded me, I was like, it seems like it was yesterday that our generation, my generation, the millennials, everyone was saying that about us 15 years ago. The millennials are adrift. They don't have the work ethic. They don't have the values that the baby boomers and they did before them. And if you go back to the 1970s, they said the exact same thing about the baby boomers. They're adrift. They don't have the work ethic. They don't have the values.

Go back to the 30s. And they said the exact same about what we now know is the greatest generation. They don't have the morals. They don't have the work ethic. They're adrift. I think the truth is, no matter the generation, no generation handles their 20s with a lot of grace and dignity. It's a very difficult period because you're still trying to figure out who you are. You are technically an adult.

You are technically on your own and kind of out of the cradle and trying to figure yourself out. But very few people do. And I think that's true at a generational level, which is why it is so, easy and almost inevitable that the older generation criticizes whoever the current crop of 20-year-olds are. I remember in my 20s how I thought about things financially. I was married at the time. And we lived off one salary. And that was our way of like, because you go from making no money and, you know, like scrounging in the garbage basically for food at the student union building to sort of like, oh, you're

getting a paycheck every two weeks. This is insane, you know. And so we were like, oh, we'll just live off one paycheck and we'll save the other paycheck. And then the thinking was if we do our 20s right, it just sets up the next 50 years. And by doing it right, we were totally different than all of our friends. So they were getting houses and pools. And we're like, we're in a one-bedroom condo, you know, barely scraping by on one salary. We're not going on vacation.

We're not doing all these other. But we never felt like we were missing things with all these other people because, you know, in our heads, we just were like, oh, they're living paycheck to paycheck. And we don't have nearly as nice of a life as they do. But like if we can maintain this for a decade, then all of a sudden our 30s become a little bit easier. 40s become easier. And then as you sort of age, you start thinking about money differently, right? In your 40s and 50s, you're like, oh, I need to retire. Like, how do I take care of my parents financially?

You know, how do I pay off the house? How do I take care of my parents? How do you see those milestones, like, affecting people? I told the story once before, but I hadn't really thought about it very much. I grew up with a guy. I worked with a guy. I was probably 18 or 19, and he was probably 28, let's say. So he's a little bit older than me.

I worked with him at a ski resort. And we worked in the ski rental shop. together. It seems Kip Gar, really cool guy. And Kip, at the time, I knew when we worked together, he had $25,000 in credit card debt from ski trips that he had taken. He'd skied in Europe and he skied all the South America and whatnot. And at the time, I was like, 25 grand in credit card debt. You are a maniac. You're an idiot. You're not a maniac. You're an idiot. And I gave him so much grief about it. And I just thought, it was almost on like a daily basis. I'm like, you are insane. I can't fathom it. And the very sad punchline here is Kip died in a

a ski accident when he was 30, 32, something like that. And it was amazing the speed at which in my head, I was like, I'm so glad you took those trips, man. I'm so glad you lived the life you did before you tragically left us so young. And I thought about that a lot. And obviously, like, no one should live their life thinking they're going to die at 32 or whatever it might be. It's not an appropriate way to live.

But I think of a lot about like the question you should ask is if you were on your deathbed, or facing down the barrel of death. This is a terrible thing to talk about, but it's a fine thing to talk about. What would you regret? What would you look back on? Kip died in a ski accident. It was like a mountaineering accident.

He was hiking up the trail. He was hit by a massive avalanche. And I wonder in that moment if he had a couple seconds of realizing he was about to die and his life flashes before his eyes. And I imagine just knowing him the life he lived,

if his life flashed before his eyes, he was probably like, fuck yeah. I did it. Like, I did some cool things. And so like, so what are you going to regret? And I've been a big saver my whole life, my whole adult life. And if I were in that situation tomorrow, heaven forbid, I would not have the regrets for the trips I didn't take and whatnot

because I would take so much pleasure knowing that because I saved my wife and kids are going to be okay. Nothing would matter more than me than that. And I would massively regret it if I was staring down that barrel, so to speak, knowing that not only am I gone, but my wife and kids are in trouble now because that would leave me just overwhelmed with regrets. So it is never as simple as being like live for today or save for tomorrow. It's always just what are you likely to regret at some point in the future? It could be a year from now. It can be on your deathbed 70 years from now, whatever it is, always thinking about your capacity for regret, what you are likely to regret. And my regret's probably different than yours.

Very different from mine was from Kipps. And so it's, I think, that's how I think about it. You have to think constantly about what you're likely to regret in the future. What advice would you give to your younger self about spending money? Someone asked me about this recently, and I thought it was interesting. Let's go back to when I was 19. And I think we were all, you know, I had that that age. I was a saver. But at 19, it meant like saving 100 bucks was like a feat. That was a hero, like 100 bucks. If I saved a thousand bucks, like, wow, that was crazy. And let's say, I don't know what the numbers are, but let's say I, because I invested that, that $100 is now worth $500.

It's probably something like that with what the market's done. $500 today does not mean that much to me. It's not that big a deal. So was it worth it? Or if I had a time machine, should 19-year-old Morgan have taken his friends out to dinner with that $100 versus invested it into amount of money that means nothing to me today? And my response was, I don't think that's the right way to think about it, because I think it's impossible to have a YOLO paycheck-to-paycheck mentality in your young years.

and then assume that you're going to flip a switch when you're 35 and become a saver. And so I think the reason that I've had good financial habits, in my mind at least, through today, is because I started them at 19. It's not that the $100 turned into 500. It's that the habits I formed in that era brought me through today. And I could not have changed the habits when I turned 35. It just doesn't work like that. And so that's part of why I don't have a lot of regret for saving money that was a huge amount to me back then,

that has grown to a completely insignificant amount to me today. It was the habits that I formed back then that made all the difference. I think you're paying for dinner next time. I'll do it. It's okay. I think you paid last time, so I probably owe you. You're highly affluent, and how do you think about raising kids with money in terms of what do you do you do? What do you try to avoid? I had this conversation with someone last week, and he has first generation.

immigrant parents. His parents moved here from America, moved to America and worked their tails off to support their children, including this in the sky. And now he has a daughter and he said, Morgan, I worry that she's spoiled, certainly relative to the life that he had when he was a kid. You know, she has this and she has that and she can buy these toys and whatnot and she's spoiled. And he said, what do I do about that? And I said, I bet you if we were talking to your parents right now, they would say that was the goal. The goal, the reason that they moved to America and worked their tails off is so that their grandchild would look spoiled by comparison. And so there's part of me when I completely understand and I feel it as well the urge to not spoil my kids. I want them to be

hardworking, independent, understand the value of a dollar. Of course I want that. You want that. We all do. I think there's also something to be said that the goal, the purpose of all of this is that so myself in the future and my kids and my grandkids and my grandkids and my grandkids will live in a world that by today's standards appear spoiled. That's the goal, isn't it? Like, wouldn't it be a failure if our great-grandkids live the exact same life that we do today and have to work just as hard and work the same hours?

That sucks. And that's always been true. If you look at a middle-class, ordinary American today, not someone who's super affluent, middle-class American, by the standards of 1900, let's say, they are spoiled rotten. They are absolutely spoiled rotten. And if the person in the 1900s had a time machine to come today, they wouldn't stop laughing at how spoiled this person was and how trivial their problems were. But again, like that's the point.

The point is that we have innovation and technology over time so that life becomes a little bit easier. It's always the case that to the previous generation that had it harder, it looks, the phrase you use is spoiled. But I think what's actually happening is progress. And so, but now I understand that you want your kids to be grateful. You want them to be hard, you know, hard working and whatnot. But compare how people react when they get the flu today to how, to the standards of 150 years ago where it's like you had eight kids and seven of them died of infectious disease before their fifth birthday or whatever it was. Like, oh, boo-hoo, you got the flu. You got a headache for a day.

But that's not how we think about it. It hurts. So it's always the case that the progress of a generation appears spoiled to one, even if it's true progress that we have. Now, I want my kids, I think as a broad formula, I want to use the money that. that I have to protect within limitations, my children's downsides. I don't ever want them to just collapse on their face and they can't work their way out in life. I want to be there to as a somewhat of a safety net. But I don't want to be a fuel.

