Latest / Masters in Business / Morgan Housel on the Culture of Finance (Podcast)

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Morgan Housel on the Culture of Finance (Podcast) · Masters in Business

• 0:02
  Speaker 1: This is Master's in Business with Barry Riddholts on Bloomberg Radio.
• 0:07
  Speaker 1: This week on the podcast, I have an old friend
• 0:09
  Speaker 1: who is also an extra special guest. His name is
• 0:14
  Speaker 1: Morgan Housel, and he could be the most popular writer
• 0:18
  Speaker 1: in finance today. He's a partner at the Collaborative Funds,
• 0:23
  Speaker 1: but we really know him for his weekly missives on
• 0:27
  Speaker 1: investing and behavior and psychology. Uh. There aren't a lot
• 0:31
  Speaker 1: of people on my must read list, Morgan is certainly
• 0:36
  Speaker 1: one of them. I think you'll find this conversation absolutely fascinating. So,
• 0:41
  Speaker 1: with no further ado, my conversation with writer Morgan Housel.
• 0:48
  Speaker 1: This is Master's in Business with Barry Riddholts on Bloomberg Radio.
• 0:53
  Speaker 1: I have an extra special guest today. His name is
• 0:56
  Speaker 1: Morgan Housel and he is a partner at Collaborative Funds.
• 1:00
  Speaker 1: But he is also a financial writer who began at
• 1:04
  Speaker 1: the Motley Fool and has published in such August institutions
• 1:07
  Speaker 1: as The Wall Street Journal, USA Today and elsewhere. He
• 1:11
  Speaker 1: is the two time winner of the Best in Business
• 1:14
  Speaker 1: Award from the Society of American Business Editors and Writers,
• 1:18
  Speaker 1: and a winner of The New York Times, Sydney Award.
• 1:21
  Speaker 1: His new book, The Psychology of Money, Timeless Lessons on Wealth, greed,
• 1:26
  Speaker 1: and Happiness, came out September eight. Morgan Household, Welcome to Bloomberg.
• 1:33
  Speaker 1: Thank you for having me Berry. It's good to be here.
• 1:35
  Speaker 1: I have been looking for an excuse to bring you
• 1:37
  Speaker 1: on the show, um forever. Full disclosure, we know each
• 1:40
  Speaker 1: other uh quite a while. But in preparing for this conversation,
• 1:46
  Speaker 1: I discovered all sorts of funny little things about you
• 1:50
  Speaker 1: that I never knew. Starting with your undergraduate career, tell
• 1:56
  Speaker 1: us what you originally studied and what you thought you
• 1:58
  Speaker 1: would be when you got out of college. So I
• 2:02
  Speaker 1: have a interesting education background, and it might might might
• 2:06
  Speaker 1: help to start a little bit before college. I grew
• 2:08
  Speaker 1: up as a ski racer in Lake Tahoe, UM, and
• 2:11
  Speaker 1: because ski racing was taking so much time, myself and
• 2:14
  Speaker 1: a lot of my peers were doing it effectively bypassed
• 2:17
  Speaker 1: high school infectively. Did not go to high school. We
• 2:20
  Speaker 1: did an independent study program where you uh, we did
• 2:24
  Speaker 1: virtually nothing. I mean we, I honestly don't have many
• 2:27
  Speaker 1: many memories of doing anything. For my high school education.
• 2:30
  Speaker 1: We got a piece of paper that said diploma on
• 2:33
  Speaker 1: it when we were sixteen years old, and that was it.
• 2:35
  Speaker 1: So when I started college, I started when I was
• 2:37
  Speaker 1: twenty years old. I had no high school education. I
• 2:39
  Speaker 1: had an eighth grade education. At that point, I had
• 2:42
  Speaker 1: to start at the very bottom. I started at a
• 2:44
  Speaker 1: local community college with the most remedial courses that they offered,
• 2:47
  Speaker 1: trying to catch up. And I was always interested in finance,
• 2:51
  Speaker 1: even during this period I had. I had no education,
• 2:54
  Speaker 1: I had no idea what I was doing or or
• 2:56
  Speaker 1: what I was looking at. But I was always interested
• 2:58
  Speaker 1: in the stock market. I was interested in investing, and
• 3:00
  Speaker 1: it just kind of occurred to me. I don't know
• 3:02
  Speaker 1: where I learned this or how I figured it out,
• 3:04
  Speaker 1: but I got this idea that investment bankers were the smartest,
• 3:09
  Speaker 1: most richest, most powerful, glamorous people in the history of
• 3:13
  Speaker 1: the universe. So I wanted to be an investment banker.
• 3:16
  Speaker 1: This was the mid two thousand's. Every slightly ambitious young
• 3:20
  Speaker 1: man in finance and economics wanted to be an investment banker.
• 3:23
  Speaker 1: That was what I wanted to do, and I had
• 3:24
  Speaker 1: no backup plan. When I went to college. I was
• 3:26
  Speaker 1: going to be an investment banker. That was it. I
• 3:28
  Speaker 1: was going to move to Manhattan. I was gonna work
• 3:30
  Speaker 1: in mergers and acquisitions, and the story no plan B.
• 3:33
  Speaker 1: And then I got an investment banking internship in my
• 3:36
  Speaker 1: junior year of college. And I walked in on day
• 3:39
  Speaker 1: one and literally literally within minutes, I thought to myself,
• 3:44
  Speaker 1: get me the hell out of here. This is the
• 3:45
  Speaker 1: worst environment, the worst culture I've ever seen in my life.
• 3:49
  Speaker 1: It was just such a hazing environment of it wasn't
• 3:52
  Speaker 1: about learning or doing good work. It was fit in
• 3:54
  Speaker 1: your desk and shut up so we can yell at you.
• 3:57
  Speaker 1: And if you're lucky, you'll go home at three am
• 3:59
  Speaker 1: and you will enjoy yet and you will have a
• 4:00
  Speaker 1: smile on your face. And like, I'm I'm all for
• 4:03
  Speaker 1: hard work, I'm all for grinding, but this was just
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  Speaker 1: such a hazing It was not hard work for any
• 4:09
  Speaker 1: sake other than, uh, you know that the the senior
• 4:12
  Speaker 1: bankers had to do it themselves, so they wanted to
• 4:15
  Speaker 1: put the torture back on you. So I got to that.
• 4:18
  Speaker 1: I got out of that really quickly. I think I
• 4:20
  Speaker 1: lasted maybe like a month or something like that. Uh.
• 4:22
  Speaker 1: And then I needed to do something else in finance.
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  Speaker 1: I didn't know what it was gonna be. But that's
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  Speaker 1: how I kind of serendipitously ended up as a financial writer.
• 4:30
  Speaker 1: That was not part of the plan whatsoever. But I
• 4:33
  Speaker 1: had a friend who was a writer at the Motley
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  Speaker 1: Fool at the time, and he said, Hey, you're interested
• 4:37
  Speaker 1: in investing. They're hiring writers. Why don't you apply? And
• 4:41
  Speaker 1: I did apply, thinking, Ay, they're not going to hire me,
• 4:44
  Speaker 1: but be if they do, maybe I'll stay there for
• 4:47
  Speaker 1: uh three months or six months before I find another
• 4:50
  Speaker 1: real finance job. And long story short, I ended up
• 4:53
  Speaker 1: staying as Molly Full for almost ten years and fell
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  Speaker 1: in love with writing. You know, I've always been interested
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  Speaker 1: in investing and finance. I was then, I still am now,
• 5:03
  Speaker 1: but you know, falling in love with with writing was
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  Speaker 1: something that I did not see comment. It was not
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  Speaker 1: part of the plan, but it became what I do
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  Speaker 1: for a living now. So that was, you know, fourteen
• 5:12
  Speaker 1: years ago, and here we are, so let me let
• 5:14
  Speaker 1: me roll back pre Motley Full but post investment banking.
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  Speaker 1: Wasn't there a stint doing some private equity somewhere in
• 5:21
  Speaker 1: the middle, But yeah, yeah there was. So this was
• 5:24
  Speaker 1: kind of summer two thousand seven, I guess, and I
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  Speaker 1: interned at at a private equity firm in Los Angeles,
• 5:29
  Speaker 1: and I love private equity. It was great. It was
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  Speaker 1: a good mix between business and finance versus just one
• 5:36
  Speaker 1: side or the other. Whereas investment banking is just finance,
• 5:39
  Speaker 1: you're not you're not working with the companies that you're
• 5:41
  Speaker 1: investing it, you're just doing deals. So private equity was great.
• 5:44
  Speaker 1: And then uh, summer of two thousand seven, as you
• 5:47
  Speaker 1: know all too well, everything started blowing up. Financial markets
• 5:50
  Speaker 1: started seizing up, credit markets seized up. So if you
• 5:53
  Speaker 1: are a private equity firm that was borrowing tons of
• 5:55
  Speaker 1: money to do these deals, things got really dicey, and
• 5:59
  Speaker 1: you know the look that was not two thou eight
• 6:00
  Speaker 1: by then, this was still two thousand seven, but it
• 6:03
  Speaker 1: was already clear enough that things were breaking and our
• 6:06
  Speaker 1: portfolio companies were struggling that I was told, hey, there's
• 6:10
  Speaker 1: not going to be a full time position for you.
• 6:12
  Speaker 1: Uh you know when when When when you graduate? So
• 6:15
  Speaker 1: that was when I needed to do something else and
• 6:17
  Speaker 1: found my way kind of by pure accident, into writing.
• 6:21
  Speaker 1: And the ironic thing that knowing you're writing all these
• 6:25
  Speaker 1: views to me, it's funny. Investment banking, private equity, venture capital.
• 6:31
  Speaker 1: It's so opposite the way you describe how you invest
• 6:36
  Speaker 1: and how you think the average investors should put their
• 6:39
  Speaker 1: money at risk, sort of sort of contradictory. You keep
• 6:43
  Speaker 1: it simple and say more or less just be a
• 6:46
  Speaker 1: passive long term index or or am I oversimplifying that?
• 6:50
  Speaker 1: I think it's a little oversimplified, because the only the
• 6:53
  Speaker 1: only edit I would make to that is, look, I
• 6:56
  Speaker 1: am I dollar cost average into index funds. I plan
• 6:59
  Speaker 1: on holding them for decades if I if I'm so
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  Speaker 1: lucky to be able to do that. But that's what
• 7:03
  Speaker 1: works for me, and I'm not going to pretend like
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  Speaker 1: that's the best advice for everyone. So I'm not a
• 7:08
  Speaker 1: passive zella at all. I I admire a lot of
• 7:11
  Speaker 1: active managers. I'm not against active management, And in the
• 7:14
  Speaker 1: slightest I'm not just saying that to cover my basis.
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  Speaker 1: I'm really not. This works for me because I and
• 7:21
  Speaker 1: in my life value this simplicity and the hands off
• 7:24
  Speaker 1: approach of our finances. Why I love being able to
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  Speaker 1: wrap my head around our entire net worth in the
• 7:30
  Speaker 1: simplest ways possible. And I think that active management is
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  Speaker 1: something where it should be the case that no more
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  Speaker 1: than ten percent of people who set out to do
• 7:39
  Speaker 1: it will be successful in it. But of course, like
• 7:41
  Speaker 1: that should be the case, people will always make make
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  Speaker 1: the you know what, will point out active managers underperforming
• 7:48
  Speaker 1: the benchmarks. Well they should of course, it's the case.
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  Speaker 1: You shouldn't have a situation where everyone who tries to
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  Speaker 1: beat the market can and and they're rewarded, you know,
• 7:57
  Speaker 1: with with with kingly thumbs when they do it. That
• 8:00
  Speaker 1: not be the case. It should be the case where
• 8:01
  Speaker 1: it's like, you know, you know what, what percentage of
• 8:04
  Speaker 1: college basketball players go to the NBA A really small percentage,
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  Speaker 1: but that's how it should be. The NBA is the
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  Speaker 1: big leagues where the you know, the stakes are high
• 8:12
  Speaker 1: and the pay is huge. That's how it should be.
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  Speaker 1: So when I just think about that from an active
• 8:16
  Speaker 1: management perspective, it's not that I'm against it. It's just
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  Speaker 1: a risk reward trade off. And I know with really
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  Speaker 1: high confidence that if I and my wife can dollar
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  Speaker 1: cost average into index funds, do it consistently and hold
• 8:31
  Speaker 1: them for thirty or forty or maybe even fifty years,
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  Speaker 1: we will achieve every financial goal that we possibly have.
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  Speaker 1: And more so, when I look at that, and then
• 8:40
  Speaker 1: I look at the odds of outperforming actively, you know,
• 8:42
  Speaker 1: something like ten percent something like that. I just kind
• 8:45
  Speaker 1: of I just kind of shrug my shoulders and say,
• 8:47
  Speaker 1: why why why would I need to do that? If
• 8:48
  Speaker 1: I can do this simple thing, Uh, that's going to
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  Speaker 1: achieve all of my goals and I put no effort
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  Speaker 1: into it. The odds of like catastrophic failure are very low.
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  Speaker 1: The odds of you know, the fund losing end of
• 9:00
  Speaker 1: its value or becoming a fraud, whatever it is. The
• 9:02
  Speaker 1: odds of of the the the the manager retiring or
• 9:06
  Speaker 1: being accused of fraud, whatever it is, that's all out
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  Speaker 1: the window. It's just like all those other risks are
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  Speaker 1: gone and and versus acts investing where I would have
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  Speaker 1: a chance of doing worse. Uh not because managers are
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  Speaker 1: bad at what they do, or you know, it's hard
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  Speaker 1: to pick it's hard to pick good managers. But that's
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  Speaker 1: just how the active management space should work. When I
• 9:25
  Speaker 1: look at that trade off, it just doesn't make a
• 9:27
  Speaker 1: lot of sense for us, but I completely understand why
• 9:30
  Speaker 1: it would for other people. I you know, there are
• 9:33
  Speaker 1: a lot of people for whom like they cannot wake
• 9:35
  Speaker 1: up in the morning and look at the mirror, and
• 9:37
  Speaker 1: look in the mirror. If they were dollar costs averaging
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  Speaker 1: in the index months, it's just against their personality. They
• 9:42
  Speaker 1: would feel bad about it. They want to do it,
• 9:44
  Speaker 1: they would feel like they're leaving opportunity on the table.
