Morgan Housel: How tariffs reshape your cost of living

How tariffs land on importers and quietly raise your cost of living: why patience, savings, and modest expectations buy more freedom than calls.

Steven BartletthostMorgan Houselguest

Apr 28, 20252h 14mWatch on YouTube ↗

EVERY SPOKEN WORD

150 min read · 30,012 words

0:00 – 2:00
Intro
1. SBSteven Bartlett
  How important is this tariff situation?
2. MHMorgan Housel
  It has the potential to be the biggest economic story of our lives. People are losing a lot of money on tariffs, and you're probably a matter of weeks away from empty shelves. And there's a button on the president's desk that says, "End it right now."
3. SBSteven Bartlett
  So can you tell me what a tariff is?
4. MHMorgan Housel
  I'll keep this very simple. Morgan Housel is the money mindset guru...
5. NANarrator
  Who's shaking up everything you think about wealth and how to achieve it.
6. SBSteven Bartlett
  I looked at the most Googled questions around money, and one of the most popular is how to achieve freedom financially.
7. MHMorgan Housel
  It is largely a mindset. You have an obligation to understand how money works and how to manage it. And it's one of many topics in which you're gonna learn the best by experiencing the downside. Gonna come back to that.
8. SBSteven Bartlett
  The next question is how to save money.
9. MHMorgan Housel
  So most people view saving money as it's just wasted sitting there, but you need the push-in so that when the economy goes south and there is a recession, I want to have a level of control over my ability to support my family.
10. SBSteven Bartlett
  So how much money do you think it's sensible to have saved?
11. MHMorgan Housel
  This is a bad answer that no one's gonna like, but...
12. SBSteven Bartlett
  When you look at all these people through history that have generated great wealth, are there, like, certain strategies they deployed?
13. MHMorgan Housel
  One thing that virtually everyone listening to this could learn from is they were way more patient and had way more endurance than anyone else.
14. SBSteven Bartlett
  Also, I wanted to understand investing and this idea of compounding interest.
15. MHMorgan Housel
  So compound interest is the most misunderstood thing about investing, because that's what builds wealth. If you look at, like, Warren Buffett, he wouldn't want to get haircuts, because if he invested that money and leave it alone for 50 years, in his mind, a haircut would cost $10,000.
16. SBSteven Bartlett
  And then do you recommend people try and buy houses or is it just to rent those houses?
17. MHMorgan Housel
  So the truth is...
18. SBSteven Bartlett
  This has always blown my mind a little bit. 53% of you that listen to this show regularly haven't yet subscribed to the show. So could I ask you for a favor before we start? If you like the show and you like what we do here and you wanna support us, the free simple way that you can do just that is by hitting the subscribe button. And my commitment to you is, if you do that, then I'll do everything in my power, me and my team, to make sure that this show is better for you every single week. We'll listen to your feedback, we'll find the guests that you want me to speak to, and we'll continue to do what we do. Thank you so much.
2:00 – 4:40
Timeless Lessons of Greed, Wealth, and Happiness
1. SBSteven Bartlett
  In 2020, my older brother, Jason, came to me after spending more than a decade working in the finance industry, and he said to me, "Steven, there is one book you need to read to understand money." And that was your book, The Psychology of Money. And that's how I came into your world and understood who you were, what you think, and really, this book has shaped how I think about money ever since. And this is why I loved having you on the show last time, but I was insistent to speak to you again with everything that's going on with, in the world right now. Morgan, what is the most important thing we should be talking about at this present moment based on, I guess, the subtitle of this book, Timeless Lessons of Wealth, Greed, and Happiness?
2. MHMorgan Housel
  Thank you, Steven. So, so, uh, so good to be back. I think what's, what I like about what you just said, and thank you for, for that, is that you said the book changed how you think.
3. SBSteven Bartlett
  Mm-hmm.
4. MHMorgan Housel
  And that's important because the book does not tell you what to do. Nowhere in the book do I say, "This is how you should invest your money. This is how you should spend your money." Because you're different from me and everyone else. We're all different. I've always just been interested in how people think, like, what's going through your head when you're making investing decisions?
5. SBSteven Bartlett
  Mm-hmm.
6. MHMorgan Housel
  And if you can understand greed, fear, risk, envy, jealousy, those topics, that is way more important than anything they will teach you in a PhD finance course at Harvard. Not that the, the technical stuff doesn't matter, but the psychological stuff with money is everything. I mean, so much... So many money problems in the real world have to do with impatience, envy, greed. Tha- that's it. It's not that people don't know the formulas, don't know the data, don't know, you know, how to calculate compound interest by hand. None of that matters. It's envy, it's in- it's impatience. And so that, as a writer, that's wh- I was always interested in. Like, I'm tired of people giving advice and saying, "These are the stocks you should buy, and here's what the economy's gonna do next quarter." I was like... No one was any good at it. But I was always just fascinated in what's going on in people's heads. And you asked why is that important right now. Well, I think it's always important. Like, those topics of, you know, the, the subtitle is Timeless Lessons because I think a lot of these things were as true 1,000 years ago as they will be 1,000 years from now. Like, greed and envy and impatience is just ingrained in how people think. It always has been. And so you see what's going on right now with tariffs in the economy. Stock market's gone up a lot. Bitcoin's gone up a lot. So these points have always been true, but a lot of them are magnified right now. A lot of people have made a lot of money on Bitcoin. A lot of people are losing a lot of money on tariffs. So greed, fear, envy, it all kind of just collides. Uh, it is right
4:40 – 6:54
The Current Tariff Situation in 2025
1. MHMorgan Housel
  now.
2. SBSteven Bartlett
  How important, uh, is this tariff situation that we find ourselves in? Because we're seeing all over the news everywhere, tariffs, Trump's done this, 10% here, blanket tariff here. Does it matter? And maybe even more specifically, does it matter to the average person?
3. MHMorgan Housel
  It has the potential to be the biggest economic story of our lives. It doesn't have to be. One thing that's very interesting about the tariff story is that if you compare it to 9/11 or COVID or 2008, the banking crisis, the tariff, uh, issue that we're going through right now can be ended in one minute. There's a button on the president's desk that says, "End it right now." And even, you know, if that did happen, there would still be some lingering damage in terms of trust and reputation, but there was no button on the president's desk for COVID that said, "End this all right now." It didn't exist. And 9/11 and Lehman Brothers in 2008, once those risks hit, we just had to deal with them through their finish. This is different because it, it can and is changing by the day. So when people have a take on what's going on right now, that might, that take might be stale an hour from now. But it's absolutely true that the global economy, to an extent that I think people don't appreciate enough, is a very complicated, intricate machine. And most economic problems come when people, like, try to fiddle with that machine a little bit. They're like, "Oh, let's turn this dial by one degree and see what happens," and then, like, oh, it blows up. "Oh, I shouldn't have done that."... tariffs is like, let's hit it with a baseball bat a couple times. Let's hit it with, like, a crowbar and see, and see what happens. Like, the global economy is so interconnected, and if you go to your local grocery store, Target, or Walmart, whatever it might be, and, and go around and look at where that stuff was made, it's, uh, I mean, and it's all over the world. It's, like, very li- like, it's, it's everywhere. And once you shut that down and put barriers on that, it can become a, a big problem very quickly. One thing I've noticed in the last couple weeks that I think is very interesting are the number of educated and smart friends that I have who send me a text or a call or an email saying, "Hey, can you explain what a tariff is? I see this word, but I don't really know what it is." And I think that's important because I don't think the average person understands what can happen to the economy if this persists for a long period of time.
6:54 – 11:41
What Are Tariffs?
1. SBSteven Bartlett
  I'm so glad you said that, because I've been waiting for weeks now to ask somebody, like yourself, who studied economics, to explain in a simple way what a tariff is. And feel free to use an analogy. I, I think about 50% of people have no idea what a tariff is.
2. MHMorgan Housel
  Yeah.
3. SBSteven Bartlett
  And then on a sort of incremental scale, um, people's clarity gets better and better until... I, I would estimate about 5% of the general population could articulate what a tariff is, 5% or less. So can you tell me what a tariff is?
4. MHMorgan Housel
  First I would say is tariffs have been used for hundreds of years, and there is, there can be a very good useful purpose for them in the economy. I think as they're structured right now in the United States, it's a huge mistake and has the potential to be a catastrophe. But they can be a useful thing in the economy. This is not a black and white thing. What a tariff is is, let's keep this very simple. The United States buys a bunch of computers that are made in China, bunch of iPhones that are made in China. They're on a container ship, they ship them to the United States. When they get to the port in the United States, the importer, which is Apple bringing the iPhones in that were made in China...
5. SBSteven Bartlett
  An American company.
