Morgan Housel: Why passive income is the great wealth lie

1. 0:00 – 2:21

   Intro

   1. SBSteven Bartlett0:00

      People talk a lot about passive income.

   2. MHMorgan Housel0:01

      Which is not a thing. Look, there's two ways to get wealthier, and passive income is not part of that equation. But what's really important for people is how we should spend money, 'cause I've written about money and finance and investing for 20 years. And I can tell you, the correlation between how much you spend and how happy you are, it can exist, but it is not as simple as you think. Morgan Housel is the legendary financial guru.

   3. SBSteven Bartlett0:22

      Revealing that everything we've been told about saving and spending money...

   4. MHMorgan Housel0:25

      Could be our biggest downfall, and here's why. If you're unhappy with your life, it is a very easy assumption to make that if you had more money, a bigger house, a better car, wh- whatever it might be, things would be better. And it's a lie we tell ourselves, of course, because here's the truth. So much of spending is a psychological itch that you're trying to scratch, and that manifests in so many different ways. For example, life is a competition. It doesn't matter how well I'm doing. It matters how well I'm doing relative to you, and the most tangible way to do that is through material stuff.

   5. SBSteven Bartlett0:52

      I was reading some funny stats. They say that if you win the lottery, the probability of your neighbor going bankrupt increases.

   6. MHMorgan Housel0:58

      It's an amazing statistic. So be careful who you socialize with, because you're going to anchor to them as a baseline level of success and happiness.

   7. SBSteven Bartlett1:06

      So is it wrong to buy a Rolex?

   8. MHMorgan Housel1:07

      Absolutely not. But when it's controlling your personality, it's no different than any other addiction, where it's forcing you to do things that you otherwise don't want to do.

   9. SBSteven Bartlett1:14

      What about people who don't seem to spend anything?

   10. MHMorgan Housel1:17

       It's just as dangerous. Like, there's something called post-traumatic broke syndrome, and I'll talk about that. But I guarantee you that everyone can spend money in a way it's gonna make them happier.

   11. SBSteven Bartlett1:25

       So if I wanted to make a framework to know how to spend my money, where do I start? But also, based on everything you know about money, if I want to get complete financial freedom-

   12. MHMorgan Housel1:33

       What's-

   13. SBSteven Bartlett1:33

       ... what's the five things that I should be thinking about?

   14. MHMorgan Housel1:36

       The first thing that I think is most important is...

   15. SBSteven Bartlett1:39

       I see messages all the time in the comments section that some of you didn't realize you didn't subscribe. So, if you could do me a favor and double-check if you're a subscriber to this channel, that would be tremendously appreciated. It's the simple, it's the free thing that anybody that watches this show frequently can do to help us here, to keep everything going in this show, in the trajectory it's on. So please do double-check if you've subscribed, and, uh, thank you so much. Because in a strange way, you are- you're part of our history, and you're on this journey with us, and I appreciate you for that. So yeah, thank you. Morgan, everybody loves to talk about investing. They love to talk about saving money. But I've never heard anybody emphasize the importance of

2. 2:21 – 4:31

   The Importance of Spending Money

   1. SBSteven Bartlett2:21

      spending money. You've written this book, The Art of Spending, so it begs the question, why would someone like you, who sells tens of millions of copies of their books when they write about something, and really, really cares about the art of writing, commit themselves to writing a book about the art of spending when you couldn't, when you could have written anything that you wanted to and it would have been a success?

   2. MHMorgan Housel2:42

      So I've written about money and finance and investing for 20 years, and almost never had I, myself, said, "What is my spending philosophy?" I can tell you how I invest. I can tell you how I save. I can tell you why I do those things. If five years ago, if you said, "Morgan, tell me your philosophy about spending in your own life?" I'd be like, "Hm, I- I don't really know." And as I looked into it, there are literally tens of thousands of books on how to invest, how to grow your money, how to get rich, how to help your career. That top- that topic is endless. There is virtually no book out there written about spending money, and I think the reason why is because we don't... I think we intuitively think nothing needs to be said, because the answer should be obvious. More is better. Fancier is better. That's the end of the topic. But if you know particularly wealthier people... I mean, it affects everybody, but particularly wealthier people. You know it's not that simple. That the correlation between how much you spend and how happy you are, it- it can exist. Everyone can spend money in a way it's gonna make them happier, but it is not as simple as you think. And as I started digging into it in my own life, of when have I been envious of other people? Of their material possessions? Why was I envious? Why- when have I been jealous? Why was I jealous? What kind of spending made me happy? What left me completely flat? It's- it's a much more complicated topic than it seems at the surface. You know, an- another title for the book could have been The Psychology of Spending Money, 'cause that's what this is. So it's a look at the psychology of greed and envy and social aspiration, and like, climbing the social ladder, who you're trying to impress, whether those people are paying any attention to you. That's what this book is.

   3. SBSteven Bartlett4:20

      So for someone like me who wants to improve my relationship with spending, I guess the question... Yeah, I guess the qui- first question is, understanding The

3. 4:31 – 7:42

   Why Will This Podcast Make My Life Better?

   1. SBSteven Bartlett4:31

      Art of Spending Money: Simple Choices for a Richer... What- what is it gonna do for me? How's it gonna make my life better to understand this? Why- why does it matter to the person that's listening right now?

   2. MHMorgan Housel4:40

      I think it is a very easy assumption to make if you're unhappy with your life, that if you had more money, those problems would go away.

   3. SBSteven Bartlett4:46

      Yeah.

   4. MHMorgan Housel4:47

      Sometimes it can be true. It's not automatically false. It's just easier to assume that that's true than it actually is. And so I guarantee you that every single person listening to this right now has some degree of that. If I had a little bit more money, my problems would go away. Even if they don't necessarily know it or not. So much of spending is a psychological exercise. There's an itch that you're trying to scratch, and that manifests in so many different ways. And so I've often thought of money... Look, is money the root of society, the core of society? No. There's obviously a million things more important than money. But I do think it's the clearest window that we can look through to try to figure out what's going on in our own lives and other people's lives in society. It shows very starkly what people value, what they're scared of, what they're aspiring to become. There are many more elements to the puzzle. Your health, your friends, your family. We can go on that forever. But money is a very clear window, that if you see how somebody engages with money, you're like, "Oh, I understand your insecurities. I understand your aspirations. I understand your self-confidence. I understand what you think of other people." You can learn a lot about that.

   5. SBSteven Bartlett5:51

      It's- it's kind of like a reflection of your- your trauma.

   6. MHMorgan Housel5:53

      Yes, and it- it manifests in very different ways. There's a great financial writer named, named Tiffany Aliche. And she's, uh... She grew up very, very poor, and now she's extremely successful. And she calls it...... post-traumatic broke syndrome.

   7. SBSteven Bartlett6:08

      (laughs)

   8. MHMorgan Housel6:09

      Where even though she has a lot of money right now, she... I- I- I don't want to put words in her mouth, but my understanding is, like, she's, she's afraid to spend it because she's... The, the feeling in her head is, "I will never go back to that. I can't ever go back to that poor person." Post-traumatic broke. And so it can manifest in very different, sometimes opposite ways. And so the point is not, like, if you grew up poor you're going to want to display it, but the point is that it's a psychological itch. It, it's not just, "I want the nice car because nice cars are better." There's a social signaling. You're signaling to others, you're signaling to yourself. It's a trophy for yourself of what you've overcome. The more I dug into it, the more it was so clear of, like, spending is not just on material stuff. It's not just, "I want to buy this car or this house or these clothes or this jewelry because it's nice." It's, "I'm trying to send a signal to others or to myself of what I've overcome." One of the ways I thought about this in my own life was if I was on a deserted island with maybe just, just me and, and my family, nobody could see how we were living. Nobody can see your house, nobody can see your car, nobody can see your clothes, nobody can see your jewelry. How would I live? For me, and I think most people in that exercise, you immediately gravitate away from status and towards utility. Like, I would not want a Lamborghini. I probably want, like, a pickup truck, something that has, like, more util-... If nobody could see it, I would just want utility. I would not want an enormous house, I would want a house with a nice view because I'm not trying to show off to other people. I just want something that is calming and, and serene to myself. And so once you start seeing the stark difference between utility and status, o- o- once you, once you force yourself to see it, you're like, "Oh, it's everywhere."

   9. SBSteven Bartlett7:41

      Is something

4. 7:42 – 10:14

   Is There Something Wrong With Chasing Status?

   1. SBSteven Bartlett7:42

      inherently wrong with status?

   2. MHMorgan Housel7:43

      No. No.

   3. SBSteven Bartlett7:44

      Is it wrong to buy a, a Rolex?

   4. MHMorgan Housel7:45

      Absolutely not, particularly at certain points of your life.

   5. SBSteven Bartlett7:48

      Okay. So when, when is it good, when is it bad, when is indifferent, like indifferent?

   6. MHMorgan Housel7:52

      I don't know. I don't know. It's hard to say what's good and bad in terms of a formula because everybody's different.

   7. SBSteven Bartlett7:56

      Yeah.

   8. MHMorgan Housel7:56

      But I would say this: my own personal desire to show off materially happened when I was in my late teens, early 20s. And looking back, I didn't know this then, but the reason why is because I had nothing else to offer the world.

