Latest / Masters in Business / The Art of Spending Money with Bestselling Author Morgan Housel

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The Art of Spending Money with Bestselling Author Morgan Housel · Masters in Business

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Masters in
• 0:11
  Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
• 0:17
  Speaker 2: On the latest Masters in Business podcast. My conversation with
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  Speaker 2: Morgan Housel. I've known Morgan for I don't know fifteen years,
• 0:25
  Speaker 2: and I've loved all of his writing and his books.
• 0:29
  Speaker 2: The Psychology of Money is one of the best best
• 0:33
  Speaker 2: sellers in all of personal finance, coming up on ten
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  Speaker 2: million copies sold. Amazing same as ever Timeless Stories about
• 0:41
  Speaker 2: Human Nature. The new book The Art of Spending Money,
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  Speaker 2: Simple Choices for a Richer Life, drops today. I thought
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  Speaker 2: this conversation is one of our best. Morgan is a
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  Speaker 2: deeply thoughtful person. Everything he says comes from both experience
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  Speaker 2: and academics. I love the way he puts stories together
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  Speaker 2: with lessons. I thought the conversation was fascinating, and I
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  Speaker 2: think you will also with no further ado, My conversation
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  Speaker 2: with author Morgan Housel. Let's for people who may not
• 1:14
  Speaker 2: be familiar with you in your career, Let's give them
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  Speaker 2: a little bit of background. You go to University of
• 1:20
  Speaker 2: Southern California, where you get a BA in economics. What
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  Speaker 2: was the career plan?
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  Speaker 3: The plan all along was to be an investment banker
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  Speaker 3: or a hedge fund manager.
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  Speaker 4: The reason why is.
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  Speaker 3: Every or very many young, ambitious, young twenty something males,
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  Speaker 3: particularly in the mid two thousands, that was the thing
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  Speaker 3: to do. If you go back to the early mid
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  Speaker 3: two thousands, tech really wasn't that much of a thing yet.
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  Speaker 3: Of course it was around, but it didn't have the money,
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  Speaker 3: the prestige the growth that.
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  Speaker 2: Did, especially after the crash after.
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  Speaker 4: The Gosh, finance was the thing.
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  Speaker 3: If you were young and ambitious and wanted to make
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  Speaker 3: a lot of money, you went to Wall Street, you
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  Speaker 3: worked at Goldman Sachs or investment banker. That's what I
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  Speaker 3: wanted to do, Plan A, B and C didn't want
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  Speaker 3: anything to do. I got an investment banking internship in
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  Speaker 3: what would have been I guess junior year, and it
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  Speaker 3: was like, this is it, this is the dream. Here
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  Speaker 3: we go, this is awesome. Within ten minutes of the
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  Speaker 3: first day, I knew it was not for me.
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  Speaker 4: Ten minutes.
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  Speaker 3: It took ten minutes for me to be like, Nope, nope,
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  Speaker 3: that's not going to work. I'm I can do good work,
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  Speaker 3: but not under the hazing style pressure that was so
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  Speaker 3: prevalent in banks back then. And it's not that I
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  Speaker 3: didn't have the work ethic for it. It was just
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  Speaker 3: it seemed like such a broken culture that I wanted
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  Speaker 3: nothing to do.
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  Speaker 2: It's so funny you said that I had the same
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  Speaker 2: experience as a first year associate and a summer associate
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  Speaker 2: in a law firm, and I'm like, oh, this is
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  Speaker 2: a horrible lifestyle. You're in your twenties. Why do I
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  Speaker 2: want to be spending every weekend in the law library.
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  Speaker 2: It was miserable.
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  Speaker 4: Yeah.
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  Speaker 3: They had a quote on the first day of my
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  Speaker 3: investment banking internship and they said, the rule here is
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  Speaker 3: if you don't come to work on Saturday, don't bother
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  Speaker 3: coming back on Sunday.
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  Speaker 4: And I went, nope, no, what about Monday. That's not
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  Speaker 4: for me. That's great.
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  Speaker 2: So I don't have to work weekends. Fantastic, see it right?
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  Speaker 3: So then, so I didn't know what to do, and
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  Speaker 3: I was really a drift and lost. And then I
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  Speaker 3: graduated in two thousand and eight financial crisis. World is
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  Speaker 3: in flames, nobody is hiring, and I stumbled haphazardly, not
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  Speaker 3: by any plan or strategy. Out of desperation, I took
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  Speaker 3: a job as a finance writer at the Molly Fool.
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  Speaker 2: So were you an analyst or a finance writer?
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  Speaker 4: A writer from day one? I was still in college
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  Speaker 4: at the time, Uh huh.
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  Speaker 3: And I started covering banking stocks at the Motley Fool
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  Speaker 3: in two thousand and seven time, and I've been a
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  Speaker 3: writer ever since.
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  Speaker 2: So I'm curious talking about being a hedge fund manager
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  Speaker 2: or an investment banker. I know your early life you
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  Speaker 2: were both a ski bomb and a car valet. Yeah,
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  Speaker 2: parking really expensive cars. Did that have any influence on
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  Speaker 2: your initial erroneous career choice?
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  Speaker 4: It had so much influence.
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  Speaker 3: But really, I grew up in a middle class family,
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  Speaker 3: great town and not a wealthy town, not poor, not
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  Speaker 3: out in the sticks, but a decidedly middle class town
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  Speaker 3: in California's just outside of Lake Tahoe, California. Also before
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  Speaker 3: tech money infiltrated Lake Talk, So back then it was
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  Speaker 3: truly just a small little mountaintown.
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  Speaker 4: It's not anymore because tech money came up.
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  Speaker 3: And so I didn't have much concept of wealth because
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  Speaker 3: in the town that I grew up in, regular people
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  Speaker 3: had old pickup trucks and rich people had new pickup trucks.
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  Speaker 3: That was the stratification of wealth. That was as far
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  Speaker 3: as it got. And so but anyway, I started working
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  Speaker 3: at this these fancy hotels and all of a sudden,
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  Speaker 3: people were starting to come in in these cars that
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  Speaker 3: just blew my mind. Not just BMW's and Mercedes, but Ferraris,
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  Speaker 3: Lamborghinis once in a while. And then I went to
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  Speaker 3: college in Los Angeles, stayed working as a valet at
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  Speaker 3: even nicer hotels in LA and then it was Rolls,
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  Speaker 3: Royce's and Aston Martins, and it was just a level
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  Speaker 3: of wealth.
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  Speaker 4: That I didn't know existed.
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  Speaker 3: And in my young, you know, nineteen twenty year old mind,
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  Speaker 3: it was just so appealing to me. I was just
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  Speaker 3: overwhelmed with, like, whatever that is, I want it. I
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  Speaker 3: want some of that immediately. But it was also I
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  Speaker 3: think I not on purpose, but I think I just
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  Speaker 3: kind of started picking up the little subtle clues of
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  Speaker 3: the psychology of rich people. The first thing that was
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  Speaker 3: I was very apparent was that a lot of them
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  Speaker 3: were not that happy. A lot of them were just
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  Speaker 3: kind of old, bitter, broken men arguing with their wives,
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  Speaker 3: always kind of stressed, third wives right right away, always stressed,
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  Speaker 3: always barking on the phone, and it was, and it
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  Speaker 3: was all the time. It was all the time, And
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  Speaker 3: I remember picking up on that and being like, Hey,
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  Speaker 3: on one hand, I really want that. On the other hand, like,
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  Speaker 3: is that supposed to be my role model? Because it
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  Speaker 3: doesn't look that great. And I know a lot of
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  Speaker 3: middle class people from the town I grew up and
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  Speaker 3: who seemed a hell of a lot happier than that guy.
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  Speaker 3: And so I think that was I started picking up
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  Speaker 3: on kind of the psychology of wealth, not intentionally, but
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  Speaker 3: it was a very good window into that aspect of
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  Speaker 3: wealth because in my little, p size nineteen year old brain,
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  Speaker 3: it was in my what I assumed was you have
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  Speaker 3: so much money, you must just be a walking ball
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  Speaker 3: of happiness. That was that was the intuition that I had,
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  Speaker 3: But it was so clearly not that.
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  Speaker 2: So think about that for a second. And I have
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  Speaker 2: so much stuff from your new book to that's relevant
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  Speaker 2: to this, but we'll get to that later. Think about
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  Speaker 2: when you're young and relatively broke. And I grew up
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  Speaker 2: lower middle class and put myself through college and grad
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  Speaker 2: school and always felt like, Gee, if only I didn't
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  Speaker 2: have to worry about money, how much greater my life
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  Speaker 2: would be. But chasing away the lack of money blues.
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  Speaker 2: That's just a modest decrease in stress, not the secret
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  Speaker 2: to happiness.
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  Speaker 3: I think of what is tends to be true, and
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  Speaker 3: there's no hearted fast rules here. This is not black
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  Speaker 3: and white, but it tends to be true that wealthier
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  Speaker 3: people might have fewer bad days than poor people. I
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  Speaker 3: don't know if they necessarily have more good days. That's
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  Speaker 3: a great now, that is a lifestyle improvement. To have
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  Speaker 3: fewer bad days, to not have to worry and stress
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  Speaker 3: about making rent and healthcare and whatnot to remove. That
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  Speaker 3: is a lifestyle improvement, but it is not happiness. It
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  Speaker 3: is different in the same way that you and I
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  Speaker 3: are fortunate enough to wake up every morning not worrying
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  Speaker 3: about catching polio, right, that's a lifestyle improve.
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  Speaker 2: Or what you can eat that dell or exactly will
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  Speaker 2: you eat that? Right?
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  Speaker 3: And relative to the standards of one hundred years ago,
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  Speaker 3: that is an unbelievable lifestyle improvement. But it's not happiness
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  Speaker 3: because you and I didn't wake up this morning thinking
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  Speaker 3: about it.
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  Speaker 2: That is simply Maslow's hierarchy of basic needs. That's different
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  Speaker 2: than happiness than contentment, which we'll talk about so let's
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  Speaker 2: stay with your writing at the Motley Fool. One of
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  Speaker 2: the things two of the things that really distinguish your writing. First,
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  Speaker 2: you're a great storyteller and you find some fascinating stories.
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  Speaker 2: But second, you figured out early that finance is not
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  Speaker 2: so much about math as it is about behavior. Now
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  Speaker 2: tell us how you stumbled into an interest in behavioral finance.
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  Speaker 3: So much of this was moley Ful is a stock
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  Speaker 3: picking organization, and I'm not I don't look down upon
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  Speaker 3: stock picking, but it's not what I do. It's not
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  Speaker 3: how I invest, it's not what interests me at all.
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  Speaker 3: And so I kind of had to find a little
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  Speaker 3: niche for myself. At the Mali Fool, they were completely
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  Speaker 3: and they were completely supportive of my you know, kind
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  Speaker 3: of black sheepedness being there being like, hey, you know
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  Speaker 3: everyone else is picking stocks and I'm just trying to
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  Speaker 3: do something else over here. You're counterprogramming, right, And so
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  Speaker 3: I had to figure out what to do. For a while,
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  Speaker 3: it was macro. This was post financial crisis, and I
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  Speaker 3: was like, I'm going to study the forces of the economy,
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  Speaker 3: and that not intentionally but kind of just pushed into
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  Speaker 3: behavior in psychology, I think a lot of that was
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  Speaker 3: as I was studying macro, this realization and you've been
• 8:36
  Speaker 3: a big part of this as well, of realizing that
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  Speaker 3: there is nothing in a macro textbook that will explain
• 8:42
  Speaker 3: two thousand and eight, and so as a writer, as
• 8:44
  Speaker 3: I was trying to explain what just happened and the
• 8:47
  Speaker 3: aftermath of the GFC was there's nothing in there that
• 8:49
  Speaker 3: explained why people did what they did. Nothing in an
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  Speaker 3: economics textbook or the academic framework that would explain the
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  Speaker 3: housing bubble that preceded it, the behavior during the crash,
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  Speaker 3: the pessimism after it, Like, not much there, but if
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  Speaker 3: you looked at it through the lens of psychology or sociology,
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  Speaker 3: or political science or evolution, all these other fields like
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  Speaker 3: had a lot to say and could explain why people
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  Speaker 3: were doing the things they do.
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  Speaker 2: So that was just the subtle.
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  Speaker 3: Coming to terms with the idea that money and finance
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  Speaker 3: is not the study. It's not the study of finance,
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  Speaker 3: it's a study of how people behave with money.
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  Speaker 2: So I'm pulling forward a quote from later in our
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  Speaker 2: conversation that's dead on with that insight. Risk has two stages.
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  Speaker 2: First one it actually hits. Then when the scars influence
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  Speaker 2: our subsequent decisions. Now, so you graduate into the eight
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  Speaker 2: to nine disaster, everybody post financial crisis, and I shouldn't
• 9:47
  Speaker 2: say everybody, but so many people post financial crisis was Hey,
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  Speaker 2: that was just the first leg after March or nine, Wait,
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  Speaker 2: wait for the second leg.
• 9:56
  Speaker 3: Nerrophrase double dip recession. That's where everybody said it for
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  Speaker 3: eighteens a day. It was decades before. If you go
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  Speaker 3: back to twenty ten, particularly twenty eleven, everybody in the
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  Speaker 3: financial media said the phrase double dip recession every hour.
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  Speaker 3: It was inevitable. It was absolutely inevitable. The other version
• 10:14
  Speaker 3: of this is at the end of World War Two
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  Speaker 3: nineteen forty five, it was a foregone conclusion that nobody
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  Speaker 3: disagreed with that the US economy would fall right back
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  Speaker 3: into the Great Depression, that in the absence of military spending,
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  Speaker 3: it was not just going to contract and revert to
• 10:27
  Speaker 3: the mean, it was going to go back to the
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  Speaker 3: nineteen thirty two lows of desperation. And in hindsight it
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  Speaker 3: didn't happen, but it was a foregone conclusion back then.
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  Speaker 3: It is always the case that the simple narrative, and
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  Speaker 3: oftentimes the simple narrative is just extrapolating whatever just happened
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  Speaker 3: is going to be the most appealing, the most logical,
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  Speaker 3: It makes the most sense in the cyclical nature of economies. Though,
• 10:48
  Speaker 3: like we all know in hindsight, what happened during those
• 10:50
  Speaker 3: piers that actually the end of World War Two. There
• 10:52
  Speaker 3: were some mild recessions in the late forties and fifties,
• 10:55
  Speaker 3: but by and large that was actually the beginning of
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  Speaker 3: an epic boom in the fifties and sixties, and after
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  Speaker 3: the GFC, you know, twenty nine twenty ten, that was
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  Speaker 3: in the stock market and economically the beginning of a boom.
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  Speaker 4: And it's almost.
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  Speaker 3: Impossible to realize that in real time, as it was
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  Speaker 3: almost impossible to realize in ninety nine two thousand that
• 11:16
  Speaker 3: of course in tech stocks, but also in the broader
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  Speaker 3: economy that was about as good as it gets. And
• 11:21
  Speaker 3: when it's just about as good as it gets, that
• 11:22
  Speaker 3: was it was so easy to extrapolate from there, but
• 11:24
  Speaker 3: that was actually the end of the good days.