6. MHMorgan Housel
  ... has to pay the tariff-
7. SBSteven Bartlett
  Oh, okay.
8. MHMorgan Housel
  ... that's put on it. And a lot of people, and it's, it's very understandable why they would think this, would say, "Well, no, in that situation China pays the tariff." And there could be a situation where China starts discounting the iPhones, the, the, the, the company that's making the iPhones would discount it. Like, there can be some offset. But the person who's paying that tax is the importer.
9. SBSteven Bartlett
  So, often we think about we've applied the tariff to China.
10. MHMorgan Housel
  Right.
11. SBSteven Bartlett
  So what's happening is China having to spend the 10%, or I think the tariff currently is, like, 125%, 140%.
12. MHMorgan Housel
  145. It, it-
13. SBSteven Bartlett
  145%.
14. MHMorgan Housel
  The number doesn't matter because trade will eventually, will just stop at those levels. It just won't happen.
15. SBSteven Bartlett
  So if Apple import an iPhone now with that tariff level, then Apple would have to pay the 145%-
16. MHMorgan Housel
  Yes.
17. SBSteven Bartlett
  ... when it arrives at the shore-
18. MHMorgan Housel
  Correct.
19. SBSteven Bartlett
  ... of the United States?
20. MHMorgan Housel
  I mean, here's, here's an example that most people will understand, sales tax. You know, in, in most states in the United States, it's, uh, 6% to 10%. If you go to a store and buy something, you add the sales tax to that.
21. SBSteven Bartlett
  VAT in the UK.
22. MHMorgan Housel
  Ex- oh yeah, fair. Who pays that is not the store, it's the customer. So even if the tax is put on the seller, the seller passes it onto you, the customer, and says right on your receipt, "You bought something for $10, and then there is, uh, there's your sales tax and here's what you're gonna pay in the end." And so it's similar from that. Now, let, let, here, let me explain this, why there would be a very useful case for tariffs to show that this is not black and white and this is not, "Oh, all tariffs are bad." Th- this happened in the United States during COVID. We were virtually 100% reliant on masks, N95 masks, uh, that were made in China and Korea, and not in the United States. And so when you have a medical crisis in the early days of COVID and we're like, "We need hundreds of millions of masks yesterday."
23. SBSteven Bartlett
  Mm-hmm.
24. MHMorgan Housel
  They're all made somewhere else. We do not wanna be in that situation. So it would absolutely make sense to have a tariff on masks to make sure that they are so expensive to import overseas that we have to start making them in the United States. That makes sense. Same with military equipment. You do not want to go to war with a country and be reliant on that country to make the, your military gear, your bullets and your bombs and your tanks and whatnot. Absolutely makes sense to have a tariff on that to make sure they're made in the United States. That said, so it's, it's not black and white, but to have a blanket tariff and say, "Everything that comes from any country anywhere in the world, and China's gonna be this to an extreme degree, is gonna have a tariff on it." And whether that's between 10% for all countries or 145% from China, that, you know, I, I've used this analogy before that if you talk to dieticians, there is a huge amount of debate over what's the best diet should you eat? Should you be, uh, keto, should you be vegan? Like, everything in between. They don't, there's so much debate. All of them agree that processed sugar is bad. Nobody, nobody thinks processed sugar is good. And tariffs are that with economists. Like, there is so much debate among economists on what should the tax rate be, what should subsidies be, should we, you know, like, you know, like, free market versus, v- versus subsidies. There's so much debate. No serious economist thinks that you should have a trade war. And the thing is, this is not new. We've been doing this for hundreds of years, and it's very well known that in the 1930s, the Great Depression, we took, put huge tariffs on in the early days of the Great Depression. Uh, they didn't know it was called the Great Depression back then 'cause we put them on and it shut down global trade. And it's easy to think that if you put tariffs on your own country, that will make it easier to manufacture. Like, all those jobs that we shipped overseas building cars, they're all gonna come rushing back to America. And it, it very rarely happens like that when you have a trade war. By, what I mean by trade war is we put tariffs on China, they respond and put tariffs on us, and you just go tit for tat and it's, and you go back and forth, and it's like mutually assur- mutually assured destruction in economic terms.
11:41 – 18:13
Trump's True Reason for the Tariffs
1. MHMorgan Housel
2. SBSteven Bartlett
  So why is Trump doing it then, in your view? Because he's given lots of reasons. He's said that, "They're ripping us off." He says, "Lots of countries have been ripping off the United States." How would you unpack what he's saying there and what do you believe the true reason is underneath that?
3. MHMorgan Housel
  To his credit, Trump has been very consistent on this for literally 40 years. You can go, go on YouTube, he gave an interview in, I think it was 1986, he went on Oprah in 1986 talking about how free trade wasn't free and that Japan and other countries were ripping us off, and that the, the solution to it were tariffs. So he, this is not a new view. This has been a lifelong quest that he's had.I would say, not necessarily Trump's views, but I would say it absolutely makes sense that there is a large chunk of America that looks back to the period of 1950s, 1960s when we were a manufacturing powerhouse and says, "That was better than what we have now, and we should go back to that." I get why people would say that, 'cause it's true that we have lost a lot of manufacturing jobs in the last 50 years. I think manufacturing jobs peaked in the late 1970s, and we've lost something like 10 million manufacturing jobs that we had, you know, versus what we had back then.
4. SBSteven Bartlett
  Mm-hmm.
5. MHMorgan Housel
  And I get why, if I was in that situation, I would probably feel the same. Where I push back is the situation that we had in the 1950s and 1960s where it was just America manufacturing powerhouse were a very unique period that I think is virtually impossible to bring back, and I'll tell you why. At the end of World War II in 1945, Europe and Japan were in rubble. They were decimated from the war. America was not decimated whatsoever, and so we had basically a, a global manufacturing monopoly for a period of time. China was not in the equation. South Korea was not in the equation. India, Bangladesh, those, they were not in the, in the equation. It was basically Japan, the United States, and Europe, two of which were just struggling to feed their citizens, and once they got that under control, it was like, "We have to rebuild the damage from the war." So America had about 20 years, from 1945 to the mid-1960s of, we have a manufacturing monopoly, and then we had 16 million US soldiers come home from the war, and there was so much pent-up demand for them to buy homes and washing machines and cars and radios and all these things, and all of them were built in America because nobody else could build them. And that created a really special time when, like, because we had a manufacturing monopoly, it was just, like, factories everywhere. We built up so many factories during the war, there was endless demand for those products. And this is, this is an important part too. White-collar workers during that period didn't make that much money relative to what they did before or since. And that was important because the wages that the blue-collar manufacturing workers were earning felt great by comparison.
6. SBSteven Bartlett
  Hmm.
7. MHMorgan Housel
  So if you were an autoworker in Detroit and you compared your wage in 1955 to the local accountant or dentist or doctor, by comparison relative to today, you're like, "Oh, it's, it's pretty good. Yeah, the doctor makes more than me, but not that much more than me." You know, "I drive a Chevy, he drives a Cadillac. His is a little bit nicer, but we're living mostly the same lives." And so I think that was a lot of the feeling of prosperity in the '50s and '60s was this very unique period of manufacturing monopoly as Europe and Japan were rebuilding, and by comparison to other workers, it felt amazing. And then at about the 1970s, Japan and Europe had gotten themselves back together from the ravages of World War II, and they became manufacturing dynamos in their own right. And I don't think we really understood this in America until three companies came in, which were Toyota, Honda, and Nissan-
8. SBSteven Bartlett
  Hmm.
9. MHMorgan Housel
  ... and they started selling cars in America. And at first, it was very easy to be like, "Look at these little, like, lawnmower toys that they're importing," 'cause you, you compared, like, a early Honda Civic to, like, a Chevy Camaro in the '70s and it was like, it was, you can't even compare them. So at first, the reaction of American car companies were like, "These guys are a joke. No one's gonna buy these little cars." But then gas prices surged in the '70s and '80s, and all of a sudden, the cars that Americans wanted was the tiny little Honda Civic that got really good gas mileage. And then once they started buying them, they were like, "Hey, this Toyota, this Honda, this Nissan, it's actually a pretty good car. It's actually pretty well built." And I think there was a lot of denial among that, among manu- American manufacturers, that other, these other nations that we, that didn't exist for 20 years in terms of a global manufacturing source were actually pretty damn good at it now.
10. SBSteven Bartlett
  Hmm.
11. MHMorgan Housel
  And then one other thing happened to, to wrap, to wrap this up, and this might be the most important part of it. The reason that you cannot reasonably expect the manufacturing powerhouse to come back as it was is, yes, we did ship jobs to China and Mexico and Canada and India that used to be in America, and that has contributed to the massive decline in manufacturing employment, but a bigger factor in there is automation. And if you look at a mon- Like, I- I would challenge people to do this. Go on YouTube and look at a Tesla assembly line-
