1 00:00:00,120 --> 00:00:02,720 Speaker 1: Welcome to How the Money, Um Joel and I am 2 00:00:02,759 --> 00:00:05,760 Speaker 1: Matt and today we're talking the Psychology of Money with 3 00:00:05,800 --> 00:00:28,240 Speaker 1: Morgan Household. Our guest today is Morgan Household. Morgan has 4 00:00:28,280 --> 00:00:31,400 Speaker 1: a degree in economics and started writing about investing thirteen 5 00:00:31,480 --> 00:00:35,160 Speaker 1: years ago. He is a partner at the Collaborative Fund, 6 00:00:35,280 --> 00:00:38,040 Speaker 1: which is a venture capital firm that invests in companies 7 00:00:38,080 --> 00:00:39,600 Speaker 1: that are trying to make the world a better place. 8 00:00:39,760 --> 00:00:43,200 Speaker 1: Morgan is also a former columnist at The Motley Fool 9 00:00:43,320 --> 00:00:45,720 Speaker 1: and The Wall Street Journal, but his work has also 10 00:00:45,760 --> 00:00:49,600 Speaker 1: been published in Time, USA, Today, Business Insider, and he's 11 00:00:49,600 --> 00:00:53,360 Speaker 1: recently published his book The Psychology of Money, Timeless Lessons 12 00:00:53,440 --> 00:00:56,440 Speaker 1: on Wealth, Greed, and Happiness. We're excited to talk about that, 13 00:00:56,520 --> 00:00:59,000 Speaker 1: so let's go ahead and dive into our discussion today. Morgan, 14 00:00:59,160 --> 00:01:01,080 Speaker 1: thank you so much for runing us on a podcast. 15 00:01:01,400 --> 00:01:03,840 Speaker 1: Thanks so much for having me so Morgan, Matt and 16 00:01:03,880 --> 00:01:05,880 Speaker 1: I were We love craft beer. We're drinking a craft 17 00:01:05,920 --> 00:01:08,319 Speaker 1: beer right now as we speak, and it's something that's 18 00:01:08,360 --> 00:01:10,440 Speaker 1: important to us that we value now while saving an 19 00:01:10,480 --> 00:01:12,479 Speaker 1: investing well for the future. So do you have something 20 00:01:12,560 --> 00:01:15,160 Speaker 1: like that in your life that fits that bill for you? Look, 21 00:01:15,160 --> 00:01:17,759 Speaker 1: there's no craft beer equivalent, because craft beer is something 22 00:01:17,800 --> 00:01:19,920 Speaker 1: that you would drink on an a regular basis. But 23 00:01:20,000 --> 00:01:22,319 Speaker 1: let me tell you about something that I did fairly 24 00:01:22,360 --> 00:01:25,200 Speaker 1: recently that I would put into this bucket of a 25 00:01:25,200 --> 00:01:28,640 Speaker 1: splurge that made me so happy. Uh. We bought a 26 00:01:28,640 --> 00:01:32,520 Speaker 1: new mattress. This sounds silly, this sounds trivial. Completely changed 27 00:01:32,560 --> 00:01:35,240 Speaker 1: our life and is the perfect equivalent of the mattress 28 00:01:35,280 --> 00:01:37,960 Speaker 1: that we had before. We had had for over ten years, 29 00:01:38,120 --> 00:01:40,280 Speaker 1: and I thought, look, it's fine, it's it's fine. It's 30 00:01:40,280 --> 00:01:42,480 Speaker 1: a perfectly fine mattress. There's nothing wrong with that. We 31 00:01:42,480 --> 00:01:44,920 Speaker 1: sleep just find no issue until we finally we have 32 00:01:44,959 --> 00:01:47,160 Speaker 1: young kids. They wind up in our bed too often 33 00:01:47,200 --> 00:01:48,920 Speaker 1: at night. So we said, we need to move from 34 00:01:48,920 --> 00:01:50,480 Speaker 1: a queen to a king size bed. We're gonna get 35 00:01:51,240 --> 00:01:54,000 Speaker 1: went out and got a nice king Cannot tell you 36 00:01:54,200 --> 00:01:57,320 Speaker 1: how much of a difference it makes, life changing, And 37 00:01:57,360 --> 00:02:00,480 Speaker 1: I kicked myself for not doing it sooner. It necessarily 38 00:02:00,520 --> 00:02:02,160 Speaker 1: that we didn't do it sooner because it was a cost, 39 00:02:02,680 --> 00:02:04,640 Speaker 1: because it was too expensive. It was just kind of like, oh, 40 00:02:04,760 --> 00:02:06,760 Speaker 1: we have this one that works. Still problem until we 41 00:02:06,760 --> 00:02:08,600 Speaker 1: went out and splurged, and then it was what have 42 00:02:08,600 --> 00:02:10,280 Speaker 1: I been missing for the last ten years. I'm so 43 00:02:10,320 --> 00:02:11,960 Speaker 1: glad I did it. Can you spend a third of 44 00:02:11,960 --> 00:02:14,400 Speaker 1: your life there? Right? So it is it is something 45 00:02:14,400 --> 00:02:17,120 Speaker 1: worth putting some money into, right right When when when 46 00:02:17,160 --> 00:02:18,840 Speaker 1: you phrase it that way, when it's a third of 47 00:02:18,880 --> 00:02:21,320 Speaker 1: your life, it's you you should be spending tens of 48 00:02:21,360 --> 00:02:24,480 Speaker 1: thousands of dollars on the match. But yeah, I'm glad 49 00:02:24,520 --> 00:02:26,640 Speaker 1: we don't have to. But yeah, it wouldn't be unreasonable 50 00:02:26,720 --> 00:02:29,760 Speaker 1: time to start a new company. Basically moved to like 51 00:02:29,800 --> 00:02:31,840 Speaker 1: one of those foam mattresses as well, and didn't like 52 00:02:31,880 --> 00:02:33,400 Speaker 1: you kind of swapped it out because you hurt your 53 00:02:33,440 --> 00:02:35,080 Speaker 1: back on it or something. Was the deal with that? 54 00:02:35,080 --> 00:02:37,160 Speaker 1: I bought like a hundred dollar foam mattress and and 55 00:02:37,240 --> 00:02:39,119 Speaker 1: we don't you don't want to go that cheap? Yeah, 56 00:02:39,200 --> 00:02:40,840 Speaker 1: I end up putting my back like the first day, 57 00:02:40,919 --> 00:02:43,160 Speaker 1: sold it on Facebook Marketplace and made my money back, 58 00:02:43,160 --> 00:02:45,160 Speaker 1: and then got one from Costco. So it's it's a 59 00:02:45,200 --> 00:02:47,119 Speaker 1: tough thing. It's like it's like you said, it's well, 60 00:02:47,160 --> 00:02:48,519 Speaker 1: spent a third of our lesson there, but we don't 61 00:02:48,560 --> 00:02:50,600 Speaker 1: spend that much time thinking about it. And I'm even 62 00:02:50,639 --> 00:02:52,480 Speaker 1: a person I travel a lot pre COVID. I would 63 00:02:52,480 --> 00:02:53,920 Speaker 1: travel all the time, so I slept in hundreds of 64 00:02:53,919 --> 00:02:56,200 Speaker 1: hotels beds, and I never really noticed that much of 65 00:02:56,240 --> 00:02:57,840 Speaker 1: a difference, maybe because I only sleep on it for 66 00:02:57,880 --> 00:03:00,080 Speaker 1: a night or two. But when it's your sleeping on 67 00:03:00,240 --> 00:03:03,040 Speaker 1: a bad mattress or just an okay mattress night after 68 00:03:03,120 --> 00:03:06,280 Speaker 1: night after night for years, it really starts to add up. Yeah, 69 00:03:06,320 --> 00:03:08,720 Speaker 1: for sure. Here you well so kind of piggybacking on 70 00:03:09,120 --> 00:03:12,359 Speaker 1: our physical bodies. Yeah, you've mentioned before that you walk 71 00:03:12,400 --> 00:03:14,120 Speaker 1: a good bit, you know, like you walk, you do 72 00:03:14,160 --> 00:03:15,800 Speaker 1: a good bit of thinking that way, and that's a 73 00:03:15,880 --> 00:03:18,520 Speaker 1: huge part of your job as a writer. Do you 74 00:03:18,560 --> 00:03:20,880 Speaker 1: find that kind of cleanse your head or you know, 75 00:03:20,919 --> 00:03:21,959 Speaker 1: like like do you do you do this on a 76 00:03:22,000 --> 00:03:24,760 Speaker 1: regular basis? Or maybe do you you know, step outside 77 00:03:24,760 --> 00:03:26,400 Speaker 1: and go for a walk, like when maybe you're stuck 78 00:03:26,400 --> 00:03:28,160 Speaker 1: on a topic or something like that. How does that 79 00:03:28,440 --> 00:03:30,440 Speaker 1: how does that actually play out in your life? It's 80 00:03:30,440 --> 00:03:32,920 Speaker 1: definitely regular. It's at least twice a day one night. 81 00:03:32,919 --> 00:03:35,680 Speaker 1: I would say it's at least once a day, often too, 82 00:03:35,800 --> 00:03:37,400 Speaker 1: sometimes three times a day that I get out and 83 00:03:37,400 --> 00:03:39,040 Speaker 1: a walk. And for me, and it's not just me, 84 00:03:39,120 --> 00:03:42,120 Speaker 1: there's actually a lot of scientific research on this, legitimate research. 85 00:03:42,160 --> 00:03:45,120 Speaker 1: It shows when people walk their brain works differently, because 86 00:03:45,120 --> 00:03:47,120 Speaker 1: when you're sitting at your desk, your brainking kind of 87 00:03:47,120 --> 00:03:49,040 Speaker 1: shut off because there's no threats in front of you. 88 00:03:49,040 --> 00:03:50,880 Speaker 1: You're not going to trip over a curb, you don't 89 00:03:50,880 --> 00:03:52,720 Speaker 1: have to watch out for the cars coming. Your brain 90 00:03:52,800 --> 00:03:55,320 Speaker 1: just kind of shuts down. And therefore the amount of 91 00:03:55,520 --> 00:03:58,440 Speaker 1: just getting your getting the gears moving in your head 92 00:03:58,480 --> 00:04:00,760 Speaker 1: for creative thinking thinking about a topic also kind of 93 00:04:00,960 --> 00:04:03,760 Speaker 1: slows down with it. Whereas when you're walking, you're just engaged. 94 00:04:03,840 --> 00:04:05,520 Speaker 1: And they said, you're you're watching out for the traffic, 95 00:04:05,560 --> 00:04:08,160 Speaker 1: you're listening to the birds, you're smelling the wind, you're 96 00:04:08,280 --> 00:04:10,280 Speaker 1: making sure you don't trip, you're making sure you're looking 97 00:04:10,320 --> 00:04:12,400 Speaker 1: at the bikes coming towards you, etcetera. And it's just 98 00:04:12,480 --> 00:04:14,800 Speaker 1: it's a level of engagement that keeps you going. So 99 00:04:14,880 --> 00:04:16,560 Speaker 1: for me as a writer, this has always been the 100 00:04:16,560 --> 00:04:17,800 Speaker 1: case for me, but I think it's true for a 101 00:04:17,800 --> 00:04:20,640 Speaker 1: lot of people that I do the majority of my 102 00:04:20,680 --> 00:04:23,880 Speaker 1: quote unquote writing when i'm walking, and I'll take notes. 103 00:04:23,920 --> 00:04:26,240 Speaker 1: Sometimes I'll send myself emails when i'm writing, and a 104 00:04:26,240 --> 00:04:28,120 Speaker 1: lot of times if I can't figure something out in 105 00:04:28,160 --> 00:04:30,680 Speaker 1: an article or or or or when I was writing 106 00:04:30,680 --> 00:04:32,640 Speaker 1: the book, I would go for a walk for ten 107 00:04:32,720 --> 00:04:35,080 Speaker 1: fifteen minute walk not that long, and figure it out, 108 00:04:35,160 --> 00:04:37,360 Speaker 1: and that's when it starts to come. And that's when 109 00:04:37,360 --> 00:04:39,479 Speaker 1: it comes. So for me, it's not just a physical thing. 