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  Speaker 2: You know. The shocking thing about the post financial crisis period,
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  Speaker 2: and I'll take a little credit for flowing this phrase
• 11:34
  Speaker 2: out there, it was the most hated bull market in
• 11:37
  Speaker 2: history by like October nine, people were talking about wait
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  Speaker 2: for the next thirty forty percent dip, and you mentioned hindsight.
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  Speaker 2: Our hindsight bias keeps us looking backwards and ignoring the
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  Speaker 2: fact that, hey, when is a down fifty percent market
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  Speaker 2: in the US not a great entry point, all right,
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  Speaker 2: nineteen twenty nine, But that is the exception to rule
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  Speaker 2: every other time it's been down cut in half.
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  Speaker 3: I'm a buyer, right, And actually, if you go back
• 12:04
  Speaker 3: to you know, nineteen thirty one thirty two, when the
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  Speaker 3: market was down fifty percent, it eventually fell eighty nine percent,
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  Speaker 3: So if it was down fifty percent, you still lost
• 12:11
  Speaker 3: a fortune after that, that's right. But if you made
• 12:13
  Speaker 3: those purchases down to hel percent ten years later, you
• 12:16
  Speaker 3: were doing an absolutely incredible Now that was that's cold
• 12:19
  Speaker 3: comfort for the other fifty percent that you continued to
• 12:21
  Speaker 3: lose by nineteen thirty two. But there's all these cases
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  Speaker 3: where people say they're long term investors, and they want
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  Speaker 3: to be long term investors, but then, particularly when they're
• 12:30
  Speaker 3: trying to buy the dip, if the market falls for
• 12:32
  Speaker 3: another ninety days after that, they feel like they've made
• 12:35
  Speaker 3: a colossal error.
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  Speaker 2: So I find there's a huge difference. Many people are
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  Speaker 2: intellectually long term investors, but emotionally they're not, and that
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  Speaker 2: tension is what drives a lot of that.
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  Speaker 4: See, I would put a different spin on that.
• 12:49
  Speaker 3: I would say a lot of people, you know, claim
• 12:52
  Speaker 3: to be kind of short term investors in the sense
• 12:55
  Speaker 3: that on Twitter they're like, oh, this is this is
• 12:57
  Speaker 3: the peak, this is the top. The I mean in
• 13:00
  Speaker 3: Q four is not looking They say things like that,
• 13:02
  Speaker 3: But if you actually looked how they invest like and
• 13:04
  Speaker 3: therefore they dollar cost average into their four to one
• 13:06
  Speaker 3: ks and never sell anything.
• 13:07
  Speaker 2: And that's the right approach market crash. In fact, you
• 13:11
  Speaker 2: never pick a point as the bottom, even if you
• 13:15
  Speaker 2: put a big chunk of your free capital. You should
• 13:17
  Speaker 2: always be hey, I don't know where the bottom is.
• 13:21
  Speaker 2: I'll try a little in nineteen thirty and a little
• 13:24
  Speaker 2: more throughout thirty one and thirty two. Eventually your average
• 13:27
  Speaker 2: is going to be far lower with than where the
• 13:29
  Speaker 2: market is. But you have to have a steady source
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  Speaker 2: of capital and some income.
• 13:33
  Speaker 3: Now, I remember in twenty eleven when there was the
• 13:36
  Speaker 3: double Depp recession and the market did fall I don't
• 13:38
  Speaker 3: know twenty or thirty percent. That was probably more pessimistic
• 13:41
  Speaker 3: in twenty eleven than people were in two thousand and nine.
• 13:43
  Speaker 4: Twenty eleven, people were.
• 13:44
  Speaker 2: Like, this is it, this is over going back down
• 13:46
  Speaker 2: to the.
• 13:46
  Speaker 3: Market was plunging, and the narrative was everyone's panicking, everyone's selling.
• 13:50
  Speaker 3: Vanguard put out a study that showed during that era,
• 13:54
  Speaker 3: ninety nine percent of their clients did nothing, didn't sell,
• 13:58
  Speaker 3: what didn't do any didn't do anything. And so the
• 14:00
  Speaker 3: narrative of everyone's panic, everyone's selling is usually so completely
• 14:04
  Speaker 3: different from what people are actually doing.
• 14:06
  Speaker 2: So let me share one of my favorite quotes of yours,
• 14:09
  Speaker 2: since you're talking about highs and lows. Every market valuation
• 14:14
  Speaker 2: is a number from today multiplied by a story about tomorrow.
• 14:19
  Speaker 2: I think that's genius. I love that quote.
• 14:21
  Speaker 4: Thank you.
• 14:21
  Speaker 3: You know it's always a number from today, like earnings
• 14:23
  Speaker 3: per share, multiplied by a story about tomorrow, like a
• 14:27
  Speaker 3: valuation multiple. And what's important is, particularly in a low
• 14:30
  Speaker 3: interest rate environment and particularly in a ZERP environment, those
• 14:34
  Speaker 3: stories are everything. The number from today almost doesn't matter.
• 14:38
  Speaker 3: The stories are everything. That's always been the case. But
• 14:40
  Speaker 3: in a social media world, the stories get bonkers. The
• 14:43
  Speaker 3: stories get absolutely nuts.
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  Speaker 2: Narratives become memes.
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  Speaker 4: Yeah, you know, Ben.
• 14:47
  Speaker 3: Graham had the quote in the stock market is a
• 14:49
  Speaker 3: voting machine or nol miamis knees voting machine in the
• 14:53
  Speaker 3: short term and a weighing machine in the long run.
• 14:55
  Speaker 3: But he said that one hundred years ago, and it's
• 14:57
  Speaker 3: still true. But they're because of how the world works today,
• 15:01
  Speaker 3: stocks can remain voted on, not necessarily weighed. For probably decades,
• 15:06
  Speaker 3: Tesla has been a voted upon stock, not a weight
• 15:09
  Speaker 3: upon stock, for its entire existence, and maybe that will
• 15:13
  Speaker 3: change someday. But I think in previous eras in the
• 15:16
  Speaker 3: Ben Gram era, or even not even you know, twenty
• 15:18
  Speaker 3: or thirty years ago, you could have brief, momentary flashes
• 15:23
  Speaker 3: of insanity. And that was probably the late nineties you had,
• 15:26
  Speaker 3: you know, eighteen months of just pure insanity where everything
• 15:29
  Speaker 3: was narrative driven, it wasn't really earnings driven. And now
• 15:33
  Speaker 3: you can have that going on for very long periods
• 15:35
  Speaker 3: of time. I mean, how long has has Hurts and
• 15:39
  Speaker 3: game stock been been meme stocks?
• 15:42
  Speaker 2: Like years, five, five years? Is still I think it's
• 15:44
  Speaker 2: still a thing, still a reddit, It's still a thing.
• 15:46
  Speaker 3: It's still still a thing, maybe not to the extent
• 15:49
  Speaker 3: that it was, but these stocks did not revert all
• 15:51
  Speaker 3: the way back. They still have this cult meme following,
• 15:55
  Speaker 3: and so the point being, it's always a number from
• 15:57
  Speaker 3: today multiplied by a story about tomorrow. Because the world
• 16:00
  Speaker 3: we live in interest rates and social media, the stories
• 16:03
  Speaker 3: get insane.
• 16:03
  Speaker 2: So let me mix your Canes quote with your own quote.
• 16:09
  Speaker 2: In the short run, markets or probability machines. In the
• 16:12
  Speaker 2: long run their narrative machines. That that's a good blend
• 16:16
  Speaker 2: of view, and Canes there are worse people to marry.
• 16:20
  Speaker 2: All right, One or two more questions in this segment
• 16:24
  Speaker 2: before we move on. I'm you address one of my
• 16:29
  Speaker 2: favorite pet peeves about uncertainty in a sentence that I love. Quote.
• 16:35
  Speaker 2: There's rarely more or less economic uncertainty, just changes in
• 16:39
  Speaker 2: how ignorant people are to potential risks. That sums it
• 16:43
  Speaker 2: up perfectly. I hate the uncertainty meme because by definition,
• 16:48
  Speaker 2: the future is always inherently uncertain.
• 16:50
  Speaker 3: Yeah, I mean, there have been some academics who have
• 16:53
  Speaker 3: tried to make uncertainty indexes. Where they make it in
• 16:55
  Speaker 3: the end, you can put it on a chart to
• 16:57
  Speaker 3: measure the amount of uncertainty, and there's various ways that
• 16:59
  Speaker 3: they do. In terms of like newspaper narratives and changes
• 17:02
  Speaker 3: in economic policy, and to map out uncertainty. And what's
• 17:06
  Speaker 3: so fascinating to me is if you look at these indexes,
• 17:08
  Speaker 3: which I think are pretty rationally put together, it shows
• 17:11
  Speaker 3: that uncertainty is the lowest, as in certainty was the
• 17:15
  Speaker 3: highest at two periods in modern times.
• 17:17
  Speaker 2: I guess three periods.
• 17:18
  Speaker 3: One is right before nine to eleven, the other is
• 17:20
  Speaker 3: right before the GFC, and the other is right before COVID.
• 17:24
  Speaker 3: That was when purportedly we understood the future in the
• 17:27
  Speaker 3: greatest degree.
• 17:28
  Speaker 2: And if you go to Sack time completely insane, I'm
• 17:30
  Speaker 2: going to tell you there was a lot of certainty
• 17:32
  Speaker 2: in late ninety nine. Yeah, stocks grow to the sky,
• 17:35
  Speaker 2: and you go back to March on nine, there was
• 17:37
  Speaker 2: certainty that stocks was going to zero.
• 17:39
  Speaker 3: And so what we know in hindsight is that those
• 17:41
  Speaker 3: three periods just before nine to eleven, just before two
• 17:43
  Speaker 3: thousand and eight, and just before COVID were the most
• 17:47
  Speaker 3: uncertain That was when your view of the future was
• 17:49
  Speaker 3: completely and utterly wrong, no matter who you were or
• 17:51
  Speaker 3: how smart you were. And so I think it's true
• 17:54
  Speaker 3: that there is never more or less uncertainty. It's just
• 17:58
  Speaker 3: we go through periods where we are more ignorant and
• 18:00
  Speaker 3: more confident in our ability to forecast than others.
• 18:03
  Speaker 2: Let's talk about luck. I just wrote something about this
• 18:08
  Speaker 2: and found a quote of yours afterwards that I would
• 18:10
  Speaker 2: have loved to use. Most people when they talk about luck,
• 18:14
  Speaker 2: increasing the surface area of your luck. Luck is where
• 18:17
  Speaker 2: preparation meets opportunity. Your definition of luck recognizes that it's
• 18:22
  Speaker 2: something fundamentally outside of your controls quote you can't believe
• 18:27
  Speaker 2: in risk without also believing in luck because they're fundamentally
• 18:30
  Speaker 2: the same thing, and acknowledgment that so much is outside
• 18:34
  Speaker 2: of your control.
• 18:35
  Speaker 3: Yeah, when people say like, oh, the harder I work,
• 18:37
  Speaker 3: the luckier I get, you know, those kind of they
• 18:39
  Speaker 3: seem like like benign quotes. I'm like, no, that's not
• 18:41
  Speaker 3: what luck is. If you can go out of your
• 18:43
  Speaker 3: way to increase it, it is not luck. It's hard work.
• 18:45
  Speaker 3: It's hard work, it's skill, it's a value. I commend
• 18:48
  Speaker 3: you for it, but it's not luck. Luck is you
• 18:50
  Speaker 3: were born in this era. Luck is your parents told
• 18:54
  Speaker 3: you X, Y and z. Luck is you haphazardly met
• 18:57
  Speaker 3: this person. You did not do anything intentionally to it.
• 19:00
  Speaker 3: It was completely outside of your control, the biggest of
• 19:03
  Speaker 3: which is where and when you were born that have
• 19:05
  Speaker 3: an unbelievable impact on this. Bill Groat's a great bond Mananagru.
• 19:09
  Speaker 3: I'm sure he's been on the show before. He spoke
• 19:11
  Speaker 3: about this one time that he was a bond manager
• 19:14
  Speaker 3: from the early you know, the bulk of his career
• 19:17
  Speaker 3: was during the largest decline in interest rates that's ever occurred.
• 19:21
  Speaker 4: And he wondered himself in this piece of a rope many.
• 19:24
  Speaker 3: Years ago, like, would he have had the success he
• 19:26
  Speaker 3: did if he was born ten years earlier or ten
• 19:27
  Speaker 3: years later. Would Buffett have had the same success if
• 19:30
  Speaker 3: he was born ten years earlier or ten years later.
• 19:32
  Speaker 3: I would, I would venture to say the answer is no.
• 19:34
  Speaker 3: There are both of those people, very hard working, very intelligent,
• 19:37
  Speaker 3: able to capture opportunity.
• 19:39
  Speaker 2: Yes.
• 19:40
  Speaker 3: Were they also unbelievably lucky in something they had no
• 19:42
  Speaker 3: control over, which is when they were born.
• 19:45
  Speaker 2: Yes, as well. I'm trying to remember the book that
• 19:47
  Speaker 2: mentioned it's not a coincidence that so many of the
• 19:50
  Speaker 2: best known entrepreneurs of our era were born post War
• 19:54
  Speaker 2: World War two, mid fifties, Steve Jobs, Bill Gates. It
• 19:58
  Speaker 2: goes through a whole list, and and just being born
• 20:01
  Speaker 2: into that vacuum when there was massive societal change, economic change,
• 20:06
  Speaker 2: technological change. That's what created the option of starting a
• 20:11
  Speaker 2: whole new company in a brand new space.
• 20:13
  Speaker 3: Yeah, and if Steve Jobs was born twenty years later,
• 20:15
  Speaker 3: he still would have been extremely successful.
• 20:17
  Speaker 4: He's just built different.
• 20:18
  Speaker 3: Of course, but to the degree that he was almost
• 20:22
  Speaker 3: certainly not so I think rather than luck, because people
• 20:24
  Speaker 3: don't like that phrase. It makes you sound jealous and
• 20:27
  Speaker 3: bitter of other people. I think the phrase to use
• 20:29
  Speaker 3: is what is repeatable? What have you done in the
• 20:32
  Speaker 3: past that you can do again? And if if you
• 20:35
  Speaker 3: know what in your life, in your in your world,
• 20:38
  Speaker 3: if you started over tomorrow with no money, no name, recognition,
• 20:42
  Speaker 3: no context, could you repeat what you've done? And sometimes
• 20:44
  Speaker 3: the answer is yes, So that's not luck.
• 20:46
  Speaker 2: I'm going to say no. For me personally, I guess
• 20:49
  Speaker 2: it's right time. Yes and got I literally just finished
• 20:55
  Speaker 2: a chapter for someone else's book on how random so
• 21:00
  Speaker 2: much of the world is. And I have to tell you,
• 21:02
  Speaker 2: the first couple of times a billionaire tells you how
• 21:05
  Speaker 2: important luck was, you kind of shrug it off, as Hey,
• 21:08
  Speaker 2: these guys are a little false humility. The person who
• 21:13
  Speaker 2: disabused me of that notion was Howard Marx, because he said,
• 21:18
  Speaker 2: you have to be smart, you have to be hardworking,
• 21:20
  Speaker 2: but you also have to get lucky. And I'm like,
• 21:21
  Speaker 2: come on, Howard, why do you say that. You know,
• 21:24
  Speaker 2: look at what you've done since you graduated Columbia Business School.
