The Learning Leader Show With Ryan Hawk - 382: Morgan Housel - Timeless Lessons On Wealth, Greed, & Happiness

Episode Date: September 6, 2020

Text LEARNERS to 44222 for more details Full show notes at www.LearningLeader.com The Learning Leader Show With Ryan Hawk #382: Morgan Housel - Timeless Lessons On Wealth, Greed, & Happiness Notes: "Writing helps crystallize vague thoughts in your mind." It helps clarify your thoughts. Writing is an art. When you publish your own work, you own the success or failure. Public speaking is a great tool to learn how to communicate succinctly. It's a skill worth building. The Psychology of Money is a study in understanding why people do what they do... "Use money to control your time. That's the highest dividend money can do for you." Why work with Collaboration Fund: You need more than just a check: values, philosophies, get your thoughts out into the world. Stories are more powerful than statistics. And most statistics are incomplete props to justify a story. Stories are easier to remember, easier to relate to, and emotionally persuasive. "Stop telling kids they can be whatever they want to be. You can be whatever you're good at, as long as they're hiring. And even then it helps to know someone." -- Chris Rock Excellence = Patience - Stick with it. Continue to go during down periods. That's how compounding works. Success Laws -- "Strong beliefs, weakly held." Storytelling: "The prize goes to the person who can explain something well... Stories move the needle. You convince someone something is true through stories." How to become a better storyteller? READ a lot. And practice. "If you're going to try to predict the future — whether it's where the market is heading, or what the economy is going to do, or whether you'll be promoted — think in terms of probabilities, not certainties. Death and taxes, as they say, are the only exceptions to this rule." Some quotes (thanks to RightAttitudes.com) "Two things make an economy grow: population growth and productivity growth. Everything else is a function of one of those two drivers." "Changing your mind is one of the most difficult things we do. It is far easier to fool yourself into believing a falsehood than admit a mistake." "Study successful investors, and you'll notice a common denominator: they are masters of psychology. They can't control the market, but they have complete control over the gray matter between their ears." "There's a strong correlation between knowledge and humility. People who spend 10 minutes on Google studying monetary policy think they have it all figured out, while people with PhD's and decades of experience throw up their hands in frustration. The more you study economics, the more you realize how little we know about it." "When you think you have a great idea, go out of your way to talk with someone who disagrees with it. At worst, you continue to disagree with them. More often, you'll gain valuable perspective. Fight confirmation bias like the plague." "Short-term thinking is at the root of most of our problems, whether it's in business, politics, investing, or work."

Before we get started, I have one request. Could you go to Apple Podcast? Write a review, rate the show, hopefully five stars. I haven't asked for this in actually a few years, but it does help. It spreads the word to people who have never heard of the Learning Leader show. And I would greatly appreciate if you would take a few moments, go to Apple Podcast, write a review, rate it, hopefully five stars, and tell a friend or two. you're really helping me spread the message, which I am so grateful for you doing that.

Thank you so much. All right, here we go. The people who can do the best over time are not necessarily the people who are best at what they do. They're just the people that have the fortitude to stick with something during its down periods. And everything, whether you are an investor or a business person, it doesn't matter what you do.

Everything worth pursuing has down periods. When it is things are not going well things are out of favor, things are not working. The winds are blowing in your face. It's just the people who have the fortitude to stick that out that do well over the time, because that's how compounding works. Welcome to the Learning Leaders Show, presented by Rixie and Meyer. I am Ryan Hawk. Thank you so much for being here.

Text learners to 4-4-222 in order to join tens of thousands of learning leaders from all over the world. receive mindful Monday updates what I'm reading, writing, watching, thinking about. Also give you more details about how my book, welcome to management, will help you become a more effective leader. Text, learners to 44222. Now on tonight's feature leader to the great Morgan Housel, two-time winner of the Best in Business Award from the Society of American Business Editors and Writers. of the New York Times Sydney Award and two-time finalists for the Gerald Loeb Award for Distinguished Business and Financial Journalism. Morgan is also a partner at Collaborative Fund.

A few of the topics we discussed. The importance of developing your voice as a speaker and your mind as a writer. And then knowing when to quit versus when to keep going. what we can learn from Jerry Seinfeld turning down $100 million to do just one more season of his TV show. And then Morgan shares a very emotional story about the three sides of risk and how they should impact our decision making. Ladies and gentlemen, it's Morgan, Howsel. All right, Morgan, I feel like I know you because I've read so many of your essays. for years. And so I know you through hearing your voice in my mind, but this is the first time

we got to talk. So I just want to say, thank you for all the great writing you put out. And welcome to the Learning Leader Show. Well, thank you for having me, Ryan. I'm happy to be here. And I'm curious if my actual voice matches the voice that was in your head, because he usually doesn't when you have these things. Voice that was in my head was my voice. So no, it would never match. I mean, this is that we don't have to spend too much time on this. But whenever I'm reading other people, I usually have somebody else's voice. It's a good point. Narrating it. It's like, it's like the Morgan Freeman thing, but it's never Morgan Freeman,

but it's always someone else narrating it for me. You know, that's actually a good point where you think of, I didn't actually even see, I've never, I didn't look at a picture of you for a year. So I literally only saw the written text. I didn't look at your About page. I would just look at your essays and just read them and reread them. And one of them really caught my eye.

Maybe we could even start here, even though I plan to go go here later. but you wrote about two of your friends. And this particularly hit me because I love Lake Tahoe. I've skied there in the water and on the mountains. And I want to tie this story into writing as a whole as well because I think writing is the greatest networking tool in the world. And I would imagine you probably either agree or that aligns with the way that you think. So first, I want to get to.

that story in a second about your two friends in Lake Tahoe, but can you share overall your mindset towards why you write so much and what it is brought to you personally as well as your business? Well, let me give you two answers. I'll give you the practical answer and then the deeper, more thoughtful answer. The practical answer is it's what I do for a living. This is what I do. A hundred percent of my job is to write. I work for a venture capital firm. My role is to write and do nothing else. I write and I speak at conferences and that's it. And that's all I've done. I've never done. I haven't done anything else in my whole my whole career. I started writing at the Motley Fool where I used to work as a junior in college. And it's all I've done since. So that's,

that's the practical answer. The deeper, the more thoughtful answer is I write because I don't think there's any better way to crystallize vague thoughts in your head than writing. Everyone has these vague feelings, these vague thoughts, vague ideas that are kind of floating around in their heads that they intuitively know, but they've never actually, you know, sat down and put them into words and clarify them into words. And when you force yourself to do that by sitting down to the right them, you realize either two things very quickly. One is that you can really clarify what you thought in a way that makes you say, now I understand it better. Now this makes a lot more sense. Or I think more often, when you go to put it down on paper, you look at it and you say, this idea that I've always

thought was true, but now that I put it under words, it's ridiculous. Now that I'm forced to put it into words, and I'm bypassing gut feelings. You know, if you can't rely on gut feelings and you actually have to put it into words, oftentimes you write it down and you say, maybe I don't really have an argument here. So I just think writing is a great way to clarify what anyone thinks. I've often called it selfish writing, which is the idea that if you have a blog or you're a journalist, you're writing for other people in theory, right?