110 00:04:39,680 --> 00:04:42,400 Speaker 1: I mean, that's part of it. I'm so antsy anyways 111 00:04:42,800 --> 00:04:44,560 Speaker 1: that I have a hard time sitting down for long 112 00:04:44,640 --> 00:04:46,560 Speaker 1: just because I get I get fidgety, so I gotta 113 00:04:46,560 --> 00:04:48,560 Speaker 1: get up a move. But it's also just a good 114 00:04:48,920 --> 00:04:51,800 Speaker 1: mental exercise as well. It's physical and mental exercise. So 115 00:04:51,839 --> 00:04:53,960 Speaker 1: that's why I love doing and recommend more people try it. 116 00:04:54,240 --> 00:04:56,960 Speaker 1: Are you one of those weirdoes? Account steps are now? No? 117 00:04:57,160 --> 00:04:58,960 Speaker 1: I mean I haven't, you know, accounts in your phone 118 00:04:59,000 --> 00:05:01,360 Speaker 1: automatically and once in a while I'll go back and look, 119 00:05:01,360 --> 00:05:03,599 Speaker 1: but I'm not obsessed with it now. Okay, all right, 120 00:05:03,600 --> 00:05:06,240 Speaker 1: Well let's talk about your book. Morgan. In on why 121 00:05:06,279 --> 00:05:08,080 Speaker 1: you chose to write the book, you said, the biggest 122 00:05:08,400 --> 00:05:11,680 Speaker 1: realization I've had about investing is that it is not 123 00:05:11,800 --> 00:05:13,880 Speaker 1: the study of finance, is the study of people, how 124 00:05:13,920 --> 00:05:16,720 Speaker 1: people behave with money. The gap that we see between 125 00:05:16,720 --> 00:05:19,560 Speaker 1: knowledge and results doesn't exist. In any other field. So 126 00:05:19,760 --> 00:05:21,840 Speaker 1: how you behave is more important than what you know. 127 00:05:22,279 --> 00:05:24,600 Speaker 1: Why is that? I think what's important is that, Look, 128 00:05:24,640 --> 00:05:27,839 Speaker 1: you can be the smartest financial mind in the world. 129 00:05:27,880 --> 00:05:30,200 Speaker 1: You can have a PhD and finance from Harvard. You 130 00:05:30,200 --> 00:05:32,760 Speaker 1: can know all the equations, all the statistics, all the 131 00:05:32,880 --> 00:05:35,839 Speaker 1: charts you can come across as how we generally think 132 00:05:35,839 --> 00:05:38,080 Speaker 1: of what intelligence is. You can check all those boxes. 133 00:05:38,440 --> 00:05:40,880 Speaker 1: But if you do not have a good relationship with 134 00:05:40,960 --> 00:05:43,240 Speaker 1: greed and fear, or you are not able to take 135 00:05:43,279 --> 00:05:45,039 Speaker 1: a true long term mindset, if you or if you 136 00:05:45,120 --> 00:05:48,200 Speaker 1: lose your cool when the world is falling apart, like 137 00:05:48,240 --> 00:05:51,120 Speaker 1: in March of this year when when COVID you know, 138 00:05:51,560 --> 00:05:53,720 Speaker 1: really came in came into our minds, or in two 139 00:05:53,760 --> 00:05:56,080 Speaker 1: thousand eight during the financial crisis. If you can't keep 140 00:05:56,120 --> 00:05:59,159 Speaker 1: your cruel doing those periods, then none of the analytical 141 00:05:59,200 --> 00:06:02,840 Speaker 1: intelligence that you had matters. So the behavioral part is 142 00:06:02,880 --> 00:06:05,599 Speaker 1: important because it can neutralize all of the intelligence that 143 00:06:05,640 --> 00:06:07,479 Speaker 1: you have. It sits above it. So if there's like 144 00:06:07,520 --> 00:06:11,200 Speaker 1: a pyramid a hierarchy of financial skills, behavior is the 145 00:06:11,200 --> 00:06:14,440 Speaker 1: base of the pyramid, and nothing above that matters until 146 00:06:14,480 --> 00:06:17,440 Speaker 1: you've mastered it. UH and I think there aren't many 147 00:06:17,440 --> 00:06:19,039 Speaker 1: other fields that are like that. There are a lot 148 00:06:19,080 --> 00:06:21,640 Speaker 1: of fields like look, if you're if you're an engineer 149 00:06:21,760 --> 00:06:24,920 Speaker 1: or something, then it's just the analytical intelligence that you have. 150 00:06:25,440 --> 00:06:27,960 Speaker 1: But engineering is not emotional in the way that finances. 151 00:06:28,240 --> 00:06:30,160 Speaker 1: I think if there's one field that is a that 152 00:06:30,320 --> 00:06:33,760 Speaker 1: is somewhat equivalent to uh to finance in that in 153 00:06:34,000 --> 00:06:37,039 Speaker 1: that regard, it's medicine and health where you can be Look, 154 00:06:37,120 --> 00:06:40,159 Speaker 1: I I used to know this doctor many years ago 155 00:06:40,640 --> 00:06:43,640 Speaker 1: who was a doctor, very educated uh knew a lot 156 00:06:43,680 --> 00:06:45,800 Speaker 1: of about medicine, of course, like he's a doctor, and 157 00:06:45,839 --> 00:06:48,040 Speaker 1: he was extremely overweight and he smoked. And I think 158 00:06:48,080 --> 00:06:50,960 Speaker 1: that's the equivalent of people who can know everything about finance, 159 00:06:51,000 --> 00:06:52,920 Speaker 1: but if their behaviors get in the way, it doesn't matter. 160 00:06:53,640 --> 00:06:55,600 Speaker 1: So I think that's I think medicine is in that 161 00:06:55,680 --> 00:06:58,159 Speaker 1: as well. And I mean it's even to the extent 162 00:06:58,200 --> 00:07:01,880 Speaker 1: where if you are you know, a Harvard train cardiologists, 163 00:07:01,880 --> 00:07:03,520 Speaker 1: you are so good at what you do, but you 164 00:07:03,560 --> 00:07:06,360 Speaker 1: have a terrible bedside manner to the extent that your 165 00:07:06,400 --> 00:07:08,920 Speaker 1: patients don't trust you or they don't come back to you. 166 00:07:09,240 --> 00:07:12,480 Speaker 1: Then again, your education, your intelligence doesn't necessarily matter if 167 00:07:12,520 --> 00:07:15,040 Speaker 1: you haven't mastered the behavioral aspect of your field. So 168 00:07:15,080 --> 00:07:17,440 Speaker 1: that's true in finance as well. Yeah, so I mean 169 00:07:17,480 --> 00:07:19,440 Speaker 1: in addition to to that, you know, like, how do 170 00:07:19,480 --> 00:07:22,000 Speaker 1: how do you feel that our own history how how 171 00:07:22,000 --> 00:07:24,080 Speaker 1: does that come to bear on our behavior and how 172 00:07:24,120 --> 00:07:26,400 Speaker 1: it is that we handle our money. I think what's 173 00:07:26,400 --> 00:07:28,600 Speaker 1: important about our history is that we all have different 174 00:07:28,680 --> 00:07:32,960 Speaker 1: backgrounds everyone, particularly from generation to generation. People who grew 175 00:07:33,000 --> 00:07:35,360 Speaker 1: up during the Great Depression versus people who you know, 176 00:07:35,400 --> 00:07:39,120 Speaker 1: we're in Europe during World War Two versus the millennials 177 00:07:39,120 --> 00:07:41,080 Speaker 1: who grew up with kind of you know, just experiencing 178 00:07:41,120 --> 00:07:43,920 Speaker 1: not eleven. I remember September eleventh was just before my 179 00:07:44,000 --> 00:07:47,080 Speaker 1: eighteenth birthday. Uh. And in the United States, when you 180 00:07:47,240 --> 00:07:49,360 Speaker 1: when you're a male, you turn eighteen, you are you 181 00:07:49,400 --> 00:07:51,800 Speaker 1: are required to register for the draft, and there's not 182 00:07:51,800 --> 00:07:53,320 Speaker 1: actually a draft into it, but you have to. They 183 00:07:53,320 --> 00:07:55,120 Speaker 1: send you a postcard and you sign it and return it. 184 00:07:55,320 --> 00:07:57,400 Speaker 1: And that was like a week after September eleventh, and 185 00:07:57,440 --> 00:08:00,080 Speaker 1: I remember that was such a Holy Craft moment or 186 00:08:00,160 --> 00:08:04,320 Speaker 1: me anyways, So like the generational differences of where your 187 00:08:04,360 --> 00:08:07,520 Speaker 1: life aligns with what the world is doing is really important, 188 00:08:07,560 --> 00:08:09,960 Speaker 1: and it's different from generation to generations, different from country 189 00:08:10,040 --> 00:08:13,920 Speaker 1: to country, and also just personality wise, my financial goals 190 00:08:14,400 --> 00:08:16,520 Speaker 1: and what's important to me might be completely different than 191 00:08:16,560 --> 00:08:19,080 Speaker 1: what's important to you and someone else. So even if 192 00:08:19,080 --> 00:08:21,640 Speaker 1: you and I are just as informed as one another 193 00:08:21,960 --> 00:08:23,920 Speaker 1: and are just as smart as one another, we might 194 00:08:23,960 --> 00:08:27,040 Speaker 1: come to vastly different conclusions based because we want something 195 00:08:27,040 --> 00:08:28,960 Speaker 1: different out of life. What we want for our families 196 00:08:28,960 --> 00:08:30,720 Speaker 1: and are what our goals are different. Which is just 197 00:08:30,760 --> 00:08:34,439 Speaker 1: to say there's no one right answer for most financial topics. Uh, 198 00:08:34,520 --> 00:08:37,640 Speaker 1: Look in physics and in math there is one right answer, 199 00:08:37,760 --> 00:08:40,720 Speaker 1: it's a precise answer. But in finance, I think you 200 00:08:40,720 --> 00:08:44,760 Speaker 1: know to to to make different different comparisons to other fields. 201 00:08:44,800 --> 00:08:47,480 Speaker 1: It might be something like dating or or your spouse, 202 00:08:47,480 --> 00:08:50,280 Speaker 1: where like look what some people want out of a spouse, 203 00:08:50,400 --> 00:08:53,000 Speaker 1: what is appealing and attractive them is completely different from 204 00:08:53,000 --> 00:08:55,360 Speaker 1: other people. There's no one answer for this is what 205 00:08:55,520 --> 00:08:57,760 Speaker 1: makes a good husband or a good wife, because there 206 00:08:57,760 --> 00:09:00,280 Speaker 1: are there are common denominators, but it's different for every one. 207 00:09:00,600 --> 00:09:02,959 Speaker 1: And I think money is the same that people, and 208 00:09:03,000 --> 00:09:04,319 Speaker 1: I think the screws a lot of people up that 209 00:09:04,400 --> 00:09:07,720 Speaker 1: people are always looking for the right answer, and finance 210 00:09:07,720 --> 00:09:09,959 Speaker 1: they're saying, what is the rational thing that I should 211 00:09:09,960 --> 00:09:11,640 Speaker 1: do with my money? What does the textbook tell me 212 00:09:11,679 --> 00:09:13,360 Speaker 1: I should do? And I think the answer to that 213 00:09:13,480 --> 00:09:15,520 Speaker 1: question is no, that's not how you should think about it. 214 00:09:15,520 --> 00:09:17,000 Speaker 1: You should do what you want to do with it. 215 00:09:17,080 --> 00:09:18,839 Speaker 1: Of course, there are things you should know and you 216 00:09:18,840 --> 00:09:21,120 Speaker 1: should be aware of. You know where you're likely to 217 00:09:21,120 --> 00:09:23,600 Speaker 1: go astray and what you're likely to to regret in 218 00:09:23,640 --> 00:09:26,840 Speaker 1: the future. But everyone does a little bit things differently 219 00:09:26,840 --> 00:09:29,520 Speaker 1: with their money. They spend their money differently, they say differently, 220 00:09:29,559 --> 00:09:32,560 Speaker 1: they invest differently because they have different goals. Yeah, and 221 00:09:32,600 --> 00:09:34,880 Speaker 1: in our own history can have a major impact on 222 00:09:34,920 --> 00:09:37,120 Speaker 1: how we view risk as well. Right, And that's a 223 00:09:37,160 --> 00:09:39,520 Speaker 1: topic that you cover a lot in the book. You 224 00:09:39,760 --> 00:09:42,400 Speaker 1: discuss the in chapter two you talk about Bill Gates 225 00:09:42,440 --> 00:09:45,000 Speaker 1: and his best friend Kent and how they're different outcomes 226 00:09:45,120 --> 00:09:47,800 Speaker 1: are striking. So can you discuss the role of risk 227 00:09:47,880 --> 00:09:50,240 Speaker 1: and luck in their lives and then maybe how we 228 00:09:50,400 --> 00:09:53,280 Speaker 1: view and handle our money. So it's interesting about about 229 00:09:53,280 --> 00:09:55,319 Speaker 1: Bill Gates, and this is uh this is somewhat well 230 00:09:55,360 --> 00:09:57,920 Speaker 1: known because Bill has has talked about this himself several times. 