12. SBSteven Bartlett
  I'll put it in-
13. MHMorgan Housel
  ... in the United States.
14. SBSteven Bartlett
  I'll put it on the screen.
15. MHMorgan Housel
  It is... What you will see, it's amazing. It is a miracle of engineering. What you will see are armies and armies of robots and very few people. And if you compare that to the 1950s assembly line, what you see are biceps and backs and people hauling around material. So because we got so good at automation, even if we bring manufacturing back to America, and that we still do a lot of manufacturing in America, it doesn't require the amount of employment that it used to. Doesn't require the amount of manpower, and the people who do work on Tesla manufacturing lines by and large are working on computers overseeing the robots.
16. SBSteven Bartlett
  Yeah.
17. MHMorgan Housel
  I mean, here's one stat that I thought was always interesting to me. In 1950, there was a US steel plant in Gary, Indiana. It produced five million tons of steel and had 30,000 workers. Today, it's still operating, it produces eight million tons of steel, and has 2,000 workers. So it's producing more steel today than it was in the 1950s, and it went from 30,000 workers to 2,000, because what used to be done with biceps and backs and shoulders is now done with machines and robots. And it's no different than what happened in agriculture where a farm 200 years ago was rakes and shovels, and today it's tractors and combines. Like, that same thing happened to assembly. So to wrap all that up, like, I understand and I empathize with people who say, "We need to bring back manufacturing to America. We lost what we once had." I get that and I respect it, but I think the unique circumstances and automation makes it just extremely unlikely to ever happen.
18:13 – 20:25
Why Is China the Factory of the World?
1. MHMorgan Housel
2. SBSteven Bartlett
  How did China get in there? And...Why are they the factory of the world? What are the cool components that went into them being able to produce all of the things that we use on a daily basis at a fraction of the price that they're able to produce them here?
3. MHMorgan Housel
  Tim Cook of Apple gave a really interesting interview a couple weeks ago, and he said, "You might think that we manufacture iPhones in China because it's, it's cheap labor." And he said, "That's not really true anymore. It used to be, but China is not the cheap, cheap labor country anymore. That's moved on to Bangladesh and Cambodia and other places. The reason they manufacture in China is expertise." And I think it's okay to admit, and people should admit, that your country, and also your company and you individually, can be very good at some things and not very good at others. China is just extremely good and extremely talented at particularly, like, low-end manufacturing. Low-end can be anything from, you know, inflatable swimming pools to on up to, like, basic, basic electronics. They're, they're extremely good at it. I was talking to a CEO a couple weeks ago and he said, uh, and he's generalizing here, but he said, "If you go to a, a Chinese factory and you say, 'I want this part made, and here's step one, step two, step three on how to make it,' they will do it better than anybody in the world. Nobody can beat them at that. But if you go to that same factory and you say, 'Please go design me a new part,' they're not very good at it. Americans are way better at that. And that's why the back of your iPhone says, 'Designed in California, made in China.'" Like, it's just specialization of labor. And I think America is the best in the world at a couple things: entrepreneurship, technology, services, and, like, high-end manufacturing like planes and rockets. And we're not the best in the world at low-end manufacturing, and that's okay. That's not an insult, that's not a put-down. There's specialization of labor. And, and so I, I think, I think China just got very good at one thing during a time when we've always been very, very good at, at, at different things. And I think that is why global is... like, why for a lot of people, not for everybody, so if you disagree with this, I, I get it, but why the economic system works so damn well over the last 30 years is because we really got good at specialization of labor. You design the iPhone, you make the iPhone, we're both better off for it.
20:25 – 22:54
China Stopped Being a Cheap Labour Country
1. SBSteven Bartlett
  I wanna play that clip you're talking about with Tim Cook because I remember seeing it as well, and it did, it was a bit of an aha moment for me. For anybody that doesn't know, Tim Cook is the CEO of Apple, and he's been at the helm of Apple for more than a decade, and as you know, most of Apple's products, from what I understand, are made in China.
2. NANarrator
  There's a confusion about China that, uh ... And let me at g- at least give you my opinion. The, the popular conception is that companies come to China because of low labor cost. I'm not sure, uh, what part of China they go to, but the truth is, China stopped being the low labor cost country many years ago, and th- that is not the reason to come to China from a supply point of view. The reason is because of the skill, and the, the quantity of skill in one location, and the type of skill it is. Like, um, the products we do require really advanced tooling, and the, the precision that you have to have in tooling and working with the materials that we do are state-of-the-art. And the tooling skill is very deep here. You know, in, in the US you could have a meeting of tooling engineers and I'm not sure we could fill the room. In China, you could fill multiple rooms-
3. MHMorgan Housel
  I think you'll want to watch that. I think that I, I can understand why there'd be a natural reaction for people to be, like, "No. If they can do it, we can do it too." And again, I, I don't think it's an insult when... to say, like, countries are... It's like, we're really good at some things and less good at others. How could that not be true?
4. SBSteven Bartlett
  Are they on a different living wage, from what I understand? Is that part of the equation?
5. MHMorgan Housel
  Oh. Oh, yes. Absolutely. I mean, so much of it is, you know... And, you know, if, if you asked Americans to work those, for those wages, they'd, they'd absolutely refuse to do it just because of the expectations we have, and that's a good thing. We should be proud of that, that we have a standard of living which does not, uh, does not allow or people would not put up with earning $5 a day or whatever it would be.
6. SBSteven Bartlett
  Which means that the products can be made cheaper.
7. MHMorgan Housel
  Yes.
8. SBSteven Bartlett
  Significantly cheaper.
9. MHMorgan Housel
  Right, right. And, you know, this is where I- I understand why people might raise an eyebrow at this, but so much of why... of what the modern system, how it's supposed to work is when you have that specialization, products become cheaper. And then the iPhone costs $1,000 when in any other world it would cost 4,000 if we were building it in the United States at, you know, paying wages that people would put up with in the United States.
22:54 – 24:57
What's the Impact of the Tariffs?
1. MHMorgan Housel
2. SBSteven Bartlett
  So, what's the impact on the average person listening to this now? And h- if this trade war continues, if these tariffs continue, what is the impact they're gonna see in their life?
3. MHMorgan Housel
  It's so unpredictable because, as I said earlier, it can literally change an hour from now. So, anyone giving firm predictions of, "Oh, here's what's gonna happen next," th- that's not how any of this works. But you can, you can say though that if the tariffs last, one of two things will happen, or both of these two things will happen. Things that we import will get much more expensive, or what's more, more likely in places like China, if it's 145%, is we'll just... the, the trade just stops, and then you're probably a matter of weeks away from empty shelves at, at certain... for, for certain products and certain cases. I mean, if, if you're buying, you know, a pair of slippers from China for $1 and now all of a sudden they're $2.45, if you're, if you're an importer, for a lot of those situations they'll say, like, we're just, we're just... this is not gonna work. Or if the iPhone that used to cost $1,000 is now gonna cost $2,500, Apple might just say, "There's not really a market for that. We can't really sell those. Let's just pause and wait for things to happen." We're already seeing that. Um, I'm sure this news will change by the time this airs. This is moving so quickly, but our shipping container imports from China have plunged in recent weeks, which is exactly what you would expect when you put that high of a tax on it.
4. SBSteven Bartlett
  Yeah.
5. MHMorgan Housel
  I mean, if you were buying a house for a million dollars and then all of a sudden they put on 145% tax on that, you're probably not gonna buy the house. And that's what's happening now.
6. SBSteven Bartlett
  You'd, you'd be dumb not to wait.
7. MHMorgan Housel
  Right.
8. SBSteven Bartlett
  I was sat here yesterday with a CEO and she said to me that she gets...... the majority of her products, pretty much all of them from China. And when she's looking at the tariff situation, she's figured out that if she buys those products and sells them at her current price, she's losing money on every unit.
9. MHMorgan Housel
  Yeah.
10. SBSteven Bartlett
  So she's like, "I'll lose $9 on importing a, for example, like a dress. It's like I... so I have no incentive now to continue to sell that dress, and if I... my only choice is to raise the price by, like, 150%-
11. MHMorgan Housel
  Right.
12. SBSteven Bartlett
  ... to my customer."
13. MHMorgan Housel
  Right. The two likely outcomes if it persists are much higher prices and empty shelves. And then, and then I don't think anyone knows when or to the extent that could happen, and the button on the desk that says, "End this all," could be pressed before that happens-
14. SBSteven Bartlett
  Mm-hmm.
15. MHMorgan Housel
  ... but if it persists, that's what's likely to occur.
24:57 – 26:32
America's Trust
1. MHMorgan Housel
2. SBSteven Bartlett
  What about the impact it has on trust in the United States? Because-
3. MHMorgan Housel
  Yeah. It's huge. I mean, it's-