You have an audience and you're trying to get their attention. You're trying to write for them. But there's a selfish writing component, which is that you're writing for yourself to clarify your own thoughts. One way that I would frame this is for myself, and I think most writers I've met, when you start an article, you start writing, even when you start a book, you have no idea where it's going to go. It's not like you have it all mapped out and you just go and type it out and it's done. And that's why a lot of times if you have,

if you read something, you might think for a lot of different authors, how did they, how did they know this? They just sat down and type this out. How is all that in their head? And the answer is, it was not in their head when they started writing it. As they wrote one sentence and then it reminded them something else and that led to another sentence. And then I said, oh, now I'm thinking you this other thing and you write the next sentence, you say, oh, I should go research that a little bit deeper. It all comes out as you write during the process. So I think that process of writing is helpful for everyone, whether you are a professional writer or not. So I am 100% on board with this. I think you don't fully realize how much you don't know about a topic until you try to intelligently write about it.

I wrote a book about management because specifically that jump from individual contributor to first-time manager. And I thought I knew a ton about it. And I think I have some knowledge because I went through it. I made a ton of mistakes. I tried to learn from mentors. I learned from my own mistakes and fixed it. And we ended up doing much better. But it took many years.

But the process of a publisher giving me a book advance to say, now you have to basically be an expert. And I'm using air quotes for audio listeners on that. me to do an amazing amount of research to really crystallize, as you would say, what I thought about it. In that process, I learned so much. I think writing is a great tool for learning, even if you're writing trying to teach, just like teaching is a great tool for learning. When you have to get up and speak at a conference or now virtually, you have to get clear on what do I want to say, what do I believe? What do I think in the process of coming up for what you're going to say, so much learning happens. I think I think how you just,

framed it is great, is that writing is not just a way to put out your thoughts and to talk to other people. It's a way to learn. It's how you learn. It's not just communicating. It's learning. What do you say to someone? I recently published an episode with David Perel. He's the writing guy online. It's all he teaches. It's all he talks about. And I had emails and multiple people in leadership positions saying, you know, that's great. That's just not for me. I don't want to do that. I don't have time for that. I don't, I just don't like it. What do you say to that person? That's fine. I would not.

And maybe this is an area where David and I diverge a little bit, although I have a lot of respect for David. It's not for everyone. Nothing's for everyone. But it's for more people than think that it's for them. There's people out there who think, oh, there's no reason for me to write. And there are a lot of those people for whom I think they could really benefit.

But is it for everyone? If you really don't like it and you feel like it's a waste your time, then no, it's not necessarily for everyone. But I think it's a really important skill in virtually any field. One of the big thing that's missing in a lot of traditional educations, particularly in public schools, is public speaking. Because it's a kind of thing where it's easy to think, oh, I only need to become a, you know, learn public speaking if I'm going to go out and do a lot of it. And it's like, no, the value of public speaking is learning how to communicate succinctly, learning how to communicate to a diverse audience. It's about self-confidence, self-awareness.

There's so many things that come from that no matter the skill that you're in, even if you are just talking to one other person, even if it's just you and I talking just the two of us, becoming a better public speaker will help you formulate an argument verbally and get it out there succinctly in a way that's important for everybody. And I think writing is the same. It's not just, you know, only writers should write. It's just like a natural human skill that I think everyone should learn to some degree, but not necessarily everyone needs to practice it on a daily. or weekly basis. So I want to get to your story, your essay about the three sides of risk. And I would love to also hear about the feedback. But maybe you can share this story and why you chose to wrote it. Because I found it to be deeply personal and moving. And I would imagine you probably got emails saying it made people cry. It probably even did that to you.

I'm guess while you wrote it. And it moved me in a way that rarely happens when I'm just reading an essay on a website. And it's just so beautifully and crisply done. And I get a little bit of writer's envy when I read stuff like that. But can you briefly share the three sides of risk and maybe a little bit about Brendan and Brian and how that relates to the person who may be listening to this? Yeah, so I will, so I grew up in Lake Tahoe, California, and I was a skier. I was on a squadile ski team for many years.

Growing up with a group of friends, this is from, let's call this, you know, our mid and late teenage years is kind of the setting here. So the story took place in 2001 when I and my friends were 17 years old at the time. And so I grew up with these, with a group of about a dozen other ski racers, and we did everything together year round. We trained together. We skied together. We traveled together.

We were around each other. all the time. Most of us more or less bypassed high school and did an independent study program that led us ski six days a week. So this is like all we did. And I'll give you a briefer version of the story, but we can dig into any part that you want. But we were skiing one day, myself and two of my very close friends who I had been kind of inseparable with for years before that, skiing in February of 2001. And it was, it had just been a giant blizzard in Squaw Valley, the ski resort that we were at. And we were skiing out of bounds, which you're not supposed to do. It's illegal. You duck under the boundary ropes that say do not cross and then you

ski. And we were skiing down the backside of Squaw Valley, which is out of bounds. It spits you out on this back country road where we would hitchhike back to the mountain. I had done it with them. In the article, I guess that I had done it a dozen times before. I thought about it afterwards. I probably done it something like four or five times before, something like that. So I had done this route before, but not very often because it's a pain in the ass to hitchhike back once you get to the bottom. So we did it once that morning. And as we were skiing down that morning, the three of us, myself and my two friends, we triggered a very small avalanche. It was the first one that I had ever been in, despite I was, you know, I was skiing six days a week for 12 years before that.