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  Speaker 1: And I just don't have that in the slightest. I
• 9:48
  Speaker 1: want to spend all my day reading and researching and
• 9:52
  Speaker 1: thinking about writing and doing the writing. Uh so, so
• 9:55
  Speaker 1: that that's where that's where I leave it. So active
• 9:58
  Speaker 1: investing is not like lake will begun where all of
• 10:01
  Speaker 1: the children are above average, sort of a mathematical cork um.
• 10:06
  Speaker 1: Doesn't work that way. I mean you would. It's it's like,
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  Speaker 1: for years, I was one of the people who was
• 10:12
  Speaker 1: pointing at these statistics of mutual fund managers underperforming the benchmarks,
• 10:17
  Speaker 1: you know, and saying this is ridiculous. They're all, you know,
• 10:20
  Speaker 1: this is this is the indication of their failure. And
• 10:23
  Speaker 1: it took me a while to come around to the
• 10:24
  Speaker 1: idea of like, no, that's how it should be. That's,
• 10:27
  Speaker 1: of course how it should be. If neal back to
• 10:29
  Speaker 1: like the college basketball analogy, no one looks at the
• 10:32
  Speaker 1: fact that or whatever it is, of college basketball players
• 10:35
  Speaker 1: don't go to the NBA. No one looks at that
• 10:38
  Speaker 1: and says, college basketball is a joke. You know, you know,
• 10:41
  Speaker 1: they're they're they're they're all failures. What are they doing?
• 10:43
  Speaker 1: They have no idea what they're doing. It's a scamp.
• 10:45
  Speaker 1: No one would say that. Everyone would just know, like, hey, look,
• 10:49
  Speaker 1: the jump from uh from good to really good is
• 10:53
  Speaker 1: going to have a big calling effect. There's like not
• 10:56
  Speaker 1: not everyone's gonna make it. That's how it should be.
• 10:58
  Speaker 1: So it's it's hard in the musical fund space and
• 11:01
  Speaker 1: the hedge fund space whatever it is to accept that though,
• 11:04
  Speaker 1: that that's just the reality of it, that you know,
• 11:06
  Speaker 1: maybe ten percent of you will outperform over the long run.
• 11:09
  Speaker 1: But when you expect, when you accept that that's how
• 11:11
  Speaker 1: it should be, it should not be any different than that.
• 11:14
  Speaker 1: In adjust world, that's exactly what you would expect. Then
• 11:17
  Speaker 1: it just becomes, you know, less less cynical. When you're
• 11:20
  Speaker 1: looking at it. You look at it and say, yeah,
• 11:22
  Speaker 1: performed last year. But that's how it should be. So
• 11:24
  Speaker 1: it doesn't bother me anymore. It makes perfect sense to me.
• 11:27
  Speaker 1: You have been writing about finance for the better part
• 11:31
  Speaker 1: of a decade. At what point do you start to
• 11:34
  Speaker 1: run out of topics? Do you do you ever begin
• 11:37
  Speaker 1: to feel like you're repeating yourself? Well, there's there's there's
• 11:40
  Speaker 1: two ways to look at this, And first I would
• 11:41
  Speaker 1: say you've been writing about finance for the better part
• 11:43
  Speaker 1: of two decades, so you have insight on this as well.
• 11:46
  Speaker 1: I know, I think there's there's there's two sides of this.
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  Speaker 1: One is um my belief and I'm pretty sure I
• 11:52
  Speaker 1: stole this from Jason's wide. But there's only like a
• 11:54
  Speaker 1: dozen financial topics worth writing about you can you can
• 11:58
  Speaker 1: kind of you know, guess what they are. Volatility is
• 12:01
  Speaker 1: common is common, compounding is amazing, Fees hurt like, there's
• 12:04
  Speaker 1: only there's only so many topics that you can write about.
• 12:07
  Speaker 1: Unlike the core ideas. Uh so, yes, there there's a
• 12:11
  Speaker 1: very limited number of things to write about. But the
• 12:13
  Speaker 1: number of ways that you can express those ideas, the
• 12:16
  Speaker 1: number of examples, the number of of different connections from
• 12:20
  Speaker 1: other fields that you can tie back to investing, those
• 12:22
  Speaker 1: I think are endless. They are bottomless. You could do
• 12:25
  Speaker 1: this forever. You could be a writer for a thousand
• 12:27
  Speaker 1: years and never run out of examples. And for me,
• 12:29
  Speaker 1: that really took off when I realized that investing is
• 12:33
  Speaker 1: not the study of finance. It's the study of how
• 12:35
  Speaker 1: people behave with money. And since it's the study of behavior,
• 12:39
  Speaker 1: it has all of these other lessons from other fields,
• 12:43
  Speaker 1: rules and laws from other fields, other industries, other practices
• 12:47
  Speaker 1: that apply to investing. So when you think of investing,
• 12:50
  Speaker 1: is just how people think about greed and fear and
• 12:53
  Speaker 1: opportunity and scarcity. Well, those things apply to a lot
• 12:57
  Speaker 1: of other fields. They apply to politics, they applied to
• 13:00
  Speaker 1: military history, they applied to biology, they applied to you know,
• 13:03
  Speaker 1: all these like all these other fields that will that
• 13:07
  Speaker 1: are important. Like if you can take the lessons from
• 13:09
  Speaker 1: those fields and apply them to investing or write about
• 13:12
  Speaker 1: how people dealt with those topics in different fields and
• 13:15
  Speaker 1: what we can learn about that as investors, then I
• 13:18
  Speaker 1: think the well of ideas is endless. Um So it's
• 13:22
  Speaker 1: it's it's definitely the case that every week, I'm sure
• 13:24
  Speaker 1: you can relate to this as well, Barry, that every
• 13:26
  Speaker 1: week I kind of wake up and say, what am
• 13:28
  Speaker 1: I going to write about this week? I'm talking to
• 13:30
  Speaker 1: feel like I'm running ow ideas, But you always figure
• 13:32
  Speaker 1: it out. I mean that's the case for you as well. Right, yeah,
• 13:35
  Speaker 1: I don't you know. I used to let me back
• 13:39
  Speaker 1: up a little bit. So when I started writing, I
• 13:42
  Speaker 1: was putting stuff up every day just as a habit,
• 13:45
  Speaker 1: just as a routine to become a better writer. And
• 13:49
  Speaker 1: I actually had a conversation with Jason's wife, who you
• 13:52
  Speaker 1: referenced earlier, about Hey, how do I transition to weekly
• 13:57
  Speaker 1: columns that are a little more in depth and use
• 14:00
  Speaker 1: a little more data and not just sort of I
• 14:03
  Speaker 1: don't want to say superficial, but just daily becomes a
• 14:07
  Speaker 1: little more news driven and weekly allows you some time
• 14:10
  Speaker 1: to step back and think that that definitely was a transition.
• 14:13
  Speaker 1: It wasn't easy going from daily to weekly. I still
• 14:17
  Speaker 1: post on the blog every day, but those are quick hits. Hey,
• 14:21
  Speaker 1: take a look at this Take a look at this chart.
• 14:23
  Speaker 1: See that it's not the same as a thousand word
• 14:25
  Speaker 1: column where you're really going into depth. So that leads
• 14:30
  Speaker 1: me to my next question, which is, tell us a
• 14:32
  Speaker 1: little bit about your daily routine. How do you structure
• 14:35
  Speaker 1: your day? When do you get to think, when do
• 14:38
  Speaker 1: you get to write? It's changed a lot over the
• 14:41
  Speaker 1: years because when I was at the Motley Full, particularly
• 14:43
  Speaker 1: early on at the Motley Fell I was on the
• 14:46
  Speaker 1: volume game. I was writing three articles per day, which
• 14:49
  Speaker 1: gives you, you know, literally minutes maybe an hour to
• 14:51
  Speaker 1: think of an idea, do a little bit of research
• 14:54
  Speaker 1: on it, write it and get it out. But that
• 14:57
  Speaker 1: was that was tough, but that was also a great
• 14:58
  Speaker 1: way to learn how to write. I had no writing
• 15:00
  Speaker 1: experience or background when I joined, so that was a
• 15:03
  Speaker 1: good you know, just kind of thrown in the deep
• 15:05
  Speaker 1: end and figured out. So my routine back then was
• 15:08
  Speaker 1: very much just like almost like a daily panic, think
• 15:10
  Speaker 1: of three things to write, get him out there. And
• 15:12
  Speaker 1: also the articles weren't very good because I wasn't thinking
• 15:15
  Speaker 1: about I didn't have time to think them through. You
• 15:17
  Speaker 1: really picked up a following at the Motley Fool pretty
• 15:21
  Speaker 1: early in your career. There where was the transition from
• 15:24
  Speaker 1: just cranking out a lot of Volume two, I'm gonna
• 15:27
  Speaker 1: do something more thoughtful and in depth. It was it
• 15:30
  Speaker 1: was actually I was speaking with him the other day.
• 15:32
  Speaker 1: My old boss of the millyful of name is Brian Richards.
• 15:34
  Speaker 1: He's he's still he's still one of my great friends.
• 15:37
  Speaker 1: Um he. I came to him one day and I said, hey,
• 15:40
  Speaker 1: rather than writing three articles today, what if I were
• 15:44
  Speaker 1: to slow down and write like three per week and
• 15:47
  Speaker 1: they would be much more thoughtful and in depth and
• 15:49
  Speaker 1: better researched. But the thing is the reason I'm not
• 15:52
  Speaker 1: doing that is because I'm getting paid per article. So
• 15:54
  Speaker 1: if I reduced my volume by I can't feed my
• 15:57
  Speaker 1: family anymore. So I came down and said, what if
• 15:59
  Speaker 1: I cut on this three a week, but you paid
• 16:01
  Speaker 1: me the same, and he said, great, Yeah, absolutely, let's
• 16:03
  Speaker 1: do it. And the pitch to him was like, hey,
• 16:05
  Speaker 1: my articles are gonna be better, They're gonna be much
• 16:07
  Speaker 1: more in depth and thoughtful. So so we did that
• 16:10
  Speaker 1: and it it worked. I feel I feel like that
• 16:12
  Speaker 1: was the turning point for me, is when I the
• 16:14
  Speaker 1: economics let me slow down and think things through, and
• 16:19
  Speaker 1: you would be a little bit more in depth and thoughtful.
• 16:22
  Speaker 1: And that was when I really started going from you know,
• 16:25
  Speaker 1: just sitting on my deck and just at my desk
• 16:27
  Speaker 1: and cranking out whatever I could as fast as I could,
• 16:29
  Speaker 1: to hey, let's let's read a book about this topic
• 16:33
  Speaker 1: and then I'm going to go for a walk and
• 16:35
  Speaker 1: think about it and think about how it applies to
• 16:37
  Speaker 1: these other things that I read about, and call some
• 16:40
  Speaker 1: of my friends and bounce the idea off of them
• 16:42
  Speaker 1: and then do some other research, just a much more calmer,
• 16:46
  Speaker 1: thoughtful process. Um So that was when I started spending
• 16:49
  Speaker 1: most of my day reading and going for walks, which
• 16:52
  Speaker 1: is what I do now. That that that's when it started.
• 16:55
  Speaker 1: So the actual writing that I do now and now
• 16:57
  Speaker 1: I slowed down to one article per week something like that.
• 17:01
  Speaker 1: So my week is reading and going for walks, which
• 17:07
  Speaker 1: is where I do most of my quote unquote writing.
• 17:09
  Speaker 1: That's where all like the thinking, like piecing ideas together
• 17:12
  Speaker 1: happens and speaking with friends on the phone who are
• 17:15
  Speaker 1: in kind of you know, similar fields, have expertise about
• 17:18
  Speaker 1: these things that I don't. That's the huge majority of day.
• 17:21
  Speaker 1: There's not a lot of structure because I don't think
• 17:24
  Speaker 1: there's there can be because good ideas creativity can't be forced.
• 17:27
  Speaker 1: They can't be scheduled. Like there's no like you can't
• 17:30
  Speaker 1: just have like a calendar entry and say, Okay, at
• 17:33
  Speaker 1: nine o'clock, I'm gonna do creative thinking and come up
• 17:36
  Speaker 1: with an idea. It doesn't work that way. It's always
• 17:38
  Speaker 1: just this kind of random things. Sometimes the ideas are
• 17:41
  Speaker 1: really easy and Monday morning it just like pops in
• 17:44
  Speaker 1: your head and you got it and your step for
• 17:45
  Speaker 1: the week. Other times it's really just this, like you
• 17:48
  Speaker 1: spend several days just kind of grinding through a bunch
• 17:50
  Speaker 1: of ideas, a lot of which don't work. A lot
• 17:52
  Speaker 1: of us aren't very well thought out. Or you try
• 17:55
  Speaker 1: to start writing an article and you quickly realize it's
• 17:58
  Speaker 1: not it's not gonna work. So there's there's really not
• 18:00
  Speaker 1: much structure other than just kind of um unstructured rambling thinking.
• 18:06
  Speaker 1: And that's that's It's not an easy thing to do
• 18:08
  Speaker 1: because most of the time it feels like you're not working.
• 18:11
  Speaker 1: And then so I feel like a lot of my time,
• 18:13
  Speaker 1: even after doing this for fourteen years, I'm constantly hit
• 18:15
  Speaker 1: with this idea of like, what did I get done today?
• 18:18
  Speaker 1: I didn't do anything today. I've just been sitting. I've
• 18:20
  Speaker 1: been sitting on the couch, you know, reading some reading
• 18:23
  Speaker 1: some books, that listened to two podcasts. I didn't do
• 18:25
  Speaker 1: anything productive today. And it's hard to accept that. No,
• 18:29
  Speaker 1: that's that's the work. I mean, obviously, that's that's it's
• 18:32
  Speaker 1: it's a great job. I'm fortunate to be able to
• 18:34
  Speaker 1: do that, but that is the work. It's just trying
• 18:36
  Speaker 1: to piece together different ideas over time so that maybe
• 18:40
  Speaker 1: once a week one of them sticks enough that you
• 18:42
  Speaker 1: can write a thousand words about it and publish it.