4. SBSteven Bartlett
  Can you explain that to me?
5. MHMorgan Housel
  Trust is hard because you don't know how valuable it is until you lose it.
6. SBSteven Bartlett
  Mm-hmm.
7. MHMorgan Housel
  But once you lose it, you're like, "Oh, that was everything." And, you know, foreign investors, people who don't live in the United States, have $30 trillion invested in America. That's just in stocks and bonds. That's not housing or office buildings, just in stocks and bonds, $30 trillion that they've invested. And a lot of the reason they do that, well, there, there's many reasons, one of which is because it's, by and large, seen as a trustworthy economy, a stable economy, an economy of rules and predictable laws, and trust that you could not say the same about Russia. And so when on... when global investors are looking where to park their money, it has... this has been the case for the last 80 years, America is usually at the top of that list. There's also a thing where a lot of the reason that they invest money in the United States is because they have to, because they have a trade deficit with us. So if China is selling us a lot more stuff than they're buying from us, like we're, we're importing a lot more from China than we're exporting back to them, they're going to end up with a lot of US dollars. And what... they need to do something with those dollars, they ha- they have to invest them somewhere. And historically, that's been in Treasury bonds, which lowered our interest rates, and that was good for everybody.
8. SBSteven Bartlett
  And what's a Treasury bond?
9. MHMorgan Housel
  It's debt that the government issues from the federal government. So it's a bo- you're, you're loaning money to the government, and they're promising to repay you plus interest.
10. SBSteven Bartlett
  Okay. So less people are gonna do that if they have less trust in the United States.
11. MHMorgan Housel
  Less trust, and also less need to do it because they don't have as many dollars that they need to invest.
26:32 – 29:20
Are We Heading for a Recession?
1. MHMorgan Housel
2. SBSteven Bartlett
  Are we heading for a recession? Because I, I saw some stats earlier on that said the probability of a recession has surged by 45%, which is the highest since December 2023, because of the tariffs. That was from Reuters.
3. MHMorgan Housel
  It's interesting when people put, like, the odds of a recession at 45% because they can't be wrong. Like, if, if there isn't a recession, they'd be like, "Yeah, we said it was 45%. We didn't say it was gonna happen." So I... my answer if you said, "Are we heading for a recession," would always be, "Yes." If you asked me a year ago, if you asked me five years ago, like historically, there's a recession. In modern times, it's been every, every four to five years that, that it's occurred. And so we shouldn't pretend that when they happen that they're this crazy, out-of-the-blue thing. It's an inevitable feature that you're always gonna have recessions. But is this gonna cause it? We-
4. SBSteven Bartlett
  What is a recession?
5. MHMorgan Housel
  A recession, technically, is when GDP, in the economy, GDP is just like economic output, how much the economy is, is moving. When that declines for two quarters in a row, that's the technical definition. For most people, you don't need to worry about technical definitions because a recession, in your mind, is when you are feeling worse off economically for a long period of time, when you feel like you can't get a job, or your neighbors, your roommates can't get jobs, and, and it's, and it's -it's starting to hurt on you. And, you know, it's kind of like, what's the definition of being sick? Well, it's when you don't feel good, but there's... you can get more technical than that. But a recession for most people is when you don't feel good economically.
6. SBSteven Bartlett
  You're not concerned about a recession?
7. MHMorgan Housel
  I... it's not that I'm not concerned, but it would be like saying, if you live in Florida, are you concerned about, uh, hurricanes? The answer is yes, you should be concerned about hurricanes, but you also know with 100% certainty that they're gonna come. If you choose to live in Florida, and you live in Florida for 40 years, you know you're gonna get hit by one, 100% chance. And so it's not that I don't worry about it, it's that I think it is inevitable, always, no matter what's going on. This has nothing to do with tariffs, d- with tariffs. That's always been the case. And so this is where, at the individual level personally, like room for error in your finances is so critical. What I mean by that is just like savings, cushion, being scared of debt. It's when everyone is... when you're well... when you're gainfully employed, and you have a good paycheck, and the stock market's going up, and Bitcoin's going up, everyone feels great. You feel amazing. And nob- it's very rare in that situation that you want to envision yourself losing your job, or losing a job and not being able to find another one for six months, or needing to move, or getting divorced, or having a medical ill- Like, no one wants to envision that. But the truth is, like, what are the odds that one of... at least one of these will happen to you and I over the next 30 years: major job loss or just a major impact in, in our businesses, divorce, cancer, wayward children? I can go on down the... What are the odds that at least one of those will occur to you and
29:20 – 30:38
The Importance of Backups During a Recession
1. MHMorgan Housel
  I in 30 years?
2. SBSteven Bartlett
  High, very high.
3. MHMorgan Housel
  100%.
4. SBSteven Bartlett
  Yeah.
5. MHMorgan Housel
  And for a lot of people, they will experience all of those. And so the idea that life is fragile, the economy is fragile, countries are fragile, is... like people don't necessarily want to admit that because it's hard to get out of bed in the morning if you admitted that to yourself, but I, I think it's inevitable. And it doesn't have to be necessarily scary if you have the right, like psychology around it of just, yeah, like when times are good, I don't expect them to last forever. That's not how the world works. And the right finances around it of like, "Yeah, when times are good, I'm gonna save, because I know this might not last forever." And what I value more than anything with money is independence. It's not flashy cars or homes. I want to be independent, so that when the economy goes south, and there is a recession, and things are going bad, I want to have a level of control over where I work, where I live, what I'm able to do, my ability to support my family. That's more than... that's, that's the top of the list. And so when things are going well, and for a lot of people they...... haven't for the last couple years, but for a lot of people, they did. I think that's always important is, like, I think, I think it's a major psychological skill in life in general. This goes beyond money, is recognizing when things are abnormally good, and preparing yourself for them to go the other way, as the, as they inevitably will.
30:38 – 35:49
How to Be Financially Free in 2025
1. MHMorgan Housel
2. SBSteven Bartlett
  Independence you value. It sounded like freedom to me.
3. MHMorgan Housel
  Yeah.
4. SBSteven Bartlett
  Can you tell me how to achieve freedom financially, and what I should be thinking about in the context of a world that's changing at such incredible speed? When we're talking about tariffs, and recessions, and now AI, I've been thinking over the last couple of weeks, like, "What should my per- personal financial strategy be? How should I be thinking about it?" Is it a strategy? Is it a psychology? Is it a mindset? What is it that I should be thinking about to survive this area of tremendous tr- change and Trump economics, and get through the other end with that freedom and independence that you and I both desperately value?
5. MHMorgan Housel
  This sounds like such a, a squishy BS kind of answer, but I think there's a lot of, uh, there's a lot of truth to this, and I'll explain in a second. It is largely a mindset, and that, that sounds crazy, but I'll, I'll explain what I mean. My grandmother-in-law, she passed away a couple years ago. She was 92 when, when she passed away. She, for 30 years, she lived off of nothing but Social Security. I think she got $1,700 a month from Social Security, and she had nothing else. No savings, no pension, no nothing. She was the happiest person you'll ... I've met half a, half a dozen billionaires in my life. I'm sure you have as well. None of them were as happy as she was.
6. SBSteven Bartlett
  Hmm.
7. MHMorgan Housel
  And she was technically, she was, like, financially broke, but she had this level of psychological wealth that was, like, unparalleled. And the reason was off $1,700 a month. That was all she needed. She was perfectly happy toiling in her garden, watching birds, going for walks, hanging out, reading from books from the library. Perfectly content with all of that. She didn't need anything else. So she had very little money, but she wanted even less. And that, so like, she had a level of independence that a lot of billionaires do not.
8. SBSteven Bartlett
  Mm-Hmm.
9. MHMorgan Housel
  Because if you are a billionaire, if you have a billion dollars in the bank, but you are so encumbered by your business, your employees, your suppliers, your customers, you're waking up at 3:00 in the morning sweating 'cause you got this email and you're stressed out about it, you actually have very little independence in that situation. Your shareholders or regulators are coming down on you. I mean, we see this, I, I'm not, there's no one in, in particular here, but we've seen very wealthy people kind of become sycophants to politicians. And, and the truth is, a lot of those ex- like mega-billionaires absolutely rely on politicians and regulators to keep their machine moving. And so my grandmother-in-law, on $1,700 a month, had a higher level of independence than a lot of those people do. And I, that's why I thi- I say like, a lot of this is a mindset, because the truth is, the vast majority of people listening to this could have a level of independence. It's not, it's not that you can retire tomorrow, but you can have a level of financial independence once you realize that the key is managing your expectations more than it is, "How can I just pile up as much money as I, as I possibly can?" It's easy to think like, "How do you become financially independent? Like, save a ton of money." And there, like there, there's, there's truth to that, of like, of, of, of course that's part of it. But more of it is just in like, what kind of life do you want to live? Because if your expectations are growing faster than your net worth, it's never gonna feel like it. You'll, you'll never be independent. Never. You can have a hundred billion dollars, but if you want more and more and more like it's, it's never gonna feel like it's enough.
