Young and Profiting with Hala Taha - Morgan Housel: How to ACTUALLY Build Wealth, Investing to Gain Financial Independence | E266

Episode Date: January 8, 2024

Morgan Housel made his first investment when he was 18, putting $1,000 into a certificate of deposit at his local bank. When he started to make some interest on that investment, he was hooked. He devoured books on finance and economics, eventually becoming a financial columnist for The Motley Fool and The Wall Street Journal. In today’s episode, Morgan shares why he thinks finance is more like psychology than physics, some of the common emotional pitfalls related to money, his secrets to staying rich, and much more.   Morgan Housel is a partner at The Collaborative Fund. He's the author of the best-selling book The Psychology of Money. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers and winner of the New York Times Sidney Award. His latest book is Same As Ever: A Guide to What Never Changes.   In this episode, Hala and Morgan will discuss: - Serendipitously finding a job he loves - The skiing accident that changed his life - What he learned from James Clear and Atomic Habits - How behavior can trump smarts - Why finance is more like psychology than physics - Independence and the purpose of wealth - Common emotional pitfalls related to money - Secrets to staying rich - What Bill Gates can teach you about optimism - Which unappreciated trait of Warren Buffet we should emulate - How stress can be a good thing - And other topics…   Morgan Housel is a partner at The Collaborative Fund. He's the author of the best-selling book The Psychology of Money. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers and winner of the New York Times Sidney Award. In 2022, MarketWatch named him one of the 50 most influential people in markets. He serves on the board of directors at Markel. His latest book is Same As Ever: A Guide to What Never Changes.   Resources Mentioned:  Morgan’s Website: https://www.morganhousel.com/ Morgan’s LinkedIn: https://www.linkedin.com/in/morgan-housel-5b473821/ Morgan’s Instagram: https://www.instagram.com/morganhousel/ Morgan’s Twitter: https://twitter.com/morganhousel Morgan’s Podcast: https://podcasts.apple.com/us/podcast/the-morgan-housel-podcast/id1675310669  Morgan’s Book, Same as Ever (2023): https://www.amazon.com/Same-Ever-Guide-Never-Changes/dp/0593332709/  Morgan’s Book, The Psychology of Money (2020):https://www.amazon.com/Psychology-Money-Timeless-lessons-happiness/dp/0857197681    LinkedIn Secrets Masterclass, Have Job Security For Life: Use code ‘podcast’ for 30% off at yapmedia.io/course.   Sponsored By: Shopify - Sign up for a one-dollar-per-month trial period at youngandprofiting.co/shopify Nom Nom - Go to youngandprofiting.co/trynomnom for 50% off on your two-week trial  HelloFresh - Go to HelloFresh.com/profitingfree and use code profitingfree for FREE breakfast for life! Indeed - Get a $75 job credit at indeed.com/profiting   More About Young and Profiting Download Transcripts - youngandprofiting.com  Get Sponsorship Deals - youngandprofiting.com/sponsorships Leave a Review -  ratethispodcast.com/yap Watch Videos - youtube.com/c/YoungandProfiting   Follow Hala Taha LinkedIn - linkedin.com/in/htaha/ Instagram - instagram.com/yapwithhala/ TikTok - tiktok.com/@yapwithhala Twitter - twitter.com/yapwithhala   Learn more about YAP Media Agency Services - yapmedia.io/

What's up, young and profitors? Please consider supporting the sponsors of our show today. Shopify simplifies selling online so you can focus on successfully growing your business. Sign up for $1 per month trial at Shopify.com slash profiting. Nom, nom delivers freshly made dog food straight to your door. For 50% off a two week trial, go to trinom.com slash profiting. Skip the grocery store and save time with easy, tasty recipes delivered to your door with HelloFresh. Go to HelloFresh.com-profiting-free and use code profiting-free for free breakfast for

life. Indeed is the hiring platform where you can attract, interview and hire all in one place. Start hiring now with a $75 sponsor job credit to upgrade your job post at indy.com-sashprofiting. As always you can find all of our deals in our show notes. If you don't have control over your behavior, you can and very likely will go broke. Just yesterday the story came out about this guy who lived in a trailer. When he died he left $4 million to his town. He does not have the pedigree. He does not have the degree from Harvard, but he was clearly patient, not greedy,

and because of that, he became very wealthy. In your book, you quote Benjamin Franklin, who once said, if you would persuade, appeal to interest and not to reason. People underestimate the power of incentives. Everyone thinks, oh, my moral boundaries are right here. But if you had a $6 million bonus, dangled in front of your face.

You'd be like, oh, maybe I can shift a mat a little bit. The biggest risk is what you didn't see coming. Pearl Harbor, September 11th, COVID. The three biggest societal shocks that we've dealt with in America. And the common denominator of all three of those is that nobody, certainly no ordinary American saw those coming until the day that they happened. If we don't know what they're going to be, how can we prepare for these risks? I don't think I've ever told this before, but I'll tell it here.

Welcome back to the show, ya fam. With a podcast name like Young and Profiting, it's no surprise we often talk about the ways we can profit in life on the show, one of the main ways being money. Today, we again are talking about money, but specifically the psychology and human behavior surrounding money and investing. And my guest today literally wrote the book on this topic. Morgan Howell is a partner at the Collabor collaborative fund, and previously he was a columnist at the Motley Fool and the Wall Street Journal.

He's a two time winner of the Best in Business Award from the Society of American Business Editors and Writers, and Market Watch has named him one of the 50 most influential people in markets. His book, The Psychology of Money, was a bestseller, and he's got a brand new book called, Same as Ever, A guide to what never changes. Morgan, welcome to Young & Profiting Podcast.

Thanks so much for having me. Happy to be here. I am very excited for today's episode. We've been trying to get on this conversation for like a year now. So I'm going to cut straight to the chase. You are a master of many trades. You're a best-selling author, investor, you're even a podcaster. So how do you define what you do today?

It's such a good question. I would say, I don't. I've never tried to put myself in a box, and I think I've moved around over the years. I think if you asked me that question 10 years ago, I would have said, I'm an investor who writes. And maybe if you ask me today, I would say, I'm a writer who invests. I just switched around what I enjoy doing. And it used to be that all of my emphasis and research and enjoyment was investing. I want to scour the world and study investing history and whatnot. And I still love that. I'll always do that. But the art of storytelling really bit me 10 or 15 years ago. And that's what I've really find joy in doing now.

And that's the craft that I want to hone. And I think jumping around like that has been really important. If you just put yourself in a box and say, I am a blank. You're cutting off so much of the world that you might find enjoyment in and have some talent in doing.

Yeah. And when did you first get interested in finances as a young man? I think I was 19 when I first stumbled across investing. I've told the story before, but it'll always stick with me. When I was 18, my grandparents gave me $1,000, and I put it in a CD at the bank, certificate of deposit where it earned interest. And I think I intuitively knew what interest was, but I didn't really get it.

And I remember I logged into my account the next day, and the balance had grown from $1,000 to $1,000 in three cents. I earned three cents of interest, and I remember jaw hitting the floor, being completely stunned that I just earned money for doing nothing, just for waking up in the morning, somebody paid me. I knew at that moment I was like, this is the thing, this is what I love doing. And so all throughout college, I wanted to be a hedge fund manager

or an investment banker. I think in that era, like the mid 2000s, that's what everybody wanted to do in that field. And then I kind of stumbled haphazardly across writing. It was never part of the plan. I never wanted to become a writer. And even when I started doing it, I was a senior in college when I got a job at the Motley Fool writing about stocks and I didn't want to do it

I just needed a job But I fell in love with it. So I think that in itself is a lesson particularly for people in college You might think you know what you want to do and you have a goal and you have a path in front of you But so many people including myself probably you Stumble into what they actually love and want to do serendipitously. So I think it was great that I did not follow the path that I thought I had paved for myself and just stumbled into something else. Yeah, and it sounds like you had an open mind to explore different skills and see what you were good at. And then then you were able to merge finance and writing, which you didn't expect to actually do

into a career as an author, a best-selling author at that. Well, here's what's really interesting. I would not say I had an open mind about it. I graduated college in 2008 when the world was on fire, and everything was burning down. The economy, no one in finance was hiring. Everybody was laying people off. So I found a job at the Motley Fool as a writer,

and I took it because I had rent to pay. That was why I took it. I didn't do it because I was hiring, everybody was laying people off. So I found a job at the Motley Fool as a writer, and I took it because I had rent to pay. That was why I took it. I didn't do it because I was like, oh, maybe I like writing, that'll be fun. I took it because I was like, I need a paycheck today. And they were the only people in finance who were hiring. And so for the first six months, I not only did I not really like it,