I don't just want to give them money and be like, oh, lucky you. You have your parents made a little bit of money. We're just going to give it to you now. I think that's by and large not the right way to do it. And I think that's like, I think inadvertently my parents did this of it was unspoken. but I think I intuitively knew when I was 18 that if I fell on my face, they would be there to catch me,

even if it was unspoken. But I also knew clear as day that they were not just going to write me a check. That was completely out of the question. But because of that, I think I was able to enter adulthood with a little bit more confidence knowing that like,

hey, I'm going to take a risk and move to this new city and do this new thing. But like, if it doesn't work out, I'm not going to be homeless. That was a good way to do it. And so teaching your kids to be self-sufficient, even if their lifestyle appears

spoiled by today's standards, they become self-sufficient. They can keep it going on their own. Is their lifestyle today? Is that the contrast point? So like whatever life they're living with you in the home growing up, that becomes their reference point. Right, exactly. My wife and I had this experience like a year or two ago where we were thinking about buying a new car, one of which, one of the options that we could buy was a pretty nice car. And I had this thing of like, let's say that our two kids 20 years from now want to be kindergarten teachers. And because of that, The car that they might be able to afford is a Honda Civic or whatever, you know, a much more modest car. Have I ruined their adulthood to some degree because I set their expectations that in childhood,

mom and dad drove this, but now when I'm an adult, we got to drive this. And I think there's just such an inherent natural thing of like parents. I want to raise kids who are going to do better than we did, not just financially, but in many aspects of life. And I think the children want to have a generational growth pattern as well. They want to look back and be like, man, I grew up here, but now as an adult, I'm here. Like, amazing. It feels great to surpass your parents. This is the first generation where they think that might not be the case.

I think they're probably wrong about that. In general, of course, there's going to be lots of examples where that was the case, but I think they tend to. I would bet that they would be wrong about that. Now, I think it is true that even if statistically and analytically, my kids will be living a better life than we are, particularly for things like medicine, I think by comparison, they won't appreciate it in greater degrees than we didn't appreciate our progress because of social media. Because they have only known an era in which not just there are some, but there are literally tens, hundreds of millions of people on Instagram who appear to be richer, happier, smarter, more successful than they are. You can so imagine a world in which even if you are living like a Saudi prince 50 years from now, someone online is doing it better. And so you're sitting there in your gold palace, so to speak, feeling down about yourself.

And so you can easily imagine a world in which the growth rate of expectations just becomes exponential because of social media. Yeah, there's so many negative byproducts to that. I mean, I think, you know, it used to be our reference point was our street. Yeah. Our little community. And maybe Joe got a new car or you bike or something, yeah. Shane got a swimming pool kind of thing. and now you pop open Instagram.

Joe's got a golf stream and Jane's got a Bugatti kind of thing. Or Jane has a beautiful smiling family of cute kids in their photo session without seeing the screams and the tantrums that took place before it kind of thing. It's just everyone has a very inflated sense of other people. And I do this too. I post cute pictures of my kids online. I don't post tantrums. I don't post fights.

And so it's like everyone is putting on an act, so to speak. in an innocent way, but in a very real way. Yeah, you're camouflaging different parts of your life. Absolutely. Now, once in a while, some people, I do follow a couple people who are like, I think they want to post their warts, so to speak. They want to post the downs. And it's very refreshing.

People love, like the saying, misery loves company. People love hearing that you're not the only one suffering, that other people are going through the fights, the stresses, the anxieties, the doubts that you are as well. Like, it's a very comforting thing to hear. Yeah. I mean, we talked earlier about the Stephen Bartlett interview I did that we didn't air because it was so bad. Yeah.

And it was my failure and not Steve's. And I posted that publicly. Yeah, brave of you. And I remember just being petrified. But I was like, people only see success. Like so much of what people see is like, oh, the book's doing well, the podcast is doing well. The newsletter's doing well. Like, oh, Shane must be, man, I remember, like, that was a hard few days for me after that.

I remember when you posted that. of being like, good for you, man. Like, the response that I had as an outsider watching that was not like, oh, look at Shane, this clown. He's stumbled on stage. That was the opposite. The response I had is like, man, good for you, because I've had a lot of failures. And good to know that I'm not alone in that.

Of all the, I wrote 4,000 blog posts over my career. And the one that meant the most to me by far was the post I wrote in 2017. It's called Overcoming Your Demons, where I wrote about, I grew up with a very severe stutter. I really struggled to speak until my honestly early 30s. Really had a hard time. And if you go back to my childhood, I could barely speak. It was very difficult for me to get a sentence out. Severe stutter.

And I wrote about that process and in part how I overcame it and whatnot. And I was really hesitant to post it. A, because it felt like a look at me post. And it felt like, even though this wasn't the intention, it felt like a fishing for sympathy post. But I think one of the points that I made in the post was like, everyone's got their demons. And you usually don't know about it. Actually, a lot of people stutter, but you usually don't know about it because most stutterers just don't speak that much.

So I guarantee you you have a friend or a coworker who you think is just quiet. And they're not quiet. They just don't want to speak because they struggle to speak. And so that's an example of like a lot of people have demons that you just don't know about. And everyone has their own version of that. And people love it when you expose your own because it makes them feel less. alone. Well, that's what happened. I've rarely been texted or contacted so much about the post that I was about that. And it wasn't sort of like I was worried people would think I'm fishing for

sympathy or, but it was more like, oh my God, this thing happened to me last week too. I totally bombed this. And then all of a sudden people didn't feel alone. I mean, one of the most common feelings is everyone else is crushing it in life. And I'm struggling. Because all you can see is they're outside. You can see basically the act that they want you to see, but you are extremely aware. You are aware of nothing more than the thoughts that are running through your head, the doubts, the anxieties, the worries, the things that didn't get exposed. I think if you could see inside of everyone's head and see their thoughts, you would see that people are a hundred times more anxious than you assumed. There are a hundred times funnier than you assumed. There are a hundred

times more doubtful and depressed than you assumed. Like, I think in either direction, positive and negative, you would realize that the range of emotions is a hundred times greater than you think, because most of the time, what people are showing you is what they want you to see. It's the performance. How do you think about inheritance? I like the idea, not first proposed, but I think clarified in recent times by Bill Perkins, who wrote the book, Diwas Zero, who was like, if you are going to give your kids money, and I know this might a little bit controversial, predict what we just previously talked about. If you are going to give your kids money, give it to them when they need it, which is probably

their 30s and 40s when they're starting to build a family of their own. The idea of I'm going to wait, I'm going to make you wait until I die, at which time you might be 70 and then you can have all of it is a weird philosophy. It's the most common philosophy, but it's kind of a weird philosophy where, and I will acknowledge again that this can, and I still don't know what my wife and I are going to do with our kids. But if you can help them buy a house when they're 30, that's a lot. is going to give them a much greater boost in life than if they get a million dollars when they're 75

after you die. And so I think that's that's a lot of it. There's a Charlie Munger quote where one of his very wealthy friends comes and says, Charlie, if I leave all of my money to my kids, is that going to ruin their ambition? And Charlie says, yes, of course it will, but you have to do it anyways. And the friends says like, why, why do I have to do it? Charlie says, because if you don't, they will hate you. And I think there's some truth to that, not just for the billionaire families, but I think there's there's some truth to that too, that I think there can be a lot of animosity. And I understand the animosity of a 40-year-old working their butt off and struggling living paycheck to paycheck while their parents are, just to make up an example, you know, retired in Florida playing golf

every day. I understand why that creates a little bit of ill feelings. And the parents basically being like, oh, well, one day, this is going to be yours. And the kid being like, I don't, like, I would appreciate if that day were now. Very complicated topic. There's, I don't think there's any formula for doing it right. But that's, I, and I think in general, I like that philosophy. What can people learn from the Vanderbilt's? So the Vanderbiltz of all the Robber Baron families who lived not far from where you and I are recording right now, I think the, the Carnegie's and the Rockefellers did a very good job at using their wealth to both give themselves a good life and to benefit society. Not perfect, but they did a pretty good job given the sums of money

that they had. And the Rockefellers still have a lot of wealth today have billions of wealth today. and every library, every city in America has a Carnegie Library and Carnegie Hall and whatnot. That still exists. The Vanderbilt, I think, did the worst by far. And it is hard to imagine another family who had so much money, who had the equivalent of hundreds of billions of dollars, who squandered it, I think is the right word, so quickly. And part of it, I do have some empathy for them because I don't think they meant to do this. I think when Cornelius Vanderbilt died in the 1800s, he was.