• 21:27
  Speaker 2: And his answer was, everybody I went to school with
• 21:31
  Speaker 2: was super smart. They were all incredibly hard working. Not
• 21:35
  Speaker 2: all of them became wildly successful. And you have to
• 21:38
  Speaker 2: just acknowledge how much of this is just serendipity. And
• 21:42
  Speaker 2: when a guy like that, who has no false humility,
• 21:45
  Speaker 2: when he says, no, I could give you ten instances
• 21:48
  Speaker 2: where my life changed because of dun luck, you kind
• 21:51
  Speaker 2: of have to acknowledge that, right, was ja Paul Getty said.
• 21:54
  Speaker 3: He said the three successes, the three rules for getting
• 21:56
  Speaker 3: rich are go to work early, stay late.
• 22:00
  Speaker 2: Oil fantastic. Coming up, we continue our conversation with Morgan Housel,
• 22:07
  Speaker 2: author of the best selling book Psychology of Money, discussing
• 22:11
  Speaker 2: how he writes books, essays and columns. I'm Barry Results.
• 22:16
  Speaker 2: You're listening to Masters in Business on Bloomberg Radio. I'm
• 22:34
  Speaker 2: Barry Redults. You're listening to Masters in Business on Bloomberg Radio.
• 22:38
  Speaker 2: My extra special guest is Morgan Housel. He is the
• 22:42
  Speaker 2: best selling author of Psychology of Money as well as
• 22:45
  Speaker 2: Same as Ever his latest book, The Art of Spending Money,
• 22:49
  Speaker 2: Simple Choices for a Richer Life. Before we get to
• 22:52
  Speaker 2: the book specifically, I want to talk a little bit
• 22:55
  Speaker 2: about your writing process, and you know you're Some of
• 23:00
  Speaker 2: my favorite essays of yours take historical stories, world wars,
• 23:06
  Speaker 2: business failures, unlikely successes, and I specifically recalled Kitty Hawk's
• 23:12
  Speaker 2: story and the solo sale competition around the world, and
• 23:16
  Speaker 2: you connect them to timeless lessons on behavior and money.
• 23:21
  Speaker 2: Tell us a little bit about your research process. How
• 23:23
  Speaker 2: do you find these amazing and crazy stories.
• 23:27
  Speaker 3: I think it started with a survival technique as a writer,
• 23:31
  Speaker 3: because as a finance writer, if I got up every
• 23:33
  Speaker 3: day and wrote, here's what the Dow did today, you're
• 23:36
  Speaker 3: out the people who can do that faster than you.
• 23:38
  Speaker 3: You're not really adding much value if you do that.
• 23:40
  Speaker 3: And so as a writer it was like, hey, if
• 23:42
  Speaker 3: I need to get people's attention, I need to make
• 23:44
  Speaker 3: it interesting. So and one of the ways to do
• 23:46
  Speaker 3: that because myself, as a reader, what I enjoyed when
• 23:49
  Speaker 3: other people did is when they tied the rest of
• 23:52
  Speaker 3: the broader world into finance. Here's a story that has
• 23:54
  Speaker 3: nothing to do with money. It's a story about evolution
• 23:56
  Speaker 3: or World War two, whatever it might be, and let's
• 23:59
  Speaker 3: take the lesson from that entire I loved when people
• 24:01
  Speaker 3: did that.
• 24:01
  Speaker 4: I loved it, loved it, loved it, and wanted to
• 24:03
  Speaker 4: do it myself.
• 24:04
  Speaker 3: The second part is I think I got you closer
• 24:05
  Speaker 3: to the truth that when you study those fields, whatever
• 24:08
  Speaker 3: it might be politics or military history, you're studying behavior
• 24:12
  Speaker 3: and it's the same behaviors that impact investors in the
• 24:14
  Speaker 3: same way. And so a lot of even finance professionals
• 24:17
  Speaker 3: get into trouble when they view and study finance through
• 24:21
  Speaker 3: the very narrow lens of finance without realizing that it's
• 24:24
  Speaker 3: a very broad field of how people behave.
• 24:27
  Speaker 2: So that was the first of it.
• 24:28
  Speaker 3: The second is when you start looking for it, when
• 24:30
  Speaker 3: you have the little seed in your head that when
• 24:33
  Speaker 3: you're reading about a broad array of fields, if you
• 24:36
  Speaker 3: have a little bird in your head that says, how
• 24:37
  Speaker 3: does this tie back? Like what is the behavior and
• 24:39
  Speaker 3: how can tie it back to money? You see it
• 24:41
  Speaker 3: everywhere you can't stop seeing it, and you realize, like
• 24:44
  Speaker 3: how interconnected our behavior is, because the same way that
• 24:47
  Speaker 3: you and I think about risk and investing also impacts
• 24:50
  Speaker 3: a lot of things that we think in life. Our friendships,
• 24:52
  Speaker 3: our relationships, our health tie back to the same framework
• 24:56
  Speaker 3: of how we think about risk and money. It's very
• 24:58
  Speaker 3: tied together. The whole world is kind of woven together
• 25:01
  Speaker 3: in those and so you start seeing these same themes
• 25:04
  Speaker 3: over and over and over again about how compounding works,
• 25:06
  Speaker 3: how risk works, how envy works.
• 25:09
  Speaker 4: It's the same.
• 25:09
  Speaker 3: And I also think if you see a behavior repeat
• 25:12
  Speaker 3: in several different fields, you found something that is like
• 25:15
  Speaker 3: infinitely important and then you can be like, oh, that's
• 25:17
  Speaker 3: a good one.
• 25:18
  Speaker 4: I need to talk more about that.
• 25:19
  Speaker 2: In finance, how often when you're doing research you have
• 25:22
  Speaker 2: that WTF moment that's like, oh my god, how can
• 25:26
  Speaker 2: this possibly be true? And you research it and it's like, Wow,
• 25:29
  Speaker 2: not only is this true, but it applies to so
• 25:32
  Speaker 2: many other things. Is that a monthly occurrence a weekly occurrence?
• 25:35
  Speaker 2: How often does that happen?
• 25:36
  Speaker 3: I think it's very often that you find behaviors that
• 25:40
  Speaker 3: also have a ven diagram overlap with with money. That's
• 25:44
  Speaker 3: pretty often in terms of them being like a slam
• 25:46
  Speaker 3: dunk of like, oh, that is just a phenomenal interesting story,
• 25:49
  Speaker 3: and it is so identical to what happens in investing.
• 25:51
  Speaker 4: That's probably a once a.
• 25:52
  Speaker 2: Year kind of thing.
• 25:53
  Speaker 4: Oh really, I think. So that's a lot of slam
• 25:55
  Speaker 4: dunk in psychology.
• 25:57
  Speaker 2: And money, you have a bunch of those. And same
• 25:59
  Speaker 2: as ever, you have a run of those. There's a
• 26:01
  Speaker 2: lot of that in this you're less than fifty years old.
• 26:04
  Speaker 2: You have more than fifty of these stories.
• 26:06
  Speaker 4: Some better than others, though. There's a couple.
• 26:08
  Speaker 3: There's a couple that I've come across over the years
• 26:11
  Speaker 3: where I remember just sitting back in my chair and
• 26:13
  Speaker 3: being like.
• 26:13
  Speaker 2: That's that's just a jackpot.
• 26:14
  Speaker 3: That story is just could not be better seeing it,
• 26:18
  Speaker 3: and you find it in these areas that have nothing
• 26:19
  Speaker 3: to do with money.
• 26:21
  Speaker 4: I remember it.
• 26:21
  Speaker 3: So you mentioned in the artist spending money the story
• 26:23
  Speaker 3: about the sailors, Yes, has absolutely nothing to do with
• 26:25
  Speaker 3: money whatsoever.
• 26:26
  Speaker 2: And I remember reading everything to do with ego and behavior.
• 26:29
  Speaker 3: And behavior, But I remember reading an old New York
• 26:31
  Speaker 3: Times article is from not that old, maybe two thousand
• 26:34
  Speaker 3: and seven, and it had one line it said there
• 26:36
  Speaker 3: was a sailing race back in the nineteen sixties, and
• 26:39
  Speaker 3: one of the sailors was about to win, but decided
• 26:41
  Speaker 3: he liked sailing, so he quit the race and just
• 26:43
  Speaker 3: kept sailing.
• 26:44
  Speaker 2: And I didn't want the publicity and all the nonsense
• 26:47
  Speaker 2: around the opposite of ego.
• 26:48
  Speaker 3: And I remember reading that like that's interesting, Like can
• 26:50
  Speaker 3: we pull on that thread a little bit more?
• 26:52
  Speaker 4: And you start doing.
• 26:52
  Speaker 3: Research and you're like, oh, this is this is ego
• 26:56
  Speaker 3: or the lack of it, And of course that applies
• 26:58
  Speaker 3: to money in what I thought was just a slam
• 27:00
  Speaker 3: dunk way, Like that's a rare story.
• 27:02
  Speaker 2: Fine, you know, pull on that thread. People don't understand
• 27:05
  Speaker 2: the original quote from the professor who said it was
• 27:08
  Speaker 2: the plural of anecdote is data. And what was meant
• 27:12
  Speaker 2: by that is you start pulling on the thread of
• 27:14
  Speaker 2: these one offs and you find these broader things applical
• 27:17
  Speaker 2: to other things. You shouldn't just dismiss the one off
• 27:21
  Speaker 2: because it's anecdotally really kind of fascinating. So the other
• 27:26
  Speaker 2: one that has always stayed with me involved Kitty Hawk.
• 27:30
  Speaker 2: How long was it before the first Right Brothers faster
• 27:35
  Speaker 2: heavier than air flight made it into the New York times.
• 27:39
  Speaker 3: It took them about four years to build the airplane,
• 27:42
  Speaker 3: and then after they flew it in Kitty Hawk, it
• 27:44
  Speaker 3: took them about another four years before virtually anybody was
• 27:46
  Speaker 3: paying attention. And there were years after the right brother's
• 27:49
  Speaker 3: first flight.
• 27:50
  Speaker 4: We all seen the.
• 27:51
  Speaker 3: Picture, one of the most famous pictures of all time. Now,
• 27:53
  Speaker 3: it was literally years after that took place that The
• 27:55
  Speaker 3: New York Times was writing things along the lines of
• 27:58
  Speaker 3: humans will never fly, it will never happen.
• 28:00
  Speaker 2: It's already happened. Then they're staying the wrong thing.
• 28:02
  Speaker 3: And there was even periods back in Dayton, Ohio, where
• 28:05
  Speaker 3: they were from. After Kitty Hawk, they went back to Dayton,
• 28:07
  Speaker 3: and Dayton is where they truly mastered flying. They figured
• 28:10
  Speaker 3: out the two hardest parts, which were turning and landing
• 28:12
  Speaker 3: and h and Danon was a big city in the
• 28:14
  Speaker 3: early nineteen hundreds, and they're flying like over people's backyards
• 28:18
  Speaker 3: and there's virtually nothing written about it. There was in
• 28:21
  Speaker 3: one of their biographies it basically says that people in
• 28:23
  Speaker 3: Dayton that saw them flying assumed it must have been
• 28:25
  Speaker 3: some sort of magic trick, asking like where's the rope.
• 28:29
  Speaker 4: Kind of kind of thing, like.
• 28:30
  Speaker 2: The rope attached to exactly exactly well, it's it's you know,
• 28:34
  Speaker 2: it's all turtles all the way down.
• 28:36
  Speaker 3: But it was the analogy that was given in their
• 28:38
  Speaker 3: biography by David mccallough was if you and I saw
• 28:41
  Speaker 3: a demonstration of time travel today, we would be like, okay,
• 28:44
  Speaker 3: but it's just an illusion, like you didn't actually do that,
• 28:47
  Speaker 3: Like I saw what you did, but that's but there's
• 28:49
  Speaker 3: there's a trick here. And that's how they viewed flying
• 28:52
  Speaker 3: at the time. And it really took almost about half
• 28:55
  Speaker 3: a decade before people were like, oh, this is this
• 28:58
  Speaker 3: is the thing, this is this is big. And I
• 29:00
  Speaker 3: think that's true for a lot of new technology that
• 29:02
  Speaker 3: the gap between discovering it and it becoming a world
• 29:06
  Speaker 3: changing thing can be years of not decades. It's almost
• 29:10
  Speaker 3: never that it happens overnight that we come up with
• 29:12
  Speaker 3: a new technology and people are like, that's it.
• 29:14
  Speaker 4: That's the thing.
• 29:15
  Speaker 3: People talk about how quickly chat GBT was brought into
• 29:19
  Speaker 3: the fold. You know, within a year of it coming out,
• 29:20
  Speaker 3: there were hundreds of millions of users. But AI has
• 29:22
  Speaker 3: been a thing for.
• 29:23
  Speaker 2: Thirty years, forty years.
• 29:25
  Speaker 3: So the idea that like, oh, we recognized it immediately,
• 29:27
  Speaker 3: like no, it took a lifetime to get there.
• 29:29
  Speaker 2: You know. I saw I saw a Reddit map and
• 29:32
  Speaker 2: I thought of you. It showed here's how far you
• 29:36
  Speaker 2: could travel one hundred years ago from London, and it
• 29:39
  Speaker 2: was a map of this is a day, this is
• 29:41
  Speaker 2: a week, this is a month, and then modern times
• 29:45
  Speaker 2: you could get anywhere on Earth today within thirty six hours. Now,
• 29:49
  Speaker 2: the polls whatever, but back then you couldn't even get
• 29:53
  Speaker 2: to America in a month from London. It was It's
• 29:56
  Speaker 2: just insane how that changed. And that's what made me
• 29:59
  Speaker 2: think of Kitty Hawk. There's another quote of yours I
• 30:03
  Speaker 2: love that's related to all of your books, which is
• 30:07
  Speaker 2: getting rich and staying rich are different things that require
• 30:11
  Speaker 2: different skills.
• 30:12
  Speaker 3: To explain that well, we all know the stories of
• 30:15
  Speaker 3: the hedgeplom manager who was very good at getting rich
• 30:18
  Speaker 3: and had no ability to stay rich whatsoever.
• 30:21
  Speaker 2: There's a lot of stories about that. Art you ghosts
• 30:23
  Speaker 2: very recently, very many billions.