10. SBSteven Bartlett
  Mm-Hmm.
11. MHMorgan Housel
  Or if, if you enjoy birdwatching and reading books like my grandmother-in-law, 1,700 bucks a month, you're all set. You're set for 30 years.
12. SBSteven Bartlett
  You're rich.
13. MHMorgan Housel
  You're rich.
14. SBSteven Bartlett
  And free.
15. MHMorgan Housel
  She was psychologically rich, even if she was financially poor. And I think that's, that's the biggest thing about it. Adam Smith, who was the, the greatest economist to ever live, this was 300 years ago. He once wrote about this. He was like, "Why do people work so hard?" And he, he was just like, "It's a simple question, but why, why do people work so damn hard?" And he's like, "It can't just be for, for our sustenance," because even poor people, when as he was writing about it had, uh, homes and adequate food most of the time. He's like, "There has to be something else." And what that something else was he wrote was, "To be seen by other people." And it was, it was like it was attention and admiration. They wanted to be getting rich so that they could have a bigger house and a, and a nice car, not in his day, but they, they wanted to be... they wanted attention from other people. But he was like, "It's not that you needed the money," because even in his day, 300 years ago in, in Scotland I think he was, he, he was like, "Look, people have homes and food, like what, what, what are they doing this for?" And he was not criticizing them, like his whole point was like, they're going out and innovating, we're gonna have great technology and like, it's great to go do that, but the reason to do it was not because they had to stop. Now, of course, most people to get shelter and food do have to keep working, but they're working more than they absolutely need to because they want something else besides independence.
16. SBSteven Bartlett
  Is there an evolutionary basis for this? I was, I was thinking the other day after watching an interview with Naval, where Naval talks about how evo- from an evolutionary perspective, humans don't really understand the concept of wealth. Because once upon a time when we were cavemen and -women, wealth was what you could carry.
17. MHMorgan Housel
  Yeah.
18. SBSteven Bartlett
  But we do understand the concept of status, which really meant a lot to us in our sort of tribes and was life or death for many of us. So even though billionaires get all the money in the world, the next thing they wanna do is start a podcast.
35:49 – 40:32
The Evolutionary Desire to Show Off — Status
1. SBSteven Bartlett
  (laughs)
2. MHMorgan Housel
  (laughs)
3. SBSteven Bartlett
  You know what I mean?
4. MHMorgan Housel
  Right, right.
5. SBSteven Bartlett
  Because there's just not enough. Like everyone I know ............................
6. MHMorgan Housel
  Well, well, what a lot of 'em do too is, when they have all the money in the world, what they want is immortality, and you see these guys trying to live forever-
7. SBSteven Bartlett
  Yeah. Yeah, yeah, yeah.
8. MHMorgan Housel
  ... kind of thing. So that happens as well.
9. SBSteven Bartlett
  Yeah. That's interesting.
10. MHMorgan Housel
  Hard ............................
11. SBSteven Bartlett
  But that's linked to status, 'cause status was longevity.
12. MHMorgan Housel
  Yes.
13. SBSteven Bartlett
  Like if you had status, you had food, you had the reproductive potential once upon a time.
14. MHMorgan Housel
  Yeah.
15. SBSteven Bartlett
  So it's the same evolutionary sort of desire to like live survival.
16. MHMorgan Housel
  Yeah. Harvey s- uh, Firestone, who was a, a, a tire magnate a hundred years ago, Firestone Tires, during the, the explosion of cars a hundred years ago. He wrote about this in his biography. He was like, every rich person he knows, once they get money, buys a house that is way too big.... than they need. Not- not- not- not only bigger than they need, bigger than they want. Because a giant house is just a huge pain in the ass. The roof is leaking and, like, everything's breaking down. It's a huge pain to manage. So he wrote his bio. He was like, "Why do we do this?" And he was like, I... he was... he- he did it too. He was like, "I bought a house that is way bigger than I want, and it's a pain, it's a burden, but we all do it." And he's like, "Why?" And he's like, "It has to be status." There's no utility to a 40-bedroom house. Zero. There's a lot of downside in upkeep, but he's like, "E- every one of us does it." And you see, he said even Henry Ford, who was like the cheapest SOB out there, lived in a giant mansion in Detroit. He's like, "It's so natural." And he was like, "It's just because we- we- we want to show other people." It's not utility. It's not making our lives better. It's actually making our life worse. But we- we have this evolutionary desire to show people that we've made it. That's- that's the calling card.
17. SBSteven Bartlett
  But if it's hardwired, then is there much we can do about it?
18. MHMorgan Housel
  I think, uh, it- it's true that virtually everyone who I really admire in life, they're... by and large, they're not hugely successful people that you've heard of. They're just people who I've met, and they're ordinary people with ordinary jobs where I'm like, "Man, you seem like you've got it all figured out." They took themself out of the system that they were supposed to be in, and they're like, "I'm just gonna go figure out my own way." And there's a- a really interesting story, a guy named Chuck Feeney. He started a company called, uh, DFS, the, uh, duty-free stores in airports.
19. SBSteven Bartlett
  Mm-hmm.
20. MHMorgan Housel
  He made, I think, at the peak of his wealth, he was worth about nine billion dollars. And this was, like, in the '90s when that was a, that was a lot of money. (laughs) It still is a lot of money. But he, uh... the f- the well-known part of Chuck Feeney is that despite that wealth, he lived like an ordinary person. He lived in a, like, a one-bedroom apartment. He flew coach. He drove, like, a- a- a sm- like, a- a- a normal car, lived like a normal guy. And some people criticize that from that. He- he gave all of his money to charity. He gave nine billion away, lived like a monk himself. The less known part of Chuck Feeney that I think is- is very... is- is more important, is that when he first got wealth, became wealthy in 1980s, he lived the life of a billionaire. He had a fleet of private jets. He had mansions all over the worlds. He had a yacht. And after doing it for a couple years, he was like, "I don't like any of this." He's like, "I- I- I like being an ordinary, simple person. And so I'm gonna go live an ordinary life. I don't care what the world d- The world tells me this is what I should want now that I have money." But he's like, "But I don't. I want simplicity." And what I like about that is not that he chose to live like a monk, because I- I personally wouldn't wanna do that if I had that... I- I- I would have a jet if I had that kind of money. So it's not to say that he did it right. But what I like that he did is that he said, "I don't care what the world tells me to like. I'm- I'm- I'm- I'm gonna do it on my own terms." And that, like, that's true independence.
21. SBSteven Bartlett
  That's true status, to be honest.
22. MHMorgan Housel
  That is... that's true status too. He's like, "I don't care." That's the ultimate definition of F-you money.
23. SBSteven Bartlett
  Hmm.
24. MHMorgan Housel
  Of, like, so much money that, like, "I don't care. You're, like... you- you tell me I'm supposed to live in a mansion in Beverly Hills, but I like my one-bedroom apartment in San Francisco. I like my buddies over here." Another person who's done that to a very real extent is Warren Buffett. Lives in the same house today that he bought when he was 27 or whatever it was.
25. SBSteven Bartlett
  And he's got 100 billion or something.
26. MHMorgan Housel
  Right. And, of course, he could live anywhere. He could buy anything. But he likes being with his friends, doing it on a... you know, likes playing, uh, bridge with his buddies.
27. SBSteven Bartlett
  In the first case, though, that gentleman had to have his dream fail him first before he realized. And so this raises another question, which is, am I... does the viewer at home have to make the $100 million and then taste it, buy the mansion, to realize that it was never about the mansion?
28. MHMorgan Housel
  I think the answer to that is yes.
29. SBSteven Bartlett
  Oh, gosh. (laughs)
30. MHMorgan Housel
  That it's very difficult... you know, there's- there's a thing where... I- I forget who said this, but, like, they're responding to the quote, "Money doesn't buy happiness," and they're like, "Okay, but let me go figure that out for myself first." Like, if you don't have a lot of money, and you see rich people tripping over themselves, and people like Will Smith saying, like, "I- I- I was no happier at all when I was rich than when I was poor. Actually, I was happier when I was poor."
40:32 – 42:58
Salary Differences
1. SBSteven Bartlett
  are somewhat associated to money. Like-
2. MHMorgan Housel
  Yeah.
3. SBSteven Bartlett
  ... the pain in your belly, the bills on your desk, the threats from the court. I'm thinking of myself here, that I was getting the- the letters coming through with the red text on them telling me that my credit cards were exp- um, gonna be shut down. The inability to feed yourself, to socialize with your friends.
4. MHMorgan Housel
  Yeah.
5. SBSteven Bartlett
  The heating in your house. The ch- ch... your child's pencil case costs. All of it seems to circle back to money. And so when you hear people who are wealthy being subjectively honest about their own experience and then what's made them happy, it is hard to hear.
6. MHMorgan Housel
  Yeah.
7. SBSteven Bartlett
