What Has Covid-19 Done To The Economy? | Morgan Housel | Modern Wisdom Podcast 151

Chris Williamson 0:00 (wind blowing) Hello, friends. Welcome back. My guest today is Morgan Housel, and that should be a name that you're familiar with as I published an episode with him only a couple of weeks ago, one of our top ever played in Modern Wisdom history, so why is he back on? (inhales sharply) I brought him back because the current state of the financial markets and the global economy is really confusing. I have no idea why the market is 25% down and whether it's as bad as the Great Depression from 1928 or the financial crash of 2008 or whatever it is. So I needed someone who knows what he's talking about, and Morgan is the man who has taken that task on his shoulders. So today, expect to learn just what is going on with the financial markets, why prices have dropped, just how this does compare to previous financial crashes, what some of the signals would be that the market is at least starting to calm down in terms of volatility. Also, at the very end of this episode, I give my best advice for how to be antifragile during this situation if you are under containment, if you are potentially in lockdown, or there's some social distancing procedures that you have to follow where you can't leave the house as much. Stay until the end to find out mine and Morgan's best suggestions on how to not only avoid boredom but perhaps even flourish and develop yourself and your family/home during the process. In other news, I know that this is the second in seven days of podcasts regarding the coronavirus. I promise you that this is not going to become the COVID-19 podcast, but I do think that as someone with a platform and an audience who is prepared to listen to long form, in-depth discussions and also someone who has access to the kind of guests that I do, there is a little bit of a duty for me to try and provide the best quality of information that I can. The episode with Dr. Feigl-Ding from last week, which you should definitely go and check out if you haven't already, t- teaching us about the virus and what it actually does to the human body, et cetera, et cetera, um, it is the most played of all time, and I think that that is because people are desperately searching for information at the moment, and if I can in some way help to create some signal through the noise that's going on at the moment then, (inhales sharply) yeah, it feels like a, a pretty good use of my time. That being said, I also appreciate that giving you interesting and different topics which actually help to distract you and remind you that- that there is a world out there aside from the virus which is running rampant across the globe, I'm, I'm gonna do that as well. So normal service will be continued to be resumed soon, but for now please welcome the wise and wonderful Morgan Housel. Oh yeah, P.S., if you enjoy this episode with Morgan, you will love his new book, The Psychology of Money, and it is available for pre-order now by following the link in the show notes below.

Narrator 3:02 (instrumental music)

Chris Williamson 3:17 Ladies and gentlemen, welcome back. Morgan, we said we weren't going to have to speak until your new book comes out at the end of summer-

Morgan Housel 3:24 (laughs) .

Chris Williamson 3:24 ... and look at us now, two weeks later and we're talking again.

Morgan Housel 3:28 That's how fast the world changes. And I think that's, I mean, and let me just jump right into it, I think that's been the interesting thing of what's happened in the, uh, uh, in the last two weeks is how it's not what happened, it's how fast it happened. Like, if you look at the long history of stock markets, markets falling 25% is not uncommon at all. It's something that on happens, happens every four years or so going back to the last 100 years. For it to happen this fast is unprecedented. This is literally the fastest it's ever occurred. So I think that to me, if there's anything that's shocking that's happened in the last couple weeks from a financial perspective, the health perspective is a different, is a different topic altogether, but from an investing perspective, it's the, the, the speed in which this has occurred that's amazing.

Chris Williamson 4:10 What are the headlines? What's the headlines in terms of financial activity over the last two weeks? What has happened?

Morgan Housel 4:17 Well, here's... Uh, let me, let me start by saying this, in a normal recession, in a bad recession, you might have sales in certain industries down 5%, 10%, maybe if it's a really bad recession in a specific industry, 20%, that's bad. What we're dealing with here is a different magnitude. You have entire geographic regions where sales are down 80%. You know, and so there's, there's really no modern pres- precedent for that because it's not like a recession where people pull back a little bit. This is j- just shutdown. And it's almost like the only precedent for that in recent, somewhat recent times is literally, like, World War II. Now, I don't wanna equate those in significance but in terms of just an economy shutting down, just stopping overnight, uh, you know, that's not really something that we have much experience with. And I think it's important to say that since we don't have a lot of precedent for what's going on, no one knows what's gonna happen next. There's really just n- there's not a playbook that we can learn from history that's gonna tell us r- what, a lot of what's gonna happen next. We always say the next recession is never like the last one, and when we say that, we always feel like, well, it's gonna be a little different-

Chris Williamson 5:27 Yeah.

Morgan Housel 5:27 ... but all recessions kind of have a similar trajectory and whatnot. But this is just a different, a different thing altogether. And of course, we don't even know what's gonna happen next in terms of shutdowns and lockdowns, let alone what the recovery afterwards might look like.

Chris Williamson 5:41 So we're recording this March 13th. Yesterday, on the 12th, was that the biggest move that we've seen so far? Was that the largest market move from top to bottom or-

Morgan Housel 5:53 Uh, y- yes. Uh, in, in percentage terms, the US stock market fell just about 10%.... which, uh, the only other, uh, single day that was worse than that, uh, was 1987, the crash of 1987, and some days during the Great Depression in 1929. Uh, in the, in 1987, I think the market fell 22% in one day, and in the Great Depression you had about three consecutive days where it fell 10 to 15% each day. Um, but other than those two episodes, yesterday was-

Chris Williamson 6:25 (laughs)

Morgan Housel 6:25 ... was the worst. So, if you've lived through it and you survived it, congratulations. This is what, this is, this is the big leagues now.

Chris Williamson 6:31 Wow. Yeah, th- it's squeaky bum time, I think, as my dad, as my dad would call it.

Morgan Housel 6:36 (laughs)

Chris Williamson 6:36 Um, so-

Morgan Housel 6:37 It's the real deal, yeah.

Chris Williamson 6:38 Yeah. So we've talked, uh, about what's actually happening in terms of some of the businesses, right? So the economy within countries, and the market move as well. Which one of these is gonna have the biggest economic impact, do we think?

Morgan Housel 6:51 I think, uh, you would have to say... Well, it, it's interesting 'cause here's the two sides of it. You know, China, just kind of because of its political, um, structure, was able to effectively create, uh, firm lockdowns across a very large swath of its country. 50 million people were on 100% lockdown, more or less. Uh, so that's gonna be the biggest economic hit, because everything just came to a stop. And you have these statistics, like gambling revenue in Macau was down 90% month over month, and Chinese car sales were down 90% in February from the previous year, because everything just came to a stop. So I think China's gonna have the biggest hit, but they also might have one of the fastest recoveries because they kinda took their medicine really quick, and now they got the curve under control, and now maybe they can start going back to something that looks like normal. Whereas in the United States where, and Italy and other countries in Europe, where just because of the, the, how the politics are structured and how the government is structured, you cannot just come in and shut the economy down and tell people to stay in their houses and you'll be arrested if you leave.

Chris Williamson 7:56 (laughs)

Morgan Housel 7:56 At least that has not happened yet.

Chris Williamson 7:58 Yeah (laughs) .

Morgan Housel 7:58 Therefore, you know, our, our, the, the short term hit that we might take might be less, but I have a feeling it's just gonna be a much more draggedio process to, uh, both experience the downturn and then a slowness in the recovery afterwards. I think one analogy for that is also people are familiar with the Great Depression of the 1930s, and what was bad about the Great Depression was that it was not only deep, it was very long. It lasted for several years, from about 1929 till 1933 or '34 b- things started turning around. There was also another depression in 1920 in the United States, and basically it was, uh, World War I had just ended. We were kinda switching the economy from wartime footing to normal footing, and then there was a lot of disruption. So there was a very bad depression in 1919, 1920, uh, and it was extremely deep. It was actually deeper than the Great Depression by some measures, but it was fast. It was, uh, two or three quarters of a big, big hit, but then things kinda bounced back really quickly. Uh, and that, and, and since it bounced back pretty quickly, like it didn't make history like the Great Depression did, 'cause what was so bad about the Great Depression was the length. And maybe that's an appropriate analogy for maybe China goes through something like our 1920 depression, and maybe for other people, I, I do not think that we're gonna be, you know, looking at something r- uh, that's equitable to the Great Depression. But maybe that's a, a, a similar analogy, that it's gonna be maybe not quite as deep as China's but just more drawn out. Uh, and the other thing that's so different about what we're dealing with right now relative to past recessions is that this is a, being caused by biology. It's not being caused by business problems, which is very different from all past recessions that we've been through. If you think about 2008, a lot of the reason that the recovery after 2008, you know, and as we got into 2010, 2011, 2012, a lot of the reason it was so slow to recover and there was not just a fierce bounce back was because the, 2008 was caused by business problems. Whereas this, what we're going through right now, is being caused by biology. And so that also, it brings an element that I think people who study these things just don't really know what, you know, what's gonna happen now because we don't have a lot of experience with that. But it also means, like, that, let's say, and I, I, I'm not a doctor or a biologist, so I have absolutely no authority to say this, but let's say that in the next four months, six months, one year, whatever, there is some effective treatment or even a vaccine if we're looking out the next year, year and a half. You know, there was no equivalent of a vaccine in 2008.