wanted no one else in his family to have to suffer ever again. You just say, you're going to have tons of money and you can just live like an absolute king for the rest of your days for generation after generation after generation. And what I think it inadvertently did, even though some people foresaw this when it first happened, was it created a family who valued nothing but money. And the money was their dictator. The money told them who they could be. It told them where they could live. It told them what their personality could be. It told them what they could value. It told them who they can marry, told them who they can socialize with, a lot of which was not who they actually were. And so you had these people who were, and who would inherit the equivalent of

$10 billion when they were 18, who were basically puppets in their own life. They were like character actors in their own life because they wanted to be somebody completely different. Maybe they wanted to like live on a farm and have a very like humble life. And the family structure said, no, you're going to live on Fifth Avenue and a 50,000 square foot house and host balls and and and and and and and and and and and and and and and and and and and and and and and and you have to be you are vanderbilt you have to be that and the vast majority of them I think were miserable for it and it wasn't until the money was mostly exhausted that a lot of them were that the the subsequent errors were like mercilessly let go

like with a sense of like they were lucky to be let go and be able to be themselves and this is now well known but one of the first Vanderbilt heirs to get to do that was Anderson Cooper of CNN the journalist. who was, you know, I think one of the first people in his family, which is a little bit of an exaggeration, but one of the first people in his family to get to have the privilege to be himself and live his own life and not have to live up to the title of Vanderbilt air, even if it didn't fit his personality at all. He wrote a book on that, didn't he? He wrote a book about the history of the Vanderbilt's and how it fit in with other kind of robber baron families in his day. And it's not all negative. And if you read the biographs of the Vanderbilt, it's not it's not all negative, but it is not anywhere near the happiness that you would assume for people who would inherit $10 billion on their 18th birthday. It's nowhere near that. And so, look, I want to be, I want to have a higher net worth. I want to be wealthy. But you don't see it what money can't do for you until you look at the magnifying glass of like unbelievably wealthy people and what it does for them and what it can't do for them.

How does wealth affect your relationship with your spouse? Oh, I think not at all. I mean, it's a great question because I don't think I've thought about that whatsoever. But my wife and I met when we were young. We were 19, 20 years old when we met and had nothing. And we're college students. And of course, we did nothing. And are we happier today?

We have a different sense of life because now we've been together for 20 years and we have two lovely kids together and whatnot. It's a very different view on life and a sense of accomplishment for that. But are we happier? And I think that's like, no, but that's not uncommon. Not everybody, but a lot of people, if you ask them, when was the happiest time in your life when you had the most laughs, the greatest times? A lot of people, not everybody, will tell you high school college.

High school college, this is a man, hanging out my buddies and parties and parties and we did this crazy thing. We did that crazy thing. And one of the common denominators of that era, of that age, is you have no money. But you're still very capable of having a great time with your friends and laughing and going out and going to parties and going on road trips, whatever it might be. And so the things that make my wife and I happy, we like walking our dog and we like that 10 years ago as much as we do today.

And even before we had a dog, we like going for walks and doing this. We like laughing and talking about things and whatnot. It's things that don't cost any money whatsoever. And I think that is a perfect example of the list of things that money cannot do for you. And so if I look at my own life relative to who I was 10 years ago, does my wife? love me more? No. Do my kids love me more? No. Like, that's, that's, now the psychology of downgrades can play back in here because what would happen if my career imploded and it was my fault? Would my wife might love me less? Like, maybe because the psychology of downgrades and taking care of your family,

that that plays a role in there. Would, would my kids think less of me if we had to fire settle our house and move into a roach filled apartment? Like, maybe. So there is some element, particularly on the way down, but definitely on the way up. It, uh, It's the psychology of it is not necessarily what you think. What my wife values, and of course this is not unique to me, is that I'm a good husband. I pay attention. I listen. I'm helpful.

I'm grateful. Like not how big is our house or how fast is our car. Yeah, that's a good place to be. What can you learn about someone from how they spend their money? I think it is a very insightful window into people. Now, is money everything in the world, of course not. isn't the most important thing in your life? Absolutely not. But it is a very clear window into how people think about social aspiration, self-confidence, doubt, a lot of other things.

I could list half a dozen things that are obviously more important than money. Health, humor, you know, your relationships with people, obviously more important. But when you look at how someone spends money, you're like, oh, I can tell a lot about you. If I saw your bank account in your credit card statement, I could learn a lot about you. I could probably learn as much about you from that as I would if I spend a couple days just getting to know you.

And so I think that's true. Even just looking at how people dress, I think is very interesting. I always make this point of like, and this is true is a shade of gray. There are exceptions to this. But when I see like a middle-aged man driving a yellow Ferrari,

I'm like, I don't judge, but I'm like, there's a story there. And I bet most of the time, not all the time, but the story is that person was snubbed or doubted or doubted themselves at some previous point in their life. And the yellow Ferrari is a trophy to show to others and to show yourself of like, I made it. I overcame.

That's what it was. And that's why I think in general, too, the yellow sports car, so to speak, tends to be a new money phenomenon. Not a lot of old money families with those or fewer of them. Because I think the new money, wealth, like feels vindicated over what they overcame. I used to be poor and I'm not anymore and I want people to know it. And I want to show myself. It's a trophy to myself. Whereas the old money family is probably closer to be like, look, we've always had this.

It's like we didn't have to overcome anything. It's the expectation. It's the expectation of it. I look at the people who do that and, you know, to use the yellow Ferrari example. And I'm like, that person has a chip on their shoulder. Yeah. And also wink. Like I relate to that.

Yeah. And I don't think that's a bad thing. It's not a criticism. I have a family member. I wrote about this in the art of spending money who grew up extremely poor, homeless, foster system kind of poor. And they became a very successful businessman. And he told his daughter, when his daughter was getting ready for college, he said, please pick the most expensive school that you can get into. Please, I'm begging you. It was almost like the more expensive, the better. As in like, as I would feel better. He felt so good about what he overcame. The idea that he could say, I used to be homeless, and now I'm sending my daughter to a school that costs 70 grand a year, whatever it was. That was a trophy for him internally. It wasn't even signaling to others. It was, I think he went to bed that night being like, I did it. I did it, man.

And so that whole idea that, like, a lot of spending is not utility. It's not even rational. A lot of times it's filling a psychological hole that you have from some point in your life. We have a mutual friend, Brent Beshore, and he has the concept that is stuck with me ever since. And I use it so often now between clean fuel and dirty fuel and sort of what motivates you. And, you know, he argues that clean fuel is a better source. And I counter this with, like, dirty fuel. It just, it never goes out.

Like, you don't use it up. It just, you keep going with it. And that drives in part society. And it might drive that person to buy the yellow Ferrari or send their kid to the most expensive school. But they did that by creating some sort of economic value in life to get rewarded for that. Yeah. And that's their status thing, whatever. keep going. Whatever it might be. I think I've become much less cynical and judgmental about whatever

your thing might be. So again, when I see the LFRA, I don't judge you, but I know there's a story. And now I have a story. I have my own insecurities and faults and flaws and when everybody does and you express them in a different way. And maybe it's a case. I mentioned earlier, I've always been a big saver. Not even maybe. I would say almost certainly, but part of that came from earlier periods of my life when I had lower self-esteem, very low confidence in my ability to earn a lot of money and that has led me to saving money with the idea that like oh this is all going to come crashing down soon and I need to prepare for that personal you know downfall I think if you got me on the therapist's couch you would you would pull something like that out of me and so

everybody has their own little version of this in some degree in their own unique ways that influences how we think about and spend money is spending for status ever useful I think it can be I'm wearing a you know I'm dressed like this I I don't dress like this on sat at my house, but I want to fit in and be appropriate for you and your audience. So is that signaling? You know, if I was, if nobody was watching, I would not wear a collared shirt like I am right now. I'd be wearing a T-shirt and some dirty shorts or something, right? So, and so my, come on, it's a clean shirt at least. That's a nice-looking shirt. But so is this, is this signaling? Like, yeah, probably. But I think, but it's perfectly fine. Because I'm not signaling to show off.