• 30:25
  Speaker 3: To zero and the more famous, more famous examples long
• 30:29
  Speaker 3: term capital management or Jesse Livermore. I mean, going down
• 30:31
  Speaker 3: the list of people who are unbelievably skilled at getting
• 30:33
  Speaker 3: rich and completely brainless at staying rich, they're two very
• 30:38
  Speaker 3: different skills. And when you see either a person or
• 30:40
  Speaker 3: a company that has both equal skills of getting rich
• 30:43
  Speaker 3: and staying which, it's a rare thing, and some companies
• 30:46
  Speaker 3: have this. Microsoft has had that Apple. You know, no,
• 30:49
  Speaker 3: I would take that. I'd take Apple back if there
• 30:51
  Speaker 3: Microsoft since ninety nine. They went through a very rough
• 30:53
  Speaker 3: period before that. Microsoft is probably the quintessential example of
• 30:56
  Speaker 3: a country that a company that is or unbelievable, unbelievable
• 31:00
  Speaker 3: getting rich and has an equal ability at staying rich
• 31:03
  Speaker 3: in terms of how it manages its balance sheet and
• 31:04
  Speaker 3: staying relevant whatnot. It's a very rare skill, and it's
• 31:07
  Speaker 3: often a contradictory skill, because to get rich you need
• 31:11
  Speaker 3: optimism and risk taking, and to stay rich you need
• 31:13
  Speaker 3: almost the exact opposite. You need a level of paranoia
• 31:16
  Speaker 3: and conservatism to keep you around. You need that jeckal
• 31:20
  Speaker 3: and Hyde personality to do well over long periods.
• 31:22
  Speaker 2: And so the interesting thing about the examples we both
• 31:25
  Speaker 2: gave arch ghosts and long term capital management. They got
• 31:28
  Speaker 2: rich through an excessive use of leverage. But in your
• 31:31
  Speaker 2: book you talk about the Vanderbilts now, which is kind
• 31:34
  Speaker 2: of fascinating. They got wealthy through just wild business success,
• 31:40
  Speaker 2: oil and railroads, and go down the list. And yet
• 31:45
  Speaker 2: once they had that money, all they could do is
• 31:47
  Speaker 2: spend it at a profligate rate, derived seemingly no joy
• 31:53
  Speaker 2: out of the process. And it took three or four
• 31:55
  Speaker 2: generations and they were the money was all gone pretty much.
• 31:58
  Speaker 4: You know.
• 31:58
  Speaker 3: Of all the robber baron families here in New York
• 32:01
  Speaker 3: who managed the money, the Carnegie and the Rockefellers did
• 32:07
  Speaker 3: very well at using their huge wealth to better society
• 32:12
  Speaker 3: and to make their errors, to give them good lives,
• 32:16
  Speaker 3: and to keep it around for several generations. The Vanderbilts
• 32:18
  Speaker 3: did by far the worst, by far and away the worst.
• 32:20
  Speaker 3: So when Cornelius Vanderbilt died a justed for inflation, he
• 32:23
  Speaker 3: had about three or four hundred billion dollars, just an
• 32:26
  Speaker 3: unbelievable fortune. As you mentioned, within about three generations there
• 32:29
  Speaker 3: was virtually nothing left. And in between those three generations
• 32:33
  Speaker 3: were a series of errors who, by and large, with
• 32:36
  Speaker 3: few exceptions, were miserable. Were miserable, miserable people, and the
• 32:40
  Speaker 3: reason why was very clear when you study their biographies.
• 32:43
  Speaker 3: The money completely controlled their personality. It told them who
• 32:47
  Speaker 3: they could be, It told them where they could live,
• 32:49
  Speaker 3: It told them the lifestyle they had to live. It
• 32:51
  Speaker 3: told them who they could marry, It told them who
• 32:53
  Speaker 3: they could be friends with. It had complete and outer
• 32:56
  Speaker 3: control about it. They had all of the financial independence
• 32:59
  Speaker 3: that one in history could ever imagine, and they had
• 33:02
  Speaker 3: no intellectual independence, They had no lifestyle independence had They
• 33:06
  Speaker 3: were completely dictated.
• 33:07
  Speaker 4: By the money.
• 33:08
  Speaker 3: And it wasn't until the money was more or less
• 33:10
  Speaker 3: exhausted that the first Vanderbilt heirs who didn't get anything
• 33:14
  Speaker 3: could build a life of their own.
• 33:16
  Speaker 4: And this is now very well known.
• 33:17
  Speaker 3: The first Vanderbilt air who virtually didn't get anything is
• 33:21
  Speaker 3: Anderson Cooper. His mom was Gloria Vanderbilt.
• 33:24
  Speaker 2: A designer who famously built her own fashion shot.
• 33:27
  Speaker 4: And that was effectively where the big trust funds ended.
• 33:29
  Speaker 3: And Cooper has talked about this that you know, he
• 33:32
  Speaker 3: was one of the first people in his family in
• 33:33
  Speaker 3: one hundred and fifty years who could was like blessed
• 33:36
  Speaker 3: with the ability to build his own life where the
• 33:38
  Speaker 3: money didn't control it and dictated. And it's an amazing
• 33:41
  Speaker 3: thing to watch.
• 33:42
  Speaker 2: Are you the master of your wealth or are you
• 33:44
  Speaker 2: a slave to money? That's it really is the key question.
• 33:47
  Speaker 2: You know, you talked about the Rockefellers and versus the Vanderbilts.
• 33:54
  Speaker 2: I had the CIO of General atlantic On and General Atlannik.
• 33:59
  Speaker 2: Is the money that comes from the Duty Free shops,
• 34:02
  Speaker 2: which has blown up to be a spectacular fortune. The
• 34:06
  Speaker 2: founder you discuss in the book spent most of his
• 34:10
  Speaker 2: life giving away all his money and he couldn't be happier.
• 34:13
  Speaker 2: Tell us about him.
• 34:14
  Speaker 3: So the founder's a guy named Chuck Feeney, passed away
• 34:16
  Speaker 3: couple of years ago. Unbelievable story that he has started
• 34:19
  Speaker 3: Duty Free store made for him personal fortune about ten
• 34:22
  Speaker 3: billion dollars thirty years ago.
• 34:25
  Speaker 4: Yes, a lot of money.
• 34:26
  Speaker 3: The well known part of Chuck Feeney's story that's been
• 34:28
  Speaker 3: well documented is that he gave ninety nine point nine
• 34:31
  Speaker 3: to nine percent of it away.
• 34:32
  Speaker 2: I think during his life, during his life and his will,
• 34:35
  Speaker 2: I think he ended it out regularly.
• 34:36
  Speaker 3: I think the statistic was he took out two million
• 34:39
  Speaker 3: dollars with an m to live off of lived in
• 34:41
  Speaker 3: a small apartment flu coach, lived like a complete and
• 34:44
  Speaker 3: utter ordinary person, and gave ten billion dollars away.
• 34:47
  Speaker 4: That's the well known part of it.
• 34:49
  Speaker 3: The less well known part of his story that I
• 34:50
  Speaker 3: think is actually more important is that if you go
• 34:52
  Speaker 3: back to the eighties when he first made his fortune,
• 34:55
  Speaker 3: he lived like a billionaire. He had mansions and yachts
• 34:59
  Speaker 3: in a private in private jet, lived like the quintessential
• 35:02
  Speaker 3: billionaire would, and hated it ostensibly was not for him.
• 35:06
  Speaker 3: He has a quote that I love. He said, I
• 35:08
  Speaker 3: realized that I was happy when I was giving money away,
• 35:10
  Speaker 3: and I was not happy when I was not giving
• 35:12
  Speaker 3: money away. And so he chose, he rejected that and
• 35:16
  Speaker 3: chose to live this very frugal life that he had.
• 35:18
  Speaker 3: And what I love about that is not that he
• 35:20
  Speaker 3: lived frugally like you know there, you know he was.
• 35:23
  Speaker 2: He was.
• 35:23
  Speaker 3: He was kind of obsessive about it in a way
• 35:25
  Speaker 3: that I would not do it. I don't think he.
• 35:26
  Speaker 2: Will, like in front of the bus, you don't have
• 35:27
  Speaker 2: to sit in the back exactly giving away ten billion dollars. Sure,
• 35:30
  Speaker 2: But what I love about it is that he chose it.
• 35:32
  Speaker 3: He did not. He did not give any any care
• 35:36
  Speaker 3: in the world how society told him to live. The
• 35:39
  Speaker 3: money did not dictate his personality. He did it for himself.
• 35:42
  Speaker 3: He was He was a truly independent thinker. Could not
• 35:44
  Speaker 3: be more polar opposite than the Vanderbilts, who were absolutely
• 35:47
  Speaker 3: beholdened to what money in society told them that they
• 35:50
  Speaker 3: should be unbelievable.
• 35:52
  Speaker 2: Another one of my favorite quotes of yours. A big
• 35:55
  Speaker 2: takeaway from economic history is that the past wasn't as
• 35:58
  Speaker 2: good as you remember, the present isn't as bad as
• 36:02
  Speaker 2: you think, and the future will be better than you anticipate.
• 36:06
  Speaker 2: That's a fantastic quote because it's so true. We're stuck
• 36:10
  Speaker 2: here in the moment. History is roasty nostalgia, the future
• 36:14
  Speaker 2: is wishful thinking. Tell us how you put this quote together.
• 36:18
  Speaker 2: How'd you come together with this?
• 36:19
  Speaker 3: I think a lot about nostalgia. I'm a very nostalgic person,
• 36:21
  Speaker 3: so I think about it a lot in my own life.
• 36:24
  Speaker 3: And it tends to be true that we massively overestimate
• 36:27
  Speaker 3: how good the past was because we know how the
• 36:29
  Speaker 3: story ends. Yes, and so when we look back at
• 36:31
  Speaker 3: the nineteen nineties, we say, what an amazing period of
• 36:34
  Speaker 3: time because we know how everything played out. It all
• 36:37
  Speaker 3: worked out, but in the nineteen nineties we didn't know that.
• 36:39
  Speaker 3: We can wax about how great the nineteen fifties were.
• 36:43
  Speaker 3: Middle class America, prosperity mom and pop, white picket fences
• 36:46
  Speaker 3: got kind of thing.
• 36:47
  Speaker 4: They didn't know it back then.
• 36:48
  Speaker 3: What a lot of them were thinking about back then
• 36:50
  Speaker 3: was nuclear holocaust and the recession that see was seemingly
• 36:53
  Speaker 3: right around the corner. And so when you know how
• 36:56
  Speaker 3: the story ends, it makes it almost impossible to put
• 36:58
  Speaker 3: yourself in the shoes the past, including your own shoes
• 37:01
  Speaker 3: of the past, very difficult to do. So I think
• 37:03
  Speaker 3: we just habitually overestimate how good the past was. We
• 37:07
  Speaker 3: overestimate how bad the present is because we are just
• 37:10
  Speaker 3: completely bombarded with negative headlines about what's going on today.
• 37:13
  Speaker 3: If it bleeds, it leads right, and then extension of
• 37:15
  Speaker 3: that is you extrapolate today into the indefinite future, and
• 37:19
  Speaker 3: so we underestimate how good the future can be.
• 37:22
  Speaker 2: Really fascinating quote. Last writing process question, you discuss the
• 37:31
  Speaker 2: reverse obituary exercise and how can help people clarify their priorities.
• 37:37
  Speaker 2: Explain what a reverse obituary is.
• 37:39
  Speaker 3: It's this idea that it's kind of a grim exercise,
• 37:41
  Speaker 3: but I think it's very useful. Write down what you
• 37:44
  Speaker 3: want your obituary to say, what would be your dream
• 37:47
  Speaker 3: obituary to say? And everyone would be different, but for
• 37:51
  Speaker 3: me in that exercise, I would immediately go towards Morgan
• 37:54
  Speaker 3: was a good father, he was a good husband, he
• 37:57
  Speaker 3: was a good citizen. He helped his town, he helped
• 37:59
  Speaker 3: his friends. That's what I would want it to say,
• 38:01
  Speaker 3: and I think most people would be like close to that.
• 38:04
  Speaker 2: Not Morgan's bought a really cool red Ferrari.
• 38:07
  Speaker 3: You automatically know what is not in there, which is
• 38:09
  Speaker 3: your salary, the square footage of your house, the horsepower
• 38:12
  Speaker 3: of your car. It would be be completely absurd to
• 38:14
  Speaker 3: put that, and you would automatically say, what an absolutely
• 38:17
  Speaker 3: hollow life it is.
• 38:19
  Speaker 2: If that's what I.
• 38:19
  Speaker 3: Could put in my obituary was how much money I made,
• 38:21
  Speaker 3: how much money I saved? What a completely useless life?
• 38:24
  Speaker 3: And so I think automatically it pushes people to realizing
• 38:27
  Speaker 3: what they actually want out of life, what they actually
• 38:29
  Speaker 3: aspire to. And I think the gap between what you
• 38:34
  Speaker 3: are aspiring to today versus what you know intuitively you
• 38:38
  Speaker 3: want your obituary to say, which you want to accomplish
• 38:40
  Speaker 3: over the long term, can be huge. Maybe not for everybody,
• 38:43
  Speaker 3: maybybe there's some people that truly are living the life
• 38:46
  Speaker 3: of their reverse obituary. But I think it's a good
• 38:48
  Speaker 3: exercise to really clarify what you want out of life.
• 38:52
  Speaker 2: I lie, that wasn't the last question. I have so
• 38:55
  Speaker 2: many You're leading me down so many paths, starting with
• 38:59
  Speaker 2: nothing's worse than getting what you want but not what
• 39:02
  Speaker 2: you need.
• 39:02
  Speaker 3: And there's a lot of that, because if you are
• 39:04
  Speaker 3: fortunate enough to have a lot of money, earn a
• 39:06
  Speaker 3: lot of money, save a lot of money, sometimes that's
• 39:09
  Speaker 3: what that's what you want, that's that's exactly what you wanted,
• 39:11
  Speaker 3: that's what you set out to achieve, and you got it, congratulations.
• 39:15
  Speaker 3: But very often it's not what you need. What you
• 39:17
  Speaker 3: needed were relationships, health, mental, clarity, clear conscious that's what
• 39:22
  Speaker 3: you needed, and that's what would.
• 39:24
  Speaker 4: Actually feed your soul. And so I use the example
• 39:26
  Speaker 4: in the book.
• 39:27
  Speaker 3: You cited this earlier when we were hanging out among
• 39:29
  Speaker 3: the top ten richest men in the world. There are
• 39:32
  Speaker 3: accumulative fifteen divorces, and so they have everything that they
• 39:36
  Speaker 3: wanted in terms of money and lifestyle and possessions, and
• 39:39
  Speaker 3: a lot of them, without passing too much judgment, at
• 39:43
  Speaker 3: least at various times, did not have what they what
• 39:45
  Speaker 3: they needed, but they absolutely needed. And you can imagine
• 39:48
  Speaker 3: too that the ninety five year old millionaire who's in
• 39:50
  Speaker 3: very poor health. Everything he wants, not what he needs
• 39:53
  Speaker 3: kind of thing. But I think that that afflicts a
• 39:54
  Speaker 3: lot of people.