231 00:09:58,040 --> 00:10:00,560 Speaker 1: Bill gets onto one of the only schools in the world, 232 00:10:01,000 --> 00:10:02,440 Speaker 1: one of the only high schools in the world that 233 00:10:02,480 --> 00:10:05,720 Speaker 1: had a computer, and that was his introduction to computers. Uh. 234 00:10:05,800 --> 00:10:08,320 Speaker 1: It was the Lakeside School in Seattle. That was where 235 00:10:08,320 --> 00:10:10,320 Speaker 1: he found computers. That's where he met Paul Allen. They 236 00:10:10,320 --> 00:10:12,760 Speaker 1: went on to solve to to found Microsoft. Uh. And 237 00:10:12,800 --> 00:10:15,199 Speaker 1: Bill Gates has said, in no uncertain terms, he said, look, 238 00:10:15,200 --> 00:10:17,520 Speaker 1: if there was no Lakeside, there would be no Microsoft. 239 00:10:18,000 --> 00:10:20,520 Speaker 1: And now, look, is Bill Gates hard working? Is he 240 00:10:20,559 --> 00:10:22,800 Speaker 1: a genius? Is he for looking? Was he willing to 241 00:10:22,840 --> 00:10:26,640 Speaker 1: take risk? Of course all of those? But was Bill 242 00:10:26,679 --> 00:10:30,440 Speaker 1: Gates ridiculously extraordinarily lucky, Yes, because he went to one 243 00:10:30,440 --> 00:10:31,840 Speaker 1: of the only high schools in the world that had 244 00:10:31,840 --> 00:10:34,360 Speaker 1: a computer. Now during that time. To show the other 245 00:10:34,440 --> 00:10:37,600 Speaker 1: side of that equation, when Bill was at Lakeside, his 246 00:10:37,600 --> 00:10:39,640 Speaker 1: best friend was a guy named Kent, And Kent, by 247 00:10:39,640 --> 00:10:43,480 Speaker 1: Bill's reckoning, was smarter than Bill, more technologically minded, more 248 00:10:43,520 --> 00:10:46,319 Speaker 1: business minded. He was like Bill, but just a little 249 00:10:46,320 --> 00:10:48,440 Speaker 1: bit better. This is this is all according to Bill 250 00:10:48,760 --> 00:10:51,959 Speaker 1: and Kent. And Bill always assumed that throughout high school 251 00:10:51,960 --> 00:10:54,400 Speaker 1: they were inseparable friends, that they would go on to 252 00:10:54,480 --> 00:10:57,000 Speaker 1: college together and they would start a company together. So 253 00:10:57,120 --> 00:10:59,960 Speaker 1: Kent easily could have been the co founder of Mike 254 00:11:00,080 --> 00:11:02,120 Speaker 1: or soft and he may have been the CEO Ken 255 00:11:02,200 --> 00:11:03,959 Speaker 1: may have. It could have been that Bill Gates was 256 00:11:04,000 --> 00:11:07,120 Speaker 1: kind of second fiddle to Ken's uh to Ken's company. 257 00:11:07,120 --> 00:11:10,560 Speaker 1: But Ken died in a mountaineering accident in uh when 258 00:11:10,559 --> 00:11:13,079 Speaker 1: when when he was eighteen or or or or nineteen 259 00:11:13,120 --> 00:11:15,920 Speaker 1: years old. Uh. So here you have. Bill had the 260 00:11:16,320 --> 00:11:18,400 Speaker 1: good side of luck. He got very lucky by going 261 00:11:18,480 --> 00:11:21,920 Speaker 1: to lakeside and discovering computers. Ken had the really sad, tragic, 262 00:11:22,000 --> 00:11:24,400 Speaker 1: unfortunate side of risk that he was never able to 263 00:11:24,440 --> 00:11:27,040 Speaker 1: achieve his dreams because he had this freak accident uh 264 00:11:27,360 --> 00:11:29,320 Speaker 1: during his teenage years. Which is just to say that 265 00:11:29,360 --> 00:11:32,480 Speaker 1: I think luck and risk are kind of the opposite 266 00:11:32,520 --> 00:11:35,200 Speaker 1: sides of the exact same coin. They're both this idea 267 00:11:35,240 --> 00:11:36,760 Speaker 1: that there are things that happened in the world that 268 00:11:36,840 --> 00:11:39,560 Speaker 1: are outside of our control that have a bigger influence 269 00:11:39,600 --> 00:11:43,040 Speaker 1: on outcomes than anything that we intentionally do. That's what 270 00:11:43,200 --> 00:11:45,559 Speaker 1: luck and risk both are. And we think of them 271 00:11:45,559 --> 00:11:47,920 Speaker 1: as completely different things like luck and risk that we 272 00:11:47,920 --> 00:11:50,440 Speaker 1: we we really wrench mentioned those in the same sentence, 273 00:11:50,480 --> 00:11:52,360 Speaker 1: But I think they're the exact same force, just in 274 00:11:52,400 --> 00:11:55,480 Speaker 1: the opposite direction. Uh. And what's important about this is 275 00:11:55,520 --> 00:11:57,920 Speaker 1: that as investors for people are dealing with their money, 276 00:11:58,280 --> 00:12:00,480 Speaker 1: we are very clear, keenly aware of risk. We talk 277 00:12:00,520 --> 00:12:02,880 Speaker 1: about risk all the time. Risk is like the central 278 00:12:02,880 --> 00:12:06,360 Speaker 1: topic in investing. And and if you're a professional investor, 279 00:12:06,440 --> 00:12:09,560 Speaker 1: sometimes they hire risk managers, and if you're a portfolio manager, 280 00:12:09,600 --> 00:12:12,760 Speaker 1: you adjust your returns for risk risk adjusted returns. But 281 00:12:12,800 --> 00:12:15,320 Speaker 1: we never talked about luck in the same way. No 282 00:12:15,360 --> 00:12:19,240 Speaker 1: one ever reports, no investor reports luck adjusted returns. No 283 00:12:19,240 --> 00:12:21,360 Speaker 1: one is ever going to hire a luck manager. And 284 00:12:21,400 --> 00:12:23,920 Speaker 1: a lot of that is because look, if I claim 285 00:12:24,000 --> 00:12:26,480 Speaker 1: that you were just lucky, I look like a jerk. 286 00:12:27,160 --> 00:12:29,640 Speaker 1: If if if if if I were to say, hey, 287 00:12:29,679 --> 00:12:32,480 Speaker 1: you're really successful, but you just gotten lucky, I look cynical. 288 00:12:32,559 --> 00:12:34,439 Speaker 1: I look mean. So no one wants to do that. 289 00:12:34,559 --> 00:12:37,120 Speaker 1: Few people want to do that. Or if I did 290 00:12:37,160 --> 00:12:39,719 Speaker 1: something successful myself and I look in the mirror and say, 291 00:12:39,760 --> 00:12:41,840 Speaker 1: well I just got lucky, well that's hard for me 292 00:12:41,880 --> 00:12:43,600 Speaker 1: to swallow as well. I don't want to accept that. 293 00:12:43,920 --> 00:12:45,920 Speaker 1: So even though we know that luck is present in 294 00:12:45,960 --> 00:12:47,959 Speaker 1: the world and it's a big impact in the world, 295 00:12:47,960 --> 00:12:50,640 Speaker 1: has a huge impact on results, we tend to sweep 296 00:12:50,679 --> 00:12:52,839 Speaker 1: in under the rug because it's not very comfortable to 297 00:12:52,880 --> 00:12:56,000 Speaker 1: talk about, either for other people or ourselves. And so 298 00:12:56,080 --> 00:12:57,960 Speaker 1: I think we just have to be a little bit 299 00:12:57,960 --> 00:13:01,040 Speaker 1: more careful when we are look finding role models in 300 00:13:01,040 --> 00:13:04,400 Speaker 1: the world, particularly in finance, and saying, well, that person 301 00:13:05,080 --> 00:13:06,760 Speaker 1: got a lot of success, so I should try to 302 00:13:06,800 --> 00:13:08,880 Speaker 1: do what they did, And a lot of times that 303 00:13:09,000 --> 00:13:11,800 Speaker 1: is a recipe for disappointment because you cannot replicate what 304 00:13:11,920 --> 00:13:15,160 Speaker 1: someone else did if that person had any element of 305 00:13:15,240 --> 00:13:18,720 Speaker 1: luck in their paths and success. And the more successful 306 00:13:18,760 --> 00:13:22,480 Speaker 1: someone is, the higher the chances that luck played a 307 00:13:22,520 --> 00:13:25,760 Speaker 1: significant role in their outcome. And again it's after rate. 308 00:13:25,800 --> 00:13:28,240 Speaker 1: It's not to say that people who are successful are 309 00:13:28,280 --> 00:13:30,959 Speaker 1: not hard working, or are not you know, didn't make 310 00:13:30,960 --> 00:13:33,080 Speaker 1: a right decision, didn't take a risk, it's all of 311 00:13:33,120 --> 00:13:35,800 Speaker 1: those things. But there is but there is also an 312 00:13:35,840 --> 00:13:38,679 Speaker 1: element of luck that is easy to ignore. Yeah, it's 313 00:13:38,720 --> 00:13:40,280 Speaker 1: a combination of the two, and it's it's something that 314 00:13:40,320 --> 00:13:42,600 Speaker 1: we have to hold, you know. At the same time, 315 00:13:42,760 --> 00:13:45,240 Speaker 1: I think it definitely takes a kind of a humble 316 00:13:45,360 --> 00:13:48,200 Speaker 1: nature or kind of posture in order to, you know, 317 00:13:48,280 --> 00:13:51,080 Speaker 1: to accept that we are lucky in our lives. But 318 00:13:51,160 --> 00:13:53,280 Speaker 1: you know, like when it comes to investing, like, how 319 00:13:53,320 --> 00:13:55,640 Speaker 1: do we come back this this problem of like risk 320 00:13:55,640 --> 00:13:57,640 Speaker 1: perception in our lives. You know, there is a lot 321 00:13:57,640 --> 00:14:00,560 Speaker 1: of volatility recently in the market, but we've so recently 322 00:14:00,559 --> 00:14:03,120 Speaker 1: seen in an almost unending tenure bowl market, and so 323 00:14:03,320 --> 00:14:06,160 Speaker 1: how can we put those into perspective in order to 324 00:14:06,240 --> 00:14:09,600 Speaker 1: make better investing decisions. One of the things that I 325 00:14:09,600 --> 00:14:11,720 Speaker 1: think is really important when we're thinking about risk in 326 00:14:11,720 --> 00:14:15,000 Speaker 1: the economy and from the stock market is rather than 327 00:14:15,080 --> 00:14:17,319 Speaker 1: having a forecast of what you think it's going to happen, 328 00:14:17,559 --> 00:14:19,120 Speaker 1: is going to think that's happened next, It's much better 329 00:14:19,200 --> 00:14:21,720 Speaker 1: to just have expectations of what might happen next. Those 330 00:14:21,760 --> 00:14:23,880 Speaker 1: might seem like similar things, but let me explain the difference. 