• 18:44
  Speaker 1: I can relate to that sensation of what did I
• 18:47
  Speaker 1: accomplished today? And if you don't have anything on the
• 18:51
  Speaker 1: page to show for it, or you've been in meetings
• 18:54
  Speaker 1: and phone calls all day, it feels like, well I
• 18:58
  Speaker 1: failed to produce something. Did I really get anything done?
• 19:02
  Speaker 1: I think what's so hard about that is that for
• 19:04
  Speaker 1: most of of modern history, work was visible and physical.
• 19:10
  Speaker 1: So your work was digging a ditch or pulling a
• 19:13
  Speaker 1: lever at the factory, or you know, making goods in
• 19:16
  Speaker 1: in a factory, or you worked on a farm. That's
• 19:19
  Speaker 1: for most of our history, work was very physical. It
• 19:22
  Speaker 1: was doing stuff with your hands, and it was visible.
• 19:24
  Speaker 1: You could see, you could see what other people were doing,
• 19:26
  Speaker 1: and you can see what you got done. And then
• 19:29
  Speaker 1: now is you shift to the era where most jobs
• 19:32
  Speaker 1: are thought jobs. They are creative jobs where you're working
• 19:35
  Speaker 1: with your head, and what really matters is not what
• 19:38
  Speaker 1: you've what you've it's not your physical deliverables, it's the
• 19:42
  Speaker 1: ideas that you came up with then work becomes something
• 19:45
  Speaker 1: that just happens in your head. And most people, myself
• 19:48
  Speaker 1: um do their best work when they're sitting on the
• 19:51
  Speaker 1: couch or going for a walk, or doing something that
• 19:54
  Speaker 1: looks nothing like work. Like I, I really don't do
• 19:57
  Speaker 1: any good work, any good thinking from sitting up desk,
• 20:00
  Speaker 1: and I think that's true for most people. Are definitely
• 20:02
  Speaker 1: not sitting in a meeting. That's true for most people too.
• 20:06
  Speaker 1: I get my best ideas what I'm doing things that
• 20:07
  Speaker 1: look absolutely nothing like work, which is easier when you
• 20:10
  Speaker 1: work from home because you don't have a boss, you
• 20:12
  Speaker 1: don't have a coworker who's who's watching you sitting on
• 20:14
  Speaker 1: the couch and is judging you for it. But even still,
• 20:17
  Speaker 1: even for yourself, it just doesn't feel like you're being productive,
• 20:21
  Speaker 1: even though that's when you do your best work. So
• 20:23
  Speaker 1: last question about the business of writing, so to speak,
• 20:27
  Speaker 1: who is your audience? Who are you writing for? I've
• 20:30
  Speaker 1: always so Here's this is where I might differ for
• 20:33
  Speaker 1: for from many writers is that most most writers will
• 20:36
  Speaker 1: know who their audience is and they will try to
• 20:39
  Speaker 1: write for them, and they'll say, oh, I'm writing towards
• 20:42
  Speaker 1: for investors or financial advisors, and let's write for them.
• 20:45
  Speaker 1: I've always been been attracted to this idea of selfish writing,
• 20:49
  Speaker 1: where I'm writing for myself, And what I mean by
• 20:51
  Speaker 1: that is I only want to write things that I
• 20:54
  Speaker 1: think are interesting that I would want to read myself,
• 20:57
  Speaker 1: and then I just have to take a leap of
• 20:58
  Speaker 1: faith that there are other people out there who will
• 21:00
  Speaker 1: want to read that too. And the reason I do
• 21:02
  Speaker 1: that is because I think obviously people do their best
• 21:04
  Speaker 1: work when they are most interested in it, when they
• 21:07
  Speaker 1: when they themselves personally think something is interesting and they
• 21:10
  Speaker 1: are learning about it as they go as they write.
• 21:13
  Speaker 1: So that's all I ever try to think about for
• 21:15
  Speaker 1: who my audience is. And I haven't done much research.
• 21:18
  Speaker 1: I I have a hard time answering your questions. I
• 21:20
  Speaker 1: don't know who my audience is. I know, I mean,
• 21:22
  Speaker 1: there are lots of them are financial advisors or fund managers,
• 21:26
  Speaker 1: but I know there's a lot of non finance people
• 21:29
  Speaker 1: that are in there. UM And hopefully if I find
• 21:31
  Speaker 1: something personally interesting that and and and it's interesting enough
• 21:35
  Speaker 1: for me that I want to go write about it, um,
• 21:37
  Speaker 1: there will be other people who are who are interested
• 21:39
  Speaker 1: in it as well. When I was working at the
• 21:41
  Speaker 1: Wall Street Journal. The task that they gave me was
• 21:45
  Speaker 1: right and investing column every week that is relevant to
• 21:49
  Speaker 1: a hedge fund manager, but is understandable and accessible to
• 21:53
  Speaker 1: someone who has no financial background or training or even interest.
• 21:57
  Speaker 1: That was that was the challenge, the goal which pushed
• 22:00
  Speaker 1: me to, you know, writing about finance and economics in
• 22:03
  Speaker 1: a way that is I think, you know, that is
• 22:05
  Speaker 1: hopefully totally jargon free and under and understandable without erasing
• 22:09
  Speaker 1: the really important context, the nuance of finance and investing.
• 22:14
  Speaker 1: So I think when you do that, it opens up
• 22:16
  Speaker 1: your financial writing, your thoughts, and your ideas to a
• 22:19
  Speaker 1: much broader audience. Uh. You know, you know, lots of
• 22:22
  Speaker 1: finance writers are just writing for cfps, and anyone else
• 22:26
  Speaker 1: who is a not a CFP is not going to
• 22:27
  Speaker 1: understand a word of what they're saying, that kind of thing. Whereas,
• 22:30
  Speaker 1: whereas I think if you're writing it through the lens
• 22:32
  Speaker 1: of behavior and history and just how people think about money,
• 22:35
  Speaker 1: the psychology of money, then it just opens up the
• 22:39
  Speaker 1: you know, the the net that you're casting out to
• 22:41
  Speaker 1: your audience is much wider. I share your enthusiasm for
• 22:45
  Speaker 1: writing for an audience of one. People ask me who
• 22:48
  Speaker 1: who's the podcast for, and my answer is always just me.
• 22:51
  Speaker 1: It's people I want to sit down and have a
• 22:53
  Speaker 1: conversation with. If anyone comes along, great, But these are
• 22:56
  Speaker 1: folks that I'm interested in talking to. It's a podcast
• 23:00
  Speaker 1: audience of one. And it sounds like you do the
• 23:02
  Speaker 1: same thing with your writing. I think you and I
• 23:05
  Speaker 1: have swapped Daniel Borsten's quote he's the former Librarian of Congress.
• 23:10
  Speaker 1: I write to figure out what I think. And besides,
• 23:13
  Speaker 1: at that hour all the bars are closed is his
• 23:15
  Speaker 1: uh his famous line, which I think is pretty pretty talent.
• 23:20
  Speaker 1: The last question on this really is it sounds like
• 23:24
  Speaker 1: your writing style and your voice have evolved over time.
• 23:28
  Speaker 1: How long did it take for the voice that we
• 23:32
  Speaker 1: know today as Morgan Housel to come about. I don't
• 23:36
  Speaker 1: think it ever, and I think it's a constant evolution.
• 23:39
  Speaker 1: I'm sure that what I write ten years from now,
• 23:41
  Speaker 1: if I'm still doing this, will sound very different from
• 23:43
  Speaker 1: what I am today. I think everyone's writing is kind
• 23:46
  Speaker 1: of shaped by who they who they read last, and
• 23:50
  Speaker 1: what they read last. Of course that's the case like
• 23:53
  Speaker 1: when whenever I write something that may maybe seems like
• 23:56
  Speaker 1: it's in a different voice. It's probably because I just
• 23:58
  Speaker 1: read a book that I liked, that is that was
• 24:00
  Speaker 1: written in a way that was really inspiring to me,
• 24:02
  Speaker 1: and when I sit down and write, I'm kind of
• 24:04
  Speaker 1: have that voice still in my head. I think that
• 24:07
  Speaker 1: the shift that I've that I've had over time, um
• 24:10
  Speaker 1: is just using smaller words, shorter sentences, shorter paragraphs, because
• 24:15
  Speaker 1: that's just that that, to me is the huge majority
• 24:18
  Speaker 1: of what separates uh, good writing from average writing is
• 24:22
  Speaker 1: just who is just who can say the most amount
• 24:25
  Speaker 1: of stuff and the fewest words possible, That's who wins.
• 24:28
  Speaker 1: And then so if if you look at the stuff
• 24:30
  Speaker 1: I wrote ten years ago, it was just bigger words,
• 24:32
  Speaker 1: longer paragraphs. And if you look at from when I
• 24:34
  Speaker 1: first started, it was the classic like let's use big
• 24:38
  Speaker 1: words that people have to use a dictionary to look
• 24:40
  Speaker 1: up to try to show people that I'm smart, which
• 24:42
  Speaker 1: is like the worst absolute writing that exists. Um. So
• 24:46
  Speaker 1: I think that that is just the that that's been
• 24:48
  Speaker 1: the only common denominator over time. Is trying to simplify it.
• 24:51
  Speaker 1: But I would say the actual voice is always evolving.
• 24:53
  Speaker 1: And even if I go back and look at stuff
• 24:55
  Speaker 1: I wrote three years ago, not that long ago. Sometimes
• 24:57
  Speaker 1: I read it and it seems like a different person. Um,
• 25:00
  Speaker 1: it's just so, that's that's always changing over time. Interesting.
• 25:03
  Speaker 1: Go pick up any Kurt Vonnegut novel which were written
• 25:07
  Speaker 1: so long ago, and he absolutely writes so much information,
• 25:12
  Speaker 1: so much detail, such wonderful storytelling with very simple words
• 25:17
  Speaker 1: and very simple sentences. That's always the common denominator if
• 25:20
  Speaker 1: you look at like Earnest hending Way, or like any
• 25:22
  Speaker 1: of the really famous historic authors, and you just ask
• 25:26
  Speaker 1: what makes that good writing? Like, you know, that's good writing,
• 25:29
  Speaker 1: but why is it good? Most of the time, I
• 25:31
  Speaker 1: think if you really think about it, you will come
• 25:33
  Speaker 1: down to simplicity. That it was just easy to read.
• 25:36
  Speaker 1: And most readers are have limited time. They don't have
• 25:40
  Speaker 1: endless amounts of time to really struggle through a paragraph
• 25:43
  Speaker 1: and stop and think, what what did that sentence mean?
• 25:46
  Speaker 1: What is he saying? I have to go back and
• 25:48
  Speaker 1: read it again. People don't want that. They want to
• 25:50
  Speaker 1: just glance at their eyes over the page and quickly
• 25:52
  Speaker 1: understand what you're saying, what your point is, so they
• 25:55
  Speaker 1: can get back to their day. And the only way
• 25:57
  Speaker 1: to do that is to use simplicity, simple words. Short
• 25:59
  Speaker 1: sentence says, but you have to do it in a
• 26:01
  Speaker 1: way that doesn't remove any of the essence of what
• 26:04
  Speaker 1: you're talking about. That's the challenge. Like anyone can write
• 26:07
  Speaker 1: with short sentences and whatnot, But if you're doing that
• 26:09
  Speaker 1: and you strip away the most important salient points of
• 26:12
  Speaker 1: what you're talking about, and then you failed. You have
• 26:14
  Speaker 1: to say the most amount of stuff in the fewer
• 26:16
  Speaker 1: sports possible, and both sides of that are important. Quite interesting.
• 26:20
  Speaker 1: So let's talk a little bit about this book. I
• 26:22
  Speaker 1: really enjoyed it. I read it on the beach. I
• 26:25
  Speaker 1: plowed right through it. You use some wonderful stories to
• 26:29
  Speaker 1: make really important points about finance and investing and just
• 26:36
  Speaker 1: your relationship with money. How do you find some of
• 26:39
  Speaker 1: these really wonderful stories you use as illustrative points. To me,
• 26:44
  Speaker 1: It's like, look, I am a financial writer. I mean
• 26:46
  Speaker 1: I write about investing in the economy, but I never
• 26:49
  Speaker 1: read finance books. I never read investing books. I rarely
• 26:52
  Speaker 1: read anything online about investing. I just want to read
• 26:55
  Speaker 1: from the cast the widest net that I can and
• 26:58
  Speaker 1: read about behavior, how people think, and how people have
• 27:01
  Speaker 1: dealt with greed and risk and scarcity, and try to
• 27:04
  Speaker 1: learn from that in a way that's going to make
• 27:06
  Speaker 1: me a better investor, make me a better investor writer.
• 27:09
  Speaker 1: So all of those stories, there's just that's those just
• 27:11
  Speaker 1: came from years and years of just casual, unstructured reading
• 27:15
  Speaker 1: and just poking around, but always with this idea in
• 27:18
  Speaker 1: my head and always with this like this seed in
• 27:20
  Speaker 1: my head of when when I'm reading and trying to
• 27:22
  Speaker 1: ask how does this apply to investing? I think if
• 27:25
  Speaker 1: you're always asking that question, when you're reading about a
• 27:28
  Speaker 1: broad variety of topics, you know there's there's stories in
• 27:30
  Speaker 1: the book about meteorology and about medicine and about dentistry
• 27:35
  Speaker 1: that all tie back to investing. So if you just
• 27:37
  Speaker 1: have the widest net possible that you can read and
• 27:41
  Speaker 1: always asking yourself how does it apply to my field?
• 27:44
  Speaker 1: Then I think those stories are are pretty easy to find.
• 27:46
  Speaker 1: And I think that applies to a lot of fields
• 27:47
  Speaker 1: that's not just investing. I think if you are a doctor,
• 27:50
  Speaker 1: or an engineer, or a politician, whatever it is, if
• 27:54
  Speaker 1: you're reading about a broad variety of fields and topics,
• 27:58
  Speaker 1: you will and you're and you're always how does this
• 28:00
  Speaker 1: apply to what I do? That doesn't I think a
• 28:02
  Speaker 1: great way to learn. And if you are only learning
• 28:05
  Speaker 1: about your field through the narrow lens of your field,
• 28:08
  Speaker 1: and if you're an engineer, you're only reading about engineering.