• 39:55
  Speaker 2: You know, I'm trying to remember who it was. Might
• 39:57
  Speaker 2: have been Noah Smith. We were involved in a group
• 40:00
  Speaker 2: discussion on wealth and happiness, and I think it was
• 40:04
  Speaker 2: Noah who said, you have to break the world into
• 40:07
  Speaker 2: two groups. And the group that's been divorced or is
• 40:11
  Speaker 2: in the middle of going through a divorce, the curve
• 40:14
  Speaker 2: of their happiness relative to their money looks totally different.
• 40:18
  Speaker 2: That it's such a miserable experience. Almost no amount of
• 40:22
  Speaker 2: money is going to change their headspace. And you wrote
• 40:25
  Speaker 2: something related to that, which is unhappy people, regardless of
• 40:31
  Speaker 2: how much wealth they have, are always going to be unhappy.
• 40:34
  Speaker 2: That has to be and happy people the more money
• 40:38
  Speaker 2: they get up into a certain point continues to bring
• 40:42
  Speaker 2: at least some degree of happiness and perhaps some contentment.
• 40:46
  Speaker 2: How true is that? Are some people just unhappy and
• 40:49
  Speaker 2: nothing is ever going to change that? Yeah?
• 40:51
  Speaker 4: I think that's true.
• 40:51
  Speaker 3: I mean, that's one of the most important little quirks
• 40:53
  Speaker 3: of the broader topic of the relationship between money and happiness.
• 40:57
  Speaker 3: Does earning more money make you happy. The asterisk there
• 41:01
  Speaker 3: is that if you start out as an unhappy, anxious,
• 41:04
  Speaker 3: depressed person, it's unlikely that earning money is going to
• 41:07
  Speaker 3: make you happier. It's not going to fill the hole
• 41:09
  Speaker 3: that you needed to fill. But if you start out
• 41:11
  Speaker 3: as a pretty happy, joyful, healthy, content person, earning more
• 41:14
  Speaker 3: money is leverage on who you already are. So like
• 41:17
  Speaker 3: in either direction, it's just leveraging who you already were.
• 41:20
  Speaker 4: To begin with.
• 41:21
  Speaker 3: And so yes, you can find lots of examples of
• 41:23
  Speaker 3: people who earned a lot of money and had an
• 41:24
  Speaker 3: amazing life. The money made them very happy. Most of
• 41:27
  Speaker 3: those people still would have been happy anyways if they
• 41:29
  Speaker 3: earned less. And we can find plenty of examples of
• 41:32
  Speaker 3: the cranky, old, crotchety billionaire, and they probably would have
• 41:35
  Speaker 3: been cranky and croachy. There's no amount of money or
• 41:37
  Speaker 3: success that would have changed that.
• 41:39
  Speaker 4: At its core.
• 41:40
  Speaker 2: That's really amazing, really the last question. So right now,
• 41:44
  Speaker 2: the Psychology of Money is on pace to hit ten
• 41:47
  Speaker 2: million copies, since this segment is on your writing process
• 41:52
  Speaker 2: as you were putting this together, and I remember speaking
• 41:55
  Speaker 2: with you as you were writing this and stitching together
• 41:59
  Speaker 2: a whole bunch of work. Did you have any idea, Hey,
• 42:02
  Speaker 2: I'm onto something, or did it just feel like I
• 42:04
  Speaker 2: got a deadline and I'm not going to make.
• 42:07
  Speaker 3: One hundred percent the ladder one hundred percent the ladder.
• 42:10
  Speaker 3: I think it's true that in many aspects of life
• 42:12
  Speaker 3: that ninety percent of virality is luck, or it's to
• 42:16
  Speaker 3: you what we're talk talking about.
• 42:17
  Speaker 2: Derek Tom repeated and hit makers and how random hit
• 42:24
  Speaker 2: records are, and the impressionists, and that book just goes
• 42:28
  Speaker 2: through a run of Hey but for this, this, and this,
• 42:33
  Speaker 2: none of these things would be well known and beloved.
• 42:37
  Speaker 2: Is it really ninety percent?
• 42:38
  Speaker 3: That's a wild number, and sometimes I'm making that up,
• 42:40
  Speaker 3: but that's what it feels like. I mean, the first
• 42:41
  Speaker 3: print run of Psychology Money was five thousand copies because
• 42:44
  Speaker 3: all the data that we had at the time was
• 42:46
  Speaker 3: that would be a big success. And if you know
• 42:48
  Speaker 3: anything about publishing, selling five thousand books is no small
• 42:52
  Speaker 3: feet right to get five thousand people to pull out
• 42:54
  Speaker 3: their credit cards and pay for your words. That's that's
• 42:57
  Speaker 3: that's a that's that's a success. Can I tell you
• 43:00
  Speaker 3: it's so funny you say that.
• 43:03
  Speaker 2: So I read the initial manuscript over the summer, and
• 43:07
  Speaker 2: then the hard copy shows up a couple of weeks ago,
• 43:10
  Speaker 2: and I went through it a second time. And as
• 43:13
  Speaker 2: I'm reading it, I'm sitting on a big, comfortable chair
• 43:17
  Speaker 2: in a well lit room with a lovely view out back,
• 43:22
  Speaker 2: and I'm thinking, you know, I don't really need a
• 43:25
  Speaker 2: lot of money to be happiness. I just need twenty
• 43:27
  Speaker 2: seven bucks to buy a book to read each week.
• 43:30
  Speaker 2: And what is more delightful than either lying in a
• 43:33
  Speaker 2: hammock or sitting in a comfy chair and taking two
• 43:38
  Speaker 2: thousand hours of somebody's intellectual output for twenty seven bucks.
• 43:42
  Speaker 2: Is there a bigger bargain in all of the world
• 43:46
  Speaker 2: than purchasing a well written book and a.
• 43:49
  Speaker 3: Thirty dollars hammock and a nice view and a warm
• 43:52
  Speaker 3: cup of coffee doesn't take that much.
• 43:54
  Speaker 2: A cup of tea when I'm reading absolutely coming up,
• 43:58
  Speaker 2: we continue our conversation with Morgan Housel, author of the
• 44:02
  Speaker 2: best selling book Psychology of Money, discussing how he writes books,
• 44:07
  Speaker 2: essays and columns. I'm Barry Results. You're listening to Master's
• 44:12
  Speaker 2: Business on Bloomberg Radio. I'm Barry Redults. You're listening to
• 44:30
  Speaker 2: Masters in Business on Bloomberg Radio. My extra special guest
• 44:34
  Speaker 2: is Morgan Housel. He is the best selling author of
• 44:37
  Speaker 2: Psychology of Money as well as Same as Ever his
• 44:40
  Speaker 2: latest book, The Art of Spending Money, Simple Choices for
• 44:44
  Speaker 2: a Richer Life. So the book shifts from your previous
• 44:49
  Speaker 2: writing how we think about money, how we make money,
• 44:52
  Speaker 2: to how we actually use it. What inspired that pivot, I.
• 44:58
  Speaker 3: Think a lot of it was if you asked me
• 45:00
  Speaker 3: five years ago what my investing philosophy is. I could
• 45:03
  Speaker 3: sit here for hours and tell you my philosophy is
• 45:06
  Speaker 3: of investing and why I do what I do, and
• 45:09
  Speaker 3: what the logic is behind it and how it fits
• 45:10
  Speaker 3: my person. I could talk to you all day about that,
• 45:12
  Speaker 3: and you and I have over the years talk about
• 45:14
  Speaker 3: that topic. But if you ask me five years ago,
• 45:15
  Speaker 3: what is my spending philosophy? How do my wife and
• 45:18
  Speaker 3: I think about how we spend our money? And I
• 45:20
  Speaker 3: couldn't really tell you anything. I hadn't really thought about it.
• 45:23
  Speaker 3: And as I look to there are literally tens of
• 45:25
  Speaker 3: thousands of books written about how to grow wealth. Tens
• 45:28
  Speaker 3: of thousands of books written about how to grow wealth,
• 45:30
  Speaker 3: virtually none written about what to.
• 45:32
  Speaker 2: Do with it.
• 45:33
  Speaker 3: It's one of the few areas in finance that has
• 45:35
  Speaker 3: not been trampled over yet. And I think part of
• 45:38
  Speaker 3: the reason why is because we intuitively assume that nothing
• 45:40
  Speaker 3: needs to be said about it, that yes, we know
• 45:43
  Speaker 3: how complex markets are, and so we can talk all
• 45:46
  Speaker 3: day about the intricacies of it. But when you talk
• 45:48
  Speaker 3: about like spending money, I think most people's intuition at
• 45:50
  Speaker 3: least is like, you just spend it, you just buy things,
• 45:54
  Speaker 3: and then it's better, So it's all good. And I think,
• 45:56
  Speaker 3: but if you observe people, rich people, poor people, everybody
• 46:00
  Speaker 3: in between, you realize it's not that simple. That there
• 46:02
  Speaker 3: are some people who have gotten a lot out of
• 46:04
  Speaker 3: spending money, have done it very well, have used it
• 46:07
  Speaker 3: as a tool to live a better life, and there's
• 46:09
  Speaker 3: probably an equal number of people who've done a very
• 46:11
  Speaker 3: poor job about it, for whom it controlled their personality
• 46:14
  Speaker 3: equal a lot more, maybe more, they were chasing a
• 46:17
  Speaker 3: phantom life that they could never keep up with. They
• 46:20
  Speaker 3: were constantly torture mentally tortured by keeping up with the Jones.
• 46:24
  Speaker 3: Is that kind of thing that's actually that's like, there's
• 46:26
  Speaker 3: such a deep psychology of it in there, and so
• 46:29
  Speaker 3: what the book does is I don't tell you how
• 46:31
  Speaker 3: to spend because I don't know you.
• 46:33
  Speaker 2: I don't say very subjective and very subjective. It's called
• 46:36
  Speaker 2: the art of spending money, not the science of spending money.
• 46:39
  Speaker 3: Right, and which also mirrors how I think about investing.
• 46:42
  Speaker 3: I don't think there's one right way to invest. People
• 46:44
  Speaker 3: have very different personalities, different risk tolerances and whatnot, and
• 46:47
  Speaker 3: it's the same for spending. But I think the psychology
• 46:49
  Speaker 3: of how people think about envy and contentment and happiness
• 46:53
  Speaker 3: and social aspiration that tends to be universal.
• 46:55
  Speaker 4: So that's what the book digs into.
• 46:57
  Speaker 2: I love the quote, and I don't remember who I'm
• 47:00
  Speaker 2: stealing this from. Nothing is more infuriating than seeing your
• 47:04
  Speaker 2: idiot brother in law get rich.
• 47:06
  Speaker 4: That was JP Morgan.
• 47:07
  Speaker 2: Unbelievable, right, absolutely true. There's a quote of yours that
• 47:11
  Speaker 2: I'm not going to steal. I'll give you credit. And
• 47:14
  Speaker 2: this speaks right to how subjective our experiences are. Your
• 47:19
  Speaker 2: personal experiences make up maybe point zero zero zero zero
• 47:23
  Speaker 2: zero zero zero one percent of what's happened in the world,
• 47:28
  Speaker 2: but perhaps eighty percent of how you think the world works.
• 47:32
  Speaker 2: I love that quote.
• 47:33
  Speaker 3: Explain it, you see it a lot in a lot
• 47:35
  Speaker 3: of fields, particularly politics. Of the life that you have lived,
• 47:38
  Speaker 3: the experiences you've had, the town that you live in,
• 47:41
  Speaker 3: the employment situation that you face during your life, makes
• 47:44
  Speaker 3: up your view of the world, your model of how
• 47:47
  Speaker 3: the world works, and therefore it influences what you think
• 47:49
  Speaker 3: should happen next. And virtually everybody does this, that what
• 47:53
  Speaker 3: you have nothing is more persuasive than what you've experienced firsthand.
• 47:56
  Speaker 3: And you can go out of your way to try
• 47:58
  Speaker 3: to understand other people and be empathy of what they've
• 48:00
  Speaker 3: been through, but nothing makes more sense to you than
• 48:03
  Speaker 3: what happened to you personally. And since we've all had
• 48:06
  Speaker 3: very vastly different lives, different generations, different countries, different parts
• 48:10
  Speaker 3: of the world, we all have different models of how
• 48:13
  Speaker 3: we think the world works. And it's you know, a
• 48:17
  Speaker 3: criticism of my first book, The Psychology Money, were people
• 48:20
  Speaker 3: who would write and say what you wrote might be
• 48:23
  Speaker 3: true for a college educated white American male, but it
• 48:27
  Speaker 3: is what you are, which is what I am guilty
• 48:29
  Speaker 3: of stories. But they would say in a way that
• 48:31
  Speaker 3: they were absolutely right to say, it's different for me
• 48:34
  Speaker 3: in this country, in this generation, whatever it may have been,
• 48:36
  Speaker 3: And I would say, yes, I totally get that. I
• 48:38
  Speaker 3: try to make the point in the book, but I'm
• 48:40
  Speaker 3: still beholden to the lens that I have lived, as
• 48:43
  Speaker 3: everybody is.
• 48:44
  Speaker 2: You know, the greatest thing you could do to get
• 48:46
  Speaker 2: out of your own little bubble is just travel across
• 48:49
  Speaker 2: the country by car, and suddenly you realize, oh, now
• 48:53
  Speaker 2: I understand. This is why farmers say what they say.
• 48:56
  Speaker 2: This is why people out in the Midwest vote the
• 48:59
  Speaker 2: way they do the country or the world. And it's
• 49:04
  Speaker 2: really a shame that less than fifty percent. I don't
• 49:07
  Speaker 2: know if the statistic is still true, less than fifty
• 49:09
  Speaker 2: percent of Americans have a passport used to be a
• 49:11
  Speaker 2: data point. I don't know if that's still correct. But
• 49:15
  Speaker 2: you get out in the rest of the world and
• 49:17
  Speaker 2: suddenly you say, oh, we're not the only ones who
• 49:19
  Speaker 2: know how to do this. Other countries do this specific
• 49:23
  Speaker 2: thing better than us. We need to be more open
• 49:26
  Speaker 2: minded about our narrow little experience.
• 49:29
  Speaker 4: And the better question.
• 49:30
  Speaker 3: If you see someone who thinks or acts very differently
• 49:33
  Speaker 3: than you, the question you want to ask is not
• 49:35
  Speaker 3: why do you believe that?
• 49:37
  Speaker 2: It's would I believe.
• 49:38
  Speaker 3: The same thing if I were living in your life
• 49:40
  Speaker 3: and almost all the time. The answer is yes, that
• 49:43
  Speaker 3: if you were the farmer, you would also vote the
• 49:45
  Speaker 3: same way that if you lived in Russia or China
• 49:47
  Speaker 3: or Venezuela, you would also think the same way as
• 49:49
  Speaker 3: they do. And so it's very easy to criticize them,
• 49:53
  Speaker 3: like you know, to criticize other people. Look at how
• 49:55
  Speaker 3: dumb they are making these decisions when you would do
• 49:58
  Speaker 3: the exact same thing if you were in there sit So.
• 50:01
  Speaker 2: Let's get focused on the book, because there are some
• 50:03
  Speaker 2: wonderful quotes and wonderful chapters in it. One of the
• 50:06
  Speaker 2: themes throughout is the trade off between wealth as a
• 50:10
  Speaker 2: source of freedom versus riches as a status symbol. Explain
• 50:16
  Speaker 2: the difference.