   9. SBSteven Bartlett8:10

      (laughs)

   10. MHMorgan Housel8:10

       I had no intelligence, I had no wisdom, I didn't know how to love anyone. I had nothing else to offer friends, family, spouses, whatever it would be. And so the last remaining lever, if you're trying to get attention and respect, is, "Well, look, I have no intelligence to offer, I have no wisdom to offer. Maybe people will admire me for my car."

   11. SBSteven Bartlett8:27

       Ah.

   12. MHMorgan Housel8:27

       That was why I wanted it. And now that I- I hope in a... and I, I hope to today, 20 years later, I have a little bit more to offer to my wife, to my friends, to my family, to, you know, employers and customers, whatnot, then my desire for those things has gone down. Not to zero, but it's gone down. There's a great Warren Buffett quote where he says, "Success in life is when the people who you want to love you do love you." And key to that is, like, you have to ask the question, like, who do you want to love you? And for a lot of people, the quick knee-jerk reaction is, "Everybody." And so you want to have a nice car, nice clothes, nice jewelry because you think everyone's going to stop and stare. When I drive this down the road people are going to be... stop and say, "Look at that guy. L- look at her. That's amaze... Like, they're so successful. I, I admire them, I respect them." And by and large, that is almost never true because no one's thinking about you as much as you are. They're not, they're not paying attention to your car or your clothes or your house. They're busy worrying about themselves.

   13. SBSteven Bartlett9:26

       Mm-hmm.

   14. MHMorgan Housel9:27

       Jimmy Carr, who I think you've had on the show before. Is that right?

   15. SBSteven Bartlett9:29

       Mm-hmm. Mm-hmm.

   16. MHMorgan Housel9:29

       Love Jimmy Carr. He said this a couple weeks ago. I heard it, and it was one of those I had to stop and write it down because it was so profound. He said, "In your 20s, people worry about what other people think of them. In your 30s, you say, 'I don't care what anybody thinks of me.' And in your 40s, you finally realize the truth, which was nobody was thinking about you the whole time. They were busy worrying about themselves." And look, that's not black and white. Of course people think about you and look at you and sometimes judge you, but not nearly to the extent that we think. And that was why I get back to the exercise, if nobody was watching, how would I live? The truth is because virtually nobody is watching, except the people who I really love and admire. And they're going to admire me for things that have nothing to do with the kind of car that I drive or the clothes that I wear.

5. 10:14 – 15:31

   What’s the Evolutionary Basis for This Stuff?

   1. MHMorgan Housel10:14

   2. SBSteven Bartlett10:14

      What's the, the evolutionary basis for all of this stuff?

   3. MHMorgan Housel10:17

      Life's a competition. It doesn't matter how well I'm doing, it matters how well I'm doing relative to you. It doesn't matter how big my house is if I'm trying to signal. All that matters is my house is bigger than yours. That's true for all wealth. There's no such thing as you are wealthy once you have X number of dollars. That, that d- does not exist. Everything is relative to other people. And the truth is, like, we live in a world of such material abundance where the majority of people listening to this will have some sort of shelter and a car and, and can buy, can buy clothes and whatnot. And s-... Because relative to a lot of history we live in material abundance, the competition, the arms race for bigger and ni- nicer things is extraordinary. And it's way more powerful and potent today than it's ever been for two reasons. One is social media. So I am now aware of the homes that other people live in, the cars that they drive, the clothes that... the vacations that they take. I'm now aware of it in a way that we were not 15 years ago. The other thing is because the internet has democratized access to audience intention, the ability to become extremely rich is much more powerful than it's ever been. It's still rare, of course, but it's, it's easier today than it's ever been to become very, very wealthy, even if only a small number of people are doing it, because your, your potential customer base is now the entire world. You know, a hundred years ago if I was a businessman, my customer base was whoever lived in my town.

   4. SBSteven Bartlett11:42

      Mm-hmm.

   5. MHMorgan Housel11:43

      Now if you're a businessman, your customer base can be the entire world. And so it's easier to make a huge fortune. And because of social media, once you make that fortune, people are probably gonna know about it because a lot of those people who become very rich are gonna say, "Look at how I'm living." And so you have this, like, trickle-down aspiration of everyone else being... Like, my definition of wealthy, if you're a young person today, a young person's definition of wealthy might be a multibillionaire with a private jet and a private island. Where I think 80 years ago, people's definition of wealthy was a three-bedroom house and one car.... and a, and a, and a happy family. And so, we live in a world where, like, aspirations have inflated by such a dramatic degree that the arms race of spending just gets that much, that much higher.

   6. SBSteven Bartlett12:28

      I think there's something in this idea that you almost have to develop the skill of disconnecting your admiration from your aspirations-

   7. MHMorgan Housel12:35

      Yeah.

   8. SBSteven Bartlett12:35

      ... if you want to live a good life. 'Cause so many kids will, like, look up to you and say, "I want to be like Morgan when I'm older," um, because they admire what you've done. But, uh, uh, the reality is they, they're just seeing the sort of shop window-

   9. MHMorgan Housel12:47

      Yeah.

   10. SBSteven Bartlett12:47

       ... of your life. And so I, uh, p- uh, people do this with Elon all the time.

   11. MHMorgan Housel12:50

       Right. And Elon has even said, he's like, "You might think you want to be me, but you, you don't."

   12. SBSteven Bartlett12:54

       Yeah.

   13. MHMorgan Housel12:54

       And he, the, the clip where he did that, he points to his head and he's like, "It's a, it's a tornado up here."

   14. SBSteven Bartlett12:59

       Yeah.

   15. MHMorgan Housel12:59

       And I think it's true, that for most people who are extremely successful, who are the ones that people tend to as- to look up to-

   16. SBSteven Bartlett13:05

       Mm-hmm.

   17. MHMorgan Housel13:05

       ... like the extreme outlier successes, a lot of the reason they're so successful financially and in their career is because they've devoted every second of their life to that career, which most of the time comes at the expense of everything else. So, they are very successful, made a lot of money, and that came at the expense of their health, their relationships, the relationships with their, their spouses, their children. So, I make the point in the book that of the top 10 richest men in the world, there are a cumulative 13 divorces among the top 10 richest people.

   18. SBSteven Bartlett13:34

       (laughs)

   19. MHMorgan Housel13:34

       And it's a small sample size. Like, you can't really, you know, say that, that, that much with that. But this is a group that is almost universally admired, particularly among young men. You know, Elon Musk, Jeff Bezos, Mark Zuckerberg. How, how amazing would it be to have that much money? But ac- even, if you dig into their actual, their, their, their, their whole life-

   20. SBSteven Bartlett13:51

       Mm-hmm.

   21. MHMorgan Housel13:51

       ... not just their net worth, not just the house and the jet that they have, but if you look at holistically their entire life, you're like, "Mm, I don't know. It's, it's, it's, it's not that great."

   22. SBSteven Bartlett14:00

       Mm-hmm.

   23. MHMorgan Housel14:00

       It's, it's one thing to admire someone if you can pick bits and pieces. "I want, I want his house, and her car, and his career, and his physique." But you can't pick bits and pieces. You have to take the whole thing. And once you take the whole thing, you realize that, like, a lot of the people who you may have been looking up to either did not have a better life than you did, or it was just marginally better in a way that was easy to overlook.

   24. SBSteven Bartlett14:24

       I had this conversation with a girl in New York last week. I was at, at a shoot, a client, like a brand shoot, and she sat me down to interview me for TikTok, and she said, um, she goes, "At what, what age did you become a millionaire?" And I said, "About 24, 25." And she went, "Oh, I'm 24, 25 now and I'm not a millionaire." And I remember saying to her, I was like, "Yeah, but would you, would you take my trade?"

   25. MHMorgan Housel14:46

       Right.

   26. SBSteven Bartlett14:46

       And I explained to her, I was like, "So, I was lonely between the age of 18 and roughly 20. I was working in call centers. My parents wouldn't speak to me, so I had no contact with my family, really, um, for, through that period. And then I started shoplifting at n- about 18, 19 to feed myself, and my brother had given me this big, um, sort of industrial packet of oats. And what I had to do is it's like powder. I mixed the powder with water, and there's, there's, there's this photo online, I think, from my previous TED Talk, my first one, where I was just drinking this, this powdered water." So I said to her, I said, "And, and I was a millionaire at 24. Lonely, not speaking to my family, drinking powdered oats-"

   27. MHMorgan Housel15:23

       Drinking oat powder. (laughs)

   28. SBSteven Bartlett15:23

       "... shop- shoplifting, working night shifts in multiple call centers-"

   29. MHMorgan Housel15:27

       Right.

   30. SBSteven Bartlett15:27

       "... would you take the trade?"
6. 15:31 – 17:43

   There's Always a Trade-Off

   1. SBSteven Bartlett15:31

      take the trade. And I said, "So you can't, you can't pick it apart, because I, if you want to, my outcome, you have to take the path that I took if you want my specific outcome." And p- people don't think about that. Like, one of the things this podcast has actually taught me is to think through the framework of trade-offs.

   2. MHMorgan Housel15:45

      Yeah.