331 00:14:24,280 --> 00:14:28,400 Speaker 1: If I were to say, hypothetically, the next recession is 332 00:14:28,400 --> 00:14:31,920 Speaker 1: going to happen in two three, that's a forecast, very 333 00:14:31,920 --> 00:14:35,160 Speaker 1: specific forecast. But if I were to say, in general, 334 00:14:35,200 --> 00:14:38,080 Speaker 1: there tend to be about two or three recessions per decade, 335 00:14:38,160 --> 00:14:39,440 Speaker 1: and we don't know when they're going to come, but 336 00:14:39,480 --> 00:14:41,040 Speaker 1: in general we should expect there to be two or 337 00:14:41,080 --> 00:14:44,160 Speaker 1: three per decade, that's an expectation very different from the forecast. 338 00:14:44,160 --> 00:14:45,880 Speaker 1: Because I don't know when it's going to come. I 339 00:14:45,880 --> 00:14:47,560 Speaker 1: don't know where it's going to occur. I don't know 340 00:14:47,600 --> 00:14:49,240 Speaker 1: how big it's going to be. It's just part of 341 00:14:49,240 --> 00:14:51,960 Speaker 1: my baseline expectation of what to expect. It's kind of 342 00:14:52,000 --> 00:14:53,880 Speaker 1: how people like, if you live in California, this is 343 00:14:53,880 --> 00:14:57,040 Speaker 1: how they think about earthquakes. Everyone in California knows that 344 00:14:57,080 --> 00:14:59,280 Speaker 1: there will be more earthquakes in the future. They know 345 00:14:59,320 --> 00:15:00,720 Speaker 1: that some of them will be little, some of them 346 00:15:00,720 --> 00:15:03,560 Speaker 1: will be huge. But no one knows when it's gonna come. 347 00:15:03,600 --> 00:15:05,840 Speaker 1: No one tries to forecast. No one says, oh, there's 348 00:15:05,840 --> 00:15:08,960 Speaker 1: gonna be a there's gonna be a big earthquake. Uh, 349 00:15:09,000 --> 00:15:11,880 Speaker 1: you know, in on December fifteenth. You just can't do that. 350 00:15:12,200 --> 00:15:15,160 Speaker 1: So so rather than that, the people in California just 351 00:15:15,280 --> 00:15:18,080 Speaker 1: expect there to be earthquakes, and they build their homes 352 00:15:18,080 --> 00:15:21,040 Speaker 1: expecting them to occur at any point. Their emergency crews 353 00:15:21,080 --> 00:15:22,960 Speaker 1: trained for them to occur at any point. And I 354 00:15:22,960 --> 00:15:26,400 Speaker 1: think we should think about recessions and bear markets and 355 00:15:26,680 --> 00:15:28,600 Speaker 1: problems in our own financial lives in the same way, 356 00:15:28,680 --> 00:15:31,360 Speaker 1: rather than trying to predict it, just expecting as a 357 00:15:31,360 --> 00:15:33,880 Speaker 1: baseline scenario of what might come. Your way, and then 358 00:15:33,920 --> 00:15:36,800 Speaker 1: that moves you towards rather than, you know, trying to 359 00:15:36,840 --> 00:15:38,960 Speaker 1: predict the next recession so that you can sell your 360 00:15:38,960 --> 00:15:41,000 Speaker 1: investments ahead of time and get out of stock so 361 00:15:41,080 --> 00:15:43,680 Speaker 1: you avoid the decline, it pushes you more towards saying, 362 00:15:43,840 --> 00:15:46,200 Speaker 1: how can I just be durable and rather than trying 363 00:15:46,240 --> 00:15:47,600 Speaker 1: to avoid it, how can I just make sure that 364 00:15:47,600 --> 00:15:50,040 Speaker 1: I can endure whatever comes my way? And I think 365 00:15:50,040 --> 00:15:52,600 Speaker 1: that is just such a better way to deal with 366 00:15:52,680 --> 00:15:56,160 Speaker 1: uncertainty in the world, rather than fooling ourselves again and 367 00:15:56,200 --> 00:15:58,840 Speaker 1: again and again, like we do that we are able 368 00:15:58,880 --> 00:16:00,640 Speaker 1: to predict what's gonna happen next, and that we can 369 00:16:00,680 --> 00:16:02,600 Speaker 1: do something about it and get out before and get 370 00:16:02,640 --> 00:16:04,960 Speaker 1: back in read at the bottom, which is what we've 371 00:16:04,960 --> 00:16:07,280 Speaker 1: been fooling ourselves that we can do for ages. This 372 00:16:07,320 --> 00:16:10,000 Speaker 1: is not anything new. We've always been doing this, despite 373 00:16:10,120 --> 00:16:13,640 Speaker 1: any significant evidence that we're actually capable of doing that. 374 00:16:13,680 --> 00:16:15,880 Speaker 1: And I think that single point leads to a lot 375 00:16:15,920 --> 00:16:19,080 Speaker 1: of financial trouble for investors, and we're we're in a 376 00:16:19,120 --> 00:16:21,960 Speaker 1: whole lot of uncertainty right now. Morgan, Like, what impact 377 00:16:22,040 --> 00:16:23,560 Speaker 1: do you think that the pandemic is going to have 378 00:16:23,920 --> 00:16:26,800 Speaker 1: on a generation of young people when it comes to 379 00:16:26,840 --> 00:16:29,760 Speaker 1: their view of risk and then how they approach investing. 380 00:16:30,400 --> 00:16:32,440 Speaker 1: I think, uh, you know, if you were to ask 381 00:16:32,480 --> 00:16:34,240 Speaker 1: me this back in March or April, I would have 382 00:16:34,280 --> 00:16:36,800 Speaker 1: given you a slightly different answer, because back then would 383 00:16:36,840 --> 00:16:38,760 Speaker 1: what I would have said is something like this, COVID 384 00:16:38,840 --> 00:16:43,440 Speaker 1: nineteen is impacting everyone indiscriminately, which was true back in March. 385 00:16:43,680 --> 00:16:46,360 Speaker 1: Basically the entire economy was shut down except for you know, 386 00:16:46,440 --> 00:16:51,480 Speaker 1: grocery stores. Virtually everyone was was was in deep trouble, 387 00:16:51,520 --> 00:16:53,880 Speaker 1: and the stock market was crashing. So whether poor rich, 388 00:16:54,000 --> 00:16:57,600 Speaker 1: everyone was getting you know, just just just really scuffed 389 00:16:57,680 --> 00:17:00,600 Speaker 1: up in March. Now that we are six months ahead 390 00:17:00,600 --> 00:17:02,440 Speaker 1: of that, we know that's really not the case. And 391 00:17:02,480 --> 00:17:05,960 Speaker 1: to grossly generalize, but by and large, if you are 392 00:17:06,000 --> 00:17:08,080 Speaker 1: in the in an upper income group, say if you 393 00:17:08,119 --> 00:17:10,200 Speaker 1: earn more than a hundred and fifty dollars a year, 394 00:17:10,359 --> 00:17:13,159 Speaker 1: by and large the recession for you is over. I'm generalizing. 395 00:17:13,160 --> 00:17:14,639 Speaker 1: Of course, no one hold me you know there, and 396 00:17:14,680 --> 00:17:16,359 Speaker 1: of course there are exceptions to that, but by and large, 397 00:17:16,400 --> 00:17:18,439 Speaker 1: the recession is over. Stock markets back in an all 398 00:17:18,480 --> 00:17:21,000 Speaker 1: time high. Most people in those jobs are able to 399 00:17:21,000 --> 00:17:23,679 Speaker 1: work from home and keep their businesses going, and for 400 00:17:23,720 --> 00:17:26,080 Speaker 1: people who are earning a lower income, let's say less 401 00:17:26,080 --> 00:17:28,640 Speaker 1: than sixty dollars a year. This is truly the Great Depression, 402 00:17:28,680 --> 00:17:32,320 Speaker 1: if not worse than anything we've seen during or since 403 00:17:32,359 --> 00:17:34,800 Speaker 1: the Great Depression. So I think, just as we move 404 00:17:34,840 --> 00:17:37,679 Speaker 1: on in these months, the segregation in terms of how 405 00:17:37,720 --> 00:17:40,000 Speaker 1: people are doing in the economy has grown so much 406 00:17:40,119 --> 00:17:41,800 Speaker 1: relative to where we were back in March or April. 407 00:17:41,840 --> 00:17:44,080 Speaker 1: And that's really important because back in March or April, 408 00:17:44,160 --> 00:17:46,160 Speaker 1: I would have told you that since it is impacting 409 00:17:46,200 --> 00:17:50,320 Speaker 1: everyone indiscriminately, that the lessons that we learned from that 410 00:17:50,359 --> 00:17:53,239 Speaker 1: will be kind of economy wide and and you know, 411 00:17:53,440 --> 00:17:55,679 Speaker 1: and and and really span across all different groups in 412 00:17:55,680 --> 00:17:57,560 Speaker 1: the economy, Whereas now I think we're going to be 413 00:17:57,640 --> 00:18:01,920 Speaker 1: left with two separate, distinct groups coming out of COVID. 414 00:18:01,960 --> 00:18:04,400 Speaker 1: Whenever this ends, however, you wanted to find that one 415 00:18:04,440 --> 00:18:07,800 Speaker 1: that is emotionally scarred for life and financially scarred for life, 416 00:18:08,240 --> 00:18:10,360 Speaker 1: that you know, businesses will collapse that won't be able 417 00:18:10,359 --> 00:18:12,800 Speaker 1: to be rebuilt, people will go through, will have their 418 00:18:12,840 --> 00:18:15,880 Speaker 1: retirements destroy, their savings wiped out, etcetera, etcetera. And then 419 00:18:15,920 --> 00:18:19,440 Speaker 1: another group of people for whom uh COVID nineteen from 420 00:18:19,440 --> 00:18:22,800 Speaker 1: an economic perspective, was kind of a wild ride for 421 00:18:22,840 --> 00:18:24,679 Speaker 1: two months that they that they moved on, and they 422 00:18:24,720 --> 00:18:27,480 Speaker 1: really have no discernible impact on their behavior going forward. 