• 28:11
  Speaker 1: If you're a historian, you're only reading history. Like that's
• 28:14
  Speaker 1: that's a narrow lens to learn about any field, particularly
• 28:18
  Speaker 1: fields that has to do with just trying to answer
• 28:20
  Speaker 1: the question how do people think, how do people behave?
• 28:23
  Speaker 1: What are people likely to do next? That's all that
• 28:26
  Speaker 1: investing is. But that's what a lot of fields are
• 28:28
  Speaker 1: as well, So that's that's why I take that approach.
• 28:30
  Speaker 1: I also just think it's more interesting. Most investing books
• 28:33
  Speaker 1: and economics books are really boring and and maybe people
• 28:37
  Speaker 1: who work in the field will find them worthwhile to read,
• 28:40
  Speaker 1: but definitely not like you average lay person on the street.
• 28:43
  Speaker 1: They're not going to pick up, you know, most economic
• 28:46
  Speaker 1: textbooks and say, oh, this is really fascinating. So you
• 28:48
  Speaker 1: have to be able to present it in a way
• 28:50
  Speaker 1: that is both interesting and also much more intuitive to grasp.
• 28:55
  Speaker 1: If you just lay out a bunch of formulas and charts,
• 28:57
  Speaker 1: most people are just gonna say this isn't for me.
• 29:00
  Speaker 1: I don't have enough mental bandwidth to get through this
• 29:02
  Speaker 1: right now. But if you can tell a story about
• 29:04
  Speaker 1: something that happened in World War Two, then a much
• 29:07
  Speaker 1: than a higher degree of people are going to say, oh,
• 29:09
  Speaker 1: this is interesting. I'm kind of fascinating to this now.
• 29:12
  Speaker 1: It humanizes what is typically just an analytical fieldman investing
• 29:16
  Speaker 1: in a way that I think makes it more accessible
• 29:18
  Speaker 1: for people. This is a story that you come back
• 29:20
  Speaker 1: to in your columns and in the book about the
• 29:24
  Speaker 1: Right Brothers and how completely ground breaking, game changing Kittie
• 29:32
  Speaker 1: Hawk was in the first powered human flight, and you
• 29:36
  Speaker 1: describe how no one really had any clue what took
• 29:40
  Speaker 1: place for years and years and years discussed that a
• 29:43
  Speaker 1: little bit. To me, it's always been fascinating because the
• 29:45
  Speaker 1: airplane is, in my view, and I don't think this
• 29:48
  Speaker 1: is a bold statement, the airplane was the most important
• 29:51
  Speaker 1: invention of the twentieth century because it impacted everything. It
• 29:55
  Speaker 1: impacted everything from retail transportation to business commerce delivery to military.
• 30:02
  Speaker 1: You know, it transformed geopolitics that started world wars and
• 30:06
  Speaker 1: ended world wars every like the airplane changed everything. Um
• 30:11
  Speaker 1: and when it came about. When the Rip Brothers first
• 30:13
  Speaker 1: flew in uh in Kitty Hawk, virtually no one paid
• 30:17
  Speaker 1: any attention to it, and not just not just in
• 30:19
  Speaker 1: the first few days after they're flying in which virtually
• 30:22
  Speaker 1: no newspaper covered it, but even after they went back
• 30:25
  Speaker 1: to Dayton, Ohio, where they're from. They left Kitty Hawk,
• 30:27
  Speaker 1: went back to Dayton, and and Dayton, they were flying
• 30:30
  Speaker 1: all over people's homes, people's businesses that were flying their
• 30:33
  Speaker 1: airplane all throughout town. And even then people weren't paying
• 30:37
  Speaker 1: much attention to it. And even when people started paying
• 30:39
  Speaker 1: attention to the fact that, hey, these kids made the thing,
• 30:42
  Speaker 1: that's that's pretty cool. Maybe it's not just a toy.
• 30:45
  Speaker 1: Maybe this is not just some like crazy wild science experiment.
• 30:48
  Speaker 1: Maybe there's usefulness to this. What most people thought about
• 30:51
  Speaker 1: the airplane, even when they started paying attention to it,
• 30:54
  Speaker 1: was just for military purposes. They thought, can we strap
• 30:57
  Speaker 1: a machine gun onto this? Can we drop bombs out
• 31:00
  Speaker 1: of this? It wasn't for years and not it's not
• 31:02
  Speaker 1: in decades that people really saw the usefulness of what
• 31:06
  Speaker 1: the airplane would be, which was transporting people around the world,
• 31:09
  Speaker 1: transporting goods and packages and and inventory around the world.
• 31:13
  Speaker 1: That took a long time for people to figure out
• 31:16
  Speaker 1: that that would be the usefulness of the airplane. So
• 31:18
  Speaker 1: when you think about that, just that, just that idea,
• 31:21
  Speaker 1: and then you say, how does that apply to today? Like,
• 31:23
  Speaker 1: what inventions are out there today we're not paying any
• 31:26
  Speaker 1: attention to, or we are paying attention to, but we
• 31:29
  Speaker 1: just have no clue about what their ultimate usefulness will
• 31:32
  Speaker 1: be because you know it's going to be the case.
• 31:34
  Speaker 1: It was. It was especially true for the Right Brothers,
• 31:36
  Speaker 1: but it was also true when the car first came about,
• 31:39
  Speaker 1: when computers first came out, when the Internet first came about, etcetera, etcetera, etcetera.
• 31:43
  Speaker 1: I feel like it takes at least a decade for
• 31:45
  Speaker 1: most big inventions to get notice, to get recognized, which
• 31:49
  Speaker 1: then makes you asking, what have we done in the
• 31:51
  Speaker 1: last ten years that no one's paying attention to? Quite interesting.
• 31:54
  Speaker 1: Tell me a little bit about your writing process for
• 31:58
  Speaker 1: putting this book together. What was your routine, Like, how
• 32:02
  Speaker 1: long did it take you and what did you learn
• 32:05
  Speaker 1: in the process of writing a book. So the genesis
• 32:08
  Speaker 1: of the book what came from a long form post
• 32:10
  Speaker 1: that I wrote in called the Psychology of Money, which
• 32:13
  Speaker 1: I set out at the time. I I kind of
• 32:15
  Speaker 1: shamelessly ripped off the title from Charlie Munger's speech The
• 32:19
  Speaker 1: Psychology of Human Misjudgment, which I loved. It's it's a
• 32:22
  Speaker 1: wonderful speech that I think he gave in I think,
• 32:26
  Speaker 1: and he lays out in that speech, I don't know,
• 32:29
  Speaker 1: fifteen or so of these just ideas about how human
• 32:32
  Speaker 1: thinking goes astray, and it's a really good speech. He
• 32:35
  Speaker 1: uses examples from other fields. So I kind of looked
• 32:39
  Speaker 1: at that and said, how can I do the same,
• 32:41
  Speaker 1: but for you know, just within the confines of money.
• 32:43
  Speaker 1: He's talking about just how humans misbehave in general, how
• 32:47
  Speaker 1: can I how can I narrow that down to money?
• 32:50
  Speaker 1: And then so for the post, I took the twenty
• 32:52
  Speaker 1: or so biggest ideas that I thought I had come
• 32:56
  Speaker 1: across in my decade of writing about this, and I
• 32:59
  Speaker 1: just tried to plain them as as as succinctly as
• 33:03
  Speaker 1: I could in the post um and and it did
• 33:06
  Speaker 1: really well. Over a million people read the post. It's
• 33:08
  Speaker 1: the biggest article that I've ever published. And it was
• 33:11
  Speaker 1: also the case that when I was writing it, I
• 33:13
  Speaker 1: was trying to keep it short because it's a blog post.
• 33:15
  Speaker 1: It still ended up in nine thousand words, which is
• 33:17
  Speaker 1: a very long blog post. But there were still a
• 33:19
  Speaker 1: lot more to say, there were more stories to tell,
• 33:22
  Speaker 1: there were other different points that I wanted to talk about,
• 33:25
  Speaker 1: So I knew when I wrote it like this could
• 33:26
  Speaker 1: be a book. Which is always a challenge with a
• 33:29
  Speaker 1: book is that there are a lot of good ideas
• 33:31
  Speaker 1: out there and a lot of great points, a lot
• 33:33
  Speaker 1: of great articles. But turning something into you know, from
• 33:36
  Speaker 1: a one thousand word blog post into a sixty thousand
• 33:40
  Speaker 1: word book is a big jump. And most books out there,
• 33:43
  Speaker 1: the reason that people don't finish them, most readers don't
• 33:46
  Speaker 1: finish the books they start is because most topics do
• 33:48
  Speaker 1: not take sixty words to explain. You can get your
• 33:51
  Speaker 1: point across in two thousand words chapter one and two.
• 33:54
  Speaker 1: You get the point and then you can move on.
• 33:56
  Speaker 1: So I've always struggled with what is my book the
• 34:00
  Speaker 1: first book going to be because it's hard to find
• 34:02
  Speaker 1: a topic in which you can really devote that much
• 34:05
  Speaker 1: space too. But but this I realized that I could
• 34:08
  Speaker 1: um most particularly because rather than one idea that I
• 34:11
  Speaker 1: spent two hundred fifty pages rambling about, it's nineteen different ideas,
• 34:15
  Speaker 1: completely separate ideas. So you can start the book if
• 34:18
  Speaker 1: you want to do on chapter seventeen and it would
• 34:20
  Speaker 1: make sense to you, Like all the ideas have a
• 34:22
  Speaker 1: common theme that are tied together, but each one of
• 34:25
  Speaker 1: these ideas lives independently, which is really important for me
• 34:28
  Speaker 1: with writing the book, because that was going to reduce
• 34:31
  Speaker 1: the odds that I was just going to ramble on
• 34:34
  Speaker 1: and on and on and on about one topic. So
• 34:36
  Speaker 1: that was important in terms of the actual writing and research. Like,
• 34:41
  Speaker 1: most of these ideas that I that I that I
• 34:43
  Speaker 1: that I read about in the book are things that
• 34:45
  Speaker 1: I have come across and some of which I've written
• 34:47
  Speaker 1: about um during the years. So it was not like
• 34:50
  Speaker 1: I started with a blank flate with this book. I
• 34:52
  Speaker 1: kind of had a lot of these ideas kind of
• 34:54
  Speaker 1: sitting out there already, and then I I gave myself
• 34:57
  Speaker 1: one year to write it, uh, and a for nine months,
• 35:00
  Speaker 1: I think I had written one chapter. Uh. It was
• 35:03
  Speaker 1: just so easy to procrastinate and delay and delay and delay.
• 35:06
  Speaker 1: And then my wife one day, uh, you know, kind
• 35:09
  Speaker 1: of gave me some craft about how little progress I
• 35:11
  Speaker 1: was making. She kind of expressed that she was disappointed
• 35:14
  Speaker 1: and how little progress I was making. So then I
• 35:16
  Speaker 1: cleared everything off my calendar and I wrote the majority
• 35:19
  Speaker 1: of the book over about a four week period last December. Wow,
• 35:23
  Speaker 1: that's amazing, you know. Your your comment about how everything
• 35:27
  Speaker 1: is too long reminds me Our mutual friend, Michael Batnick,
• 35:31
  Speaker 1: is fond of saying most books should be magazine articles,
• 35:34
  Speaker 1: most magazine articles should be blog posts, and most blog
• 35:37
  Speaker 1: posts should be tweets. That philosophy abuse a lot of
• 35:41
  Speaker 1: your columns because you often write stuff that I finished
• 35:46
  Speaker 1: reading and I'm like, wow, that was like four words.
• 35:48
  Speaker 1: He could have gone on for triple that length. You
• 35:51
  Speaker 1: purposely choose to keep things short, don't you. I mean,
• 35:55
  Speaker 1: very few readers, whether it's a book, a book, or
• 35:58
  Speaker 1: an article, whatever it is, very few readers get to
• 36:00
  Speaker 1: the bottom and say, I wish it was longer, I
• 36:02
  Speaker 1: wish there were more words. I wish there were more
• 36:04
  Speaker 1: supporting examples. What's the idea? But most of the time
• 36:07
  Speaker 1: what people want out of an article or a book
• 36:10
  Speaker 1: is just a single idea or maybe a handful of ideas.
• 36:13
  Speaker 1: They don't need to just grind through four hundred pages
• 36:16
  Speaker 1: of examples. If you can leave them when they finished
• 36:18
  Speaker 1: the book, when they close it, whether they make it
• 36:20
  Speaker 1: to the end or not. If they can close the
• 36:22
  Speaker 1: book and put it back on their shelves with two
• 36:24
  Speaker 1: or three ideas in their head. The ideas can be
• 36:26
  Speaker 1: summarized in a sentence or two. That is, I think
• 36:29
  Speaker 1: most that's what you know. That's that's a success in
• 36:32
  Speaker 1: my view. So I try to keep it short, uh,
• 36:35
  Speaker 1: for for that reason, just trying to it's just out
• 36:38
  Speaker 1: of respect for the readers. There's actually one chapter in
• 36:40
  Speaker 1: the book that is four hundred words long, which is
• 36:43
  Speaker 1: one page. And when I turned it in, the publisher said,
• 36:45
  Speaker 1: is this the mistake? Are you? Did you for? Is?
• 36:49
  Speaker 1: Did you lose the rest of it? Like what happened here?
• 36:51
  Speaker 1: And I said, no, that's all I wanted. That's that's
• 36:52
  Speaker 1: all I have to say on this topic. And they said, okay, well,
• 36:55
  Speaker 1: you know the book. Do you want to add some
• 36:57
  Speaker 1: more to it? Do you want to add another example,
• 36:58
  Speaker 1: you know, some more examples. I said, no, that's all
• 37:01
  Speaker 1: I have to say on that topic. And out of
• 37:03
  Speaker 1: respect for the readers, I'm going to leave it at that.
• 37:04
  Speaker 1: I'm not gonna waste anyone else's time and ramble on
• 37:07
  Speaker 1: about this just because it's a book and I want to,
• 37:10
  Speaker 1: you know, have it be thicker. Uh you know, So
• 37:12
  Speaker 1: so it feels better we can charge more for it.
