The Pomp Podcast - #374: Morgan Housel on the Psychology of Money

Episode Date: September 1, 2020

Morgan Housel is a partner at The Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal. He also recently wrote a fantastic book titled, The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness. In this conversation, we discuss his writing process, what content he consumes, his biggest investing mistake, portfolio allocation, risk/reward, index funds, mental models, 60/40 portfolios, and Bitcoin. ============================ Athletic Greens is an all-in-one daily drink to support better health and peak performance. Even with a balanced diet, it’s difficult to cover all of your nutritional bases. That’s where Athletic Greens will help. Their daily drink is like nutritional insurance for your body that’s delivered straight to your door. You can get yours at https://athleticgreens.com/pomp ============================ Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ============================ Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Morgan Housel is a partner at the Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal. He also recently wrote a fantastic book titled The Psychology of Money, Timeless Lessons on Wealth, Greed, and Happiness. In this conversation, we discuss his writing process, what content he consumes, his biggest investing mistake, portfolio allocation, risk reward, index funds, mental models, 60-40 portfolios, and Bitcoin. I really enjoyed this conversation with Morgan, and I hope you will as well. Before we get into the episode though,

I want to quickly talk about our sponsors. The first is Athletic Greens. If you're like me, and you're really pushing hard at multiple areas of your life, you may not be eating the most balanced diet, then you probably want some extra nutritional support. That's going to be an upgrade on your current multivitamin or current regime. Everyone knows that I eat dominoes every Saturday and I love it. Or even if you have a balanced diet, it's near impossible to eat perfectly every day. That's why I get the peace of mind, including athletic greens and my nutritional routine every day and why I'm pumped. That's right. Not pumped, but I'm pumped. They are sponsors of the show so athletic greens is an all-in-one daily drink that supports better health and peak

performance it contains 75 vitamins minerals and whole food source ingredients that makes it the perfect one-stop shop to get comprehensive nutrition all in one place it literally is the ultimate solution to fill the nutritional gaps in your diet it supports multiple areas of health including your energy immune support gut health stress and recovery i personally love how easy it's delivered straight to your door each month and how easy it is to have it included as a daily habit. I pop out of bed in the morning. I scoop it. I put in some cold water. I shake it and then I down 75 absorbable ingredients that quickly. It makes me feel way better about eating dominoes on Saturdays. I take my athletic greens every day so I earn the right to eat dominoes

on saturday so right now athletic greens they're an awesome team they're gonna give my listeners this epic offer by giving you up to a year's supply of vitamin d3 k2 with your first purchase so the two essential nutrients that will help you support your immunity everyone knows right now it's important to boost your immunity this allows you to boost your immunity particularly if you're stuck to your computer and not spending enough time outside i know a bunch of you are are sitting inside. Go and let Athletic Greens help you. So you can go to athleticgreens.com slash pump to get this special offer. Again, athleticgreens.com slash pump. It doesn't matter if you eat healthy and are perfect or you're bad and you eat dominoes on Saturday like me,

you should be drinking Athletic Greens. Athleticgreens.com slash pump. Go do it. Next up is Choice. It's a new self-directed IRA product that I'm really excited about. If you're listening to this, you are likely part of the 7.1 million Bitcoin owners who have retirement accounts with dollars in them, but not Bitcoin. I used to be in that situation too, but now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your own private keys and using tax advantage dollars to do it. Absolute game changer. You get a self-directed IRA that allows you to buy Bitcoin, hold the private keys, and use tax advantage dollars to do it. Go check out Choice. You can go to retirewithchoice.com

slash pomp. Again, retirewithchoice.com slash pomp. Go check it out. Lastly, don't forget that I write a daily letter to over 50,000 investors about business technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry, you can subscribe at pompletter.com. Again, pompletter.com. All right, let's get into this episode with Morgan. I hope you guys enjoy this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp

as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I have Morgan here. I'm extremely excited about this, mainly because I don't think there's a single thing that I've ever read that you've written where I've been like, wow, that wasn't worth my time. So thanks so much for doing this, man. Well, thanks for having me. And maybe that's a dare. I can try to see if I can write something next week that would be below your expectations, but thank you. Just waste everyone's time. Okay. Let's start with your background for those that don't know you.

Where did you grow up and what did you do to get to finance and investing and writing? Yeah. So I grew up most of my life around and in the Lake Tahoe area of California. And I grew up skiing. I was a ski racer from the time I was a young kid. I was in karate for a long time. I have a second degree black belt in karate. That was a different life though. Don't pick a fight with me now because you would hurt me. But the skiing was an important part of my childhood, particularly in my teen years, because myself and a lot of my other ski racing friends that I was growing up with, we didn't go to high school. We did this independent study program that was designed for juvenile delinquents, which we were not. We needed the time during the week to ski and to train and

to travel to races. So we didn't have any high school. The independent study program was like, I took a couple of tests. And when I was 16, they handed me a diploma. I did nothing for it. We did nothing. I have an eighth grade education. I went from eighth grade to college. And that was really difficult for me to do because I started college when I was 20. So I started a little bit later. And since I had an eighth grade education, I had to start from ground zero because not only had I not done anything in six years since eighth grade, but I had forgotten everything. I had not exercised my brain. And during my teenage years, I wasn't reading. I wasn't paying attention. I wasn't watching like nothing. I was completely zoned out of anything intellectual. So I had to

really start at ground zero in college with like the most basic, like the first math course that I took in college was literally like, this is a negative number. And when you add a negative number to a positive number, like that, it was the most basic you can get. So that was kind of a struggle for me, but I still just kind of grinded it out. And it took me like six years to graduate college. So I was, I was older than my peers, which I think was good because I took it more seriously. And I always knew throughout that time that I wanted to go into investing. Investing just fascinated me. I didn't know anything about it, but it fascinated me. If I'm honest, a lot of it was because I was 20 and investors at the time or people in finance at the time just had

seemed like they had so much power and prestige and allure. And I wanted the Bentley. I wanted the house in the Hamptons. All of that really appealed to me. It doesn't anymore, but it really did to me then. So I wanted to get into investing in finance. And the plan was investment banking because that's like everyone else, every young male in college, every 20-year-old male wants to be an investment banker. Like, of course that's, that's not true, but that's, that's what it felt like to me. And I quickly realized I got an investment banking internship in my junior year. And I realized that it was just pure hell. It was just awful. It was like the culture of it, the hazing aspect of it, the shut your mouth and work till 4am aspect of it was so antithetical to

everything that I wanted to do, but also like the culture in which I'm able to do good work in. And so that quickly ended. And then I needed to do something else in finance. I had no idea what it was going to be. I didn't have any backup plans. But I had a friend at the time who was a writer for The Motley Fool. And he said, hey, Motley Fool's hiring writers. You're interested in investing.

I had no writing background, particularly because I had no high school education. I really had absolutely no history of writing at all, anything. I applied thinking that, A, they're not going to hire me. but if they do, I'll do this for like three or six months or something before I find another finance job. And I ended up staying at The Motley Fool for 10 years and just fell in love with the process of writing. I've always been fascinated in investing, but writing was something that, you know, my first year or so at The Motley Fool was the writing part I didn't like. It was hard. It was work. I wasn't any good at it, but I just slowly started falling in love with the writing

part of it. Not just the investing, but just the process of sitting down and thinking through a topic and being like, what is a unique point that I think is interesting? How can I explain that really quickly in a fun way with a story? How can I get my point across effectively? I really love that aspect of it. So that's where I started my writing career. I started at The Motley Fool when I was a junior in college and ended up staying there for 10 years. And then I joined the Collaborative Fund 40 years ago, which is a VC private equity firm. But my whole role there is writing and speaking. And that's effectively all that I do. So my whole career, I've been a financial writer. And that's all I want to do. It took me a while to get there. Even if you went

back maybe like four years ago, not that long ago, I would have said, yeah, I'm a writer now, but I aspire to do something else. I didn't really know what it was. Many years ago, I started out to get my CFP. I didn't get it. I abandoned that. But it wasn't until the last couple of years that I've embraced with both hands that I'm a writer and this is what I want to do. This is what I love to do. And it's what I'm always going to do. So a lot of people are probably not familiar with the Motley Fool. I grew up in North Carolina and so ended up meeting a lot of people who had worked there or kind of new people there. And it's a pretty impressive business. So maybe just explain a little bit about the Motley Fool kind of business model, and then talk

a little bit about being there for 10 years. I'm assuming you got there relatively early in the life cycle of the business and kind of scaled over time. No, well, so they started in 1994. They were one of the first kind of online communities. It started as an AOL chat room in 94. And by 1999, they were enormous. I think it was a billion-dollar company, like everything was in 1999. And then they had a big kind of fall in the dot-com crash, but they survived. And by the time I joined in 2007, it was very much an established 13-year-old corporation

with several hundred employees. It grew while I was there. I think today it's maybe approaching 500 employees, something like that. I won't get into the business metrics, but it's bigger than you think. That's what I'll tell most people. It's a thriving business. And the whole business is newsletter subscriptions, subscriptions to stock picking products. And they have mutual funds and financial advisory products and whatnot.