I was kind of ashamed of it. I was like, I wanna be a hedge fund manager, and now I'm a blogger. What is this? After about a like, I want to be a hedge fund manager and now I'm a blogger. What is this? After about a year, I started to really enjoy it and just love the craft of writing. Yeah, and that makes sense because usually if you don't have experience, you're bad at that thing and then you feel demotivated because you're not that good at it, but over time if you get better, you can enjoy it and find motivation I'm sure in what you're doing. I think if there is one thing that has really helped me in my career,

it's a combination of, for the first two or three years, I had to do that job because nobody else was hiring. And then after that, I think I've just been stubborn. I don't know if it's patience or stubbornness or a mix of the two. But I've been writing about behavioral finance every day for 17 years. And if you do anything for that long, you'll gain some proficiency. No matter what it is, anybody in any field, if they do it every day for 20 years, will get good at it.

And so I think that's been just like sticking with it has been what's helped me the most. Yeah. And I think something that also changed the way that you think about the world is actually an accident that happened when you were younger on ski slopes. It severely impacted you. It's really, really traumatic and tragic what happened. Can you tell us about that and how it shaped

the way that you view the world? Yeah, so I grew up as a competitive ski racer in Lake Tahoe, California. I was on the Squa Valley ski team and that was my life from my childhood and my teenage years, skied six days a week, 10 months a year, all over the world racing.

It was great. It was such a cool experience. And there were about 12 of us on the Squa Valley ski team. We were all best friends. We had been together since we were children skiing six days a week all over the world. And so one day in February of 2001, I was 17 years old. And I was skiing with my two best friends. We had grown up together.

They were 17 as well. And we would ski down the backside of Squaw Valley, which is out of bounds, which you're not supposed to do. You duck under the ropes that say, do not cross. But we did this because we were young and rebellious, and that's where the best skiing is. It's untracked. You have the place to yourself. Now, when you ski out of bounds like that, when you get to the bottom, there's no chairlift, because you went out of bounds. So it would spit us out on this backcountry road and we would hitchhike back. We love doing this.

It was kind of a thrill, like we got to hitchhike. It was all very rebellious. Something that 17-year-olds do. So the three of us ski this run. And as we're skiing down, I'd very vividly remember we triggered a small avalanche. And it's a feeling that you will never forget because rather than pushing on the ground with your skis to gain traction and control Also, the ground is pushing you and avalaches are very

powerful. You'll be skiing down and then also you have no control and it'll push you 20 feet this way and then jolt you 30 feet that way But it was pretty small and it ended pretty quickly and three of a ski down and we like high-fived about it at the bottom. We were like, whoa, do you see that? I have a little show so cool. We hitchhiked back and Brendan and Brian, my two friends were with me. They said, hey, let's do it again. That was great.

Let's go ski that run again. For whatever reason, I don't really know. I said, I don't wanna do it again. But how about this? How about you guys go do it again? And rather than hitchhiking back, I'll drive around to the side of the mountain and I'll pick you up in my truck. So you don't have to hitchhike. They said, great, let's do it.

We made that plan. We went our separate ways. They went skiing. I went back to get my truck to go get them. 20 minutes later, I drive around to meet them at the pickup spot where I was going to meet them and they weren't there. And I really didn't think anything of it. I thought that they had priority hitchtike back and maybe I was going to meet them and they weren't there. And I really didn't think anything of it. I thought that they had priority hitchtike back and maybe I was late. It didn't really bother me. And I went back to our locker room where I expected to find them and they were not there either.

And nobody had seen them. At that point, I started to wonder what happened, but I really wasn't worried at that point. Several hours later, Brian's mom called me at home and she said, hey, Brian didn't show up for work today. Do you know where he is? And I told her the truth. I said, yeah, we skied down the backside out of bounds and I was going to pick them up, but they never showed up. And I think in that moment, she and I pieced together

what probably happened here. Later that day, several hours later, we got the police involved, missing persons report. They eventually, we had turned into, we got search and rescue involved. Search and rescue went on the hill at about midnight to start looking for them. They had these giant portable floodlights and a team of search dogs, search and rescue dogs. And then later the next morning, after about nine hours of searching, when the search and rescue workers got to the area, the out of bounds area where I told them we'd skeen, they said it looked like half the mountain had been torn away from what was clearly a very fresh, just massive, enormous avalanche. And avalanches can be the equivalent of like a tsunami, just unbelievable amount of power. They can snap giant trees with their force. And it had clearly just been a massive avalanche here. The search dogs

eventually homeed in on a spot in the avalanche field where rescuers who had these giant pro poles found Brennan and Brian Dead in the avalanche. They were buried about six feet under so of course I always have to say when I tell this story I think you and everyone else listening has been lost somebody dear to them It's not unique in that sense. I don't want to pretend like it was unique that I had a friend who died Most people have experienced some version of that of course I had a really profound impact on me and one of the reasons why and it took me a while to really piece us together It was if I had gone with them on that second run

100% chance I would be dead. It was such a massive. It took out everything in its path And so then I look back on it And it's like the most important decision that I ever made in my life by far was not going on the second run and I didn't put any thought into that decision. I didn't weigh the pros and cons. I didn't do a risk analysis. It was just a brainless dumb decision. Why don't you guys go do it? I'll do something else. And nothing in my life has mattered more. And I think a lot of things in life are like that, where in hindsight, and only in hindsight, do you look back and you're like the worst or the best thing

that ever happened to me came about because of this dumb brainless decision. And maybe people listening to this today, if you left your house for work at 8.53 instead of 8.54, you may have died in a car accident. You know, I'm making this up, but there's all these just random, like you understand how

the world hangs by a threat of these decisions. And when you come to terms with that, I think it makes you much more humble in your ability and willingness to predict what's going to happen in the future. When you see how fragile it is, you just realize you have no idea what's coming next. Yeah. And so you accomplished a lot at a young age. Like I said, I hopped on the column. It was like most people I interview are like 50, 60 years old or whatever, you're definitely not that old, right? So you accomplished a lot in your life.

Do you feel like it's because you had this experience that 17 years old losing your two best friends and realizing how fragile life is, like you better get at it? I think that would be a small part of it. I think in a broader sense, ski racing was so important because we were independent and treated as adults since we were like 14. And we would travel around with the coaches skiing, but the coaches, God bless them, would

just go to bars and then like we were out being adults for better or worse. But I think that created an incredible sense of independence and like forced you to grow up very fast. That had a big impact on me, but certainly losing my friends at that age made me realize how fragile life can be. And I think my perception of risk changed dramatically after that. And after that, I would not take risks that I would have before that because you see the consequences of your actions.