• 37:15
  Speaker 1: To me, it's just it's like the Golden rule. I'm
• 37:17
  Speaker 1: a big reader, uh, and I I don't like when
• 37:21
  Speaker 1: other writers waste my time with words that don't need
• 37:24
  Speaker 1: to be there. So that's what I tried to do
• 37:27
  Speaker 1: for the book. Is just I wanted to go deeper
• 37:30
  Speaker 1: than a normal blog post, because that's what you can
• 37:32
  Speaker 1: do in a book. You can tell longer stories. But
• 37:34
  Speaker 1: I also just wanted to respect people's time and make
• 37:36
  Speaker 1: my point as quickly as I can and then get
• 37:38
  Speaker 1: out of their way so they can move on to
• 37:40
  Speaker 1: the next chapter or go about the rest of their day.
• 37:42
  Speaker 1: All right, last two questions about the book. The first one,
• 37:46
  Speaker 1: what did you learn about the process of writing a book?
• 37:50
  Speaker 1: Would you do it the same way back in loaded
• 37:53
  Speaker 1: the way you did in the last four weeks, or
• 37:56
  Speaker 1: would you go out about differently. If you're advising an
• 38:00
  Speaker 1: new writer who wants to put out a book, what
• 38:03
  Speaker 1: would you tell them is a productive approach to cranking
• 38:08
  Speaker 1: out two and fifty or so pages. I would never
• 38:11
  Speaker 1: recommend that anyone try to write, you know, you know,
• 38:14
  Speaker 1: like like three quarters of a book in four weeks,
• 38:17
  Speaker 1: Like I did it was. It was miserable, it was terrible,
• 38:20
  Speaker 1: But I'm I I needed that deadline. When I gave
• 38:23
  Speaker 1: myself a year to write it, it it was so easy
• 38:25
  Speaker 1: to procrastinate and put it off and put it off.
• 38:27
  Speaker 1: We we we My My wife gave birth to a
• 38:30
  Speaker 1: daughter right an in the middle of that period, which
• 38:33
  Speaker 1: made it easier for me to say, oh, I'm going
• 38:35
  Speaker 1: to take a month off. One month turn to two months,
• 38:37
  Speaker 1: two months turn to three months. So for me, like
• 38:39
  Speaker 1: I needed that pressure to just to just sit down
• 38:42
  Speaker 1: and crank it out. I don't I would definitely not
• 38:44
  Speaker 1: recommend it, but I have a feeling that when I
• 38:46
  Speaker 1: write book number two, something similar is going to happen.
• 38:49
  Speaker 1: Um that's that's always when it's the case. But it
• 38:52
  Speaker 1: actually it actually worked out fairly well too, because during
• 38:55
  Speaker 1: those four weeks when I was doing absolutely nothing but
• 38:58
  Speaker 1: writing this book, barely even talking to my family, I
• 39:01
  Speaker 1: was just writing, like five in the morning until when
• 39:03
  Speaker 1: I went to bed. It was since it was constantly
• 39:06
  Speaker 1: on my mind and it was so fresh in my
• 39:09
  Speaker 1: head and there was nothing else in my head but book,
• 39:12
  Speaker 1: it made it easier for me to focus on it,
• 39:15
  Speaker 1: and since everything was still fresh, in my mind, Like
• 39:16
  Speaker 1: when I was working on chapter seventeen, there were things
• 39:20
  Speaker 1: that popped in my head about chapter three that I
• 39:22
  Speaker 1: could go back and change because chapter three was still
• 39:24
  Speaker 1: fresh in my mind. Versus, if you're writing something over
• 39:27
  Speaker 1: the course of a year, by the time you're you're
• 39:29
  Speaker 1: reading in the last chapter, the things that you wrote
• 39:31
  Speaker 1: in chapter two that was a year ago, you forgot
• 39:34
  Speaker 1: about it. So just just having that much uh, focused
• 39:37
  Speaker 1: on the book at one point actually worked out well
• 39:40
  Speaker 1: for me. And you hinted at what's going to be
• 39:42
  Speaker 1: my next question, which is when are we going to
• 39:45
  Speaker 1: see the next book from you? The book A book
• 39:47
  Speaker 1: number two is is definitely happening. We have a deal
• 39:50
  Speaker 1: with a publisher. Haven't made any public announcements yet. Um,
• 39:54
  Speaker 1: you know, the the the the turnaround time on books
• 39:56
  Speaker 1: is pretty long. It's about you know, a year and
• 39:58
  Speaker 1: a half or two years from the time you start
• 40:00
  Speaker 1: writing it to the time it's on the shelves. So
• 40:02
  Speaker 1: that will come out is broader than investing. It's not
• 40:05
  Speaker 1: a finance book, it's not an economics book. Um, but
• 40:08
  Speaker 1: it's the book that I'm really excited about. I've kind
• 40:10
  Speaker 1: of written a little bit about it. In blog posts
• 40:12
  Speaker 1: in the past, and this is gonna be This is
• 40:15
  Speaker 1: another topic that even though I've written blog posts on it,
• 40:17
  Speaker 1: I finally realized that I can write about that. I
• 40:20
  Speaker 1: can write two d and fifty pages on this topic. So, uh,
• 40:24
  Speaker 1: you know, still playing with the the final idea, but
• 40:28
  Speaker 1: I have a broad idea in mind, but we're not
• 40:29
  Speaker 1: talking about it publicly. But let's say two years from now,
• 40:32
  Speaker 1: you and I will be on the podcast again talking
• 40:33
  Speaker 1: about it. All right, looking forward to it. So let's
• 40:37
  Speaker 1: jump right into the big question. What are the big
• 40:41
  Speaker 1: lessons that investors should have learned from I think there's
• 40:45
  Speaker 1: there's two or three that come to mind, and all
• 40:47
  Speaker 1: of these were things that we've known before. Is just
• 40:51
  Speaker 1: just like slam them into our faces in a blunt
• 40:54
  Speaker 1: force way and made them obvious. One is that the
• 40:58
  Speaker 1: biggest risk that is out there is always what nobody
• 41:01
  Speaker 1: is talking about, because what makes it risky is the
• 41:04
  Speaker 1: fact that nobody is talking about it. So all the
• 41:06
  Speaker 1: things that people tend to worry about over the last
• 41:09
  Speaker 1: ten years, is the FED going to raise interest rates? Uh,
• 41:12
  Speaker 1: if Congress going to raise the debt failing, or we're
• 41:14
  Speaker 1: gonna have the stimulus packages, trade wars, etcetera, etcetera. It's
• 41:17
  Speaker 1: not that those things are not risky, it's just that
• 41:19
  Speaker 1: they are well known. They're well publicized. We're talking about
• 41:22
  Speaker 1: them all the time, so we can prepare for a
• 41:24
  Speaker 1: range of different outcomes. What really moves the needle over
• 41:27
  Speaker 1: time are the things that just come out of the
• 41:29
  Speaker 1: blue overnight that no one is talking about it. And
• 41:31
  Speaker 1: since they're not talking about it, they're not prepared for
• 41:33
  Speaker 1: it either in in actual terms in terms of their finances,
• 41:37
  Speaker 1: their their cash obligations there, you know, their their ability
• 41:40
  Speaker 1: to service the debt, and they're not prepared for it.
• 41:42
  Speaker 1: In psychological terms, it's just such a shock and and
• 41:46
  Speaker 1: and people getting stuck into this, you know, this shell
• 41:49
  Speaker 1: shock attitude of sitting there with their jaws in the
• 41:51
  Speaker 1: floor when it happens. So that was definitely the case
• 41:53
  Speaker 1: with when pandemics could have been seen coming. Like go
• 41:56
  Speaker 1: Gates gave a ted talk in ten I think it
• 41:59
  Speaker 1: was where he describes the risk of like exactly what
• 42:02
  Speaker 1: we're dealing with. It's not that we could not see
• 42:04
  Speaker 1: these coming, it's just that the exact timing was completely
• 42:08
  Speaker 1: unknown and for the majority of people other than epidemiologists
• 42:12
  Speaker 1: and people like Bill Gates. I think we just assume
• 42:14
  Speaker 1: that these kind of things like global pandemics, we're something
• 42:17
  Speaker 1: that happened a hundred years ago, but that we have
• 42:19
  Speaker 1: moved on from from in humanity, and then they were
• 42:22
  Speaker 1: not going to be part of our lives, which makes
• 42:24
  Speaker 1: it that much more scary what we're dealing with it.
• 42:26
  Speaker 1: So the general idea that the biggest risk is what
• 42:29
  Speaker 1: no one is talking about, really like drives from the
• 42:32
  Speaker 1: idea of of taking forecast and economic projections with a
• 42:37
  Speaker 1: grain assault, because it's not that those things are going
• 42:39
  Speaker 1: to be wrong or that they are not risk, it's
• 42:41
  Speaker 1: that in any given year, I think this is true
• 42:44
  Speaker 1: every single year, and definitely over any given decade, the
• 42:47
  Speaker 1: biggest news story is something that was completely unforseeeable before
• 42:50
  Speaker 1: it happened. Whether it is COVID nineteen or September eleventh,
• 42:54
  Speaker 1: or collapse of the Soviet Union JFK being assassinated, the
• 42:57
  Speaker 1: Great Depression, whatever it is, the big US news story
• 43:00
  Speaker 1: is always something that was unforseeable. That's one of the
• 43:03
  Speaker 1: big ones. Uh. You know something else that's that's true
• 43:07
  Speaker 1: is just the value of room for error in your finances,
• 43:10
  Speaker 1: room for error in your budgets, room for error in
• 43:12
  Speaker 1: your valuation analysis. The number of companies that went from
• 43:16
  Speaker 1: record sales, record health in February to bankrupt in March
• 43:21
  Speaker 1: or April is astounding, and just like something like just
• 43:27
  Speaker 1: kind of puts a spotlight into how fragile so many
• 43:30
  Speaker 1: businesses are, and how fragile so many investors are. How
• 43:33
  Speaker 1: quickly things can change and when things go in a
• 43:35
  Speaker 1: different direction, it only takes a couple of weeks or
• 43:38
  Speaker 1: a couple of days, maybe a couple of months before
• 43:41
  Speaker 1: things are broken and there's gonna be permanent damage, having
• 43:44
  Speaker 1: room for error in your finances, Like just at the
• 43:47
  Speaker 1: personal finance level, I think in general, not everyone, but
• 43:50
  Speaker 1: in general most investors don't have enough cash in bonds
• 43:54
  Speaker 1: and that and that seems like a controversial statement when
• 43:56
  Speaker 1: everything is going well and then march around will realize
• 44:00
  Speaker 1: exactly why they have that. Cash and bonds is often
• 44:03
  Speaker 1: associated with conservatism, like not wanting to take a lot
• 44:06
  Speaker 1: of risk, not wanting to be, you know, be subject
• 44:10
  Speaker 1: to a lot of risk, and I just don't think
• 44:12
  Speaker 1: that's the case. What they do, what cash and bonds
• 44:14
  Speaker 1: do is they allow the stocks that you do own
• 44:17
  Speaker 1: to be left untouched, uninterrupted, so that they can compound
• 44:20
  Speaker 1: over time. The great quote from Charlie Monger is the
• 44:24
  Speaker 1: first rule of compounding is to never interrupt it unnecessarily.
• 44:28
  Speaker 1: And when you think about it in those terms, then
• 44:30
  Speaker 1: you realize that the cash and bonds that you do own,
• 44:32
  Speaker 1: who cares that you're earning no return or a negative
• 44:34
  Speaker 1: return these uh during these times, if once per decade,
• 44:38
  Speaker 1: if that cash and bond and bonds can prevent you
• 44:41
  Speaker 1: from being forced to sell stocks and in opportune time,
• 44:44
  Speaker 1: they're going to earn all of their return and then
• 44:46
  Speaker 1: sum those to me are the biggest takeaways from So
• 44:50
  Speaker 1: that raises two questions I have to ask you about
• 44:54
  Speaker 1: your answer. I'll come back to the question of how
• 44:57
  Speaker 1: you invest, but I want to stick with the idea
• 45:00
  Speaker 1: of completely unforeseen black swan events or or unanticipated events.
• 45:08
  Speaker 1: Here it is, it's the end of the summer of
• 45:11
  Speaker 1: the headlines are talking about overvalued stock, about a tech bubble,
• 45:16
  Speaker 1: about day traders? Are any of those things as important
• 45:20
  Speaker 1: as the headlines make are those things we should be
• 45:23
  Speaker 1: worried about? Or the mere fact that it's headline news
• 45:28
  Speaker 1: suggests that it's less likely to be what causes the
• 45:32
  Speaker 1: next disruption. It's not that those things are are are
• 45:37
  Speaker 1: not risky. Like if like could could testa stock moves
• 45:41
  Speaker 1: of its value in the next month, of course, of
• 45:43
  Speaker 1: course it could. We've seen that happen with other companies
• 45:45
  Speaker 1: in the past. Of course it's possible. But if it
• 45:48
  Speaker 1: were to happen, it would not be that surprising, particularly
• 45:51
  Speaker 1: for people who don't own the stock, but even for
• 45:53
  Speaker 1: those who do. Everyone has to know that that is
• 45:55
  Speaker 1: a possibility. So when it happened, it's not that it's
• 45:58
  Speaker 1: not a risk. It's just that it would be easy.
• 46:00
  Speaker 1: Particularly after it happened, we would say, of course that happened,
• 46:03
  Speaker 1: that was foreseeable. But this has been happening for decades.
• 46:07
  Speaker 1: So it's not that it's not a risk. It's just
• 46:08
  Speaker 1: that it's it's somewhat foreseeable. Um, and so that's what
• 46:13
  Speaker 1: that's what's uh, that's that's really what risk is. Like
• 46:16
  Speaker 1: the idea that you and I can sit here right
• 46:18
  Speaker 1: now and say Tesla might fall in the next month.