Chris Williamson 10:32 (laughs)

Morgan Housel 10:32 We just had to grind through it. We just had to take the medicine and just have to sort of just like, "Okay, we just gotta do this."

Chris Williamson 10:39 Yeah.

Morgan Housel 10:39 But you could see that if there was an effective... And again, I need to preface this so hard with th- you know, I have no idea what I'm talking about here, but-

Chris Williamson 10:45 Mm-hmm, yes.

Morgan Housel 10:45 ... let's say in three months there's a headline that says, uh, "So-and-so laboratory has discovered an effective treatment," or that, you know, "A vaccine is looking really, is looking really good." That could bring back so much economic activity, because the problems right now are not business, they're not economic, it's biology. So I think this has the potential to spring back faster than previous recessions that we've been through. And I say potential 'cause I don't know if that's exactly what's gonna happen. But it has potential that did not exist in 2008 for this to be ver- more severe than 2008, but also recover quicker and faster than we did in 2008.

Chris Williamson 11:25 Yeah, everything that we're saying just has to have a million caveats behind it, doesn't it? Because it's so-

Morgan Housel 11:31 Everything. (laughs)

Chris Williamson 11:31 ... unprecedented at the moment. That is the word, right? Economically unprecedented. So you, y- y- you've touched on it there. Just so we've got it definitively, are you saying that there's essentially nothing that's that analogous to the situation we're in right now that's ever occurred?

Morgan Housel 11:47 I think it's probably pretty close. The only thing that would be similar again, uh, and it's very different of course, but I think the only thing similar is probably World War II, where in a, in a relatively short period of time you had, uh, th- pretty much the entire global economy just shifted immediately.... and, and just the r- the regular order of life was completely disrupted. Now, it was, it was very different, and I don't know, I have no idea, you know, 80 million people died in World War II, I have absolutely no clue what's going to happen here. But I think in just in terms of the severity of the change to the regular order of life, that is probably the closest analogy. Because you think of the other major recessions, in 2008, 2001, 1974, 1980, just a very viv- different set of circumstances that we were dealing with. People had money problems, but they were not afraid to go, to go to the restaurant. They maybe, they maybe they could not afford to go to the restaurant, but once they had money,

Morgan Housel 12:47 they were not afraid to go to the restaurant. Where now you're looking at a situation where people are afraid for their health. And there's another big thing here, which is that in 2008, uh, the consequences of getting caught up in the tragedy of 2008 was you're going to lose your job. Now, that's a big deal. I do not want to minimize that. But now the consequences of getting caught up with coronavirus is you might die, and that's just a completely different psychological set of circumstances.

Chris Williamson 13:14 The stakes have been raised, haven't they?

Morgan Housel 13:16 The stakes have been raised so much. And again, I don't want to minimize the trauma of losing your job, particularly if you're a working parent or something, but the stakes are just much different now. I think whenever you say the word die-

Chris Williamson 13:28 (laughs)

Morgan Housel 13:28 ... then p- people's propensity to over- to react, and I, I, I don't even want to say overreact because an overreaction might be the rational thing-

Chris Williamson 13:36 Mm-hmm.

Morgan Housel 13:36 ... but you're gonna get, get a much deeper reaction than we have for people who are used to studying how recessions play out. So it's just a totally different set of circumstances here. But let, let, let me also say one thing, and I don't know if this is a good analogy or not, but I was speaking with a friend right before this, uh, and, uh, and we started talking about something that I thought was very interesting. And maybe this is something that you know more than me about. But I was talking about the, the London Blitz in World War II-

Chris Williamson 14:04 Mm-hmm.

Morgan Housel 14:05 ... in the, in, in, around 1940 when London was being bombed by the Germans night after night after night, and it was an absolute tragedy, of course. I've read stories to the effect of this. In the early days, everyone was completely petrified, did not want to leave their homes, hunkering down in their bunkers, as you would expect, of course. And then as the days and weeks went on, uh, at least for some people, there was a growing sense of, "Look, we have to just move on. We cannot live in shelters our entire lives. We just have to go about our lives and accept the risk of what we're facing." I'm probably, uh, over-generalizing that. I want to be-

Chris Williamson 14:44 Mm-hmm.

Morgan Housel 14:44 ... sensitive to the situation that I did not experience. But I, I, I was speaking with a friend, and I said, "I wonder if that's an appropriate analogy, that right now, we are in the panic phase, uh, pretty much across the world. But I wonder, as the weeks and maybe months go on, um, that even if things do not get any better and, and this keeps spreading, I wonder to the ex- to what extent are people just going to say, 'Look, I cannot live in my basement washing my hands 40 times a day anymore.'"

Chris Williamson 15:11 Mm-hmm.

Morgan Housel 15:11 "We have to just accept the risk and go back on with our lives." I don't know if that's true.

Chris Williamson 15:16 Yeah.

Morgan Housel 15:16 But I think there is precedent for, at some point, people just, uh, start getting accustomed to the risks in their life, even if those risks are very large.

Chris Williamson 15:24 If so-

Morgan Housel 15:24 Once they get accustomed to them, once those risks are not new anymore, then they're willing, more willing to just say, "Look, this is risky. Some of us are gonna die. Like, that's true, but we need to go about our lives. We just need to go do this." I don't know if that's the case, but it's an interesting thing to think about.

Chris Williamson 15:39 I couldn't agree more. Yeah, uh, it's, um, it's like a reverse hedonic adaptation, isn't it?

Morgan Housel 15:43 Exactly, yeah.

Chris Williamson 15:44 Like, I've got used to this new... The last podcast that we did was talking about people getting accustomed to their new levels of wealth, NBA players who this, that, and the other. Whereas now, it's almost the opposite of that. One way in which I can see this situation being very different to the Blitz, in terms of people's response, is that you going outside and putting your own life in danger during the Blitz did not endanger the lives of anybody else. Whereas-

Morgan Housel 16:14 Good point, yeah.

Chris Williamson 16:14 ... the, um, ancillary, analogous, kind of the, the orthogonal problems that you're going to come up against by leaving, let's say that you leave the house because you're just gonna get on with your day, but you get infected, then bring it back, then infect the rest of your family. That, I think, is playing on so many people's minds, you know, like the social cost, the, what is it that Naval says where he talks about, um, uh, privatized gain versus socialized loss.

Morgan Housel 16:41 Yeah.

Chris Williamson 16:41 And you know, that's what, that's what the person who decides to go to work just so that they can continue to get money despite having a cough, that is the situation that we're playing ourselves with. And there's no, you, you're totally right, the UK and America, there's no martial law implemented. There's nothing stopping me if I get a (coughs) I get a dry cough and I think, "Oh no, it'll be fine, I'll be okay. I could do with making some money this week. I'm just going to crack on and go to work."

Morgan Housel 17:09 Right.

Chris Williamson 17:09 If I decide, if I decide to do that, that's putting other people unnecessarily at risk, and that is-

Morgan Housel 17:17 It's a great point.

Chris Williamson 17:17 ... I think that's where the, the difference lies.

Morgan Housel 17:20 Yeah, totally. I think that's totally true, especially when the biggest risk that you're going to be, uh, if, if you go out and catch it yourself, and then you come home and you're with your spouse and your kids or your parents, your in-laws, whoever it is that's living with you, it's like the people you're going to put at risk are, are the people who are closest to you and, and you love the most, which just adds a different element to this.

