The Savings Expert: “Do Not Buy A House!” Do THIS Instead! - Morgan Housel

1. 0:00 – 2:23

   Intro

   1. MHMorgan Housel0:00

      If you're buying a house because you (beep) , d- don't do it. Run for your life.

   2. SBSteven Bartlett0:04

      Mr. Morgan Housel. He's the author of The Psychology of Money, one of the best-selling business books of this decade.

   3. MHMorgan Housel0:11

      He can help anyone build wealth and change their life. The world is split between people who don't know how to start making money and people who don't know when to stop making money. And if you are stuck in a low-income job, you feel like you don't have the opportunity to generate wealth, but once you realize that opportunities are available for everybody, you can choose where you wanna live, what job you want, when you retire, because you can be rich.

   4. SBSteven Bartlett0:33

      Prove it.

   5. MHMorgan Housel0:34

      People like Ronald Read, and he was a janitor.

   6. SBSteven Bartlett0:36

      What does it take to amass Mr. Read's $8 million fortune?

   7. MHMorgan Housel0:39

      He has a fascinating story of somebody who became rich despite not having the skills that you normally associated with wealthy people. Then there's Warren Buffett, who's worth $100 billion, but the real secret to their success? Investing. My parents are a great example of this. We were very poor, no financial background, and they have, like, minimal financial interest, but now they'd probably be in the top 3% of professional investors. If you wanna do well with money, you don't need to be a genius. If you have endurance and you're investing, you're gonna be filthy rich. But when most people say, "I wanna be a millionaire," what they actually mean is, "I wanna spend a million dollars. I want some nice clothes, a bigger house, the nicer car." Ask yourself, what is your relationship with money? If your expectations rise faster than your income, you're never gonna be happy with your money. That's the problem.

   8. SBSteven Bartlett1:22

      So if I have 100 pounds, what's the first thing that I should do?

   9. MHMorgan Housel1:26

      I keep it as painfully simple as I can. So...

   10. SBSteven Bartlett1:31

       Ladies and gentlemen, you're about to meet the man whose book changed my entire life as it relates to money and finance. About four or five years ago, my brother, who's a investment banker, said, "Steve, there's one book I need you to read about wealth, investing, and money, and finance," and he passed me a book called The Psychology of Money. That book changed my fortunes. It is the reason I've been a successful investor, and it's the reason I've been able to hold onto my wealth and build it. It's this man, and that's the reason why you need to stay tuned and listen to this episode. (upbeat music) Morgan, you wrote what I would consider to be the greatest book on money and finance ever written. I say

2. 2:23 – 4:14

   Why Do You Write Books About Money?

   1. SBSteven Bartlett2:23

      that because I remember when I came into money when I was, uh, 25, 20, no, 27, 27, 28 years old, and my brother turned to me and said, "There's one thing I ask of you." He said, "You have to read this book called The Psychology of Money. It will stop you losing all of the money you've just earned from your career." And it changed my life. I've talked about it for years and years ever since, and that's why I was so keen to have this conversation with you, because I really believe if people choose to listen to this conversation, it stands the chance of changing those two. So let's begin. Why? Of all the things that you could do with your life, Morgan, why are you writing books about the subject matter that you explore? What is the reason?

   2. MHMorgan Housel3:03

      Well, first, that's a, that's a big statement. That's a lot to live up to. It's kinda scary to hear that-

   3. SBSteven Bartlett3:06

      (laughs)

   4. MHMorgan Housel3:06

      ... because I've oth- I've often been, and this gets to the why, when, I- I've just find it as selfish writing, where I write for an audience of one, and that is me. And I like to think of myself as a pretty selfless person, but for writing, I don't try to say, "I'm gonna write a book for this person or that person or that audience." I write what I'm interested in, and I write it in a way that I think is interesting.

   5. SBSteven Bartlett3:28

      Mm-hmm.

   6. MHMorgan Housel3:28

      And I try to solve my own problems, and then I take a leap of faith that if this is interesting to me and it's gonna help me, maybe it'll help somebody else. That's very different from the traditional writing style of saying know your audience. Know your audience very quickly turns into pander to your audience, and I think a lot of people, maybe they don't even know it, but if they read a book and they don't necessarily like it, it's because they were being pandered to. They were being spoken to in a way that a person would never speak to them in real life. So I just, this is almost like my diary, I think, in terms of these are just topics that I found interesting for myself. And so I guess that's the why. I feel like I've really found myself in a career where I can just figure out my own problems and try to figure out what I think and what's interesting to me and then kinda put it out to the world and then hope that other people

3. 4:14 – 10:53

   The Psychology of Money & What Wealth Really Means

   1. MHMorgan Housel4:14

      will enjoy it.

   2. SBSteven Bartlett4:14

      Let's start with The Psychology of Money. What is the benefit to my life if I understand the things that are written in The Psychology of Money?

   3. MHMorgan Housel4:21

      Well, let me start with, I think most finance books will, their, their answer to that question would be, "When you're done with this book, you will know how to pick stocks better. You will know how to balance your checking account or what credit cards that you should use." For my book, I think when you're done with it, I hope that you will just look in the mirror and say, "Who am I?" Which is kind of what I did with this, trying to figure out who I am and what I want and why I was insecure, why I wanted to show off to other people the car that I drove. So if you'll become more introspective about who you are and what you want out of life and what money can do for you and cannot do for you and become a little bit more introspective about why you think about where you are in the social hierarchy and greed and fear and why you think about these things that you do, I- I honestly think that, I- I- I hope at least 'cause it was this way for me, that when you're done for, with the book, that's kinda when the learning begins. Because maybe this will just spark a bit of curiosity for you to then go for a walk and think about what you want out of life and whatnot. So I think of most books, when you're done with the last page, the learning is done.

   4. SBSteven Bartlett5:27

      Mm-hmm.

   5. MHMorgan Housel5:27

      This, I hope, has just sparked something in you that will get you to think more clearly about what you want with money and what money can and cannot do for you.

   6. SBSteven Bartlett5:34

      Part of that journey of understanding what you want helps you to define the word on the front of this book, wealth. What is your definition of wealth?

   7. MHMorgan Housel5:43

      Well, I- I- I made up these definitions in the book. So these are just my things that I made up, but I defined rich as you have enough money to buy what you want, to pay for your mortgage, to make your car payment, to go out to dinner with your friends. You have money in the bank. Wealth, I think, is very different. Wealth is money that you did not spend and maybe you will not spend. So wealth is hidden.It's the money that you didn't spend on a car, it's the money that you didn't spend on a big house, you didn't spend on jewelry. And that's really important, because wealth that's saved up, the unspent money, is what gives you independence and autonomy, and just the ability to wake up every morning and do whatever you want with your, with your life. And so, I think separating that is really important because when most people say, "I wanna be a millionaire," what they actually mean is, "I wanna spend a million dollars." That's what they mean. And when I think about being a millionaire, I think it's you have a million dollars that you're not going to spend. And that because you're not gonna spend it, you have this giant cushion that will give you independence and autonomy. And so you can wake up tomorrow and say, "I can do whatever the hell I want today. I can work for who I want, I can work for as long as I want, I can retire when I want." The world is yours. Like, every bit of savings that you have is a piece of your future that you own. It's a, you're, you're just buying your time in the future, so that it's yours and you can do whatever you want with it. And that, to me, has always been the goal. There's a quote from Charlie Munger where he says, "I never wanted to become rich, I just wanted to become independent." And that, well, the first time I read it, it was like, "That's me too. That's what I want." I don't want a Lamborghini, I don't want a mansion and a yacht. I wanna wake up every morning and just say, "Whatever I wanna do today is mine. Uh, n- nobody's gonna tell me where to work, when to work, what to do. It's all me." And to me, for not just work, but for your family life, for your health, for your mental sanity, there's nothing more important than that.

   8. SBSteven Bartlett7:34

      It sounds like you're talking about your father.

   9. MHMorgan Housel7:37

      Y- my dad, he was a v- hey, he has such an interesting background. My, my, my mother too. Their background is so crazy, and I didn't realize how crazy it was until I was an adult. The early part of my childhood, when my parents were in school, we were very poor. My parents were students living off of student loans and grants, we had no money. And then my dad became a doctor when I was 12 or 13 and things changed. It wasn't, we were not rich, but, like, things got very comfortable. And what was really important is that the frugality that my parents had to have when they were poor stuck with them, even after they started making a little bit of money.

   10. SBSteven Bartlett8:09

       They didn't buy a Lamborghini or-

   11. MHMorgan Housel8:10

       No, no. I mean, we grew up in a very mo- like, modest house. It was a nice house and we took some, like, decent family vacations, but my pa- we always lived well below our means. Way below our means.

   12. SBSteven Bartlett8:18

       Did that confuse you? Because you must have known that your dad had the money.