• 46:22
  Speaker 1: That is very different from the conversation if you and
• 46:24
  Speaker 1: I were having in January or December and we were
• 46:27
  Speaker 1: looking ahead saying, what are the biggest risk for the
• 46:28
  Speaker 1: next year. No one would have said a global pandemic
• 46:32
  Speaker 1: that's going to shut the global economy down and cause
• 46:34
  Speaker 1: the worst economic crisis. It's the Great Depression. And by
• 46:37
  Speaker 1: the way, during that period, Tesla stock is going to
• 46:39
  Speaker 1: be up. No one would have seen that. No one
• 46:42
  Speaker 1: would have said that. So the fact that it was
• 46:44
  Speaker 1: unforeseeable is what has made it risky quite interesting. And
• 46:47
  Speaker 1: then the second question is you know, it's funny given
• 46:51
  Speaker 1: your backgrounds UH investment banking to private equity. I find
• 46:58
  Speaker 1: the way you personally invest what you describe in the
• 47:01
  Speaker 1: chapter of the book surprisingly conservative, surprisingly risk averse. Your
• 47:06
  Speaker 1: your career seems like you embrace risk, but what you
• 47:10
  Speaker 1: actually do with your money is pretty you know, middle
• 47:13
  Speaker 1: of the road. Tell us about how you invest personally
• 47:17
  Speaker 1: and how you budget and plan for your personal finances.
• 47:21
  Speaker 1: So it's interesting that you bring that up because I
• 47:23
  Speaker 1: don't feel like that's the case. I feel like I'm
• 47:25
  Speaker 1: definitely an optimist. I feel like there's going to be
• 47:28
  Speaker 1: a tremendous amount of economic growth throughout the rest of
• 47:30
  Speaker 1: my life that I want to take advantage of and
• 47:32
  Speaker 1: invest in and compound and benefit from. It's maybe just
• 47:37
  Speaker 1: a difference in how people get there. So in our
• 47:39
  Speaker 1: personal finances, I read about this in the book. The
• 47:41
  Speaker 1: last chapter is called Confessions, and I kind of just
• 47:44
  Speaker 1: open up the kimono on my my wife's personal finances.
• 47:47
  Speaker 1: There's no numbers in there, but just here's everything that
• 47:49
  Speaker 1: we do with our with our money and how we
• 47:51
  Speaker 1: invest is we're quite true. What we save a high
• 47:55
  Speaker 1: portion of our income. We don't. We don't prevent ourselves
• 47:58
  Speaker 1: from buying anything that we want. It's just that most
• 48:01
  Speaker 1: of our needs or wants, our desires, you know, haven't
• 48:04
  Speaker 1: shifted that much over time. So as our incomes have grown,
• 48:06
  Speaker 1: are spending hasn't. And therefore we save a higher percentage
• 48:09
  Speaker 1: of our income. And then we dollar cost average into
• 48:12
  Speaker 1: Vanguard named X funds, and that that's it. Like our
• 48:15
  Speaker 1: our entire net worth is a house, a checking account,
• 48:18
  Speaker 1: some and some Vanguard funds and some shares of Berkshire
• 48:21
  Speaker 1: Hathaway that has have for like sentimental reasons. But that's it.
• 48:24
  Speaker 1: That's all of our finances. And back to what we
• 48:27
  Speaker 1: were talking about earlier. I uh, you know, our our
• 48:30
  Speaker 1: allocation might look for someone our age and our income,
• 48:33
  Speaker 1: our net worth, it might look conservative. It's there's various
• 48:36
  Speaker 1: ways to measure this, but cash is a percentage of
• 48:38
  Speaker 1: our of our stocks. Let's say is something like uh
• 48:41
  Speaker 1: twenty something like that, which few financial advisors would say
• 48:45
  Speaker 1: that's necessary, But for me, it's important because I just
• 48:48
  Speaker 1: want to make sure, Like my goal as an investor
• 48:51
  Speaker 1: is to make sure that the stocks that I do
• 48:53
  Speaker 1: own can remain untouched for thirty or forty or fifty years.
• 48:58
  Speaker 1: That's my goal, and I'm gonna achieved that goal if
• 49:01
  Speaker 1: I can make damn sure that I can be hit
• 49:03
  Speaker 1: with a Category five financial storm and maintain it without
• 49:06
  Speaker 1: having to sell my stocks for whatever reason, whether that
• 49:09
  Speaker 1: is a job loss or I have, you know, a
• 49:12
  Speaker 1: change in expectations that I want to go out and
• 49:13
  Speaker 1: buy a boat or a bigger house, or send my
• 49:15
  Speaker 1: kids to private school. I want to be able to
• 49:17
  Speaker 1: handle all of that without ever having to touch my stocks.
• 49:21
  Speaker 1: Because if I can do that, if I can leave
• 49:23
  Speaker 1: my stocks untouched for the next twenty or thirty or
• 49:25
  Speaker 1: forty years, that's when the big games are going to happen.
• 49:29
  Speaker 1: That's when there's going to be extraordinary returns. So it
• 49:32
  Speaker 1: looks like I'm not taking a lot of risk in
• 49:34
  Speaker 1: the short run. But the reason I'm doing that is
• 49:36
  Speaker 1: specifically so I can take the most amount of risk
• 49:38
  Speaker 1: and gave the most amount of leverage in the long run.
• 49:41
  Speaker 1: To me, it's the idea of saving like a pessimist
• 49:45
  Speaker 1: and investing like an optimist. I want to be really
• 49:47
  Speaker 1: pessimistic about the short run so that I have the
• 49:50
  Speaker 1: opportunity to take advantage of the optimistic long run like
• 49:54
  Speaker 1: a pessimist, invest like an optimist. I love that. So
• 49:57
  Speaker 1: in the book you discuss the ten and see if
• 50:00
  Speaker 1: people to engage in confirmation bias, to go out and
• 50:04
  Speaker 1: seek information that confirms their prior belief. How do you
• 50:09
  Speaker 1: avoid that? We all have biases, We're all subject to
• 50:13
  Speaker 1: the same wet ware a foibles. How do you prevent
• 50:17
  Speaker 1: yourself from falling into the usual behavioral problems. I don't
• 50:22
  Speaker 1: want to pretend like I can. I don't think anyone can.
• 50:24
  Speaker 1: Daniel Knoman, who is of course like the godfather of
• 50:27
  Speaker 1: this topic, of all these topics of behavior, has been
• 50:30
  Speaker 1: asked several times if he himself has become less biased
• 50:34
  Speaker 1: doing this research, and he says no. So like if
• 50:37
  Speaker 1: if someone like Konomen cannot you know, change who they are.
• 50:41
  Speaker 1: How can someone like myself or you or anyone else
• 50:43
  Speaker 1: do it? We can't. I think the best thing you
• 50:45
  Speaker 1: can do it's just be interrospctive about yourself and your
• 50:48
  Speaker 1: own flaws and embrace them. Rather than thinking you can
• 50:51
  Speaker 1: change them or avoid them, just embrace them with both
• 50:54
  Speaker 1: hands and then try to structure your life around your
• 50:58
  Speaker 1: known flaws. So for me gets back into like, maybe
• 51:01
  Speaker 1: I do have a lower risk tolerance in the short
• 51:03
  Speaker 1: run than other people my age, but that's fine. Rather
• 51:06
  Speaker 1: than me trying to change that, or me trying to figure,
• 51:09
  Speaker 1: you know, trying to alter my mindset, alter my feelings,
• 51:13
  Speaker 1: I would just rather embrace it with both hands and say,
• 51:15
  Speaker 1: this is who I am. So I'm going to accept that,
• 51:16
  Speaker 1: and I'm going to have a financial life and acid
• 51:20
  Speaker 1: allocation that just accepts that and embraces it. That is
• 51:23
  Speaker 1: the thing. The best thing you can do with behavioral biases.
• 51:26
  Speaker 1: You can't change who you are, but you can embrace
• 51:29
  Speaker 1: who you are and try to try to situate your
• 51:31
  Speaker 1: life in a way that accepts it rather than I'm
• 51:34
  Speaker 1: trying to rather than tries to avoid it. So one
• 51:36
  Speaker 1: of the lessons we've seen from is there is some
• 51:40
  Speaker 1: number of people moving out of big urban centers and
• 51:45
  Speaker 1: to a little bit more suburban or even rural locations, uh,
• 51:50
  Speaker 1: to kind of get away from crowds and COVID. When
• 51:53
  Speaker 1: you and I were talking a year ago, long before
• 51:56
  Speaker 1: COVID popped up, you were discussing leaving d C to
• 52:02
  Speaker 1: relocate to the suburbs of Seattle. But tell us a
• 52:05
  Speaker 1: little bit about what you ended up doing and what
• 52:09
  Speaker 1: it was like doing it in the midst of of
• 52:12
  Speaker 1: a pandemic. So my wife grew up in Seattle, and
• 52:15
  Speaker 1: she and I lived here for several years after college.
• 52:17
  Speaker 1: We then moved to d C. She went to grad school.
• 52:19
  Speaker 1: We we end up staying there for for a while.
• 52:21
  Speaker 1: Our plan has always been to come back to Seattle.
• 52:23
  Speaker 1: That's been our plan for years. Uh. And we just
• 52:26
  Speaker 1: happened to pick May of to move. We we planned
• 52:29
  Speaker 1: that well before COVID, but it ended up being obviously
• 52:32
  Speaker 1: the worst time possible that you could move yourself and
• 52:36
  Speaker 1: two small kids. We have a four year old son
• 52:38
  Speaker 1: and an infant daughter. Moved them across the country. We
• 52:41
  Speaker 1: got it done. It worked. We flew out here. We
• 52:44
  Speaker 1: on our plane, our seven thirty seven from DC to Seattle.
• 52:47
  Speaker 1: Was I think us and six other people on the flight.
• 52:49
  Speaker 1: On the entire flight Biscuits had a private seven thirty
• 52:52
  Speaker 1: seven that was bringing us out here. But it worked out.
• 52:56
  Speaker 1: It all worked out. It was scary, it was it
• 52:58
  Speaker 1: was hard, but it all worked out. To clarify, you
• 53:00
  Speaker 1: weren't flying private, it was you flew commercial. There was
• 53:04
  Speaker 1: just nobody else on the plane. There's no one else
• 53:05
  Speaker 1: on the plane. I think literally everyone on the plane
• 53:09
  Speaker 1: had three rows to themselves. I mean it was a
• 53:11
  Speaker 1: seven thirty seven and the entire flight of passengers I
• 53:14
  Speaker 1: think was ten and people on the whole flight um
• 53:19
  Speaker 1: and and we we were four of them, and we
• 53:21
  Speaker 1: used airline miles to fly across, so they didn't even
• 53:23
  Speaker 1: get any revenue out of us. I feel I feel,
• 53:25
  Speaker 1: I feel sort of bad about it. But the point
• 53:27
  Speaker 1: that you bring up about, like people moving out of cities,
• 53:31
  Speaker 1: who knows how severe that's gonna be, Or maybe there's
• 53:34
  Speaker 1: a vaccine in three months and everyone pours back into Manhattan.
• 53:36
  Speaker 1: Who knows the danger and that kind of stuff that
• 53:39
  Speaker 1: we've seen in the past, though, is how quickly that
• 53:41
  Speaker 1: snowballs when people move out and then tax revenue declines
• 53:44
  Speaker 1: and then police services decline and then it's snowballs from there.
• 53:47
  Speaker 1: It's that happened to New York in the nineteen eighties,
• 53:49
  Speaker 1: happened to Detroit over the last fifty years. Uh So
• 53:52
  Speaker 1: that's the danger about it. It's not just like a
• 53:54
  Speaker 1: trend that's going to happen this year, but how quickly
• 53:58
  Speaker 1: those things snowball and become really hard to reverse over time.
• 54:00
  Speaker 1: To be fair, we heard the same thing post nine
• 54:03
  Speaker 1: eleven and that ended up. You know, New York came
• 54:06
  Speaker 1: back bigger and stronger. Not a coincidence that cities have
• 54:10
  Speaker 1: been creative centers of human capital for the past I
• 54:14
  Speaker 1: don't know, twenty centuries. I imagine they're going to be
• 54:18
  Speaker 1: okay once there's a vaccine and treatment, right, I mean
• 54:23
  Speaker 1: we we We certainly hope though, but of course getting
• 54:25
  Speaker 1: back in the surprises that no one sees coming. Who
• 54:29
  Speaker 1: knows what's gonna happen. If has not diminished your willingness
• 54:34
  Speaker 1: to forecast what's going to happen in the next six months,
• 54:37
  Speaker 1: I don't think anything else will. So I agree with that.
• 54:39
  Speaker 1: It seems like it seems like the base case scenario
• 54:42
  Speaker 1: would be that we'll get a vaccine and life will
• 54:44
  Speaker 1: roughly go back to normal, but who the hell knows
• 54:46
  Speaker 1: at this point. So I want to I want to
• 54:48
  Speaker 1: come back to the concept of you being a risk
• 54:53
  Speaker 1: averse investor, but not being risk averse in the rest
• 54:56
  Speaker 1: of your life, and let me just tick through a
• 54:58
  Speaker 1: few things, because you and I have discussed this and
• 55:01
  Speaker 1: you always push back. So in high school, you're a
• 55:05
  Speaker 1: downhill ski racer. That's a you know, that's an easy, gentle,
• 55:09
  Speaker 1: risk free gig, investment, banking, private equity. You're now a
• 55:14
  Speaker 1: partner in collaborative firm, which is a venture capital farm.
• 55:18
  Speaker 1: You're your writing is something that not only did you
• 55:22
  Speaker 1: not go to school for, but your first job was, Yeah,
• 55:26
  Speaker 1: what the hell, let me jump in and see if
• 55:27
  Speaker 1: I could do that with absolutely no basis for expecting
• 55:31
  Speaker 1: to achieve any level of success. Am I making too
• 55:35
  Speaker 1: much of this or does your actual behavior maybe the
• 55:40
  Speaker 1: maybe I'm I'm reversing the way I should look at
• 55:43
  Speaker 1: this because you're such a conservative investor, Does that allow
• 55:47
  Speaker 1: you to engage in risk your behavior as a professional,
• 55:52
  Speaker 1: to take chances, to roll the dice, to try things
• 55:55
  Speaker 1: that you couldn't do if you didn't feel like you
• 55:57
  Speaker 1: had a comfortable financial cushion to leap off of. I
• 56:01
  Speaker 1: think there's probably some truth to that. But there's also
• 56:03
  Speaker 1: another side of it, which was ski racing in my
• 56:06
  Speaker 1: my teenage in early twenty years. I didn't realize how
• 56:09
  Speaker 1: much risk I was taking. I didn't I didn't think
• 56:11
  Speaker 1: it was that risky until two things happened. I wrote
• 56:14
  Speaker 1: about this recently. Two of my good friends who I
• 56:16
  Speaker 1: grew up with ski racing were killed in an avalanche.