• 50:17
  Speaker 3: I make up these definitions, so this is just my
• 50:20
  Speaker 3: view of it, but I would define rich as you
• 50:22
  Speaker 3: have the income to buy the things you want. You
• 50:25
  Speaker 3: can make your mortgage payment, you can make your car
• 50:27
  Speaker 3: lease payment, whatever, you can purchase the lifestyle you want. Wealth,
• 50:30
  Speaker 3: I would say, is having some level of independence over
• 50:34
  Speaker 3: both financial independence in order the ability to work where
• 50:37
  Speaker 3: you want as often as you want, is take time
• 50:40
  Speaker 3: off when you need to, retire when you want to.
• 50:42
  Speaker 3: But also like intellectual independence, you don't have to pander
• 50:45
  Speaker 3: to other people. You don't have to pander to a
• 50:47
  Speaker 3: boss or to clients or two regulators. You have the
• 50:50
  Speaker 3: independence to be who you are and wake up every
• 50:53
  Speaker 3: morning and say I can do whatever I want today.
• 50:55
  Speaker 2: That's wealth.
• 50:56
  Speaker 3: And the interesting thing is there are people who make
• 50:59
  Speaker 3: millions of dollars a year who are rich and have
• 51:01
  Speaker 3: no wealth whatsoever. And there are people who make fifty
• 51:04
  Speaker 3: thousand dollars a year who are not rich and are
• 51:06
  Speaker 3: extremely wealthy and their ability. For example, I use the
• 51:09
  Speaker 3: example of my late grandmother in law on the book.
• 51:12
  Speaker 3: For thirty years she lived off of nothing but seventeen
• 51:15
  Speaker 3: or eighteen hundred dollars a month in social security. She
• 51:17
  Speaker 3: had no pension, no assets, no n she was broke,
• 51:21
  Speaker 3: seventeen hundred bucks a month soci security. Happiest woman you
• 51:23
  Speaker 3: ever mean in your life, happiest woman you will ever meet.
• 51:26
  Speaker 2: Ever.
• 51:26
  Speaker 3: She was perfectly content. She had no money, but she
• 51:29
  Speaker 3: didn't want any of it. She was totally happy and
• 51:32
  Speaker 3: content working in her garden and going for walks and
• 51:35
  Speaker 3: like bird watching with her friends. It's all she wanted
• 51:37
  Speaker 3: to do. And so she had no financial wealth and
• 51:40
  Speaker 3: she was like off the charts. Psychological wealth. She had
• 51:44
  Speaker 3: total control over her expectations. Part of it was she
• 51:46
  Speaker 3: was a child of the Great Depression, and like that.
• 51:48
  Speaker 3: I'm sure that had an impact on it. Back to
• 51:50
  Speaker 3: you know, we're just mirrors of our past experiences. But
• 51:53
  Speaker 3: you and I know people who are extremely wealthy on
• 51:56
  Speaker 3: paper who are the opposite. They might be billionaires, they
• 51:59
  Speaker 3: have financial wealth, and they have no psychological wealth. And
• 52:02
  Speaker 3: unlike my late grandmother in law, she they wake up
• 52:04
  Speaker 3: every morning being like it's not enough.
• 52:06
  Speaker 4: I need more, I need more, I need more.
• 52:08
  Speaker 3: So the difference between financial wealth and psychological wealth is
• 52:11
  Speaker 3: a big part of it.
• 52:12
  Speaker 2: The most valuable financial asset is not needing to impress anyone.
• 52:17
  Speaker 2: The ability to not need to prove yourself to strangers
• 52:21
  Speaker 2: is priceless. I heard this how much of our bad
• 52:26
  Speaker 2: spending behavior is just simple, simple primate status seeking within
• 52:33
  Speaker 2: the tribe.
• 52:34
  Speaker 4: I think a tremendous amount of it. Man, you don't need.
• 52:36
  Speaker 3: To be to look very far to see that. I
• 52:39
  Speaker 3: heard this great quote from the comedian Jimmy Carr recently.
• 52:42
  Speaker 3: He said, in your twenties, most people worry about what
• 52:44
  Speaker 3: other people think of them. In your thirties, you say,
• 52:47
  Speaker 3: I don't care what anybody thinks of me, And in
• 52:49
  Speaker 3: your forties you finally realize the truth, which is that
• 52:51
  Speaker 3: nobody was thinking about you all a lot.
• 52:54
  Speaker 4: And it's such a.
• 52:55
  Speaker 3: Wonderful It's such a wonderful quote the idea that nobody
• 52:58
  Speaker 3: is thinking about you as much as you are, and
• 53:00
  Speaker 3: nobody cares about your house, your clothes, your jewelry, nobody
• 53:03
  Speaker 3: cares about it as much as you do.
• 53:05
  Speaker 2: They're busy worrying about themselves.
• 53:07
  Speaker 3: I think that realization, at least for me, was so
• 53:10
  Speaker 3: liberating to be like, look, why am I trying to
• 53:12
  Speaker 3: peacock for strangers if they're not even paying attention. What
• 53:15
  Speaker 3: I want to do is use money as a tool
• 53:18
  Speaker 3: to help the things and lever the things that actually
• 53:20
  Speaker 3: make me happy, which is time with my kids, health, independence,
• 53:25
  Speaker 3: Like those things are great. But to the extent that
• 53:27
  Speaker 3: I'm just using it to try to gain the attention
• 53:30
  Speaker 3: of strangers who are too wrapped up in their own
• 53:33
  Speaker 3: heads to even pay attention to me, then that was
• 53:36
  Speaker 3: That was a very freeing and liberating moment.
• 53:38
  Speaker 2: The spotlight bias is fascinating because we're all the lead
• 53:42
  Speaker 2: characters in our own story, but in everybody else's story. We're,
• 53:46
  Speaker 2: you know, walking on actors extras just in the background.
• 53:50
  Speaker 3: Yeah, I mean I remember seeing this study of they
• 53:52
  Speaker 3: would take somebody and put them in like an ugly sweater,
• 53:56
  Speaker 3: and then they would send them into a party and
• 53:58
  Speaker 3: then they would you know, the person would mingle around
• 54:01
  Speaker 3: the party in this hideous sweater, and then they would
• 54:03
  Speaker 3: ask everybody else at the party, did you notice the
• 54:06
  Speaker 3: woman in the ugly sweater?
• 54:07
  Speaker 4: And everyone's like, no, no, no, didn't pay anytime.
• 54:09
  Speaker 2: I have a pimple over here that I've been thinking
• 54:11
  Speaker 2: about the whole time.
• 54:12
  Speaker 3: But if you asked the woman who was wearing the
• 54:14
  Speaker 3: ugly sweater the test subject, how many people notice? She
• 54:17
  Speaker 3: basically says everybody. We always overestimate the extent that other
• 54:20
  Speaker 3: people are thinking of us.
• 54:21
  Speaker 2: Huh, that's amazing. Let's talk about time. Money's greatest intrinsic value,
• 54:27
  Speaker 2: and this can't be overstated. You wrote is its ability
• 54:30
  Speaker 2: to give you control over your time. So we know
• 54:33
  Speaker 2: that's very true when it comes to earning money and
• 54:36
  Speaker 2: investing money. Is it true when it comes to spending.
• 54:41
  Speaker 4: I've been a big saver for my whole career. I
• 54:43
  Speaker 4: know you have as well.
• 54:44
  Speaker 3: You know I live blow, I mean save and invest
• 54:46
  Speaker 3: the majority of what I make, and I've never viewed
• 54:49
  Speaker 3: it as saving money or delayed gratification. I think I
• 54:52
  Speaker 3: always viewed it as purchasing independence and I get a
• 54:55
  Speaker 3: benefit out of that right now today. And I think that,
• 54:59
  Speaker 3: like very simple reframing of it is important. If you
• 55:02
  Speaker 3: view it as saving money, idle money, delayed gratification, it
• 55:05
  Speaker 3: feels like a burden.
• 55:06
  Speaker 2: It feels like work, and.
• 55:07
  Speaker 3: It feels like, yes, I have this wealth, but I
• 55:09
  Speaker 3: need to go deploy it like quickly. I think if
• 55:12
  Speaker 3: you view it as every dollar that I save is
• 55:14
  Speaker 3: a piece of my future that I own, and I
• 55:17
  Speaker 3: get benefit out of that right now. I get benefit
• 55:20
  Speaker 3: out of knowing that I'm independent today, it's not delayed.
• 55:23
  Speaker 3: That's been an important shift in thinking for me that
• 55:27
  Speaker 3: all I want out of money is to be independent.
• 55:29
  Speaker 3: I just want to be able to wake up every
• 55:31
  Speaker 3: day and say I can do whatever I want today,
• 55:33
  Speaker 3: even if most days I wake up and say I
• 55:35
  Speaker 3: want to work today.
• 55:36
  Speaker 4: I want to be productive.
• 55:37
  Speaker 3: It's my choice, and I can do it on my
• 55:40
  Speaker 3: terms with the people who I like, and quit when
• 55:43
  Speaker 3: I want to do what I want to. That is
• 55:44
  Speaker 3: more valuable than any material possession you can have.
• 55:47
  Speaker 2: I really didn't start spending money until my fifties. Like,
• 55:52
  Speaker 2: I was a worker saver for most of my life,
• 55:55
  Speaker 2: and it was only you know once. I never had
• 55:58
  Speaker 2: a midlife crisis. But you start to realize, and certainly
• 56:02
  Speaker 2: the pandemic, I think very much made everybody realize, Hey,
• 56:06
  Speaker 2: life is short and you never know when your number
• 56:09
  Speaker 2: comes up? So what am I waiting for? I think
• 56:12
  Speaker 2: there was a lot of that going on. Have you
• 56:15
  Speaker 2: made that pivot? Have you? Like? Because I know I
• 56:18
  Speaker 2: recall when you were in DC and you were looking
• 56:20
  Speaker 2: for houses back on the West Coast. I remember you
• 56:24
  Speaker 2: wrestling with do I really want to buy a big house?
• 56:27
  Speaker 2: How many kids we can have? How has that spending
• 56:31
  Speaker 2: decision felt? How has yours personal spending change?
• 56:34
  Speaker 3: My wife and I have loosened up over the years.
• 56:37
  Speaker 3: Very You and I have known each other for fifteen years,
• 56:39
  Speaker 3: and we've been We've spent a lot of time personally
• 56:42
  Speaker 3: together talking about our own lives and whatnot.
• 56:43
  Speaker 4: And you've known and.
• 56:44
  Speaker 3: I think you've probably given me playful grief about how
• 56:47
  Speaker 3: cheap I used to be. It's always been a thing
• 56:49
  Speaker 3: I've always been, or I was for a long time,
• 56:52
  Speaker 3: very cheap, but my wife and I were totally content,
• 56:54
  Speaker 3: and it always kind of not bothered me. But I've
• 56:57
  Speaker 3: always found it interesting that people would give me so
• 56:59
  Speaker 3: much reef about how little I spent when the truth was,
• 57:02
  Speaker 3: like we were, we were living a great life. We're
• 57:04
  Speaker 3: at we're thrilled with what we did, and we've loosened up.
• 57:07
  Speaker 3: We spend considerably more money now than we did five
• 57:10
  Speaker 3: or ten years ago, but it's always just been on
• 57:13
  Speaker 3: the framework of independence, because the truth was, ten years ago,
• 57:16
  Speaker 3: I bought anything I wanted.
• 57:17
  Speaker 4: It just wasn't that much, just didn't want that much.
• 57:20
  Speaker 3: And today we buy anything we want, and it's just
• 57:23
  Speaker 3: marginally a little bit more because we have kids and
• 57:25
  Speaker 3: we've we've found new things that bring us joy and whatnot.
• 57:28
  Speaker 3: And so it's always been I always feel like we've
• 57:30
  Speaker 3: been in control over it, even when we are very frugal,
• 57:32
  Speaker 3: or today when we've loosened up a little bit, it's
• 57:34
  Speaker 3: always been our choice, not pushed or forced about by
• 57:39
  Speaker 3: social forces and society and marketing.
• 57:41
  Speaker 2: You know, it's funny, my wife is the conservative spender.
• 57:46
  Speaker 2: I'm I'm the value conscious spendthrift now, so I will
• 57:50
  Speaker 2: buy stuff, but I have to feel like I'm getting
• 57:54
  Speaker 2: value for money. All the junk I've bought over the years, watches, cars, houses, whatever,
• 57:59
  Speaker 2: every thing I own, I could sell for more than
• 58:01
  Speaker 2: I paid, because I feel like like I can't imagine
• 58:06
  Speaker 2: walking into a dealership and saying to the manager of
• 58:11
  Speaker 2: the Ferrari Ferrari of Long Island, I'll take that five
• 58:16
  Speaker 2: hundred dollars. It's unconscionable to me.
• 58:19
  Speaker 3: It's never too late for a midlife crisis, though you
• 58:20
  Speaker 3: can still figure it out.
• 58:22
  Speaker 2: You know, it's not so much a midlife crisis as
• 58:26
  Speaker 2: it's been a post pandemic. Life is short. What are
• 58:29
  Speaker 2: you waiting for? And in the office, we are constantly
• 58:33
  Speaker 2: telling clients true story. I get a call from a
• 58:36
  Speaker 2: client wants to buy a Ferrari, wants to buy a
• 58:39
  Speaker 2: sail boat, and someone says, oh, Barry's boater and he's
• 58:42
  Speaker 2: a car guy. I talked to him and the answer
• 58:45
  Speaker 2: I told him is, you've never been a sailer. Why
• 58:47
  Speaker 2: are you going to spend two million dollars on a
• 58:50
  Speaker 2: fifty foot sailboat that a needs a crew and b
• 58:53
  Speaker 2: you'll use twice and sell for a half a million
• 58:56
  Speaker 2: dollar depreciation. But by the way, this guy can buy
• 58:59
  Speaker 2: a month for the rest of his life and still
• 59:01
  Speaker 2: leave a nice estate to his kids. Go buy the Ferrari,
• 59:05
  Speaker 2: and not only by the Ferrari. Take the kids to
• 59:08
  Speaker 2: the Ferrari High Performance Driving class, which the dirty secret
• 59:13
  Speaker 2: about all these racing schools are effectively defensive driving courses.
• 59:18
  Speaker 2: In drag, it's all about staying within your skill set,
• 59:22
  Speaker 2: staying within the parameters what the car can do. You
• 59:25
  Speaker 2: become a better safer driver, even though it's about epets,
• 59:28
  Speaker 2: turns and high high speed driving. And he did He
• 59:33
  Speaker 2: did that. He bought the Ferrari, loves it, took the
• 59:35
  Speaker 2: fam to the course, everybody had a great time with
• 59:39
  Speaker 2: the boat, sold it a year later, took a big hit.
• 59:42
  Speaker 2: I'm not allowed to mention the boat anymore so, but.