   13. MHMorgan Housel8:21

       Yes, particularly when I was probably, like, 16, 17, and I could l- learn, like, how much does a doctor make? You can go look it up and figure it out. And then it was like, I definitely looked down on my parents at that age because I was like, "I know you can afford a better car. I know you can buy me better Christmas presents. I know we can afford a bigger house, and you're, and you're not doing it because you're mean." I think that was, I think that was my view. And then it really clicked about 10 years ago, this is not that long ago. So my dad is an ER doctor, which is one of the most stressful jobs that you can imagine. It's literally people dying in your arms every day. And he did this for 20 years. And after 20 years of doing this, night shifts, children dying in your arms literally every, every week, he said he had, he had had enough. It was, it was a lot. He put in his dues, he did it for 20 years, and he said, "I'm done. I'm, I'm gonna retire." And the reason he could do that is because he had saved up so much money. He was living well below his means, they had a very high savings rate. The moment he woke up and said, "I wanna be done," he was done, and that was it. And if you contrast that with so many other people, including some of his colleagues who were also burnt out at age 60, who were also burnt out by having people die in their arms for 20 years, they wanted to retire and they couldn't, because they had the bigger house, because they had the nicer car that I thought that we should've had when we were growing up. And when they quit and moved on to their next phase of life, they got so much happier. And so it was like, uh, so that, this was 10 years ago. I was in, you know, in my late 20s at this point. I was like, "Now I get it." He was frugal, he saved a lot, and that made him independent. And the independence made him happier than any car would've done, made him happier than any big house would've done. So I was like, I think that is one of the keys to happiness. Happiness is, like, the most complicated topic you can imagine, but one of the big puzzle pieces is independence. And there's been a lot of work on this, studies on this, of like, one of the things that makes people really happy in life is having control over what they're doing. And it's more so the flip of side of that. It's like, what makes people very unhappy in life? Not having control over what happens in their future. Not having control over their schedule, where they're gonna work, whether they're gonna get laid off. Having that uncertainty is a massive anchor and weight on your life. And if you can-

   14. SBSteven Bartlett10:38

       And bad for your health.

   15. MHMorgan Housel10:39

       E- absolutely. I mean, that was a big thing for my dad too, he was working night shifts for, (laughs) for 20 years with this. It, it, it, it's very bad for your health, it's not great at all. So the ability, the financial ability to just wake up one day and say, "I'm done, done with that," is

4. 10:53 – 14:05

   Why Not Having Control in Your Life Is Making You Unhealthy and Unhappy

   1. MHMorgan Housel10:53

      s- huge.

   2. SBSteven Bartlett10:54

      I, I was reading studies about this idea of autonomy, 'cause I was trying to figure out what you have to have professionally to love your work, and I came up with these five different points. One of them was autonomy and control, and I, I came up with that because I read studies where people who work jobs where they had low autonomy and control had physiological consequences. They were more likely to get disease, they experienced stress significantly more, more likely to have cardiovascular problems and heart disease, which is the single biggest killer of, of people generally. And I thought, "Fucking hell, just not having control in your life-"

   3. MHMorgan Housel11:23

      Yeah.

   4. SBSteven Bartlett11:23

      ... makes your body shut down?"

   5. MHMorgan Housel11:25

      Yes. You know, this is something that I think everybody has experienced. If they have something really stressful going on at life, they get into bed, they're tired, you can feel your heart pounding. Like, the physiological response of stress is huge, it's massive. And if you have that going on every day for five years, 10 years, 20 years, 30 years, forget about it. Forget about it. There's this great quote from John D. Rockefeller. He's, he was the richest man in the world, and he lived till, I think he was 99, something like that. Maybe it was 97. And his doctor talked about why, like, his key to longevity. And the doctor said, quote, "He never lets anything bother him, he spends plenty of time outside, and he leaves the table when he's still a little bit hungry."That was his key to longevity. It was just, and, and when you read his biography, you realize how true that was. No matter what was going on in his life, in the most stressful business conditions you can imagine, none of it ever bothered him. He just had ice in his veins, and he could just keep going. And so I- I- I do think that's, that's definitely one of, like, the keys to physical health, is lowering the amount of stress. And there are not many other things in life that are gonna increase the stress that you have than not having control over what you're doing in life.

   6. SBSteven Bartlett12:33

      Freedom. Chapter seven of your book. This is the broadest lifestyle variable that makes people happy. Doing something you love, but on a schedule you can't control starts to feel the same as doing something you hate. Psychologists call this reactance?

   7. MHMorgan Housel12:48

      That's right.

   8. SBSteven Bartlett12:49

      Yeah.

   9. MHMorgan Housel12:49

      You know, I- I- I do think there are a lot of ... I think the best example are CEOs who might make $30 million a year, $50 million a year, but they have no control over their time. Every single second of their day is planned and demanded by somebody else, and they have to do things that they don't want to do. If they wake up and they're tired, "Too bad. You gotta go to your meetings today." If they wake up and they're exhausted, "Too bad. You have to travel to China to f- close this deal."

   10. SBSteven Bartlett13:11

       Mm-hmm.

   11. MHMorgan Housel13:11

       They have no control over their time. And compare that to someone who makes much less, but they, they wake up and they can wake up and do whatever they want, whatever they want to do. You want to hang out with your friends? You want to sleep in? You want to take a nap at two o'clock? Whatever you want to do. The person who I think really sticks out in that, in that vein is Warren Buffett, who is the, the CEO who makes a zillion dollars a year, is worth $100 billion. But if you dig into how he's structured his day, total control, 100% autonomy, he can do whatever the hell he wants all day long. What he wants to do is get up and go to work, but he's, he has delegated things so effectively that he can do whatever he wants. And that's not only the key to his, I think, business success, but his health lifestyle success and why he's 93 and still going as strong as ever.

   12. SBSteven Bartlett13:55

       I, I was thinking about my calendar when you were talking about the CEO that makes $30 million a year, but is just dragged around by his schedule. It sounds a lot like me, to be honest. I feel like the more successful I've got in my professional

5. 14:05 – 18:20

   Why You Need to Learn to Stop Pushing Your Financial Goals

   1. SBSteven Bartlett14:05

      career, the more my calen- the minute I wake up in the morning, I'm just, like, a puppet master to these little boxes on my Google Calendar.

   2. MHMorgan Housel14:13

      Yeah.

   3. SBSteven Bartlett14:13

      They drag me around the world, and there's very little ... I actually said to my assistant about a month ago, I was like, um, "Sophie, please, can you do me a favor? Could you just put lunch in for 30 minutes because I'm not eating?" Could you just put, like could you just put that in midday every day at the same time?

   4. MHMorgan Housel14:26

      So you can breathe.

   5. SBSteven Bartlett14:28

      So I can have a little bit of a moment where I do nothing. And then, also, the other thing I've put in now, I have a personal trainer seven days a week, and I've just put that in my calendar. It was before then a residual beneficiary, as was everything for me. Well, not for me, 'cause my work is for me, but, um, it- it got the time that was left over when all my priorities were done. And I do reflect on that and go, like, how ... Like, A, when does that stop? Because it's clearly not gonna stop when I make money, 'cause I have the money. And B, how much control do I actually have? And do you know what I do sometimes? I think I've noticed this about myself. I think sometimes I cancel things just to prove to myself that I still have control. (laughs)

   6. MHMorgan Housel15:03

      See, that's great.

   7. SBSteven Bartlett15:04

      (laughs)

   8. MHMorgan Housel15:04

      See, that's a good thing. There's a quote from Nassim Taleb where he says, like, "You are wealthy when the money that you deny tastes better than the money you accept." So you get ... Someone comes to you with a business deal, and you say, "No, thanks, I don't want it," when that tastes, uh, better to you than accepting the deal, it feels better to you-

   9. SBSteven Bartlett15:20

      Mm-hmm.

   10. MHMorgan Housel15:20

       ... that's, like, one definition of, of rich. There's another great quote from Taleb where he says, "The world is split evenly between people who don't know how to start making money and people who don't know when to stop making money." And I think there are a lot of people that are in- in- w- watching this that are in kind of our field who are easily in the latter. They have all the money that they could ever want to spend, or maybe not m- not that much, but they have more money than they ever thought they would have. But for every goal that they hit, "Oh, I w- when- whenever my net worth is X, all my problems are gonna go away. Everything's gonna feel great." And then, they hit X, and they just keep moving the goalpost down and down. It's already in the book that, like, the hardest financial skill is getting the goalpost to stop moving. It's the hardest thing in the world. It's hard for everybody, because virtually everybody thinks, "If my net worth or my income was this level, I'll be fine. I'll feel great. No more problems. I'll wake up every morning with a smile on my face." And then, if you're lucky enough or you work hard enough to get there, you realize it's not the case at all. You're just gonna keep pushing it, keep pushing it, keep pushing it forever.

   11. SBSteven Bartlett16:18

       Have they done studies to test that in terms of analyzing whether people's goalposts move off into the future even when they're, like, billionaires and whatever?