   3. SBSteven Bartlett15:46

      So, think about-

   4. MHMorgan Housel15:46

      Yes.

   5. SBSteven Bartlett15:46

      ... everything as a trade-off. Think of a Zempac as a trade-off. There's a trade you're making somewhere, and even, you know, when you aspire or you admire people, if you admire what we've done here, for example, think about the trade-off. Like, even with this team, the team have been working here every single day, including the weekends, from morning till night for the last 14 days here in New York every single day.

   6. MHMorgan Housel16:08

      Right.

   7. SBSteven Bartlett16:08

      Do you want a, do you want a, do you want a podcast? Like, do you- (laughs)

   8. MHMorgan Housel16:11

      Right.

   9. SBSteven Bartlett16:11

      Do you want the trade? And if you do, fine, but just be informed about, as you say, both sides of the trade.

   10. MHMorgan Housel16:16

       Another Jimmy Carr quote that I love... He's a profound individual. Not only is he hilarious, he's very smart. The quote is, "Everyone is jealous of what you've got. Nobody's jealous of how you got it."

   11. SBSteven Bartlett16:26

       Yeah.

   12. MHMorgan Housel16:26

       And I think it's just so easy to overlook. One of the things I write in the book is what's called the reverse obituary, which is, it's a very good, helpful exercise to write down, it's kind of morbid, but what do you want your obituary to say? It's kind of a weird thing, but for me, everyone's different, but for me, I would want it to say, "Morgan was a good father, a good husband, a good friend, helped his community, was a good worker." That's what I would want it to say. Never in a million years in that obituary would I want it to say what my income was, how big my house was, how many times I went on vacation, how many horsepower my car had. Like, it's ridiculous to think that that's what it would be.

   13. SBSteven Bartlett17:03

       (laughs)

   14. MHMorgan Housel17:03

       I would want it... You instantly drift towards the things that you know you're actually, you actually want in life. And, of course, it's going to be different for everyone. But I, I, I found it a helpful thing, because you realize that it would be completely absurd to put the things that I might be chasing in my life in my obituary. And so if i- in any given day, in any given year, you're like, "I got to earn a higher income and I want to buy a bigger house, and, ah, like, I need a new car. Oh, do you see? They came out with this watch." But at the end of your life, you know that's not gonna matter. What's gonna matter is were you a good spouse, a good parent, a good worker? Were you honest? Were you a good friend? Were you funny? That's it. You know that's what's gonna matter, because that's what you want in your obituary.

   15. SBSteven Bartlett17:41

       I think part of the reason people spend in the way that

7. 17:43 – 19:29

   Saving Addiction

   1. SBSteven Bartlett17:43

      they do as well is linked to that, which is sometimes that behavior, which is also linked to the point about trauma at the start, might result in a savings addiction.

   2. MHMorgan Housel17:51

      Yeah.

   3. SBSteven Bartlett17:51

      I often wonder this, 'cause, you know, when I was younger, I had this crazy spending problem, and I've also seen people who don't seem to spend anything-

   4. MHMorgan Housel17:59

      Yeah.

   5. SBSteven Bartlett17:59

      ... and they're just, like, hoarding capital. You talk about this a bit in the book. Like, what... Is that equally bad behavior?

   6. MHMorgan Housel18:04

      Yeah, I think it's equally bad, 'cause both of them are the exact same thing, which is money's controlling you. Money should be a tool that you use to become a better version of yourself, to become a happier, more content version of yourself.... but when it's controlling your personality, it's, it's, it's no different than like any, any other addiction where you don't, it's forcing you to do things that you otherwise don't want to do. And that can manifest on either end of the side. Either people can't stop spending or they cannot spend enough. A lot of financial advisors will tell you one of the biggest problems that they have, eh, are clients who have saved enough money for retirement. Good job. You saved for 40 years. You maxed out your 401K. You did everything you were supposed to. And now you're 70 years old, and you have enough money to travel and play golf, and you won't. You won't do it. And I think it's because they become so accustomed to the identity of, "I'm a saver. Every month I save, and every month my net worth goes up." And they cannot bring themselves into switching gears and going in the other direction. And for a lot of those people, the money is in full control over their identity. It's telling them how to live, what to like, what to aspire to, what to enjoy. The money is totally in control of their personality. And, and it's, it's just as dangerous and just as, just as detrimental as you when you were a teenager of, "I can't stop spending." It's, and both of those are in, are, they are... the money is like playing the marionette doll of your life. It's telling you exactly what to do and when to do it.

   7. SBSteven Bartlett19:28

      If I wanted

8. 19:29 – 24:56

   Can Money Make You Happy?

   1. SBSteven Bartlett19:29

      to make a framework to know how to spend my money, wh- where do I start? Do I have to get clear on something? Do I... you know. And I guess the other question, which is somewhat linked to this, is this overarching debate around can money make you happy?

   2. MHMorgan Housel19:39

      Right.

   3. SBSteven Bartlett19:40

      But I'm trying to figure out, like, where do I start? 'Cause I, I want to... one of the things I want to get out of today is I want to have a, a clearer framework for-

   4. MHMorgan Housel19:46

      Yeah.

   5. SBSteven Bartlett19:46

      ... how to spend my money.

   6. MHMorgan Housel19:48

      Well, those two points that you just brought up, I think, are very related. The first, on the point of can money make you happier, the answer is yes. But there's a, there's a, there's an asterisk next to it that we need to get to. For years, there was a big academic debate of does more money make you happy. A lot of s- some of the studies showed, yes, clearly it does. Others shows, studies showed, no, it really doesn't. And the academics, the economists were like battling for decades. It's kind of been cleared up in the last, just the last couple of years, this last couple of decades with some nuance, which is this. If you are already an unhappy person, if you're already anxious, if you're already depressed, by and large having more money will not help you, at least that much. It might help you a little bit around the margins if you're, if you start as an unhappy, depressed, anxious person. If you are already a happy, content, joyful, laughing person, having more money will give you a better life. So in either direction, it's just leveraging who you already were. It's not going to change you that much. It's just going to leverage who you already were. Very similar to like, they say this about power.

   7. SBSteven Bartlett20:49

      Mm-hmm. Mm-hmm.

   8. MHMorgan Housel20:49

      Like, once you gain power in politics or something, it just leverages the personality that you already had. Money is very much like that. And so it's, it's not a, a, a panacea in the sense of like, oh, like if, if you're miserable, like if you had more money, it's going to clear up your problems. It can make some of your problems a little bit easier to deal with. But, I mean, think about it in these stark terms. Let's say you are overweight and unhappy. You hate your job, and you're recently divorced, and your kids won't talk to you, but you live in a mansion, and it has a Ferrari in the driveway, and you got all kinds of fancy stuff. I- i- is, is, is that a good life? If all, if everything else in your life sucked and you woke up every morning going, "Oh, I got to go to work today. I hate my job. I can't stand my job. I'm, I'm lonely, I'm miserable, I'm overweight, I can't sleep, I'm addicted to alcohol." Whatever it might be. Of course, it's a terrible life. The house and the car don't matter at all. But you can flip that around and say like, let's say you live in a very modest middle class house, and you drive a, a, a 10-year-old Honda Civic, but you love your job. You love your coworkers. You have a great relationship with your spouse. Your kids admire you. You have your friends over for a barbecue every Friday night. Materially, it's very modest. You have what you need. You're not impoverished. You're not homeless. You have the food that you want and the shelter that you want, but you would be an absolute maniac to choose the miserable person in the mansion versus the content, happy person in the middle class house. If your goal is to live a good life, it's psychotic to pick one o- uh, one over the other.

   9. SBSteven Bartlett22:21

      I felt this quite starkly recently 'cause I flew to Cape Town on my own. Um, I've only ever been there with my girlfriend and with other friends. And the first time, I've, I've only been there a few times. I've got a house there, and it's a very big house. And, uh, the first time I came was with my family. The second time was with my girlfriend and my friends. This time I came on my own.

   10. MHMorgan Housel22:36

       Yeah.

   11. SBSteven Bartlett22:37

       And I felt this deep existential feeling waking up, walking through that house alone thinking, "Fuck me life." It was so clear to me that the point of such a, such a thing is to fill it with people.

   12. MHMorgan Housel22:52

       Yes.

   13. SBSteven Bartlett22:52

       And you say-

   14. MHMorgan Housel22:53

       That's what I... I make, I make this point in the book of like the very simple question, will a big house make you happier?

   15. SBSteven Bartlett22:59

       I think it will make you depressed if it's empty. (laughs)

   16. MHMorgan Housel23:01

       Yes.

   17. SBSteven Bartlett23:01

       Because that's how I felt. I was like, "I'd rather be in a studio apartment alone than a big house on my own."

   18. MHMorgan Housel23:08

       Right. I had a similar realization to you a couple years ago when I took my, my, my, my, my family and I went to Maui for a vacation. And I, I love Maui. It's my favorite place in the world. And now I have kids, so I'm building sandcastles with my kids on the beach in Maui. And that, I remember thinking like, "This is, this is a 10 out of 10. This is like, this is peak life for me."

   19. SBSteven Bartlett23:26

       Mm-hmm.