So I had a lot of mileage under my belt. The first avalanche I had been stuck in. And it was pretty small. I don't think it came above my knees. We didn't think anything of it. We laughed about it. We got to the bottom. We commented about how interesting it was. We laughed about it and shrugged it off. And then we hitchhiked back to the mountain. And when we got to the mountain, my two friends said they wanted to do it again, the same run. They want to do again.

I didn't want to do it for whatever reason. I don't really know why I didn't want to do it. But I said, hey, how about this? Why don't you guys go do the run again? And rather than hitchhiking back, I will drive around the mountain and pick you up when you're, when you get to the bottom. They left. and I immediately got in my truck and went around to pick them up and they weren't there. And didn't really think much of it.

But, you know, I'll speed up some of the story. The day went on. We didn't find them. Got called the police, missing persons report, got search and rescue involved. Search and rescue was on the mountain by about midnight that evening. And the next day, search and rescue and a team of search dogs found them buried under six feet of snow. And they had died in a massive avalanche. And it was interesting.

I wrote this article based off of an experience I had. at a conference last year. And this was a financial conference, an investor conference. Someone asked me, what has skiing taught me about investing? And I thought, well, that hasn't taught me anything about investing, but I got to tell a story now. So I told that story that I just told you. And the analogy that I used is that there are three sides of risk in any kind of risk. There is the first side is the odds of getting hit by a risk. The second side is the average consequences of getting hit by that risk. And the third side is the tail. consequences, the extreme events, the sides that, you know, the one in a million circumstances

that's really going to bludgeon you. And I brought that up because we knew as 17-year-olds that skiing out of bounds was dangerous. We knew it was risky. But we thought that the consequences of our risk meant that we might get our season passes pulled or our coaches might yell at us. Maybe you'd blow out your ACL, which is almost like a right of passage as a ski racer. Never once ever did we think that the consequences of the risk that we took would meant that we'd die. Never. But that was it. That was the tail end risk of what we were doing.

And tail risks are all that matter. That's true for this story that I told about skiing, but that's also true for investing. It's also true about the economy. I wrote in the article how ridiculous it was that as investors and people thinking about the economy, for the last decade, we spent so much time. arguing whether risk in the economy met that the Federal Reserve set interest rates at 0.5% or 0.6%. That was our definition of risk. And then a virus comes along and 50 million people lose their jobs. Like that's real risk. The tail risk of what we've experienced in 2020, that's risk.

The BS that we were talking about in 2014 about what's the Fed going to do next, that's not risk. That's not what moves the needle in people's lives. What moves the needle across your life, the moments that really matter where the decisions that you make are so imperative to what you're going to do in life are the tail event risk. So that that was how I equated the two of what did I learn about investing from scheme? Well, you know, here's an incident where the tail risk completely changed my life forever and ended their lives in the most tragic way you can imagine. And that always had a big impact me. I didn't think of it in those terms at the time when I was 17. but looking back, I think that was the answer.

I think I've been more aware of tail wrist since then than certainly I was before that because I was 17. A 17-year-old boy thinks about the world in a very interesting way. But I think I'm probably more attuned to tail risks than other people are. Although I hesitate to say that because I mentioned this in the article. My story is not necessarily unique. Most people out there have known someone dear to them who tracks. tragically died or had a near-death experience in themselves.

So I know I'm not, I don't want to argue that like this is unique to me. But that event just made me so aware of the power of, of, of, of, of, of, of, tales risks. So you've chosen to publish another book. It's called the the psychology of money, timeless lessons on wealth, greed, and happiness. And I'm usually, uh, or in this case, I'm really interested in that subtitled. timeless lessons on wealth, greed, and happiness. And it's 19 short stories exploring the strange ways people think about money and teaches

you how to make better sense of one of life's most important topics. And I'm curious as to what it was that brought you to want to write about the psychology of money in book form and put these timeless lessons in combining wealth and greed with happiness. because a book is something that you have to dedicate years of your life to focus on a specific question or questions to try to answer them to help other people. And this is what you've chosen to do. What is it that made you choose this specific topic or these lessons or these short stories to share with the world? I started as a full-time financial writer in 2007, which was an interesting time to start because this was the early days of the great financial crisis that hit afterwards.

that came in 2008. So to me, that was such a, you know, it was, it was not a front row seat, but it was just a big spotlight because I was covering these events for a living to observe what was going on at the time. And it always just struck me that the lessons that you could take away and the explanations for the financial crisis for why it happened, you could not find in a financial textbook. You couldn't. Like what happened or even in any economics textbook? You would not find the answers for why something like, 2008 would happen. But you could find them in a psychology textbook or a history textbook or a sociology textbook about why people do the things they do around greed and fear and how people

deal with opportunity and scarcity, why people would lever up with subprime mortgage bonds. You can't find that in a finance textbook, but you will find it in a psychology textbook. You will find it in a history textbook all throughout history of people doing things. In hindsight, are ridiculous, but they do them over and over and over again with great confidence. So that just made me more, the financial crisis made me more attuned to the psychological side of investing, which was different for me because I, at the time, and most people, as they are taught finance, is a math-based field. What are the numbers?

What is the data? What are the formulas? What does the spreadsheet tell me I should do? What is the spreadsheet tell me is going to happen next? And you treat it as like perfect fact. Like it's physics. Like in physics, you have data and formulas and the formulas are perfect. They give you perfect, precise answers that tell you exactly what's going to happen next.

A physicist can tell you exactly how fast a ball is going to roll down a hill, exactly how much gas you need to send a rocket into space. A really silly example that I think is so fascinating. So NASA sent a probe that passed Pluto. I forget when it passed. But from the time it launched from Earth to the time that passed Pluto was within one minute of NASA's estimate. When the mission began, NASA estimated exactly how long it would take to get to Pluto.