It's a pretty diverse business. And it was a great place to work. That's why I stayed there 10 years. you know, I'm not, I kind of was when I started, but I'm not anymore. And wasn't most of the time I was there. I'm not a stock picker and it's a stock picking place, but it's so it, in some ways it was a little bit of a interesting fit for me, but it was such a good place to work. It's filled with so many good people who are still some of my closest friends that I really enjoyed my time there. So if you're working in a place that has, I'll call it a culture of stock picking or a bent

that it leans that way, and that's not your game, how do you navigate that? And how did you find what you thought was your angle on finance investing in the markets? For me, it actually meshed fairly easily. Because to me, my whole investing, what I'm interested in, what I think is most important is investing behavior. Just your ability to think about risk and greed and long-term thinking and how people think about opportunity and scarcity. That's all I'm interested in. And whether you are an index investor or a stock picker or private equity investor or a Bitcoin investor, it doesn't matter. Those topics of greed and fear and long-term thinking, like the psychology of investing, the psychology of money, is applicable to everyone

regardless of how you are investing. So even though I was investing in index funds and everyone else sitting at the desk next to me was picking Netflix stock, the common denominator of what I was thinking about was applicable to everyone. So even though I may have seen like kind of an outsider there, I think the stuff that I wrote about was still hopefully helpful to other people who are who are investing in a different way. So you mentioned the psychology of money, which is a amazing softball for me to bring up. You wrote the book, the psychology of money. I've read almost two thirds of this already. And this is the only book people have heard me talk about books on here before. One, I don't really like reading physical books. Normally, I usually

do audio books or something else. This is the only book that I can remember in recent history that I've actually read. And before I move on to the next chapter, I go back and I read a second one. It's one of these books that just to me has so much packed into it in terms of the lessons and the way that you describe it. Why the hell did you want to write this? At what point were you like, you know what, I'm not going to go write like I do on a daily basis. Instead, I'm going to write this book? Well, first, thank you. And I would say, I would actually push back on the last question because I wrote the book in the same way that I write on a daily basis. When I first started to set out, when I was first outlining the book, it was going to be 10 chapters, which

is kind of a normal length book. And each chapter would be four or 5,000 words, which if you're not familiar with word count, a normal blog post is probably 800 words. So four or 5,000 words, is that's a lot of, it's a lot of material and it's, and four to 5,000 words is not a length that I have a lot of familiarity with. I don't have a lot of experience with that length. So it was kind of daunting when I set out and I quickly abandoned that approach. And I said, no, I'm going to make this 20 chapters and they're each going to be about 2000 words, which is much closer to what I have experience with. And it's also look from the reader's point of view. I've, I've, I've been a big reader for the last 13 or 15 years or so. And the biggest

thing that I hate about books, even really good books that I would recommend is just the excessive length that doesn't need to be there. There's people rambling on and on and on because it's a book. So let's just ramble on for another 50 pages about this one point and keep making repetitive examples of it. And I just wanted to abandon that. So rather than writing 10 chapters in which I would ramble on, I said, let's write 20 chapters. And I want to make my point quickly. Since it's a book, there's more depth than a blog post. There's longer stories. There's more research and information, but I really just want to make my point, make it as succinctly as I can, and then get out of your way and move to the next chapter. There's one chapter in the book that is

400 words, which is like one page. And I think that's probably my favorite chapter in the book. And when I turned it into the publisher, they said, hey, is this a mistake? Are we missing stuff here? And I said, no. And they said, well, do you want to add more to that? And I said, no, that's all I have to say on that topic. And out of respect for the reader, if I have nothing else to say, then I'm done. Move on. I'm not going to waste your time rambling just to prove that I can write a long book. What is that? I think Naval says most books should be blog posts, most blog posts should be tweets, and most tweets shouldn't be sent type of situation. I think very similar here in that it's very concise and jam-packed with information. The topic, The Psychology of

Money, Timeless Lessons on Wealth, Greed, and Happiness. Why that focus versus the plethora of other ideas and things that you could have written about or that you have written back in the past? When I started The Motley Fool, I was a banking analyst. My job was to cover Wells Fargo earnings and stuff. Then I transitioned from that into covering the economy. Most of my time at The Motley Fool, I was writing about the components of GDP and what inflation was doing, that kind of stuff. Then I transitioned in my later time at The Motley Fool and the last four years at Collaborative Fund to what I write about is kind of investing history and investing psychology and where those two things meet up. And I'm most interested in that because to me, the biggest

story prior to March of this year, prior to COVID was the great financial crisis, 2008. And most of my time as a writer has been writing about why that happened and like what we can do about it in the future. Like what were the causes of it? What were the incentives of it? And to me, the causes of the financial crisis cannot be found in any economics textbook or any financial textbook. They're found in psychology textbooks and sociology textbooks and history textbooks. How people think about greed and fear, that kind of stuff, that is not something that lends itself to the analytical side of finance where all the attention goes, the analytical side of economics. It's this soft kind of mushy topic that gets swept under the rug in investing and swept under

the rug in economics because it's soft and mushy and you can't explain it in formulas. But to me, it's the single most important aspect of investing and of economics is the behavioral side of it, the psychological side of it. You can be the best stock picker in the world. You can be the best economist with the most sophisticated model in the world. But if you panic in March of 2020, or if you lose your mind in September 2008, none of it matters. None of your analytical ability makes any difference in the world if you're going to lose your mind during booms and busts. And so that's why the psychology side of money is not the only important part, but I think it's the most important part because it can neutralize all the other analytical parts of investing. So to me, it's always been the most important.

I also just think it's the most interesting. It's not just a bunch of dry numbers and charts. It's stories about how we behave as people, which applies outside of investing. The introduction of my book is called The Greatest Story Ever Told. And I think that's what money is, because we learn so much about money that applies to other areas of our life. Money just teaches us it's a window into how people think about risk and greed and opportunity, which applies to how people think about relationships and careers and politics and all these other areas that don't seem like they have anything to do with investing, but they all fall under this umbrella of how people behave. Yeah. And I guess what's really interesting is to go back to like March, I'm pretty sure the data has come out now that most of the people who panicked and sold were older folks, right? Who basically were trying to protect their portfolios and all this kind of stuff. And they basically

sold at, you know, 15, 20% down. And then also the market turns around and kind of rockets through. One of the things that is kind of a consistent theme, I think, in your writing is basically like almost preventing yourself from yourself, right? Or protecting yourself from yourself. Talk a little bit about the psychology aspect. Just like you are fascinated by it, I think most people say, oh, that's a really interesting thing. But it's also operating within this highly complex system of the psychology of a 30-year-old versus a 70-year-old in a market panic. They're optimizing for almost different things in many cases. How do you think about almost the external forces impacting or playing onto that psychology? I think it's a big issue that you brought up because there's this implicit assumption, this unspoken assumption that there should be one right answer to investing questions. And is this stock a good buy? Is this asset allocation smart or not? And obviously, everyone has completely different expectations and goals and whatnot. So if you watch CNBC and they're talking about, is Microsoft a good buy? Is this a stock you should own? Well, are you a teenage day trader? Are you a 90-year-old widow? It's completely different. But we rarely talk about finance like that. It's always spoken about one answer to

things. And you could even bring this down to, I think one of the major causes of bubbles, and I write about this in the book, is that bubbles happen, or at least one of the reasons that happen is when momentum entices short-term traders. There's momentum in stocks, so short-term traders rationally and reasonably, they come in and say, well, I want a part of this. There's momentum. I want to take some of these profits. Then that pushes up momentum even more, and that starts getting people's attention. Then long-term investors watch what is going on with these short-term momentum traders, and they take it as a cue. They take it as a signal to say, oh, well, maybe they know something I don't, so maybe I should go all in to these ridiculously inflated

stocks or any other asset, real estate, whatever it is. And then long-term investors start taking their cue from short-term traders. And then everything goes to hell. And it's not until hindsight that you're like, look at the people. Let's take housing, for example. Let's not talk about stocks. But if you look at condos in Miami in 2006, a huge portion of those were just being flipped every 30 or 60 days. And so those were just short-term traders. And you could say they weren't even irrational because there was momentum. They weren't making money at the time. The problem happened is when people who were long-term homebuyers, they were looking for a place to raise their family, took their cues from those prices and they said, oh, let's go buy some

Florida real estate. And then two years later, they got hammered. So I think that's just the idea that people are playing totally different games, but we're all on the same field and we're all trying to take cues from each other. That's like the basis of finance is taking cues from what the market signals, what is the market telling you? Well, if you're playing a different game from other people, then the signals it's giving you might be perfectly rational and good information from one person and completely dangerous nonsense to you. And it's so hard to separate that in real time, but it's so important to understand what your own goals are, what game you are playing, and try to only take cues that are relevant to that game and those

goals. I love it. Psychology of money, timeless lessons on wealth, greed, and happiness. One of the most popular questions i got when people knew you were coming on is when the hell is the book coming out the book the book comes out september 8th and people are asking that because i've been plugging the book since february which i don't know in hindsight if that was a smart thing to do but um it's created i i i think it's just setting up people for disappointment because when you set up that much anticipation you know eight months of anticipation then when it finally comes out you're like this is what i've been waiting all year for but for better or worse that's that's The turnaround on books is obviously so long.