   20. MHMorgan Housel23:26

       Building sandcastles with my kids. Everyone's happy in the sun. But then I had this realization of like, "If that's a 10, playing with LEGOs at home on the living room floor with my kids is like a nine." Like, it's really close.

   21. SBSteven Bartlett23:38

       Hmm.

   22. MHMorgan Housel23:38

       Because the realization was what I enjoy is like quality time with my kids. And I think a lot of the reason that people like vacate, like travel is not because they like getting on an airplane and flying around the world and being jet-lagged and cramped into a small hotel. What they like is uninterrupted time away from work, away from all the other stresses of everyday life. That's what they actually enjoy.

   23. SBSteven Bartlett23:58

       Hmm.

   24. MHMorgan Housel23:58

       That's why they like travel. It's not necessarily the location. It's like what the location is doing for you. So the question of will a big house make you happier, it will to the extent that it makes it easier to have your friends and family over-

   25. SBSteven Bartlett24:10

       Ah.

   26. MHMorgan Housel24:10

       ... because your friends and family are the ones who are actually making you happy.

   27. SBSteven Bartlett24:13

       Ah.

   28. MHMorgan Housel24:13

       And so the answer can be kind of will a, will a nice house make you happy? The answer can be yes, if you're using it for the right reasons. There was this article in the New York Times, this is probably 10 or 15 years ago.And, uh, the article said, "Two things happened to J- to Julia Roberts this week. One, she won the Academy Award. And two, she found out her husband was cheating on her." And so, the column said, "Pop quiz. Did Julia Roberts have a good week?" And it's like, you would be a fool to say yes. It was probably the worst week of her life, I imagine.

   29. SBSteven Bartlett24:41

       Yeah.

   30. MHMorgan Housel24:42

       Um, but what we see from the outside was dolled up in a beautiful dress, accepting the highest honor of her career, and saying like, "Wow, that must be an amazing..." But it gets back to, once you see the full picture, you're like, "Nah, it's not as easy as it seems."
9. 24:56 – 29:02

   Are We All Stuck in a Status Game?

   1. SBSteven Bartlett24:56

      page 23 of your book, uh, a, a quote that I loved, "Show off the inside of your house, not the outside."

   2. MHMorgan Housel25:01

      Right.

   3. SBSteven Bartlett25:01

      And that's

   4. MHMorgan Housel25:02

      Because the inside of your house are what your friends and your family are seeing.

   5. SBSteven Bartlett25:04

      Is there like a, a hack here? Like is there... You know, 'cause you have all these like internet communi- communities that come up with these like hacks, these other ways to live. They, they, they step outside of the matrix and they form their own little, their own little cult that are like doing it differently and not, not abiding by the rules of the, the quote-unquote "matrix." I very much feel like most of us are trapped in the matrix.

   6. MHMorgan Housel25:24

      Yeah.

   7. SBSteven Bartlett25:25

      We're trapped in this like status game, competing against each other. Not f- not searching for happiness. Like what is the, the hack here? How do I get out of the matrix and what does that look like?

   8. MHMorgan Housel25:33

      I think if there is a formula that I, I lay out in the book, and I, I make the point that like there's, there's no formula for how to spend money. But if I did try to make a formula for a pretty good life, and this extends way outside of money, the formula for a pretty good life is independence plus purpose. If you wanna say like, "H- how can I be a happy person?" You need to be independent, you need to be able to do what you want to do, when you want to do it, with whom you want to do it with, and you need some kind of purpose that is higher than yourself, and that could be a million different things. It could be friends, it could be family, it could be career, it could be religion, whatever it might be. I think it is very difficult to imagine anyone having a good life without those two things. If your entire life and your schedule is dictated by somebody else, of you have to go to this job that you don't like, you have to have a long commute that you don't like, you have to do this when you don't want to do it, it's, it's hard to be happy. And if you don't have any kind of purpose that you're doing it for, it's difficult to be happy. And so the idea that, to me, the best thing to spend money on is independence, and I view it as purchasing. I, I don't view it as saving money, I view it as purchasing independence. That's how I, I view it. I view it like I'm buying independence when I save. And so to me, the biggest thing that I spend my money on, and this sounds weird, but I, is saving, and I view that as buying independence. I view that as every dollar that I save is a little bit more independent than I was before. It's a little bit of my future that I now own and control. And if, if you're listening to this and you're like, "Look, I'm not financially independent. I have, I have no des- I have no possibility of being financially independent," independence exists on a spectrum, and literally every dollar that you save is a little bit more independent than you were before. If you have $100 in the bank, in savings, that can make it so that if you were to lose your job, you have a little bit more flexibility for rent or groceries or whatever it might be that you didn't before. If you have $1,000, $10,000, any amount that you have is a little bit more independent than you were before. And so when you view one of the cores of living a good life as independence and any amount of saving money will buy you independence, I think that's a powerful observation for people. And then the purpose part is going to be different for everyone. For me right now, in my life, it's being a good father. That's what I want my end, my identity to be. That's my overarching goal in life, is to be a good dad. I, I think the vast majority of parents will tell you that there was no greater joy, purpose than watching their kids thrive. It can also bring a lot of sorrow and a lot of sleepless nights and a lot of anxiety and a lot of worry that comes along with it, but nothing that I've experienced or any of the other parents that I know would, would say that anything in their life has come before that, that it's been a great thing. So we got on this point because the formula is independence plus purpose. For me, the purpose is being a parent. That's not going to be true for everyone.

   9. SBSteven Bartlett28:18

      But you're trading independence for that.

   10. MHMorgan Housel28:20

       I'm trading... It's internal independence that I'm giving up. I want to sacrifice for my kids. I want to... Like loyalty to people who deserve your loyalty is a wonderful thing. Loyalty to people who don't deserve your loyalty sucks. And so if you are working, if you're giving your loyalty to a company that doesn't respect you, that sucks. That's terrible. Loyalty to people who deserve it is a very fulfilling thing. So my kids deserve my loyalty.

   11. SBSteven Bartlett28:45

       How do they earn that (laughs) loyalty?

   12. MHMorgan Housel28:47

       Just by being my kids.

   13. SBSteven Bartlett28:48

       (laughs)

   14. MHMorgan Housel28:48

       And there are some days where I feel like they, they don't appreciate it. They're like, "Of course." But I, I think that tends to be true. People get into problems when they are loyal to people or organizations or political affiliations who don't deserve the loyalty. That's when it gets dangerous.

   15. SBSteven Bartlett29:01

       Do you think

10. 29:02 – 31:00

    Is the "Freedom" Culture Actually Making People Unhappy?

    1. SBSteven Bartlett29:02

       the promise of independence and freedom has a secret hidden dark trade-off that people don't talk about? Because there's this culture right now of like, you know, be your own boss and stand on your own two feet, and when you think about what makes humans happy, it seems to be collective things. It seems to be, actually in your case as you're saying, dependence.

    2. MHMorgan Housel29:20

       Yeah.

    3. SBSteven Bartlett29:20

       Your kids depend on you.

    4. MHMorgan Housel29:21

       Yes.

    5. SBSteven Bartlett29:21

       And in some ways you depend on them. All the things that seem to... Like having my friends at my house made me happier than being in the house alone.

    6. MHMorgan Housel29:27

       Right.

    7. SBSteven Bartlett29:27

       But the narr- the public narrative is all about like optimizing for freedom, whatever that means, and really more so optimizing for independence, not depending on someone else.

    8. MHMorgan Housel29:37

       Yeah.

    9. SBSteven Bartlett29:37

       But when you look at the people that seem to be the, the most unhappy, they seem to be the most independent.

    10. MHMorgan Housel29:45

        Right. Because they're, if, if you picture someone like living in a cabin by themselves-

    11. SBSteven Bartlett29:50

        Freelancer, yeah.

    12. MHMorgan Housel29:50

        ... in the middle of Montana with no one around them or whatever it might be.

    13. SBSteven Bartlett29:52

        No family, no pets, freelance work on a laptop on their own in a, in a glass box in Dubai. Um, no o- no big obligations. Not, not in a church. This is-

    14. MHMorgan Housel30:03

        But back to the formula, independence plus purpose. Those people have no purpose.

    15. SBSteven Bartlett30:06

        Oh, yeah,

    16. MHMorgan Housel30:24

        100% independent in the sense that you don't rely on anyone and no one relies on you, because then you have no purpose.

    17. SBSteven Bartlett30:30

        Mm-hmm.

    18. MHMorgan Housel30:30

        It's choosing who you want. I think it's- I think you're not independent if you have to be loyal to a job that you hate, but you have to have it 'cause it's the only job you got and you- and you have to do it, and you're- you- you have to pay this exorbitant rent on an apartment that you don't even enjoy that much. Like, those are dependence on things that you don't want, but like, I want to be dependent on my family-

    19. SBSteven Bartlett30:52

        So it's-

    20. MHMorgan Housel30:52

        ... because that gives me purpose.

    21. SBSteven Bartlett30:53

        It's like the independence to make the choice, I guess, of- of freedom.

    22. MHMorgan Housel30:54

        To make the choice of who you're going to be dependent on, right?