• 59:46
  Speaker 3: I think I think you could easily imagine a client
• 59:48
  Speaker 3: that was the opposite that they're like. Sailing has always
• 59:51
  Speaker 3: been my dream, change my life, absolutely, and and they
• 59:55
  Speaker 3: loved it. And they also bought a Ferrari, and a
• 59:56
  Speaker 3: week later said why did I do this?
• 59:58
  Speaker 2: It really depends on who you are. The joke about
• 1:00:01
  Speaker 2: boaters is every boater's favorite boat is their second to last,
• 1:00:05
  Speaker 2: because they only always go one step too far. Now, no, no,
• 1:00:08
  Speaker 2: the forty foot was plenty. I don't need a giant whatever.
• 1:00:12
  Speaker 2: But that's very much a case. So let's bring this
• 1:00:16
  Speaker 2: back to the book and spending. Talk about the connection
• 1:00:21
  Speaker 2: between money and happiness and what is spending for contentment mean?
• 1:00:27
  Speaker 2: How does happiness and contentment differ.
• 1:00:29
  Speaker 3: I think one of the issues with money and happiness
• 1:00:32
  Speaker 3: is that we chase the wrong emotion. We chase happiness,
• 1:00:34
  Speaker 3: and it seems very well intentioned. Of course, I want
• 1:00:37
  Speaker 3: to be happier. You want to be happier, that's great.
• 1:00:39
  Speaker 3: The problem is that happiness is always a fleeting emotion.
• 1:00:42
  Speaker 3: People are rarely happy for more than a couple minutes
• 1:00:44
  Speaker 3: at a time. I think it's very similar to humor,
• 1:00:47
  Speaker 3: where if I told you the funniest joke you've ever heard,
• 1:00:49
  Speaker 3: you laugh for a couple of minutes.
• 1:00:51
  Speaker 2: A couple seconds, you don't last at the next you don't.
• 1:00:53
  Speaker 3: Last for ten years, laugh for ten years, and just
• 1:00:55
  Speaker 3: doesn't work that way.
• 1:00:56
  Speaker 2: It's always fleeting.
• 1:00:57
  Speaker 3: So I think when you daydream about the new house,
• 1:01:00
  Speaker 3: the new car, the boat, when you daydream about how
• 1:01:03
  Speaker 3: great that will feel, buy and large, what you are
• 1:01:06
  Speaker 3: imagining is being content with those things. You imagine yourself
• 1:01:09
  Speaker 3: in the future house, sitting in the living room, and
• 1:01:12
  Speaker 3: what you actually imagine is yourself being saying I'm good,
• 1:01:15
  Speaker 3: I'm totally I don't need anything bigger. This is what
• 1:01:17
  Speaker 3: That's what feels good, the like picturing and imagining contentment
• 1:01:22
  Speaker 3: feels amazing. And I think that's what people should aspire to,
• 1:01:24
  Speaker 3: not necessarily happiness by contentment. And I think that's always
• 1:01:28
  Speaker 3: a goal, because you're not truly independent if you're not
• 1:01:31
  Speaker 3: fully content.
• 1:01:32
  Speaker 2: You know. That's to me, that's the value of buying
• 1:01:35
  Speaker 2: a lottery ticket for two bucks. Isn't the one in
• 1:01:38
  Speaker 2: a billion chance that you're going to win one hundred
• 1:01:40
  Speaker 2: million dollars. It's the twenty minutes you get to sit
• 1:01:43
  Speaker 2: around joking about what you would do with one hundred
• 1:01:45
  Speaker 2: million dollars. That's fun.
• 1:01:47
  Speaker 4: Yeah, of course.
• 1:01:48
  Speaker 2: I remember having an argument with my sister we were kids.
• 1:01:52
  Speaker 2: What do you mean you wouldn't buy me a car?
• 1:01:54
  Speaker 2: All right, maybe I'd buy everybody a car? What about this?
• 1:01:57
  Speaker 2: What about buying a half? And it was we were
• 1:01:59
  Speaker 2: having this hilarious debate. No one want anything was the
• 1:02:03
  Speaker 2: dollar lottery ticket? So that's always fascinating. I love the
• 1:02:08
  Speaker 2: story that Cal Richards tells. For people who don't know
• 1:02:11
  Speaker 2: who call Richard is. He's the sketch guy does these
• 1:02:14
  Speaker 2: wonderful little diagrams. Had a New York Times calm for
• 1:02:17
  Speaker 2: a long time, and he tells a story of being
• 1:02:20
  Speaker 2: big biker, loves cross country biking. There was a bike
• 1:02:24
  Speaker 2: he was jonesing for six thousand dollars for this really
• 1:02:28
  Speaker 2: high end, ultra lightweight titanium bank bike, and he couldn't
• 1:02:33
  Speaker 2: bring himself to pull the trigger. And his wife says,
• 1:02:36
  Speaker 2: you bike four times a week, go buy it. And
• 1:02:39
  Speaker 2: he said a year later, it's the best purchase he
• 1:02:41
  Speaker 2: ever made. He goes out with friends, he has these
• 1:02:44
  Speaker 2: memories from it. It's just been wonderful. How do you
• 1:02:47
  Speaker 2: distinguish between the purchases that are going to bring you
• 1:02:52
  Speaker 2: joy and the purchases that are just empty, unsatisfying babbles.
• 1:02:57
  Speaker 3: I think you kind of hit the nail on the
• 1:02:59
  Speaker 3: head there when you said Carl buying the bike, it
• 1:03:01
  Speaker 3: was great because of the experience, because he goes out
• 1:03:03
  Speaker 3: with his friends and he creates all these memories with
• 1:03:05
  Speaker 3: and like that's what made him happy, not necessarily the bike.
• 1:03:08
  Speaker 3: It was what the bike allowed him to do. I
• 1:03:09
  Speaker 3: think it's similar for homes, where, well, buying a big
• 1:03:12
  Speaker 3: mansion make you happier, The answer might be yes, if
• 1:03:15
  Speaker 3: it makes it easier to have your friends over and
• 1:03:17
  Speaker 3: have your If.
• 1:03:18
  Speaker 2: You tell in the book about people who have houses
• 1:03:22
  Speaker 2: that feel like hotels are so large needs a staff
• 1:03:26
  Speaker 2: of four hundred to run, nobody's happy in those houses.
• 1:03:29
  Speaker 3: Right, And you can compare that to someone who lives
• 1:03:30
  Speaker 3: in a fifteen hundred square for the house but has
• 1:03:33
  Speaker 3: their friends over every Friday for a barbecue and they
• 1:03:35
  Speaker 3: stay up till one in the morning, laughing with each other.
• 1:03:37
  Speaker 2: That's a better life. That's a way better.
• 1:03:38
  Speaker 3: So it's not what the possessions can do, it's how
• 1:03:41
  Speaker 3: can they or what the possessions are. It's how they
• 1:03:44
  Speaker 3: can serve as a conduit into things that make you
• 1:03:46
  Speaker 3: actually happier. And for everyone those things exist. It's like
• 1:03:49
  Speaker 3: maybe buying a bigger house will make you happier, and
• 1:03:52
  Speaker 3: buying a cool car. If you're spending time with your
• 1:03:53
  Speaker 3: friends and you're going you're taking your kids to track
• 1:03:56
  Speaker 3: races and one doilege you're talking about, maybe that doesn't
• 1:03:58
  Speaker 3: make you happierually not a direct thing, because you can
• 1:04:01
  Speaker 3: easily imagine buying the mansion but having no friends, having
• 1:04:04
  Speaker 3: no family, and you're sitting there alone, and then you're
• 1:04:07
  Speaker 3: wondering why you feel unfulfilled, why you dreamed for years
• 1:04:10
  Speaker 3: of having this house, and now you're sitting in it
• 1:04:12
  Speaker 3: and you're like, I don't feel anything. It's because the
• 1:04:15
  Speaker 3: only situation which it would actually make you happier and
• 1:04:18
  Speaker 3: more content is what it would serve as a lubricant
• 1:04:21
  Speaker 3: for for bringing other people over that actually make you happy.
• 1:04:23
  Speaker 2: Quick car story that I think you'll appreciate. So one
• 1:04:28
  Speaker 2: of my projects was taking a three hundred thousand kilometer
• 1:04:33
  Speaker 2: eighty seven nineteen eighty seven nine to eleven coup that
• 1:04:37
  Speaker 2: had been an accident single owner for like twenty five years.
• 1:04:42
  Speaker 2: The body and the interior was in really good shape,
• 1:04:44
  Speaker 2: but it needed a lot of mechanical work. And I
• 1:04:49
  Speaker 2: took this long story short, converted it to an ev
• 1:04:52
  Speaker 2: It's long process, and I was kind of horrified at
• 1:04:56
  Speaker 2: all the Porsche purists who would just torched me for
• 1:05:01
  Speaker 2: doing such blasphemy. And a friend owns a detailing and
• 1:05:06
  Speaker 2: wrap shop and he hosts a big cars and coffee
• 1:05:09
  Speaker 2: every year, and he's like, hey, can you bring the EV?
• 1:05:13
  Speaker 2: I don't really know if I want to do that.
• 1:05:15
  Speaker 2: I'm going to get, you know, really beaten up over it.
• 1:05:19
  Speaker 2: He's like, trust me, it's a great crowd, that all right.
• 1:05:22
  Speaker 2: So and this car ended up costing me everything said
• 1:05:26
  Speaker 2: and done, about what it would have cost me to
• 1:05:28
  Speaker 2: walk into a Porsche dealership and say give me that
• 1:05:31
  Speaker 2: nine to eleven brand new and not in Probably the
• 1:05:34
  Speaker 2: same is true where you live where I live. Nine
• 1:05:36
  Speaker 2: elevens or cameras, they're everywhere, right, they're they're valuable, but
• 1:05:41
  Speaker 2: they're not rare, whereas Ferraris are rare and valuable. So
• 1:05:44
  Speaker 2: I bring the all right, I'll bring the EV and
• 1:05:47
  Speaker 2: I bring it to this event. It's about fifty sixty
• 1:05:49
  Speaker 2: seventy cars, and I'm right across the way from a
• 1:05:52
  Speaker 2: guy with the brand new half a million dollar Ferrari cylindery.
• 1:05:57
  Speaker 2: It's its new front engine, twelve cylinder. And so I
• 1:06:01
  Speaker 2: opened the front where there's a big battery pack, and
• 1:06:03
  Speaker 2: I opened the back where the engine's supposed to be,
• 1:06:05
  Speaker 2: and there's another battery pack with a Tesla motor on
• 1:06:08
  Speaker 2: the bottom. And I just braced myself for people coming
• 1:06:13
  Speaker 2: up and just like, oh, you destroyed this car, and
• 1:06:17
  Speaker 2: I was so wrong. People were fascinated, and by the
• 1:06:20
  Speaker 2: end of the day I felt bad for the guy
• 1:06:22
  Speaker 2: with the Ferrari. Yes he was there by himself, no
• 1:06:24
  Speaker 2: one was talking to him. I had a steady stream
• 1:06:26
  Speaker 2: of people saying, Wow, this is really cool, this is different,
• 1:06:30
  Speaker 2: this is a one off. It doesn't hurt that the
• 1:06:32
  Speaker 2: license played is EV nine to eleven. It's the first
• 1:06:35
  Speaker 2: one in New York. That was genuinely surprising to me
• 1:06:39
  Speaker 2: that it wasn't something that you could just buy. It
• 1:06:43
  Speaker 2: was something that created a little required a little thought,
• 1:06:46
  Speaker 2: a little creativity.
• 1:06:47
  Speaker 4: And foster relationship.
• 1:06:48
  Speaker 2: And I, oh god, people giving me cards, Hey I
• 1:06:52
  Speaker 2: want to I'm hosting this event. Can you bring this
• 1:06:54
  Speaker 2: car like it was? And every time I bring that
• 1:06:57
  Speaker 2: car anywhere, people lose their minds.
• 1:06:59
  Speaker 4: That's great.
• 1:07:00
  Speaker 2: So it's so fascinating. And it wasn't a function of
• 1:07:03
  Speaker 2: spending a boatload of money. It was a function of, Hey,
• 1:07:06
  Speaker 2: this is kind of a kind of different you have
• 1:07:10
  Speaker 2: every time I spend money. You're in the back of
• 1:07:13
  Speaker 2: my head. I want to go through a couple more
• 1:07:18
  Speaker 2: quotes before we get to our favorite questions. You cite
• 1:07:25
  Speaker 2: the University of Pennsylvania professor Killingsworth. If you're already an
• 1:07:30
  Speaker 2: unhappy person, it's unlikely that more money will ever fix
• 1:07:34
  Speaker 2: your problem.
• 1:07:35
  Speaker 4: Yes, it could leverage who you are in either direction.
• 1:07:37
  Speaker 2: Either direction. And then our friend Michael Batnik said something,
• 1:07:42
  Speaker 2: I hope I'm not talking out a class. Wealth seems
• 1:07:46
  Speaker 2: like a burden and an obligation. The people I know
• 1:07:49
  Speaker 2: have become wealthy, other people treat them differently. They always
• 1:07:52
  Speaker 2: have their hands out at a certain point, it doesn't
• 1:07:55
  Speaker 2: seem like it's worth it.
• 1:07:57
  Speaker 3: I think everyone can make it worth it, but it's
• 1:07:59
  Speaker 3: easy for it to spiral out of control and to
• 1:08:01
  Speaker 3: let it change the what other people think of you,
• 1:08:05
  Speaker 3: your family, your friends, the rest of society. And so
• 1:08:08
  Speaker 3: it's very easy to think that when we are spending
• 1:08:10
  Speaker 3: a lot of money, we are gaining people's admiration. But
• 1:08:12
  Speaker 3: you have to be careful because often what you are,
• 1:08:14
  Speaker 3: the emotion you are fostering, is envy. The other people
• 1:08:16
  Speaker 3: envy you, and that's and that it's it's hard in
• 1:08:19
  Speaker 3: real time.
• 1:08:19
  Speaker 4: To know which is which.
• 1:08:20
  Speaker 3: You're like, oh, they're looking at me, they're looking at me,
• 1:08:22
  Speaker 3: they're talking about and they're talking about me like they
• 1:08:23
  Speaker 3: admire me, I don't know.
• 1:08:24
  Speaker 4: They envy you, which means they hate you.
• 1:08:27
  Speaker 2: So that's a good point to bring up. Fomo. Fomo
• 1:08:29
  Speaker 2: is recklessness massed as ambition.
• 1:08:32
  Speaker 3: Explain, it's outsourcing your critical thinking to other people. And
• 1:08:36
  Speaker 3: those other people got rich quickly, which of course is
• 1:08:38
  Speaker 3: going to is going to inhibit their own ability to
• 1:08:41
  Speaker 3: think rationally and cleanly about it. It's a very dangerous thing.
• 1:08:44
  Speaker 2: Let's let's talk about wealth as everything you don't see,
• 1:08:48
  Speaker 2: which is effectively double entry accounting. You see the asset,
• 1:08:52
  Speaker 2: you don't see the liability.
• 1:08:54
  Speaker 3: Yeah, I can see your house. I can see your car,
• 1:08:55
  Speaker 3: you're not your your your ev nine to eleven car.