   12. MHMorgan Housel16:26

       I mean, here's, here's the broadest way that I would frame this up that has been studied. If you look at America today, the average household, adjusted for inflation, is making twice as much money than they were in the 1950s. Tw- adjusted for inflation, the average household, double the income that they were back then. And we're less happy. The statistics that try to measure happiness over time, not an easy thing to do, but we're less happy today than we were back then. And this is why, like, look, can money buy happiness? Yes. And to some extent, does it? Yes. Like, people who are in abject poverty are not as happy as people who are covering the basics and they have food, and shelter, et cetera, et cetera. But over time, when you, when society is getting richer, and you're comparing yourself to other people, and maybe the average American's income doubled, but so did their neighbors', so did their coworkers', so did their siblings'. So you just, uh, automatically adjust to that. I talked about Rockefeller before, John D. Rockefeller, who died in, I think, the 1930s. He was worth, adjusted for inflation, almost half a trillion dollars during his day, adjusted for inflation. But he never had, during his life, penicillin, Advil, sunscreen, polio vaccine. Keep c- keep on going down the list of things that virtually everyone can take advantage of today that he never had. But you can't say that the average American is living better than Rockefeller today because we have all of these technologies that he never did, because we just look at what other people have and assume that that is the baseline. So you can imagine a world in which my kids, my grandkids are earning twice as much as me, adjusted for inflation, and they're no happier for it. Because the new technologies, whatever it will be, that would seem like magic to you and I, will just become their baseline.

   13. SBSteven Bartlett18:06

       Mm-hmm.

   14. MHMorgan Housel18:06

       And that's always been the case. If there was, if-... Thomas Jefferson or somebody came to the year 2023, he would faint at the new technologies and the medical discoveries that we have. And these are technologies that you and I don't spend one second

6. 18:20 – 22:16

   The First and Most Important Rule of Happiness

   1. MHMorgan Housel18:20

      being grateful for, because we've just accepted them as a new baseline.

   2. SBSteven Bartlett18:23

      It reminds me of something in your new book, which is out in (clears throat) November, which is, you know, I- I've gassed up a lot of books on this podcast before, but this is one of my favorite of all time. It's just so easy to read and so engaging, because you- you're one of those authors in this book that realizes the world that the reader's living in, and they are busy, and they want the point, and they want you to, you know, give them a- n- not one word more than you need to. It is so brilliant. It's so brilliant. Um, in this book, you talk about exactly that. You say the first rule of happiness is low expectations.

   3. MHMorgan Housel18:57

      Yep.

   4. SBSteven Bartlett18:58

      And that's exactly what you're talking about is, comparison is the thief of joy because it just raises our own expectations, right? And with that out the window goes our happiness.

   5. MHMorgan Housel19:06

      Yeah. And it's- it- it- it seems counterintuitive to people, that if you want to be hap- for most people it's if you want to be happier, you need to be ambitious, you need more, you need to make more money, work harder, have a more successful startup, whatever it would be. And there's, that's true, but that's half the equation. The other half of the equation is, keep your expectations low so the gap between those two... It's the gap between those two that actually accrues to happiness over time.

   6. SBSteven Bartlett19:27

      How did you learn that?

   7. MHMorgan Housel19:29

      I think it's just, I think there have been a couple little stories that really stuck out to me. One that I love, that just knocked me on my ass the first time I read it, was Stephen Hawking, the late physicist who was, without exaggeration, one of the smartest people to ever walk this planet. He was just an absolute genius. And a quirk here, of course, is that he had a motor neuron disease and he was paralyzed from head to toe. He had no control over his body. He spoke through a computer. Not a single muscle in his body could he actually control by himself. So he was, you know, physiologically, it's one of the worst lives that you can imagine. And he did an interview with the New York Times a couple years before he died, and during the interview he's talking about how happy he was and how amazing his life was. And the New York Times said, they asked him, they said, "What is your secret to happiness?" Like if there's anyone who has the right to complain about life, it's- it's that guy. And he's talking about how happy he was. And he said, "My expectations were reduced to zero when I was 21," which is when he got his disease. And he said, "Everything else since then has been a bonus."

   8. SBSteven Bartlett20:27

      Mm-hmm.

   9. MHMorgan Housel20:27

      So this is like, the guy who his life is like, i- i- has ended up in a way that most people watching that would say like, "That's among the worst scenarios you can imagine," and he's probably happier than you and I. Because his expectations were so low that just waking up in the morning and seeing the sunrise and getting to go to work and talk to people was this magical gift. I mean, you can imagine, not to get too morbid about this, but imagine you're on your deathbed, and the doctor is very confident that you're gonna die tomorrow. And then let's say that you make it one more day. What is that sunrise gonna feel like?

   10. SBSteven Bartlett21:00

       Mm-hmm.

   11. MHMorgan Housel21:00

       What's that, you know, holding your- your wife's hand for one more day gonna feel like? It'd be amazing, just 'cause your expectations were on the floor.

   12. SBSteven Bartlett21:09

       Mm-hmm.

   13. MHMorgan Housel21:09

       And so, at the, uh, it's always like that. And you go through life seeing so many people who have everything, all the money, the great family, all the health, the beauty, everything you can imagine, and they're not happy for it. And it's because with everything that they have, their expectations rise not only to that level, they might rise above it.

   14. SBSteven Bartlett21:25

       Mm-hmm.

   15. MHMorgan Housel21:25

       So if you are some- if your expectations rise faster than your income, you're never gonna be happy with your money, no matter how much money you make. You can make a billion dollars a year, but if you needed and wanted 1.1 billion, you're broke. You feel broke.

   16. SBSteven Bartlett21:38

       Mm-hmm.

   17. MHMorgan Housel21:38

       And the reverse of that is true too. There are people who make $50,000 a year, but if they only need 40 to be happy, they're stoked (laughs) , they feel great. And so that's, I think that's one- one of the reasons it's so important is because managing your own expectations is more in your control than managing your circumstances, in terms of raising your income, raising your investing returns. It's not-

   18. SBSteven Bartlett21:59

       How?

   19. MHMorgan Housel21:59

       ... it- it's not that you can't control raising your income. You can be ambitious and smart and entrepreneurial, of course. But it's more in your control to just, inside your head, to just say, "I'm gonna try to want less." That- that's just a mental exercise that, it's not to say it's easy, it's- it's not easy at all, but you have total control over

7. 22:16 – 25:35

   The Most Valuable Financial Skill Anyone Can Have

   1. MHMorgan Housel22:16

      doing it.

   2. SBSteven Bartlett22:16

      So how, in a practical sense, can one go about keeping their expectations below their circumstances, I guess?

   3. MHMorgan Housel22:24

      Here's- here's one that really made an impact on me, and it's great that we're in LA because that's where this story took place.

   4. SBSteven Bartlett22:30

      Mm-hmm.

   5. MHMorgan Housel22:31

      I was a valet here in LA all throughout college at a five-star hotel here in town. So, A, I w- I was young, I was, you know, age 19 to 24, something like that. And all day, it was people driving in in Ferrari and Lamborghinis and Rolls-Royces. And one day it hit me, just, I- I- I remember the moment because it was like out of the blue it hit me. Whenever someone would drive in in a Rolls-Royce or something, never once would I look at the driver and say, "That guy is cool." Like, "Wow, look at him, he's so cool." What I did is I imagined myself as the driver, and then I thought, "If I was the driver, people would think I'm cool." And then I was like, "Wait, don't you see, like, the disconnect here?" Nobody cares about the driver, but they wanna be the driver because they think people will then f- care about them.

   6. SBSteven Bartlett23:14

      (laughs)

   7. MHMorgan Housel23:14

      And once you realize that, like, the takeaway is nobody is thinking about you as much as you are. Nobody cares about your stuff as much as you do. Nobody cares about your car or your house or your clothes or your jewelry as much as you do. Because to the extent that they're even looking at them, they're looking at your car, looking at your house, really what they're doing is imagining themselves with that nice car. They're not giving you the credit. They're imagining themselves having it. So once I realized that was the game that was being played in society, once you u- once you recognize that's the game, your willingness, your desire to show off plunges. And of course, I- I like nice stuff. I like nice cars, I want some nice clothes, I live in a decent house. But once you realize that, it plunges. And I think the most valuable financial skill that anybody can have is not needing to impress other people. If you don't need to impress other people, that is an asset on your balance sheet that is worth a billion dollars. Because so much of society...... as a whole and an individual, is just geared towards, "How can I get other people's attention? How can I show off to other people? How can, how can they like me more?"

   8. SBSteven Bartlett24:20

      I both agree and understand, but agreeing and understanding is different from being able to do.

   9. MHMorgan Housel24:25

      I think at the society level, it will never be f-... It'll always be like that, same as ever. It's never, it's never gonna move away from that. If you can manage it around the edges at the individual level, it's massive for your life. One thing that's important here is that if you are a young person and you're kinda looking for a spouse, a mate, a boyfriend, a girlfriend, a wife, a husband, whatever it would be, then your ability to look really nice and to signal and to kinda put up your peacock feathers is important, and I get it, and I did it back in the day. Once you are more settled down in your career, in your relationships, if at that point you are still hanging on to the desire to impress other people, that's when it's broken, that's when it's just pure net loss in your life. Because you're trying to show off to, for people who you don't even need or want to love you. There's a great quote from Warren Buffett where he says, "The definition of success is when the people who you want to love you do love you." And so for me, it's, like, five people.

   10. SBSteven Bartlett25:19

       (laughs)

   11. MHMorgan Housel25:19

       It's, like, my parents, my wife, and my kids, and, like, th- that's it. That's it. Th- those are the people who I want to love me. And if they love me, I'll... I probably have 90% of the happiness that I'm capable of. And if they don't love me, uh, then I'm never gonna have more than like 10% of the happiness that I'm

8. 25:35 – 27:48

   The Most Important Saying for a Relationship or Career

   1. MHMorgan Housel25:35

      capable of.