    23. SBSteven Bartlett30:58

        Got you. And on this po- earlier point you were talking

11. 31:00 – 33:05

    Your Favorite Form of Saving Is Spending

    1. SBSteven Bartlett31:00

       about saving, um, and, uh, that you- your favorite form of spending is saving.

    2. MHMorgan Housel31:05

       Yeah.

    3. SBSteven Bartlett31:06

       Someone's listening now, how much money do you think they should, at a minimum, have saved?

    4. MHMorgan Housel31:12

       I- if you're trying to get technical about it, I would say what are the odds that at some point in your life, you're gonna lose your job and not be able to find another job for six months? The odds are not bad that that will happen to you at some point. Not very comfortable to think about. Maybe it's already happened to you already, but the odds that at some point that will happen are pretty good. And therefore, if you were to say, like, "Look, a good measure of some level of higher end independence, not a low level of independence, but, like, a- a medium level of independence is six- is- is I could keep myself going for six months." And for a lot of people, that's a daunting task, and, like, it- it's okay. You're probably not gonna achieve that when you're 18. It might- it's- it's gonna take some savings to get there, but that is a level at which you can exhale to a degree that most people have never been able to do before of, like, there's gonna be some bad stuff happening in your life, it's gonna be uncomfortable, but it's gonna be okay. And from- for- for most people, for most of history, it was, "There's bad things gonna happen to you and you're not gonna be okay. It's gonna be very traumatic."

    5. SBSteven Bartlett32:10

       Hmm.

    6. MHMorgan Housel32:10

       And- and one of the important things there is when you lose that job, the ability to go find a good job, even a better job, where you want, doing what you want, with the people who you like working with, is very important. If you don't have any savings, you're gonna have to, by default, pick the very first job that you can come across, even if it's a terrible job in a location that you hate, doing something you hate, working with people you don't like. And so the flexibility to give yourself time to find a job that is a little bit easier and better for you, that is the purpose of savings.

    7. SBSteven Bartlett32:42

       And that goes back to your point about independence, which is you want to ... S- building up those savings is building up the independence or the freedom to make a choice about who you work with-

    8. MHMorgan Housel32:52

       Right.

    9. SBSteven Bartlett32:52

       ... if the worst were to happen. You don't have to n- necessarily go get a job at a, you know, some awful place.

    10. MHMorgan Housel32:56

        Some- some terrible place.

    11. SBSteven Bartlett32:57

        You talk about jealousy in the book as well. And, um, I was reading some stats that, uh, they're quite funny stats, but they- they say that, essentially that

12. 33:05 – 35:04

    Jealousy of Other People’s Wealth

    1. SBSteven Bartlett33:05

       if you- if you win the lottery, the probability of your neighbor going bankrupt increases (laughs) by double.

    2. MHMorgan Housel33:11

       Right. It's an amazing statistic. Right?

    3. SBSteven Bartlett33:15

       So what- what's- (laughs) what's happening there?

    4. MHMorgan Housel33:17

       Well, you're looking at your neighbor who won the lottery, and your neighbor probably bought a vacation house, bought a new car, sending their kids to private school, whatever it might be. And you, watching that, are like, "I need that for myself. I- it's- it's unfair that they have it and I don't, and I'm gonna go do any reckless financial decision to get that." So much of what we think is- is normal, our definition of success, is what other people around us have. And so if you are watching your neighbor live a better life th- than you, then all of a sudden your definition of a good life is what they're doing, and you will do some reckless things to get it. I think that's- that's what happens. And so one of the takeaways there is, like, be careful who you socialize with, because you're going to anchor to them as a baseline level of success and happiness. Be very careful with what you do and who you look up to and who you aspire to. I grew up in Lake Tahoe, California-

    5. SBSteven Bartlett34:09

       Mm-hmm.

    6. MHMorgan Housel34:09

       ... and this was before tech money, when it was not a wealthy area. It is now, because all the tech money from San Francisco came up. But Tahoe in the '90s and early 2000s was- was just a- out in the woods. And, you know, you could buy a house for nothing, and most people in town didn't have any money. And then I went to college in Los Angeles, where there is a lot of wealth, there are high expectations, and there are Lamborghinis and Rolls-Royces and whatnot. And one of my observations was people were happier in Tahoe.

    7. SBSteven Bartlett34:36

       (laughs)

    8. MHMorgan Housel34:37

       And I think the reason why is because the definition of success in Tahoe back then was a two-bedroom house and a pickup truck.

    9. SBSteven Bartlett34:44

       Mm-hmm.

    10. MHMorgan Housel34:44

        That was success. In Los Angeles, the definitions of success was a mansion and a- and a Bentley. And so it was- it was easier for people in Tahoe to be like, "I'm good. I- I checked the boxes. Like, look, I'm successful. Look at- look at my tiny little house and my beat-up pickup truck. That's success, right?" And so that was like, be careful who you socialize with, 'cause you're going to anchor to their level of success.

13. 35:04 – 38:45

    The Spectrum of Financial Independence

    1. MHMorgan Housel35:04

    2. SBSteven Bartlett35:04

       I have a- a- some graphs in front of you there. Um, I think one of them is the spectrum of financial independence.

    3. MHMorgan Housel35:12

       Yeah.

    4. SBSteven Bartlett35:12

       Could you explain to me what that is and- and how- how that's useful to understand, and why that's useful to understand?

    5. MHMorgan Housel35:18

       I think it's- I had this friend, uh, 10 or- 10 or 20 years ago, and he said, "I don't save any money 'cause I don't see the purpose. All I'd be able to save is 100 bucks a month, and what's that gonna do for me? And since it's- I don't think it's gonna do anything for me, I might as well just go spend it." And then I'm thinking, "No, no, that's ..." Like, $100 in savings, or if you do it for a year, $1,200 in savings, is $1,200 more independence than you had before. And again, w- not if, but when you lose your job or your car breaks down, you're gonna realize how unbelievably valuable that money is. And it's not savings, it's independence that it's giving you. So the idea that independence is on a spectrum. It is not you either don't have to work or you have to work. It's not that stark, but most people think of it in those terms. Why would I try to become independent if I have no chance of not working?

    6. SBSteven Bartlett36:03

       Hmm.

    7. MHMorgan Housel36:04

       And the simple way to view it is every dollar that you save is a piece of your future that you own, that you control, that is yours. The flip side of that is that every dollar of debt that you have is a piece of your future that somebody else controls. It's a- it's a moment in time in the future that y- is not yours, it belongs to somebody else. And so I've always viewed it ...... on a spectrum. When I was younger and much poorer, I was a big saver. Even though, like, was I independent? Like, no, of course I had to work. I had to work to pay my rent and pay my groceries, of course. But I viewed it as, like, every $20 that I saved, every $50 that I saved put me in a better position than I was before. And looking back on it, I- I- I don't think I could've articulated that 20 years ago, but it's what I felt. A lot of that for me back then was coming from a place of fear. I didn't have a lot of self-confidence in myself and my career, so I was like, "I need to save to prepare for when this all comes crashing down."

    8. SBSteven Bartlett36:55

       Mm-hmm.

    9. MHMorgan Housel36:56

       And even though it didn't come crashing down, I'm so glad that I did it, 'cause I've- I've had a sense of financial security, and I've had a sense of independence, financially, since I was in my early 20s. Not because I had saved a ton, I hadn't, but any amount that I saved I- I viewed as like the cushion that- that gave me a- a much higher sense of confidence, that if or when things go wrong, I'm not going to be flailing. I'm going to have some cushion to fall back on.

    10. SBSteven Bartlett37:23

        And what is this- this spectrum? Uh, what are the stages of this spectrum?

    11. MHMorgan Housel37:27

        So let's start at the very bottom. You're homeless, you're panhandling, reliant on the kindness of strangers. As you go up from there, you can be completely reliant on your boss in a job that you don't like. Now that's- that's- that's a- that's another low level. As you go up from there, you have, look, I'm- I'm reliant on my job, I'm relying on my ch- on my paycheck, but I probably have some opportunities. I could go work at another job, I could- I could choose to work here, I could choose to work there. And then as you go up from there, it's like, "Yo, I- I like my job and I have some savings, so if I lost this job, I can fall back onto it from there." You can go up from there to have... You can live where you want, you can work where you want, you can change fields, you can- you can go and you can do a completely different job. You can take two months off and travel if you wanted to. Like, you're working your way up, all the way to the highest level of financial independence, which is, "I don't need to work anymore. I've saved enough and I can- I can- I can wake up every morning and do whatever I would like to do." That's obviously an aspiration that for most people will never be reached until they're maybe in their, you know, 70s and they're retiring and they have social security and some other savings from there. But for most people, like, a good level of independence as a good goal is enough savings so that if you lost your job, if your car broke down, if you needed to replace the roof on your house, you'll be able to do it without losing that much sleep.

    12. SBSteven Bartlett38:42

        B-

    13. MHMorgan Housel38:42

        That is a realistic level that I think almost anyone

14. 38:45 – 41:20

    How Do People Achieve Financial Independence?

    1. MHMorgan Housel38:45

       can achieve.