Well, yeah, when you're that young, it's inevitable. A lot of people at like 18, 19, 20, that's when you're doing the most drugs and like all this kind of stuff because you just think you're invincible. So I have a feeling you probably didn't really do much of that at all. I think even before that happened, I was always kind of, I had friends who were doing it more than I, I'm not going to sit here and say, I did none of it. But, okay, I'll give you a specific example. I was telling my wife the other day, I remember when I was 18, one of my friends had cocaine. And I was like, absolutely not, like not even in the slightest to the million years when

I touched that stuff. Never. But all my other friends are like, yeah, that's giving a whirl. Let's see how this works. So even at that age, I think just naturally, I had a risk assessment that was different from my friends, yeah. So you worked at Motley Fool like you were saying, you got a job right out of college at Motley Fool,

and you actually thought you were gonna stay there and work there forever. You bought a house, you know, the headquarters, and you thought you'd never leave. So what actually changed your mind to pivot your career a bit? Yeah, it was one of the hardest decisions of my career, because I was really happy and comfortable at the Motley

Fools. A great place to work still is filled with great people. I was happy there. Got in Craig Shapiro, who runs a private equity firm called the Collaborative Fund, reached out to me in 2015. And he just said, Hey, I like your work. Why don't you come to Collaborative Fund and just keep doing it. Keep doing exactly what you're doing, but just do it here. And I said, Hey, I'm flattered, but I'm'm really happy here. No thanks. My wife and I had just had our first kid who was two months old at the time. I was not prepared to just throw

my career upside down. But he kept pushing and kept pushing and kept pushing. And I think what the decision for me eventually became was, if I stay at the Motley Fool forever, from the time I was in college until I retire in my 60s Well, I regret never trying something different and I think after a while I realized that the answer was was yeah, I think I might wonder what else was out there So I finally joined collaborative fund in 2016 and it's been amazing You know that was before I had written books or done anything like that and Craig was one of the only people I think in the world who would say,

Morgan, just go do your thing. I'm not gonna tell you what to write or when to write. And I don't write about what collaborative fun does. I just, I feel like it's just my own canvas to write about anything that I'm interested in. And so that was a really rare opportunity. Almost every professional writer at an organization, if you write for the Wall Street Journal or Reuters

or CNN or some given editor telling you what to write, how to write it, when to turn it in. And I think that just strips away the art of writing. It just turns it into a job instead of an art. So I really enjoy the artistic side of it. At what point did you decide, hey, I want to write actual books, not just for a blog. Was that a conscious decision or was that when you went to this new fund they told you, hey we want you to write books? No, definitely not the latter. And it was a conscious decision for a long time to not write books. I never saw the point in it. And I would always say, look, I blog twice a week. Why does it matter if it's stuffed in between two pieces of cardboard? It's

the same thing. It's the same words. I'm still writing, so who cares? So that was why I pushed off writing books for years. A publisher came to me in 2014, maybe 2013, and said, hey, we want you to write a book. And I was absolutely, I'm not ready. I don't want to do it. It sounds hard. And so, in hindsight, I'm so glad that I waited because I became a better writer. I had more content to use for the books. So, the fact that I was so stubborn about doing it, it was so beneficial to me. In 2018, I wrote a very long blog post called The Psychology of Money. It was a 10,000-word blog post, which is very, very long.

Most books are about 50,000 words. So, it was one fifth of a book in a blog. It was the biggest blog post that I had ever written. It did really well. It was well received. And so that was when I was like, oh, people like this style and format and this substance. And it's not going to take me that much effort

to expand what I already have into a book. And so that was when I was like, okay, like I'm finally going to do this. My wife had kept convinced me. I don't think I've ever told this story before, but I'll tell it here. Yeah, Tony. An author named James Clear,

who wrote a book called Atomic Habits. It's the best selling and one of the best books of the last generation. It's just an absolute gem of a book. And he published his book in 2018. And I think it was seeing the success of Atomic Habits that I was like, I want that. It was not jealousy, it was not envy, it was seeing the success of atomic habits that I was like, I want that. It was not jealousy, it was not envy, it was motivation.

What James has, I want to chase it. And James, as you will see when he comes on, is the nicest, most humble, politest guy you'll ever meet. So the fact that not only had James had success in a book, but I was like, I want to be James. Not like, not just his success, I want to be him. It was like a big motivator for me to be like, okay, I really want to write a book now.

And James and I have become friends since then. It's actually interesting. In the summer of 2018, I was in Omaha, Nebraska for the Berkshire Hathaway Shareholder meeting. And we rented a house with like 10 friends. And this random guy came over to have dinner. I don't know who invited him. No idea who he was.

He introduced himself. He said, hi, I'm James Clear. I'm writing a book called Atomic Habits. It's going to come out in a couple months. And so we had no idea, like in hindsight, looking back, it's so funny to piece all that together. Yeah, that book is huge. I think to this day, it's still like on all the bestseller list.

So like you were saying, you wanted to become an author because you saw the opportunity and you were like I want what James Clear has. How has being an author actually transformed your career like what opportunities have come about? I'm sure you like weren't doing podcasts before you had a book, is that right? I'd say In some ways nothing has changed and in some ways everything has changed. Nothing has changed because I still write about the same topics I still read the same topics. I still sit in the same chair and think the same way. My wife and kids don't treat me any differently. In most ways, nothing has changed. What the book did to me, and it's a very real thing, is it gave me independence, which is a big topic in psychology of money.

What you want to use money in wealth for is to gain control over your time. And if I'm being honest with you, I feel like I'm really opening myself up in this podcast here. Before the book, I was always filled with career anxiety. What happens if I hit late off? What happens if this doesn't work? And it really scared me, particularly as I became a father, I got mouths to feed. What happens if this doesn't work? That's the one thing that's changed post books, a greater sense of financial independence. That means the world to me. And I also, my life has pointed this out too. I think I've been in a better mental state post books that I have in my life. It didn't make me happier, but I think it removed anxiety from my life.

It's interesting that in a way, that was what the book was about. But then because of writing the book, I got to experience it myself, that was what the book was about. But then because of writing the book, I got to experience it myself, which has been the cool thing. And why do you think that freedom has come about? Is it because you're getting speaking engagements that you're like pulling in extra revenue streams? Obviously, book sales has some revenue streams

but book sales these days. Don't really move the needle, right? Maybe your book's still. But what do you think changed in terms of you feeling that you have more freedom? It's all the above. It's book royalties. It's speaking.

It's all the above. And we haven't really changed our lifestyle to any meaningful degree. We live in the same house and drive the same car and whatnot. A lot of that is just a crude to net worth. This is what I write about psychology money too. Wealth is what you don't see. It's not the cars that you buy. It's not the house that you buy.

Wealth is the money that you buy, it's not the house that you buy. Wealth is the money that you've saved that gives you independence that allows you to do whatever the heck you want to do. And so that's what it's been for us. It's like we've saved the vast, vast majority of it. And because of that, the anxiety that I had of what if back then has largely been stripped away. Now you will never get rid of what if, because what if you get hit by a car? You're never going to remove risk. But a lot of the tangible career risks that I had five years ago has dissipated. Let's hold that thought and take a quick break with our sponsors. Young and Profiters, last year when I launched my course, I had to work really

hard to get people down the funnel to my website, and the last thing I wanted was to turn my potential students off with a clunky user experience, and by no means am I a web developer. I may not have coding skills, but who needs that when you've got Shopify? Checking out on Shopify takes just one click, so whether you're selling an online course or merchandise, Shopify is the best place for your business. Shopify is your secret weapon for selling smarter at every stage of your business. Whether you're at the Launcher Online Shop Stage, the did we just hit a million order stage or even the, oh my God, we're going to IPO stage.

Because here's the truth. Businesses that grow continue to grow with Shopify. Shopify's one tap secure checkout with Shopify is the best converting checkout in the world. We're talking up to 36% better than other leading commerce platforms. In the world of online sales, high conversion rates are gold. The easier it is for your buyers to buy, the easier it is for sellers like you to sell. If you're tired of abandoning carts, it's about time you abandon your inferior commerce platform. Switch to Shopify today and watch your business thrive.

As another your approaches, don't miss out on another sale. Set yourself up for success by making the switch to Shopify. Switch to Shopify today for $1 per month trial at Shopify.com-profiting. Go to Shopify.com-profiting and switch to Shopify today. Shopify.com-profiting. Young and profitors, what's a game where no one wins? The waiting game. When it comes to hiring, don't wait for great talent to find you. Find them first with Indeed. When you're hiring, you need Indeed.

Indeed is the hiring platform where you can attract interview and hire all in one place. Indeed is the only job site where you only pay for applications that meet your must-have requirements. And candidates you invite to apply are three types more likely to apply to your job posts than candidates who only see it in search, according to US and D data.