Chris Williamson 17:40 It's a very vicious-

Morgan Housel 17:41 You're totally right.

Chris Williamson 17:41 Very, very vicious situation.

Morgan Housel 17:42 It is, it is. It, it's different in that sense, yeah.

Chris Williamson 17:45 Yeah. Um, so I want to talk about the, the markets and, and sort of how and why they've responded in this way. We've spoken about the fact that they've moved, what did you say, 25% down? Is that right?

Morgan Housel 17:56 That, that's, that's roughly right. It was, it was 27 this morning, and now we had a big up day, so yeah, let's, let's, let's call it 25.

Chris Williamson 18:03 Okay, cool. Yeah, we'll even it out nice round 25% in the red. Um, why has that happened? For people who maybe have only basic understanding of economic theory, have people, have investors just said, "I'm going to pull my money out." What are they doing? Is it sitting in their bank account at the moment? Are people deciding... Are they literally going out and trying to buy bars of gold? Like, what's happened?

Morgan Housel 18:23 Well, the, let's, let's keep two things in mind here that I think are important, is that, one, whenever there's been a tremendous amount of, uh, selling, very quickly, very vicious selling, like we've seen in recent weeks, there's, there are several kinds of investors that might be causing that. One is, that I think is really important, that has grown in importance over the last 10 or 20 years are these computer algorithms that are literally just automated programs. It's not a person typing in, uh, sell orders into their, into their, uh, E-Trade account. It's literally these computer algorithms that are making the trades by themselves, by the, the knowledge that is invested in the algorithm. And a lot of those algorithms can, especially during very volatile times, can go kind of haywire. And so how much of what's been going on in the last couple weeks is not necessarily human fear, but just computers saying, "This isn't right, sell, sell. No, no, that's not right. This correlation looks weird to me, so sell, sell, sell." We don't know, but I suspect it's quite a bit. Uh, we, we don't know what the measurement of that is, but that, there's, there's that element to it.

Chris Williamson 19:25 And to in- to interject there, Morgan, that's the first time that we'll have had such a proliferation of, uh, expert advisors/algorithmic trading, right? You know, in 2008-2009, we would've had some, but it's now going to be ratcheted up even more so. So, this is, again, another parameter, another variable that is affecting the current economic, uh, uh, market, which we haven't seen before.

Morgan Housel 19:50 I, I think that's probably right. It was, it was actually fairly large in 2008, but it, it, you're, you're right that it is bigger, and I think it's, it's definitely more sophisticated today.

Chris Williamson 19:58 Mm-hmm.

Morgan Housel 19:58 And sophistication I might put in air quotes, because oftentimes, you know, rather than sophistication, maybe the word is complex, and complex can lead to some weird outcomes-

Chris Williamson 20:07 (laughs)

Morgan Housel 20:07 ... when we have, when we're getting wild in these times like we have right n- uh, today. So, it's important to realize that when there's a tremendous amount of selling, it doesn't necessarily mean a human is scared, it's just someone is selling out there. The other thing is, look, these are different economic times. Like, the numbers that we've put around about, uh, in China, car sales down 90%. And I, who knows what it's going to be in the United States? I've spoken with some friends who are small business owners who their sales are down 50, 60, 70% in the last week. Um, so there is just a ratcheting down of economic expectations relative to where we were three weeks ago. Public companies are not going to be as profitable over the next year, maybe more than they were three weeks ago. So, there's that. And then there is also a- another thing to keep in mind here, kind of the counter to all of this, which is that it's very often to look at the headlines or to watch CNBC and come to the con- the conclusion that investors are panicked, people are panicked and they're selling. Which is true, but there's a very important caveat, which is that what you're seeing is just the marginal transaction. Uh, and what's important is that, uh, during these times, the huge vast majority of investors, in the high 90 percents, are not doing anything. So, one of my favorite statistics was the last time we had kind of a big crazy 20% sell-off, uh, was the summer of 2011. A lot of people don't remember that anymore, but in the summer of 2011, it looked like we were heading back into financial crisis 2.0, um, that we were going to head back into the Great Recession, and a lot of peop- And it got, it got really dicey for a while. Stock markets fell about 20%. During that period in August 2011, when markets fell 20%, 98% of Vanguard investors, Vanguard being, you know, the largest investing platform in the world, did not make a single transaction. 98%.

Chris Williamson 21:57 (laughs)

Morgan Housel 21:58 So, it's so easy to look at that period and say, "Everyone's panicked," and the answer is no. A very small percentage of people are panicked, and they're making transactions, and those transactions are having an influence on the going price of stocks. But 98% of people are, not only are they're not doing anything, a lot of people just aren't even paying attention. You, like, trillions of dollars out that, that is invested in the market is for people that in- you know, invest in their company 401 (k) s, and every paycheck they put a couple hundred bucks into their 401 (k) ) . And most of those people don't even know the password to their brokerage account.

Chris Williamson 22:31 (laughs)

Morgan Housel 22:31 They're not paying any attention to what's going on. So, to me, that's always like an important context when I think it's easy to say, "Everyone's panicking." No, they're not. Uh, some professional investors are panicking, and some individuals are too, but the majority of people are just going about their day right now. That's always important to remember when things are getting crazy.

Chris Williamson 22:47 Yeah, we see the, the scenes from Wall Street, right, with the guys shaking those pieces of paper in the, in the air, and we think, "Oh, my God." Like, that's, that's a microcosm which is, um, they're the representative for so many other people around the world. And you're totally correct, especially when you're dealing with a global pandemic. People are thinking about, "How can I make sure that m- me and my family are safe? Have I got enough food in the house? What's going to-"

Morgan Housel 23:11 Yeah.

Chris Williamson 23:11 "... happen to my kids? Are my kids gonna be sent home from school?" You're totally right. They're not thinking about the finer points of, of trading and, and bits and pieces like that. I've, uh, I've got a note that I made, uh, during the week since I knew that we were gonna do this. You made an analogy, um, that I think was a tale from your grandma, where she said, "The difference between camping is fun and being homeless is miserable." And it was-

Morgan Housel 23:34 Correct.

Chris Williamson 23:35 It was talking about that. And I realized this week that a meditation retreat is fun, but house arrest in Italy is also miserable. And that's-

Morgan Housel 23:46 Yeah, I, I'm sure that's right.

Chris Williamson 23:46 That's just a perfect, a perfect analogy, you know? Like, there's, there's people who decide, "Oh, I'm gonna spend a little bit of time at home with the family this week. I'm gonna decide that I'm go- Oh, I might, might go and decorate the house. I might do a few other bits and pieces." But when that's mandated by your government because there's a, a pandemic running riot outside in the streets, it's a lot less fun.

Morgan Housel 24:05 Absolutely. I think that's true. I'll give you, I'll give you my personal example. This past Christmas break, I took about, uh, 10 days off of work, and we, we didn't travel anywhere, we stayed home, and it was really bad weather, so I didn't, didn't do anything outside. So, I spent about 10 days on the couch listening to podcasts, reading books, and it was so much fun. I loved it. It was just a great 10 days of just leisure and reading and learning.But you're absolutely right, that if I, if, if we went into lockdown here, and then it was, I have to spend the next 10 days or two weeks or whatever sitting on the couch reading books, I'd probably be miserable just because that's against ... (laughs)

Chris Williamson 24:37 (laughs) Yeah. Because it's not your decision. Um-

Morgan Housel 24:40 It's not your decision, yeah.

Chris Williamson 24:41 What were you going to talk about ne-? Right, okay, so I want to know what you have changed your mind on in the last few weeks. Anything that's, that comes to the forefront of your brain that you've changed your mind on or a new perspective that you've gained over the last couple of weeks?

Morgan Housel 24:55 I don't, I don't want this to sound flippant, but I don't, I don't think the answer is anything. And ma- maybe there's two reasons for that. One is that, um, I just don't know enough yet. Like, maybe as in the next month, I'll learn something else that's going on about the progress of the disease or the known fatality rate, whatever it is-

Chris Williamson 25:12 Hmm.