• 56:18
  Speaker 1: And then three months later I broke my back. Then
• 56:20
  Speaker 1: do any nerve damage, but broke my back, which is
• 56:22
  Speaker 1: a very serious thing to happen. Both of those things
• 56:24
  Speaker 1: kind of opened my eyes to what risk is and
• 56:27
  Speaker 1: and they changed how I think about risk, probably through today.
• 56:30
  Speaker 1: Like those events stuck with me. The other thing like uh,
• 56:34
  Speaker 1: my my very short stint in investment banking or getting
• 56:37
  Speaker 1: a writing job when I had not been a writer.
• 56:39
  Speaker 1: It didn't feel like I was taking any risk because
• 56:40
  Speaker 1: there wasn't a lot of downside if it didn't work.
• 56:42
  Speaker 1: Then if it didn't work out, I could have just
• 56:43
  Speaker 1: walked away. Um, it may be felt different worth investment
• 56:47
  Speaker 1: banking because I had no Plan B. So when I
• 56:49
  Speaker 1: realized that Plan A wasn't gonna work. There was this
• 56:52
  Speaker 1: moment of oh my, like what now, like I don't
• 56:54
  Speaker 1: I don't know what I'm gonna do for my career now.
• 56:56
  Speaker 1: That felt risky, But I was also I was, you know,
• 56:58
  Speaker 1: twenty one years older whatever, so my concept of risk
• 57:02
  Speaker 1: was very different than it is now now that I
• 57:05
  Speaker 1: have two young kids that I support. It's very different
• 57:07
  Speaker 1: when you're when you're doing things when you're downside feels
• 57:10
  Speaker 1: that much limited. So it's a combination of learning about
• 57:13
  Speaker 1: what risk really is over time and also taking risk
• 57:16
  Speaker 1: that didn't have a lot of downside. But there there
• 57:18
  Speaker 1: is a sense I think that my our our main,
• 57:23
  Speaker 1: our north star for how we manage our personal finances
• 57:26
  Speaker 1: is again being being very pessimistic in the short run
• 57:30
  Speaker 1: and having a ton of cash like preparing for the
• 57:32
  Speaker 1: apocalypse in the short run, will still maintaining a lot
• 57:35
  Speaker 1: of long term optimism both with our with our heads
• 57:38
  Speaker 1: and with our investments, and then just in terms of
• 57:40
  Speaker 1: how we invest. It's hard to wrap your head around
• 57:43
  Speaker 1: that kind of dual personality, the Barbell personality, but that
• 57:46
  Speaker 1: it is. I think that like what is necessary for
• 57:50
  Speaker 1: getting rich and staying rich, which are the two two
• 57:53
  Speaker 1: conflicting separate skills, but you need to marry both of
• 57:55
  Speaker 1: those to do well over time. You have to have
• 57:57
  Speaker 1: optimism and pestimism at the same time. Just know where
• 58:00
  Speaker 1: each one of them belongs in your life, and if
• 58:02
  Speaker 1: you don't, if you only have one or the other.
• 58:05
  Speaker 1: We all know perma bears, who you know, have been
• 58:08
  Speaker 1: waiting for the stock market to decline since nine and
• 58:11
  Speaker 1: we all know perma bowls who kind of run themselves
• 58:14
  Speaker 1: off the ledge, either fraudulently or innocently. They just take
• 58:17
  Speaker 1: way too much risk by off more than they can
• 58:19
  Speaker 1: choot and some backfiring. So I think you have to
• 58:21
  Speaker 1: manage both of those at the same time. That's what
• 58:24
  Speaker 1: we try to do with our personal finances, and for us,
• 58:26
  Speaker 1: how we manage optimism and pessimism is just about time
• 58:29
  Speaker 1: horizon optimism over the next thirty years and a lot
• 58:33
  Speaker 1: of pessimism over the next twelve to twenty four months.
• 58:35
  Speaker 1: So you start the book out with something that I
• 58:39
  Speaker 1: have to ask two questions about, and you you just
• 58:43
  Speaker 1: hinted at it. There is an enormous difference between getting rich,
• 58:50
  Speaker 1: which we see lots of folks are capable of doing,
• 58:53
  Speaker 1: and staying rich, which seems to be a very different
• 58:57
  Speaker 1: skill set. Tell us about people who have a hard
• 59:01
  Speaker 1: time despite being wealthy, either starting wealthy or achieving it.
• 59:06
  Speaker 1: Staying wealthy. I mean the kind of person that can
• 59:10
  Speaker 1: invest in, you know, a seed stage startup and then
• 59:13
  Speaker 1: watch it increased, you know, five thousandfold and make a
• 59:16
  Speaker 1: ton of money, do really well in the stock market.
• 59:19
  Speaker 1: Those tend not to be the kind of people who
• 59:21
  Speaker 1: can eventually say, okay, that's enough, I'm gonna put my
• 59:24
  Speaker 1: money in muni bonds so I can, you know, say
• 59:26
  Speaker 1: even so I can stay rich and protect my downside.
• 59:28
  Speaker 1: You tend not to have those kind of personalities and
• 59:31
  Speaker 1: the same people, but you need something along those lines
• 59:34
  Speaker 1: in order to stay wealthy over time. I think getting
• 59:37
  Speaker 1: rich and staying rich are completely separate skills. We want
• 59:41
  Speaker 1: to think they are the same. The people who are
• 59:43
  Speaker 1: able to get rich this year are going to be
• 59:45
  Speaker 1: the same kind of people who are still wealthy ten
• 59:46
  Speaker 1: or twenty years from now. But it turns out that
• 59:48
  Speaker 1: there's not the case. There's a tremendous amount of turnover
• 59:51
  Speaker 1: in the Fords list of billionaires, or if you're to
• 59:54
  Speaker 1: look at you know, the these turnover a mutual fund managers.
• 59:57
  Speaker 1: The ability to do well in the short run in
• 59:59
  Speaker 1: the long run are very very different. But and that
• 1:00:02
  Speaker 1: is it's not intuitive, but it's really necessary to wrap
• 1:00:05
  Speaker 1: your head around because everyone wants to do well, not
• 1:00:07
  Speaker 1: just this year. They want to do well for the
• 1:00:09
  Speaker 1: long run. No one wants to get rich and then
• 1:00:11
  Speaker 1: lose everything like that's that's some of the world. Like
• 1:00:13
  Speaker 1: most people would rather not get rich than they would
• 1:00:16
  Speaker 1: be to get rich and then lose it two years later.
• 1:00:19
  Speaker 1: So you really have to marry those two skills. And
• 1:00:21
  Speaker 1: since they are separate, conflicting skills, it's a it's a
• 1:00:24
  Speaker 1: hard thing to do. I think about Bill Gates a
• 1:00:26
  Speaker 1: lot who took probably the biggest business risk swinging for
• 1:00:30
  Speaker 1: the Fence, is the biggest flyer that's ever been taken,
• 1:00:32
  Speaker 1: which was in he said every human on the planet
• 1:00:36
  Speaker 1: should have a computer on their desktop in their homes,
• 1:00:39
  Speaker 1: which is the most absurd thing in the world. At
• 1:00:41
  Speaker 1: the time, he was like the most optimist risk taking
• 1:00:45
  Speaker 1: Swing for the Fences. But during that very same moment
• 1:00:48
  Speaker 1: he made a vow that Microsoft would always have enough
• 1:00:51
  Speaker 1: cash in the bank so that they could pay everyone's
• 1:00:53
  Speaker 1: payroll for twelve months with no revenue. So there he
• 1:00:57
  Speaker 1: was marrying optimism and pestimism. He had to ridiculous optimistic
• 1:01:01
  Speaker 1: view about where computers were going. But at the same time,
• 1:01:04
  Speaker 1: he was an incredible pessimist in the short run, so
• 1:01:06
  Speaker 1: much so that he wanted to make sure that Microsoft
• 1:01:09
  Speaker 1: could survive with no revenue if no one was willing
• 1:01:11
  Speaker 1: to pay for its products. I think that is a
• 1:01:13
  Speaker 1: rare skill to have in the same person. I don't
• 1:01:16
  Speaker 1: think Elon Musk has that skill, and who knows where
• 1:01:19
  Speaker 1: that's going to lead to. But Elon Musk is obviously
• 1:01:21
  Speaker 1: willing to swing for the fences. But is he good
• 1:01:23
  Speaker 1: at managing the short run? I mean, I don't think
• 1:01:26
  Speaker 1: he is. So it's a It's a very different personality
• 1:01:29
  Speaker 1: set than someone like Bill Gates, who has long term
• 1:01:31
  Speaker 1: and dirting success across many different environments recessions, booms, bus.
• 1:01:36
  Speaker 1: Microsoft has thrived because of that, both when he was
• 1:01:39
  Speaker 1: managing the company, but also just the kind of mentality
• 1:01:42
  Speaker 1: that he left the company with. So you always need
• 1:01:45
  Speaker 1: those two two sides, and if you don't realize that
• 1:01:49
  Speaker 1: they are separate, skilled that needs to be nurtured separately
• 1:01:52
  Speaker 1: and independently. Uh you're you're probably gonna run into a
• 1:01:55
  Speaker 1: point eventually where you realize that you didn't have one
• 1:01:57
  Speaker 1: of those skills, and it leads to something regrettable. The
• 1:01:59
  Speaker 1: morning we're cording this, the Bloomberg Billionaire Index shows I
• 1:02:03
  Speaker 1: think one, two and three is Jeff Bezos, Bill Gates,
• 1:02:08
  Speaker 1: and Elon Musk in that order. Uh. If you read
• 1:02:11
  Speaker 1: about Musk, it's fascinating. He took a PayPal windfall, didn't
• 1:02:16
  Speaker 1: even you know, plan with it. He just kind of
• 1:02:19
  Speaker 1: rolled it all over into Tesla, and at several points
• 1:02:22
  Speaker 1: in Tesla's history it was on the verge of, you know,
• 1:02:26
  Speaker 1: not making it. He really doubled down and doubled down again.
• 1:02:30
  Speaker 1: And uh, it worked out. At least so far, it's
• 1:02:33
  Speaker 1: worked out for him, and the same with SpaceX has
• 1:02:35
  Speaker 1: worked out for him. The question is, as you point out,
• 1:02:39
  Speaker 1: can he keep doing it? So you mentioned Bill Gates,
• 1:02:42
  Speaker 1: who who there's a wonderful story in one of the
• 1:02:45
  Speaker 1: biographies about him. They used to have bets him and
• 1:02:49
  Speaker 1: Balmer and others in the early days of Microsoft, how
• 1:02:53
  Speaker 1: late they could leave for the Seattle airport and not
• 1:02:57
  Speaker 1: miss a flight. And my favorite story he is he
• 1:03:00
  Speaker 1: once left so late that he pulls up in his
• 1:03:04
  Speaker 1: then old Porsche nine eleven, leaves it running with the
• 1:03:07
  Speaker 1: keys in it, and just runs into the airport, just
• 1:03:09
  Speaker 1: leaves it in front of, um, the arrival gate. UM.
• 1:03:15
  Speaker 1: I don't know what made me think of that other
• 1:03:17
  Speaker 1: than you. You brought him up and will edit this
• 1:03:19
  Speaker 1: out because it's ridiculous, But no, it's such a good
• 1:03:23
  Speaker 1: story and and and it makes you wonder, like what
• 1:03:25
  Speaker 1: happened to that car? Did he come back and get
• 1:03:27
  Speaker 1: just someone just take it and drive off? I imagine
• 1:03:28
  Speaker 1: he left. I'm sure it got told and he picked
• 1:03:31
  Speaker 1: it up, and I doubt he cared about it. But
• 1:03:32
  Speaker 1: the reason I brought that up is you mentioned earlier
• 1:03:37
  Speaker 1: you were a valet for many years at a couple
• 1:03:39
  Speaker 1: of different places. For those of us who valet cars
• 1:03:44
  Speaker 1: and occasionally a nice car here and there, what happens
• 1:03:48
  Speaker 1: when you give a high end sports car to a
• 1:03:51
  Speaker 1: valet at a restaurant or a hotel. What do you
• 1:03:54
  Speaker 1: think happens when you give a nineteen year old a
• 1:03:56
  Speaker 1: Ferrari and then he gets to drive it around the
• 1:03:58
  Speaker 1: corner where no one's watching. What do you think happens, Verry,
• 1:04:01
  Speaker 1: that that scene from Ferris Bueller's day Off where they
• 1:04:04
  Speaker 1: take uh they take this to seventy Spider out for
• 1:04:08
  Speaker 1: a joy ride and you know, all but destroy it.
• 1:04:11
  Speaker 1: That's the worst nightmare, I think. I also think that's
• 1:04:14
  Speaker 1: why a lot of these a lot of these car
• 1:04:16
  Speaker 1: companies have come up now with valet keys, so that
• 1:04:20
  Speaker 1: you could give a car to a valet and it's
• 1:04:23
  Speaker 1: rev limited and speed limited. It ain't going over thirty
• 1:04:26
  Speaker 1: miles an hour, so there's no reason to take it anywhere.
• 1:04:29
  Speaker 1: I don't know of any stories. I'm sure. I'm sure
• 1:04:32
  Speaker 1: it has, but in my experience, I didn't know of
• 1:04:34
  Speaker 1: any times when a valet left the lot with someone
• 1:04:37
  Speaker 1: else's car when when they shouldn't have, like like taking
• 1:04:40
  Speaker 1: on the street. Now, I that's not something I saw.