What I love about Indeed is that it does all the hard work for you. It shows us quality candidates whose resumes, fit our descriptions immediately after we post up, and then we get matched with quality candidates instantly. According to TalentNAS 2019, Indeed delivers four times more hires than all other drop sites combined. Indeed streamlines the hiring process with powerful tools

that help you find match candidates. With Instant Match, over 80% of employers get quality candidates who's resume on Indeed Matches their drop description, the moment they sponsor a job. At YAP, we use Indeed to hire all of our new talent. That is the first place we go to put up our job posts. Join us and more than 3 million businesses worldwide that use Indeed to hire great talent fast. Start hiring now with a $75 sponsor job credit to upgrade your job post at Indie.com-profiting. Offer good for a limited time. Claim your $75 credit now at indie.com slash profiting. Just go to indie.com slash profiting and support the show by saying you heard about it on this podcast.

Indie.com slash profiting. Terms and conditions apply. Need to hire. You need indeed. Okay, so your book, Psychology of Money, came out in 2020, was a huge hit. And you say in the book that money has little to do with how smart you are and a lot to do with how you behave. So let's start there. I think it's a good foundation of the book.

Can you shed some more color on that and give us examples of how behavior can actually trump smarts? Well, here's how I always define it. If you are the smartest financial mind in the world, you have a PhD in finance from Harvard, you know all the numbers, you won the Nobel Prize in economics, but you don't have control over your behavior. You don't have a control over your greed

and fear or patience or temper. You can and very likely will go broke. And the flip side of that is if you have no financial education, you don't know anything, you didn't graduate high school, you're a country bumpkin who knows nothing. But you do have control over your greed and fear and patience and temper. You have everything you need to become wealthy. Just yesterday, there is a new story that came out about this guy

who lived in the middle of West Virginia or something like that and lived in a trailer. I heard this. He recently died and he left $4 million to his town. Yeah. That's the perfect example. He does not have the pedigree. He does not have the degree from Harvard. He did not work at Goldman Sachs.

But he was clearly patient, not greedy, etc. And because of that, he became very wealthy. So there are very few fields in which that's the case. If you did not go to medical school, you do not know how to perform open heart surgery, full stop. But it's not like that in finance. You don't need the education to do well as long as you have the behaviors. So because it's one of the few fields that's like that, it's easy to overlook what you need. And most people, if they're like,

I want to become a good investor, they're like, great, I'm going to go get a degree in finance, I'm going to memorize all the formulas. And by and large, that's not what you need. What you need is the behavior. Now, for a lot of people that behavior is nature instead of nurture. They're born understanding. Their brain is wired in a way that lets them do it.

And some people are the opposite of that. But just understanding what you need and what you don't is I think the most important thing of doing well with money. And just to dig in on what you said, you also say in your book that we learn traditionally about finance like its physics, right? Its rules, there's laws, but you say we should look at it more like psychology with emotion and nuance. Can you dig deep around that? In math and in physics, there's one right answer for everybody.

So if I say what is two plus two, it's for no matter who you are or where you're from or where you live or how old you are. But in finance, it's not like that because if I say how should you invest your money, well, what works for me might not work for you and vice versa. Everyone listening, we're all going to come to a different conclusion because our risk tolerance is different, our social aspirations are different, our time horizons are different, everything is different. So it's much closer to like taste and music. And if I said, what's the best music?

There's no one answer for that. It just depends who you are and what you like and how old you are. Music that I liked when I was 15 would be atrocious to me now. So you're gonna change throughout time. That's most of the nuance in finance is just realizing that there is not one right answer. And I think the majority of the time in finance when people are arguing with each other

about how should you spend your money? How should you invest your money? They're not actually arguing. They're not actually debating. It's just people with different experiences and different risk tolerances talking over each other. And it's the equivalent, if I think X and X is good for me, you might think X is terrible because it would be bad for you. That's the biggest issue with financial debates. So this reminds me of something that you were just mentioning, the fact that you and your wife have basically stayed at the same goal post all these years. You drive the same car,

you live in the same house. You haven't really increased the amount of money that it costs to live your life, but you've both increased your income, so you're able to save more. Talk to us about this importance of knowing what your own goal post is and why that matters. The first thing I think is important is like, we live a great life. We live in a great house and a great neighborhood and we take great vacations.

We are not the kind of people, like the guy who's living in the trailer and it's like leaving all this money. There is obviously some balance to it. But I think the idea that if your expectations grow faster than your income, you will never, ever be happy with your money is one of the most important and powerful realizations in finance that there are hedge fund managers who make a hundred million dollars a year and feel like they're falling behind because their buddies make two hundred million a year. There is no cap to that. Elon

Musk displaced Jeff Bezos as a richest man in the world. I don't know this to be the case, but maybe that bothered Jeff Bezos because now he's only worth a quarter of a trillion dollars while Musk was worth a third of a trillion dollars. There's no end to financial comparison. And so, yes, it's important if you want to do well with money to grow your income, invest your money, grow your net worth. But it is equally important and very easy to overlook that you also need to go out of your

way to manage your expectations. And just be happy with what you have. Knowing that if you get the bigger house or the nicer car, it's going to feel cool for like four minutes. And then you're going to get used to it and it's not going to feel any different. And so look, we live in a nice house in a safe neighborhood. All of that checks all the boxes. But there is this thing of, yeah, but if we got so, look, we live in a nice house in a safe neighborhood. All of that checks all the boxes. But there is this thing of, yeah, but if we got a bigger house, we

wouldn't be any happier. And we might actually spoil the expectations of our kids who think that that bigger house is now the norm. So this is something that like we always battle with because even for us who believe this and live it, the expectation of, ah, maybe we should get a Range Rover. It's always there, that feeling, that drive is always there. But then just taking a step back and be like, well, is there something else we could do with our money? Would the vacation make us happier? Would donating it make us happier?

That battle is always there, but whenever we've experienced it, and when you go out of your way to keep your expectations low too, then your drive for a better life moves away from what's the next car, what's the next house. Actually what makes us happier is spending more time with our kids, going for walks with my wife. So like, hey, can we use our money to do that? Use our money to free up our time so that we can spend more time with our kids and with

each other? Because that's definitely going to make us happier. But the Range Rover probably won't. That's the debate that we always have in our heads. Yeah. And as I get older and make more money, I feel like I'm actually becoming smarter about the way that I spend my money, because I realize how much I have to work for a certain amount of things.

This reminds me, it was Thanksgiving yesterday, so I saw my family. And my sister-in-law has never worked today in her life just carrying a $6,000 bag. Meanwhile, my company made $5 million last year and my most expensive bag is like $3,000. It made me realize how much different people's priorities are and how people spend their money and manage their money is so varied in terms of what people

believe success looks like in terms of how much they want to save and it's so, so varied across the spectrum. It's so varied and this is one thing that I've kind of tweaked my views on in the last couple years is that the $6,000 back for your sister-in-law, maybe that is the best use of her money. Yeah. Maybe it's not, but for some people, it would be. Even if for my wife and I, or maybe you, it would not be to each their own. And there are a lot of people who will look at how my wife and I spend our money, particularly the few of our friends who would know our income.

And then look at how we spend, we'll be like, what are you guys doing? You are missing out on so much. And I don't think we are. I think we're pretty cognizant of what we're doing and how we spend it and we're doing the best Thing for us which to me all that matters. I've never wanted to become the Manchin Lamborghini guy. I've always wanted to become the independent guy who can just do whatever he wants any day And no one's gonna tell me what to do or when to do it. I'm not like a, I've reject

all authority kind of guy. I'm not like a hardcore libertarian, but for money stuff, for work stuff, I'm going to have the most fun and do the best work if it's on my own terms. So the fact that I can write what I want when I want. And the reason I can do that is because I have some sense of financial independence. I don't need to work for the salary company. That is the best use of money for me by far. I want to talk a little bit more about the purpose of money. You've been alluding to it. But talk to us about why independence and autonomy is really the purpose of gaining wealth. I think back to what we said of everyone's different and maybe the $6,000 handbag is right for you, but not for me. But if there is one common denominator of which almost everybody from every culture

and every age is gonna get benefit from, it's independence. People by and large do not enjoy being told when to work, how to work, and what work to do. They do that because they have to. They need the paycheck and that's the way to do it. But when most people, the first taste of independence, they have, they're like, oh, that's good. That's the one I like. And even if you are working for a salary company, if you have a boss and in a position that

gives you independence and autonomy, not only is it more enjoyable, you're going to do better work. The quality of your work is going to go up if you're doing it on your own terms. It's such a universal driver of happiness. And maybe that's actually the wrong word, because independence doesn't necessarily make you happy, but it removes unhappiness. That's an important nuance, but it's really important. People who are wealthier by and large

do not wake up happier. Happy in the sense that they wake up smiling every morning. It's not that, but I think they have fewer bad days. And that is a huge life advantage to remove uncertainty and misery from your life is massive. It's one of the few things and money that tends to be universal. And it's also very easy to overlook because particularly for young people, and particularly young men, the major reaction of why do you want to become rich is so I can have nice stuff. So I can have a big house in a fancy car. And it's easy to overlook what's actually going to bring you the most joy is using it

to give yourself independence. I love that. So let's talk about emotions and money. What are some of the common emotional pitfalls that a lot of us fall under when it comes to handling our finances? The two biggest I come to mind, one from personal finance and one from investing. In personal finance, it's social comparison. And there is no such thing as an objective measure of wealth.