Morgan Housel 25:13 ... that will make me change my worldview. But the other reason I don't think I've changed my mind about is because all of my investing philosophy w- starting well before this, it's been the case for years, f- more than a decade, has been based around the concept of survival. Just if, uh, uh, I, I want my investing strategies to be based around endurance so that I can put up with upheaval, and kind of inherent in that is that I am always expecting, uh, and prepared for major upheaval. I don't know what's going to cause it or when it's going to come or how severe it's going to be or how quickly it's going to come, but I'm always prepared for, for stuff to hit the fan, so to speak.

Chris Williamson 25:53 (laughs)

Morgan Housel 25:53 So, uh, and I think that's not true for a lot of investors. A lot of investors, when they experience a 20% decline, uh, it's th- they never expected it, or even if they, like, in, in theory expected it, they kind of thought it would never happen, and so they're really taken, uh, uh, off guard when it happens. Whereas I'm ... And maybe this is just indicative of my personality, I'm kind of a worst-case scenario worrier-

Chris Williamson 26:16 Hmm.

Morgan Housel 26:16 ... but I'm always under the impression that stuff like this is going to happen, and I've written about this before. I keep um, a much higher percentage of my assets in cash than most people of my age would. Um, and the reason is because I, I think I'm always worried about stuff like this, and when stuff like this happens, I want to make sure that my endurance is in place, um, so that I can not have to freak out, and especially ... (laughs)

Chris Williamson 26:40 Man, I've got a ... Morgan, I've, I've got a question here from someone on Twitter who DMed me and said, "Morgan once alluded to the fact that he basically hoards cash as a k- security blanket fully knowing it's damaging long term and diluting his returns, but protects him in situations like that. Is he still that way today?" I guess you've just, at least in one, one form answered that.

Morgan Housel 27:01 It's, the answer is yes, and I would ac- I would actually add to that in terms of n- you know, to get personal about my situation here, but, uh, my, my wife is a stay-at-home mother. I have two young kids. I'm the sole breadwinner. If anything, I've probably gotten more paranoid because-

Chris Williamson 27:16 (laughs)

Morgan Housel 27:16 ... everything in my whole family's stability is on my shoulders here.

Chris Williamson 27:19 Yeah, yeah, yeah.

Morgan Housel 27:19 So if anything, I've gotten more paranoid, and I ... But I'll tell you, it doesn't not bother me a single bit, even ... Le- let's rewind the clock to a month ago when markets were at all-time highs. Of course, I could go back and do the calculation and say, "Hey, if my, if I had invested some of this more ca- some of this cash in stocks over the past 10 years, my net worth would be X percent higher."

Chris Williamson 27:39 Mm-hmm.

Morgan Housel 27:39 Does not bother me in the slightest. I've, I've, I've always said, and this is not ... I, I, I don't expect this to be the case for everyone, so I'm not saying everyone should do this, but I am, I do not manage my money to achieve the highest returns. I manage my money to get the best night of sleep, and because of that, uh, it does not bother me in the slightest that I'm giving up some returns. I should also say, when I say I have a lot of cash, it's not, it's not a crazy amount. It's not like I'm, I have 90% of my money in cash or anything like that. (laughs)

Chris Williamson 28:06 Yeah, it's not a ma-

Morgan Housel 28:07 But-

Chris Williamson 28:07 It's not a mattress full that you and your missus are sleeping on and having to rearrange each night-

Morgan Housel 28:10 It's, it's ... (laughs)

Chris Williamson 28:10 ... 'cause the hundreds are under her head this week instead of yours, yeah.

Morgan Housel 28:13 It's ... No, it's nothing like that. I mean-

Chris Williamson 28:15 (laughs)

Morgan Housel 28:15 ... it, it depends how you measure it-

Chris Williamson 28:17 Yeah.

Morgan Housel 28:17 ... as a percentage of our assets or percentage of our equities, but, you know, it's s- probably something like, uh, you know, we have five times as much stock as we do, as we do cash, so like 20% of the portfolio, something- it's something l- It changes based on a lot of different variables or however you want to measure it, but it's- i- it's- it's not a crazy percentage. It's just higher than most people in my situation would, but it's because ... And it ... I, I won't even say it's because I'm conservative or I don't want to take a risk. It's that I value endurance more than any other investment v- variable, because once you have endurance and once you have just r- rock solid endurance, that's when you can really let compounding work over long periods of time, because when you face a period like we have over the last month, you're not going to get knocked on your butt and get knocked over. You're going to say, "Look, I have the cash to withstand this. I can put up with this. I'm just gonna full speed ahead, let's go." And once you say that, that's really when compounding works miracles over a very long period of time, once you have the endurance to not get knocked down during these headwinds. Uh, it's so much more powerful to do that than it is to in, you know, really maximize for ROI and have all of your cash invested in stocks, and then you hit a bad period where maybe you get laid off or whatever happens, the normal, you know, banana peels of life that people slip on, and during a market do- during a markets go, market decline, you suddenly say, "Uh, you have to panic sell at the bottom," or something like that. Th- that is a situation that's going dent your returns far more than having, uh, a, a g- a, a big slug of cash during a bull market.

Chris Williamson 29:50 Yeah, it's choosing to make a little bit less over a long period of time versus risking losing a lot in a short space of time.

Morgan Housel 29:59 Right. There's a financial advisor named Carl Richards who writes about this and he ... I'm paraphrasing here, I'm, I might, I might butcher this-

Chris Williamson 30:05 (laughs)

Morgan Housel 30:05 ... but he says-

Chris Williamson 30:06 (laughs)

Morgan Housel 30:06 ... you know, it, it, i- i- it's, it's about exchanging, uh, the opportunity to m- to make, to make a killing in exchange for making sure that you don't get killed.

Chris Williamson 30:17 Yeah.

Morgan Housel 30:17 That's, that's really what I'm going for. I, I just want to make sure I don't get killed as an investor, and I'm willing to exchange not making a killing in order to make sure that I never get killed.

Chris Williamson 30:26 I wonder how many people will be learning that lesson right now, you know? People who-

Morgan Housel 30:30 Lots.

Chris Williamson 30:30 ... have v- have entered-

Morgan Housel 30:31 I'll tell you, a lot.

Chris Williamson 30:31 Yeah.

Morgan Housel 30:33 Yeah. And I don't, there's no schadenfreude in there, is, I, I feel bad for those people but, it's a, it's a lesson that a lot of people will learn.

Chris Williamson 30:40 Well, I noticed, so Sam Harris tweeted one of the cleverest things I've seen so far, which is totally not to do with finance but is analogous to what we're talking about here, where he said, "The mortality of this virus," it's between two and 4%ish, we can say it's between there, um, "This is a dry run for something that's a lot more vicious and has shown us just how poorly prepared we are for it." And the interconnectedness and fat tail probability and all that stuff, all the reasons as to why it's, it's been able to spread so quickly. But imagine if this was MERS or Ebola with mortality of 30% or 50%, but the infection rate was still people being able to infect others whilst being asymptomatic, and it dragged out over a long period of time, and blah, blah, blah. You know, that would be ... That, you're talking existential, like, end of humanity type stuff. So again, with that, you know, one of the things that people can take it ... There's not many positives to take from this situation, but one of them is, it could be worse. There are, by a number of parameters that this could be worse. Um, just looping back as well to what you said there about your survivability and that long-term thing, I'm just gonna start to read from something you tweeted earlier on today which I absolutely love, and it's Charlie Munger in 2009 asked, being asked how worried he was that stocks had fallen by 50%. And this is his quote: "Zero. This is the third time Warren and I have seen our holdings go down top tick to bottom tick by 50%. I think it's in the nature of long-term shareholding of the normal vicissitudes of worldly outcomes of markets that the long-term holder has his quoted value of his stocks go down by, say, 50%, and essentially, if you're not willing to react with equanimity to the market price decline of 50% two or three times a century, you're not fit to be a common shareholder and you deserve the mediocre result you're going to get." Oh my God! (laughs) That guy has got-

Morgan Housel 32:23 Yeah. It's ga-

Chris Williamson 32:23 ... balls of steel.