I finished writing this on January 1st. I wrote the last sentence on January 1st and I turned in the publisher. We had finished editing it by like May, something like that, maybe June. And then it goes through like the process of getting it printed, getting inventory sent out, getting everything like goes from the printer

to the distributor, to the bookstores, to Amazon. And like, it takes a while to get everything turned around. Can people go to Amazon and pre-order it now? Yes. Okay. All right. Everyone go pre-order it. It's a fantastic book. Highly suggest. Before we get into more of the kind of finance topics, there's a lot of questions about just content, how you learn to be a good writer, what your process is, not writing the book, but just kind of the more daily content you put out. Talk a little bit about, you know,

you get to Motley Fool. It sounds like you weren't a writer at all, didn't really understand what you were doing. Like, how have you picked up and honed that craft over time? And what does your process look like today? I think it's those two things in the Motley Fool. One is that when I started, I was writing three articles per day, every, you know, five days a week, which is a tremendous amount. It's too much. And like, because I was playing the volume game, three articles a day, like they weren't any good, because I was just I had an hour to think of an idea, type it out and get it sent out. So it was just a really but that much volume when you're writing that much three articles a day, every day for years, just that much experience, anyone will gain a little

bit of skill in writing by just sheer repetition. The other thing that was really important is that these articles were public. Because Motley Fool had a big platform, even though I was a brand new writer, tens of thousands of people were reading these articles and leaving comments on them. So the feedback, like most people, if they have a brand new blog, realistically, they don't have any readers. So they're not going to get much feedback, very minimal feedback. But I, from day one, the first article I wrote, I had thousands of comments of feedback. And a lot of that, you know, people as you're aware from Twitter, but it was more so in the comment section, because it was more anonymous. If you write a bad article, people will tell you in no uncertain

terms. So I just had so much feedback. And I was had so much volume experience, I was doing it so much that I think that's the best way that you can learn is when you have a lot of repetition and a lot of constant feedback, you put those two things together. And then over the course of 10 years, of course, you're going to gain some sort of skill. If you have those two things and you don't get better over 10 years, then there's something wrong with it. That's where I learned to write. I write a lot less now. I only write one article per week now. The process now is, there's not a lot of structure to it. I don't know if this is going to be that much of an interesting story because there's not a big process that I have. It's just a lot of reading,

a lot of going for walks and thinking about whatever topics are on my mind, trying to piece things together? What have I read recently that I thought was a really neat story? And how does that apply to something that I can tie back into economics and investing? And oh, this reminds me of that. And that reminds me of this. It's just a lot of just wandering around my house thinking about those things. And then, so that's 90% of the work is just kind of aimless reading, aimless going for walks and thinking, sitting on my couch and thinking about things. It doesn't look like work, but it is. It's trying to piece things together. So by the time I actually sit down and write an article. That's like maybe 10% of the actual work. It doesn't take that much time

to sit down and write it. And the other thing that's true about the writing, and this is true for I think every writer, if they're honest about it at least, is that when I sit down to start writing an article, I really don't have much of an idea of where it's going to go because the process of writing is what makes you think. It's like you write one sentence and you're like, oh, that reminds me of this. And you write another sentence and you're like, oh, wait, does that contradict something else I wrote in the previous paragraph. So now I got to change that. It's like, it's not like you have the whole thing laid out in your head and then you sit down and just smash the keyboard and it's done. It's not like that at all. It's this process of like the practice,

it's often viewed as writing is the way that you communicate, but I don't think that's really the case, or at least that's only part of it. Writing is the way that you think. Writing is the process of getting your thoughts out there and crystallizing these vague thoughts that you have in your head. So that's, that's really, there's not much more to it than that. It's just a lot of reading, a lot of thinking, and then just kind of grinding through. It doesn't get any easier over time. I think the actual writing, the actual clicking the keyboard gets easier over time. Crafting a sentence gets easier over time, but piecing things together is, I don't think I'm ever going to run out of material, but it doesn't get easier over time. It's still kind of a daily,

it's still kind of a weekly grind to figuring out what I'm going to write about next. it's interesting because uh it reminds me of the saying and i'll butcher it but uh it's basically like if you got to cut down a tree spend you know four hours sharpening the uh the axe before you start swinging type situation right somewhere here of like you spend a lot of time thinking and then you have a general idea of where you're gonna go and so do you ever get like writer's block or anything like that in terms of you've already done you know a lot of the kind of mental work of okay this is the topic and here's like maybe the pieces that i want to put together in it. Does that help you kind of avoid any sort of writer's block? Or do you still get some of that?

The most important part about writer's block for me is this. If there's one metric that I know of, which is going to predict whether an article I write is going to do very well, it's how easy it was for me to write the article. If I sit down to write an article, and it's just comes out so easily, it just I just hit the keys and like, like first draft is perfect. Those are the articles that are going to do really well. If I'm struggling to get through something and I'm just writing, I'm like, ah, this isn't clear. It's not good. I don't know what I want to say. That's always because I don't think there's any exception to it. That's always because the idea that I have is not right. It's not a good idea. And I'm struggling to write it because the idea sucks

versus if the idea is good and the idea is clear, it's really easy to just go out there and type it out and put it out there. So whenever I get to writer's block, to me, that's a signal, not that I'm struggling with writing. To me, that's a signal that whatever my idea is, my thesis is for the article is wrong. And I should take a step back and say, what's going on here? I think if there's a skill and you've been doing it for more than a decade is that I can quickly kind of triage when that happens and say, okay, look, I've been working on this piece for only 30 minutes, but I can already tell this is not going anywhere and let's just abandon it and move on. And I think that's a really important thing versus just struggling

and working so hard on a piece that you know is going to suck and then you put it out there and it's going to hurt your reputation. No one else is going to like it too. So that's always a signal to me for writer's block. It's like a great investor, cut your losers early. That's exactly it. It's the same philosophy. Yeah. So a lot of this obviously is you are consuming tons of information, you're ingesting that, you're synthesizing it, and then you're kind of putting your own unique perspective and then kind of creating your own content. I saw a couple people asking, what are the types of content that you consume? And also, what do you pay for versus not pay for? And kind of,

I think people are really just looking for recommendations in terms of like, what does Morgan think is high quality content that maybe I could read as well? So let me start with what I pay for. I pay for Wall Street Journal, New York Times, The Economist, The Atlantic. That's it. Yeah, that's what I pay for. And those are great. Those are great for news, like capital N news, journalism, which is really important, but you're not going to get the really nuanced take from that kind of stuff. Those are good to get your facts about the world. But the takes I get, which is the really important part, virtually everything I read comes through Twitter and books, I would say. That's like the barbell of my information intake is Twitter and books. And I would say if

there's one philosophy that I have about reading, it's that I think I got this idea from Patrick where he said, you want a really wide funnel and then a really tight filter. So I try to read anything and everything that might look slightly interesting to me in a wide variety of topics. I almost never read investing books, but I read books about all kinds of topics. And I read articles about all kinds of different fields, not just economics and investing, but politics and biology and history and biographies, like all kinds of different stuff, a really wide filter. but then the tight, sorry, a really wide funnel, but then the tight filter is again, just like writing. I think I can triage really quickly when I start reading something within a couple sentences

to say, nope, nope, this is not, this is not for me. I'm out of here. It's either bad writing or it's about a topic that I just, it's, I'm not interested in. So I think that's a good reading philosophy, whether it's online or books, try to get your eyes on as many things possible, as many shots on goal as you can, but then cut your losses very quickly so you can move on. People should not have any guilt whatsoever reading books, including my book. If you're reading it and you don't like it, don't waste your time. There's a lot of good books out there. Don't waste your time on bad ones. Don't burden yourself with bad books. That's the reading philosophy that I have. I try to read as much as I possibly can and move on from the bad stuff as quickly as possible. I love that. You mentioned earlier investing in index funds while being in kind of this culture of stock picking. Maybe talk a little bit about how you think about your portfolio construction today and how you choose to get various exposures just so as we kind of talk about more of the nuanced financial topics, people understand kind of the perspective you're coming from. Yeah. So I've written about this a little bit in the past, but my entire net worth is this house, a checking account, and some Vanguard funds, a little bit of Berkshire Hathaway, and that's it. That's everything. I love that simplicity and I value that simplicity. I would not even recommend that most people or even some people, that's what works for myself and my wife and my kids. because to me, the metric that is going to make all the difference in the world for me over my

lifetime as an investor, my lifetime as a human and as a father and a husband is going to be how long can I remain investing for? And I know that if I dollar cost averaging the index funds and I leave them alone for 30 or 40 or 50 years, I'm going to hit every one of my financial goals and then some. And therefore, to me, that's everything. That checks all the boxes of what I want. I don't aspire to be the world's greatest investor. I aspire to be a great writer. That's what's important to me. But for me to go out and beat the market averages this year, and maybe I can keep that going for a couple of years, that's just not important to me. But it is important to a lot of people. And that's why I'm not a passive zealot. I'm not one of those people banging the

table saying everyone else is a moron who's not doing this. To me, it's just this works for me, and everyone's got to find something that works for them. And I want to spend all of my bandwidth thinking about the psychology of money, the psychology of investing, and none of my bandwidth thinking about what industry is going to perform well in Q3. That's just not,

I don't have any interest in that whatsoever. So to me, it's just kind of like finding your own goals and what works for you. To me, I also have, I've just embraced just as part of my personality that I have a lower risk tolerance than a lot of people would for my age and income and net worth.