Everything is just relative to what other people have. You look at your house, your car, your bank account, and you say, what do I have compared to that person? That person is usually your friends, your neighbors, your coworkers, but also just people on social media. That is the fuel to move the goalpost. Because even if you are doing well, you're going to start looking at people who are doing better than you, and you're always going to feel inadequate. And it's very hard to break that cycle.

Social media makes this so ridiculously difficult because now the people who you are comparing yourself to is like the curated algorithmic reel on TikTok and Instagram that knows exactly what's gonna make you anxious. They know exactly which posts are gonna make you feel inadequate because that's what's gonna get you to stare at it the longest and be like, why don't I have what he or she has? That's like a really difficult trap to break. In investing, the pitfall is FOMO. It's fear of missing

out. It's similar to social comparison. That person is getting richer than me, and therefore I need to take more risks or try to copy that person in order to catch up to him. And the danger in that is that just like in gambling, everyone on social media talks about their wins, never their losses. So the people who look like they are getting so much richer than you, A, probably or not, that gets probably some sort of mirage. But because you don't know that, you're going to start taking risks that you shouldn't and can't afford to take. In 2021, where there was like the Robin Hood explosion in investing,

it went supernova at that point because you had all these 19-year-old people who were like, I just made $20,000 on Robinhood and you should be able to double your money every week. A, most of the hat was bullshit. And B, the people who looked at that said, I need to go start trading options too. And you know how that ended for the vast majority of them. It ended in tears and losses. And so all of that is driven by FOMO, the idea that someone else is getting richer than you and you need to catch up. And so if you can break away from that and realize that there are always people who are either look like or actually are getting richer than you, and that's fine. That's totally fine. It's unavoidable. You don't need to catch them.

You just need to play your own game and do what works for you. It's really important. Yeah, I feel like everything you're saying is reminding me of this bag story from yesterday. That's kind of why I brought it up is because at first I felt bad. I was like, man, she's got a $6,000 bag. I worked so hard. I don't have a $6,000 bag. And then I realized, well, I could have a $6,000 bag. These are just not my priorities.

So to your point, everybody has different gold posts. And just because somebody looks like they have a $6,000 back. These are just not my priorities. So to your point, everybody has different gold posts. And just because somebody looks like they have a lot of money, doesn't mean like behind the curtain that they actually have much going on at all. I would actually take it a step further, with nothing to do with your sister, Lon. Yeah, nothing like sister and Lon, but it's... I'm sure she's wonderful.

Yeah, just to see example. Yeah. When you see somebody driving a $100,000 car, the only thing you know about their finances is that they have $100,000 less than they did before they bought the car. You have no idea how much money they have. And I learned about this when I was in college.

I was a valet at a nice hotel in Los Angeles. And these people would come in driving porches and ferraris and Lamborghinis. And then if you get to know them and talk to them, you realize they're actually not that successful. They just spent half of their salary on a Lamborghini lease payment. The vision that they had, the identity of, oh, this guy's driving a Lambo, he's clearly super successful. No, you actually don't know that at all.

And it's the classic millionaire next door of like a lot of the people who are very successful are actually driving F-150s. They're actually driving Toyota 4Runners. And you would never know it because that's why they're rich. It's because they actually invested their money instead of spending it on a car they couldn't afford. Yeah, I love it.

So related to this, you say that keeping money and getting money are two very different skills. You actually say that if you could summarize money success in a single word, it would be survival. So talk to us about how we can actually keep our money and the main ways that people tend to lose their wealth. It's just this idea that getting rich and staying rich are two different skills. And they're often conflicting skills, which means it's hard for people to do them at the same time. Getting rich requires taking a risk, being optimistic about yourself, being optimistic about the economy and the stock market,

that's what you need to get rich. And staying rich is almost like the exact opposite. You have to be a little bit paranoid, a little bit conservative, scared of risk, cognizant of risk, in order to make sure that you're not taking big enough risk to throw yourself over the edge. I think one way to summarize it is save your money like a pessimist and invest your money like an optimist. Save your money with the idea that the world is risky and dangerous and fragile, and there are always recessions and bear markets and pandemics and terrorist attacks and wars and political mess-ups that you need to be able to endure financially. But if you can, if you can, keep your head on straight during those periods,

the rewards for those who stick around are incredible. I've been investing for 20 years, 2004 is about when I started investing. During that time, there has never been a single moment in which you couldn't point to a dozen things going catastrophically wrong in the economy. Every single moment stock markets overvalued, companies are doing very well, unemployment's too high, inflation's too high, interest rates are too low. At any moment, you could have pointed to a dozen things. And during those 20 years, the stock market is up fourfold.

That's how investing works. You have to save like a pessimist to endure all of those dozen things to point at. But if you can stick around, you look back over a 20-ap period and you're like, man, I made four times my money during this period. It's incredible. That's always how it works.

Saving like a pessimist, investing like an optimist. So Bill Gates started Microsoft, and Bill Gates actually is more of a pessimist. Talk to us about how he's used his pessimism to set up Microsoft for success, because even in 2023, Microsoft is a huge company that's growing and leading the AI charge and everything like that.

I think Bill Gates is the best example of someone who has gotten optimism and pessimism to coexist. Because when he started Microsoft in the 70s, he took the most optimistic swing that any entrepreneur has ever taken. When in the 70s, he said every desk in the world needs a computer on it. That was the craziest idea in the world, crazy optimism. At the same time, from the day he started Microsoft, to the day he left in 2000, he ran it as conservatively as you possibly could. He said he always wanted enough cash in the bank so that he could run Microsoft for one

year with no revenue. Like the most pessimistic way to run a business, I think that's why they've done so well. It's not that they're always optimistic or they're always pessimistic. They realize that if you can survive all the uncertainty and all the upheaval, then you have a fighting chance to actually compound for 50 years as they have. And very few businesses are actually like that. If you have a very optimistic CEO, they're like, let's bury our self-indead and invest every penny that we have and swing for the fences. And nine out of ten of those businesses are eventually going to go bankrupt, probably pretty soon.

But also if you're too pessimistic, then those businesses become obsolete. So it's getting both of those at the same time that is so rare, but that's really the key to doing well over your entire career, over the entire lifetime, is getting optimism and pessimism to coexist. We'll be right back after a quick break from our sponsors. Calling all dog owners. I had a dog that recently passed away. His name was Bam Bam, and he died at 16 years old, and he lived a long time. And towards the end of his life, I had to take more care of him. And I didn't have the bandwidth to cook homemade food, and he was a picky eater who wouldn't eat anything else, so I tried nom nom nom.

Nom nom delivers freshly made dog food straight to your door. Every portion is personalized to your dog's needs with real wholesome ingredients that you can see and recognize. Their nutrient-packed recipes are designed by board-certified veterinary nutritionists without any additives or fillers that contribute to bloating and low energy. I loved Nam Nam, it came delivered to our door, it was fresh, it was made to his senior needs, I felt like he was more energetic, he would be running around with me more and acting more like a puppy.