   2. SBSteven Bartlett25:35

      In that chapter about happiness, you talk about your friend Brent as well and his theory on marriage.

   3. MHMorgan Housel25:39

      My, yeah, my friend Brent Beshore has this great theory on marriage where he says, "Marriage only works if both partners wanna serve the other partner and expect nothing in return." So, you wake up every morning and you say, "I wanna serve my spouse, but I expect nothing in return from them." And if you both do that simultaneously, you're both pleasantly surprised 'cause what happens is, I didn't expect you to do anything for me, but you did, and vice versa. And both of you just wake up every morning, you're like, "But you did that for me. You, you helped me out here. You, you were empathetic to me there," and it feels great.

   4. SBSteven Bartlett26:11

      You exceeded my expectations.

   5. MHMorgan Housel26:12

      Exceeded my expectations. And I think what breaks down any marriage or career, or whatever it would be, is when you become needy. Like, nothing breaks love more than being needy. And really what needy is, is just your expectations are so high that you wake up and you say, "I expect you to do this for me. I expect you to help me. I expect you to serve me." That's just, like, massively high expectations that you have in that relationship.

   6. SBSteven Bartlett26:37

      It's, it's also like expecting ex- an external factor, in that case your partner, to validate you in some way or to... And that kinda goes back to your point about money where in order to stop showing off and focusing on those five people that we want to love ourselves, we need to understand and ideally solve our s- often toxic relationship with, like, our need for validation. And that, I guess, brings me to the first chapter in your book where you talk about the stories of money that we have and where they've come from. And something that's always baffled me is when you go into low-income areas, there's more gambling shops.

   7. MHMorgan Housel27:11

      Yeah.

   8. SBSteven Bartlett27:12

      And I can attest to it. When I was 18, 19 years old and I'm shoplifting pizzas to feed myself and I'm doing all sorts of stuff, when I got my student loan, and I was in university for one day, and they gave me, like, the first payment of my student loan. And I don't think I've ever said this before. I put the entirety of the payment on a bet.

   9. MHMorgan Housel27:31

      Wow.

   10. SBSteven Bartlett27:32

       And I lost it in the sixth, in the, in injury time of that football match. I don't bet. I-

   11. MHMorgan Housel27:37

       And did you need that money for tuition? Like, it was-

   12. SBSteven Bartlett27:38

       Fuck, yes.

   13. MHMorgan Housel27:39

       ... it was then go- it was then gone.

   14. SBSteven Bartlett27:39

       I needed it to eat.

   15. MHMorgan Housel27:40

       Yeah, yeah.

   16. SBSteven Bartlett27:41

       I wasn't spending (laughs) ... I had no money. My... I didn't come, I didn't come from money. My parents... I had gone to university with 50 quid, then I got this, like, £1,000 sent

9. 27:48 – 32:17

   Why Low Income People Are More Reckless With Money

   1. SBSteven Bartlett27:48

      to me from student loan whatever. I was so reckless with money when I didn't have money.

   2. MHMorgan Housel27:52

      Yeah.

   3. SBSteven Bartlett27:52

      The minute I got money, it's like everything just chilled the fuck out, and I-

   4. MHMorgan Housel27:56

      Yeah.

   5. SBSteven Bartlett27:56

      ... I became really long-term, patient. I made really responsible decisions. I stopped buying flashy things. I, like, don't even own a TV now.

   6. MHMorgan Housel28:04

      I'm very similar. I feel like the more money I have, the less my material desires are. For sure, for sure. And when I say that out loud, I'm like, "Yo, absolutely."

   7. SBSteven Bartlett28:11

      Why is that, that when we have less, we are reckless with our money?

   8. MHMorgan Housel28:14

      Well, I think there's two sides of this. One of my theories is that what everyone wants in the world is respect and admiration from other people, and there's kinda two ways to get that. You can get your respect and admiration through your wisdom, through your love, through your humor, or if you don't have that to offer from the, to offer to the world, you're gonna get it through your material possessions. So, if you can gain respect and admiration through your business success, your wisdom, your love, your friendship, great, then you're gonna get it, and you're gonna fulfill that bucket. If you can't get it from those things, then you're like, "Well, might as well show off my car. It's all I got to do. That's all I have." I think that's one side of it. So, as you become more successful, your desire to show off diminishes because you're gaining respect and admiration through other things that are not material. The other side of this that's so important is that, you know, I saw this statistic years ago that the poorest of 10% of Americans buy, like, 80% of the lottery tickets in America. And these are people who can l- like, barely feed themselves, the lowest 10%. They're literally struggling to put a roof over their head and feed themselves, are going out hand-over-fist buying scratcher tickets. And the f- the knee-jerk reaction when you hear that is, "Morons."

   9. SBSteven Bartlett29:25

      Mm-hmm.

   10. MHMorgan Housel29:25

       "What are you doing, you idiot?" And maybe that is the right reaction, but I started thinking about it, and I was like, okay, maybe if you try to put yourself in those people's shoes, maybe they would say something like this, "If you are stuck in a low-income job and you feel like there's no way out, you feel like you don't have the opportunity to work your way up the ladder, become an entrepreneur, you feel like you're stuck in this position, buying a lottery ticket might be the only thing in life that gives you a little bit of hope. It might, it's, might be what feels like literally your only ticket to get out." And that might be not something that you and I feel like because we have... we- we- we at least feel like we might have other opportunities.

   11. SBSteven Bartlett30:01

       Uh, it's... You're so right, because when I gambled, what I then did the same day before the result of my bet or my lottery ticket came in, and I said this to my teammate other day, is I would go on Rightmove and, like, Auto Trader, and look at stuff that I would buy if I won.

   12. MHMorgan Housel30:17

       Yeah. Yeah.

   13. SBSteven Bartlett30:18

       (laughs)

   14. MHMorgan Housel30:18

       I think there's a sense too that if you are stuck in a lower spot in life, if you have a feeling that the world is unfair-... and very often it is, so may- some- maybe that- that might be the right mindset. But if you feel the world is unfair, then it's very natural to think, "I might as well cheat, too."

   15. SBSteven Bartlett30:34

       Mm-hmm.

   16. MHMorgan Housel30:34

       If the world's unfair, why not? Might as well cheat.

   17. SBSteven Bartlett30:36

       Mm-hmm.

   18. MHMorgan Housel30:36

       And I think that, at- at least at some level, has some explanation for the relationship between poverty and crime.

   19. SBSteven Bartlett30:42

       That word hope, is- is so- is so true.

   20. MHMorgan Housel30:44

       I think it's true, too, that if-

   21. SBSteven Bartlett30:45

       Gives you just a glimpse of hope, 'cause it gives you... even if it's a 0.00001% chance.

   22. MHMorgan Housel30:50

       If it's the only thing in your day that made you smile a little bit, made you feel like you had a little bit of hope-

   23. SBSteven Bartlett30:54

       And dream.

   24. MHMorgan Housel30:54

       ... then I get why they do it.

   25. SBSteven Bartlett30:55

       Yeah.

   26. MHMorgan Housel30:55

       The other reason, the other thing that I think a lot about here is that if you are in a low-income job and you're working graveyard shifts and you're exhausted and you're taking three buses to get your kids to school, if the only thing that day that gives you a little bit of pleasure is a cigarette and some alcohol, I get it. I totally get it. And that's also the relationship between health and poverty, is a lot of that, too. So it's very easy for people who are of higher means to look down at those people and point out all the bad decisions that they're- that they're doing in life.

   27. SBSteven Bartlett31:24

       Mm-hmm.

   28. MHMorgan Housel31:24

       But I think you underestimate how much the desire to just have a little bit of hope, a little bit of pleasure, and if those are- feel like your only avenues for hope and pleasure, maybe that's the explanation for at least part of it.

   29. SBSteven Bartlett31:35

       Quick one. This is really, really fascinating to me. On the backend of our YouTube channel, it says that 69.9% of you that watch this channel frequently over the lifetime of this channel haven't yet hit the subscribe button. I just wanted to ask you a favor. It helps this channel so much if you choose to ju- subscribe. Helps us scale the guests, helps us scale the production, and it makes the show bigger. So if I could ask you for one favor, if you've watched this show before and you've enjoyed it, and you like this episode that you're currently watching, could you please hit the subscribe button? Thank you so much, and I will repay that gesture by making sure that everything we do here gets better and better and better and better. That is a promise I'm willing to make you. Do we have a deal? Let's speak, then, to 18-year-old Steve that was in that little room with the stack of these, what they call

10. 32:17 – 35:55

    How to Learn to Finally Save Your Money

    1. SBSteven Bartlett32:17

       c- county court judgments, where- and bailiffs and stuff. Stack of letters on his desk. What advice, based on all you know about money and finance, can you give to somebody who is maybe, you know, making $1,000 and- $1,000, $2,000 a month, covers their rent, just about, doesn't have a lot of money left over. What is the best way to go from that position to a position of wealth, in your view?