And I'm okay with that. I don't try to fight against that or try to change who I am. This is who I am. For most people, or I don't know about most people, but a lot of people our age, Anthony, would be what matters to them is like swinging for the fences, making a lot of money. And what really matters to me more than anything is that I can go to bed every night and look at my wife and look at my children and say, you guys are going to be okay. We're all going to be okay. Whatever happens, we can withstand a category five storm. We're going to be okay. That to me is that's my biggest goal. But I know that's not a lot of people's biggest goal. So I always love the phrase, personal finance is more personal than it is finance. And I think we need to embrace that

more in the financial Twitter communities and whatnot, that there's no one right answer for people. And a lot of the debates that we have about this person thinks X and this person thinks Y, they're actually not debating. They just have completely different goals that lead them to a different area and they're playing a different game. I think that is a very rational view of the world and one that is missing quite often, especially in, was it 240 characters? That's right. Hard to share that nuance. Talk a little bit about, you have relationships with, and one of the impetus for this question was, you know many of the best investors in the world from a pretty objective, just data driven manner. Many of them are on, you know,

FinTwit on Twitter, and then other relationships that you have. How do you kind of gain comfort and really have the patience and discipline to do what's kind of best for you when you do have all those relationships, right? I think a lot of people, they kind of fall into, well, I don't have access, I couldn't do that anyways. But when you do have potential access, how do you still kind of remain disciplined? And really, it's kind of a more of a, how do you control your psychology, right, as you have this plan? Well, I think there's two parts of it. One is, to me, there's really not a lot of temptation because of what I just said about what is really important to me is just thinking if I can dollar cost average for 40 years, then every one of my financial goals is going to be met times 10.

So for me, there's not a lot of just temptation of like, oh, I can go do that. And to me, the idea of, hey, if I invested in better funds, I could earn higher returns this year. To me, I would almost put that in the bucket of, yeah, if I got a second job, I would have more income this year. I almost kind of equate those two. Some people, maybe that's not the best analogy, but that's kind of where I put it. It's like, I could earn higher returns investing in other funds, but it would pull me away

from things that I really like and from like the psychology of thinking about my finances in a way that is really appealing to me, which is super simple, really basic. I have all the numbers in my head because there's only like four assets that I own in everything.

It's really simple for me. And that's just how I like it. And if I can do that and meet all of my goals, then why would I want to do something else that's going to be more complicated or more risky? I think maybe that's a big part of this. If there's one part of my and my wife's personal finances

that I'm most proud of, it's that we have gotten the goalpost of financial success to stay pretty stable over time. And I think for a lot of people, the goalpost is always moving. So when they have higher income, better investment returns, they get a big windfall. If the goalpost moves in tandem with that, then you never feel like you're getting ahead. But for us, the goalpost has stayed fairly stable. So even though as we have gotten ahead over time, incomes have gone up, the market's done very well. This is the worst economic crisis since the Great Depression and my index funds are up like 12% this year. So it's like, if you can have that and your goalposts stay steady, then to me, then the appeal of doing that much better kind of diminishes. If I had way higher aspirations

back to when I was 19 and I wanted a Bentley and a house in the heavens, if I still had those aspirations, then I would be chasing down my great investing friends to try to get ahead. But since I don't, it's just like what I do now checks all the boxes that I need to. Yeah, it's pretty interesting. Like if you almost think of it like a percentage basis, the difference between 120% and 130% of your goal, just how much extra effort would it take to get that extra 10% seems to almost not be worth it in some cases for some people, right? Right. I mean, I'll give you one example. I won't, I won't get into the, to the details, but we got a modest financial windfall two

years ago. It was, it was, it was meaningful as the percentage of our net worth, like it was pretty meaningful. And when I told my wife about it, she, she just said, is this going to affect how we live? And I said, no. And she said, she said, that's fine then. I don't, I don't, I don't, she, she, she just didn't care.

It was just, it was like nothing. And for a lot of people it would be, we got this windfall where we can go buy a bigger house, go for a bit. And for her, it was just like, well, if it doesn't change how we live, then who cares? It's just a game. It's just the numbers on the board that doesn't. And I love that moment because that was the best indication of like our goalpost has stayed steady in a way that we're totally content with.

It's not like we're holding ourselves back and saying we would rather go out and spend our money on this. But because we want to be frugal, we're going to deny ourselves that pleasure. If we can actually legitimately remain comfortable with the goalpost where it is, I think that is how you gain actual happiness with your money. Because now everything that we save, since we're not spending it on stuff, every dollar that we save is just like a little bit more financial independence that will let us go out and live whatever life we want to live, retire whenever we want to, live wherever we want to. It's just a level of control over our time that is meaningful to us in a way that, you know, a higher level of material living is not necessarily important to us. Absolutely. And maybe talk a little bit about, you spend, you know, most of your day, if not all of your day thinking about financial markets, psychology of money, like things that are related to money, investing in markets. How do you and your wife kind of think through financial planning, right? There's a bunch of people who have come on the podcast in the past, and one person in a relationship is well versed and spends all day and kind of like, it's almost like their occupation or related activity. The other does not. And so kind of how do you think through almost this arbitrage of information, right?

It's not even education as much as just like somebody's reading all day about something and somebody's not. So how do you kind of fit that into the model of creating a financial plan, staying disciplined, et cetera? Especially maybe even in times of chaos as well, like where you just might have better access to information. So I guess there's two important parts of this. One is that we've been lucky, and that's the right word. It is just dumb luck in that my wife and I see completely eye to eye on spending, which for a lot of couples, that is not the case. And that's a big, big issue.

So I think my wife and I have been together since maybe she was 19, I was 21, something like that. So the majority of our adult life and the number of spending disagreements that we've had, I'm sure there have been a couple, but I can't think of any. It's always been really pretty eye to eye. So that's a huge component of our personal finances. The other component is that she is much smarter than me. She has a high school diploma.

She went to high school unlike me. But just leaving that aside, she's much more analytically intelligent than I am, but she has no interest in our finances whatsoever to the point where once a year, I have to sit her down and walk her through where we keep everything. But because of that, it's just the level of trust, I guess. I 100% control the financial decisions. Not because I don't want her input. Of course I do.

it's just she's not interested in that so i so i do that on my own um so i guess from a planning perspective our month-to-month spending has always remained roughly stable there's not a lot of change i guess we have two kids now so i guess there's been like an uptick due to that but what we spend money on hasn't changed that much in a long time um so after so there's no like okay we're going to spend x and save y we spend on whatever we want to but what but what we want to spend on is not, you know, a huge portion of what we take in. So after we spend whatever we want, then I dollar cost average into index funds, the same amount every month, max out retirement funds. And then, you know, there's been some differences over time. My wife was working for

a long time. Now she's staying at home with our kids. So that income went away. And then we just bought this house. So there was a big financial transaction there. So it's not perfectly stable over time. But I think when you have a big gap in between your spending and when you have a high savings rate because you've kept the goalpost, you just have so many options about what you can do with your money, which makes the decisions a lot easier. Absolutely. No, it makes a lot of sense. A lot of people wanted to know about just your view on what is happening in markets. We can start with kind of the disconnect and PE ratios, we can talk about kind of the Fed, and a lot of the quantitative easing, you tell me kind of maybe how you just holistically look at, there's this

public health crisis, obviously, there's a government mandated shutdown, kind of a lot of uncertainty and chaos in March starts to ensue, the government steps in, kind of how do you look at from once they stepped in to today, like what's transpired, and maybe kind of the frameworks you use to just think through this? I think, I mean, I'm surprised as much as anyone else that we would be going through this, what, 40 million jobs lost and now at a 10% unemployment rate still and stocks at all-time high. And you have companies like, you know, car companies like Tesla that are up 500% year to date during the greatest recession since the Great Depression. Like it's, it's, it's boggling from, from like a first glance, but I think some of it makes slightly more sense if you dig into it. One is that, of course, and this is nothing that's going to be too surprising, but one is that when we talk about the stock market, we're talking about indexes like the S&P 500, of which are heavily concentrated in a very small handful of stocks that are doing very well right now, because even with the pandemic, their businesses increased.