In fact, I always make a joke that he acted like a puppy till the day that he died. And that's also thanks to nom nom. And nom nom is trusted by so many other dog owners. Over 40 million meals go to good dogs like yours and mine, inspiring millions of clean bowls and tailwags. Plus nom nom comes with the money back guarantee. If your dog's tail isn't wagging within 30 days, Nom Nom will refund your first order. No fillers, no nonsense, just Nom Nom. Go right now for 50% off your No Risk 2 week trial at trinom.com-profiting.

Spell trinom.com-profiting for 50% off. Trinom.com-profiting. calm slash profiting for 50% off. Try nom.com slash profiting. There are lots of ways to potentially boost your investments these days and even more options on weird stash them. Make the smart move by transferring your brokerage account over to Robinhood, whether you're transferring $1,000 or $2 million.

Don't miss out on Robinhood's offer of an unlimited 1% bonus on your assets. Elimited as in no cap. See why over 3 million people have rated Robinhood 5 stars on the App Store. Visit Robinhood.com-sash-profiting to claim your bonus. Terms apply to the bonus. See full bonus terms at Robinhood.com. Investments offered through Robinhood Financial LLC.

Investing is risky. And I know that you are a strong proponent of having patience. And in your book, you've got a chapter called Tales You Win. And you talk about how sometimes it's that one Picasso painting that an art investor requires that makes up for all the ones that they don't. So can you give us some examples of long tail strategy and why that's important? The painting examples, one that I love, it's there were all these art collectors in last 50 years

and a very small number of families ended up with these ridiculous art portfolios. They had Picasso's and Monés and like Renoir, like the top paintings ended up in the hands of very few number of people. How did those art collectors know what was gonna become valuable? Because when Picasso was alive in painting,

he was not the Picasso who he is today. Most artists become famous after they die. How did these people know what was gonna be big? And they looked at their art portfolio. And the explanation was, those collectors did not know who was gonna be big. What they did is you had a couple of collectors would go out and buy every painting they could possibly get their hands off of. With any painting was for sale, they scooped it up, and they ended up with thousands or tens of thousands of paintings.

And within that portfolio ended up by chance, some Picasso's and some Monet's and some Renoirs, but they didn't know in hindsight what it was going to and some Renoirs, but they didn't know in hindsight what it was going to be or in with foresight they didn't know. It was only in hindsight that because they collected so many, a couple of them ended up being worth a zillion dollars. And investing is exactly the same. You have no idea which companies are going to be the next Tesla, the next Apple, the next Amazon. Nobody knows. And people who say they do know are fooling you. But if you own an index fund that owns 3,000 companies in it, then you know that whatever is going to be the next Tesla is in there, whatever it might be. Always in investing if you own an index of 100 companies. Over a 10-year period, you're going to

earn most of your returns from five of them. A very small portion is going to return most of them. And since you don't know what those five are going to be with foresight, the best idea is just own all of them knowing full well that whatever is going to be the winner is going to be in your portfolio. And that's why you have the statistics about what percentage of active stockpickers out perform index funds? It's very, very low, particularly if you adjust it for fees and for taxes, over a 10 or 20 year period, it rounds to zero.

Warren Buffett recently said that in his life, he's met 10 people who he thinks can consistently outperform the stock market, consistently pick the right stocks, 10 people, that he's ever met in his entire life. And everyone listening to this podcast, you are not one of them, I'm sorry, I'm sorry. Good luck.

And so I think that's the only anecdote to that. And it's the easiest, cheapest anecdote to that is index investing. It's just all of them knowing that you're gonna have the winners in there. And speaking of Warren Buffett in your book, you say if he had retired at 60 years old, he might not be the Warren Buffett that we knew today.

That's like, such, like everybody thinks of him as like the most successful investors because he's been investing for 60 years or whatever it's been. Yeah, if you look at his net worth, 99% of his net worth was accumulated after his 60th birthday. So he's 93, I think he is now. And 99% of the money came after he was 60, which means that if he had retired when he was 60, like a normal person, may have he was a billionaire when he was 60, you would have never heard of him. The whole reason he's so successful and the whole reason he's now a household name is because he's been, yes, he is a good investor, but the secret is that he's been a good investor

for 80 years. And it's just the amount of time he's been doing it for that generates all of that money. He also started investing when he was 11 years old. That's why he's so successful because he's been doing it non-stop from 11 to 93. That's actually the biggest takeaway that ordinary people can take from him because I and you and anyone else cannot pick stocks like Warren Buffett. But can we try to emulate his patients? Is that something that we could maybe copy from him? You have a fighting chance of replicating his patients then you do a replicating his intelligence. Just understanding why he's wealthy

and using that as a takeaway of what we can do and copy him at is really important. So this is a concept that I think is from your next book that we're gonna talk about, but what we're talking about is reminding me of this. I know that you actually don't really pay attention to daily news when it comes to changing your stock strategy or picking your stocks. You don't just follow, like, hear something's hot and then buy it, right?

So talk to us about how you actually decide what stocks are going to invest in for the long term. So your last point, I keep it as simple as I can. I own Vanguard Index funds. I've owned for a long time. It's probably all I will own for a long time. I'm not recommending other people exactly do that. You have to figure out what works for you.

And as we talked about earlier, there are definitely people for whom picking stocks is the right strategy for them, even if it's not the best for my wife and I. But one little quirk, I would say, is I actually do follow financial news every day. Every day I know what the market did. I read the Wall Street Journal every day

because I think it's intellectually interesting. I think it's a fascinating window into how people behave. But the important thing is that I don't read the Wall Street Journal and then say, I need to go out and buy and sell these specific stocks. It doesn't influence my behavior. I just think it's a fascinating window

into how people behave. But my personal investing strategy is as simple and basic as you could possibly be. My entire net worth is this house, a checking account, Vanguard funds, and shares of Marquette Alarm on the board of directors. And that's pretty much it. And where do you park your cash?

What's your strategy for cash? It's spread out over many different accounts. And actually quite a bit of it is now in Treasuries, because you can earn a great return there. Spread out over different bank accounts, different brokerages accounts. Yeah. And the money that I have in short-term treasuries,

I consider that cash. That's cash-like to me. Mm, got it. Okay, let's move on to your new book. It's called Same as Ever. It covers a lot of the ideas that we've been discussing and much more. So talk to us about why you wrote this book

and how it expands on your first book, the psychology of money. So Same as Ever is about what never changes over time. I think in many ways psychology of money is about the behavior of you, the individual, and Same as Ever is about the behavior of us, the collective. Like, what do we, the collective society, keep doing over and over and over again?

And I've always been a student of, I think, two things. One is investing and the other is history. I like the intersection of that, like investing history and economic history have always been so fascinated in. And one of the things that will really stick out when you're studying any kind of history is it's really interesting to see what has changed over time. What do people used to do that they don't anymore? That's interesting.

But to me, way more interesting and way more common is when you see what has not changed at all. And when you're studying the history of Americans a hundred years ago or Europeans a thousand years ago, or Chinese five thousand years ago, you see all these kinds of behaviors that would fit in perfectly today. And you see that in the past, Americans a hundred years ago or Europeans a thousand years ago or Chinese five thousand years ago You see all these kinds of behaviors that would fit in perfectly today That have not changed whatsoever

So how people respond to greed and fear and uncertainty and opportunity That is the same today in the United States as it was in any culture a thousand years ago And it hasn't changed at all and because of that We know that it's going to be part of our future for the rest of our lives and a lot of why I wrote this book was because I kind of got disgruntled at how bad we were as an industry at Predicting what's going to happen next Predicting the next recession the next bear market nobody can do it Nobody has any ability to do it.

And so with that, you can either say, nobody knows anything, don't even try to predict. No one has a clue, just kind of become a cynic about it. Or you can say, okay, we don't know what's gonna change, but we do know what's not going to change. We do know what behaviors are gonna be part of our future, regardless of where the future goes. So let's put all of our emphasis on that.

And so same as ever is 23 very short little stories about little facets of human behavior that I think have always been with us and always will be. And no matter where your future goes or where society's future goes, you know that these little bits that I write about are gonna be part of the story. I love you, have it in your book that you say,

if you travel 500 years back or 500 years forward, the world will look much different in terms of technology and medicine and even language, but human behavior doesn't change much over time. It's so fascinating. It's so true. It takes, I think, thousands and thousands of years for us to like our brain biologically to actually change or evolve. So we're the same human that we were thousands of years ago, even though so much has changed. And one of the things that doesn't go away for humans is risk, right?