    2. MHMorgan Housel32:40

       I think one of the best ways to think about it at the lower levels, and I explained a little bit of this earlier but to dig into it, is a lot of what's probably giving you stress in life is that you don't have control over what you're doing, and if you view every dollar of savings that you have as a bit of your future that you own and control, then I think that mind shift- that mindset can shift pretty dramatically. And it's like, that's- that's the ticket out. The ticket out is not a nicer car, it's not a bigger house, it's not better clothes. The ticket out is independence. That's what's gonna give you the better career, it's what's gonna make you happier, it's what's gonna make you healthier, and the only thing that's gonna give you independence is having enough money saved up so that you can choose where you wanna live, maybe even what job you want. You can choose ma- at- at- at some point down the road when you retire, if you get sick, it's not just gonna break you immediately. Having that independence is gonna take more weight off your shoulders than anything else you can do in life.

    3. SBSteven Bartlett33:31

       Save money.

    4. MHMorgan Housel33:32

       That's it. That's the... the title of that chapter in the book is Save Money, because you can't put it any clearer or starker. Like, that's- that's it.

    5. SBSteven Bartlett33:38

       He says there are three types of people. Those who save, those who don't think they can save, and those who don't think they need to save.

    6. MHMorgan Housel33:46

       Yep.

    7. SBSteven Bartlett33:48

       Three types of people. Which one are you? Those who save, those who don't think they can save, and those who don't think they need to save. I'll tell you what, I've been all three in my life.

    8. MHMorgan Housel33:57

       That's interesting. I've always been a saver.

    9. SBSteven Bartlett33:59

       No, I haven't.

    10. MHMorgan Housel34:00

        And see, that... I think that's actually very rare, that you change who you are.

    11. SBSteven Bartlett34:03

        Really?

    12. MHMorgan Housel34:04

        On the nature-nurture spectrum, I actually think, and this is kind of disappointing to talk about, it's not fun to talk about, but on the nature-nurture spectrum, I think a lot of money is nature. Warren Buffett talks about the people who have the money mind, which means, like, either they get it or they don't. And if they get it, they get it instantly. And if they don't, they'll get it never at all. I- I- I actually don't believe in it- th- it's that black and white. Charlie Munger explains it like that. He says, "When explaining financial matters to young people, they either get it instantly or never at all." And he's putting that too starkly, I think. I don't think it's that black and white. But on the nature-nurture spectrum, is it 80/20? Is it 70/30? I think it's probably something in that range.

    13. SBSteven Bartlett34:44

        So let me give you a count- a counterargument to that, then. So as I said, I've been someone that do- didn't think he could save, 'cause I didn't have money, and I just thought, "Oh, uh..." you know, but I could've saved in th... Looking back now I know I could've saved. Um, I could've saved a small amount, but I didn't see the value in saving small numbers. I didn't understand the laws of compounding returns, which we'll definitely talk about. I have also been the person that saves, and I've also been the person who thought they didn't need to save. I've been all three. My counterpoint to this goes back to a story that I read from your early years, where two of your friends died on a ski trip.

    14. MHMorgan Housel35:19

        Yep.

    15. SBSteven Bartlett35:19

        And it also links to something you said in your new book, Same As Ever, where you speak about how sometimes in life, like, hitting rock bottom is the greatest incentive to change our lives.

    16. MHMorgan Housel35:33

        Yeah.

    17. SBSteven Bartlett35:33

        So I put those two things together and go, that moment when you, uh... two of your friends died on a ski trip that you were on when you were younger, it had an impact on your risk appetite-

    18. MHMorgan Housel35:41

        Yeah.

    19. SBSteven Bartlett35:41

        ... and your attitude towards... and therefore, your attitude towards money.

    20. MHMorgan Housel35:44

        Yep.

    21. SBSteven Bartlett35:44

        What- what happened? What happened?

    22. MHMorgan Housel35:46

        So I grew up skiing in- in Lake Tahoe, California, and I was a competitive ski racer.

    23. SBSteven Bartlett35:50

        Right.

    24. MHMorgan Housel35:50

        Uh, so all throughout my childhood and teenage years, I skied six days a week, 10 months a year, all

11. 35:55 – 41:33

    A Tragic Incident That Taught Me My Most Valuable Lesson About Money

    1. MHMorgan Housel35:55

       over the world. And it was great. There were about 12 of us on the Squaw Valley ski team. We had grown up together, and we had spent our entire lives together. And when I was 17, this was in 2001, I was skiing with my two- two of my best friends, Brendan Allen and- and- and Ryan Richman, and we would ski out of bounds, which is illegal. You're not supposed to do it. We would duck under the rope that says, "Do not cross," and we'd ski out of bounds, because that's where a lot of the good skiing is. And when we would do this, it would spit us out on this back country road, wh- where we'd have to hitchhike back. There's no chairlift when you ski out of bounds, you have to hitchhike your way back. So w- so we did it one morning in February 2001, the three of us did it-And when we did it, w- we triggered a very small avalanche. And I re- I remember it so clearly. Like, I can still feel it 21 year, 22 years later. I can still feel what it was like. It's the weirdest sensation I've e- uh, that I've had in my life. Because when you get hit by an avalanche, rather than pushing on the snow to gain traction with your skis, the ground is pushing you. So, all of a sudden, you're skiing along and you got control, and all of a sudden, boom, you have no control anymore. The gr- the ground is pushing you around. Probably similar to what it feels like if you're standing on the ground during an earthquake, like the ground's pushing you. Uh, but it was a pretty small avalanche, maybe came up to our knees, ended pretty quickly, and we kind of, like, literally high-fived about it at the bottom and went about our day. We get back around to the- the base lodge. We hitchhiked back. And Brendan and Brian said they wanted to do it again, they wanted to ski again. And I said, "Hey," for whatever reason, I- I- I just didn't want to do it, so I said, "Hey, rather than hitchhiking back, why don't you guys go do it again, and I'll drive my truck around and pick you up?" So, we said, "Great." We made our plans, went our separate ways. They went skiing. I went back around to take my boots off and jump in my truck and go pick them up. 20, 30 minutes later, I go to pick them up at the pickup spot and they weren't there. And I knew, it only took us a minute to ski down the hill, so 20 minutes later I knew, like, they- they- they weren't coming. I wa- I was not worried. I figured that they had already hitchhiked home. But, so after waiting for another 20 or 30 minutes, I just left and went back to the lodge. I expected them to be there, and they weren't. And I still didn't really worry. Like, we didn't have cellphones back then, and people were just comfortable being out of touch. If you didn't know where your- your buddy was, like, it wasn't that big a d- it wasn't that big a deal. So, we w- went about the day. I- I started worrying a little bit. I remember I stopped at Brendan's house, expected him to be there, and he wasn't there either. And I remember calling and leaving a message on his voicemail, and I remember ending the voicemail by saying, "I hope you're okay, man." Those were my last word. I remember that very clearly. The day went on and I think at about four, five o'clock, Brian's mom called me. And she said, "Brian never showed up for work today. Do you know where he is?" And I told her what happened. I said, "We skied the backside of Squaw, where we'd hitchhiked back. I was gonna pick him up, but they never showed up, and I haven't seen them since." And I also remember so clearly Brian's mom saying, "Oh, my God," and hanging up the phone. And that was so, like, so it's then we started getting worried. We called the police. The police didn't take it very seriously 'cause they thought, "Ah, they're out at a party. They ran off with a girl for the night." Like, they weren't worried. But we finally got search and rescue involved. And rescuers with probe poles found Brendan and Brian buried under six feet of snow, and they were, they'd been killed from a massive avalanche. And so, look, I think virtually everyone listening to this, I'm sure you too, have lost somebody close to you, somebody that you love. So, I know the experience was not unique in that way. But it was the first time that I had experienced loss, and it was the first bad thing that had ever happened to me in my life. So, it had a big impact on me, and there were a lot of takeaways. I think at the time, I didn't have the cognitive tools to piece together what happened or to learn about what happened, like have any sort of takeaways. But as I got older and thought about it and looking back, I put together all these, like, realizations of what that did to me, how it changed me, and what were some of the lessons from it, too? One that I talk about in the book that I think about all the time is my decision to not go with them on a second run was this completely brainless decision. I put no thought into that decision. It was not a cost-benefit analysis. I didn't think through it, but it's the most important decision I've ever made in my life. 100% chance if I was with them, I would have died. And I had skied literally thousands of runs with Brendan and Brian. How many times did I deny a second run with them? Or say, "You guys keep going, I'm gonna go in"? Almost never. But one time I did, it saved my entire life. And so that, w- you really realize that the world hangs by a thread. Everybody thinks, like, oh, you're gonna put a lot of thought into your big decisions to make sure that you're successful in life, where you go to college, what your career's gonna be, who you marry. That's all great. But the world hangs by a thread, and there are tiny little know-nothing decisions, maybe that you made today, of maybe it was when to cross the street, maybe it was when to leave to get in your car, that can utterly change the course of your life. And so wh- once you accept that, of how much the world hangs by a thread, I think you become much more humble with your willingness to make forecasts about the future. What the economy's gonna do, who's gonna win the election, what's gonna happen in my life, my career, my family's lif- We have no clue. We have no idea. Because all we can think about are the big decisions. We cannot piece together the chaos theory of, "I got in my car at the l- uh, at the wrong time. I met the wrong person," or, "I met the right person." Or, you know, "I- I decided not to take a second run." We cannot forecast the impact of those things. And so that had a big impact on me, too, of just, who are we to fool ourselves that we can predict the next recession, that we can predict where our careers are gonna be in 10 years, that we can predict how long our marriage is gonna last, that we can predict how long we're gonna live? We can't. Nobody can. Because we can't predict how crazy these tiny events

12. 41:33 – 45:55

    Investing and the Biggest Mistake Most People Make

    1. MHMorgan Housel41:33

       can turn into.