I'm signaling to fit in and be accepted, which is a little bit different. And so there's always a degree of of fitting in, whether that is, you know, manners and being polite to other people. Is it that you actually, you know, when you say thankful, you know, thank you, thank you to people with someone who does something nice for you, waiter comes and fills up your waterglass, you say thank you. Is it because you are truly grateful for it, which might be the case? Or is it just like, that's the appropriate thing to do? It's just proper manners to do that.

Is that signaling? Like, probably. And so, to answer your question, yes, there is absolutely time when signaling is important. I think it becomes dangerous when the purpose of your signaling, is I want to get the attention of strangers who are not in this with me, who are not part of the group that I'm trying to gain the respect and admiration of. I'm trying to gain the attention and admiration of other people who I don't know who are probably not even watching to begin with.

I think that's a lot of it. I think you see this very often with people who have very poor manners who are very gruff and say whatever's on their mind, that in their mind they're like, I don't care what you think about me. I don't get. But the truth is, like, they probably don't get accepted. into groups and societies and like friends circles and clicks and whatnot that would really benefit them. And so that's, I think there's a joke where it's like, just be yourself is good advice

for like 5% of people. And I love that joke, that mean of like most people should not be themselves. They should meter what they say and how they behave around other people in a signaling way in order to fit in. That's a really good point. I want to come back to something we talked about earlier, which is excellence is the capacity to take pain. And I want to know what you've learned about psychology from studying the history of panics, depressions, crashes, and what advice you could give people who might be going through that, whether it's, you know, they're listening to this five years from now

and we're in a market downturn, or their life just feels like it's not working the way it should at the moment. I think there's two things. When we talk about broad economic crashes and depressions, on one hand, I could say the economy is cyclical. And that's the greatest sense of opportunity. 1932, a stock market had fallen 89 percent, but it was about to go absolutely parabolic rocket ship up. And so you can talk about that, be greedy when others are fearful. But I think there's some survivorship bias in there because the German economy also collapsed in the 1920s and 30s.

And did they get a rebound out of it? No, they got Hitler out of it is what happened. And you could list a dozen examples of that, and individual examples of when people whose career fell, their portfolio fell. And was that an opportunity for them to grow for a lot of people? No, it was the end. It was the collapse. So I think avoid the idea of the economy and your individual life is volatile, but you always want to avoid catastrophic collapse. You never want to get to a point where you can't actually recover from it.

And it's very difficult to know where that point would be. I think there are, of all of the possible outcomes of the United States during the Great Depression in the 1930s, we got probably the outcome that actually happened was like a top 10% outcome. It easily could have, if not should have, turned out as it did in much of Europe, where after the Great Depression, the people's response was like, maybe we should give fascism a try. Maybe this thing didn't work. That was probably the most probable outcome. And so the fact that it didn't happen doesn't mean we should think it's always going to happen like that. It's true for individual lives as well. I think that's part of the psychology of collapse is like it's too easy to look back at what happened for companies and whatnot.

Everyone knows or it is now well known in the story of Apple. Apple, absolutely, Apple computer absolutely struggled in the 1990s, nearly went bankrupt in the late 90s, early 2000s and then had this unbelievable revival. Steve Jobs creates the iPad and the iPhone and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the and the. And the rest is history from there. But for every one of those stories, you can tell 50 stories about companies that just lost and went bankrupt. And so it's too easy to think about the psychology of pulling yourself up from the pits of despair. Because I think those are the rarities from that. And I think this is why financial and psychological independence become so vital. And it's also the case that I think as a survival mechanism, we underestimate the odds of bad things happening to.

us because if we were if we were honest about the odds of it happening it'd be too hard to get out of bed in the morning if we were honest about the odds of you of you getting divorced of you losing your job of your kids not turning out the way that you thought they would of you not saving for retirement if you were honest about those odds it'd be hard to wake up tomorrow you'd wake you'd be overwhelmed and so i think we there is a there is a almost healthy amount of ignorance that we have of of being like yeah but that's not going to happen to me and it's almost in a good way that you do it. It's like a survival mechanism. But because we do it, I think it is very important to financially and psychologically have a level of independence. So just focusing on the financial

independence, a level of savings that seems like it's too much. That seems like, oh, this is completely excessive. Do I need this much savings and liquidity? The answer might be yes, because you're probably underestimating the odds of very bad things happening in your life. What percentage of your net worth is in cash? It's probably 20 to 30 percent. Maybe it's high teens. is it's right in that in that zone and it's been like that over the over the course of of big changes in my net worth i've always added about like that now any financial advisor would look at that and say morgan given your age and income that's way too much you don't need that and i don't even disagree with that i mean it is it is it is ridiculous but i value sleeping at night and as i said before maybe there's a nugget of my past that's left me with a lower

sense of self-confidence of being able to, you know, the idea that this is all going to come crashing down. And the idea that what I value more than anything is not outperforming the market or outperforming my peers, it's independence. And so there are quirks of my personality and my wife's personality that lead me to that. Never in a million years would I recommend that to everyone or even many people. And I think it's, I think it is unique to my personality. But that's the point. How you allocate your money is unique to your personality. And I hope. you don't judge me and I wouldn't judge you if you do it very differently. I think that's, I think that's the most important part. It's less about what do I do and more the idea that I do

it because I'm me and I'm not you. I always read these articles about how rich people are spending their money and then people in the comments are like an uproar. Yeah. You know, I, like, you would do it differently. Yeah, I was like, my personal belief is like if you earn that money legitimately and you create a value for society, you should be able to spend it however you want. Mark Zuckerberg is a very interesting case study here because at least from the appearance, I don't know him, so maybe this is just a fake outward appearance. Up until, like, five years ago, he was the frugalest billionaire, you can imagine. I think he had a jet for, for security reasons, but, like, lived in a modest house, drove

an Accura, like, you know, well, at least gave the appearance of living. And in the last five years, I think he's been, like, screw it, we ball, let's go, bought a yacht, bought, has like a $10 million watch collection, bought, like, everything, which he deserves. He's one of the richest men of all time. But it's interesting, if it is. true that there was like, oh, I used to be frugal, but now I'm doing this. And I don't, again, I really don't judge that either. Maybe he found, like, he was, maybe he was happy and content living a modest lifestyle, but then he was like, man, I love watches. I love the artistic value.

I love the engineering of value of them. So even when people go through big changes, I think it's like, great, if that works for you, that's wonderful. And we can contrast that against Buffett, who we talk a lot about, who obviously does not have $10 million watches in a yacht. Famously lives in the house he bought when he was like 26 or whatever. And I think that works for him. Totally works, totally fits his personality. Everyone's going to be a little bit different here. For a lot of people, their goal is passive income in order to fund their expenses. Talk to me about what that is. And if that's a good goal or not on the spectrum of sort of financial independence, where is that? It's a very appealing word because the idea is I get paid to do nothing. But the vast majority of what people consider

passive income, they're working their butts off for, particularly real estate. If you're you're a landlord. And people are like, oh, it's passive income. No, it's not. Your toilet breaks, the roof leaks, the tenant doesn't pay. They put a hole in the wall. Like, anyone who's been a landlord knows that it could be, particularly if you have multiple properties, a full-time job. Absolutely a full-time job. Is that passive? Like, no. The only like true passive income would be like you own treasury bonds and the interest is, you know, you actually didn't have to do anything for that. There's an opportunity cost in there. So it's not like purely free money. but dividends, interests like that, that could be considered passive income,

but most of what people consider, like, the income hacks that they have. And people get really crazy about it. They're like, oh, I do consulting, and that's passive income. Like, what? That's labor, this is what it is. And so I think it's a great idea, but people take it definitionally way too far. My kids have looked this up a lot in terms of how they think about money and, like, they're exploring their little ventures,

and, you know, in elementary school, they start talking about it and it continues in middle school and stuff. And one of the things I've tried to tell them is every form of passive income that somebody has was once active income. Extremely active income. And so let's say the person who is like clipping coupons for the treasury bonds that they all, yeah, but they probably work their butt off to make the money that is now an investment. And you have to factor that into the passiveness of it. And so there's a lot of that. I think it's pretty rare that people truly have a situation where they're like, I'm making a ton of money from this thing that I did nothing for, either in the past or today.

That's pretty rare. Do you have a framework that you use for making the big decisions in life? You've talked about sort of switching houses, and I know you did that a couple years ago. You also moved from D.C. to Seattle. Yeah. How do you, like, walk me through your framework for? This is definitely not advice because I don't know if it was a good idea, but all of those were a spur of the moment. and be pretty haphazard, if I'm being honest.