The actual time was within one minute of their estimate, to get from Earth to Pluto. There's so much incredible precision that you can do for something like physics, like astrophysics. And we want to think that finance is the same, that there is firm rules and we can come up with firm conclusions that tell us exactly what's going to happen next. And the financial crisis told me that that's all wrong. It's all wrong. That finance is a psychological field. It's a soft field that has to do with people making crazy decisions and oftentimes wrong decisions that don't make much sense in hindsight, but are governed not by the formulas of finance, but from people's own relationship with

greed and fear and scarcity. So that got me into, let's call it behavioral finance. And then it was just this idea, a broader idea too, that a lot of what you could learn about at finance, that was important in finance, that was worth paying a business. attention to in finance was also true in other disciplines. People's relationship with greed and fear is not something that you can just learn about through the lens of finance. You can learn about that through the lens of military history, through the lens of politics, through the lens of biology, sociology, marriage, divorce, all these other fields that

fall under this umbrella of how do people deal with risk and opportunity. You can learn investing lessons from that. So if you put those two together, a lot of what I've done writing online, but also for the book, it's just trying to survey history in the world and say, what are some kind of often non-investing stories that I can use that teach me something really important about the softer side of investing? And that's what the book is. It's 19 stories, most of which have nothing to do with finance, but end with a very clear takeaway about how we can think about money, not just investing, but money, which is like personal finance

and investing in business decisions in a more rational way that helps us become more attuned with the softer psychological side of dealing with money. So I say in the book early on in the book, this is not a book about what to do with your money. This is a book about what happens in your head when you try to do things with money is what it's trying to get at. So, okay, there's a lot to get to. I recently spoke with a guy named Bill Perkins. And Bill's an interesting guy, a controversial episode, but he did make me think, think. And I wonder if you guys have similarities or not. So I want to pose this question because you've written about working as a hotel valet and parking the $200,000 Ferrari. And you've also referenced

that wealth is what you don't see. Bill Perkins is a guy who says he wants to die with zero, meaning with no money in his account. If he wants to take care of his kids, he wants to do that while he's alive and while they're young enough to use it properly to create experience dividends, meaning if you want to climb a mountain, you probably aren't going to be able to do that when you're 68 years old and retired, but you can do that when you're 35. So do it when you're 35. So Bill might say, well, we'll buy the experience, exchange your money for the experience, buy the Ferrari because you'll love how it looks and feels when you're out there versus I think successfully balancing the patience required to build wealth.

So how would you juxtapose those two things with these creation of memory dividends versus the power of compounding as well as wealth building and the psychology behind that? I would also love to die with zero dollars in the bank if I knew when I was going to die. If I knew exactly when that moment was come, I can plan perfectly for that. But you don't. You don't know whether you're going to die tomorrow or when you're 106 years old. So if you can, you know, that's the challenge of it. To me, and look, the first thing I would say is everyone is different. So I hesitate to say this is what people should do. That plan might work for Bill. It might work for other people. For me, what I think is true for myself.

And also, I think it's probably the most universal way to use money to make you happier. Not for everyone, but the most universal is using money to control. your time to have more control, to wake up every morning and say, I can do whatever I want to do today. That to me is the highest dividend that money pays. And look, for a lot of people, you will wake up every morning and say, I want to go to work today. I'm not saying use money to retire and do nothing, you sit at your house. You might say you want to go to work. You might say you want to go hike the Himalayas. It's doing whatever you want to do. It's being, it's having things, you know, on your own terms rather than dictated by someone else's demands. I've always used to

example of FDR, Franklin Delano Roosevelt, who when he was a child, his mother placed very tight restrictions on what he did. Even when he was five years old, he had a very strict schedule. You wake up, you have to do these chores at this time, and then you have this tutor at this time. And FDR woke up one day and he said, Mom, I'm so sick of the regiment that you put me through. I don't have any freedom. Every minute of my day is controlled by someone else. So his mom said, okay, I agree with that. That's a valid criticism. How about for one day you can do anything. you want. Whatever you want to do at any time, it's all you. And his mom wrote in her diary that day, after I was five years old at the time, that that day that he could do anything he wanted to do

on his own times, he did the exact same thing that he normally does on someone else's schedule. But he felt great about it because it was his decision. He was doing it on his own terms. And I think that is so true for most people that if you have control of your time, which just means like for most people, you have an adequate amount of savings. That means you can pick a job that might have a shorter commute or you can retire when you want to, not necessarily early, just whenever you want to, even just knowing that you can do it, even if you don't, is a way that I think you can use money to actually make yourself happier. Is experiences a better way to make yourself happier than buying stuff than buying a new car

or fancy clothes? For most people, yes, yes, totally. But it's usually, to me, it's usually broken out as money can buy you experiences or stuff. And I just think adding a third category of control over your time, giving yourself options, even if you never exercise those options, even if you have money in the bank and you just go through life knowing I could retire. I'm not going to, but I could. Even if you don't do it, waking up in the morning knowing that you could is going to make you feel more control over your life. Like you have control more control over your life. And that to me is one of the ways that that's

something that you will never get used to in the sense that if you buy a fancy car or a big house, you'll get used to it really quickly. It might make you happy for a week and then you get used to it. Waking up every morning and saying, I can do what I want to do. Like, I'm in control. That is something that you will never get accustomed to. It'll feel great forever. Do you feel that way? I do in the sense that I've been a big saver in my whole life. So I have a degree of financial independence. It's always on a spectrum. There's a spectrum of financial independence from, you know, being completely relying on the kindness of strangers to being multi-billionaire. There's a big spectrum in between there.

But in general, I would say, yeah, yeah, I feel like I could do what I want to do. With the work that you do and the writing that you produce and the value you bring to your business, I'm looking from afar. I'm wondering the freedom you feel to be able to plan and design your days, knowing that a lot of the value you bring is in your creative output, the ability to attract people to the work that you produce. I have to believe, since you're a writer, that then draws interest in both you as well as collaborative fun. And that's part of why you do what you do and why they employ you. Or you are part one of the leaders, I assume. Is that how it's put

together by design? Yeah. I mean, so the value of content within the collaborative fund is particularly for a private investor. And you guys launched that 10 years ago, correct? That's right. Yeah. And you were part of the launching team? No, no. So I joined in 2016. Okay. Okay. So go ahead. Sorry, I cut you off. Go ahead. No, no, that's fine. The value of what we, of what I do with content is, particularly for private investments where you have to win a deal. If we want to invest in the company, it's not like we can just go on to e-trade and buy shares of that company. When it's a private market, a private business, you have to win a deal. You have to convince other people that you are the investor who is worth partnering with

or else they might go with someone else. And so if you're only value as an investor in the private market is that you can write a check, that's a hard way to set yourself apart because a lot of people can write checks. There's a lot of money in the investing industry. You have to be able to show that you can do something else other than wire someone else money. So the values that you have, the philosophies that you have, how you think about the world, you know, how you treat other investors, what you think is important to you and what trends in the economy are important to you. Those are ways that you set yourself apart. And those values,

those philosophies, that ability to think doesn't mean anything unless people know about them. You have to put your thoughts out out there to the world so people can understand how you think and what is important to you, what your values are. So by putting out content and not marketing content. Nothing that I write is, here's why collaborative fund is the best, and here's why you should partner with us. It's not that whatsoever. It's just things that I hope people will be interested in that they hopefully will share with other people that just raises the awareness of the firm in a way that hopefully brings our brand name more top of mind to people when it does come time to make an investment or partner with other investors and whatnot. So you could call it marketing.