423 00:18:27,880 --> 00:18:32,480 Speaker 1: If there is any kind of society wide change that 424 00:18:32,560 --> 00:18:35,480 Speaker 1: I think might come out of this is I think 425 00:18:35,480 --> 00:18:38,760 Speaker 1: there will probably be a higher demand for social safety 426 00:18:38,760 --> 00:18:40,879 Speaker 1: net then there was before, and that will be like 427 00:18:40,880 --> 00:18:43,520 Speaker 1: a bipartisan not in any sort of political way, but 428 00:18:43,920 --> 00:18:45,600 Speaker 1: I mean we saw this with the Cares Act back 429 00:18:45,600 --> 00:18:49,000 Speaker 1: in March, the big stiminars package that past the Senate. Zero. 430 00:18:49,960 --> 00:18:51,680 Speaker 1: I mean, you could hold a vote in the Senate 431 00:18:51,720 --> 00:18:54,400 Speaker 1: that says, you know, just just two plus two equal four. 432 00:18:54,440 --> 00:18:56,600 Speaker 1: There's going to be at least ten detractors from that. 433 00:18:56,640 --> 00:18:59,639 Speaker 1: The fact that it was it was, that everyone voted 434 00:18:59,680 --> 00:19:01,520 Speaker 1: for it, you know, just kind of shows that there 435 00:19:01,560 --> 00:19:04,760 Speaker 1: is there is huge demand when when things are breaking 436 00:19:04,760 --> 00:19:07,639 Speaker 1: and things are hitting the fan, then having the federal 437 00:19:07,680 --> 00:19:10,960 Speaker 1: government step in the backstop the system is a very 438 00:19:11,000 --> 00:19:14,240 Speaker 1: bipartisan thing to do. And so things like enhanced unemployment 439 00:19:14,240 --> 00:19:16,160 Speaker 1: benefits that are now expired, I have a feeling those 440 00:19:16,200 --> 00:19:18,080 Speaker 1: will come back and will probably be some sort of 441 00:19:18,119 --> 00:19:20,640 Speaker 1: permanent thing, not six dollars a week. But I think 442 00:19:20,640 --> 00:19:23,159 Speaker 1: there's gonna be greater demand once people realize that the 443 00:19:23,200 --> 00:19:26,439 Speaker 1: federal government is capable of really backstopping a lot of 444 00:19:26,440 --> 00:19:29,040 Speaker 1: the pain of recessions, and anything less than that just 445 00:19:29,040 --> 00:19:32,040 Speaker 1: seems cruel going forward. So once we kind of experiment 446 00:19:32,080 --> 00:19:34,240 Speaker 1: with that, once, it's very hard to take that back, 447 00:19:34,280 --> 00:19:35,560 Speaker 1: and I have have a feeling that will become sort of 448 00:19:35,560 --> 00:19:37,600 Speaker 1: a permanent thing that we have. That's great. That's we 449 00:19:37,600 --> 00:19:40,040 Speaker 1: appreciate your thoughts there, Morgan. We're gonna take a quick break, 450 00:19:40,080 --> 00:19:41,960 Speaker 1: and after that we're going to continue to talk about 451 00:19:42,000 --> 00:19:44,320 Speaker 1: the psychology of money with you, and we'll get to 452 00:19:44,359 --> 00:19:55,199 Speaker 1: that right after this. We're back from the break. We're 453 00:19:55,200 --> 00:19:57,320 Speaker 1: talking with Morgan Housel. We're talking about the psychology of 454 00:19:57,359 --> 00:19:59,399 Speaker 1: money and Morgan, you you write in your book you 455 00:19:59,440 --> 00:20:02,120 Speaker 1: say that it's impossible not to be emotional about our money. 456 00:20:02,119 --> 00:20:04,159 Speaker 1: We've covered some of that already, but you mentioned that 457 00:20:04,200 --> 00:20:06,600 Speaker 1: we should embrace those flaws. What do you mean by 458 00:20:06,640 --> 00:20:08,720 Speaker 1: embracing the flaws that we have when it comes to 459 00:20:08,760 --> 00:20:10,680 Speaker 1: our emotions. I think a lot of it. When we're 460 00:20:10,680 --> 00:20:13,359 Speaker 1: talking about behavioral finance, what a lot of people ask is, 461 00:20:13,640 --> 00:20:15,879 Speaker 1: how can I overcome my biases. Like it's one thing 462 00:20:15,920 --> 00:20:17,879 Speaker 1: to point out the biases, but then people ask, Okay, 463 00:20:17,880 --> 00:20:19,960 Speaker 1: what can I do about this? Uh. It took me 464 00:20:20,000 --> 00:20:22,440 Speaker 1: a while to realize this. It took me years to 465 00:20:22,480 --> 00:20:24,960 Speaker 1: realize this, but I've come to the conclusion that no 466 00:20:25,040 --> 00:20:28,800 Speaker 1: one can overcome most of their financial biases because it's 467 00:20:28,800 --> 00:20:30,280 Speaker 1: not something that you can just read about in a 468 00:20:30,359 --> 00:20:32,840 Speaker 1: book or have a conversation with someone and then assume 469 00:20:32,880 --> 00:20:35,480 Speaker 1: that you fixed it. Because we're dealing with dopamine and 470 00:20:35,600 --> 00:20:38,960 Speaker 1: cortisol and these these hormones that are controlling our behaviors. 471 00:20:39,000 --> 00:20:40,720 Speaker 1: That there's no way that we can just read a 472 00:20:40,760 --> 00:20:43,800 Speaker 1: book and overcome the influence of dopamine. That's not how 473 00:20:43,840 --> 00:20:46,399 Speaker 1: people's bodies work. So people are I think people are 474 00:20:46,480 --> 00:20:49,080 Speaker 1: just hardwired to think about greed and risk in different 475 00:20:49,160 --> 00:20:51,720 Speaker 1: terms that they are by and large unable to overcome. 476 00:20:51,800 --> 00:20:54,040 Speaker 1: And if you accept that, then it makes sense of 477 00:20:54,280 --> 00:20:56,720 Speaker 1: Rather than saying, how can I fix my biases, what 478 00:20:56,760 --> 00:20:58,800 Speaker 1: you should do is become introspective, try to figure out 479 00:20:58,840 --> 00:21:01,280 Speaker 1: what your faults are that we all have, and then 480 00:21:01,520 --> 00:21:03,760 Speaker 1: just accept them and say, Okay, I'm gonna I'm gonna 481 00:21:03,760 --> 00:21:05,920 Speaker 1: invest my money and save my money and have a 482 00:21:06,200 --> 00:21:09,159 Speaker 1: financial strategy that just embraces the flaws that I have. So, 483 00:21:09,200 --> 00:21:11,000 Speaker 1: for example, if you are someone who looks back at 484 00:21:11,040 --> 00:21:14,199 Speaker 1: yourself and you realize that you panicked in March, and 485 00:21:14,200 --> 00:21:16,320 Speaker 1: you panicked in two thousand eight, and you panicked in 486 00:21:16,359 --> 00:21:19,280 Speaker 1: two thousand one, whenever the world feels like it's falling apart, 487 00:21:19,560 --> 00:21:21,840 Speaker 1: you hate it. It feels like it's broken, You can't 488 00:21:21,880 --> 00:21:23,800 Speaker 1: stand losing money, and you sell a new one out. 489 00:21:23,840 --> 00:21:25,920 Speaker 1: And that's quite a few people who fall into that bucket. 490 00:21:26,160 --> 00:21:28,680 Speaker 1: I think rather than assuming you can will ever learn 491 00:21:28,720 --> 00:21:30,840 Speaker 1: your lessons, so to speak, and to assume that you 492 00:21:30,880 --> 00:21:32,879 Speaker 1: won't do that next time, I think you should just 493 00:21:32,880 --> 00:21:34,560 Speaker 1: embrace that that's who you are. Then maybe you have 494 00:21:34,600 --> 00:21:37,080 Speaker 1: a lower risk tolerance than you thought you did, and 495 00:21:37,080 --> 00:21:39,320 Speaker 1: therefore you should have less of your money in stocks 496 00:21:39,359 --> 00:21:41,200 Speaker 1: than you may have at one point in your life 497 00:21:41,200 --> 00:21:43,720 Speaker 1: assumed that that you could have. Uh. I think doing 498 00:21:43,760 --> 00:21:46,880 Speaker 1: that is a much more sensible approach than having panicked 499 00:21:46,880 --> 00:21:48,760 Speaker 1: two or three times in the past and then assuming 500 00:21:48,760 --> 00:21:51,520 Speaker 1: you've learned your lesson. And what's hard about that is 501 00:21:51,560 --> 00:21:53,960 Speaker 1: that when the stock market rebounds like we are like 502 00:21:54,000 --> 00:21:56,520 Speaker 1: we're at today, back near or at all time eyes. 503 00:21:56,880 --> 00:21:59,400 Speaker 1: It gets easy to assume you've learned your lesson because 504 00:21:59,440 --> 00:22:01,840 Speaker 1: you made your money back. Hey look and look at 505 00:22:01,840 --> 00:22:04,080 Speaker 1: the stock market fell. I got scared, but hey, they 506 00:22:04,119 --> 00:22:05,760 Speaker 1: came right back. I've learned my lesson. I won't do 507 00:22:05,800 --> 00:22:10,840 Speaker 1: that again. It's very difficult to actually try to anticipate 508 00:22:10,880 --> 00:22:12,840 Speaker 1: how you're going to feel during the heat of the 509 00:22:12,920 --> 00:22:15,320 Speaker 1: moment when the world is falling apart like it was 510 00:22:15,359 --> 00:22:18,120 Speaker 1: back in March. I think most of us, including myself, 511 00:22:18,200 --> 00:22:20,439 Speaker 1: if you have asked us in January, how would you 512 00:22:20,440 --> 00:22:23,200 Speaker 1: feel if the stock market fell thirty in three weeks? 513 00:22:23,560 --> 00:22:25,720 Speaker 1: I think most of us would have said, Wow, that's big, 514 00:22:25,720 --> 00:22:27,720 Speaker 1: but that sounds like an opportunity I can buy more. 515 00:22:27,840 --> 00:22:29,399 Speaker 1: That sounds like stock to your cheek, let's get in. 516 00:22:30,119 --> 00:22:32,240 Speaker 1: But it's very difficult to actually be able to tell 517 00:22:32,320 --> 00:22:34,760 Speaker 1: yourself with foresight and say, how would you feel if 518 00:22:34,760 --> 00:22:37,679 Speaker 1: the stock market was falling in three weeks? Because we 519 00:22:37,760 --> 00:22:39,760 Speaker 1: had the greatest pandemic in a hundred years, and it 520 00:22:39,800 --> 00:22:41,840 Speaker 1: looks like we're going back into the great depression that 521 00:22:41,880 --> 00:22:43,880 Speaker 1: was going to ruin the entire world and might kill 522 00:22:43,960 --> 00:22:46,479 Speaker 1: all of us, including our families. That is something that 523 00:22:46,560 --> 00:22:48,960 Speaker 1: is much more difficult to anticipate how you're going to 524 00:22:49,080 --> 00:22:51,440 Speaker 1: feel in the moment, and that is why people are 525 00:22:51,440 --> 00:22:55,200 Speaker 1: just generally bad at anticipating what they're gonna do during 526 00:22:55,320 --> 00:22:58,120 Speaker 1: risky moments. And then so rather than trying to look 527 00:22:58,160 --> 00:22:59,920 Speaker 1: forward and assess how you might feel, we should just 528 00:23:00,080 --> 00:23:01,840 Speaker 1: look back and say what did I do in the past, 529 00:23:01,840 --> 00:23:04,199 Speaker 1: because that's the best guide of what I'm likely to 530 00:23:04,240 --> 00:23:06,800 Speaker 1: do in the future. I like it. Yeah, creating systems 531 00:23:06,840 --> 00:23:13,080 Speaker 1: that fit with Yeah, what your tendencies are behavior profile? Yeah, exactly. Morgan. 532 00:23:13,320 --> 00:23:15,800 Speaker 1: You you recently wrote a post where you advise folks 533 00:23:15,880 --> 00:23:18,639 Speaker 1: to to save like a pessimist, but to invest like 534 00:23:18,680 --> 00:23:21,359 Speaker 1: an optimist. You're saying a lot with that simple phrase. 