And is it luck that they, by and large, worked out? And I say by and large, because a lot of them didn't, there were elements of it where it didn't really work out. But I think it's true that particularly the big forks in your life, it's not at all clear which way you should go. And I think it's also true that gut feelings tend to actually be pretty good. That's not just a gut feeling. That's just that you can't crystallize what the thought is,

but you know which way you should go. You know which way to do it. I think that tends to be the case. I got feelings are actually pretty accurate. More often than not tends to be the case. So I didn't, if I look back at my decision to become a writer, my decision to move to D.C., from D.C., to have kids. We were talking about this the other day.

We have two kids. My wife and I didn't sit down and have a deep discussion about, do we want kids? How many do we want? What are our parenting philosophies? After we got married, we're like, I don't know. I guess we should do it. That was just it.

But the truth is there was a gut feeling there, and the gut feeling was actually pretty accurate. So I think people trusting their gut more often than seems right. Like you don't need to have an analytical conversation on a spreadsheet to figure something out. This is the one question I probably get more than any other question when I'm giving talks is sort of the relationship between your emotions and your instincts and rational and where we should be on that spectrum. And the example I always use is sort of chess.

And so chess is not a perfect analogy, but it works in this case, which is the grandmamma. masters have an instinctual move in their head. They can't explain. 99.9% of the time that's the move they make. And then why do they take all this time before they make a turn? Well, because they're checking, they're verifying that their instinct is correct. And I think so much of life is that. And Daniel Kahnman would agree, right?

It's just slow down your intuitive brain. It doesn't mean override it. It doesn't mean ignore it. Let it inform your decision, not make your decision. Yeah. And I also like the idea of like, you've got to be very careful with decisions that are irreversible that are going to have lasting consequences and be much less choosing and picky and analytical about decisions that are reversible and whatnot.

Jeff Bezos talks about that lot. There's sometimes where you make a decision in a business and you're like, look, if this doesn't work, we can just go back to what we were doing before. It's not that big. It might cost a little bit of money, but we can go back. And there's some decisions about like this is a, this is a roach motel. Like we walk in, we ain't walking out of this. We got to make sure it's the right place to go in.

I think there's a lot of decisions like that in life. about, you know, even if it is reversible, who you marry, the career that you have, where you live, those are reversible decisions, but it's much more difficult to do it. And there's some decisions, your reputation and whatnot, that are irreversible. Like if you lose trust, whatnot, you're probably not getting it back, at least anytime soon. And so those irreversible decisions are the ones where you do want to stop and take a step back and be like, let's think this through and do it. My wife and I think there's plenty of times that I can think of when we tried to be analytical about it

and try to be like, okay, let's talk this through. And it let us nowhere because most big decisions don't have a very clear procon list. It's like I could see it working out this way. I could see it working out that way. And like, I don't know. I could go either way. And those are the most difficult where you are just using your gut and hoping that it's right over time. And also not everything on that list is equally weighted.

Yeah. So that's why I get kind of frustrated when like the lifestyle gurus will be like, here's how I make, here's, here's how I do this and here's the, the multi-step process to making a good decision. I'm like, I don't, I don't think that's usually how it works. It's usually just like, I think, let's just go with this. That feels like the right one to do. Obviously, some people are better at that than others, that understanding the consequences and what they're likely to regret, but I think most of the time, it's nothing more than that. What advice do you have for somebody living paycheck to paycheck? First, empathy, have been there, don't. Don't.

want to go back, understand and empathize with the idea that you feel like everyone else is doing better than you and you're not and that maybe you're not living the life that you once foresaw for yourself. So the first comment I have is empathy for what they're going through. And the second I have, I always say two things. One is that all wealth is what you have minus what you want. And it is so profoundly common and easy to ignore the second part of that equation that you have to minus what you want and you are more in control of that by and large than what you have. It's It's possible but not easy to double your income. Possible but not easy.

It is well within your control, even if it's not easy. It's more within your control to try to be more content with what you have and try to lower your expectations, even if you're still an ambitious person and do that. Easier said than dumb, but I think that it's always going to play a role. The second is understanding that independence exists on a spectrum. And if you can save $1, if you can save $10, if you can save $1,000, if you could save $1,000, If you could save $100, you're in a better position than you were before. And a lot of people in this position will be like, well, I can't save $5,000 a month.

So why save anything? That kind of mentality. And I think it's every dollar makes a difference, particularly once or twice a decade when you lose your job or whatever it might be. You're going to be like, I am so grateful. That is that $5 you save, that $10 you save is the oxygen of your life that's going to allow you to make different decisions than you otherwise would have had to. I go deeper on this sort of the expectations minus what you have. I mean, there are people. And again, I say this with empathy, not with any sort of shame or criticism or telling

you you should just be more grateful for what you have. There are people who earn very little money and are totally satisfied with it. And I think oftentimes that is just unique to their personality. That's not a learnable skill. It's not a teachable skill. It's just who they were. They were just blessed with that of just being like, I got a little apartment and a pair of shoes and it's like, I'm good, that's all I need. Those people exist. And it makes, and the opposite of that

exists too. Maybe this is a more pertinent example of the people who make $20 million a year and feel broke because their life is not complete in their mind unless they're earning $25 million, because that guy over there is earning $25 million. Those people exist absolutely as well. So you realize the power of expectations is enormous in how we feel about ourselves. And it is true. I'll give you, I'll give you an analytical example of this. You have to be careful with this because you have to wrap it in the context of expectations and empathy. But the average new house today is almost three times the size of a house in the 1950s, three times. I read this book recently on Leavitt Town, which is back in the 1950s, the Leavitt brothers, home bills build a bunch of

gigantic home communities, kind of urban sprawl, kind of suburban sprawl, I should say, that created kind of the backbone of what we knew then and view now as like middle-class, class America, white picket fence, average people, plumbers, teachers, firemen, policemen, who could buy a house when they were 25 and raise their kids in this. And I think it is often used with the example of like, we don't have that today. Our grandparents have it. We don't have it today. There is some truth to that.

But the truth is, if you look at what the Levittown house was, it would be considered low-income poverty housing today. It was 700 square feet. your four kids shared one bedroom. It had one bathroom for the six of you. Forget garage, forget porch, forget air conditioning, forget any of that.

It was as bare bones, basic, tiny, no frills as they could get. They were also part of the reason that the Levin brothers were able to build so many houses so cheaply is that they were thrown together like cardboard boxes. And so that amazing middle class prosperity house

that you have, the roof was leaking, that was poorly insulated, like going to, by today's standards, it would be not what people would think and not what they would want. And so it's easy today to be like, used to have it better.

You used to have it better than us. And I think you have to push back on that a little bit. If somebody says, I don't feel like I'm doing as well as I wanted and I should, I think that always demands empathy. If somebody says, people used to be doing better than we are today, that's a factual statement that can and should be fact-checked. That is an apples-to-apples comparison that you can look at. And I think most of the time you would look at that, you would come to some conclusion that when people make a statement like people in the 1950s were better off than we are now, it's usually not true.

But that does not preclude the feeling that you have today of I'm not doing as well as I thought I should and I'm living paycheck. Because I think more often what happens there is that the expectations over generations have increased. So in the 1950s, a 700 square foot house with no garage was amazing. It felt like a palace. And by today's standards, it's more along the lines of I need a, 1,900 square foot house and I better have air conditioning in a garage, et cetera, et cetera. That's not to call people spoiled or whatnot. It's just the acknowledgement that expectations increase over time. I remember reading this thing and I don't know who said it, but it was basically

boiled down to remember there was a time where you wanted what you have now. And I think now some people will hear that and be like, no, there was actually a time when I thought I would have more than I do now. So that, I think that exists too. But for a lot of people, I'd even say maybe the majority, there was something, there was at least something, going on in your life right now that you used to aspire to and probably told yourself that you would be so happy if you had that thing one day. How did you feel after same as ever came out in relation to psychology of money? The reason I ask this is this relates to anybody who had a massive success and then all

a sudden they're back on stage again. Yeah. I've often, I've said this a million times. I write for an audience of one, which is myself. I write books that I think are interesting about topics that I'm interested in in a voice and telling stories that I think is interesting for me. And I never want to or think about pandering to you, to the audience. And so there's part of me that is inherent in that where I'm just like,

I really don't really care what other people think of these, good or bad. I'm just kind of writing them for myself. But it's true that, you know, my first book, Psychology of Money, first print runs 5,000 copies, ends up selling about 10 million and counting kind of thing. Great, amazing. But it also sets the expectations of myself and other people to a different degree. And so when my second and now third book comes out, it's always judged relative to that. And good problem to have ultimate first world problem.