I think at its core, that's what the idea is. But I never want to do anything that looks like marketing. really wanted to be stuff that just people, because no one looks up in the morning and says, I want to read a marketing piece. Yeah. I want to read a commercial. You tell stories. That's what you do for a living. And you find a way of weaving things together.

Analogies using stories that have nothing to do with finance or money, but somehow tying it together. And that's the magical part of it. How frequently does it come up when your team at Collaborative Fund is looking to do a deal? and somebody in the room has said, I love the way Morgan thinks. I want to work with your team. I've read his stuff. I like the way he believes it's obviously that you guys value this way of thinking.

You value somebody like that. I want to work with you. Like how frequently does that happen? I don't know because I'm usually not in the room when that happens, but I don't necessarily why wouldn't they bring you in that room, though? Seriously, why would? If it were me, I would. be, especially if they have any inclination that they may be there partially because they've read

your work, why wouldn't they bring you in the room? Well, there are times when I am. If it's a deal that's really related to something that I'm interested in or have some knowledge about that it will, then it will. But for most of the time, I'm, I'm doing my writing. I live in Seattle. You know, most of the team is in New York and San Francisco. But I also, I also wouldn't, I don't know how often comes up because I wouldn't want to know. I don't think that's a healthy thing for anyone to know. So, and, We also don't measure that kind of thing. We just take it.

It's not like I have a monthly quota of people, you know, citing me that I need to meet. It's just kind of more or less a leap of faith that if we put a lot of effort into content and wave our hands in a way that gets people to notice our brand, that's going to pay off over the long run. So there's really no metrics per se that we follow. But one of the thing I bring up that ties back to like having control over your time and some level of autonomy.

I mean, there's a lot of reasons that I really enjoy the collaborative fund, but one of the reason is just full autonomy in the content that I write. Most places, if you're a journalist, even at Wall Street Journal, New York Times, or I would say especially at those kind of places, the writers don't have a very high degree of autonomy. You get an idea or an editor gives you an idea, and then you can go out and research it and write it, and then the editors whittle it down, cut this out, add this end. They pass it to another editor who cuts this out and slashes this and burns this. and by the time it's published, it's often, it's not, you know, it's a collaborative effort.

And look, I read the Wall Street Journal in the New York Times every day. I think they put out great content. But to me, as a writer, I think writing is an art. And it's an art in the sense of that what one person thinks is great, another person will think is terrible. And there's nothing wrong with it. It's just how it is. It's like painting or sculpting or music. There's music that some people love and other people think it's terrible.

Writing is the same. And therefore, I don't want other people saying, oh, Morgan, here's what you should write. And oh, no, no, you should take out that paragraph and add this. No, no, no, no. This is mine. This is mine. You can go get your own blog. This is mine.

I'm going to write about what I want to write about. And I'm going to say it how I want to say it. And everyone else get their hands off it. I also love that because since it's just mine, like these pieces from start to finish is just me. I love that I can own the successes and the failures. because if other people were chipping into these articles, then when an article did really well, I couldn't necessarily say, well, that was me.

It was like, well, yeah, the article did well, but maybe that was because the parts that the editors put in, people really liked. Maybe they didn't like what I. And then vice versa, if an article does really poorly, I would be able to say, well, maybe it did poorly because the editors took out all the good parts versus now when I work. When it's all me, I own the successes and the failures,

which is a really good way to learn. because every piece of feedback that I get on an article positive or negative, I know that feedback is coming straight to me. It's not coming from anyone else. There's no one else chipped on this piece. It's just me. And I love that autonomy. I think it's really important.

I think that's how you learn. And it's just such a more fun, creative process when you can look, I know for a fact there are things that I write that people look at and say, that's dumb. That doesn't make sense. I don't know why he would say that. I would never write that. But to me, that's like good.

That's what's making it art. If it's so bland that everyone agrees with it, it's not really, it's not really art. I love the art side of writing. You've studied history. You've studied excellence. You've spent time around a lot of people who have sustained excellence. And I'm curious, Morgan, when you have to think about the commonalities among people who have sustained excellence over an extended period of time, what have you found to be some of the common behaviors and or traits of those people?

There's two answers I'll give you. One might seem pretty obvious, so I'll keep it short. And the other is I think less obvious. I'll try to elaborate on that a little bit more. The key for almost all of that, and this is the obvious answer, is just patience. It's just sticking with it. The people who can do the best over time are not necessarily the people who are best at what they do. They're just the people that have the fortitude to stick with something during its down periods.

It's in everything, whether you are an investor or a business person, it doesn't matter what you do. Everything worth pursuing has down periods when it is things are not going well. Things are out of favor. Things are not working. The winds are blowing in your face. It's just the people who have the fortitude to stick that out that do well over time because that's how compounding works. Compounding doesn't work over a year or two years or five years. Compounding works when you've been doing something for 10 or 20 or 30 years.