Amazon, Facebook, Google, Microsoft, Apple, those companies, even though we're looking at a diversified index, that's everything. That's like, that's all that matters over time. So if you look at, you know, certain industries that are much more tied to main street, small companies and certain sectors, they've been demolished as you would expect to happen during a depression. But since we're so, we're more concentrated into a few big tech names than ever before, they kind of mass a lot of that. But the other that's been the biggest trend for the past almost 40 years that I think is almost too simple for smart investors to take seriously is just the level of interest rates. Of course, stocks are going to do well when investors who have to do something with their

money say, okay, I can earn 0% in bonds, 0% in cash, or I can pay 30 times earnings for Microsoft or whatever it is. I don't know if that's the case, but of course, things are going to look more appealing at ridiculous interest rates today with 0% rates than they did 20 years ago when you could earn 8% on treasury bonds. Of course, that's the case. That's why value investing hasn't worked in the last 15 years is because when your discount rate is so low, then what a company is going to earn this year does not make that much of a difference. It's what the company is going to earn over the next 20 years that really matters. That's why even this year where if S&P 500 earnings were wiped out this year, in a discounted cash flow model, does it make that

much of a difference if your year one earnings are wiped out and your discount rate is zero? No, it doesn't make that much difference over time. So I think that's part of it. And the other thing is, of course, the Fed, which is just pulling out the howitzers and the bazookas and just blasting money throughout the economy. And of course, is there a risk to that? Of course. Is there going to be ultimate repercussions of that? Likely. I don't think we can say certainly because the Fed's been doing this since 2008. And a lot of the repercussions that were so obvious to people that have always been just around the corner have not played out. A collapse in the dollar, hyperinflation right around the corner, things that made a lot of sense to really smart

people in 2008 haven't played out. I think if people are not honest with themselves about asking why did those things have not played out, why have we not turned into Zimbabwe like it seems so obvious in 2008, then if you're not asking those questions, then I think you might be missing a big part of Fed mechanics and what might happen in the future. It's not to say that there's not going to be risks. Of course, to me, the biggest part of inflation, I don't want to go down too much of a rabbit hole here, but inflation is obviously too much money chasing too few goods. People spend too much time, too much effort on the money part of that equation and not enough focus on the good side of that equation. Every historical example of hyperinflation happens when, yes, a regional

economy is printing a lot of money, but also when their industry, their economy is broken and they can't produce goods anymore. It happens after wars, when their factories have all been bombed into rubble. It happens in places like Zimbabwe, when the government confiscates all the productive assets, or Venezuela, when the government comes in, the only productive assets in the country, the oil fields, the government confiscates them, runs them into the ground, and they can't produce anymore. That's when you get inflation risk. And I bring that up because 2020 is the first time that we've seen in a really long time, maybe the first time in modern American history, That we've seen industries that are fundamentally broken, that's going to really prevent their ability to produce over time, particularly industries like hotels and airlines, that are just going to be so broken that even when this is over, however you want to define that, when there's a vaccine or whatnot, if you have tremendous pent-up demand for travel, for flying,

But let's say by next year, American and United are bankrupt or they've laid off half their staff, which is a more likely scenario. Then you could have a ton of demand and not a lot of goods because hotels have gone bankrupt. Airlines aren't flying like they used to. That's when you could get legitimate inflationary pressure. So it's not just about what the Fed is doing or how much money they're printing. It's about the fundamental health of the economy. And the fundamental health of the economy is more broken now in 2020 than I think it's ever been in our lifetimes. And how does something like, you know, this morning, Jerome Powell gave a speech that pretty much people, I think, have been rumoring that he was going to give, which essentially just says, hey, look, we're going to keep a higher level of inflation or target a higher average inflation level, which people, you know, are talking about, okay, they're going to overshoot the 2% for some period of time, and kind of just create this more inflationary environment. does that change anything in terms of that analysis of the demand and the goods? Is there a level of kind of the demand that once you go past some trigger point or milestone, it's kind of the point of no return? Or do you think that it always stays as a relationship between the demand and the goods? I mean, what's so hard about 2020 is that you have 40 million people lose their jobs, but then incomes, average incomes increased during that

period and hit an all-time high. Savings rate is off the charts. Retail sales adjusted for inflation are at an all-time high. So there's not a lot of historical analogies when you can look at that. During the Great Depression, unemployment was 25% and people's incomes fell like 40%. So completely different from what we're dealing with today. So how do you forecast future demand in a situation like today, where especially as COVID-19 lasts, back in March, we were hoping this would be a one month or a two month ordeal. But now that it's at least a six month and probably a one year, maybe a two year ordeal, every month that ticked by that ticks by a greater share of businesses that had just laid off workers temporarily are done, they're going to close

their doors for good. And that way, and then because of that, even when you get a vaccine, when this is over, you can't just bring all those workers back, you just have a higher structural level of unemployment, like we did in 2008. So is that going to is that like that would, lead to lower demand. But now you have both the Congress and the Fed, I think, learned after 2008 what you can do with stimulus. And whatever limits they thought there were to stimulus before 2008, kind of like the Milton Friedman era of low government intervention, Fed needs to be careful. All that was thrown out the window. And I think because after 2008, both the stimulus package, which was about a trillion dollars in 2008, and what Bernanke did in 2008. Now you have

both Congress and the current Federal Reserve saying, hey, when the economy is weak, we can just pull out the nuclear bombs and just drop them all over the economy. In 2008, the stimulus package was, I think, $800 billion, and people's jaws were on the floor. Now we're like, hey, let's do $3.5 trillion. People are like, yeah, that sounds right. This is a totally different view. Same with the Fed. When Ben Bernanke was cutting interest rates in 2007 from 5% for 4%, people were saying, he's being reckless. He's being reckless. Now, the Fed is out buying corporate bond ETFs. It's a totally different world. I don't know if we can look at the new world. I think people need to accept and acknowledge that that is a new world. Policymakers

have a totally different view of where the ceiling is than they did even a decade ago. So how do you measure demand, future demand in that world where even record high unemployment rate leads to record high income and spending? I don't know what happens in that future. It might be like, this is not my forecast. I don't want anyone to tie this to what I expect, but it might be that policymakers are much better at managing business declines than they were in the past. Now, there's a long history of policymakers thinking that they have managed the business cycle. And then the next thing you know, everything goes to shit. So who knows what's going to happen from there? But maybe we have, to some degree, we have knowledge now that is going to allow us to better manage declines than we have before. And maybe the cost of that, the risk of that is we're going to have more frequent recessions or deeper recessions when they happen, more damage. Of course, there's going to be a downside to that. But I would not rule out the possibility, just from what we've seen in 2020 so far, that we are living in a completely different world of managing the business cycle for better or worse. How does this change like a 60-40 portfolio? So I had the gentleman who goes by the pseudonym John Street Capital on Twitter come on, and he was talking a lot about kind of the evolution of 60-40 and how that may not work, obviously, given the more macro environment. How do you think about that, and what are the changes, if any, that you expect to see to kind of that standard portfolio allocation? I think obviously the ding against 60-40 right now is that the 40 in bonds is almost certainly

going to lose money to inflation over time, which of course, that's a big factor that we shouldn't just poo-poo. There's two important counters to that though. One is that if you look at the long history of 60-40 and you're looking at 100 years of data where the 4% withdrawal rate rule came from in a 60-40 portfolio. All of that data set includes a period right after World War II going into the 1970s when interest rates went from 2% to 15%. There's a lot of historical precedent for the scenario in which we're currently living in right now, where you have record low interest rates and the possibility of high future inflation. That's exactly what the country dealt with for the middle of the 20th century. That's still where the 4% rule comes

from. So it always feels like we're living in unprecedented times, like bonds earn you nothing. But it's like, no, we've been through that before. We haven't dealt with that in 40 or 50 years, but there's a long history of that. The other thing that's important is that we probably got spoiled in the 80s and 90s and early 2000s with this idea that bonds were a place where you can earn a good income, not just a little income, but a great income. I mean, 30-year treasuries that outperform stocks over the last 30 or 40 years, a long period of time. People probably got this idea that the 40 in your portfolio, the bonds, are also an income-generating, wealth-creating engine. That shouldn't be what they're there for. They should be there,

the 40% of your portfolio or whatever it is. Maybe it's 70-30 or whatever the portion is. The sole purpose of that should be a protection against needing to sell your stocks during any market decline or job interruption, whatever it is, that is the sole purpose of it is like the airbag, the seatbelt for your stocks. Because having that 40% of your assets in bonds might look like you are pessimistic over time, that you're pessimistic about where the economy is going to go and you want some diversification. To me, it is actually like why you have that is because you are so optimistic about your stocks. You're so optimistic that your stocks are going to compound over the next 20, 30, 40 years that you want to make damn sure that you never have

to touch them. And by having 40% of your assets in bonds or cash or paying off your mortgage, like having that as the equivalent, just makes it so that you are lowering the odds that you are ever going to have to touch your stocks. Charlie Munger says the first rule of compounding is to never interrupt it unnecessarily. And that's what your bonds and your cash and paying off your mortgage should do. It's like that barbell personality is hard to wrap your head around to say, I'm so optimistic about stocks of the long run, but I'm terrified and pessimistic about the short run that I want all this cash and bonds to make sure that I'm going to be okay and give me that safety blanket. But I think that barbell personality is what you need. You need