This is something that we're gonna enjoy to the end of time is this concept of risk. And we touched about risk a little bit earlier, but in your book, you write, the biggest risk is always what nobody sees coming. So talk to us about these blind risks. There's a great financial advisor named Carl Richards who has this quote, one of those quotes that just knocked me off my feet.

The quote is, risk is what is left over when you think you've thought of everything. So you can spend all day trying to predict the next risk in your personal life or in the economy and for society, and that's great. You should do that. But then when you are done with that exercise, the thing that is not on the list is what's actually the biggest risk that you're going to face. So think about what the biggest risks we've dealt with in the United States over the past couple generations. Pearl Harbor, September 11th, and COVID are probably the three biggest societal shocks that we've dealt with in America. And the common denominator of all three of those is that nobody, certainly no ordinary Americans,

saw those coming until the day that they happened. In all those situations, there was no economic outlook, there was no analyst forecast, there was nobody on the news warning you about these things that in one day utterly transformed the world that you lived in. And so the biggest risk is what you didn't see coming. And the fact that people didn't see coming is what made it dangerous because they were not prepared emotionally, financially, logistically, they were not prepared for these things to happen. So when they hit, it was like red alert, what do we do now? And it's always like that. I think in any given year, it is like that. What is the biggest worldwide news story in 2023?

It's probably, I hope it's gonna end up, hopefully nothing bigger than it happens. We'll be Israel and Hamas. We'll be the biggest story of 2023. Of course, there has been tensions to say the least in that region for literally thousands of years, but how many people in January of 2023 predicted that that would be the biggest news story.

Maybe there were some people who were on the ground and had a greater sense, but by and large ordinary people watching the news, it was not on the radar whatsoever. Same with in 2019, if you were looking at the biggest risk for 2020, nobody said a viral pandemic that's going to close down the schools, nobody said that. 2001, nobody sees 9-11 coming, You can play that game all day long. And so because of that, you can state with a lot of confidence that the biggest risk over the next year and over the next 10 years is something that you and I and none of us are even thinking about because it's always been like that.

Care point, I'm Palestinian and I didn't even see it coming. I was just like, wait, what happened? These big stories, they blow you away by surprise. How can we prepare for these risks? If we don't know what they're gonna be, how can we prepare accordingly? By definition, you can't, but that in itself, that realization and that mindset is really powerful

in itself because you stop pretending that you can predict. There's a great quote from Nassie Nthalab where he says, invest in preparedness and not in prediction. So one way that I think about that is think about earthquakes in California. California knows that there is going to be a major earthquake in the future. But everybody also knows that you can't predict when it's going to come. It's impossible to predict what day it's going to happen or what year it's going to happen. So because of that, you're just always prepared.

They build buildings that can withstand it no matter when it comes. predict what day it's going to happen or what year it's going to happen. So because of that, you're just always prepared. They build buildings that can withstand it no matter when it comes. They don't like, you know, oh, on Earth, it's going to come in December. So let's retrofit the buildings then. You're always prepared for it. And I think that's how you should think about economic risks, recessions in bear markets and job losses. You have no idea when it's going to come.

So don't try to think, oh, once you see a recession coming, then you'll start to save money. No, it could happen tomorrow. So always be prepared for it. I think that idea of having expectations instead of forecasts is the only way to really survive in that world where risk is what you don't see. Yeah, that makes sense. And another key concept that you talk about in terms of human behavior is pushing too far too fast. Now you say that this is something people do in investing, you say it's also something people do with their companies. So can you talk just about that?

Yeah, whenever you have something good, you have an investing strategy that works or a company that's going well. The very normal knee jerk reaction is great. Let's make it go faster. Let's make it bigger. Yeah, let's milk it. Let's push it as hard as you can. You do it with noble intentions.

You're like, I don't want to leave money on the table. If I have this golden goose, let's keep milk and the goose. It happens all the time. Like in investing people who are doing well start using leverage, or they start making bigger bets, more concentrated bets. In businesses when it's going well, it's like, let's raise more money and grow faster,

faster, faster, faster. And it is such a common story that those investors, those entrepreneurs, or even in your own individual career, you eventually realize that there was a natural speed limit to what you're doing. And if you go over the speed limit, you're going to get in trouble. And you only know where that speed limit is in hindsight when you've gone past it, and you get a speeding ticket, so to speak. And so you see this with every successful business. The example I used in the book was Starbucks 15 years ago. Most people don't remember this now, but there is a period in the early and mid-2000s

where Starbucks was opening a new store on every street corner like every couple of hours. It was just like this absolute proliferation of Starbucks stores. And because of it, the quality of the coffee and of the food plunged. The company's only goal was to grow, grow, grow, grow, grow. And the quality of the stores disintegrated. And Starbucks had a really rough period because of that. And in hindsight, they talked about, they're like, look, the natural growth rate that we could sustain the quality of the product, we way exceeded,

we pushed it way too hard. And because of that, the business broke for a period of time. There's so many examples of that. If you have a good legitimate business that is working and customers love you and they will pay you. But if you try to take that and just say, let's try to make it go twice as fast, it's probably going to break. So understanding the natural speed limit and size of whatever you're doing

is a really critical aspect of what you are doing. Any guidance for us to understand like, hey, this is a red flag that I'm pushing too hard and that I should just calm down a bit with what I'm doing. Let's use the Starbucks example. The reason people love Starbucks was not necessarily because it was on every corner.

It was because they liked the quality, the food, they liked the taste. And once your ability to scale takes precedence over that, then you know exactly what's going to happen. So understanding, I think this is such a basic comment, but it's so easy to overlook. Understanding why you are successful is the key to doing this. And a lot of people, they don't actually understand why consumers like them or why their boss appreciates them. And because of that, they overlook

what is actually needed to keep this going. And once you have an honest assessment of customers like me because of X, then realize any deviation away from that. And of course, you're gonna lose what made you special into it begin with. I don't think it's any more complicated than that. Yeah, I think that's great advice for all the entrepreneurs tuning in.

So, something else that you talk about in the book is stress. You say that stress focuses your attention in ways that good times can't. Talk to us about why stress sometimes can be a good thing. We look back historically, the biggest periods of innovation and new technology and productivity growth, biggest periods of innovation and new technology and productivity growth without exception happened during periods when the world was on fire, so to speak. Like the most productive economic decade that's ever occurred is the 1930s during the Great Depression. When the economy was the biggest train wreck it had ever been, because every business in

America woke up and they're like if we don't find ways to get more productive and get our act together, we're going to go out of business tomorrow. And that as a motivator, that fear as a motivator creates the biggest productivity we've ever had. The other was World War II and the Cold War. The incentive to figure things out was so extreme because if we didn't figure things out, Adolf Hitler was going to control the world next year. And that kind of incentive created this technology boom of the likes the world has never seen. What do we get out of World War II?

We got nuclear energy, rockets, jets, penicillin, microwaves, radar, eventually with the Cold War satellites, all of these things that benefit you and I today that happen specifically because of the stress and anxiety of the war. And you can maybe be able to say this with COVID in hindsight too, like tragic and deadly as it is, if it unleashes the scientific boom as it has, that maybe 20 years from now is going to benefit us in ways that we can't even fathom today. Using the phrase silver lining to COVID is a step too far because it's killed like 10 million people. I'm not saying like, oh, that's a great thing, but it's always

the case that you look back and you're like, hey, despite that tragedy, we got this incredible new innovation because of it that's making life so much better today. So everybody wants a world in which everything goes great and there's no uncertainty, there's no bad times. Of course, that sounds like a great world, but in that world, the incentive to improve would diminish greatly. And it's always the stress that creates

the biggest improvements. I love this concept because it's so true. Constraints, deadlines, even if you think about your own self, if you know that you have a deadline tomorrow, your procrastination releases and you can just get your shit done because you know the deadline is tomorrow. It really helps you become more creative, helps you step on the gas in terms of completing whatever you need to complete. So what you're saying totally makes sense in terms of big disasters in the world and how it can actually foster lots of innovation and creativity because our backs are against what we basically have no choice but to get it done now.