    2. SBSteven Bartlett41:34

       And this comes right back to investing, doesn't it? Because m- most people that consider themselves to be investors, whether that's just putting a couple of quid into crypto or something else, engage in the idea that they can predict the future.

    3. MHMorgan Housel41:48

       Yeah.

    4. SBSteven Bartlett41:49

       Um, and this is where it appears that most money is lost.

    5. MHMorgan Housel41:52

       I mean, think about the biggest risks to the US economy over the last two generations.

    6. SBSteven Bartlett41:56

       COVID?

    7. MHMorgan Housel41:57

       I mean, th- that's one of them. The others would be Pearl Harbor-

    8. SBSteven Bartlett41:59

       Recession. Okay.

    9. MHMorgan Housel42:00

       ... 9/11, COVID, and maybe, uh, Lehman Brothers couldn't find a buyer in 2008, which sparked the financial crisis of 2008. Those are the biggest risks, by far.

    10. SBSteven Bartlett42:08

        Mm-hmm.

    11. MHMorgan Housel42:08

        And the common denominator of every one of those stories is that nobody saw them coming. They were not in any newspaper before they happened. They were not in any economic outlook. Nobody was going on TV warning you that this was coming. The common denominator of those is that they did all of their damage in two seconds (snaps fingers) . And that will be the case going forward. I- you can guarantee that the biggest news story and the biggest risk over the next year or the next 10 years of our life, whatever it is, is something that nobody's talking about today.... that you and I have, can't even fathom. 'Cause it's always been like that. There's never been a time when the biggest news story was foreseeable. And it's alwa- ... And it'll be like that going forward. So, that's another just, like, embracing how fragile the world is. There's a great quote from a financial advisor, who I really admire, named Carl Richards, and he says, "Risk is what's left over when you think you've thought of everything."

    12. SBSteven Bartlett42:57

        Hmm.

    13. MHMorgan Housel42:58

        You can go out of your way to think about all of the risks that are in your life and, like, great, and, like, how you're gonna prevent them, great. That's a good thing to do. When you're done with that exercise, what's left over that you're not thinking about is what risk actually is. So, like, by definition, we can never plan or even imagine what the biggest risks in our life are gonna be.

    14. SBSteven Bartlett43:14

        You say that in Same as Ever. You say ... I think the, the chapter title is Risk Is the Things You Can't See or something along those lines.

    15. MHMorgan Housel43:21

        Risk Is What You Don't See. Yeah.

    16. SBSteven Bartlett43:22

        Risk Is What You Don't See. That was a little bit terrifying.

    17. MHMorgan Housel43:26

        It, it's true. And I think, I think sometimes you can phrase it as terrifying. It's also kind of relieving that, l- l- like, why are you gonna put so much effort into trying to predict what the stock market's gonna do next, what the economy is gonna do next? Why are you building a forecasting model to figure out what the economy's gonna do over the next 10 years? When you look at the last 10 or 20 years, how could you ever predict 9/11 or COVID? And even, look, like, something like COVID, there was, like, a 2015 Bill Gates TED Talk where he talks about the biggest risk to society is a viral pandemic. So, it's not that nobody saw th- that thing coming, but the specifics of when it's gonna happen, how bad it's gonna be. Is it just gonna shut down the economy for a week or two years? That is completely impossible to predict.

    18. SBSteven Bartlett44:10

        But there's also lots of other TED Talks that say everything's gonna be great. (laughs)

    19. MHMorgan Housel44:13

        Of course, of course.

    20. SBSteven Bartlett44:14

        So, there's probab- there's a lot more. So, on balance, the world had no idea.

    21. MHMorgan Housel44:18

        I think on balance, the world breaks once per decade. Not exactly once per decade, but on average, once per decade. Everything that you thought about risk and uncertainty and stability goes to shit.

    22. SBSteven Bartlett44:29

        So, how do I prepare? If risk-

    23. MHMorgan Housel44:31

        Th-

    24. SBSteven Bartlett44:32

        If, if risk is what I don't see, how do I prepare?

    25. MHMorgan Housel44:34

        There's another great quote from Nassim Taleb that I like where he says, "Invest in preparedness, not in prediction." So, rather than going out of your way to be like, "Here's what I think is gonna happen in crypto. Here's what I think is gonna happen in the stock market," just make sure that you have a big enough buffer in your finances, cash, liquidity, being scared of debt, so that no matter what happens, you're, y- you at least have a fighting chance of enduring it and making through. One, one thing I've o- I've often thought about is that you should have enough cash in your investing portfolio, the amount of cash you should have sh- should feel like it's too much. It should feel ... It should make you wince a little bit 'cause if you only have enough cash to put up with the risks that you can envision and the risks that you can foresee, you're gonna miss a surprise every single time. Every single surprise is gonna (laughs) be a surprise to you. But if you feel like you have too much cash, then at least you have a fighting chance of putting up with the 9/11, the COVID, the Pearl Harbor, whatever it might be. So, wh- when people look at my asset allocation, my investments, a lot of people look at it and say, "You seem really conservative. Why do you have this much cash? What are you saving for?" And my answer is always, "I don't know. I have no idea what I'm saving for." Who are we to assume that we can predict the risks that are gonna be in our own personal lives and throughout the broader world? Nobody can do it. The only way to prepare for it is to have what feels like too much

13. 45:55 – 51:58

    The Best Advice on How to Invest Your Money

    1. MHMorgan Housel45:55

       safety.

    2. SBSteven Bartlett45:55

       What is your capital allocation strategy? How do you invest your money? Um, this is, you know, this is the thing people wanna know most about you.

    3. MHMorgan Housel46:02

       I keep it as painfully simple as I possibly can. So, literally, my entire net worth is cash, a house, and index funds, and some shares of Markel where I'm on the board of directors. And that's it. There's nothing else. My entire ... I can summarize everything so easily and so cleanly. And truly, that's it. And it's not even like I have 20 bank accounts. Like, I have one bank account, one brokerage account, and, like, and a house, and that's it. It's so simple.

    4. SBSteven Bartlett46:26

       Why, why index funds? You're the reason I ... Your capital allocation strategy is almost identical to mine. I wanna talk about the house thing as well. But, um, after reading your book, I stopped trying to pick stocks-

    5. MHMorgan Housel46:38

       Yeah.

    6. SBSteven Bartlett46:38

       ... and I invested all of my available capital into index funds outside of investing it in starting companies. So, I'm a shareholder in, I don't know, 50, 60, 70 companies. I ... All my other available capital is invested in index funds. And then I have a very longstanding large position in Ethereum, which I've held for, like, six years or something now-

    7. MHMorgan Housel46:59

       Yeah.

    8. SBSteven Bartlett47:00

       ... which has done me very well.

    9. MHMorgan Housel47:01

       Yeah.

    10. SBSteven Bartlett47:01

        That is it. And, uh, the Ethereum investment is also based on the fact that I run a software business that is in blockchain, and I could see that developers are building on top of Ethereum more than any other blockchain. So, that insight was really beneficial to me.

    11. MHMorgan Housel47:15

        And six years, so even with the big fall over the last two years-

    12. SBSteven Bartlett47:20

        Yeah.

    13. MHMorgan Housel47:20

        ... you're, you're still up a lot.

    14. SBSteven Bartlett47:21

        Yeah, I, I think your book taught me that successful investing is when you lose the password to your investment account. (laughs)

    15. MHMorgan Housel47:28

        Yes. (laughs) Yes, that, that's exactly it.

    16. SBSteven Bartlett47:29

        I don't actually think you said that in there, but that's like ... When I lose the password to my investment account, I'm so proud of myself-

    17. MHMorgan Housel47:35

        Yeah.

    18. SBSteven Bartlett47:35

        ... because it means I haven't checked it in forever. And so it was funny 'cause you were coming today. I thought, "Oh, yeah. Oh, I have all this money in these index funds. I'll check it." And I thought, "Fuck, I don't know the password." Like, I'm so-

    19. MHMorgan Housel47:45

        (laughs) Good, that's why you're gonna do okay.

    20. SBSteven Bartlett47:47

        I'm so proud of myself.

    21. MHMorgan Housel47:47

        The reason I do this, what's important is that I am not one of the people who says, "Nobody can beat the market, so therefore use index funds." That's not what I believe. I think there, I think it's extremely hard to beat the market, and very few people will do it. But I think there are really smart people who can do it, and people who I know who I could invest with. The reason I don't is not because I don't believe it can be done. It's because the variable that I wanna maximize for in my investments is endurance. If I can just earn average returns for an above average period of time, it's gonna lead to amount of success that will literally put you in the top 5% of investors. My parents are a great example of this. My parents are smart people, but they really, they have no financial background. And they have, like, minimal financial interest, I would say. And, but they have dollar cost averaged into index funds for going on 40 years now. And literally, if you look at the returns, they've never sold anything, ever.And literally, if you look at the returns, they'd probably be in the top 3% of professional investors.

    22. SBSteven Bartlett48:41

        What is, for anyone that doesn't know, what is dollar cost averaging, and what is an index fund?