to be a paranoid optimist in investing and so optimistic about the long run that you want to make damn sure that you can achieve the long run and live through the long run. And the way that you're going to do that is making sure that you have enough safety and cash and liquidity to get you through the short run. The short run is always a chain of decline and disappointment and loss and businesses going bankrupt. And every year, there's a huge news story about something going wrong in the world. Every 10 years, the world breaks, whether it's COVID-19 or 2008 or September 11th. Every 10 years, the world comes to a screeching halt and things start falling apart. But over the course of 30 or 40 years, there's going to be progress. And that's why you're

owning equity so those can compound over time. So when you just view it as the sole purpose of your cash and bonds, it's not to generate wealth like it used to be over the last 30 years. It's to prevent you from ever having to touch your stocks so that they are able to compound to their greatest degree over time. Then I think it makes a lot more sense. What's been your biggest investing mistake? I mean, since I've been dollar cost averaging into index funds for a long time, almost by definition, the reason that you do that is to avoid some of the bigger mistakes. But before I started doing that, so here's one that I think is interesting. I read like a lot of people, Ben Graham's The Intelligent Investor over time. And I think the first edition he wrote

in like 1934, the last edition was updated in like 72, something like that. So let's say the latest edition is like 50 years old, something along those lines. And in his book, a lot of reason the book is so popular is because he gives practical investing formulas. I'm making this up, but it's like, you should go out and buy stocks that are trading for less than two times book value and less than three times cash flow, specific formulas of what you should do. So as a young investor, I looked at that and I'm like, great, he's telling me exactly what to do. I can go use a screener and use this formula to buy these stocks. And a lot of the formulas were to buy stocks that are trading for less than book value, like less than net working capital,

which during Graham's day, during Buffett's early days, that strategy worked really well. That's a lot of where Buffett's early gains came from, is finding stocks who are trading so cheaply they're trading for less than their net cash value. And so I started doing that when I was a young investor and none of it worked. Most of these companies went bankrupt. It wasn't that they didn't perform well, they just went poof. And I just realized a lot of what was going on is that that strategy worked during Graham's days. It worked during the 1950s. It does not work anymore.

Because during Graham's days, you had good, high quality companies, like good profitable companies with great brands that traded for less than their cash value. And that just doesn't happen anymore. There's too many fast computers, too many millions of hedge funds looking for the same thing

that those opportunities don't exist anymore, at least as frequently as they did back then. And today, if you find a company that is trading for less than its cash value, there's a reason. There's a reason it is that cheap. And the reason is probably because the company is going out of business.

So just the idea that the world changed over time. And even if you're looking at something like Ben Graham, who's known for timeless wisdom, a lot of the things that he believed and practiced during his day don't apply anymore. And it's hard for people to accept that because we want to think that investing is like physics. Like how the world worked a million years ago

is exactly how it works today. But investing is not like that. The strategies that work over time evolve. and it's like it's hard to uh you know balance this idea of of am i just falling for like the latest trends or have trends that that did work for a long period of time do those not work anymore and i need to abandon them and move on that is a that is a really difficult thing to do but i learned the hard way that that is a a realistic part of every investor's journey and i think a lot of people uh forget that one of the other key pieces to this is that uh the rules change

And what I mean by the rules is all terms of regulation and things like that. This past week, two of the rule changes have been, one, some amendments to the accreditation rules, and then also some changes to the way that companies can use direct listings versus going through the traditional IPO process. Maybe either comment on those specific things or just talk a little bit more generally about how the kind of evolving regulatory environment and rules can drastically affect investors and strategies and things like that. I think in terms of better ways to go public, of course, that's necessary because the normal IPO route, and Bill Gurley has been kind of the leading voice in this, but the normal IPO route is a joke. It's always been a joke. There's a reason that investment bankers have private jets and Ferraris. It's a very lucrative field because the fees that are generated by IPOs to the banker is a joke and to the early investors for whom they are allocating shares is crazy. And so to live in a market that is this efficient and still be doing things that are inefficient is crazy, of course. But there's also been fewer IPOs, or not necessarily fewer IPOs, but companies are staying private longer because there's so much more private capital today than there was 10 or 15 years ago, or certainly 20 years ago. There's trillions of more in private markets than there were 20 years ago. So the need to go public is not as great as it used to be.

And I think that's only going to grow over time. And you have a lot of companies like Airbnb and Uber before it went public that were able to get liquidity for their early investors and some of their employees because the depth of capital markets in the private arena, it was so much greater than it was in previous times. In Phil Knight's book, Shoe Dogs, which is about how he started Nike, he talks about that when he started Nike, which I think was like the late 60s, early 70s, he said there was no such thing as venture capital.

And when he was trying to fund a startup, he had to go to the bank and get lines of credit. That was his only source of capital. So we've come so far in a short period of time in private capital markets, where now if the equivalent of Phil Knight started today, he could raise billions of dollars in private markets, without everyone public. So obviously, it's a different world in that sense. But of course, it's great that we're moving towards saner views of going public. SPACs, which is like the other way that companies are going public, that seems like just a flagrant profit grab on the

people who are running SPACs. Because there's probably no greater get-rich scheme than SPACs over time, where you are running a SPAC. If you go out and find a company and convince your investors to buy it, you automatically get 20% of it without having to do anything. Not 20% of the profits. You just get 20% of the company just for finding it. Like, of course, people are going out and Paul Ryan and all these people are going out and starting stocks. You can make a fortune doing it, of course, in doing that. The thing about the rule change with accredited investors, I mean, the old rules were always kind of antiquated. The fact that they're not adjusted for inflation meant that it's been traditionally that you need a net worth of a million dollars,

which back in the 1980s was real money. And today, it's significantly less money. So of course, those rules are antiquated. I don't think if you look at the universe of mom and pop investors, of people saving for retirements and saving for their kids' college, and you look at the financial products that are available to them, I don't think any honest financial advisor would say, you know what you're missing is a hedge fund with a 10-year lockup. That's what you're light on. It's not to say that those products are not useful, but to say that mom and pop investors saving for their goals are missing out on those, I don't know if that's a really valid topic. And certainly what's going to open up are these kind of products for small mom and pop

investors where the products, it's not that they are buying them, it's that the products are being sold to them. And you know with 100% certainty that there's going to be stories down the road of a hedge fund that use these new rules to go out and sell $25,000 slugs of their hedge fund to a bunch of mom and pop investors with a two and 20 fee. And then everything went to hell and the fund blew up. You know that's going to happen. But that said, the rules were antiquated in the past. So I don't know how much change it's going to make over time. But you're right. The rules change over time. So we can't look at today's markets and compare them directly to the 1990s or 1980s because it's just a completely different game these days yeah and i guess on the accreditation

thing like my whole thing has always been uh don't make it based on income or net worth just make it like just create like the sat for finance right i think it's great yeah if you go take this online test and you pass do whatever you want with your money you're you're sophisticated enough and like if you're an idiot and you lose all your money like you know your your problem but if you can't pass like some base level of education like one actually the market will be less educated it therefore less safe in some way. But two is like, you should probably spend some time and learn about this before you actually go and do it. And I get the argument from people of like, oh, well, there should be no rules. I don't necessarily agree with that, right? I tend to

think that like, you have to have some kind of protections because there are malicious and nefarious people who will kind of prey on the wrong population. But it definitely feels like education is a better proxy for sophistication than, you know, how rich are you? You're totally I mean, how insulting is that, that we judge sophistication and intelligence by income? Like, that's absurd. I've never thought of it until you mentioned that, but like, that's absurd. There are a lot of rich idiots out there. And there are a lot of people who, because they are school teachers or firefighters don't have a high income, but they're very smart people. So of course, like, that's, that's a great point. We should measure it. And like the, the, on the,

the finance SATs doesn't have to be that difficult. You can make it a 30 question test that you take online. I totally agree with that. I got feedback the first time I ever said this, and somebody said, you can't call it the finance SAT because everyone hates taking the SAT. You got to come up with a different name so it's better marketing to elicit people wanting to actually sit down and do it because they're scarred by the memories of the SAT. I agree with that. Talk a little bit about crypto, Bitcoin, just what your general perspective is on it and how you think, you know, folks that are not in the crypto world, kind of the more traditional public market, private market investors look at it? I don't have that many, that many opinions on

I still I don't own it. But I'm not I'm not against it. I'm just kind of a fascinated observer of what's going on with it. Because it is it is, of course, fascinating, something that obviously looked like a bubble in 2010, has gone on to something that is mainstream. And as clearly Like, I'm pretty sure it was Josh Brown who made the point of like, if crypto, just because crypto has not died yet, just because it's lasted this long, that is the indication that it's something. If this was nothing, it would have died years ago. So of course, it's something. But I don't understand. I have not yet found the argument for why I need to put my money in it. Like, it just hasn't been that clear to me yet. I'm not saying I'm not going to get there. But I just haven't, I haven't dived deep enough into it to quite understand it. Some of the arguments that I've seen put forth for it, I think, are kind of nonsense, one of which is the idea that the government cannot touch your crypto. It's this hands-off, the government can't control it, the government can't do anything. Of course they can. And my example for this would be, go back to 1933. One of FDR's first rules that he put forth was, it's illegal to own gold. If you own gold, take it to the bank right now and turn it in for cash. And if you are caught holding it after this, you can go to jail. That's what they did. They did that to control the money supply during the depression. But of course, I don't think this is going to happen. But could something happen with crypto? Like you say, like the government can't, not you, but people say the government can't touch it.