• 1:08:58
  Speaker 3: I can't see your bank account. I can't see your
• 1:09:00
  Speaker 3: brokerage statement. I can't see how much you save for retirement.
• 1:09:03
  Speaker 3: Like all wealth is actually hidden because wealth is the
• 1:09:05
  Speaker 3: money that you didn't spend.
• 1:09:06
  Speaker 4: It's the cars you didn't buy.
• 1:09:08
  Speaker 3: The vacations you didn't take, it's money that you've saved
• 1:09:10
  Speaker 3: for independence, and it's completely invisible. And it's pretty pernicious
• 1:09:13
  Speaker 3: because if you think, like for physical health, you can
• 1:09:17
  Speaker 3: see physical health. This person's overweight, this person's ripped there
• 1:09:20
  Speaker 3: you can see it, and so it's easy to find
• 1:09:22
  Speaker 3: a role model. I want to look more like that person,
• 1:09:24
  Speaker 3: less like this person. For money, it's very difficult to
• 1:09:27
  Speaker 3: do because you can't see wealth.
• 1:09:28
  Speaker 2: You don't see the hit debt, you don't see the leverage.
• 1:09:30
  Speaker 4: You don't see the leverage, you don't see what went
• 1:09:31
  Speaker 4: into it.
• 1:09:32
  Speaker 3: And of course there are a lot of people who
• 1:09:33
  Speaker 3: appear to be wealthy who are absolutely broke, and the
• 1:09:36
  Speaker 3: reverse is true. So it's very difficult to know who
• 1:09:39
  Speaker 3: to follow, who to take your cues from.
• 1:09:41
  Speaker 2: I love this quote, and this is your words. If
• 1:09:45
  Speaker 2: you're a good dad, a good husband, an honest person,
• 1:09:48
  Speaker 2: a hard worker, a helpful friend, and a funny joke teller,
• 1:09:53
  Speaker 2: you've probably earned ninety eight percent of the respect and
• 1:09:56
  Speaker 2: admiration that I'm capable of giving you. If you happen
• 1:09:59
  Speaker 2: to be rich and successful, I might bump that up
• 1:10:02
  Speaker 2: to ninety nine percent, but.
• 1:10:03
  Speaker 4: Let's not pretend it makes much difference.
• 1:10:04
  Speaker 3: I told that to a good friend of mine, who
• 1:10:06
  Speaker 3: is one of my favorite people in the entire world.
• 1:10:08
  Speaker 3: Earns a modest but not substantial income, and it bothers him,
• 1:10:12
  Speaker 3: and I told him that one day I was like, look,
• 1:10:14
  Speaker 3: if you have these, like if you're a good husband,
• 1:10:15
  Speaker 3: a good father, if you're fun to hang out with
• 1:10:17
  Speaker 3: and you're funny, that's about all the respect and admiration
• 1:10:21
  Speaker 3: I can give you. And if you happen to make
• 1:10:22
  Speaker 3: more money, like okay, kind of cool. Maybe that brings
• 1:10:25
  Speaker 3: some more stories and whatnot, but it doesn't make much difference.
• 1:10:27
  Speaker 3: I like you for this stuff, not the stuff that
• 1:10:29
  Speaker 3: you're actually chasing.
• 1:10:30
  Speaker 2: Last question before we get to our favorites. What do
• 1:10:33
  Speaker 2: you think people don't know about the art of spending
• 1:10:36
  Speaker 2: money but should what's the most important aspect of this
• 1:10:40
  Speaker 2: that just seems to slip by unnotice, Probably that.
• 1:10:43
  Speaker 3: There's no formula for it, that what works for you
• 1:10:45
  Speaker 3: might not work for me, and vice versa. And a
• 1:10:47
  Speaker 3: lot of people get into trouble with finance, whether it's investing, earning,
• 1:10:50
  Speaker 3: or saving or spending, when they follow the advice that
• 1:10:53
  Speaker 3: is good for one person but not for them. And
• 1:10:55
  Speaker 3: it's a very vicious trap to get into because because
• 1:10:58
  Speaker 3: it worked for somebody else, you're like, oh, I just
• 1:11:00
  Speaker 3: that's what I should do. It worked for them, it
• 1:11:03
  Speaker 3: surely should work for me. You have to spend more
• 1:11:05
  Speaker 3: time kind of looking in the mirror, so to speak,
• 1:11:07
  Speaker 3: and figuring out who you are, what you want.
• 1:11:09
  Speaker 2: Really really great insight. All right, let's jump to our
• 1:11:12
  Speaker 2: favorite questions, starting with who were your early mentors who
• 1:11:16
  Speaker 2: helped shape your career.
• 1:11:19
  Speaker 3: I would be lying, and I'm not blowing smoke if
• 1:11:21
  Speaker 3: I said you and josh I think an equal amounts.
• 1:11:25
  Speaker 2: You're gonna have to explain that You and josh this.
• 1:11:27
  Speaker 3: Would have been twenty thirteen, were some of the first
• 1:11:31
  Speaker 3: people who recognized me outside of the Motley Fool who
• 1:11:34
  Speaker 3: broke me out of that now I was, I felt
• 1:11:37
  Speaker 3: good and was comfortable within the zone of the Motley
• 1:11:39
  Speaker 3: Fool for their members or whatnot.
• 1:11:40
  Speaker 4: I had a pretty big audience. There's pretty good.
• 1:11:42
  Speaker 3: You and Joshu were the first ones outside of the
• 1:11:44
  Speaker 3: Moley Fool who recognized me.
• 1:11:46
  Speaker 4: And I feel like that was unbelievable.
• 1:11:48
  Speaker 3: And I think about this a lot of like, when
• 1:11:49
  Speaker 3: you see somebody like that, particularly if they're young, anything
• 1:11:53
  Speaker 3: you can say or do to help them is enormous.
• 1:11:57
  Speaker 3: It might be the smallest thing in the world to
• 1:11:59
  Speaker 3: DM them or reach out and say, hey, you're doing
• 1:12:02
  Speaker 3: some good work.
• 1:12:02
  Speaker 4: I'm really proud of me. I like your stuff.
• 1:12:04
  Speaker 3: It takes you nothing and it can completely change their life.
• 1:12:07
  Speaker 2: Nothing brings me more joy than hearing people say things like.
• 1:12:10
  Speaker 4: That, because well, that's the only nice thing I'll say
• 1:12:12
  Speaker 4: about you today.
• 1:12:13
  Speaker 2: Because the thing that's so amazing is these are throwaway
• 1:12:17
  Speaker 2: lines that you say, Hey, really like that column, really
• 1:12:20
  Speaker 2: like that piece. I thought it was that to you.
• 1:12:23
  Speaker 2: It's three seconds and of little bit of honesty and
• 1:12:26
  Speaker 2: someone says this was really meaningful that I kind of
• 1:12:31
  Speaker 2: felt like I was lost or I kind of felt
• 1:12:33
  Speaker 2: like no one was appreciating me, and just hearing that
• 1:12:36
  Speaker 2: somebody recognized that I had some skill and talent was huge.
• 1:12:41
  Speaker 2: You forget what it was like when you were in
• 1:12:42
  Speaker 2: your twenties and thirties, grinding away unnoticed for decade or so. Right,
• 1:12:47
  Speaker 2: how long were you with the Motley Fool Book was?
• 1:12:49
  Speaker 3: I was there for ten years before I left, But
• 1:12:50
  Speaker 3: I remember when you and Josh did that for me.
• 1:12:52
  Speaker 3: It was twenty thirteen. That's how you know. Vividly I
• 1:12:55
  Speaker 3: remember it, and I remember how much the confidence boost
• 1:12:57
  Speaker 3: that it gave me to keep going was enormous.
• 1:13:00
  Speaker 2: Well, that's a lovely view to say, I really really
• 1:13:01
  Speaker 2: appreciate it. Both of us have an eye for talent.
• 1:13:05
  Speaker 2: I could, I could, I could say that, and you
• 1:13:08
  Speaker 2: have fulfilled all of our highest aspirations for you. Let's
• 1:13:15
  Speaker 2: talk about books. What are you reading right now? What
• 1:13:18
  Speaker 2: are some of your favorites? And I know when you
• 1:13:21
  Speaker 2: finished writing a book, like the whole process, you're not
• 1:13:25
  Speaker 2: reading anything other than research. Yeah, so talk about your favorites.
• 1:13:30
  Speaker 3: I'm reading a book right now by by by Stefan Zwig,
• 1:13:34
  Speaker 3: who was a journalist in the in the twentieth century,
• 1:13:37
  Speaker 3: and he wrote his memoirs, which is basically about how
• 1:13:39
  Speaker 3: the world went from he was living in Austria and
• 1:13:42
  Speaker 3: in Vienna, and how the world went from before World
• 1:13:45
  Speaker 3: War One, Europe was so civilized and so great, and
• 1:13:49
  Speaker 3: everyone viewed that that would discontinue indefinitely, that it was
• 1:13:53
  Speaker 3: so organized and so polite and so which, of course
• 1:13:56
  Speaker 3: is somewhat of an exaggeration, but that was the view
• 1:13:58
  Speaker 3: that he had. And then he's about how the world changed,
• 1:14:01
  Speaker 3: both with World War One and then especially with World
• 1:14:02
  Speaker 3: War Two, and how everything happened that nobody thought would
• 1:14:07
  Speaker 3: have been possible before it happened, and how culturally and
• 1:14:10
  Speaker 3: socially that world changed.
• 1:14:11
  Speaker 4: That's that's some reading right now.
• 1:14:12
  Speaker 2: That, thank goodness, something like that would never happen here
• 1:14:14
  Speaker 2: exactly right. Let's talk about streaming. What are you listening
• 1:14:18
  Speaker 2: or watching these days? Be it? I don't want you.
• 1:14:21
  Speaker 2: This is in another solicitation for a compliment. But what
• 1:14:24
  Speaker 2: are you watching? What are you listening?
• 1:14:26
  Speaker 3: I finished Succession not too long ago, one of the
• 1:14:29
  Speaker 3: one of the best I've ever seen. One no, no, no,
• 1:14:31
  Speaker 3: And I didn't take that at all, one of the
• 1:14:33
  Speaker 3: best I've ever seen.
• 1:14:34
  Speaker 2: I love every second episode. I don't like any of
• 1:14:37
  Speaker 2: these people.
• 1:14:37
  Speaker 4: Oh but that's the point.
• 1:14:39
  Speaker 3: I loved every second of success Now and then I
• 1:14:41
  Speaker 3: just finished Your Friends and Neighbors.
• 1:14:43
  Speaker 4: That really good.
• 1:14:44
  Speaker 2: I believably good. I can't wait for you. Ham just
• 1:14:46
  Speaker 2: gets better and better, so good. And if when that
• 1:14:50
  Speaker 2: first came out, he hosted Center Live, and I want
• 1:14:52
  Speaker 2: to say, the best episode all season, so good.
• 1:14:55
  Speaker 4: I can't, I can't. I can't wait for the second
• 1:14:57
  Speaker 4: season of that.
• 1:14:57
  Speaker 2: There's a lot of stat spending earning. I mean, it
• 1:15:03
  Speaker 2: fits right into the sweet spot of what you write, and.
• 1:15:05
  Speaker 4: Just such good writing character development.
• 1:15:07
  Speaker 2: There our final two questions, what sort of advice would
• 1:15:10
  Speaker 2: you give an recent college grad who was interested in
• 1:15:13
  Speaker 2: the career and either investing or writing about finance, Read as.
• 1:15:17
  Speaker 3: Much as you possibly can. It's very boring advice, but
• 1:15:19
  Speaker 3: that's everyone. No one has more confidence in their ability
• 1:15:24
  Speaker 3: or where they think the world is going than a
• 1:15:26
  Speaker 3: twenty one year old man who's never read a book
• 1:15:28
  Speaker 3: about history of investing. Nobody thinks they've figured it out
• 1:15:31
  Speaker 3: more than that. And spend as much time as you
• 1:15:34
  Speaker 3: possibly can, reading as much as you can from the
• 1:15:36
  Speaker 3: diverse field of topics that you can.
• 1:15:40
  Speaker 2: And our final question, what do you know about the
• 1:15:42
  Speaker 2: world of investing, writing, earning, and spending today that would
• 1:15:49
  Speaker 2: have been useful back in the financial crisis when you
• 1:15:52
  Speaker 2: were first launching your career.
• 1:15:53
  Speaker 3: We mentioned diverse things there, like writing and spending, and
• 1:15:55
  Speaker 3: I actually think I have very similar philosophies on both,
• 1:15:58
  Speaker 3: which is when I write, I want to write for
• 1:16:00
  Speaker 3: an audience of one, which is me. I just want
• 1:16:02
  Speaker 3: to write things that I think are interesting, telling stories
• 1:16:05
  Speaker 3: that I think are funny and unique, and if other
• 1:16:07
  Speaker 3: people like them too, that's wonderful. But I know that
• 1:16:10
  Speaker 3: I can't please everybody, and that's just an inevil part
• 1:16:13
  Speaker 3: of it. So if I'm gonna pander to one person,
• 1:16:16
  Speaker 3: it might as well be myself. And I think that's
• 1:16:18
  Speaker 3: how I spend money too. I spend to please myself
• 1:16:21
  Speaker 3: and my family, and I don't care if other people
• 1:16:23
  Speaker 3: do it differently. I don't care if other people think
• 1:16:25
  Speaker 3: it's the wrong way to do it. It's what works for me.
• 1:16:27
  Speaker 3: And again, if I'm going to pander to anyone in
• 1:16:30
  Speaker 3: how I spend it might as well be myself.
• 1:16:32
  Speaker 2: Well, thank you Morgan for coming in. This is everything
• 1:16:36
  Speaker 2: I was expecting it to be. We have been speaking
• 1:16:39
  Speaker 2: to Morgan Housel, author of The Psychology of Money, same
• 1:16:43
  Speaker 2: Innette as Ever and the new book The Art of Spending,
• 1:16:47
  Speaker 2: Simple Choices for a Richer Life. If you enjoy this conversation,
• 1:16:51
  Speaker 2: check out any of the five hundred and eighty one
• 1:16:53
  Speaker 2: podcasts we've done over the past eleven years. You can
• 1:16:57
  Speaker 2: find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find
• 1:17:01
  Speaker 2: your podcasts, And check out my new book How Not
• 1:17:05
  Speaker 2: to Invest The ideas, numbers and behavior that destroy wealth
• 1:17:09
  Speaker 2: and How to avoid them at your favorite bookstore. I
• 1:17:13
  Speaker 2: would be remiss if I did not thank the Cracked
• 1:17:14
  Speaker 2: team that helps put these conversations together each week. Alexis
• 1:17:19
  Speaker 2: Noriega is my video producer. Anna Luke is my podcast producer.
• 1:17:23
  Speaker 2: Sage Bauman is the head of podcasts here at Bloomberg.
• 1:17:26
  Speaker 2: Sean Russo is my researcher. I'm Barry Ritolts. You've been
• 1:17:31
  Speaker 2: listening to Masters in Business on Bloomberg Radio.