But you see what's the irony of it is I write about, including in Same As Ever, and Psychology Money and the new book, the power of expectations. And how anything amazing can feel terrible if your expectations are high enough. And anything terrible can feel amazing if your expectations were low enough. It is the ultimate arbiter of how you're going to feel about something. And I knew this going into it that even if Sam is, ever was a book that I was very proud of, which it is, and sold well, which it did, it was always going to be by comparison to this thing, psychology of money, my first book, that would be graded against it.

And even if I knew going into it, I'd be lying if I said it wasn't hard. It was, it was hard. I've talked to other authors who've been in similar situations. And I think other kind of artists who have this thing, whether you're a musician or actors or whatnot, if your early success was big, it's very difficult to live up to. I will kind of name one example of this that I saw recently because I think they're big enough that I'm allowed to criticize them a little bit. And everyone has a different taste in music.

You two, the band, their albums in the 1980s are so unbelievably good. You listen to Joshua Tree and those albums. You're like, every song is like magic. Like, how did you? This is so good. The recent albums, I will judge and be like, yeah, I don't know, man. It doesn't really have it. And I think at least part of that is that I'm judging the recent albums relative to the pure magic that they produced.

If you don't like that music, you probably have your own example of it. It's okay. But that's the case. Everything is going to be judged relative to your highest moment in the past. And that's a very hard thing to deal with. Can you change your reference point if intentionally? Can you go into this and reset the bar? So it's not psychology of money.

My bar is like, I want to sell 100 copies of the book. I don't know if you can do it intentionally. I think you can be forced into it of if something terrible happens in your life, you are able to say, I'm so grateful for it because I used to be down in these pits of despair before. Stephen Hawking had a very potent example of this, the late scientist who was, of course, had no control, or he paralyzed head to toe in a wheelchair. And he talked about that he was so grateful for life and so happy to wake up every morning because his expectations were reduced to zero when he was 21 years old when he was diagnosed with this illness.

and everything else since then. And there's been some studies about this of like the comparison, the classic example of who is happier, a lottery winner or a paraplegic? And the answer is like not intuitive. It's very often the paraplegic who without diminishing

some of the obvious pain and suffering that they've been through would be like, might have a newfound appreciation for life, might have a newfound appreciation for sunsets and things like that where the lottery winner is almost the opposite. When they win, they're like,

life's going to be freaking amazing from here on out. And when it's not, they're like, oh, geez, I thought it was going to be great. It's not. And so you get a lot of counterintuitive results like that. I'm glad you kept writing. I mean, I feel like I can paralyze a lot of people. If you have such an overwhelming success on your first book, you might not want to keep going. But I personally, for whatever it's worth, I think your writing keeps getting better and better. One common review of same as ever was, of course, there's a wide spectrum of comments, but I feel like a median review of it was good

book, not as good as as psychology of money. And I always, I always been like, man, if I didn't write psychology money, you probably would have just said good book and finished it there. And it's okay. You probably would have said great book. Maybe.

And so, but I think it's inevitable. And it's a good problem to have. But it's interesting that I write about that power of expectations and experienced it in a potent way firsthand. How does our social group impact our desires and how should we think about our social group in relation to spending money?

I always say, like, be very careful who you socialize with because it will, full stop will, set your expectations of what you want. And I used the example of that I grew up out in the mountain sticks outside of Lake Tahoe, and it was very much a mountain town, not poor, but not rich by any standards. And then I went to college in Los Angeles. Los Angeles during the housing bubble in the mid-2000s, when there was just overflowing with literally trillions of dollars of fake money. And some people were just such a material culture then and now.

like when that fake money flew around, it was just, everyone was just spending it on lifestyle, just inflating everything. And I realized like, who's happier? It's not even close that it was the people in the middle class mountain town were happier because it was so much easier

to keep your expectations in check. You're like, it was so easy to be like, look, I drive a three-year-old Ford pickup and the rich guy drives a two-year-old Ford pickup. And that's the stratification. The stratification was this big. And then in L.A., the stratification was 10 miles long. And so even if you are a dentist doing well in L.A.,

you're a dentist making $300,000 a year, driving a Mercedes. You're absolutely amazing, crushing it. But no dentist in L.A. making $300,000 a year feels like they're crushing it. Because they are driving past 30,000 square foot mansions and Rolls Royces and Lamborghinis and whatnot. And so by comparison, even if you're not socializing with those people, you're aware of it. But when you start socializing them with those people, then truly your expectations just blow off the charts. It's very difficult. It's possible, but it's very difficult to be a dentist making $300 grand and be friends with someone who's living in a 30,000 square foot mansion with a private jet and have it not impact your expectations.

Very difficult to do. We keep coming back to happiness. Is that something we should be optimizing for? I think what you said, what you want to optimize for is contentment. And when you socialize with people who are dramatically wealthy or are living a better, a bigger life than you, it is much harder to remain content. possible but harder to remain content. And so being careful who you socialize with, I think is very important. That's true for a lot of things, not just outside money, but values.

It's very easy to think today, I have these, the boundary of my morality is this. But the truth is like if I started hanging out with different people, it might become this. The boundaries of my morale, or sorry, it might shrink. What I'm willing to do might be very influenced by who I'm hanging out with. I think that's true for nearly all of us. One of the things I admire about you as your friend is that you've built this life that is just totally authentic to you. What advice do you have for other people about going about building this life that's authentic to them, discovering who they are as a person and how they can use finances as a tool to accomplish that?

One is I would say thank you for saying that and noticing that, but it takes work. It is not just you get there and you're like, oh, everything's great. Now I can just cruise on this authentic life. It takes, I think, daily work. And so even as someone who writes about expectations and keeping up with the Joneses and whatnot, I think I feel like I have to remind myself daily of it. Now, there are a lot of things like that in life. If you master meditation, you don't get to stop.

You got to do it every day. And if you do stop, you just revert back to where you were. Same with exercise. You don't get to physical fitness and then you get to stop. You got to work on it daily. So I think this is one of those things as well. That takes a lot of effort. But I think the realization, easier said than done, but the realization and the

observation that people are not paying attention to you as much as you think they are. And therefore, you should stop trying to impress strangers and use money to give yourself a tool of things that are giving you a lot of fulfillmentness, your relationships, your health and whatnot. To me, that was like the biggest breakthrough. And it's so simple. Like, there's nothing that profound about what I just said. But if you can actually come to terms with it, it can totally change your life.

Just being like, nobody's watching. Nobody's watching. They're not paying attention to me. They don't care what I'm wearing. They don't care what car I'm driving. But if I can instead use that money to be independent and be able to make my own decisions about what's authentic to me, that's amazing.

You've known me for, I don't know, 15 years or so. And you have no, I've been open with you about my personal life. And you knew me during my cheap frugal years, right? And I think in a playful, friendly, respectful way, you would give me grief for it. And I kind of, in a way, I liked the grief because it was a reminder that I was being independent. that I wasn't a slave to anyone else's expectations.

I think I kind of reveled in that at the time. It was consistent with my personality, the lifestyle that I was living. But I almost enjoyed the reminder that I am not just a pawn to somebody else's expectations. And I'm doing this my way. Oh, yeah. But I also admired that you just didn't care. You didn't give a fuck about what other people thought. Yeah.

Like I would tease you about wine sometimes. Oh, I still have the palate for that. Yeah. You were just like, whatever. Like, I don't care. You would hand me an expensive glass and I'd be like, This is Charles Shaw. I don't know.