    2. SBSteven Bartlett38:45

       Based on everything you know about money, if I want to get to that highest level of complete financial freedom, what- what- what's like the- the five things that I should be thinking about at just a sort of a very simple level? You know, 'cause so many people listening right now think, "Do you know what? My goal in life isn't to become a billionaire or a 10s of millionaire. My goal in life is just to get to that point of freedom as soon as I can-"

    3. MHMorgan Housel39:06

       Yeah.

    4. SBSteven Bartlett39:07

       "... where I can start calling the shots." And there's- there was someone who I was speaking to the other day and said that there's- there's this internet movement of kids who are trying to get... What do they call it? S- f- it's like they're trying to get to the point where they can retire early-

    5. MHMorgan Housel39:19

       FIRE?

    6. SBSteven Bartlett39:19

       It's like FIRE something.

    7. MHMorgan Housel39:20

       Financial Independence Retire Early.

    8. SBSteven Bartlett39:22

       Okay, yeah, that.

    9. MHMorgan Housel39:24

       FIRE means FIRE. Yep. Yep.

    10. SBSteven Bartlett39:24

        Like, how do I get, how do I get there?

    11. MHMorgan Housel39:26

        The first thing that I think that's most important, this is the first and the last thing, this is the most important part, is that all wealth, your feeling of wealth, is what you have minus what you want. And it's so easy to ignore the latter. I talk about in the book, my- my late grandmother-in-law, my wife's grandmother, she passed away a couple years ago. For 30 years, she lived off of nothing but $1700 or $1800 a month in social security. Not a lot of money. By most accounts, very little money. But she didn't want anything more. She di- she... L- if she made $1700 a month, she did not want $1700 and $1.00, and- and $1.00. She was perfectly happy. She- she found all of her happiness working in her garden, going for walks, watching the birds, watching the sun rise, watching the sun set, talking to her friends, hanging out with her family. But if you asked her, you said, "You only make $1700 a month. You're broke. Doesn't that make you unhappy?" She'd be like, "What? Like, do you think having more money makes the sunset more beautiful? Do you think having more money makes going for a walk more pleasant?" And I'm not saying you should live, or you should be content with that amount of money, but the point is like, she was content. She was totally content, and it was her choice. And I think she was happier financially than some billionaires, 'cause there's a lot of billionaires who have a billion dollars, but they want two. They have two billion, but they want four. One of the things is that happiness might be the wrong word here. The word that people want is content. When you sit here and daydream about having the bigger mansion, what you're actually doing is you are imagining yourself in the mansion, being content with it. You imagine yourself sitting in that house and saying, "I don't want anything more than this." The feeling that we are aspiring to is just being content. Happiness is always like a 30-second emotion. It's like laughter. Like if I tell you a funny joke, you'll laugh for 30 seconds and then, and then it's over. Like, very few times in life are you happy for more than a couple minutes at a time. But what you want that is like an, a durable emotion is being content, just saying like, "I'm good. I'm good with this. I don't want anything

15. 41:20 – 48:55

    How Does Dopamine Factor Into All of This?

    1. MHMorgan Housel41:20

       more."

    2. SBSteven Bartlett41:20

       I interviewed Dr. Anna Lembke, and she's like the- the, uh, the scientist who's most, uh, renowned for talking about and writing about dopamine.

    3. MHMorgan Housel41:29

       Yeah.

    4. SBSteven Bartlett41:29

       And I was wondering how much dop- the molecule dopamine dovetails into this, because I think one of the things she said to me was that dopamine is the chemical for wanting.

    5. MHMorgan Housel41:36

       Yeah.

    6. SBSteven Bartlett41:37

       And people have, I think, mistaken it for being the- the pleasure...

    7. MHMorgan Housel41:40

       H- happiness.

    8. SBSteven Bartlett41:41

       Yeah, happiness hormone.

    9. MHMorgan Housel41:42

       Which is not. It's- it's more, more, more, more. It's y- like, you want more.

    10. SBSteven Bartlett41:45

        And she told me this crazy story about this rat, where they removed the dopamine receptor from its brain so it couldn't produce dopamine, and then they put food two inches from its mouth, and the rat starved to death.

    11. MHMorgan Housel41:55

        (laughs)

    12. SBSteven Bartlett41:55

        Because it- it- w- it- it, and in that, for... I've always thought about that. It's like, okay, so that's what dopamine is. It's the motivation to go get, to go get, to want, to pursue. What role is dopamine playing here?

    13. MHMorgan Housel42:05

        It's huge, and that's actually a good realization to be like, a l- a lot of this is not something that you can solve on a spreadsheet. It's not something you can solve with a formula. It's chemicals in your brain. And obviously some people are going to be more susceptible to that than others. I think my grandmother-in-law just had, for whatever it was, was- was wired differently than most people. Part of that was, like, she was a product of the Great Depress- she grew up during the Great Depression, which probably like lowered her expectations. She never had social media and- and whatnot. But of course, I think some people are wired differently than others for a level of contentment. But I think just... There's a- a big thing in psychiatry where diagnosing a mental illness is sometimes more important than the treatment.If you just get a diagnosis of like, "Oh, you're ADHD," whatever it is, just knowing, just like the- the fact that you can stop questioning why am I having these thoughts, you can, you can understand why you have those thoughts is more important than the treatment sometimes. And I think that's true here. If- if you... It's easier said than done to complete control your desires. But just knowing why you're doing it and realizing that it's probably not going to give you the happiness that you want, that it's just like any addiction, that the more you chase it, the further away it's going to get-

    14. SBSteven Bartlett43:10

        Mm-hmm.

    15. MHMorgan Housel43:11

        ... can go a big ways. And so for me, myself, there's a- a- all the time there are moments where I'm like, "Oh, I- I should, I should get that car. Maybe we should get a bigger house." I have those feelings daily. So the feelings don't go away, but I think I'm better now than I've been in the past at reminding myself of like, it's not going to make you happier. You know that. You've tried this before.

    16. SBSteven Bartlett43:31

        Yeah.

    17. MHMorgan Housel43:31

        You've tried it before and it didn't make you happy. What is going to make you happy is spending time with your kids, having a good relationship with your wife, and your own physical health, and laughing with your friends, and having good times with people who you enjoy. You know that's going to make you happy and you know that's not. And I have to remind myself because it's not intuitive. And I have dopamine that tells me, "You should want more, more, more, more." So you never get over it, but I think once you've diagnosed the problem, it becomes easier at just, like, spotting that emotion and realizing that it's telling you a story that's probably not true.

    18. SBSteven Bartlett44:00

        I wonder if you- I could trade the addiction, because you- you know, you referred to it there as being an addiction. If it's for dopamine equation, could I not shift my addiction to something more productive? And would that mean that my spending would get better? So actually, when I think about me as 18 years old and having that horrific spending problem, maybe I just shifted the- the thing that gave me dopamine to like building businesses or to podcasting or to writing books or to being a great dad. I don't know. Do you know?

    19. MHMorgan Housel44:27

        I think it's probably true that everybody, without exception, is addicted to something. And it's just harnessing that- that process for whatever it might be. So some people are addicted to... My wife's addicted to gardening, let's say.

    20. SBSteven Bartlett44:38

        Yeah. (laughs)

    21. MHMorgan Housel44:38

        She shouldn't care less about, about investing or spending money on a nice... She could not care less about her car or my car or your car. But if you have a good gardener, if you, if you have a pretty garden, she's, she's all over that. So everybody's got their thing and it's just like, can you harness that for productivity?

    22. SBSteven Bartlett44:53

        Mm.

    23. MHMorgan Housel44:53

        I think a lot of like extremely successful people are people who took their ad- their natural addiction and harnessed it for productivity into their business.

    24. SBSteven Bartlett45:03

        Mm-hmm.

    25. MHMorgan Housel45:03

        And that's- that's why they're so successful. They just became obsessed with one thing. And it- it's a good question of whether we can actually guide that addiction or if it's just kind of pre-wired in itself. I think it's true for myself, someone who's written books about money for 20 years, thought about money for 20 years. My mom tells a story that when I was three, I would sit there and count pennies. I don't want to count seashells. I don't want to count cards. I don't want to count rocks. I want to count money. And so I think I've always had this disposition towards being fascinated with money.

    26. SBSteven Bartlett45:35

        Why?

    27. MHMorgan Housel45:35

        I don't know, because I did it when I was three. I did it before I could even think through it. But I think everyone has their little thing. It's always been fascinating to me. I don't think I'm obsessed with money. I don't think it controls my life. But I've had to go out of my way to have a- a healthier relationship with it. But I think it's definitely been true that the reason that I've found myself in this career is that it's always been my thing. And I think everybody has that thing in their life.

    28. SBSteven Bartlett45:58

        You know, people talk about addictive personalities and, uh, I was reflecting one of my best friends who is al- an alcoholic, had a problem with gambling, then had a problem with eating, then got obsessed with marathons. And he- he traded each one of those things for the next thing. So now he's like obsessed with health and fitness. And so I was- when I was thinking about people that are struggling with money problems and even my own historical str- struggle with money, I- I think I probably just traded it for something. And actually, I'm kind of happy about that because I traded it for a- a better addiction-

    29. MHMorgan Housel46:26

        Which is?