    23. MHMorgan Housel48:46

        Dollar cost averaging means you buy the same dollar amount of investments every single month, come hell or high water. It doesn't matter what the stock market's doing, recession, boom, bust, you say, "I'm gonna put $100, or whatever it is, in the stock mar- on the first of every month." Now most people who, like, have a 401 (k) at work are doing this whether they know it or not. They have $100 or whatever removed from every paycheck, and it goes into the funds that they own, and they don't have to do anything. Whether you know it or not, you're actually doing it. The contrast to that would say, "I'm gonna buy and sell based off of how I feel-

    24. SBSteven Bartlett49:16

        Hmm.

    25. MHMorgan Housel49:16

        ... in the stock market." I wake up, I watch CNBC, I decided to sell, and I'm gonna put it back in when I feel better about the market. It's the contrast to that. An index fund is just a single fund that owns hundreds or thousands of stocks within it, and if it's diverse enough, if it's big enough, really what you're doing is you're owning a slice of the global economy, which is how I think about it. It's thousands of individual stocks in there, Tesla, Apple, whatever it would be, but really what you're doing is you're owning a slice of capitalism.

    26. SBSteven Bartlett49:41

        If I was your son, and I said, "Dad, prove to me that that's a better long-term wealth creation strategy than buying crypto or buying companies that I use or like," how would you explain that to your, to your kid?

    27. MHMorgan Housel49:55

        Your ability to do well over the next one year or five years is gonna have no role whatsoever on your lifetime ability to generate wealth. All that's gonna matter is not what are the best returns you can earn. All that matters are, is what are the returns that you can sustain for the longest period of time? All that matters is your endurance. It doesn't matter if you can double your money this year, or even double your money again the next year. All that matters is, can you stick and keep it going for 50 years? That's where compounding comes from.

    28. SBSteven Bartlett50:22

        Prove it.

    29. MHMorgan Housel50:23

        All... Because the formula for compounding is returns to the power of time. That's not quite it, but, like, more or less, that's it. So in that equation, if you understand the math, all of the heavy lifting comes from the exponent.

    30. SBSteven Bartlett50:34

        Prove it.
14. 51:58 – 54:41

    The Janitor That Became a Multimillionaire

    1. SBSteven Bartlett51:58

       It's a difficult thing. It also reminds me of the story that you talk about in the introduction of your book about the janitor, Ronald James Read.

    2. MHMorgan Housel52:05

       Yeah.

    3. SBSteven Bartlett52:06

       Who, when he died in 2014, age 92, had a net worth of over eight million.

    4. MHMorgan Housel52:12

       And he was a janitor.

    5. SBSteven Bartlett52:13

       How did he do that?

    6. MHMorgan Housel52:15

       He took what very little money he could save from his job as a janitor mopping floors at the gas station. He put it in stocks, and he left it alone for 70 years. And that's it. That's all you need. That's all you need to do. If you have endurance and you're investing and you can keep it going for years or decades, you don't need to be a genius stock picker. And not only do you not need to do it, if you have endurance, you're gonna beat literally 97 or 99% of the genius stock pickers. And what's so interesting about it is, like, picking the right stocks is hard. It's supposed to be hard. Like, there's no world in which everybody who tries to beat the market is gonna do it. Of course it's hard. Just like being an NBA player is hard. And, but having endurance is, like, largely in your control. It's so much easier to just be patient than it is to pick the right stocks every single day. And I think some people, nature/nurture, some people, like probably Ronald Read and my parents, ju- just understand it naturally. It's not hard for them to be patient. But, do... Like, there are professional investors who work 80 hours a week for 30 years to try to beat the market, and they can't do it. Not only some, that, that explains, like, most of them. And even the ones who can do it are maybe gonna beat the market by half a percent per year, 1% per year. But if you can have endurance, that is the, uh, that's a bigger benefit than you can have by even being, like, a very successful stock picker. Like, somebody who outperforms the market by one percentage point per year, and they can do that for 10 years, that's amazing. That's like Mount Rushmore investor. But somebody who earns average returns and does it for 20 years is gonna have way more money. You do it for 30 years, you're gonna be filthy rich. You'd be like Ronald Read. You could be a janitor who leaves $8 million to charity when you die.

    7. SBSteven Bartlett53:53

       But, so in the case of Ronald Read, do you not look at him a little bit and go, "Listen, bro, if you had eight or nine million dollars in the bank, you should've been living it up"?

    8. MHMorgan Housel54:01

       See, this is one I- I do kind of regret that in the book that I'm, I kind of... I didn't say it explicitly, but I kind of make him out to be a role model, and I don't think that's the ca-... He's, he's not my role model. I think he's a fascinating story of somebody who became rich despite not having any of the pedigree or any of the skills that y- are normally associated with wealthy people. But you're right that he lived in a, a, a squalid housing, and he worked as a janitor. That's not my goal. So I, I, I want to live a nice life. I want to be independent. But he's the most extreme example that you can come up with, and I- I- I wish I had stated that more clearly in the book.

    9. SBSteven Bartlett54:37

       A lot of people have this conversation around pensions, and in the UK,

15. 54:41 – 56:28

    Pensions

    1. SBSteven Bartlett54:41

       we, you, we can pay money from our salary into our pension. But I think a lot of people think, "Gosh, when I'm 60, when I'm 65, I want to be rich? I want to be rich when I'm 25."

    2. MHMorgan Housel54:50

       Yeah.

    3. SBSteven Bartlett54:51

       "And I can go to Vegas and-"... you know, ball out and buy nice things and have great experiences. Not when I'm 65.

    4. MHMorgan Housel54:59

       Yeah. No, th- that's true. I think there are a lot of people. A lot of financial advisors will say that one of the hardest things they do as an advisor is getting their clients to spend money, because they've been so conditioned to save, save, save, save, save, that when they finally retire at 65, they don't know how to spend. They have no clue how to spend money. There's a great, uh, author, I think you've had him on your show, Ramit Sethi-

    5. SBSteven Bartlett55:18

       Mm-hmm.

    6. MHMorgan Housel55:18

       ... who talks about this a lot, but like h- you, like, you need to learn how to live a, a rich life and figure out what that is for you. For some pe- Like, for me, it's just, like, my, my happy state is, like, sitting on the couch in sweatpants reading a book, going for a walk with my wife. That's wh- that's, that's my rich life that I love doing. And to do that, I need to be independent and autonomous so I can do that all day long, I can do that on a Wednesday afternoon. Ramit talks a lot about, like, maybe your rich life... I think for him, it's flying first class and wearing nice clothes. And he talks about, like, he drives, I think, like, a beat-up Honda, but he flies first class, and he dresses very nicely. So you just have to figure out what is the little thing that's gonna make you happy. And I think a lot of people's problem is that society tells you ha- what you're supposed to do to be happy. You're supposed to have a nice car, you're supposed to have a big house, you're supposed to wear nice clothes. That's what society tells you to do. And for some people, that might be the case. For other people, like me, I think it, it's not. That's, that, that would not ever make me happy. What does make me happy is independence, so I can just do these little quirky things that I like to do. So I think you just have to figure out the little things that make you happy, rather than just being forced by society into what they want you to do.

    7. SBSteven Bartlett56:26

       Knowing when enough is enough.

16. 56:28 – 59:34

    How Do We Know When Enough Is Enough?

    1. SBSteven Bartlett56:28

       This was one of the m- most interesting things that I think really rang true to me was, how do I know in my life when enough is enough? I've definitely been a victim to that external narrative that I need to have these things in my life to be a happy person, but how does one go about knowing when enough is enough?

    2. MHMorgan Housel56:45

       I think, uh, back to the story of my father, he just woke up one day and it was obvious that he would, he had been doing what he did for long enough, and it was, he had felt like he had enough and whatnot, and he, and he broke away from it. I think, for, for a lot of people, it's j- I, uh... Well, one thing that's important about the concept of having enough and independence is that when most people, even if they are independent, they wake up every morning, what they wanna do is go to work. One of, one of the big problems with the FIRE movement, the Financial Independence Retire Early movement, where people are like, they're gonna be a super saver and then retire at age 31, whatever it'd be, so many of those people who actually did that and retired at age 31, they, once they retired, after about two weeks, they were bored out of their mind. And if they did it for six months, they were clinically depressed. 'Cause for most people, you want to be productive, you wanna keep doing it. So having enough doesn't necessarily mean that you're gonna stop working. It just means you're gonna keep doing only the work that you wanna do. There's a really interesting question that Patrick O'Shaughnessy asks a lot of people, uh, in, in his office. He says, "If you won a billion dollars in the lottery, but you had to stay at this job, you're a billionaire, but you can't quit, what at this company would you wanna do? And what would you get rid of?" And virtually everyone has an answer for that question. They say, "Oh, if I didn't need the money, but I have to stay, I would love to work on this project. I love working on this thing. This, that, and the other is all bullshit to me." So, like, in any job, there's gonna be something that you wanna do. There's gonna be some project, there's gonna be some position. Or, or, or maybe it's, like, being an artist, whatever it would be. It's not that you stop working, it's that when you have enough, you get to pick and choose which of those things you're gonna end up doing.