What is? It is a two buck chuck, Shane? But I think we, you know, as good friends do, would give each other grief for it. But I actually, I feel like if people are not giving you grief for something in your lifestyle, you're probably just a sheep to somebody else's. If you can look at, particularly someone who is above average income and there isn't something in their life that they spend very little on, I think there's a high chance that they're just a sheep going along with society tells them they should want. And so I love it when you

meet a rich person who dresses shabby or eats shabby or drives a shabby car. There has to be something like that that they realize like that thing. Society told them they should like it, but they just don't. Now, they should probably also have a thing that they spend a higher percentage of their income on. And so like, that's important too. But the idea that you should just do it your own way with the idea that nobody's watching because the truth is nobody is watching. We recorded with a billionaire. It was so funny in the summer here in this very studio. And I walked in and he's like eating Kava for lunch that I was just like, yeah.

This is amazing. That's how it should be. Because it's delicious. Yeah, it's awesome. And wouldn't it suck if you loved Kava? But you're like, I'm a billionaire. I got to eat caviar. And then you're just choking down the salty nastiness of the caviar.

Isn't that a bad life? 100%. I love Taco Bell. Can't get enough of Taco Bell. Love it. What's your go-to? Nacho cheese chicken chalupa. So good.

And they cost like a buck. And it's just the cheapest, dirtiest food. But God, it tastes good. There's this, you know, Rob Henderson, he's an academic's amazing writer. He has this heuristic I love. He says, rich people food looks better than it tastes. And poor people food tastes better than it looks. 100%.

So Taco Bell looks nasty. So good. Caviar looks great. So nasty. I remember I gave a talk once in San Francisco. Francisco. And at the end of it, they took me to this Michelin Star restaurant. And it was so fancy. And it was so set up. And they brought like 13 courses or whatever it was. And the whole time I was there, I was looking across the street at this burger joint. Can I get some pizza, please? With a line

out the window. And I was like, I just want a burger. I had a burger. Is it two? What's the highest Michelin star? Is it three? Three, three. I think it was that. I had a three star Michelin. meal one time. This is last summer in Europe. And I found it very mediocre at best. And some of the dishes I found bad, legitimately bad. And they looked beautiful and it was expensive. And the atmosphere was amazing. But I think that's the perfect heuristic of like rich food looks better than it tastes. I think that's true. What do you splurge on? This seems like a cheating answer, but I think I splurred on independence because that's how I view it. I have a very high savings rate. That's not how I view it. I view it as I buy independence. I purchase little claim checks of

independence. But what do you splurge on that you spend on? Like actually like I won't give examples. I travel. I travel pretty well. I don't travel cheap. And I value that because I travel a lot. So I feel like it's almost a necessity to keep my sanity. So that's something that I don't I don't cheap out on. My wife is a is a very talented gardener, landscaper. And until recent years, I did not realize trees and rocks could cost so much, but she's proven that it can. And I love it. She loves it. We love it. So the things where it's like, that's important to my comfort when I travel, to her identity at home to do these things. And it's like, great, no budget. Just go do it. It's fun. Awesome. Love it. And other people might not value either of

those things. But that's almost the point. We do. I think that is the point of money is spending it where you value it. And I always ask myself and others, like, what would you do if nobody was watching? Yeah. What would you wear? What would you? If nobody was watching, she would garden exactly as she does. Yeah.

And if nobody was watching, I would travel exactly as I do. But isn't that, like, that's the pinnacle. Like, that is, in a way, a definition of success. Just doing what you want, whatever it might be. Because I think there's other people who are much wealthier than you and I who fly coach or don't value landscaping whatsoever. And that's okay. That's like, you got to find your thing.

Yeah. I think for people who travel all the time, like you and I travel definitely becomes something that you probably spend what your younger self would consider an obscene amount of money on. Yeah. I fly every week. The flack that I fly first class and they serve a meal on a tray, it's not a luxury. I'm trying to survive here. It's the only meal I get today.

This is like a necessity. Now, of course, it's a privilege, but that's how I view it. It's like, it's not a luxury. It's the only way that I can fly. every week and keep my sanity. Yeah, or flying overseas and giving a talk the next day. I got to lay flat. I got to do it all so I can't give the talk the next day.

Now, they're all wrapped in, like, of course I could. But it's a luxury that I'm easily willing to spend money on. What can history teach us about inflation and how can we, what advice would you have for somebody today about dealing with inflation? I think the history is that it is ever present. There's never, people get very, and I, maybe, they're right to do this, very upset at inflation. And again, maybe they're right to do that because it's very often a policy error or failure.

But there is no history without inflation. It doesn't really exist. It's not really the thing. So I think, I feel like a lot of people on the, on the, what are the stages of grief? You know, there's a stage of stages of dealing with it. A lot of people get stuck on anger. And I feel like I've just moved on to acceptance of it. I don't get that angry about it.

I accept that it's going to be there. at higher rates that I would prefer and occasionally very high rates that can be destructive but I don't necessarily get angry about it because I feel like it's inevitable within history and the idea that I should be awaiting for a world in which

prices are stable all the time and perpetuity is never going to happen. So I'm not going to waste my time waiting for it. All the time you spend thinking about something you don't control comes at the expense of something you do control. Yeah. Save an extra dollar or sort of buying more independence. I love that idea of buying independence

for money. And that doesn't mean. that you shouldn't be angry or vote when politicians screw up and cause inflation. It's not that. But I think people have, some people have too high expectations for what they expected to be eventually in an area and way that's never going to beat there. I think that's true for a lot of things, for marriages, for friendships. If your expectations for perfection, if you have expectations of perfection in an area where people are imperfect. And I have bad days. My wife has bad days. You need to have some tolerance, reasonable level of intolerance for

perfection is important. And I think you can apply that framework to how people think about inflation. It seems like pace affects a lot of what we do financially. And by pace, I mean, we know the path to get wealthy, at least generally speaking, in life. It's to save a little bit of money, dollar cost average into index funds and repeat for 20, 30, 40 years. And that is about as a sure of a path to gain wealth. Not 100%, but among the surest paths that are, And yet we have this lack of patience in part because we see other people getting wealthier faster than us and I have the saying a lack of patience changes the outcome. But in this sense, it changes our behavior.

And because it changed, oh, like I want to invest in whatever this get rich quick scheme is. Or how do you think about that? I think there is a lot of, there's an unfortunate truth with a lot of this stuff that people's personalities are wired at birth. and that's just how they're wired. And I think that includes people who are wired for long-term thinking and some people who are just not. I'm making this up. This is not an actual study.

But I've always thought that 10% of people do not need financial advice. They just get it intuitively. They came out of the womb, understanding compound interest. They're savers from the day that they earn their first dollar. They just get it. Nobody has to tell them. Another 10% of people cannot be helped. They're compulsive gamblers.

It doesn't matter what you tell them, what information you give them, they're always going to make terrible decisions. It's probably true for health as well. And so I think in here of that is that there is a lot of this. This is just who we are. And some people are more impatient than others. I do think there is a thing where even so within that framework that I said 10% don't need help, 10% can't need help. That leaves 80% who want and need good advice and can be influenced with good information. And I think within that, there is a lot of things. I've done a lot of work with high school students talking about money and investing and whatnot. And, and, and And it is inevitable every single time without exception that these very smart, very intelligent high schoolers, somebody will raise their hand and ask some version of the question, what penny stock should I buy to double my money tomorrow?

And I have to remind myself that, like, I can't criticize that because I think that is the natural intuition. For some people, they might think they're a long-term investor and their definition of long-term is a month. And maybe that's not, they think that's not a bad thing. There are other things in life where a month is a long time. I don't know what the example would be. If you're cleaning your kitchen, a month is a long time to get it done in. So, like, there are some things where you just need to understand what we say when we mean long term. And historically, when we talk about the stock market, a good definition of long term of,

of like really putting the odds of success in your favor is probably 10 years. Of putting, like, earning a real rate of return after inflation, even within the cyclicality of the economy, you should be investing for at least minimum 10 years, if not 20, 30, 40. And so a lot of people, that's like, that would, would never cross their mind that that's what we're talking about when we say long term. And particularly for young people with no experience, they're like, I'm a long-term investor. I'm going to hold for the next three months. And they really think that that's a rational statement.