    30. SBSteven Bartlett46:26

        ... one that was productive.
16. 48:55 – 54:39

    We're Wired to Want More

    1. SBSteven Bartlett48:55

       to early retirement and to live- live a better life is to want what you have...... um, and basically want less things. I go back and forward a lot with this idea because there's, like, the monks who say that, like, "Oh, happiness is not wanting something." And then there's, like, the reality of life where striving for things seems to make me happy.

    2. MHMorgan Housel49:14

       Yeah.

    3. SBSteven Bartlett49:14

       And everybody describes the journey as being the most enjoyable part.

    4. MHMorgan Housel49:18

       That's your purpose.

    5. SBSteven Bartlett49:19

       Yeah, so, like, what, what, how do, how do I make sense of this? Like, the monks are telling me that, not to want anything 'cause that's going to make me frustrated and unsatisfied, and then my lived experiences, striving for things with a group of people makes me, seems to make me happy.

    6. MHMorgan Housel49:34

       I think there's a dif- there's a difference. It's a subtle difference, but between pursuing something that you genuinely enjoy doing, which for you is this...

    7. SBSteven Bartlett49:40

       Mm-hmm.

    8. MHMorgan Housel49:40

       ... right, your, your business and whatnot, versus being addicted to something that, ch- chasing something that you don't have yet. And so I imagine, you can correct me if I'm wrong, but I imagine when you're doing this, you don't tell yourself, "I need to work harder so that one day the podcast can be up here."

    9. SBSteven Bartlett49:55

       Hmm.

    10. MHMorgan Housel49:56

        I, I imagine, tell me if I'm wrong, but I imagine you come to work every day and you're like, "I, I like doing this today."

    11. SBSteven Bartlett50:00

        Mm-hmm.

    12. MHMorgan Housel50:00

        "I liked today. I liked yesterday. I'm going to like tomorrow." And so you're not chasing a false goal. You just actually enjoy doing it.

    13. SBSteven Bartlett50:06

        Do you know what? It's a weird thing 'cause it's, it's, uh... I'm going to be honest 'cause it's, uh, the only useful position to take. It's, it's a weird combination of both. So, I, I say, like, it's important for us to have some, like, goal.

    14. MHMorgan Housel50:20

        Yeah.

    15. SBSteven Bartlett50:20

        But also living in the, in, in the total understanding that the goal doesn't actually matter.

    16. MHMorgan Housel50:26

        Right.

    17. SBSteven Bartlett50:26

        And it's this weird dichotomy I live in with, like, if we become the biggest podcast in the world, like, se- set that as a goal because it gives us something to-

    18. MHMorgan Housel50:36

        Something to chase. I get that.

    19. SBSteven Bartlett50:37

        ... check KPI and then, like-

    20. MHMorgan Housel50:39

        Right.

    21. SBSteven Bartlett50:39

        ... put time frames against and get excited by and focus on, but then also living in the total realization that it's not going to matter at all.

    22. MHMorgan Housel50:46

        Right.

    23. SBSteven Bartlett50:47

        Nothing is going to change in my life. Zilch.

    24. MHMorgan Housel50:49

        Right.

    25. SBSteven Bartlett50:49

        What, am I going to get a better black shirt?

    26. MHMorgan Housel50:51

        (laughs)

    27. SBSteven Bartlett50:51

        It's like, you know? (laughs) You know what I mean?

    28. MHMorgan Housel50:53

        B- but here, here's the truth. The reason that we live in a world with a ton of technology and a ton of great businesses and great medicine and whatnot is because virtually everybody, for all of human history, has woken up every morning and said, "It's not enough. I need more."

    29. SBSteven Bartlett51:06

        Mm-hmm.

    30. MHMorgan Housel51:06

        That's the fuel of progress. And I don't want to live in a world where everyone wakes up and says, "I have all I need," 'cause then progress would stop that day. We'd probably start declining that day.
17. 54:39 – 55:40

    People Retiring Early Tend to Wish They Hadn't

    1. MHMorgan Housel54:39

    2. SBSteven Bartlett54:39

       So on this point of how to retire early, the first one was about managing what you want. Is there anything else there that if, if I'm trying to increase the probability that I get to retire early, um, I should know in terms of tactics and strategies?

    3. MHMorgan Housel54:51

       Well, one of the things, this is a little bit different than the que- than the question that you asked, but one of the things that's important is that a lot of the people who do retire early, who they tell themselves, "I'm going to save so much money and I'm going to retire when I'm 32 and then life's going to be great," what actually happens is they retire at 32...... and six months later, they're bored out of their mind, and they realize that, like, what actually makes you happy is purpose. And for a lot of people, their purpose can be their career. Or they realize th- they had this idea that when they retired, it was just going to be a great life. But the truth is, all of their friends are working and don't have time to go play golf with them on Tuesday afternoon. And so, a lot of those people who retire early end up going back. They realize it was not what it was made, what it was made out to be. Because they had... If the... The formula is independence plus purpose. They gained independence, but they kind of lost their purpose, and then the for- and so, it was incomplete. They didn't get what they wanted.

18. 55:40 – 57:54

    Passive Income Myths

    1. MHMorgan Housel55:40

    2. SBSteven Bartlett55:40

       Well, what about passive income? People talk a lot about passive income. I had a friend DM me the other day and say, "Steve, I've got some debts, et cetera, but if I could just figure out a way to create some passive income, then that should solve the problem." And this term passive income has become like...

    3. MHMorgan Housel55:54

       Completely overused.

    4. SBSteven Bartlett55:55

       Yeah.

    5. MHMorgan Housel55:55

       Because, for example, a lot of people f- when they talk about passive income, they're like, "Oh, I'm gonna own real estate. I'm gonna have some rentals, and that's passive income." If you think owning a rental property is passive income, you've never owned a rental property 'cause there's nothing passive about it. It is a constant chain of broken toilets and leaky roofs and tenants who don't pay you on time, on... There's nothing passive. That's a full-time job doing that. And so, I heard someone say this recently, that there's two ways to get wealthier. You can sacrifice more, or you can want less, and that's it. And gain- passive income is not part of that equation because-

    6. SBSteven Bartlett56:28

       What's the first one, sacrifice more?

    7. MHMorgan Housel56:29

       Sacrifice more.

    8. SBSteven Bartlett56:30

       What does that mean?

    9. MHMorgan Housel56:31

       Work harder. Work-

    10. SBSteven Bartlett56:33

        (laughs)

    11. MHMorgan Housel56:33

        Work in a job that is, that has a lot of downsides, that might stress you out, and requires you to wake up early, and go to work and do some things that you don't want to do, and spend time away from your kids in a way that you don't want to do. Sacrifice more or want less. Those are your two choices.

    12. SBSteven Bartlett56:50

        (laughs)

    13. MHMorgan Housel56:51

        And I think that's important in the passive income debate because I- I- I don't think there's- but- there, by and large, is not a thing of passive income. Even if you're just like, uh, you know, you- you put your money in a, in a savings account that pays 3% interest, well, you had to sacrifice to earn that money-

    14. SBSteven Bartlett57:05

        Hmm.

    15. MHMorgan Housel57:05

        ... and to save that money and to delay the gratification of that money. I- I- I really think it's an ironclad formula. Sacrifice more or want less. Those are your two options.

    16. SBSteven Bartlett57:16

        It's not nice. Uh-

    17. MHMorgan Housel57:17

        That's true.

    18. SBSteven Bartlett57:18

        People want, you know, "Tell me which crypto to" (laughs) -

    19. MHMorgan Housel57:21

        Right.

    20. SBSteven Bartlett57:21

        ... "to invest in to get there."

    21. MHMorgan Housel57:22

        Of course. Everyone's always going to want the easy answer. Just like for health, the answer is eat a better diet and exercise. Nobody wants that. They just say, "Get... What's the, what's, what's the secret potion? What's the secret formula?" And maybe now we have Ozempic, so maybe now we have, it's closer to a, to a secret formula. But the truth is, what's the secret to better health? Sacrifice more, because working out and lifting weights and running is a sacrifice. It's not fun. It hurts. That's why it's good. Or want less, be happier with your imperfect body. And I- I- I think it's a great analogy between health and, and wealth.

19. 57:54 – 58:55

    Ads

    1. MHMorgan Housel57:54

       (page turns)

    2. SBSteven Bartlett57:55

       Often, the difference between a company succeeding or failing isn't down to its product or strategy. It's down to the people on the inside. After all, the definition of the word company is group of people, and some of the best companies in the world have been largely built by A players because I'll let you in on a little secret. When you hire an A player, they go on to hire more A players, and it perpetuates. The challenge is finding those first few A players. I found the majority of mine on LinkedIn, who are a sponsor of this show. LinkedIn provides talent I could not find anywhere else, talent with the necessary skills and culture fit that I'm looking for. Whenever I've paid to promote a role on LinkedIn, I've been able to hire faster and, of course, better. Their data supports this, too. You'll actually get three times more qualified applicants than if you posted the same role for free. So if you're trying to build something truly great, you can get started by posting a job for free by visiting linkedin.com/doac. That's linkedin.com/doac, and you can post your role for free there. Terms and conditions, of course, apply. (page turns)

20. 58:55 – 1:04:49

    Do I Need to Know Economics for This?