  Like, I r- I kinda was just imagining-
8. MHMorgan Housel
  Yeah.
9. SBSteven Bartlett
  ... if I was hearing this, you know, these stories when I was in that situation, I would still fucking go for it anyway. (laughs)
10. MHMorgan Housel
  Right. Now, let's say that there's a, there's a big difference between not being able to buy food for your kids-
11. SBSteven Bartlett
  Yeah.
12. MHMorgan Housel
  ... and making 200 grand per year.
13. SBSteven Bartlett
  Yeah.
14. MHMorgan Housel
  And, and, you know, the, uh, the- the- the difference between 10 grand a year and 200 grand a year is massive.
15. SBSteven Bartlett
  Yeah.
16. MHMorgan Housel
  Takes away so many stresses, so many, you know, worries about being evicted and whatnot. But the difference between 200 grand and 500 grand is not that much. And the difference between 500 grand and 20 million is not that much. And the difference between 20 million and 20 billion is zero. I think that's- that's a lot of what it comes down to. And even, I think, there is such thing as, like, a peak net worth that you would want in life, after which all the money that you accrue becomes like a social liability. I mean, who has more social liability or, like, pressure than the mega rich? You know, Elon Musk, Bill Gates, Jeff Bezos. There's a huge amount of pressure. Like, "You better donate this money, and you better do a good job doing it."
17. SBSteven Bartlett
  Mmm.
18. MHMorgan Housel
  Kind of thing. And so... and I think that number of like... and at- at a much lower, like, realistic level for people, it's when your friends learn you make a lot of money, and we go out for dinner, and they're like, "You're- you're paying, right?" And that's- that's a small thing, but it can really grate on people. That, like, "Oh, it's- it's gonna change how people think about me." Now, that- that- that's a good problem to have, of course, but it's a thing. And I think the idea of there is a maximum amount of- of... uh, like, there is a net worth level at which your happiness is gonna be maximized.
19. SBSteven Bartlett
  Do-
20. MHMorgan Housel
  And it's probably lower than you think.
21. SBSteven Bartlett
  Do you think it's important for people to have an idea what their number is?
22. MHMorgan Housel
  I don't think anyone really does, because I've done this in my own life. I'm sure you have too. When I was 19, I was like, "Oh, if my net worth was this amount..."... I'll, I'll, I'll be happy forever. And then I was fortunate enough to get, hit that amount, and I'm like, "Okay, but what if, what if we got over here?" And you just keep going up the ladder forever.
42:58 – 44:18
We Have a Distorted View of Financial Wealth
1. MHMorgan Housel
2. SBSteven Bartlett
  Is there such thing as FU money? Like, is there a number where you think you've hit FU money? I saw some thread on Twitter and it was like, "Comment below what you think FU money is." And it was interesting-
3. MHMorgan Housel
  Yeah.
4. SBSteven Bartlett
  ... to see the variation.
5. MHMorgan Housel
  I have a friend, Ben Carlson, he's a great financial writer. He came up... This is very subjective, there's no science behind this, but he was like, "A net worth of $7 to $10 million is, you can live an amazing life in the United States, have an amazing house paid for, send your kids to great schools, go on great vacations, drive brand new cars on $7 to $10 million." Um, and, and, and he brought that up. Some people might, might wince at this, but he brought that up of, it's a lot less than people would think. 'Cause there'd be a lot of people who would be like, "Oh, I'm gunning for $100 million." Even if that's just a fantasy, it's a dream.
6. SBSteven Bartlett
  Mm-hmm.
7. MHMorgan Housel
  And $7 to $9 million is out of reach for, for a lot of people, no matter how hard they're working. But I think, particularly for young people who, their definition of... I think about my son a lot with this. He watches MrBeast. MrBeast is an amazing guy. He's, I think he's one of the great guys. But because of MrBeast, like, my son's definition of wealth is a private island, a private jet, you know?
8. SBSteven Bartlett
  (laughs)
9. MHMorgan Housel
  Keep your hand on the table and win a million dollars kind of thing. It's a d- it's a different level. Whereas, when I was growing up, like, ordinary people drove dirty pickup trucks, and rich people drove clean pickup trucks. That was like, that was the stratification of what I saw growing up.
10. SBSteven Bartlett
  Right.
11. MHMorgan Housel
  And I think, because of social media and other things, kids have a very different view on what, like, financial wealth actually is these days.
44:18 – 45:44
Advice for the Economic Crisis
1. MHMorgan Housel
2. SBSteven Bartlett
  Going back to this issue of tariffs, recession, and everything that's going on at the moment, are there any things practically, for those that don't understand the economy and economics generally, that we should be thinking about to make sure that we don't get burnt?
3. MHMorgan Housel
  This is less advice going forward more than just, like, something to remember next time, which is that, if you are worrying about, if you're worried about being laid off, if you're a small business owner worried about going under, the need for room for error and cushion and savings and backup plans are, were, were just as important a month ago as they are today. You're just learning how important they are today. And I would challenge you to remember that in the future when this is all over, whenever it's all over, that when the economy's going well and you feel stable in your job, stable in your career, that is when you also, you absolutely need backup plans and room for error and savings and eschewing debt and whatnot. I have a very high level of cash as a percentage of my net worth, and a lot of financial advisors would look at that and say like, "What are you saving for?" Like, "What's, what's going on here?" And I'm like, "I, I don't know." I'm saving for a world that I know is very fragile, and I have no idea what's gonna happen to me personally or what's gonna happen to the economy. But if you're a, a lay student of history, you know that things break all the time. And, and so my, my advice to you, if you're realizing that for the first time, that how fragile the world can be and how the job security that you thought you had may, m- might, might not have been as strong, remember this next time how important room for error and backup plans are.
45:44 – 46:45
How Much Money Do You Need Saved?
1. MHMorgan Housel
2. SBSteven Bartlett
  And relative to your personal costs, your personal monthly costs, or overheads as they call them, how much money do you think it's sensible to have saved?
3. MHMorgan Housel
  It's so, uh, it's so hard for that, 'cause everyone's in a v- I'm sure people watching this will be in a massive range of, of incomes. I, I would say, this is a, a, a bad answer that no one's gonna like, but as, pretty much as much as you can. I mean, I'll give you one example of this. When COVID first hit in March of 2020, the average restaurant, I heard, had enough cash on hand to last them for 14 days.
4. SBSteven Bartlett
  (laughs) .
5. MHMorgan Housel
  And then all of a sudden they were looking at a, a six-month lockdown. And so I think one answer to that question is however much you think you, you'll need, it's probably more. The other more practical example of this is in 2008 during the financial crisis, a lot of people were losing their jobs not for two weeks or one month, but they were losing their jobs for 12 months. And they got unemployment benefits, but it wasn't enough. And so is it practical for, to say, like, "You should have 12 months of saving"? It's probably not practical for a lot of people. But the answer is: as much as you can, while realizing that the world is more fragile than you probably think
46:45 – 56:11
The Impact of AI in Our Wealth Building
1. MHMorgan Housel
  it is.
2. SBSteven Bartlett
  The other protagonist of change at the moment is artificial intelligence. And I've spent a lot of lonely, quiet hours in my room thinking about the impact it's gonna have and trying to develop my own thesis on what it means as a creator, as a podcaster, as a investor. And I wanted to understand how significant you think artificial intelligence is and if it at all impacts your thesis around money and wealth and investing and saving.
3. MHMorgan Housel
  I'm not even remotely an expert in AI, but as someone who's looked at, like, the history of technology, one thing that sticks out clear as day when you study technology, when... In hindsight when you're looking at a new technology that you know went on to change the world, the computer, the car, the airplane, those things, when you know, like, th- this was a turning point in civilization, if you go back and s- look at what the optimists were saying at the time, they massively underestimated it. And that's what the optimists were saying. Forget the pessimists on it. So go back to the 1920s and see, what were the optimists saying about the airplane? They were underestimating it by 100-fold.
4. SBSteven Bartlett
  Hmm.
5. MHMorgan Housel
  What did the optimists say about the car? They underestimated by 100-fold. Computers, same. And the Wright brothers themselves came up with the first airplane in the United States, the Wright brothers themselves only marketed their plane, primarily marketed their plane to the US Army, because they did not really foresee much use for an airplane outside of the military. They knew you could strap a machine gun on it and the, and the army might like that. But the, did the Wright brothers foresee Delta Airlines, like, and Emirates and A380? Like, not in a million years. And so I think it's true that in a lot of things in life... I think, I think it was Peter Thiel who said this, he was like, "When things are going wrong, you underestimate how, how bad they're gonna get. But when things are going right, you underestimate how big it's gonna be." I, I may have butchered that quote, but it's something like that. And it's clear that AI is right, and so it's almost certainly the case that even the optimists, even the Sam Altman optimists, are underestimating where it'll go. And a lot of the reason for that is because new technologies is not what the inventor, whoever that might be, built, it's what other people go on to manipulate it as. And that's why the Wright brothers came up with the plane and now we have the A380. Like, it's other people manipulating things along the way to create something just gigantic.