That's when your ability, both your knowledge or just the compounding and financial terms explodes and you get really good at something is when you can stick with it. The less obvious answer I will give you, and this almost seems counter to what I just said, but I don't think it's fully counter, is something that I, a topic that I love, that's really important, is the value of quitting well. I use the example of Seinfeld, who in 1999, his show was on top of the world, maybe it was 1998, on top of the world, biggest TV show of all time, so popular, cultural icon. Jack Welch, who was a CEO of GE, who owned NBC at the time, came in to Seinfeld and said,

one more year of the show and Jerry Seinfeld personally would get $100 million, $5 million per episode, which of course, even today, but at the time was completely unheard of. That was just an insane amount of money. And Jerry said, no, I'm done. I'm out. We're done. And people all around the world said, why are you? Your show is so good.

you're so popular, your ratings are off the chart. Why are you quitting? And he more or less said, no, that's the point. He said, the only way to tell when you've reached, when you've truly reached the peak is to experience the decline. And he said, I just don't want to experience, I don't want to experience the decline. I'm done. I'm out. I'm out. And he elaborated a little bit more when he said, look, the show, Seinfeld was really good because he and Larry David could spend all of their time kind of walking around the world and observing, sitting on a park bench in Brooklyn and just observing people and figuring out just the mundane nuances of life that made his comedy skits and the show sign felt so good. Just these mundane, you know, the episodes about ordering soup at a soup bar,

these just like mundane experiences in life that they were able to turn into funny and enriching content. And he said as he got more famous, he couldn't do that. He couldn't just go sit on a park bench. He couldn't go to a soup kitchen and watch how things, he couldn't do that anymore. He was kind of cooped up to his apartment because he was so far. famous. And because of that, he felt like he just, he was, I don't know if he phrased it as running out of material, but I think that was the gist of what he had. He realized as soon as what made him famous was starting to crumble, not famous, what made him successful was starting to crumble. He said, well, okay, I'm out. I'm done. I'm done. The other example of this that I love is a guy

named Marcel Hierscher, who was, as I mentioned, I grew up ski racing. Marcel Hierscher, and he's not a household name of the United States because ski racing is not big in the United States, but in Europe, he was like, he's like the Tiger Woods, the Michael Jordan of ski racing. He's not only the best in the world, but the best of all time. And just kind of in a league of his own, he was just like absolutely incredible. And last year, when he still, he still, he still probably had five, maybe seven good years left in him. I think he's 28, something like that. And last year, he just announced out of the blue

two years ago was his best season ever. And he announced that he's done. He's quitting. He's retiring, never coming back. And everyone's just like, how do you, you're so good. Why are you quitting? And he almost said the same thing as Seinfeld. He said, I'm, the reason I'm quitting is because I feel like I'm at my peak. That's the best time to quit. And he said, look, he felt like he was so lucky that he made it this far in his career without getting injured, which almost every ski or will, you'll break your leg, you'll blow out your knees. And he said, I made it this far without getting injured. Like, I just want to count my blessings and be done.

He just had a kid, his first child. And he said, I just want to go hang out with my kids. I'm done. I had so much respect for that, for people who quit well, versus what happens so often, which is people push it as far as they can. And this isn't where it gets counter to the first thing I said. They keep going and going and going. And then they're forced to quit as a shell of their former selves.

And it's just sad. I guarantee you. This is obvious. I think this should be obvious. If Seinfeld just kept going and going and going, his show probably would have been canceled in 2006. You can imagine that alternative history. And it would have been sad.

Like the last couple seasons, they would have just been forcing it. And, you know, George and Elaine may have quit and they brought in replacement. It just would have been sad. Instead, when they're on top, they said, this is the time to quit. I actually don't know if that's the best answer to your question

of like a mark of excellence among people, but it's a topic that I love. Quitting well is a topic that I love. And I hope that myself as a writer too, whenever I would feel like the young, the young up-and-cubbing writers are doing such a better job than me, and I don't get how it works anymore. I don't understand the new social media platforms. As soon as I get to that point, I hope that I can admit to myself what's happening. I can say, okay, I'm done, I'm out, and you'll never hear from me ever again. That's my goal. So I want to quote some of your work and then, and try to go through it.

So you've said people use success as an indication of what to keep doing, but most success plants the seeds of its own demise. So what people think works and try to copy is always changing. And the reason that I bring up this quote, Morgan, is because my show, and for the past five years and moving forward, is about the deconstruction of excellence to try to distill down, the actions, the behaviors, the thought processes, the frameworks of leaders who have sustained

excellence over an extended period of time so that me, as the first learner, as well as the millions around the world, can also take from those behaviors, those actions, those frameworks, those thought processes in order to help make them better from a practical application standpoint. I can actually implement this tool or this thought process or this framework in order to make my life better. Given what you've said about success and the fact that I don't know, we can all create our own definitions of success. And I'm talking more about excellence and we can compare and contrast there. How can listeners of this show and me personally, because this is why I started it for my own self, get the most use out of it other than.

than just entertainment of hearing good stories to better their lives if we know that success can sometimes plant the seeds of its own demise. It's just one topic that's related to this that I've always thought strongly about is the idea that in almost any field, there are very few laws, laws meaning like truths that will always be true. Those laws are very important, very powerful. Most fields, they will explain 90% of what you need to know, but there are very few of them. And everything else, other than those handful of laws, is subject to change. And you have to

be able to have an iron grip on the three or four laws of your field. And you know that these things are never going to change. And therefore, I'm going to devote all my time to these laws. And everything else is, I love the saying, I forget who coined this phrase, I think it's been attributed to many people, strong beliefs weekly held. That's everything else that is not an iron law of your field needs to be that. So you can just grab on to what is true and everything else you can say, look, I believe in this right now, but I'm open to this not being true at some point because that's the whole history of history is things changing. And I think most people, it is, I don't think they think of it in these terms, but most people want to think that everything they believe is a law, that everything they believe

is a truth that is not only true today, but it's going to be true next year and the year after. And I just think the number of things that are laws in investing or anything like that are very few. There's a great book that I like by a guy named Sam Arsman called The Half Life of Facts. And the title of the book explains everything you need to know. Almost every fact in most fields over time has a half-life. As in things that we thought were true, either as we learned more, it turns out it was not true, or just the world evolves to make something less true or not true anymore. That's one of the books that really changed how I think about a lot of things in life.

I had a big impact on me. And so I think that's how it depends on what field someone is in. But I think that general framework, that there's probably no more than a half dozen laws in your field. Everything else above that, you need to be open to changing your mind about at some point. It doesn't mean that you're not going to firmly believe it today, but realize that it might not be that true later is so incredibly important. I'll give you an example from investing. I'll try not to be too technical about this, but for most of the early 2000s, from 2000 to 2007, value investing, which is why when you're buying cheap companies, a trade out of low valuation, was very popular. And it worked very well.