Morgan Housel 32:24 And of course he's known for his, he's known for his blunt language, but I think that gets back to another kind of point, what I was saying, is that these major hits, and they always, they always look different and come in different forms, come from different areas, but to take a major hit, to lose 30%, 20%, 50% of your money, is something that you, as, if you're a long-term investor, you should expect with 100% certainty that that's going to happen. These are, these are not, these, they should not be surprises. It's not to say that they're fun when they occur, but you should not expect ... The whole reason that stocks are capable of producing great long-term returns is because these things happen. If you don't want to deal with this, then you can put your money in a savings account and earn half of 1% and you don't have to deal with any ups and downs. But if you want to earn 10% a year over- on your money over the long haul, you need to put up with the fact that every couple of years, you might lose 20 or 30 or 50% of it for a somewhat short period of time, who knows how long, and then it'll come back. That's the price of admission to the markets. And it's, uh, i- it's, it's unfortunate, of course, when people are reminded or they learn the cost of admission after they've entered the theme park, so to speak.

Chris Williamson 33:34 (laughs)

Morgan Housel 33:34 But this is th- this is the cost of it, this is th- this is the payment that y- that the market requires that you pay in order to, uh, go on this glorious ride over 10 or 20 or 30 years. And if you're not willing to pay it, you're gonna have a real hard time.

Chris Williamson 33:47 Well, I mean, for the people who haven't heard my first episode with Morgan, it will be linked in the show notes below and I implore you to go back and listen to it, because so many of the lessons which you gave us then apply now. What was it that we talked about? We, we spoke about the fact that so few people in the West have at least one month's salary in the bank, that they're living paycheck to paycheck, people are very highly leveraged, through talking about the fact that you need to ensure that you earn more than you spend on a consistent basis. And all of these things, right now, this is the situation, this is where you get down to brass tacks and you see who has that, th- that in reserve. And those lessons, if people had heeded those lessons for the last 10 years, they'd be fine. If people who haven't heeded those lessons for the last 10 years are gonna be a little bit less fine. So I, I wanted to, to talk about ... You, you can't give a Morgan Housel's How to Survive a Financial Apocalypse, but have you got any tips for what people can do, some of the, the ... Even if they're just mental strategies rather than financial strategies, how would you go about it?

Morgan Housel 34:50 I, I mean, it's so different for everyone because everyone's got a different financial situation, a different job situation, different family needs and whatnot. I mean, I, I, I can just tell you wh- how I'm coming at it from my own perspective.

Chris Williamson 35:01 Sure.

Morgan Housel 35:02 I'm, I, I'm ... You know, I've ... Well, I mean, the first thing I did was just to have a lot of preparation for this event. Now, that's, that's not advice for someone who did not prepare for this, but I, I have a lot of cash, we have some flexibility, um, you know, and a lot of this stuff is just unique to our financial situation, it's not gonna be that applicable to other people, but ...

Chris Williamson 35:22 Yeah, yeah.

Morgan Housel 35:23 You know, the other thing, and this is a different personality as well, too, but my family can live very, very cheaply and still have a good time. We can have a good time going for a walk, going to a park, re- going to the library and checking out books. We do, we, we do not, we're not a big low and a big high maintenance family, and that becomes such an important asset if economic times get rough. Because if you have to, if you ... This gets back to the camping versus homeless thing.

Chris Williamson 35:50 (laughs)

Morgan Housel 35:51 If you are forced to cut back your lifestyle, it hurts if you're forced to do it. If you wanted, you wanna drive the nice car but you, you can't afford it anymore, that, that, that's a painful thing if you're forced to do it. But if you have the kind of situation where it's like, no, honestly, if my wife and I, if my family and I, you know, were billionaires, and we never will be, but if we were, we would still spend our Saturday going for a walk down by the river. It's just what we enjoy doing and it doesn't cost any money. So I think to the extent that people can find hobbies that do not cost any money-

Chris Williamson 36:24 Mm.

Morgan Housel 36:24 ... that, it sound- it sounds trite but that's probably the best thing that you can do during a tough economic time. I, I know that, that sounds silly, that's not exactly financial advice, but I think it's honestly the most powerful thing you can do, is to keep your expectations low, but do it in a way that ...It doesn't feel like you're being forced to cut back. You're just finding new hobbies that don't cost a lot of money, if that makes sense.

Chris Williamson 36:45 Couldn't, couldn't agree more. I think the, that resetting of the hedonic set point, you know, um, uh, I wonder how many people in this situation will actually be, um, given renewed vigor or re- renewed love for simpler pleasures, you know? Like-

Morgan Housel 36:58 Yeah.

Chris Williamson 36:58 ... it, it's rare. Uh, some of the things I've been thinking about, which don't really touch on f- finances that much, but it's very rare that globally everybody is dealing with something, you know? Like, it n- it doesn't even rain-

Morgan Housel 37:09 Yeah.

Chris Williamson 37:09 ... everywhere in the world at the same time.

Morgan Housel 37:12 (laughs)

Chris Williamson 37:12 It might rain in countries in the same, th- at the same time, but it doesn't even rain. So, I was thinking earlier on, like, you, you'll have seen this. The, the World Cup's on, or the Olympics are on, or f- some reality TV is on, or whatever it might be. When people in the modern world have the opportunity to band together behind a common experience that all of them are having, you get an incredible sense of u- unity and a very unique opportunity to actually see what happens, bizarrely, when people are brought together. And I can't remember. It's one of th- the ex-American presidents who was talking about, um, how, uh, how much we would all be united if we were against a common foe that was from a different planet. You know, like the divisions-

Morgan Housel 37:51 Totally. 100%.

Chris Williamson 37:51 ... the divisions between, uh, countries and territories would be forgotten almost instantly. And this is kind of it. You know, p- there's, there's some people out there who want to blame China and almost be, I, I suppose, racialize the virus against the East. But really everyone's just going, "Look, we're all in this together. Fuck. Like, I feel so bad for Italy. I feel so bad for Wuhan. I feel so bad for this country. Shit." Like, you know, "We, we need to do our bit, and we need to do this, that, and the other." And it is, in the strangest way possible, the, this, a bringing together of people under this catastrophe that seems quite rare.

Morgan Housel 38:28 I think that's, I think you're 100% right. That was, that was, that was said very well. And it's, it's, it's true. Now, if there is, you know, a devil's advocate to that ... and you sort of alluded to this. It's still, if you watch the cable news outlets, it's finger pointing left and right. I think that's not gonna go away. But you're right that ... I was actually thinking today, and I didn't, I didn't tweet this, but I'm gonna say it on the podcast anyways 'cause it, it-

Chris Williamson 38:49 Mm-hmm.

Morgan Housel 38:49 ... might be wrong. I'm not, I'm not, uh, you know, claiming this, but I think this might be the biggest global event since World War II.

Chris Williamson 38:57 Yes.

Morgan Housel 38:57 Is that, does that seem fair?

Chris Williamson 38:58 That very well might be. I mean-

Morgan Housel 38:59 Like, global-

Chris Williamson 39:00 It's either this or 2008.

Morgan Housel 39:00 But, of course, there have been bigger events within countries. There have been Rwanda genocide. You can go down the list. But global in terms of something that's, like, happening to almost everyone at the same time, this might be the biggest thing since World War II. I, I didn't-

Chris Williamson 39:13 I think it might be.

Morgan Housel 39:13 No. I, I didn't, I didn't tweet that because I might be wrong about that. So, if there's a listener who says-

Chris Williamson 39:17 Hey, let us know.

Morgan Housel 39:17 ... "No, you're forgetting this." I, I'm-

Chris Williamson 39:19 Yeah, yeah.

Morgan Housel 39:19 ... open to being wrong, but I think it's close to that.

Chris Williamson 39:21 It's definitely gonna be up there, man. Yeah. Y- and it is, it is bizarre to sort of think about what does this mean because the virus is a, a very unique equalizer. Doesn't care whether you're rich or poor. Doesn't care-

Morgan Housel 39:33 Yeah.

Chris Williamson 39:33 ... where you live, what country you're in. Doesn't care who your mum and dad are. If you get it, like, there's a s- there's different strains, but the effects are exactly the same. You're in, you know, you're, you're in the same place, from the king in his castle to the pauper in the street. They're all in the same position.

Morgan Housel 39:49 Right. Now, I, now that's, that's 100% true, which is very different from, like, Vietnam and the United States where rich people could, more or less, buy their way out of the draft.

Chris Williamson 39:57 Hmm.

Morgan Housel 39:57 There were, there were ways to g- to get around it. Um, if there is a, a caveat to that, especially in the United States unfortunately, is that healthcare does, is biased towards income.