6. SBSteven Bartlett
  One perfect example of that with AI is, OpenAI have created this large language model which can do all these wonderful things. But then people are using that same technology to create AI agents-
7. MHMorgan Housel
  Yeah.
8. SBSteven Bartlett
  ... which are equally astonishing. I spent the last couple of weeks using AI agents to build some software. I'm someone that has no ability to code at all-
9. MHMorgan Housel
  Yeah.
10. SBSteven Bartlett
  ... but I can sit in my bedroom and speak to this agent and tell it to build me a new to-do list or a new website for the podcast that tracks who's been on the show and follows them in the new... Like, I can tell it to do anything. And for what's probably costing me a dollar a day-
11. MHMorgan Housel
  Yeah.
12. SBSteven Bartlett
  ... it's building me software now. And we're just at the start of that ex- exponential curve. So if we now think that these m- large language models are gonna be able to create things, create digital things-
13. MHMorgan Housel
  Yeah.
14. SBSteven Bartlett
  ... things on the internet, this podcast is on the internet. We know that it can create podcasts. We know it can create videos, images, software. I look at that and go, you play this forward, and if I apply your optimism, um, analogy, your optimism, um, lens to it, where I go, we're underestimating this curve, it's hard, it's really hard to see how this isn't tremendously disruptive in the long term.
15. MHMorgan Housel
  Not even the long term, like, in the short term.
16. SBSteven Bartlett
  Yeah.
17. MHMorgan Housel
  I'll, I'll give you one example. You, you, you talked about coding there. We're doing a little remodel in our house right now. And one of the things you can do is take a real picture of, of a room-
18. SBSteven Bartlett
  Mm-hmm.
19. MHMorgan Housel
  ... upload it in. We, we used ChatGBT for this and said, "Hey, paint it this color, remove this wall, put this in." It is better than any designer will be able to do it. And it's right there, boom, in front of you.
20. SBSteven Bartlett
  Seconds.
21. MHMorgan Housel
  And you can multiply that story by 10,000 different versions of that stories for 10,000 different jobs. Um, I, I'd see it as, as a writer, where I've, I, I don't use it to write. I write all my own words. But one, one thing that I've played around with, I don't really use this as that much of a, of a tool, but just more of an experiment of like, I'll upload a chapter from a book that I wrote and say, "Hey, give me some feedback on this." And it wasn't that good a year ago. It's pretty good today. It's pretty good.
22. SBSteven Bartlett
  Mm-hmm.
23. MHMorgan Housel
  So if you're looking for like a, like a writing assistant, it's amazing. Now, the downside of that is everyone knows like the high schoolers and the college students who use it to write the essay-
24. SBSteven Bartlett
  Yeah.
25. MHMorgan Housel
  ... just write the whole thing.
26. SBSteven Bartlett
  Yeah.
27. MHMorgan Housel
  That's, that's, that's, that's probably not great. But if you're using it as a helper, it's probably the best writing teacher that's out there.
28. SBSteven Bartlett
  Mm-hmm.
29. MHMorgan Housel
  So right there, in my just like tiny little world of AI, I really don't know anything about AI. But interior designer, editor, going down the list of jobs that like literally three months ago I would have been like, oh, that's a very valuable, uh, job right now. All of a sudden, you look at this tool for a dollar a day, as you said, you're like, it's pretty good. (laughs)
30. SBSteven Bartlett
  What does history tell us about how this shakes out? Like, when these industrial revolutions come along with the technological revolutions, w- where does the value accrue? And how do I participate in that value?
56:11 – 57:45
The Skills You'll Need in the AI Era
1. MHMorgan Housel
  now.
2. SBSteven Bartlett
  You have your son in the green room watching us right now.
3. MHMorgan Housel
  Yeah.
4. SBSteven Bartlett
  How old is he?
5. MHMorgan Housel
  Nine.
6. SBSteven Bartlett
  Nine. Okay, so he's got some decisions ahead of him.
7. MHMorgan Housel
  He's, he's wincing right now, I'm sure-
8. SBSteven Bartlett
  Yeah. (laughs)
9. MHMorgan Housel
  ... now that we're talking about him.
10. SBSteven Bartlett
  But what... In, in terms of him building his career-
11. MHMorgan Housel
  Yeah.
12. SBSteven Bartlett
  ... acquiring skills, generating wealth, based on everything you know about how people have made money through history, what are the prevailing skills that your son would have to have to assure that he makes money regardless of what the industry is?
13. MHMorgan Housel
  Learn how to communicate, learn how to get along with people you disagree with. I think that's, that's a very underlooked skill in life, is... particularly in a, in a social media-driven world where people have very different views on fundamental topics. Learn how to get along with people who you disagree with. Learn how to communicate. Those would be the top two. Those are extremely high-level. Like, I'm, I'm not saying go learn Calculus 4 kind of thing, or go, go learn engineering. But those are timeless skills, and I think those two skills can get you pretty far in life. And I, I look back at, at myself. I don't know if you had a, a similar example of this. But I, I was not a good student. My ability to do math is not any good. My abil- my grades in science were not any good whatsoever. I think if I... if there are two skills that I was... that I, I didn't even know it at the time. I was not really, like, conscious that I was doing this, but learn how to communicate, and don't be a jerk. Like, just learn... Because that, for me as a writer, that was like, learn how to communicate as writing, and, and the writing business. Learn how to get along with people so you can move ahead and move your career. Like, be nice to this person so you can move on up.
14. SBSteven Bartlett
  Hmm.
15. MHMorgan Housel
  I think you see that
57:45 – 1:00:35
How to Have a Money Mindset
1. MHMorgan Housel
  a lot.
2. SBSteven Bartlett
  What about in terms of money, making money? When you think about great people through history that have accrued a lot of wealth, what principles would you instill in him so that he had a money mindset?
3. MHMorgan Housel
  It's hard for a parent. Uh, I, I'm not, I'm not filthy rich by any means, but I've sold a couple books. And it's hard as a parent to be like, "I wanna use money to give you a good life, but I don't wanna spoil you. The last thing I want is for you to be a spoiled little brat." And it's very difficult for a lot of parents to do that. And so one of the things that I want him to learn about money, and I want him to learn it in a very stark way, is like, learn the scarcity and the value of $1. And I think the only way to do that is to experience it firsthand. So when he was born nine years ago, I wrote him a little letter, and I published this on a blog. And one of the things I said was, "I hope you're poor one day." And I said, "Not, not struggling, not broke, but I hope... The only way to understand the value of a dollar is to experience the power of its scarcity." And I hope there's a, there's a period when my wife and I are able to say, like, "Look, like, you're, you're never gonna fall flat on your face. You're not gonna be homeless. You're always gonna have good healthcare. But I hope you're able to experience the scarcity of a dollar so you value it." I did. My, my parents taught me that in a way that they didn't need to, but they let me be poor for a while. And most people will experience it because they, they, they have. That's, that's the situation they're in. So that, that's one thing I think about, of... An- and I think qui- actually quite a few families deal with that, is like, how can you help your kids? And it goes beyond money. This is, uh, you know, so many... The, the, the helicopter parent era is, "I wanna protect you from downside at all cost, emotional downside." Uh, and, and, and I think money is one of many topics in which you're gonna learn the best by experiencing the downside. (page turns)
4. SBSteven Bartlett
  For anybody that likes matcha, for anybody that likes lattes, one of my companies has just launched canned matcha lattes. And I was speaking with the founder, Marissa, and she said that creating this product has been no easy feat. They tried launching in 2021, but as is often the case in business, the development process turned out to be extremely complex. So they've spent the last four years testing and refining every single detail to create this, which is a Perfect Ted matcha vanilla latte, and a Perfect Ted matcha strawberry latte. (can thuds) So what we have here in these cans is barista-quality matcha straight from the can, (can thuds) and it tastes like it's just been made from your favorite cafe. Naturally sweet and naturally creamy, in a can. And the reason why I've invested in this company and I drink matcha is because matcha as an energy source gives me lasting energy without the big crashes that I get from other products. Grab their ready-to-drink canned matcha lattes at Waitrose, Tescos, and Holland & Barrett, and perfectted.com, where you can use code STEVEN40 for 40% off your first order. (page turns)
1:00:35 – 1:03:13
Why People Get Stuck in Crypto Scams
1. SBSteven Bartlett
  Men are struggling in a variety of different ways. And obviously, your son is gonna be a man someday. If I think about some of the stats here, men's labor force participation has declined dramatically over time. For prime working-age men between 25 and 54, participation fell from 98% in the 1950s to about 80-something percent in 2024. 10.5% of men age 25 to 54 were neither working or looking for employment compared to-... with just 2.5% in 1954. And we had a study that came out in the UK recently, I think it was the Center of Social Justice, that showed that for the first time in a long time in recent history, more young men are out of work than young women. And I think it was, like, one in seven men are out of work.
2. MHMorgan Housel
  Yeah.
3. SBSteven Bartlett
  So it's a different world for a man. But, but we still have this sort of prehistoric, caveman mindset of being a protector and a provider.