• 1:04:43
  Speaker 1: But there there was a strip in our parking lot,
• 1:04:46
  Speaker 1: like behind where everyone was watching. No one could see
• 1:04:49
  Speaker 1: where we had like two feet of straight away where
• 1:04:52
  Speaker 1: you could put your foot into the gas, So of
• 1:04:54
  Speaker 1: course we did that. The other thing is in our
• 1:04:56
  Speaker 1: vallet garage, we were always driving way too fast for
• 1:04:59
  Speaker 1: management to life. Uh, So they put in these huge
• 1:05:01
  Speaker 1: speed bumps, not normal speed bumps, but like really sharp,
• 1:05:04
  Speaker 1: brutal speed bumps, and that didn't slow us down in
• 1:05:06
  Speaker 1: the slightest We just started plowing over the speed bumps
• 1:05:08
  Speaker 1: at full speed. So that's I mean, it's it's incredible,
• 1:05:12
  Speaker 1: It's it's obviously, it's obvious. What would happen if you
• 1:05:14
  Speaker 1: give a twenty year old or twenty one year old
• 1:05:16
  Speaker 1: college boy the keys to a Lamborghini and say go
• 1:05:19
  Speaker 1: for it. It's obvious, what's what would happen? Um, We
• 1:05:23
  Speaker 1: parked on average about ten thousand cars per month at
• 1:05:25
  Speaker 1: the hotel that I was working at, uh and in
• 1:05:28
  Speaker 1: any given month we would get in a handful of accidents,
• 1:05:31
  Speaker 1: three or four accidents, and then it's been always thought
• 1:05:33
  Speaker 1: we were being so reckless, and we always had to
• 1:05:36
  Speaker 1: point out, like, no, if you drive, if you park
• 1:05:38
  Speaker 1: ten thousand cars and bang up three of them, that's
• 1:05:40
  Speaker 1: actually a pretty good record. That's actually a record that
• 1:05:42
  Speaker 1: we feel pretty good about. But when there was a car,
• 1:05:45
  Speaker 1: you know, when we were smashing up a Bentley once
• 1:05:47
  Speaker 1: a week, it's hard to explain that to your manager.
• 1:05:49
  Speaker 1: That's a challenge. And I bet you're you're banging up
• 1:05:53
  Speaker 1: Hanzas and Toyota is not. Ferraris my my roommate at
• 1:05:56
  Speaker 1: the time who worked with me were roommates, but he
• 1:05:58
  Speaker 1: was in valet as well. Uh. He was backing up
• 1:06:01
  Speaker 1: a ferrari right in front of its owner and he
• 1:06:03
  Speaker 1: just smashed it right into a curb on accident. He
• 1:06:06
  Speaker 1: wasn't being rexplenced, but he just smashed the bumper straight
• 1:06:09
  Speaker 1: into a curb. Uh. And it was it was painful
• 1:06:12
  Speaker 1: to watch. It was painful to watch everyone's reaction. Unbelievable.
• 1:06:16
  Speaker 1: I know I only have you for a finite amount
• 1:06:18
  Speaker 1: of time, So let's jump to our favorite questions, our
• 1:06:21
  Speaker 1: speed round. We ask all our guests and and let
• 1:06:24
  Speaker 1: me start with what are you streaming these days? Give
• 1:06:27
  Speaker 1: us your favorite Netflix or Amazon Prime or any podcast
• 1:06:31
  Speaker 1: you happen to be listening to. I just watched a
• 1:06:33
  Speaker 1: documentary on Netflix called Sour Grapes, which is about the
• 1:06:36
  Speaker 1: wine boom, the fine wine boom of the two thousands,
• 1:06:40
  Speaker 1: where the price of fine wine skylocketed. And what happened
• 1:06:43
  Speaker 1: during that period is a lot of counterfeit wines. A
• 1:06:46
  Speaker 1: lot of people would just take any old wine, peeled
• 1:06:49
  Speaker 1: the label off, put on a label that says this
• 1:06:52
  Speaker 1: was from came from this French vineyard, and it was
• 1:06:56
  Speaker 1: all b s it was all made up, but they
• 1:06:57
  Speaker 1: could sell those bottles for twenty bucks. So there was
• 1:07:00
  Speaker 1: one guy. His name was, name is is is Rudy
• 1:07:04
  Speaker 1: Kurtiwan who made tens of thousands of fake wine bottles,
• 1:07:08
  Speaker 1: all of the finest vintages you can imagine, and sold
• 1:07:11
  Speaker 1: them for tens of millions of dollars. He's in jail now,
• 1:07:13
  Speaker 1: so the documentary is on his scheme and it was
• 1:07:15
  Speaker 1: absolutely fascinating. Tell us about some of your early mentors
• 1:07:19
  Speaker 1: who helped shape your career in both writing and finance.
• 1:07:24
  Speaker 1: Carl Richards, who is a financial advisor. He's also a
• 1:07:26
  Speaker 1: columist from The New York Times, writes a blog called
• 1:07:28
  Speaker 1: The Behavior Death. He was always something who I really
• 1:07:31
  Speaker 1: looked up to. I just thought he was such a
• 1:07:32
  Speaker 1: good writer. He was who I wanted to be. And
• 1:07:35
  Speaker 1: I emailed him one day out of the blue, just
• 1:07:37
  Speaker 1: saying how much I liked his writing, and he said, oh,
• 1:07:39
  Speaker 1: let's let's talk and we He called me up and
• 1:07:42
  Speaker 1: we spoke, and that was just so I was absolutely
• 1:07:44
  Speaker 1: nobody at the time, so the fact that he took
• 1:07:46
  Speaker 1: the time to do that really meant the world to me.
• 1:07:48
  Speaker 1: He was also big on the speaking circuit. He was
• 1:07:51
  Speaker 1: speaking at financial conferences, which I always wanted to do,
• 1:07:53
  Speaker 1: and you did as well, Barry. I looked up to
• 1:07:55
  Speaker 1: that as well, and Carl was one of the people
• 1:07:57
  Speaker 1: who really helped me get started, uh speaking. And I'll
• 1:08:01
  Speaker 1: never forget the help that he gave me, because since
• 1:08:05
  Speaker 1: I was I was a no one he offered, he
• 1:08:07
  Speaker 1: owed me nothing, he was getting nothing out of helping me.
• 1:08:09
  Speaker 1: He just did that out of the goodness of his heart.
• 1:08:10
  Speaker 1: And I'll never forget that. Uh. We talked about reading.
• 1:08:13
  Speaker 1: We talked about books, but we haven't named any titles.
• 1:08:18
  Speaker 1: Tell us some of your favorite books and tell us
• 1:08:21
  Speaker 1: what you're reading currently. I'm always a fan of any
• 1:08:23
  Speaker 1: book that has to do with the period from uh,
• 1:08:26
  Speaker 1: you know, nineteen eighteen to nineteen kind of the end
• 1:08:29
  Speaker 1: of World War One through the end of World War Two.
• 1:08:31
  Speaker 1: So the great Depression in World War Two that period
• 1:08:34
  Speaker 1: is so fascinating to me for two reasons. One is
• 1:08:36
  Speaker 1: that the more technological change took place during those twenty
• 1:08:41
  Speaker 1: or thirty years that have taken place during any other
• 1:08:43
  Speaker 1: period in history, Like we started World War two on
• 1:08:47
  Speaker 1: horseback and ended with nuclear fission. Just so much progress
• 1:08:51
  Speaker 1: took place during that period. That period is also the
• 1:08:53
  Speaker 1: combination Great Depression world War Two is when people dealt
• 1:08:57
  Speaker 1: with the most uncertainty, the most trauma, the most tragedy,
• 1:08:59
  Speaker 1: the most misery of any other period in modern history.
• 1:09:03
  Speaker 1: And it's fascinating to learn about that just as a
• 1:09:06
  Speaker 1: lens into behavior and what people do during risk and
• 1:09:10
  Speaker 1: threat and uncertainty. So any period, like any book around
• 1:09:13
  Speaker 1: that topic, I'm always interested in. I'm reading a book
• 1:09:15
  Speaker 1: right now by historian John Meacham called The Soul of America,
• 1:09:18
  Speaker 1: which talks about periods in Americans past, uh when we
• 1:09:22
  Speaker 1: felt like like the country was coming to an end,
• 1:09:25
  Speaker 1: whether it was the race ride, whether it's a Civil
• 1:09:28
  Speaker 1: war or the race rides in the nineteen sixties, or
• 1:09:30
  Speaker 1: or dealing with today. Just kind of period that where
• 1:09:33
  Speaker 1: America was tried, where the concept of America looked like
• 1:09:36
  Speaker 1: it was breaking, and how we overcame that. It's a
• 1:09:38
  Speaker 1: really good book. I know you have a couple of
• 1:09:40
  Speaker 1: favorite books You've referenced about that period between the Depression
• 1:09:45
  Speaker 1: and World War Two. A couple of history books you've mentioned,
• 1:09:48
  Speaker 1: and I can't remember the name of him. There was
• 1:09:50
  Speaker 1: an author who you read two or three of his books.
• 1:09:53
  Speaker 1: You know what I'm referring to. Yes, there's a there's
• 1:09:56
  Speaker 1: a historian named Frederick Lewis Allen who wrote three books. Uh,
• 1:10:00
  Speaker 1: it's it's a trilogy. One is called Since Yesterday, one
• 1:10:03
  Speaker 1: is called Only Yesterday, and the others called The Big Change.
• 1:10:05
  Speaker 1: And they were about how America changed from nine and
• 1:10:09
  Speaker 1: nineteen fifty. And it is so well written. The stories
• 1:10:12
  Speaker 1: are so good, and he's writing about the perspective of
• 1:10:14
  Speaker 1: like the average American, not what is going on with
• 1:10:17
  Speaker 1: the generals and the presidents, but if you were just
• 1:10:20
  Speaker 1: an average Joe living in Ohio, what how did your
• 1:10:23
  Speaker 1: life change from nineteen fifty? And it is so it's
• 1:10:27
  Speaker 1: so good. That trilogy was so well done. He wrote
• 1:10:30
  Speaker 1: most of them in the nineteen forties and nineteen fifties. Um,
• 1:10:33
  Speaker 1: and it was they're they're just gemms out there. What
• 1:10:36
  Speaker 1: sort of advice would you give to a recent college
• 1:10:39
  Speaker 1: grad who said to you they were interested in a
• 1:10:42
  Speaker 1: career in financial writing. I would say, find four or
• 1:10:47
  Speaker 1: five people who you really look up to, people who
• 1:10:49
  Speaker 1: that you want to be when you know, five or
• 1:10:51
  Speaker 1: ten years from now, and just cold email them and
• 1:10:53
  Speaker 1: ask him out for coffee or maybe if it's still
• 1:10:55
  Speaker 1: Covid asked him out to for a a a a
• 1:10:58
  Speaker 1: quick zoom call. I think that's the best way to
• 1:11:01
  Speaker 1: get ahead, to learn from other people, and also just
• 1:11:04
  Speaker 1: to network with people who might be able to open
• 1:11:06
  Speaker 1: doors for you one day. And you people will be
• 1:11:08
  Speaker 1: surprised if you reach out to people, even people who seem,
• 1:11:11
  Speaker 1: you know, let's say, out of your league. If you
• 1:11:13
  Speaker 1: email them and say, hey, I reallymire what you do.
• 1:11:16
  Speaker 1: I'd like to take you out to coffee, how many
• 1:11:17
  Speaker 1: of them will say yes, uh this. The success rate
• 1:11:21
  Speaker 1: for doing that will probably be much higher than you assume.
• 1:11:24
  Speaker 1: And those few connections that you can make might have
• 1:11:26
  Speaker 1: a bigger impact on your career than anything that you
• 1:11:29
  Speaker 1: learn or read or or or taught in school. That
• 1:11:32
  Speaker 1: will have a huge impact on what you can do.
• 1:11:34
  Speaker 1: And our final question, what do you know about the
• 1:11:36
  Speaker 1: world to finance investing writing today that you wish you
• 1:11:41
  Speaker 1: knew twenty years ago or so when you were first
• 1:11:45
  Speaker 1: getting started. One thing that sticks out is that good
• 1:11:48
  Speaker 1: investing is not being good at something. You have to
• 1:11:51
  Speaker 1: find something that other people are bad at. So the
• 1:11:53
  Speaker 1: fact that you are good at modeling, the fact that
• 1:11:55
  Speaker 1: you are good at spreadsheets does not necessarily make a
• 1:11:58
  Speaker 1: difference because a lot of people are good at that.
• 1:12:00
  Speaker 1: So that's where a lot of investors go Astray is thinking,
• 1:12:03
  Speaker 1: I'm very smart, I'm very good at this. I have
• 1:12:05
  Speaker 1: a lot of skill. I have a lot of intelligence,
• 1:12:07
  Speaker 1: and it doesn't lead to any sort of investing results
• 1:12:10
  Speaker 1: to speak of, because so many other people are good
• 1:12:12
  Speaker 1: at You have to find something that other people are
• 1:12:14
  Speaker 1: bad at, that is and and and and try to
• 1:12:16
  Speaker 1: be a little good at that. If you are sort
• 1:12:18
  Speaker 1: of good at something that other people are bad at,
• 1:12:21
  Speaker 1: you have a lot more success than if you are
• 1:12:23
  Speaker 1: very good at something that other people are also very
• 1:12:25
  Speaker 1: good at. Quite fascinating. Thanks Morgan for being so generous
• 1:12:28
  Speaker 1: with your time. We have been speaking with Morgan Housel.
• 1:12:32
  Speaker 1: He is the author of the new book The Psychology
• 1:12:34
  Speaker 1: of Money. If you enjoy this conversation, well, be sure
• 1:12:38
  Speaker 1: and check any of our three hundred and something previous
• 1:12:42
  Speaker 1: discussions where we talk about all things finance, investing, money related.
• 1:12:48
  Speaker 1: You can find that at iTunes, Spotify, Overcast, Stitcher, wherever
• 1:12:53
  Speaker 1: your final podcasts are found. We love your comments, feedback
• 1:12:57
  Speaker 1: and suggestions right to us at m IB podcast at
• 1:13:01
  Speaker 1: Bloomberg dot Net. Check out my weekly column on Bloomberg
• 1:13:05
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• 1:13:09
  Speaker 1: Sign up for our daily reads at ridholts dot com.
• 1:13:12
  Speaker 1: Follow me on Twitter at Ridholts. I would be remiss
• 1:13:16
  Speaker 1: if I did not thank the crack staff that helps
• 1:13:18
  Speaker 1: us put these conversations together every week. Tim Harrow is
• 1:13:23
  Speaker 1: my audio engineer. Michael Batnick is my head of research.
• 1:13:27
  Speaker 1: A Tika val Brun is our project manager. Michael Boyle
• 1:13:31
  Speaker 1: is our producer slash booker. I'm Barry Riholts. You've been
• 1:13:35
  Speaker 1: listening to Masters in Business on Bloomberg Radio.