Chris Williamson 40:09 Hmm.

Morgan Housel 40:09 So, whether you, whether you a- whether you catch the virus might not be. And for some people it actually is because if you don't have paid time off work, you're more i- inclined to go to work if you've n- if you're gonna get paid, and you might be more s- you know, susceptible to getting it. But then healthcare afterwards is so biased towards income in the United States. It's a, it's a big, it's a big problem. But I think you're totally right that, in terms of something that Americans and Italians and Iranians and Chinese and, and British, everyone, French, just we're all in the same boat together. And it's like, you know, I, and, and, uh, I'm not any expert on this either, but my understanding is that China very quickly, you know, posted the genetic sequence of, uh, of COVID online, like, globally to anyone, like open source. Like, "Let's just try to figure this all out together, you guys."

Chris Williamson 40:56 Hmm.

Morgan Housel 40:56 So, that's a, that's a cool thing. Like, it, I, it's too early to be looking for silver linings of this.

Chris Williamson 41:01 Yeah. For sure.

Morgan Housel 41:01 Let's not do that yet. But it's not unfathomable to think that a year from now, two years from now, we look back and say, like, "That was actually a really cool thing that we all did together." It's not to minimize what might happen, but-

Chris Williamson 41:11 Hmm.

Morgan Housel 41:11 ... I, I think you're totally right.

Chris Williamson 41:13 Yeah. Uh, you, you are correct. There could be some great ways to transcend the suffering and the catastrophe that comes from this virus by the learning, by the models that we have, by extra preparation as we move forward. I, I can't remember what it was I was listening to the other day, but it's something like, I think, 20 million N95 masks could be made for the price of one-tenth of a fighter jet.

Morgan Housel 41:39 (laughs) That's insane. I know, it's wild.

Chris Williamson 41:41 Like, and, uh, um, we, th- I think the US are desperately trying to get, like, half a million, and it would make some huge change or whatever it might be. Um, one, another question that I've got with regards to finances. Do you think that the market has fully priced in how the epidemic can go yet, or is it still just, just reacting daily?

Morgan Housel 42:01 I think it's, it's priced in a tremendous amount of what might happen. Like, by any measure, a 25% decline is, is big. It's pricing in a lot of bad news. But no one, not a single person knows what's gonna happen next. So, it's possible that we've already way overreacted. That's possible. It's possible (laughs) that we've, we've barely scratched the surface of what's gonna happen. I, I don't know, and nobody knows. So, I don't think ... you know, markets are not being complacent. Whenever there's a-

Chris Williamson 42:27 (laughs)

Morgan Housel 42:27 ... a 25% decline in 10 days.

Chris Williamson 42:30 I can't say it's complacency. (laughs)

Morgan Housel 42:30 Like, there, there, there's no complacency. But there's still just a big question mark, and we just gotta see what's gonna happen.

Chris Williamson 42:36 What was the-

Morgan Housel 42:37 If, if someone tells you they know what's gonna happen, you know, ask them for their forecast one year ago that said a virus called COVID was gonna ruin the world.

Chris Williamson 42:46 (laughs)

Morgan Housel 42:46 You know, if, i- i- if you didn't see this coming a year ago, you have no right telling me what's gonna happen over the next year.

Chris Williamson 42:51 Man, what a quote. Yeah, I absolutely love that. What was it that you were saying? Um, I saw, I think it was a graph, a graph of, um, perhaps the FTSE 200, and you'd highlighted on it about when the different forecasts were made, um, all the way along it. And then there's just this bit where the coronavirus (laughs) gets released. And you were like, "No bo- anybody that tells you what they, that they have an idea about what's going on is so far wrong here."

Morgan Housel 43:17 Yeah. You know, the, the, the biggest risk, this was always true, this is not unique to the last couple of months, the biggest risk that we face is always what nobody is talking about. And by def- so by definition, we have no idea. And then, it's funny, whenever, when I've said that in the past, I've had interviewers be like, "Okay, so what is nobody talking about right now?" And I'm like, "No, like, nobody, including, like, nobody is talking about it." It's something that we cannot envision.

Chris Williamson 43:41 Hmm.

Morgan Housel 43:41 And just like if you went back six months from now, not a single person on the entire planet could have said, "Well, there's gonna be this coronavirus that's gonna ..." Like, no one could have said that. That's always the case.

Chris Williamson 43:52 Wasn't it, you, you highlighted all, all of the different people that were talking about whether or not, um, a, a cut in interest rates or a change in employment law was going to make a difference, and then coronavirus just comes in and shakes the Etch A Sketch and wipes everything off.

Morgan Housel 44:05 Yes. We, we spent 10 years debating who's gonna cause the next recession. Is it Barack Obama? Is it Ben Bernanke? Is it Donald Trump? Is it Janet Yellen? No, it's a virus.

Chris Williamson 44:14 (laughs)

Morgan Housel 44:14 It was none of those things. It's this little tiny virus. So that's, I think if that doesn't give you humility in your forecasting, then nothing will. So that's when i- i- it's not a comfortable answer, I get this, but no one knows what's gonna happen next. And my proof from that is no one knew, no one knew that this was gonna happen to begin with.

Chris Williamson 44:33 I couldn't agree more, man. Um, so w- a lot of the questions that I got have been from people talking about, right, when, uh, when do we react, when is it a good idea to invest in big companies that we hope will recover, uh, what are the signs that are going to show that they're recovering and stuff like that. Is it even possible to model at this stage?

Morgan Housel 44:54 Well, the important thing, and this is always true, and I know this will be true this time around too, is that the stock market is going to rebound well before the real economy rebounds. That's always how it happens. The stock market bottomed and then started rebounding in March of 2009, after the financial crisis. The real economy really didn't start getting better until early 2010, even into 2011. So the stock market, uh, always happens way before that. So if people wait for businesses to start recovering, the stock market's already in a g- going to have been recovered. That's, that's always the case, that will be true this time. So my recommendation for that is to say, look, you should really think hard about how much cash and liquidity that you need. Everyone's different, they have different job prospects, different job security, different cost structures, et cetera. But think about how much cash you need, and then once you have that secured, uh, just dollar cost average into the market. That's always what I do, and I don't think that's gonna change. So that would, that would be my advice to people is i- i- it gets dangerous if you say, "I'm gonna look for signs that business has hit bottom." That's, that's not a winning investment strategy. You gotta get in well before that. And the only way you're gonna get in before that is just kind of make it systematic and just say, "I'm gonna invest X dollars every month," and then that's it. Just keep it simple like that.

Chris Williamson 46:08 Oh, so you just piece into the market slowly over time. Is that right?

Morgan Housel 46:12 Just slowly over time. That's it, yeah. And I, I, I have my cash on the side, that keeps me safe, it's my security blanket at night, and, uh, after that, it's just dribbling in consistently over time. That's it.

Chris Williamson 46:22 I get it. So is that, uh, uh, I saw a, a comment someone had sp- it was Anton Kreil, actually. So Anton Kreil had tweeted the other day that he'd been asked, how does he feel ethically about making money in a situation like this, and I wondered what you and potentially some of the people that you're exposed to, your friends, if they ever have, um, an ethical consideration. You know, this is, any movement in the market is an opportunity for people to make money, and drastic movements in the market are drastic opportunities for people to make money. Do you ever think, like, "Oh God," like, you know, there's some friends that you'll have in there that will have been rubbing their hands together because they've been able to play the stock market in a good way and this opportunity's come to them. Do you think that people have a, a little bit of guilt in that? I don't know.

Morgan Housel 47:10 Well, I think there's two separate things, and I know this is not what you're referring to, but there's a story today about a guy who went around to every Costco he could and bought out the Clorox wipes and he's selling them for 100 times markup. Like, that's, that's, that's a profiteering that I would feel morally corrupt about, of course.

Chris Williamson 47:25 Hmm.