4. MHMorgan Housel
  Yes, absolutely.
5. SBSteven Bartlett
  But the world has changed.
6. MHMorgan Housel
  Yeah. I think it was Scott Galloway recently said that, like, a really aspirational definition of manhood is, is wanting to procreate, provide, and protect. You want to have kids, and you desperately want to provide for your family and protect your family.
7. SBSteven Bartlett
  Mm-hmm.
8. MHMorgan Housel
  And I, I do think that there are, yeah, there's men all over the world, to a higher degree than there's ever been, that feel like those three things are out of reach for them.
9. SBSteven Bartlett
  And because of this, a lot of people get involved in get-rich-quick schemes.
10. MHMorgan Housel
  Yes.
11. SBSteven Bartlett
  Crypto coins, meme coins, all this stuff.
12. MHMorgan Housel
  Daniel Kahneman, the great psychologist, passed away last year. He had a saying, he was like, "When all of your options are bad, you become very risk-taking." Because you have nothing to lose, kind of thing. So whenever you see people participating in get-rich q- q- gr- get-rich-quick schemes, you know it's because they feel like all their optio- o- all their other options are bad. If you knew, if you believed that if you could go to college and learn a s- or not go to college, but if you can go learn a skill and go work hard and earn a stable paycheck to provide for your family, 99 out of a hundred men are going to say, "That's, that's the one I want."
13. SBSteven Bartlett
  Mm-hmm.
14. MHMorgan Housel
  But if you believe, whether it's true or not, if you believe that that option's not available to you, you're like, "Let's throw it all on this, this new coin," kind of thing. And so I think you, that's, you, you see that quite a bit. There's a lot of things in life where you see people making bad decisions, or what you think are bad decisions, and it's easy to mock them, or look down upon them, or just say they're idiots. But like, deep down, there's always a, a reason that is kind of, is... There's, there's a deeper reason why they're doing it. And for a lot of these things with financial risk-taking, it's, it's like a lack of... Not, not necessarily a lack of self-esteem, but a lack of self-confidence in their ability to earn a good, dignified, stable wage to provide for their family.
1:03:13 – 1:05:54
Women vs. Men: Who's Better at Saving and Taking Risks?
1. MHMorgan Housel
2. SBSteven Bartlett
  Testosterone plays a role though, no? Because if and when we think about who becomes gambling addicts and who takes the biggest risks with finances through history, it's often men. Women do seem to be generally better with managing money than men.
3. MHMorgan Housel
  Yeah. W- with men, what a lot of it is, is the inability to say, "That's enough." Particularly with the risks that they're taking. So you see this with a, a, a, a... With a lot of hedge fund... Hedge funds are just giant investing pools of money of, like, rich people on Wall Street managing money. They have, uh, quite a long history, not a lots of them, but quite a long history of them blowing up. And it's because this very smart, genius, billionaire, Wall Street trader, who has a PhD from MIT, could not say that was enough. They kept taking more risks, more risks, more risks, until it blew up. And we, we definitely see with women managing money, that they tend to not earn as high returns on any given year, but they don't blow themselves up, so to speak, financially.
4. SBSteven Bartlett
  Mm-hmm.
5. MHMorgan Housel
  So, they're... Like, men are much more willing to swing for the fences, and women are much more willing to say, "I'd, I'd like to just take a calm, casual swing, but I want to keep it going for a long period of time." Now, who's going to do better over the course of a lifetime in that situation?
6. SBSteven Bartlett
  Your book profiles a few scenarios of-
7. MHMorgan Housel
  Yes.
8. SBSteven Bartlett
  ... who does better over th- a lifetime. And although I read your book, I think it must've been four years ago, I will always remember reading a story about a... I think it was like a stockbroker that you write about in your book.
9. MHMorgan Housel
  Yes. His name is Jesse Livermore.
10. SBSteven Bartlett
  Tell me that story.
11. MHMorgan Housel
  Jesse Livermore was a, a trader, a, a Wall Street stock trader about 100 years ago. Did most of his work in the early 1900s through about the 1920s. And he was the best in the world at getting rich, and he had no ability whatsoever to stay rich. I think he became the equivalent of a billionaire, adjusted for inflation, four separate times, and went bankrupt four separate times. He eventually, at his end, committed suicide when he went b- broke for, I think, the fifth time. And, and in between there, he had become, literally, the richest man in the world at one point. But he had no ability to say, "That's enough." So when he was the richest man in the world, he just kept taking more risk, more risk, more risk, and then it blew up. And he did it over and over and over and over again, until he eventually killed himself.
12. SBSteven Bartlett
  Damn.
13. MHMorgan Housel
  It's, it's amazing. It's a, it's an amazing story, because punctuated through his story of failure and bankruptcy and eventual suicide, is a level of success that, like, Steve Jobs could not even fathom. He has... No one in history, I think, was better at getting rich than he was, and he, he could not keep it. And for most people, like, a much better situation, of course, is like, you don't need to become the richest person in the world. You can just make a modest amount of money that's going to support you and your family, but keep it. Don't keep taking more risks that's eventually going to blow it up. Just keep it, and
1:05:54 – 1:07:02
Crypto
1. MHMorgan Housel
  it's okay.
2. SBSteven Bartlett
  What do you think of crypto?
3. MHMorgan Housel
  I don't own any, so maybe that, that's the summary of how I feel about it. But I also think... The only take that I've had on it is like, if you don't think that some of it is inspiring, and... Then, then you're not paying attention. But if you don't think that 99% of it is a, is a joke, then you're not paying attention. And I, I say that because most people are one, are one or the other. They either think the whole thing is, is a scam and they don't understand any of it, it's a bubble that's going to burst, or it's literally the greatest invention of, of human history. And I, I think whenever there's a new technology, you're likely to get, like, those extreme, one of those camps. But also, in the history of technology, what you would see is that 99% of the new players, the new companies, the new products w-won't exist in 10 years. And a couple of them will turn into Ford or Microsoft or whatever it might be. That's always been the case. So, you can't envision a world in 20 years in which crypto is not having a big part of the global economy.
4. SBSteven Bartlett
  Mm-hmm.
5. MHMorgan Housel
  And I also think you cannot envision a world in which, in 20 years, 99% of what exists today doesn't exist anymore.
1:07:02 – 1:08:30
What History Tells Us About New Technologies, Wealth, and Failure
1. MHMorgan Housel
2. SBSteven Bartlett
  Yeah. I have owned Ethereum for a long time, and more recently, I just changed it all into Bitcoin, because I think Bitcoin is...... the safest bet, so it seems to be where institutional money has gone to. And I, I'm doing the same thing as you. I've never, like, traded coins in my life or anything –
3. MHMorgan Housel
  Yeah.
4. SBSteven Bartlett
  ... but I think most of it is probably going to zero.
5. MHMorgan Housel
  Yeah.
6. SBSteven Bartlett
  As we've seen. But I think Bitcoin feels like the place that the market has decided will be the stable-est, but who knows?
7. MHMorgan Housel
  Yeah. It's not, it's not contradictory in history to say that this new technology will change the world forever, and, and at the same time, you're probably not gonna make that much money on it. The best example of that were the railroads, which was probably the most transformational new industry in US history. Like, to have a railroad going from the East Coast to the West Coast, that changed everything in such a profound way. And the vast majority of railroad investors lost all their money. So, they, you could get it right, this is gonna change the world forever. It does not mean that you're gonna make that much money on it. And that, that, that's not to say that most crypto investors... No, I, actually, I, I, I would say it's almost certain that most crypto investors will not make that much money. That's, that, that's pretty standard historical. The, the other thing is, in cars, in the early 1900s, there were 2,000 car companies in America, and 1,997 of them went bankrupt. You ended up with GM, Ford, and Chrysler. The rest virtually disappeared. So it's always the case that in a new technology that changes in the world, there's a big gap between, this is gonna change the world and everyone's gonna get rich on this.
1:08:30 – 1:10:00
Could the Crypto Security System Be Broken?
1. MHMorgan Housel

Episode duration: 2:14:05

Install uListen for AI-powered chat & search across the full episode — Get Full Transcript

Transcript of episode uxu37dqVR90

Get more out of YouTube videos.

High quality summaries for YouTube videos. Accurate transcripts to search & find moments. Powered by ChatGPT & Claude AI.

Add to Chrome

Intro

Timeless Lessons of Greed, Wealth, and Happiness

The Current Tariff Situation in 2025

What Are Tariffs?

Trump's True Reason for the Tariffs

Why Is China the Factory of the World?

China Stopped Being a Cheap Labour Country

What's the Impact of the Tariffs?

America's Trust

Are We Heading for a Recession?

The Importance of Backups During a Recession

How to Be Financially Free in 2025

The Evolutionary Desire to Show Off — Status

Salary Differences

We Have a Distorted View of Financial Wealth

Advice for the Economic Crisis

How Much Money Do You Need Saved?

The Impact of AI in Our Wealth Building

The Skills You'll Need in the AI Era

How to Have a Money Mindset

Why People Get Stuck in Crypto Scams

Women vs. Men: Who's Better at Saving and Taking Risks?

Crypto

What History Tells Us About New Technologies, Wealth, and Failure

Could the Crypto Security System Be Broken?

Get more out of YouTube videos.