    1. SBSteven Bartlett58:55

       How much do I need to understand what's going on in the wider world and the economy in order to understand, uh, my own spending behaviors, what I should spend on, how to get wealthy, how to save? Is it important to have any understanding around the macro? Because most people that listen to this show will probably hear these terms being spouted out on, by political commentators like the Federal Reserve, interest rates-

    2. MHMorgan Housel59:17

       Yeah.

    3. SBSteven Bartlett59:17

       ... tariffs, et cetera, and should I understand any of this? Should... Does any of it really impact me in a way that matters to me and my family?

    4. MHMorgan Housel59:26

       I don't think it's necessary, and you can point to people I've written about in my books who had no financial education, no training, did not read The Wall Street Journal, could not tell you how the Federal Reserve works. But they had control of their psychology, control of their emotions. They s- they worked hard. They saved their money. They invested it, and that, that's all you need. They, you, you, you... So the answer is you don't need to know how this works. Just in the same way that in order to be healthy, you don't need a PhD in biology. You don't need to understand how cell division works in order to be in good shape. And I think it's the same for the economy. And it can actually backfire for a lot of people, that once they start reading The Wall Street Journal and learning a bit about finance, it increases their confidence more than their ability. So they're like, "Oh, like, I read The Wall Street Journal. I should go day trade crypto now."

    5. SBSteven Bartlett1:00:11

       Hmm.

    6. MHMorgan Housel1:00:11

       "Because I read a thing that teaches me how the Federal Reserve works, so now, like, I'm gonna..." It increases your confidence more than your skill.

    7. SBSteven Bartlett1:00:19

       That's so interesting.

    8. MHMorgan Housel1:00:20

       And so, I- I- I think it's important to be an informed citizen, and the Federal Reserve impacts your life, and tariffs impact your life. So it's important to have some baseline understanding. But I think that's more about being an informed citizen and informed voter than it is having financial skill.

    9. SBSteven Bartlett1:00:37

       Of all of my best friends, there's like five or six of them, the one that's most catch- cash-rich is the one that knows the least about... I think he's the most rich person, to be honest. He's the one that knows least about finance, and he knows the least about investing. He knows the least-

    10. MHMorgan Housel1:00:51

        Yeah.

    11. SBSteven Bartlett1:00:51

        ... about crypto.

    12. MHMorgan Housel1:00:52

        Well, what's the meme of like the, the tail spectrum of like the poor person drives a Toyota, the middle person has a Porsche, BMW, Mercedes, and the richest person goes back to Toyota? Of like, it's, uh, like whether you are very uneducated or extremely wise, you tend to end up-

    13. SBSteven Bartlett1:01:07

        Oh, this one.

    14. MHMorgan Housel1:01:08

        That's it.

    15. SBSteven Bartlett1:01:08

        Okay.

    16. MHMorgan Housel1:01:09

        And so, I- I- I think-

    17. SBSteven Bartlett1:01:10

        (laughs)

    18. MHMorgan Housel1:01:10

        I think it, it does tend to be the truth, that the people who do the best financially-... either have, like, no financial education or extreme financial education. And it's the person in the middle that has their confidence is increased much faster than their ability. And they're like, "Oh, no, no. I, I read this thing on Reddit that taught me about day trading. So, now I'm gonna go bet my entire net worth on this company I've never heard of."

    19. SBSteven Bartlett1:01:33

        So funny. But so what is it that the, the person on the left and right side of the spectrum are both doing that is the same here? So, for anyone that can't see, I'll put it up on the screen. But it just shows... The bottom axis says net worth, and it basically says that people with low net worth buy a Toyota. People with, like, in the middle, that sort of middle percentage, buy Lamborghinis and Porsches and Jaguars. And then people with extremely high net worths buy Toyotas. And obviously, it's-

    20. MHMorgan Housel1:02:00

        Obviously, it's-

    21. SBSteven Bartlett1:02:00

        ... it's a metaphor.

    22. MHMorgan Housel1:02:01

        ... it's not, it- it's not, it's not exactly perfectly true. But I think people, like a lot of comedy, you see it, like, it's funny because people are like, "Yes, that's true. That's how it works." I think a lot of it is, like, the richer you become, you realize that the big house and the fancy car didn't do anything for you. It di- it, it didn't give you what you thought it was gonna give you. And then so you're like, "Look, I'm just gonna go back to utility. Like, status didn't do it for me, so I'm gonna go back to utility." It can also be the case that if you're successful and rich, you can gain your admiration and your attention through what the business that you built or the intelligence that you have or the, the friendship that you can offer others. And therefore, your desire to be like, "Look at my car. Look at look at how cool my car is," just goes down from there.

    23. SBSteven Bartlett1:02:47

        The way I also interpret it is that when you're, when you don't have much money or when you don't ha- have a huge financial understanding like my friend, you end up playing the really boring money games.

    24. MHMorgan Housel1:02:57

        Yeah.

    25. SBSteven Bartlett1:02:57

        And when you have a huge financial understanding, you probably also sp- sp- spend a lot of time playing the boring money games. And by boring money games, I mean index funds-

    26. MHMorgan Housel1:03:05

        Yeah.

    27. SBSteven Bartlett1:03:06

        ... and the S&P 500 versus, like, crypto.

    28. MHMorgan Housel1:03:08

        Yeah. I think you'll see that in investing, that, like, the absolute layperson will invest in index funds, and the extremely experienced Wall Street veteran will invest in index funds as well. And it's the person in the middle that just has, like, a little bit of intelligence, a little bit of experience, a little bit of information, that's trying as hard as they can to outperform the market.

    29. SBSteven Bartlett1:03:31

        I kind of learned that from reading your f- your f- The Psychology of Money because I, I think, like many people, thought there was some trick or hack that this book was gonna teach me to figure out how to trade coins at the right time or to, like, do forex trading or whatever. But ultimately, the book, if there was one overarching lesson it taught me, was that, like, patience and, uh, more boring investing is, is the way to get, to build my wealth over the long term. And that like all other strategies have hidden trade-offs which lead you to being broke.

    30. MHMorgan Housel1:04:04

        Yeah. I think there's a truth too that, like, there's a, there's an optimal level of intelligence that you want for investing where you wanna be smart enough to understand the basics, but not so smart that the basics bore you. And a lot of people get so smart that they're like, "Look, index funds, compound interest, like, I'm, I'm just putting... Like, it's too boring. Like, I, I need something really complex to satisfy the intelligence that I have." And I, I think there's a sweet spot where i- ilike for me, I'm just like, "Oh, index funds and compound interest, like that's, that's kind of as high as my intelligence goes here."
21. 1:04:49 – 1:08:43

    What’s Going On in the World?

    1. SBSteven Bartlett1:04:49

       What is going on in the world at the moment, Morgan? There's, um... It feels like people are more divided than ever before. And I th- feel like a lot of these subjects we talk about are somewhat interconnected. It feels like there's a rise in inequality. You probably know the numbers better than I do. Um, I mean, there's a graph in front of you there which shows... I think it's, is it wage growth?

    2. MHMorgan Housel1:05:09

       Yes, monthly wage growth-

    3. SBSteven Bartlett1:05:11

       Monthly wage-

    4. MHMorgan Housel1:05:12

       ... going back for about 25 years.

    5. SBSteven Bartlett1:05:14

       And it a- appears to be going down.

    6. MHMorgan Housel1:05:16

       Well, but this is growth. So, in any given year, even if growth is 2%, that's 2% higher than the previous year. So, this is not-

    7. SBSteven Bartlett1:05:23

       Right.

    8. MHMorgan Housel1:05:23

       ... wages over time. Now, it is true that if you look over a 25-year period, and you took the average American family, not everybody but the median, that their wages adjusted for inflation have gone up. Not, not up as much as people would want over 25 years, but that, that they are better off than they were 25 years ago. What is also true is that the average median family would probably disagree with that statement, even if it is true statistically for several reasons. One of which is their expectations have gone up over the last 25 years. The other is even if you're looking at average wages, average in, in the... when we talk about these statistics does not refer to any specific family. This is just a statistical number. Everyone spends their money differently. So, if I told you, "Hey, average family, you're richer than you were in the year 2000." And they're like, "Yeah, but I'm trying to put my kids through college. And have you seen the price of college?" And like, "Yeah, that might be true because the price of TVs has gone down, but have you seen the price of rent and housing?" Like, at the individual level, these statistics don't really mean that much and never have. And I think a lot of economists get into a problem with that when they're like, "Well, statistically, X, Y and Z has happened." But ignoring the psychology and the individuality of, like, what's happening actually on the ground, in people's heads, and how they spend their money, there's a, there's just endless amount of nuance in here. And so, I think it's, it's always been true that we live in a world where, over long periods of time, there's good economic growth. We become wealthier. We be- we have bigger, better things. We have more income. We have better medicine. It's equally true too that, like, there is always something legitimate to complain about, and it's legitimate to complain about. It's not just like, "Oh, you should be more grateful." It's a real thing. And so when I look at a graph like this, actually what... Like, if I was thinking just n- like, with my math head...... I'd be like, "Oh, there's been quite a bit of growth over the last 25 years." Like the growth has been gone up and down, but it's growth. You know, never in this chart is growth below zero.

Episode duration: 2:07:48