The government can't do anything about it. If the government, and this is not a prediction, but if the government put out a regulation tomorrow that said, if you own crypto, you will go to jail. If we catch you owning crypto, you will go to jail, which is exactly what they did with gold in 1933. Of course, that would have an impact on the price. So when people say the government can't impact it,

like, yes, they can. The government has handcuffs and guns. They can do whatever they want with it. Well, one of the things that I've thought through, and actually, so I've talked to a lot of people about the confiscation of gold and one of the things that for sure the US has in their toolbox, they could ban ownership. There's literally been one congressman, I think it is, in California who he said this a year and a half ago, hey, we should ban this right now, right? And his whole thing was

like, he read the breadcrumbs and said, oh, if this becomes successful, the dollar fails, whatever, the whole thing. So I don't think that that's something that has not been explored by them are thought about, right? People who think that are being naive, right, at best. But what is fascinating to me, and I don't know what happened in 1933 on this perspective, is the thing that I keep going back to is like, if the US was to ban it, there's a lot of other superpowers that are looking to get off the US dollar system. So whether that's Russia, China, etc. And is there this game theory that plays out that says, wait a second, the US and US citizens are not going to use something like actually we should adopt it right and therefore like it's our you know kind of wedge

to um to kind of get off that u.s dollar system and by the way uh we all we have to do is adopt this thing that nobody owns right i don't know if that's like an actual game theory type situation that can play out it's a possibility but maybe not a probability in my standpoint what i don't know is in 1933 when they banned gold did other countries react either positively or negatively to the US doing that? I don't know if you know that. I don't know. I don't know. That's a good question. I don't know the details about that. But I've always just used that as an example of when I'm trying to answer the question for myself, what is the purpose of crypto? Is it an inflation hedge? Is it a currency that I'm going to use to spend money on stuff? Is it to prevent, is it to

protect my assets against government confiscation and inflation? When I'm trying to answer that question, those are the kind of things that I grapple with. One thing I would say about the dollar and i'm not a dollar bull or bear i don't really have any view on it but one thing about the dollar is when people wonder what is the value of the dollar what like where it gains its value from to me it's it's pretty clear if you want to work or do business in the united states you owe taxes you can only pay your taxes in u.s dollars as long as that's the case the dollar is going to have incredible insane amount of value because a lot of people want to work here a lot of people want to do business here. We make great products. And the only way that you can buy those products,

make those products, be a company that is doing business with those products is if you pay taxes in US dollars, that's what's going to create the demand. That's not necessarily the case in Venezuela or Zimbabwe when the demand for those countries' individual unique non-commodity products is very different than it is in the United States. If you want to go to school in the United States, you're going to have to pay in US dollars, as long as that's the case. and that's going to be the case for I think all of our lifetimes and the dollar is going to have value. It's not to say that the Fed can't screw things up or there's not going to be periods when it does terrible, but to me, the dollar has a lot of intrinsic value in it. Yeah. One of the parts

that you're highlighting here is almost this like, again, there's not one size fits all. And so in the US, I think the system works pretty well for you and I. If I need to go get money out of the ATM, I go to the ATM, the money shows up, right? If I need to buy something- If we lived in Venezuela, very different. Yeah, exactly. I totally buy that. And so I think that one of the mechanisms that, again, possibility, I don't even know if it's a probability, but this idea that if you're in Venezuela and your government currency fails, I don't think that people buy into it. This goes back to the psychology and kind of belief system of money. If the government's like, oh, sorry, we screwed that one up. Here's the next one. I just don't think that people are

like, oh yeah, sure. Let me just completely trust you. I think that they start to look for other types of stores of value and meetings of exchange. But today, if you look at what are the options for them, they want dollars, right? They have the full faith and credit of the US government. It's stable. All of that is true. It's hard to get. It can be dangerous. There's probably more confiscation risk in Venezuela, obviously, than the United States, but that's dependent on who you are and where you are in the country, whatever. And so this idea that if I have an internet connection, I can get access to a different currency than my own, I think is a a very kind of um it's a paradigm shift now the question is just like what is that currency is it

a non-state backed currency is it just the digital dollar digital r&b whatever and so it almost gets into this world of like what happens when everything's digitized right and digital is basically like the same technology that bitcoin runs on to some degree with some variation like every single currency has that it's almost like the competition is now not at the technology layer now it's actually like a monetary policy thing and i just don't know like what percent of the population could even describe the U.S. monetary policy, let alone other currency policies. I don't know. I don't know. It does seem like to put one point in your scoreboard, it is crazy that we've been this far into the digital era in terms of digitizing everything else in our lives. In fact,

that you and I can have this conversation from separate sides of the country, but the most fundamental part of most of our lives, money and transactions currency has not been digitized. You're right. There is a fundamental irony in that. But I just don't know enough about it to see where it's going to go yet. And I haven't been convinced yet that I should personally put some of my money into it. Of course, that's cost me all the time, but that's a different story. but but here's what i think you're bringing up which is uh and i've actually been surprised by regulators and politicians in terms of their desire to digitize the dollar right so almost this idea of like digital money is not the you know the the negative thing or the thing that they don't want it's just the idea of whether the government controls it or not right i think that's like the the when you really get at the core of like what is bitcoin it's the separation of state

and money which is you know 10 years ago sounded like an absolutely insane idea today it's you know 1% possible, right? 5%, you know, it's still so small. But I think it's more acceptable, at least in conversation than it was a decade ago. And the question is just like, where does it top out? Isn't it all money? But isn't it already digitized? Like if the Fed credits Bank of America with digital reserves, and then Bank of America makes a digital loan, and then wires me a digital deposit, like that's all digital, right? so the the big difference and i and this is where like uh the the language used ends up being like very semantics like the way that i just back out and i look at it is if you want to send money

quote unquote digitally today to a bank account in another country or uh even at another bank it can take you know two day settlement time sometimes one day settlement times and so i i always use the terminology electronic now electronic and digital are pretty much the same thing but just it to kind of decipher the difference that makes sense instead what you get is in a digital currency you get with this instantaneous settlement or near instantaneous settlement now again that doesn't change the monetary policy that doesn't change the full faith and credit the us government and the guns and you know and all that argument it's just you're just changing the technology form factor and so to me it's like it's a foregone conclusion we will get to digital

currencies it's just which one ends up being adopted by who right because the other thing is The part I always love is people think that 187 currencies, I think, in the world are all going to disappear and it's only going to be one. And the debate is like, who's going to be the winner? It's like, well, it's been 187 for a while. I don't think they're all going to go away. You're just going to have one world currency. So I don't know. It's just interesting to kind of think through.

Before I let you go, I've got a bunch of what I'll call the more intelligent questions that I got from Twitter. And I'm just going to run through these. Uh, so Rory Karen, I think I'm saying that correctly asks, uh, why do you make us all look bad all the time? What do you have to say for yourself? I'll, I'll, I'll, I'll, I'll try to reverse that again. If this is a dare for my next article, I'll, I'll try to do something about that. Okay. Uh, Jim O'Shaughnessy asks, why do you hate profits? Well, he mentioned that because as a seed stage startup, working as a startup firm, the companies that we invest in are by large, not profitable. I turned that around to Jim and I said, Jim, you are a value investor.

Why do you hate profits? That's what I want to know. The companies that we invest in are not profitable, but at least they're making money for us. The companies that you invest are profitable and they're junk. Jim and I have a long history of teasing each other about that. Jim is one of my favorite people on the internet because he always steps in with the perfectly timed gif. He never misses an opportunity. So he knows what he's doing. He is everyone's like target of who they want to be in retirement. Jim seems like he's living his best retirement possible. He just puts out gifs on Twitter all day. It seems like a wonderful way to retire. I love that. Patrick O'Shaughnessy asks, do you dream in fully formed paragraphs and narrative

structures? No, no one does. I think it was Philip Roth who said, writing is not hard. He said, coal mining is hard. He said, writing is a nightmare. That's what writing is. Writing is not easy for anyone. Maybe it's easier for some than others, but everyone, writing is always going to be difficult. And then the last question before we get into some rapid fire to end is Brent B. Shore, a little bit more serious, says, I guess you and him had a conversation around risk reward and the psychological consequences. And he said that you changed his mind about paying off a house and to get you to explain that a little bit more. So maybe tell us a little bit about not that specific conversation, but just what you guys were talking about.