Morgan Housel 47:26 But I think if you were just saying, "This stock is cheap and I'm gonna buy it because I think it's gonna go up," no, I think there's absolutely noth- no moral guilt in that. Because especially markets going up, to the extent that you are a buyer and you are doing your, your, your marginal part to help markets go up, that affects a huge swath of the population. That's not just rich people. That's goes down to pensions and endowments that affect a large chunk of the population. So I, I don't think there should be any moral guilt about buying when stocks have plunged, and if anything, I'd say it's the other way around. It's almost like, look, this is not your, your full patriotic duty, but I do think there is a patriotic duty to pay, like, you know, to play your part in keeping the financial system together. A big part of that is not participating, like, in a bank run, which we don't have many of anymore because we have, we have insurance on our deposits. But that, you know, that's ... A, a bank run is an example of how you can be, uh, you know, going against your patriotic duty to keep the financial system together. So, and look, uh, uh, if, if people need to sell their stocks, I don't think they should feel guilty about that either. You gotta take care of your own needs, and a market is a market. You can buy or sell whenever you want. But no, I, I definitely don't think people should feel guilty about it, particularly if their wealth is gonna help them secure their family's future, their family's foundation. I think it's a wonderful thing that we should be proud of.

Chris Williamson 48:44 I get it. So is this an opportunity for somebody who has a solid amount of liquid cash to make money over the next year, the next few years?

Morgan Housel 48:56 I would, I would say, uh, yes, but I, but I would put a caveat on the last part of what you said, which was over the next year, next few years, I don't know. I don't know if this is going to clear up next week. I don't know if this is going to take 10 years. I, I don't know.

Chris Williamson 49:09 (laughs) Yeah.

Morgan Housel 49:10 As a long-term investor who's looking at truly the next generation, I'm investing for the next 30 years. I hope to pass along assets to my children. You know, when- when- when that is my time range, then I don't necessarily care whether this is going to take six months or a year or 10 years. It's not really a factor that's gonna materially change how I invest. Um, so that's the only caveat I would put onto that. I think this, this is an opportunity, as long as you have a very flexible time horizon in front of you.

Chris Williamson 49:38 Yeah.

Morgan Housel 49:39 And that, and it's also, it's also not to say that even though it, this might be an opportunity today, that does not- that- that is not to say that this might not get much worse from here. Those are two separate things. It might get much worse from here.

Chris Williamson 49:51 There's just so many unknowns, isn't there? You know, like, uh ...

Morgan Housel 49:55 Yeah. And having an unknown is so, like, having a very bad known thing does not hurt as much as having a little bit of uncertainty, if that makes sense. Like, I mean, he- here's an example. I'm just making this up. If I, if I punched you hard in the leg right now-

Chris Williamson 50:13 Mm-hmm.

Morgan Housel 50:14 ... uh, it might hurt, but it's just like, it's a known thing and it's over. Whereas if I said, "Chris, at some point in the next 24 hours-"

Chris Williamson 50:21 (laughs)

Morgan Housel 50:21 "... unexpectedly, I'm gonna punch you with medium strength in the leg."

Chris Williamson 50:25 Yeah.

Morgan Housel 50:25 That would bother you more than if I hit you really hard really quickly and just got it over with. Like, having an unknown and question mark is so much more painful than a known pain.

Chris Williamson 50:36 But-

Morgan Housel 50:36 And so it's, it's hard for everyone, and it really affects your long-term thinking. It's hard to, it's hard to think about the next year when the world as you know it changed in the last 48 hours. Very difficult to do that.

Chris Williamson 50:50 Well, you can-

Morgan Housel 50:50 So it's like, that amount of uncertainty just means that when people are looking ahead in their future, it used to be, if you go back two months ago, people had, you know, I think most people had a pretty good view of what their next year would look like. They know that they're going to do this, they're going to live here, they're going to work there. And now people are like, "I don't know what's gonna h-" and like, "Are, are we gonna be on lockdown tomorrow?" I don't know.

Chris Williamson 51:11 (laughs)

Morgan Housel 51:11 I just have no idea.

Chris Williamson 51:12 Yeah.

Morgan Housel 51:13 So that lo- that uncertainty is ver- is very hard just mentally to deal with.

Chris Williamson 51:18 There's that Larry Summers quote which you tweeted the other day, which was, "A good rule of thumb for many things in life holds that things take longer to happen than you think they will, and then happen faster than you thought they could." And there's that other one, I can't remember what the other one floating around, which is, um, "It takes decades for nothing to happen, and then sometimes decades happen in no time at all."

Morgan Housel 51:38 Exactly. There's another quote from, from, uh, Taleb who says, "History does not crawl, it leaps." And that's true. The biggest events of history happened overnight, and I think that happened in the last week. Um, and it's really interesting. So back to Larry Summers' quote, n- no one predicted that the economic expansion, the bull market, would last this long. Nobody. It lasted much longer than anyone thought, and it has now come to an end faster than anyone thought as well.

Chris Williamson 52:07 Mm. It's, man, i- i- from a- an economics perspective, this must be a fascinating thing to study and will be a fascinating thing to study for a significant amount of time, I'm gonna guess.

Morgan Housel 52:21 It's, it's true, but I can tell you for myself, as someone who's studied these things m- more or less for a living, um, of course, I'm, I'm ... y- you know, is it fascinating? Sure. But I'm worried about my parents' health. I'm worried about my family's health. So there's, it's, it's this weird thing of like, yes, this is fascinating, but it's also like, it's a scary time for everyone, you know?

Chris Williamson 52:41 Yeah. Yeah, it is. And that's, I think we, both of, me and you have today said a lot of things with trepidation and kind of tried to tread carefully on the ice, because we know that it's a, a traumatic and difficult time for a lot of people. Um, and yet, in the same sentence, it's also fair to say that it's an opportunity for growth. It's also an opportunity to make money. It's also a time that we should be studying. There's also some potential good things which should come out of it. Um, and, you know, I think ... I haven't seen much yet online of people being called out for being insensitive to these sorts of things. I do believe that people are actually a little bit more attuned to the nuance of some of these arguments at the moment, um-

Morgan Housel 53:27 Yep.

Chris Williamson 53:27 ... which, which actually makes me feel really confident. Um, it, I'm, I'm glad that it's the case that people aren't jumping down each other's necks about this. You are right. There is some, some finger-pointing, but not-

Morgan Housel 53:42 Yeah.

Chris Williamson 53:42 I don't think there's as much as there, as there could be. It does feel like people are banding together.

Morgan Housel 53:47 There's a great book written by s- uh, an author named Sebastian Junger. Uh, the book is called Tribes, and it's a very short book. You can read it in two hours, and just talks about kind of the social consequences of being in a tribe. And tribes take very different forms. There's Native American, like, tribes, but there's also just like, college is as a tribe. Uh, your, your coworkers are part of your tribe.

Chris Williamson 54:07 Football team.

Morgan Housel 54:08 And a, a point that he makes that really stood out to me is like, when a tribe goes through a shared trauma, as I think we are right now, there's a very long history of people banding together and being like, "Look, we're all in this together. We're gonna suffer together. We're gonna, we're gonna find a solution together, and we're gonna walk out of this together, arm in arm." That happens a lot. Let me go back to the London Blitz, which I think, I think you probably know more about than I do. But I- I've heard stories along the similar lines. Like, everyone was in a terrible situation, and there were, there are stories of people just being like, "Look, we're, we're, we're in this together. We're gonna rebuild together. We're gonna do this together." Some of those stories can be really inspiring. It's not to minimize the trauma that comes from that, but it's a, it's a, it's probably something that is easy to overlook when you and I are sitting here right now trying to co- trying to ponder the next year in front of us.

Chris Williamson 54:55 Mm.

Morgan Housel 54:55 It's probably easy to overlook the benefits and the upside of what happens when people band together against a shared enemy.

Chris Williamson 55:01 I get it. Right, I got a couple of questions. I want to ask you first about what would be some indications that the market, on a whole, is either getting better or worse, and then I'm gonna, we're gonna have one final question after that.

Morgan Housel 55:14 I think, uh, so let me, as I'm sitting here right now, this'll be dated when this podcast comes out, but I'm sitting here right now, the Dow Jones is up 1,700 points.

Chris Williamson 55:23 (laughs)

Morgan Housel 55:23 Uh, you might think, "That's great! Big rebound! Maybe we're back." I would, I would be cautious about that. A massive up day is just as unstable as a massive down day. So what would, what would make me think that the market is, is kind of stabilized? It's not that it stops going down, it can still go down, but I want to see it go down by 100 points, not 2,000 points. Um, and, and I, I, I want to stop seeing it go up 1,700 points. I want to see it just go up 100 points in a day. So once this, the, the daily percentage movements become more in line, I'll be, I'll be more confident that it's stabilized. But even when it's up 1,700 points, that to me is not good news. That to me is as g- that, that to me is a sign that no one has any idea what the hell is going on.