If you were a value investor during that period, you made a lot of money. You beat the market. You did well. And then so value investing became popular. This is when, you know, Warren Buffett had always been kind of a household name, but he became so, he became an eye. icon to investors during this period because he's, he's a value investor of sales of Ben Graham's books and they're like, it just became like this cult of value investing during this period. And then since 2007, since interest rates have been declining during that period since the great

financial crisis, almost nothing has worked worse than value investing. It's been a terrible way to invest, not just for a short period of time, but for the past 13 years. And so this is an area where what's interesting about the period in the last time, in the last 10 years is that so many people became so like a religious devotion to value investing. They considered value investing a law of investing that they were unwilling to let go of it over the last 10 years. And look, you can make the argument that you shouldn't let go of it. Value investing will come back. You can make all these other arguments.

You know, this is not black and white. But I think it is shocked a lot of people in the last 13 years that what they considered to be a permanent truth of investing has turned out to be maybe not necessarily not true, but much different than they once assumed. So that's an example of investing of you can learn about something about how the world works, but you need to be ready to maybe not let go of it, but soften your grip on it at some point in the future. Everything's always changing. The whole purpose of history is basically the study the moments of change throughout time. Like that's all history is, it's things changing and things happening that people did not expect. So we can't use history.

as a guide to the future because history almost by definition is the study of change throughout time. So it's always going to be different. There's always going to be things that we thought were inevitable that turn out not to be over time. Do you have a few laws for how to live an optimal life and enjoyable life, like some maxims that, not just investment wise, I've read some of the laws you've written about when it comes to finance and investing. We can talk about those in a second, but I'm curious just from like a way of being, a way of treating others, a way of just living your life. Do you have laws in that regard? I don't know if I have, I have that many specifically that I can think of. Maybe be nice to your wife, eat your fruits and

vegetables and get some exercise. That's that's most of what I can come up with. Live below your means. Save some money. That's that's about it. In finance in particular, the laws that I would come up with, I mean, there's, I've come up, I've, I've written about something more specific than this. But I would say, living below your means, investing with the long-term philosophy, and accepting and accepting volatility, that's 90% of finance. That's 90% of it. You don't need to, that's it. Those are the things that I think will always be true.

It's hard to imagine a world in which those things are not true. And they're powerful. Those are the things that move the needle, whether you are a first time, whether you're 17 years old or a a billionaire professional investor. Those are the things that actually matter and move the needle in terms of people's results. Do you play a role in who collaborative fund hires or who they choose to bring on the team? Do you have any involvement in that? Yeah, our team is still fairly small, but we did some hiring.

I think it was probably two years ago now where we brought some more people on. And yeah, I was involved in that. And it was fascinating. What do you, other than expertise in a specific field for the job that they are hired to do, Those are the table stakes. You have to have those. Other than those, what do you look for in a person to bring to work at your company? What's interesting is when we're hiring, I think all of us who are part of the hiring process,

we're looking for different things. To me, I'm always looking for people who, I guess you could summarize it as authenticity. Because if you've ever been part of a job interview where you're interviewing someone else, you can smell most people's BS so, so. easily. And I love when people are just more open about, you know, when they're describing their strengths, if you describe it in perfect terms, I'm so good at this. I'm so good at this. Well, you're probably not. No one is that good at anything. And if you're not, if you're not actively bringing up some of your weaknesses and just being a real person, I always like, look, this is something I did

at the Monteville in the few interviews that I did that I thought was really helpful for me is when it became my turn to interview someone, I would say, hey, do you want to go for a walk around the neighborhood. Let's go for a walk around the block. Let's not sit here in this interrogation table where it's like an FBI agent, you know, and you're like under indictment and it's like a deposition. That doesn't bring out anyone's real side. Let's go for a walk around the block. And this is your job interview. I want to make that clear. But let's just, let's just go for a walk and chat. And I feel like at that moment, you can almost like feel the tension leaving the room. And then you see the real person. Like the previous round of interview that they did during the deposition

across the table was an act. It's an act for everyone. I don't blame people for that, but it's all an act. And as soon as you go for a walk with them out, you know, around the block, you're getting such a clear view of who that person actually is. They become so much more authentic because walking around the block with someone and having a walk in chat is more attuned to what people normally do when there is walking with their friends talking about life. So I really, I really like that. I thought that was just a way to bring out authenticity, which is what I want to see because a lot of people will put on the act during their job interview, and I'll blame them for that. This is a natural thing to do to put your best foot forward.

But then they join a company and the people who hire you and you yourself, you know, the person who's joining the company, realize that like maybe this isn't a good fit because it seemed like a good fit when I was putting on an act, but now that the act is over, maybe it's not. So that's always that I'm looking for. So you've written about permanent assumptions, which we briefly touched on some of those. and talk a little bit about history, one of the permanent assumptions that I want to bring up and discuss

because you do this really well, and I think leaders in general need to develop this skill, and that is storytelling. Stories, I quote you, stories are more powerful than statistics, and most statistics are incomplete props to justify a story. Stories are easier to remember, easier to relate to,

and emotionally persuasive. Can you talk to me about your framework behind the use of stories, the power of stories, and then a little bit of how to get better at telling stories? I think a lot of it, there's a frustration in a lot of fields where people with the best answer, the right answer, the most complete answer, don't always get the prize. The prize usually goes to the person who can explain something well, even if what they're explaining is a subpar answer. And that frustrates a lot of people in terms of fields like,

engineering and whatnot, where people who have, are not as good at their job, get a promotion. And it's not, and a lot of the days, because the people who got promoted were just better at explain, they're better at storytelling. And stories are what actually moves the needle in life. It's not necessarily data. It's whether you can convince someone that something is true. And you convince people that something is true through stories. Because once you tell someone a story and you, you personify a problem, you put it in human terms, you, you tell. the emotion about why something's going to happen, it's so much easier for the person on the other end who is listening to contextualize how it's going to apply to them. You just show someone data and it's just a bunch of numbers.

It's hard to, even if the numbers are, you know, these are your odds of dying in a car accident. In theory, you should be able to apply those to yourself and say, how do these odds apply to me? But if you tell a personal story about someone dying in a car accident and the tragedy that it did to their family, et cetera, et cetera, then you're going to, like, that story is not going to leave your head. for the rest of the day, the rest of the week, you're going to be thinking about it. It's going to stick with you. If you can contextualize how it's going to impact you personally. I think that's what stories do. It's also just a lot more like for a writer. There's so much content online that readers have very low patience. If you start reading an article, if you're not hooked within three seconds, the reader's gone. They're added there. They moved on to something else. There's a

billion other blog post to read. They're gone. So you have to just be able to, like how do you quickly be able to capture someone's attention and quickly be able to say, oh, this is something that I'm going to be interested in that's going to tell a story that's going to, you know, give me an insight into how the world works and other people, other people's weaknesses, how other people succeeded in a way that I might be able to apply to myself. It's a more persuasive way of writing than just putting out cold facts. And that's not always intuitive because you want to think that the world is governed by cold facts, you know, things that are just obviously true. And it's, it's not. It's not. It's not how it works.