Yeah. So I read about this in the book. The last chapter of the book is called Confessions, where I open up the kimono about my personal finances. No numbers, but here's what I do with our money. And one of the things that we've done is my wife and I don't have a mortgage on our house, which is the worst thing. It's the worst investment we've ever made. It's the worst thing we've ever done with our money on a spreadsheet. Because you can get a mortgage for 2.9% these days, tax deductible. It's a joke that we decline that and put a substantial portion of our net worth into a house. Why would we ever do that? Even though I think it's the worst financial thing we've ever done with the money, it's the best money decision that we've ever made. It is the

one thing that we've done with our money that I think has given us the most amount of joy, the most amount of happiness, the most amount of high fives and saying, hell yeah, I can't believe we did that. Because it gives us so much durability in our finances. So that as we look ahead, particularly now that we have young kids and that sort of stability is really important, no matter what happens job losses huge depressions whatever it may be like we're going to be okay because we have this stability and when i go back to what i was saying earlier like my financial goal is to tuck my kids in at night and just be like you guys are cool you guys are okay we're all going to be fine that to me is like why i'm doing this it's also really important because now that

my personal finances i don't want to say are indestructible i want to jinx myself like that but our personal finances are so stable it means that the odds that i'm ever going to have to sell the stocks that I own round to zero. And therefore the odds that I can actually leave those alone for another 40 years are pretty high just because our month to month cashflow needs are so ridiculously low. So that's why we've done it. I can't justify it on a spreadsheet. I can't show you a spreadsheet and say, here's why it makes sense to pay your mortgage off. But it has given us more personal family happiness with our money than anything else we've done with money. And when I talked about with Brent, that was his argument. It's like, why would you pay off a 3% tax deductible

loan? And I was like, well, here's why we did it. And it's actually makes a lot of sense and showed him that side. Brent has more money than I do. So I don't know if it's as meaningful to him, but that's why we've done it. I love that answer. That is ultimately what this is all about, right? It's just that happiness and peace of mind. So it makes complete sense. I asked the same two questions to everyone before I let you ask me one to wrap it up. First is, what is the most important book that you've ever read, and for you, other than your own? To me, the most influential book that I've ever read is a book by a historian named Frederick Lewis Allen called The Big Change, which is how America changed from 1900 to 1950. And more

technological, social, political, economic change happened during those 50 years than most two or 500-year periods in history. In 1900, it was horse and buggy. In 1950, it was nuclear bombs and jets. And the change that took place from 1950 through today pales in comparison to what happened from 1900 to 1950. And Frederick Lewis Allen lays out so clearly how it impacted American culture from the average everyday person's point of view. Just the average guy who lived in Ohio and Indiana and was going to work, like how did his life change during that period? It's so, so fascinating. And it just had a big impact on how I think about economic growth and how I think about change. Like it's so, it's hard to think about what is going to change in the economy over the

rest of our lifetimes. But when you read something like that, you realize that by the time you and I are 80, we might live in a world that is just completely, that is so different from anything that we were living in in 2020 that we can't even fathom it today. And that's, if you are alive in 1900 and 1950, that's what it was. The world that you, the daily life that you had in 1950 was unfathomable to you in 1900. It's amazing. Second question is a little bit more fun. Aliens, believer or non-believer? Oh, I think you have to be a believer. You have to. Why? If you have any sense of how large the universe is, like how self-centered do you have to be to think that we are out of the trillions of planets. We're just the lucky

ones. How full of yourself are you to think that about yourself? There's some who really do believe that we're here alone. It's the equivalent of if you lived in a cave and you thought to yourself, I'm the only person in the world with a nose. That's what it is. How full of yourself are you think? If you actually know the numbers of how many planets are out there, to think that we're of the only ones is ridiculous. It's ridiculous. One of my favorite things to tell people is like when I was in high school, there was nine planets, like I'm pretty sure. And there was a debate over whether Pluto was one or not. Right now. And then in college, you realize there's like 20 trillion. Yeah. Now that no, like I Googled it one day and they're like, yeah, there's 1400 planets. I'm

like, Whoa, where did the other 1391 come from? Right. And you're just like, all right, man. All right, you could ask me one question to finish up. What do you got for me? Is 2021 going to be the best or the worst year for the economy in history? Because I know it's going to be one of those two. You think so? Yes.

The best or the worst? Let me give you 10 seconds on that. We're either going to find a vaccine and there's going to be pent up demand for everything, for people to go to restaurants, go to travel, everything, and combine that with stimulus it's going to be just complete economic bonanza, like we've growth like we've never seen before,

or there's not going to be a vaccine, there's going to be less stimulus, a huge portion of businesses are going to go bankrupt, and then all bets are off, it's gonna be one of those two things. So I think that both of those are fair potential outcomes. The thing that I'm perplexed by, and I didn't say this before, but I invest in no public equities other than some GBT exposure in a retirement account, right? So I'm just like a bystander watching all of this happen and scratching my head being like, again, how did tens of millions of Americans lose their jobs

and billionaires made almost a trillion dollars and all this craziness going on? What I don't know is, does the vaccine actually matter? And here's been my argument is, even with the vaccine, this whole idea of like, okay now everyone's gonna get vaccinated i think that we underestimate how many people won't take the vaccine but isn't that just a problem for them if you and i get vaccinated then we can go travel of course of course but there's this like it's almost like the psychological damage is too

aggressive of a word but like we definitely look at things differently right so it you know i live in new york city uh used to go on the subway all the time uh and for whatever reason new yorkers are just like disgusting individuals like you know you grab the bar to hold on to whatever and like you knew it was dirty but you didn't like immediately like deal with it put hand sanitizer on you know whatever then during this pandemic all of a sudden they were like oh we uh we're trying to figure out how to operationally like you know clean the subways we never had to do that before you're like wait what like you guys never cleaned the subway but you know i mean like like you just get this like psychological awareness now that a lot of things in the world has changed

And so I was talking to a friend and I said, what would it take for you to go into a movie theater right now? Like, is it something that they could do? Is it everyone's vaccinated? They take your temperature. They test you before you like, like, what are the things that could happen? And he literally was like, I wouldn't go. Wouldn't do it. Just regardless of whatever you told me, whatever assurances you gave me.

And so like, that'll go away. It's just like, how long does that take? Yeah. And I just don't know. I don't know either. To me, one data point is 1918 was, as we are right now, worse than what we're dealing with right now. And I haven't seen any evidence that by 1920, there was any kind of social and any sort of cultural fear of the flu. 1920s were the era of the jazz bar and the speakeasy and people going out to dance clubs.

That's what the 1920s were all about. And that was right after they had a pandemic that was demonstrably worse than what we're dealing with right now. So if you use that as a proxy, I have a feeling. The longer this lasts, then the lower the odds that this becomes. But I have a feeling that once people are like, this is not how vaccines work and it takes time to gain immunity, but I know there's going to be people who get stuck in the arm and want to head straight to the airport and go to Disneyland right after that.

And there's going to be so much pent-up demand. Do you think it'll be the best year ever? I think it could be. That's not my baseline assumption, but I think the odds that it's one or the other are pretty high. And if you had to pick one or the other, which one do you think that the recovery and like the positive outcome is more likely than the negative outcome? I think it's more likely. I don't think it's likely, but I think it's more

likely. Yeah. That could happen. And I think, I think it's what people are underestimating the most. And maybe that's at least one explanation for why the market looks like it's bananas right now is because the market is looking ahead. Not that I want to personify the market. I think that's dumb, but I think maybe that's, that's looking ahead and saying, no, if we get a vaccine combined with a ton of stimulus and pent-up demand, things could be ridiculous in 2021. You'll love this. I'll leave you with one story,

which is my brother, he was 23 this year, turned 24. So like literally has a Robinhood account, just starting to invest, like the quintessential story. And so sure enough, one day I see him playing around on his computer and I asked him, I said, what are you doing? And he's like, I'm looking at stocks. Okay, like I already can tell where this is going.

uh and i said you know what are you gonna buy and he goes well i just bought some united airlines and i said why and uh he looked at me dead square the eye goes planes aren't going away and like from a high level like dead on from like any sort of analysis on you know why united over anything like it didn't matter it was just like he saw one that dropped a bunch and he bought it and uh and he eventually kind of you know bought some other stuff we talked about whatever but like it hit me there is so much like the deeper you go into like fintech or uh fintwit and like all of this stuff like the analysis we all get lost in it but at some level like there's literally just people who are just like well planes aren't going away right so like i also

think i also think your brother's analysis is probably closer to good advice than what a lot of people with phds will put out there and he just said it to me like with the most serious like like duh you're an idiot if you don't believe this and i just looked at it i was like that's pretty good reasoning. One of my favorite investing stories, maybe we can wrap it up with this, was I think it was 1980. Forbes magazine was listing mutual fund managers. And they noticed that the top mutual fund manager in the country was this guy who no one had ever heard of. And he had been one of the top mutual fund managers for two or three years in a row. And he was off the beaten path. He didn't work in Manhattan. He was this guy who worked in Iowa. So Forbes, or Fortune maybe it was,

sent a reporter to his office to figure out who this great investor is and how is he racking up these great returns. And they get to his office and they ask him what his investing strategy is. And the manager pulls out a copy of Value Line, which is this publication that ranks stocks from one to five, good buy versus bad buy. I think one is the best buy. He pulls out Value Line and he goes, I buy the ones that are ranked number one. That's it. And that made him the best fund manager in the country three years in a row. So I think that simple analysis actually can have a lot of merit sometimes. I love that story.

All right, listen, everyone, go pick up The Psychology of Money, Timeless Lessons on Wealth, Greed, and Happiness. Morgan, thank you so much for doing this. We'll have to do it again in the future. This has been a lot of fun. Thanks for having me.