    3. SBSteven Bartlett58:19

       It's often too late in our lives when we realize the cost that we've paid for enough never being enough. You know, it could be family, it could be health, whatever. Um, I always reflect on the... It's Bronnie Ware, wasn't it, who interviewed people on their deathbeds and found out that the biggest regret of their dying was not living a life true to themselves, working too much, et cetera. But that's on your deathbed, there's nothing you can do at that point.

    4. MHMorgan Housel58:40

       Right.

    5. SBSteven Bartlett58:40

       And I think a lot about this, like, "What am I gonna regret?"

    6. MHMorgan Housel58:43

       Yes. I think about that too. I think... This is, this is pretty morbid to think about, but I think about if I were on my deathbed tomorrow, would I regret working hard and saving a lot of money? And my answer is absolutely not. It would give me so much pleasure to know that my wife and my two young kids are gonna be fine.

    7. SBSteven Bartlett58:57

       Mm-hmm.

    8. MHMorgan Housel58:58

       And the opposite of that, I cannot fathom being on my deathbed and looking at my wife and my eight-year-old son and my four-year-old daughter and thinking, "You guys are screwed." That would, that, that would, that would be the biggest regret I can fathom. So I think a lot of people would look at someone with a high savings rate, like me, and would assume that I'm gonna regret it on my deathbed. And who knows? But I, I, I have to think it would actually be the opposite. What makes me, gives me so much happiness and pleasure is taking care of my family. And if I were to go tomorrow, I wouldn't regret for one second the car that I didn't buy, the big house I didn't buy, the nice clothes I didn't buy. Not for a second would I regret not doing this.

    9. SBSteven Bartlett59:33

       It's a really

17. 59:34 – 1:03:19

    Should We Save Our Money for Our Children?

    1. SBSteven Bartlett59:34

       good frame to think through, isn't it, about our financial decision-making. Uh, you know, a lot of people are, like, saving up to buy a lot of nonsense that's gonna depreciate. And would you rather have a little nest egg left over for the ones you love or buy that Lamborghini?

    2. MHMorgan Housel59:47

       There's another great book called Die With Zero, which basically, t- t- the title is self-explanatory. And it... One of the concepts is even if you wanna give money away to your family, don't wait until you die. Don't make your kids wait or, like, hope you're gonna die so they can get their inheritance. Give it to them when it really matters, which for most people is in their 30s and 40s. If you wait until you die at age 90 and your kids are 60, and then they get your money, like, what's the purpose of that? Give it to them when they need it. When they're raising kids and whatnot, that's when they need your money. I, I, I really like that concept, and I think about that with my own kids.

    3. SBSteven Bartlett1:00:20

       The counterpoint to that is, though, if I just give my kids money, then, like the Chamath quote, they might lose it quick.

    4. MHMorgan Housel1:00:27

       Yeah.

    5. SBSteven Bartlett1:00:27

       So think about that, especially as, you know, someone that has a lot of cash they could give. I think about this 'cause at some point, I'm gonna have kids, and they're gonna, "Daddy, I wanna do a driving lesson," or they're gonna be 18 and go off to university or whatever. God, I hope, hope they don't go to university.

    6. MHMorgan Housel1:00:40

       (laughs)

    7. SBSteven Bartlett1:00:41

       Um, and they're gonna say, like, "I've got nowhere to live," or, "I found this nice apartment, Dad." And in those moments, do I make the decision to pay for it because I can or withhold it because they need to learn the hard way? I have this d-... yeah, I'd call it an argument, with my girlfriend where I say, "Babe, listen, when we have kids, they're gonna sit in economy." And she's like, "Absolutely not."

    8. MHMorgan Housel1:01:03

       Yeah.

    9. SBSteven Bartlett1:01:03

       And I'm like, "No, babe. When they get..." Okay, we made a deal. I think we got to about, "When they're 12 years old, I'm gonna put them in economy so they can learn for themselves the value of things."

    10. MHMorgan Housel1:01:13

        See, we, we made this mistake. I don't think I've ever talked about this, but it was about a year ago, we flew my son, who was ... He may ... I guess he was seven at the time. We flew first class, and we explained to him that this was not normal, this was not gonna be the way it is. Soon as he did it, he went home, he told all of our neighbors, told all of his friends, told everybody at school, and that was when my wife and I were like, "Can't, can't do this, never again." You see how quickly somebody can be spoiled or use that to try to show other people that they are superior to them.

    11. SBSteven Bartlett1:01:40

        Expectation management.

    12. MHMorgan Housel1:01:41

        And we're like ... That's when it was like, "No, no, we can't ever do this ever again."

    13. SBSteven Bartlett1:01:44

        And you moved his expectations in a way.

    14. MHMorgan Housel1:01:45

        Absolutely. I didn't fly first class till I was 35.

    15. SBSteven Bartlett1:01:48

        (laughs)

    16. MHMorgan Housel1:01:48

        He did it at seven. And so that my ... When I first did it at 35, I remember feeling, A, I earned this, I worked for this, and it also felt so special to me, 'cause I'd flown coach 9,000 times before that.

    17. SBSteven Bartlett1:01:59

        Hmm.

    18. MHMorgan Housel1:01:59

        So it felt amazing. And so that's ... I, I, I think about that a lot. There's a great quote from Charlie Munger where one of his rich friends says, "Charlie, if I give my kids all of my money, is that gonna ruin their ambition?" And Charlie says, "Of course it will, but you have to do it anyways." And the guy says, "Why?" And Charlie says, "Because if you don't, your kids will hate you." And I think that's, that too is like ... Lot- lots of Charlie Munger quotes are, are-

    19. SBSteven Bartlett1:02:23

        Extreme.

    20. MHMorgan Housel1:02:23

        ... framed as black and white. They're extreme, but I think that's probably like 80% true.

    21. SBSteven Bartlett1:02:27

        Really?

    22. MHMorgan Housel1:02:27

        That it's, it's probably maybe 70% true, that if you are a wealthy person, and I'm not talking billionaires. If you just have a moderate amount of wealth that you might pass along to your kids someday, that your two options are kind of at least to some extent hurt their ambition, or risk some level of strife. And it's always child-dependent. Like I always make the example that if 18-year-old Bill Gates or Mark Zuckerberg or Elon Musk inherited a billion dollars, wouldn't have made any difference to their ambition. They would have s- ... They would not have slowed them down by one second. But most people, including myself, it would have. Like I was driven by fear of not making it, which is what most people are. I was dr- ... I was scared shitless that I was not gonna find the right career, that I wasn't gonna make it, and that's what drove me. Some people don't need that, but I think it's very rare. I think the huge majority of people, if you give them an easy life, they will take it and embrace it with both hands.

18. 1:03:19 – 1:07:34

    Why You Should Never Check Up on Your Investments

    1. MHMorgan Housel1:03:19

    2. SBSteven Bartlett1:03:19

       Making money and keeping money require two different skills. You've, you've spoken about a few of the skills that are required for making money. The one that really stuck out to me that you've discussed so far is this idea of endurance, patience. Regardless of what's happening in the markets, regardless of the volatility, lose your password and sit on your hands. Just on that point as well, I remember reading somewhere, it might have even been your book ... You know, it's so crazy, 'cause the things that I know about money, I can't remember where I've got them from, but most of them came from this book.

    3. MHMorgan Housel1:03:48

       (laughs)

    4. SBSteven Bartlett1:03:48

       Like most of the principles came from this book. And one of the things that I read was that Warren Buffett would go like five years without allocating capital, and this quote where he said, "The hardest thing to be a great investor is to be able to sit on your hands and do nothing."

    5. MHMorgan Housel1:04:01

       S- sit on your ass and do nothing. That's it. That's a, that's a Munger quote.

    6. SBSteven Bartlett1:04:04

       On Berkshire Hathaway-

    7. MHMorgan Housel1:04:05

       And that's what they're doing right now, right now. Berkshire Hathaway, which is Warren Buffett's company, has like $150 billion of cash right now. And that's ... Their entire, uh, 60-year history of Warren Buffett and Berkshire Hathaway is build up a shitload of cash, wait 10 years for an opportunity, deploy it all, and then go back to waiting and building up cash.

    8. SBSteven Bartlett1:04:23

       Crazy.

    9. MHMorgan Housel1:04:23

       And that's, that's, that's how they've done it. Good opportunities are rare. Of course they are. They should be rare. It shouldn't be that anybody can just open up their stock account and find the opportunity of a lifetime.

    10. SBSteven Bartlett1:04:32

        What are the others-

    11. MHMorgan Housel1:04:32

        It's gonna come once a decade.

    12. SBSteven Bartlett1:04:33

        What are the other skills then, endurance, patience, to create, to get money?

    13. MHMorgan Housel1:04:37

        For the, for the ordinary person, endurance and patience is 99% of what you need as an investor. Because the opportunities there to invest in a low-cost index fund are available for everybody.

    14. SBSteven Bartlett1:04:47

        And they could do that from their phone, like you-

    15. MHMorgan Housel1:04:48

        And you can do that for everybody. Do it from your phone, open up a Robinhood account, buy some index funds. Anybody can do that. And so that ... And, but that was not always the case. It used to be, like 20 years ago, that the only people who could invest were people who had a lot of money and could afford a broker, and had a connection to a broker.

Episode duration: 1:57:26