535 00:23:21,400 --> 00:23:22,920 Speaker 1: But what is it that you actually mean by that. 536 00:23:23,359 --> 00:23:25,720 Speaker 1: I think it's this idea that there is that getting 537 00:23:25,800 --> 00:23:28,560 Speaker 1: rich and staying rich are two completely different things. They 538 00:23:28,600 --> 00:23:31,000 Speaker 1: are different skills that require they're they're different topics that 539 00:23:31,040 --> 00:23:34,119 Speaker 1: require different skills. We need to nurture them separately. And 540 00:23:34,200 --> 00:23:37,080 Speaker 1: getting rich requires, you know, taking a risk and being 541 00:23:37,080 --> 00:23:40,200 Speaker 1: optimistic about the future, investing for the long run, understanding 542 00:23:40,240 --> 00:23:42,119 Speaker 1: that people are going to solve problems, and that p 543 00:23:42,280 --> 00:23:45,119 Speaker 1: and and that and that businesses will will create profits 544 00:23:45,119 --> 00:23:48,160 Speaker 1: that will a crue to shareholder that will accrue to shareholders. 545 00:23:48,160 --> 00:23:51,919 Speaker 1: It's this long term optimism. But staying rich requires kind 546 00:23:51,960 --> 00:23:54,080 Speaker 1: of pessimism about the short run. You need to be 547 00:23:54,119 --> 00:23:55,720 Speaker 1: able to put up with all the ups and downs 548 00:23:55,720 --> 00:23:58,199 Speaker 1: that are that are guaranteed to come our way. And 549 00:23:58,240 --> 00:24:00,960 Speaker 1: if you look at history, I mean history is a NonStop, 550 00:24:01,080 --> 00:24:05,639 Speaker 1: continuous chain of setbacks and disappointments and recessions and bary 551 00:24:05,680 --> 00:24:09,040 Speaker 1: markets and pandemics and terrorist attacks. There's always something going 552 00:24:09,080 --> 00:24:12,440 Speaker 1: on that is getting in people's way. And in order 553 00:24:12,480 --> 00:24:14,000 Speaker 1: to do well over the long term, you have to 554 00:24:14,000 --> 00:24:15,760 Speaker 1: be a long term optimist. You have to invest like 555 00:24:15,800 --> 00:24:18,000 Speaker 1: an optimist, but you have to save like a pessimist. 556 00:24:18,320 --> 00:24:20,560 Speaker 1: Those scenes seem like they're contradictory, but they're not. But 557 00:24:20,600 --> 00:24:24,679 Speaker 1: they're not. They work together. Uh you you know, compounding 558 00:24:24,680 --> 00:24:26,359 Speaker 1: works in the long run, So that's where you need 559 00:24:26,359 --> 00:24:29,399 Speaker 1: to invest. Being able to enjoy the long run and 560 00:24:29,400 --> 00:24:30,680 Speaker 1: get to the long run. You need to be able 561 00:24:30,720 --> 00:24:32,719 Speaker 1: to survive the short run. You need to have enough 562 00:24:32,720 --> 00:24:35,680 Speaker 1: pessimism in your thinking that you have enough savings and 563 00:24:36,200 --> 00:24:38,400 Speaker 1: you are avoiding debt to a certain degree that makes 564 00:24:38,400 --> 00:24:41,480 Speaker 1: it so that when we deal with these inevitable setbacks, 565 00:24:41,880 --> 00:24:44,240 Speaker 1: you are not forced out of the game. You can 566 00:24:44,280 --> 00:24:46,560 Speaker 1: remain standing so that you and so that when you're 567 00:24:47,000 --> 00:24:48,600 Speaker 1: remain in the game, that is when you are going 568 00:24:48,640 --> 00:24:51,040 Speaker 1: to be able to let compounding work in your favor 569 00:24:51,119 --> 00:24:53,720 Speaker 1: over the long run. Or practically speaking, you're talking about 570 00:24:53,720 --> 00:24:56,880 Speaker 1: an emergency fund, right, like just that short term stability. 571 00:24:57,080 --> 00:24:59,520 Speaker 1: It's it's that. I think it's a combination of having 572 00:24:59,800 --> 00:25:01,800 Speaker 1: a good emergency fund, which I think, by the way, 573 00:25:01,800 --> 00:25:04,359 Speaker 1: most people tend to tend to underestimate how much they're 574 00:25:04,359 --> 00:25:06,960 Speaker 1: going to need. I mean, for years, financial advisors would 575 00:25:06,960 --> 00:25:09,639 Speaker 1: say three to six months, that's what you need, and 576 00:25:09,680 --> 00:25:11,480 Speaker 1: then something like COVID happens, and how many people have 577 00:25:11,520 --> 00:25:13,159 Speaker 1: been out of work now for six months and have 578 00:25:13,280 --> 00:25:15,360 Speaker 1: no prospect of going back to work for many more 579 00:25:15,359 --> 00:25:17,560 Speaker 1: months until there's a vaccine. There's the same thing in 580 00:25:17,560 --> 00:25:20,240 Speaker 1: two thousand and eight, where you know, financial advisors say, 581 00:25:20,320 --> 00:25:22,679 Speaker 1: you know, three month emergency fund, but the average duration 582 00:25:22,720 --> 00:25:25,640 Speaker 1: of unemployment was like sixteen months at the period. So 583 00:25:25,680 --> 00:25:28,680 Speaker 1: there's I do think people tend to underestimate how much 584 00:25:28,800 --> 00:25:31,000 Speaker 1: cushion they might need in their life. That's to say 585 00:25:31,000 --> 00:25:34,160 Speaker 1: nothing about medical emergencies or your car breaking down, etcetera, etcetera. 586 00:25:34,720 --> 00:25:38,119 Speaker 1: I think there's also just some level of mindset in 587 00:25:38,160 --> 00:25:40,400 Speaker 1: there where, and I mean here, here, here's how a phrase. 588 00:25:40,480 --> 00:25:42,879 Speaker 1: I think the most important financial skill for investors is 589 00:25:42,960 --> 00:25:46,200 Speaker 1: understanding the long history of volatility and realizing that over 590 00:25:46,240 --> 00:25:48,000 Speaker 1: the last you know, a hundred years in the United States, 591 00:25:48,000 --> 00:25:51,320 Speaker 1: the stock market has done extremely well. But during that period, 592 00:25:51,920 --> 00:25:54,359 Speaker 1: the stock market has declined on average ten percent on 593 00:25:54,440 --> 00:25:58,960 Speaker 1: average once per year. It's declined uh or more on average, 594 00:25:58,960 --> 00:26:03,080 Speaker 1: and on every two or three years it's declined more 595 00:26:03,160 --> 00:26:05,360 Speaker 1: on average at least once per decade. And that's during 596 00:26:05,359 --> 00:26:07,560 Speaker 1: a period where it did very well. So if you 597 00:26:07,600 --> 00:26:10,399 Speaker 1: just have a better sense that something can grow and 598 00:26:10,480 --> 00:26:13,320 Speaker 1: improve and do extraordinarily well over time, even though what's 599 00:26:13,320 --> 00:26:15,280 Speaker 1: going on in the short run is this constant chain 600 00:26:15,320 --> 00:26:19,080 Speaker 1: of setback and decline and breakage and destruction, then it 601 00:26:19,200 --> 00:26:21,520 Speaker 1: just gets a little bit easier to deal with these 602 00:26:21,840 --> 00:26:23,520 Speaker 1: And when they come, it's not it's not that it's fun, 603 00:26:23,600 --> 00:26:25,720 Speaker 1: it's not that you enjoy watching the setbacks, but it 604 00:26:25,720 --> 00:26:28,200 Speaker 1: becomes a little bit more palatable, and rather than saying 605 00:26:28,480 --> 00:26:31,359 Speaker 1: this feels wrong, something feels broken, you say, look, this 606 00:26:31,400 --> 00:26:33,159 Speaker 1: isn't fun, but this is what I expect. I know, 607 00:26:33,280 --> 00:26:35,160 Speaker 1: this is what the market tends to do over time. 608 00:26:35,400 --> 00:26:37,240 Speaker 1: And this is the cost of admissions that you need 609 00:26:37,280 --> 00:26:40,400 Speaker 1: to pay in order to achieve the long term returns. 610 00:26:40,560 --> 00:26:43,080 Speaker 1: That's the cost of returns, and investing is putting up 611 00:26:43,119 --> 00:26:46,000 Speaker 1: with uncertainty and volatility and having enough patients to let 612 00:26:46,000 --> 00:26:48,199 Speaker 1: it work itself out over time. It's all part of 613 00:26:48,200 --> 00:26:51,919 Speaker 1: the process. And Morgan, when we're talking about a behavioral approach, 614 00:26:51,960 --> 00:26:55,640 Speaker 1: part of that behavioral approach is the concept of having enough. 615 00:26:55,920 --> 00:26:57,560 Speaker 1: You wrote about that in chapter three of your book, 616 00:26:57,560 --> 00:27:00,000 Speaker 1: and how it's important to avoid some of the mistakes 617 00:27:00,040 --> 00:27:01,840 Speaker 1: that we can easily fall into if we have a 618 00:27:01,880 --> 00:27:04,560 Speaker 1: good concept of what it means to have enough. Near 619 00:27:04,600 --> 00:27:06,000 Speaker 1: the end of the book, you talk about how you 620 00:27:06,040 --> 00:27:08,880 Speaker 1: and your wife live similarly to how you live right 621 00:27:08,880 --> 00:27:10,960 Speaker 1: out of college, because you were able to stop the 622 00:27:11,040 --> 00:27:12,720 Speaker 1: goal post from moving the goals that you have in 623 00:27:12,720 --> 00:27:15,600 Speaker 1: your lives, and that seems like it's the hardest part 624 00:27:15,800 --> 00:27:19,120 Speaker 1: of money for most people. That goal posts keep shifting 625 00:27:19,119 --> 00:27:21,800 Speaker 1: as we continue to grow in age. So how do 626 00:27:21,880 --> 00:27:24,320 Speaker 1: you think we can become better better at that as 627 00:27:24,359 --> 00:27:26,840 Speaker 1: we as we grow up and get older. It's it's 628 00:27:26,960 --> 00:27:29,320 Speaker 1: it's the hardest. But I think most important financial skill 629 00:27:29,359 --> 00:27:31,440 Speaker 1: is getting the goal post stop moving, because if you don't, 630 00:27:31,560 --> 00:27:34,240 Speaker 1: if your expectations rise and lockstep with your income or 631 00:27:34,280 --> 00:27:36,639 Speaker 1: your wealth, if you're you're on a treadmill for your 632 00:27:36,720 --> 00:27:39,240 Speaker 1: entire life, of course, and it's you're always going to think, 633 00:27:39,560 --> 00:27:42,760 Speaker 1: if I only have X dollars more, then I will 634 00:27:42,920 --> 00:27:45,159 Speaker 1: then I will have enough, and you're always you're always 635 00:27:45,160 --> 00:27:46,880 Speaker 1: going to move the goal post. It's never gonna end. 636 00:27:47,080 --> 00:27:49,240 Speaker 1: So I think we talk a lot about how to 637 00:27:49,280 --> 00:27:51,160 Speaker 1: earn more money and how to do better at investing, 638 00:27:51,160 --> 00:27:53,880 Speaker 1: and that's obviously a very important topic, but we also 639 00:27:53,960 --> 00:27:56,080 Speaker 1: have to talk about how do we manage our expectations, 640 00:27:56,080 --> 00:27:58,560 Speaker 1: because if we don't do that, then we should not 641 00:27:58,600 --> 00:28:00,760 Speaker 1: be surprised when even if we are lucky enough to 642 00:28:00,800 --> 00:28:03,560 Speaker 1: have a growing income and rising wealth, we still don't 643 00:28:03,600 --> 00:28:06,679 Speaker 1: feel necessarily feel any better off for it. So how 644 00:28:06,680 --> 00:28:08,160 Speaker 1: do you do that well? I mean, first, the first 645 00:28:08,160 --> 00:28:10,680 Speaker 1: thing to knowledge is how ridiculously hard this is, because 646 00:28:10,680 --> 00:28:13,240 Speaker 1: it's the most natural thing in the world to assume 647 00:28:13,680 --> 00:28:15,360 Speaker 1: that if we have a little bit more will be better. 