Chris Williamson 56:07 (laughs)

Morgan Housel 56:09 Uh, so, so that, that would be what I'd be looking for, is just a, a ... b- by the way, in the last minute, now it's up 2,000 points.

Chris Williamson 56:15 Oh my God.

Morgan Housel 56:16 So here we are.

Chris Williamson 56:16 Wow. Yeah, so, and, and that's the thing, we're about to see market close, right, on a Friday evening, and then when this podcast will go out on Monday. So, you know, on Monday, people will be watching this podcast and they, they might v- very well might look and it could be down, it could be down more than that 1,700, right? It could have-

Morgan Housel 56:31 Sure.

Chris Williamson 56:31 ... reversed all of today's gains and more.

Morgan Housel 56:34 Of course. I mean, it was down 2,000 yesterday and now up 2,000 today, so the, the, there's net no change. It's just what's happened in between has been pure and utter chaos.

Chris Williamson 56:42 (laughs) Okay, um, final thing. We've sp- um, touched on Nassim Taleb today, and he's got a concept called antifragile, which is things which gain from disorder. Um, I've got a couple of suggestions, and I wondered if you had, about how c- how people can, uh, become antifragile during this period. Perhaps they're going to be under containment, perhaps they're going to be under some form of lockdown/house quarantine/ at least, at the very least, restricted movement. So, one of the suggestions which I've got is to buy a couple of bits of DIY equipment and maybe some paint and do some home decorating-

Morgan Housel 57:23 Love it.

Chris Williamson 57:23 ... in that room in the house that you've been intending on doing for the last 10 years, and now you've finally got it.

Morgan Housel 57:29 Love it. I think that's great. I think, I, what, what I was gonna say along those lines was, hey, if you're on lockdown, you got some free time for whatever, great time to listen to some podcasts, read some books. That's, that's what I'm gonna be doing.

Chris Williamson 57:40 Link to subscribe in the show notes below. Press subscribe here. Modern Wisdom, every Monday, every Thursday. Morgan Housel in the building. (laughs)

Morgan Housel 57:46 There it is.

Chris Williamson 57:48 Yeah.

Morgan Housel 57:48 But yeah, I think, I think most people, I think, I, I, I run into a lot of people that say, "I wanna read more, I just don't have time." Well, you, you, you might be about to get some time, so take advantage of it if you can.

Chris Williamson 57:58 Yeah, exactly. Well, we're gonna see just how much you actually want to read more when you do have time. But yeah, I couldn't agree more. You know, like, antifragile, um, industries, podcasting, definitely, the episode that I brought out at the start of this week with Eric Ding is now second only to my episode with you after five days-

Morgan Housel 58:16 (laughs)

Chris Williamson 58:16 ... of all-time plays, because obviously people are interested in that. Um, books, you know, like anything online. Netflix, I can't imagine how many more Netflix things. Have you seen that Porn-

Morgan Housel 58:26 Oh, yeah.

Chris Williamson 58:26 Have you seen that Pornhub Premium has given all people in Italy free access?

Morgan Housel 58:30 I did. I did. It was, it was brilliant marketing on their part. That was-

Chris Williamson 58:33 Unbelie-

Morgan Housel 58:33 ... that was, that was a, that was a smart decision for them.

Chris Williamson 58:35 PornHub is now a public service.

Morgan Housel 58:38 (laughs)

Chris Williamson 58:40 (laughs)

Morgan Housel 58:41 I, I, I, I, I have no comment on that, but I'm, uh, I'm, uh, but I'm not gonna disagree. I'm not gonna disagree, how about that?

Chris Williamson 58:48 Yeah, we were talking earlier on about how, um, having a girlfriend or like, having a partner is pr- pretty antifragile because the dating market is definitely going to suffer over the next couple of years. That's what no one's talking about, Morgan. I need you to start tweeting about the f- fuck the, the price of Apple and fuck the Dow Jones, I want to know about the dating market and wh- why that's doing.

Morgan Housel 59:07 The dating market?

Chris Williamson 59:08 Yeah.

Morgan Housel 59:08 And, and, and you're right. I think my, my two prized assets right now are maybe ... oh, no, no, I, I shouldn't, I shouldn't ... let's just ...

Chris Williamson 59:18 (laughs)

Morgan Housel 59:19 Um, I was gonna ... Uh, uh, uh, what I was gonna say, and I, I, I don't want to frame this as asset, but I was gonna say I'm, I'm, I'm lucky to have a spouse right now that I can hang out with and enjoy a lot of free time that, that we didn't have before 'cause we're, we're kind of on lockdown now, so ...

Chris Williamson 59:32 Yeah.

Morgan Housel 59:32 We're, you know ... And I, I travel a lot for work, um, and, and now of course all that is canceled, so I, I'm about to embark on the longest uninterrupted stretch with my children that I've ever had, which is great, right?

Chris Williamson 59:42 Well, i- it might be great or you might lose your mind. So we'll, we'll, we'll-

Morgan Housel 59:46 (laughs) We'll check back.

Chris Williamson 59:47 Yeah, exactly. Um, other, uh, other antifragile bits of advice that I've got for you. Buy, uh, probably not secondhand, or if you do buy it secondhand, disinfect it, a musical instrument. You've been thinking about starting a musical instrument for ages, perhaps that's a way to do it. Definitely books. Like, buy a Kindle. Like, you know, if, if w- you've got to prepare for the absolute worst, and potentially Amazon shipping becomes reduced, buy a Kindle. It's like £79, probably less than $100, and you'll just have o- essentially unlimited books. Get an Audible subscription as well. Netflix, maybe get an Xbox or a PlayStation or something like that. Uh, Amazon Prime for movies. (sighs) You know, a, a kettlebell. A kettlebell, a couple of resistance bands and a couple of cheap dumbbells from anywhere and that, that's y- you know, like, what else do you need? I don't know what else you need. That's me happy. I'd be happy living like that for a year.

Morgan Housel 1:00:41 That's good. You got your intellectual health, you got your physical health. What, what more do you want?

Chris Williamson 1:00:45 Couldn't agree more, man. Look, Morgan, I, um, I, I genuinely, genuinely don't want to have to speak to you again until your book comes out, because if we do, it's because there's another financial crisis. Um ...

Morgan Housel 1:00:55 I'll, I'll, I'll try not to take that as an insult, but that sounds good. Let's, let's, let's, let's plan on it.

Chris Williamson 1:00:59 (laughs) It's been so good. Um, twitter.com/morganhousel, H-O-U-S-E-L, will be linked in the show notes below. I implore you to go and follow Morgan for some good updates about what's going on with the market. Final thing, where would you suggest people go, Morgan, for a bit of news if they want some, um, accurate, sort of non-sensationalist news with regards to the current state of the financial market and economics? Is there anywhere that you'd suggest that they go?

Morgan Housel 1:01:30 I h- that's, that's a great question. I don't know if I have a good answer, other than, um, I, I think you can, you can tell who's being sensational and who's not very quickly, and it's ... I, I, I don't, I, I don't know if I have a good answer for that. Just, uh, there's some people who I follow on Twitter and some of them seem to be taking a rational stance and some of them seem to be just hyperventilating about a lot of stuff.

Chris Williamson 1:01:51 (laughs)

Morgan Housel 1:01:51 Uh, (sniffs) but, you know, there, there is a very good dashboard put out by Johns Hopkins, I believe, that just has a world tally of coronavirus known, uh, known carrier, carriers, deaths, recoveries, where they are, a map of the world, and there's a really good dashboard to follow just to kind of track the progress of what's going on that's really interesting.

Chris Williamson 1:02:10 Awesome. Morgan, thank you so much, man. I really appreciate it. Um, everything that we've spoken about, linked in the show notes below. You know what to do, like, share and subscribe. If you've got any questions, feel free to hassle Morgan on Twitter, or me, wherever you follow me. Morgan, thanks man.

Morgan Housel 1:02:25 This has been fun. Thank you.

Narrator 1:02:27 (music)