Yeah, I think for writing books, one of the biggest benefits that a publisher provides is a deadline. It's not necessarily that they're going to help you write the book, so to speak, but they're going to tell you you have to turn in your manuscript on this date. And that will get your ass in gear. Okay, so one of the last ones I'm going to ask you about this book is incentives. So you've got a chapter in it in your book where you quote Benjamin Franklin, who once said, if you would persuade appeal to interest and not to reason. So talk just about incentives, what we need to watch out for in terms of how incentives can trick us into doing things that we already know are wrong.

I think there are, it's very often the case, not always, this is not black and white, but it's often the case that if you see somebody doing something that you find morally wrong, or just something that you disagree with, you are probably underestimating the odds that you would do that exact same thing if you had their incentives. And I saw this firsthand during the financial crisis of 2008, when a lot of Americans rightly pointed at Wall Street bankers and said those greedy, bastard bankers peru in the economy. And maybe that was not necessarily the wrong criticism. But I think what people overlooked is that if you worked at Bear Stearns in 2006 and they

said, Hey, package these subprime bonds and we'll give you a six million dollar bonus You would have done it too. You would have done the exact same thing if you had that incentive dangled in front of your face And so I think we underestimate the boundaries of our morality when we don't understand the power of our incentives Everyone thinks oh my moral boundaries are right here But if you had different incentives you'd be like, oh, maybe I can shift a mat a little bit. And you don't even know you're doing it.

It's subconscious. Everyone is so influenced by these incentives. And at every level, when you're looking at World War II, how could the Germans possibly have acted like this? I think when you look into what the 1930s were like for them, the incentives, the incentives to go along with it, the incentives do not want to be an outsider, the incentives to do what you're told. It's not to justify anything in the slightest. But if you want looking for an answer of how can people do that thing, whatever that thing

would be in business, in wars, whatever it would be, the answer is usually some sort of incentives. And it's not even a financial incentive. There are social incentives. There are tribal incentives. There are political incentives to do things tribal incentives, there are political incentives, to do things that you would otherwise find repugnant, but you do it because the incentives push you to do it. That's super insightful. The last question I'm going to ask you about your book in terms of a concept is you talk about permanent and expiring information and I love the distinction

that you draw between these two. And I hope today's interview is going to be permanent information for our listeners, but can you explain what you mean between the difference of the two? I mean, one way as someone who writes books, it's a one of the best advice that I've ever heard is if you want to write a book that people will read 20 years from now, write a book that people would have read 20 years ago, make sure that what you're writing about is timeless. And I think we can say that about this podcast. I think if we had a time machine and someone listened to this podcast in 2003, 99% of what we said would be relevant.

So you have to understand what kind of information is expiring if you're watching the stock market. Oh, Microsoft miscordedly earnings by one penny per share. Like, that's a, it's expiring information. I'm not going to say it's irrelevant, but it's expiring as a shelf life. But if you're talking about how people respond to greed and Like, that's an aspiring information. Not gonna say it's irrelevant, but it's inspiring, it has a shelf life. But if you're talking about how people respond to greed and fear, that's permanent. That never changes.

And that will be as relevant 20 years from now as it is today. So you should put more of your emphasis in learning permanent skills, knowing that they're gonna stick around, rather than drowning yourself in expiring information. That might be relevant for a week or maybe even a year, but it has the shelf life of something

that's going to expire. I totally agree with that. Well, Morgan, thank you so much for your time today. I feel like this podcast was filled with so much timeless wisdom about finances. So I end my show with two questions that we ask all of our guests. The first one is what is one actionable thing our young and profitors can do today to be more profitable tomorrow.

Go out of your way to define your game and realizing that your game might be very different from your co-workers game, even your co-founders game, your siblings game, everyone is different. And don't assume that because society tells you that you should have X, that that's actually what you should be chasing. Back to the goalposts we were talking about before.

What is your goalpost, young and profitors? And what is your secret to profiting in life? And this can go beyond business and finance. Realizing that there are probably 10 people in life who I want to love me. My wife, my kids, my parents, maybe three friends. And it's not that I don't care about the opinions of anyone else, but I think it's really helpful

to have people in your life who you don't want to disappoint. Just a few people who are, it's like, that's the attitude North Star. Am I doing this for the benefit of those 10 people? Would they be proud of me? Is this gonna help my relationship with them? I think it's just a very strong guiding light. What really matters?

And if you're on your deathbed, are you going to care about your net worth or the square footage of your house or are you going to be proud that you are a good spouse, you're a good parent, you're a good friend, you helped your community? Like it's obvious what's going to be more important to you. So like, let's keep that as the focus. I love that. That's great advice. Well, Morgan, thank you so much for joining us on Young & Profiting Podcast. Thanks so much for having me. You know, Young & Profitors, this conversation got me thinking

about how our finances are so much more about our emotions than we like to think that they are. Understanding how our own psychology impacts our approach to money can keep us from making some huge mistakes down the line. And there's nobody better at showing us how to do this than Morgan Howesle. Morgan argues that finance is a lot more like psychology than physics.

There's not a single right answer for everybody and every problem. And a strategy that works for somebody else might not work for you at all. We each have our own unique risk tolerances, ambitions and time horizons. But there are some common emotional pitfalls that a lot of us fall under when it comes to handling our finances. One huge one, according to Morgan, is social comparison. Even if we're doing well, we just can't help but look over our shoulder at other people who are doing better than us. Even if we're doing well, we just can't help but look over our shoulder at other people who are doing better than us. And if you do that, it's hard not to feel

an adequate. A related trap in investing is FOMO, fear of missing out. If you see somebody else getting richer from what they're doing with their investments, you're going to think that you need to start taking similar risks to try to catch up. But there will always be others doing better than you. You don't need to catch them. You just need to play your own game like Morgan says and do what works for you. That's what worked for Warren Buffett, for example. He accumulated 99% of his net worth after his 60th birthday. Slow and steady can win the race. And even if we can't pick investments like Buffett, we can try to copy his patience.

Thanks for listening to this episode of Young and Profiting Podcast. If you would like to keep your friends and family from a little fomo, be sure to share this episode with them. And if you did enjoy this show and you learned something new, then drop us a five star review on Apple Podcast. And if you like to watch your podcast episodes, you can find all of our episodes on YouTube.

If you want to get in touch with me, you can find me on Instagram at Yap with Hala or LinkedIn by searching my name is Halataha. Before we go, I want to thank my production team, Jason, Amelia, Hashem, for Khan, and Beka, Krity, Aaron. Everybody on the team, you guys are amazing. Thank you for all that you do. This is your host, Haliters, I've been an entrepreneur now for over four years. That means that I've got team members now that have been with me for four years and have

accumulated a lot of knowledge in their brains. And I've got a lot of knowledge in my brain from all the things we've done over the years. And you may think that sounds great. But as I grow wiser as an entrepreneur, I actually realize that's really dangerous. What if one of us gets hit by a bus? How will the work get done if there's no proper SOPs or if the team's not cross-trained? One of our biggest initiatives at YAP in 2024 is to implement cross-training. So I try toulate 360 with their free 30-day trial, and I absolutely love this platform so far.

I cannot wait to roll it out to my team in 2024. Articulate makes it super easy and efficient to create engaging digital learning experiences that reach more learners, giving you endless possibilities to create, collaborate on, and distribute e-learning. Articulate 360 makes it simple to build online learning assets.

You can start with templates. They've got hundreds of topics to choose from, like new hire onboarding to security compliance. You can create courses in literally minutes. You can easily add in interactive activities, quizzes, and other lean forward moments that keep your learners engaged. When it comes to workplace learning, you want a tool that's tried, tested, and trusted.

Over 120,000 organizations use Articulate. In fact, every single one of the Fortune 100 companies in the world use Articulate. If you're tired of the same old training routine and want to give your team a fresh, engaging experience, you should join me on this 30-day trial of articulate. Visit Articulate.com-360 to start a free 30-day trial of Articulate360. Again, go to Articulate.com-360 to start a free 30-day trial. That's Articulate.com-360. trial. That's Articulate.com-360.