648 00:28:15,400 --> 00:28:17,560 Speaker 1: And by the way, that is why the economy grows. 649 00:28:17,960 --> 00:28:20,680 Speaker 1: If everyone in the economy had an idea of look, 650 00:28:20,760 --> 00:28:23,200 Speaker 1: once they earned, you know, one million dollars, then they're 651 00:28:23,200 --> 00:28:25,000 Speaker 1: going to retire and and go live in the woods. 652 00:28:25,040 --> 00:28:27,359 Speaker 1: If everyone had the mentality, there'd be no innovation, there 653 00:28:27,400 --> 00:28:29,160 Speaker 1: would be no break that, we'd have no economic growth. 654 00:28:29,320 --> 00:28:31,520 Speaker 1: So the fact that no one is ever satisfied by 655 00:28:31,560 --> 00:28:33,720 Speaker 1: and large an aggregate is actually a great thing for 656 00:28:33,720 --> 00:28:36,640 Speaker 1: the economy at large, but at the individual level. To me, 657 00:28:36,680 --> 00:28:39,400 Speaker 1: it's here. Here's one realization that I that I wrote 658 00:28:39,400 --> 00:28:41,040 Speaker 1: about in the book. When I was in college, I 659 00:28:41,080 --> 00:28:43,520 Speaker 1: was a valet at a really fancy hotel in Los Angeles. 660 00:28:44,040 --> 00:28:45,680 Speaker 1: It was a great job work there for four years, 661 00:28:45,800 --> 00:28:47,760 Speaker 1: got to interact with a lot of very interesting people. 662 00:28:48,440 --> 00:28:50,200 Speaker 1: And so something that dawned at me, and I was 663 00:28:50,480 --> 00:28:52,320 Speaker 1: I was nineteen twenty years old at the time. But 664 00:28:52,360 --> 00:28:53,760 Speaker 1: something that would dawn on me that I thought was 665 00:28:53,800 --> 00:28:56,040 Speaker 1: really interesting is that if someone drove into the hotel 666 00:28:56,120 --> 00:28:59,120 Speaker 1: driving a Ferrari or Lamborghie or Rose Royce or something. 667 00:28:59,480 --> 00:29:02,160 Speaker 1: I would never look at the driver and say, Wow, 668 00:29:02,200 --> 00:29:04,960 Speaker 1: that guy is cool. What I would say instead to 669 00:29:05,000 --> 00:29:08,000 Speaker 1: myself is if I were in the driver's seat, people 670 00:29:08,000 --> 00:29:10,600 Speaker 1: would think I'm cool. And it was this irony that 671 00:29:10,680 --> 00:29:12,640 Speaker 1: I had of like, I don't care about the driver. 672 00:29:12,960 --> 00:29:14,840 Speaker 1: I just want to picture myself as a driver and 673 00:29:14,840 --> 00:29:17,280 Speaker 1: then assume that people will care about me. And it 674 00:29:17,400 --> 00:29:19,480 Speaker 1: was this weird thing that everyone driving in in the 675 00:29:19,520 --> 00:29:22,640 Speaker 1: cars probably thought, Hey, these people think I'm cool, because 676 00:29:22,640 --> 00:29:25,120 Speaker 1: when driving to Lamborghini, everyone's looking at me. And my 677 00:29:25,160 --> 00:29:27,640 Speaker 1: realization was like, no, no one's paying any attention to you. 678 00:29:27,680 --> 00:29:30,680 Speaker 1: They're just imagining themselves in the car, assuming that people 679 00:29:30,680 --> 00:29:33,280 Speaker 1: would be paying attention to them. And then so to me, 680 00:29:33,320 --> 00:29:36,840 Speaker 1: it's maybe it's this realization that no one is thinking 681 00:29:36,840 --> 00:29:39,520 Speaker 1: about your stuff. No one is thinking about your social status, 682 00:29:39,520 --> 00:29:41,520 Speaker 1: no one cares what you have more than you do, 683 00:29:42,080 --> 00:29:44,160 Speaker 1: no one is thinking about you more than you. It's 684 00:29:44,160 --> 00:29:46,480 Speaker 1: true for everybody. And I think once you come to 685 00:29:46,560 --> 00:29:48,560 Speaker 1: terms with that, and then it should not be surprising 686 00:29:48,600 --> 00:29:50,400 Speaker 1: that the material stuff that we wanted left, which, by 687 00:29:50,440 --> 00:29:52,320 Speaker 1: the way, I like nice cars. I like nice homes 688 00:29:52,360 --> 00:29:54,560 Speaker 1: as much as anyone else. This is not, you know, 689 00:29:54,880 --> 00:29:57,440 Speaker 1: this is not you know, let's let's all go go 690 00:29:57,440 --> 00:30:00,720 Speaker 1: go pray. You know, let's this is not to go 691 00:30:00,840 --> 00:30:03,560 Speaker 1: live in the woods because monks. It's nothing like that. 692 00:30:03,880 --> 00:30:07,200 Speaker 1: But it's this realization that the benefit that you get 693 00:30:07,240 --> 00:30:09,600 Speaker 1: from nice stuff, from a social perspective, in terms of 694 00:30:09,680 --> 00:30:11,680 Speaker 1: wanting people to admire you, wanting to be people to 695 00:30:11,720 --> 00:30:14,520 Speaker 1: think that you're special, etcetera, is probably going to be 696 00:30:14,600 --> 00:30:17,479 Speaker 1: much less than you assume, and therefore it just pushes 697 00:30:17,480 --> 00:30:19,360 Speaker 1: you towards wanting other things in life. If you want 698 00:30:19,400 --> 00:30:22,880 Speaker 1: respect and admiration and people to think that you're you're 699 00:30:22,960 --> 00:30:25,600 Speaker 1: great and you're special and you're important, you're much more 700 00:30:25,680 --> 00:30:28,280 Speaker 1: likely to get that from being a nice person, being 701 00:30:28,320 --> 00:30:30,560 Speaker 1: a humble person, being a helpful person, than you are 702 00:30:30,680 --> 00:30:33,800 Speaker 1: from driving a Lamborghini. Uh. And that's I think very hard, 703 00:30:33,840 --> 00:30:36,360 Speaker 1: I think, particularly to signal to signal out a group. 704 00:30:36,520 --> 00:30:39,360 Speaker 1: It's particularly hard for young men to understand that. I 705 00:30:39,400 --> 00:30:41,840 Speaker 1: think they are just much more predisposed to thinking if 706 00:30:41,840 --> 00:30:43,960 Speaker 1: I do get to drive the Ferrari, everyone will think 707 00:30:43,960 --> 00:30:46,240 Speaker 1: I'm great, Everyone'll think I'm cool, people think I'm special 708 00:30:46,240 --> 00:30:48,680 Speaker 1: and important. Uh. And then those are also the group 709 00:30:48,720 --> 00:30:51,200 Speaker 1: that is I think most likely to overlook the driver 710 00:30:51,600 --> 00:30:54,560 Speaker 1: and just automatically assume rather than thinking the drivers cool, 711 00:30:54,600 --> 00:30:57,160 Speaker 1: they just think of themselves as the driver, and missing 712 00:30:57,200 --> 00:30:59,880 Speaker 1: that fundamental irony of what money can actually get you 713 00:31:00,000 --> 00:31:02,840 Speaker 1: has a benefit. The social pressure is like essentially they're 714 00:31:02,880 --> 00:31:05,520 Speaker 1: the problem, right. That can apply to investing as well, 715 00:31:05,560 --> 00:31:07,600 Speaker 1: you know, like on the note of like social comparison 716 00:31:08,160 --> 00:31:10,280 Speaker 1: and looking to what others are doing, like how how 717 00:31:10,280 --> 00:31:14,120 Speaker 1: could that approach negatively impact our ability to invest? Well? 718 00:31:14,160 --> 00:31:16,160 Speaker 1: You know, in your book you talk about identifying what 719 00:31:16,760 --> 00:31:20,040 Speaker 1: game it is that we're playing. Why is that so important? 720 00:31:20,520 --> 00:31:22,640 Speaker 1: I think it's important because there's this thing that's easy 721 00:31:22,640 --> 00:31:24,800 Speaker 1: to overlook because it's not very intuitive, which is this 722 00:31:25,200 --> 00:31:28,160 Speaker 1: there's only one stock market and and there's only you know, 723 00:31:28,280 --> 00:31:30,440 Speaker 1: one Apple stock that I can buy. You can buy, 724 00:31:30,480 --> 00:31:32,600 Speaker 1: hedge fund managers can buy. But we're all playing a 725 00:31:32,720 --> 00:31:36,040 Speaker 1: very different game. If you are a day trader, you're 726 00:31:36,080 --> 00:31:38,600 Speaker 1: buying Apple stock, and if you are a fund manager 727 00:31:38,680 --> 00:31:40,280 Speaker 1: investing for the next three months, you can buy the 728 00:31:40,280 --> 00:31:42,840 Speaker 1: same Apple stock. If you are a retiree or someone 729 00:31:42,840 --> 00:31:44,720 Speaker 1: who's looking to retire and you're investing for the next 730 00:31:44,720 --> 00:31:47,280 Speaker 1: twenty years, you buy the same stock. You're an endowment 731 00:31:47,320 --> 00:31:50,360 Speaker 1: fund investing for the next century by the same stock. 732 00:31:50,560 --> 00:31:53,440 Speaker 1: So we're all on the same field. We're all playing 733 00:31:53,520 --> 00:31:56,280 Speaker 1: very different games, and that's important because a lot of times, 734 00:31:56,520 --> 00:31:59,600 Speaker 1: the movement in the stock market sends signals to other 735 00:31:59,640 --> 00:32:02,080 Speaker 1: people that other people start paying attention to. But if 736 00:32:02,080 --> 00:32:03,880 Speaker 1: the signals are coming from people who are paying a 737 00:32:03,880 --> 00:32:05,479 Speaker 1: different game, you've got to make sure that you are 738 00:32:05,520 --> 00:32:08,000 Speaker 1: not being influenced those signals. Let me give you one 739 00:32:08,000 --> 00:32:10,680 Speaker 1: example from this. If you go back to the nine nineties, 740 00:32:10,720 --> 00:32:13,160 Speaker 1: when tech stocks were going berserk every day, they were 741 00:32:13,160 --> 00:32:15,920 Speaker 1: going up and up and up five per day. A 742 00:32:15,920 --> 00:32:17,880 Speaker 1: lot of that movement was just caused by day traders 743 00:32:18,000 --> 00:32:20,320 Speaker 1: who were capturing short term momentum. It made a lot 744 00:32:20,360 --> 00:32:23,280 Speaker 1: of sense for them to be buying uh Cisco and 745 00:32:23,360 --> 00:32:26,880 Speaker 1: Yahoo stock made sense for them because they were day traders, 746 00:32:27,000 --> 00:32:29,040 Speaker 1: and it didn't matter that the stocks were overvalued in 747 00:32:29,040 --> 00:32:30,760 Speaker 1: the long run, that they were trading out high price 748 00:32:30,800 --> 00:32:32,480 Speaker 1: to earnings multiples, None of that matters. They were just 749 00:32:32,480 --> 00:32:34,640 Speaker 1: trading for that day. They were trying to squeeze out 750 00:32:34,640 --> 00:32:36,720 Speaker 1: a