And this explains why a lot of the inefficiencies of life explain that. Why people, you know, why companies with subpar products succeed and companies with great products sometimes fail. It's because it's not cold facts don't move the needle. Stories do. Storytellers do. And you see that in a lot of companies, whether it's most people, the companies that they work at, the people who get the promotion are not always the people who do the best work. It's the people who are able to explain how things work and are kind of the schmoozers. Like schmoozing is a form of storytelling. it's getting yourself out there. How have you developed a skill to get better at this?

It's always just, it's just a lot of reading. There's no good writer out there who is not an obsessive reader and who reads, you know, five times more than they write or a hundred times more than they write. That's all, that's, that's all it is. It's just because the reading is how you find the stories. That's how you find the examples of what you're going to write about. But it's also just a window into what is good storytelling. Oh, I read this book and it was so good.

Or I read this book and it just lost me. I didn't get it. That's just good feedback for what makes a good story, which is a, it's a topic that is really nuanced, hard to define, to describe, like what makes a good story? It's hard to define. There's no formula for that. So I think the only way you can do it is just through lots of reading

where you're just gaining more feedback, more information on, oh, this was good, this wasn't. What was good about this? What was bad about this? I don't know. but if I read 500 of these, I'm getting a clearer sense of like how I want to be a storyteller myself. Yeah. Morgan, do you have time for one more question?

Sure. So five lessons from history, you've written about this, lesson number four. And this relates a little bit to the ability to stick with something that you answered in regards to excellence. That progress happens too slowly for people to notice. Setbacks happen too fast for people to ignore. I help people start podcast and write books now and do other things. And I found that most people quit. They quit pretty early because it gets hard because not enough people are paying attention

to their podcast or writing a book's really hard. And so they start and they're all excited and then they quit. And this felt in line with what you're writing about as a lesson from history. One of the examples you use the Wright brothers, so you can share about them or anything else. But really the thought behind progress happens to, slowly for people to notice setbacks happen too fast for people to ignore. Yeah, I mean, there's, there are no overnight miracles.

Like maybe 2020, there's a vaccine overnight. But like in general, there are no overnight miracles, but there are lots of overnight tragedies. September 11th, the bomb in Beirut this week. There are tragedies that happen not only overnight, but instantly. In a blink of an eye, you can have a tragedy. Whereas progress usually often takes decades to slowly compound something great. And look, that's what makes us so hard.

hard. If you look at any kind of path of human progress, it's hard not to be an optimist about the increase in living standards, the decline in poverty, the increase in technology, increased stock market returns, whatever it is. You should be an optimist. But at every single point throughout human history, if you open up the daily news, it's filled with reasons to be pessimistic. And I think just understanding why that is that there's so much constant pessimism that we see even throughout this arc of so much progress, that's the explanation. It's that the decline, the bad parts happen very quickly. So they're always catching our attention.

They're in the news headlines. They're here. You're paying attention to them. You can't miss them. Your friends are talking about them. The progress happens so slowly that you can't. It's just, I mean, think about something like with medical technology. If you compare medicine today, Western medicine today, with where it was 20 years ago or 30 years

ago, not that long ago. We've made so much incredible. progress during that period. But the news headlines that that progress made during the word few and far between because it's a slow, a slow progress every year. That's just how compounding works. If you're getting three or four percent better at every year, in one given year, in any given year, even in any given five years, it doesn't notice that. It doesn't look like that much. But if you look at after 30 years, you're in a different universe from where you started. So that's, I think that's really the thrust behind it is how counterintuitive compounding is.

That's what makes progress happen so slowly. Even though progress is more powerful than the setbacks that we've had throughout human history, you know, the positive outweighs the negative by a billion to one. But it's hard to see that because that compounding that gets us there takes decades and takes lifetimes to achieve. Yeah, love it. Morgan, thank you so much for investing your time, with me here today. You have that choice, obviously. I'm very appreciative. Where would you send

my viewers and listeners to learn more about you online? So most of what I do is on Twitter. My handle is Morgan Housel, first name, last name. Also, my books coming out September 8th, The Psychology of Money, Timeless Lessons on Wealth, Greed, and Happiness. I can guarantee it's worth your time to get it. I read everything that you put out online. So obviously I'm going to buy the stuff that you put out in book form. Congratulations on getting that one out. And I would love to continue our dialogue as we both progress, man. Likewise.

This has been fun. Thanks for having me today. Awesome. Thanks so much, Morgan. Great. Thanks. Thank you. Appreciate it.

All right. Take care. As you can tell, Morgan Howsel is a very thoughtful and intelligent leader. I thoroughly enjoyed listening to the wide range and the depth. in which he is able to go. A few of the key takeaways, the three sides of risk. A very emotional story.

I'll link the full essay in the show notes, but when he went skiing with his two friends, the giant blizzard and Squall Valley skiing out of bounds on the backside of the mountain and understanding the first side, second side and third side of risk. A very compelling story. And then use money.

to control your time. That's the highest dividend money can do for you. Think about that as you're building your career, is how you are using money to control and create time for yourself. And then towards the end, when he discussed storytelling, and he said the prize goes to the person who can explain something well. Stories move the needle. convince someone something is true through your stories. It is worth it for us to work on our ability to speak in front of a group and write in a compelling fashion, specifically when it comes to telling our story, whether it's with our business, our family, our friends, at home, at work, focus on being a better storyteller. What's the number one way to do that?

read more books. Ladies and gentlemen, once again, I am so grateful for you continuing to spread the word, telling a friend or two, hey, you should listen to this episode of The Learning Leader Show with Morgan Housel, very useful for what you're trying to do in your career, both at home and at work. Because you continue to do that, you are giving me the opportunity to do what I love,

on a daily basis. And for that, I will forever be grateful. Thank you so much. Talk with you soon. Can't wait.