And so part of this is just understanding the historical context of what patience means in investing. And how we teach this has such an impact. And you mentioned high school students. So one of my kids last year came home and he's like, we're having an investing competition in class. And I was like, well, tell me about this competition. And it was basically a weekly competition to see you could make the most money. I did this in fifth grade too. We had the same thing. It was pick stocks and then we'll

track it. And it was like, who makes the most money in the next week? I was like, but you're not investing. Right. Speculate. This is gambling. And then there is a truth that like nothing can be more damaging to your investing psychology than getting rich very quick when you're young. I think it just ruins you. It gives you this expectation. I remember in 2021, which was kind of like the peak of the meme stock mania, the market was just going vertical. I remember this young person tweeting me and basically saying, if you can't double your money every month, you have no idea what you're doing investing. And I'm being like, yeah, good luck to you, sir. But I also don't fault that because I think if you started investing in 2021 and you just started buying options on meme stocks, you're like,

oh, it's easy. Just double my money every week. It's not that hard. You have no context for what the base rate of success is. And so that's, I think that's really important. Becoming a student of investing history and understanding what to expect historically and the base rates around And that is very, very important because you can become so influence and blinded by the expectations of your first six months of investing, good or bad, in a way that can lead you to really poor expectations. Do you know the investor, Jeremy Grantham? Yeah. Very famous investor, very smart investor, successful investor, notoriously known for being bearish. Not always, but historically tends to be pretty bearish.

I remember reading this thing that he began his career in the teeth of a vicious bear market. that was his early experience. And everything we know about psychology is like early experiences leave scars. They stick around for a long time. So you can easily imagine an alternative history of where Jeremy Grantham started his career during a tech bubble and became a momentum investor like sky's the limit kind of person. Maybe not, but I think that tends to be true that we are all just like products of our early experiences.

So you have to be very careful not anchoring too much to that to the extent that you can. I want to come back to the index funds for a second. One of the comments we had before was people want to. to know what specific index funds you invest in. Yeah. And what the allocation within those is. So if you had 100% of your money into index funds, what percentage is in which? The vast majority is a Vanguard total stock market index VTI.

Not all of it, but the vast, vast majority is that it is as broad as you can get. It basically owns every stock in every company, in every industry, in every size in the U.S. I really don't own much of any. No, I don't own any international funds. part of that is I don't think you necessarily need to because even among U.S.-based companies, I remember doing half their revenue or more overseas. And so you get international exposure even within that. I know some people would push back at that to disagree that different markets have cycles at different times.

So you should diversify. But I've never, I just want to keep it simple. I think that's maybe the point. Even when people would be like, oh, you shouldn't own VTI. You should own this index. You should own international exposure. I'm like, we could twist that wheel all day. Like, I just want to keep it simple.

I own a slice of U.S. capitalism, and that is totally adequate for me and just keep it going from there. So the purpose is to keep it as brainless as possible so that I can focus all of my attention on what I think actually matters, which is endurance and longevity. So you're a smart guy. So you own VTI. What is the S&P 500 right now? I mean, the vast majority of that, that's weighted. Yeah. The correlation between the S&B 500, 500 companies and VTI, 7,000 companies is very, very high.

So a large, historically at least, a large percentage of that is made up of the top 10 companies. Or the top three, let's say, yeah. And you're smart. And you hear this. And you're like, well, I know history would indicate that this is going to go sideways. So I should sell my index funds. Or how do you think through this? Or like, how do you keep going for it?

I wouldn't pretend to think that I'm smart enough to preemptively do that, given how complex the world is. The world isn't just infinitely complex machine with as many moving parts and levers and gears and gizmos as you can possibly imagine. And it is so complex in the sense of like you twist one knob and a bunch of conveyor belts a mile down the road start acting funny.

It's just it works in very complex ways. But I think it's still intuitive for people to come up and be like, ah, what if we pull this lever? Let's see what happens. What if we hit this with a hammer? Let's see what happens. And like, I don't want to fool myself into thinking that I can figure out something that is infinitely complex.

Seven billion people, hundreds of different cultures, millions of different companies, infinite trends, different possibilities that could have played out. I think I can be like, oh, let me just pull up Excel and I'm going to calculate this and figure it out. Like, who am I kidding, and that I can do that. I think there are people who are extremely smart and lucky who can do that. But I am neither the former or do I want to rely on the latter? That is one of the lessons I try to teach my kids is, you know, when they're going through these investing competitions, we start talking about finances and investing.

And I'm like, you know, there's people who are the smartest people in the world who do this full time. And they literally want to take your money and make it their money. How do you plan to compete if you're picking individual stocks in that world? And then I bring up you and I'm like, well, Morgan has this thing where, you know, you don't have to be outstanding. you just have to last longer than everybody else and be average. Yeah. And the truth is, like, if I can be average for 30 years, I will beat the vast majority of people who try, not all of them, but the vast majority of people.

And the idea that, let's say, if I can be average for 50 years, I'll end up in the top 3% of investors. That's probably about where it'll be. Historically has been the case that I will outperform 97% of people who tried to beat the market. Maybe it's even more. Maybe after tax, it's 99%. the idea that being in the top 3% or the top 1% is not good enough is insane to me

that in any other endeavor, if it could say, hey, if you do nothing with no effort, you'll end up in the top 3%, the idea that I would say not good enough. I need to devote my life into getting into the top 2% has never appealed to me. If that appeals to you, more power to you, and I think a lot of people love the intellectual stimulation of picking stocks and following markets. I follow markets every day. I have been, I've followed the stock market every day for 20, two years because I think it's a fascinating window into the world. But never would I say,

like, I need to devote myself to predicting where this is going to go next so that instead of being in the top 3 percent, I can maybe be, maybe be in the top 2 percent. So today, markets are at an all-time high. You get a royalty check. Do you pop that into an index fund? Or do you drip it in? You're like, okay, well, I'll do this over the next six months or 12 months? Or do you just take it all and plop it in on whatever day you get it? In the last five years, every book check that I've gotten at 40% to taxes, the rest of stocks. Just simple. Just bring this. The exact same day you get it. You don't average it in. It's like whatever day that happens to be, that's what it is. And you don't think twice about the fact that it's an all-time high or... No, and I wouldn't defend that in say that

that's historically the best thing to do. I think that probably is the case. But again, even if someone's smarter than me could say, oh, you should do it this way. You should use this distribution strategy. You should trickle and whatnot. I'm like, yeah, but I keep it simple. I just keep it. I just keep it. I don't care that you have a whiz-bang formula for me that's going to make it better. The point is it's simple. And just like if you're eating pizza that tastes good and someone's like, you know, if you sprinkle this on it and if you cooked it for one minute longer and use filtered water in the dough, it's like, would you shut up? I like my pizza. It's delicious.

And that's how I think about investing. That's what I want to tell people. I want to be like, shut up, I'm enjoying myself. As you know, we always ask the same question at the end. It's so cool with you because it's the third time we've chatted and to see your definition. evolve over time, but we always end with what is success for you? I think about two things. I love the idea of it's very important to have people in your life that you don't want to disappoint. I think we started the conversation with that as I'm repeating

my year here. And so those few people in my life, success is not disappointing them. And I know I'm not perfect. And there will be times when they look at me and say, Morgan, I wish you had done this differently. You didn't consider my feelings enough when you did this. But there's a couple of people in my life where I really, really don't want to disappoint. And it would be hard. There was no amount of financial, material success in life in which I could look back at my life and say, I had a great life if I really disappointed my kids or my wife or my parents. Hard to imagine that. And so even when relationships don't work out, I think really disappointing that the people that you don't want to. I think that's fundamental to my definition of success. Yeah. I love that,

I also think related to that. Loyalty to people who deserve your loyalty is a very rewarding thing. The important thing is people who deserve your loyalty, which is a small list. A lot of people do not deserve your loyalty. But loyalty to someone who deserves your loyalty is unbelievably rewarding. And so I think about that a lot too. Go deeper on that. What does that mean to be deserving?

It gives me a tremendous amount of good feeling to look at my kids and basically say, no matter how poorly you treat me, I will always be there for you. You deserve my loyalty and I'm going to give it to you. I've worked at the Collaborative Fund for 10 years, Craig Shapiro, a guy who runs it. Even when I get to a point in my career when I don't need to work there anymore, Craig deserves my loyalty. He bet on me when he didn't need to. When I needed him, but he didn't need me, he bet him. He deserves my loyalty. And it feels good, it feels not just good, it feels tremendous to give it to him. He deserves it. And so I think when you experience that in life, when somebody deserves your loyalty and you give it back, it's not just rewarding to the other person. It's rewarding for you personally.

I love that. Thank you for taking time today, Morgan. Thanks, Shane. Let's do it a fourth time in the future.