little bit of money between now and lunchtime. The 751 00:32:36,760 --> 00:32:40,120 Speaker 1: problem with that is that that activity pushed up the 752 00:32:40,160 --> 00:32:42,160 Speaker 1: price of those stocks, and it caught the attention of 753 00:32:42,200 --> 00:32:44,680 Speaker 1: long term investors, and there then and then therefore, if 754 00:32:44,680 --> 00:32:46,800 Speaker 1: you are someone who are saving for your retirement, you 755 00:32:46,840 --> 00:32:49,640 Speaker 1: looked at what was happening with Yahoo stock and Cisco stock, 756 00:32:49,680 --> 00:32:52,480 Speaker 1: and you kind of subconstantly thought to yourself, maybe those 757 00:32:52,520 --> 00:32:55,080 Speaker 1: people know something I don't. Hey, those stocks are doing well, 758 00:32:55,160 --> 00:32:56,760 Speaker 1: Maybe those are the companies in the future. Maybe I 759 00:32:56,760 --> 00:32:59,280 Speaker 1: should invest my retirement money in those stocks. You took 760 00:32:59,360 --> 00:33:02,000 Speaker 1: your cues for day traders, and that is really where 761 00:33:02,000 --> 00:33:04,960 Speaker 1: the damage of bubbles came from, because the day traders, look, 762 00:33:05,040 --> 00:33:06,800 Speaker 1: they were gone. They were out as soon as a bubble, 763 00:33:06,840 --> 00:33:08,680 Speaker 1: and as soon as a bubble started to crack, they 764 00:33:08,720 --> 00:33:10,760 Speaker 1: sold everything. They were gone. The people who were left 765 00:33:10,760 --> 00:33:13,080 Speaker 1: holding the bag with the long term investors who took 766 00:33:13,080 --> 00:33:15,800 Speaker 1: their cues from those day traders. So that's just why 767 00:33:15,840 --> 00:33:18,920 Speaker 1: it's so important to understand what game you're playing and 768 00:33:18,960 --> 00:33:21,040 Speaker 1: not take your cues from other people. This is special, 769 00:33:21,560 --> 00:33:23,840 Speaker 1: especially true in financial media, where you know, if you 770 00:33:23,880 --> 00:33:26,560 Speaker 1: turn on CNBC or any other financial program, you will 771 00:33:26,600 --> 00:33:28,640 Speaker 1: hear people say something along the lines of, you know, 772 00:33:29,000 --> 00:33:31,080 Speaker 1: you should sell Netflix. It's not a good time to 773 00:33:31,080 --> 00:33:33,600 Speaker 1: own Netflix stock. And I always want to ask, well, 774 00:33:33,600 --> 00:33:35,600 Speaker 1: who is that information for. If you're a day trader, 775 00:33:35,640 --> 00:33:38,520 Speaker 1: maybe that's great advice. If you are a widowed retiree, 776 00:33:38,560 --> 00:33:41,040 Speaker 1: maybe that's the worst advice you could possibly hear. So 777 00:33:41,120 --> 00:33:43,880 Speaker 1: it's always presented as if there's only one game to play, 778 00:33:43,920 --> 00:33:46,080 Speaker 1: as if the stock market were a single, unified game. 779 00:33:46,120 --> 00:33:49,360 Speaker 1: We all have these different goals, different expectations, different time 780 00:33:49,400 --> 00:33:52,040 Speaker 1: horizons that make it so that we're all playing completely 781 00:33:52,040 --> 00:33:54,360 Speaker 1: different games than one another. All Right, we got just 782 00:33:54,440 --> 00:33:56,400 Speaker 1: a few more questions for you, Morgan, and we're going 783 00:33:56,440 --> 00:33:58,840 Speaker 1: to get to uh those in particular, we're gonna ask 784 00:33:58,840 --> 00:34:01,400 Speaker 1: you about how you invest, and we'll get to those 785 00:34:01,480 --> 00:34:12,400 Speaker 1: right after the break. All Right, we're here talking with 786 00:34:12,480 --> 00:34:15,960 Speaker 1: Morgan Housell and Morgan, let's let's dive into, like Joel 787 00:34:16,000 --> 00:34:18,720 Speaker 1: allotted to before the break, how it is that you invest. 788 00:34:18,800 --> 00:34:21,160 Speaker 1: You know, as someone who's been writing about investing for 789 00:34:21,200 --> 00:34:23,839 Speaker 1: a while now, you take a pretty boring index fund 790 00:34:23,880 --> 00:34:27,000 Speaker 1: approach to your own investments. And so as you've studied 791 00:34:27,040 --> 00:34:29,120 Speaker 1: the best, you know, you've thought about the subject deeply, 792 00:34:29,200 --> 00:34:31,759 Speaker 1: like why is your approach? You know, kind of the 793 00:34:31,760 --> 00:34:34,319 Speaker 1: most simple of all. I think what most people would 794 00:34:34,360 --> 00:34:36,799 Speaker 1: assume when they hear that I dollar cost average in 795 00:34:36,800 --> 00:34:39,279 Speaker 1: index funds. Most people would assume if that's because I've 796 00:34:39,280 --> 00:34:41,640 Speaker 1: come to the conclusion that you cannot beat the market, 797 00:34:41,640 --> 00:34:43,279 Speaker 1: that no one can do well, that no one can 798 00:34:43,320 --> 00:34:45,920 Speaker 1: pick winning stocks, etcetera. It's actually not that at all. 799 00:34:46,440 --> 00:34:48,480 Speaker 1: What my view is is a little bit more nuanced. 800 00:34:48,520 --> 00:34:51,439 Speaker 1: It's beating the market is possible, but it's extremely hard. 801 00:34:51,680 --> 00:34:55,000 Speaker 1: And these statistics that come out that show of fund 802 00:34:55,040 --> 00:34:57,520 Speaker 1: managers on to perform the benchmark that is usually used 803 00:34:57,520 --> 00:35:00,080 Speaker 1: as an indictment against the industry. My view is, like, know, 804 00:35:00,200 --> 00:35:01,920 Speaker 1: that's how it should work. It should be hard to 805 00:35:01,960 --> 00:35:05,040 Speaker 1: beat the market of people who do a great job 806 00:35:05,120 --> 00:35:07,319 Speaker 1: of beating the market. Just like there are you know, 807 00:35:07,400 --> 00:35:09,480 Speaker 1: two or three percent of college athletes make it to 808 00:35:09,480 --> 00:35:11,640 Speaker 1: the pros. But no one says that college athletics are 809 00:35:11,640 --> 00:35:13,360 Speaker 1: a scam. People say, look, it should be hard to 810 00:35:13,360 --> 00:35:15,760 Speaker 1: make it to the pros. Who expects everyone who tries 811 00:35:15,800 --> 00:35:17,799 Speaker 1: to make the NBA should make it? But that's for 812 00:35:17,840 --> 00:35:20,840 Speaker 1: some reason. That's effectively how we think about fund managers. 813 00:35:20,880 --> 00:35:23,080 Speaker 1: So from my perspective, the other thing that I've just 814 00:35:23,239 --> 00:35:25,880 Speaker 1: come across with, well, I mean the first thing that 815 00:35:25,960 --> 00:35:27,719 Speaker 1: what I would say as an extension of that is 816 00:35:28,800 --> 00:35:33,719 Speaker 1: look over time, if investors underperform their benchmark, then that 817 00:35:33,760 --> 00:35:36,360 Speaker 1: means as taking a passive approach and over a period 818 00:35:36,360 --> 00:35:37,960 Speaker 1: of time, I would expect to end up in the 819 00:35:38,000 --> 00:35:40,880 Speaker 1: top death style, the top ten percent of investors. So 820 00:35:40,880 --> 00:35:43,879 Speaker 1: when people say it's a boring conservative approach, my view 821 00:35:43,880 --> 00:35:46,719 Speaker 1: is I'm probably gonna outperform of fund managers, So which 822 00:35:46,719 --> 00:35:49,120 Speaker 1: one of us is actually being conservative? Like, it's not 823 00:35:49,160 --> 00:35:51,400 Speaker 1: necessarily if I'm gonna earn higher returns than you, than 824 00:35:51,440 --> 00:35:53,799 Speaker 1: which one of us is actually being conservative? Here? The 825 00:35:53,800 --> 00:35:55,360 Speaker 1: other thing that is really stuck out to me that 826 00:35:55,560 --> 00:35:57,840 Speaker 1: is more important in my passive approach is that the 827 00:35:57,880 --> 00:36:00,560 Speaker 1: single variable that makes a difference in invest thing it's 828 00:36:00,600 --> 00:36:02,799 Speaker 1: going to have the biggest impact on your outcomes as 829 00:36:02,800 --> 00:36:05,120 Speaker 1: an investor is not how well you do in any 830 00:36:05,120 --> 00:36:07,680 Speaker 1: given year or even any given decade. It's just how 831 00:36:07,719 --> 00:36:10,239 Speaker 1: long you invest. For the people who do the best 832 00:36:10,320 --> 00:36:13,120 Speaker 1: financially over the course of their investing careers are not 833 00:36:13,160 --> 00:36:15,120 Speaker 1: the people who are in the highest returns the people 834 00:36:15,120 --> 00:36:18,240 Speaker 1: who earn decent returns for the longest period of time. 835 00:36:18,680 --> 00:36:21,400 Speaker 1: So therefore, the metric that I want to maximize for 836 00:36:22,080 --> 00:36:25,080 Speaker 1: it's just my endurance. And look, or do I know people? 837 00:36:25,080 --> 00:36:26,880 Speaker 1: Do I know fund managers who I think will be 838 00:36:26,880 --> 00:36:29,440 Speaker 1: able to outperform the market this year? Yes, But I 839 00:36:29,480 --> 00:36:31,520 Speaker 1: don't know if I invested with them whether I would 840 00:36:31,560 --> 00:36:33,240 Speaker 1: be able to stick with that for the longest period 841 00:36:33,239 --> 00:36:35,680 Speaker 1: of time. Whereas for the indexing approach, I think it 842 00:36:35,719 --> 00:36:37,719 Speaker 1: gives me the highest chance of actually being able to 843 00:36:37,800 --> 00:36:40,600 Speaker 1: leave it alone and letting a compound for thirty or 844 00:36:40,640 --> 00:36:43,319 Speaker 1: forty or fifty more years. That's what I want to do. 845 00:36:43,520 --> 00:36:45,160 Speaker 1: So it's not that I don't believe people can beat 846 00:36:45,200 --> 00:36:47,160 Speaker 1: the market. It said, I want to have the approach 847 00:36:47,200 --> 00:36:49,319 Speaker 1: that gives me the highest odds of sticking with it 848 00:36:49,400 --> 00:36:51,399 Speaker 1: for the longest period of time. And to me, that's 849 00:36:51,440 --> 00:36:54,279 Speaker 1: just the investment strategy that has the fewest knobs to 850 00:36:54,280 --> 00:36:56,840 Speaker 1: fiddle with, the fewest levers to pull, and for me, 851 00:36:56,960 --> 00:36:58,839 Speaker 1: that is the most passive approach that I can take, 852 00:36:58,880 --> 00:37:01,160 Speaker 1: so I can spend all of my thought, all of 853 00:37:01,200 --> 00:37:05,680 Speaker 1: my bandwidth, focusing on endurance and longevity rather than what 854 00:37:05,760 --> 00:37:07,560 Speaker 1: is the economy going to do this year, this month. 855 00:37:08,080 --> 00:37:10,600 Speaker 1: And there was another change you made recently in your 856 00:37:10,640 --> 00:37:13,680 Speaker 1: life that actually, from what you've said, helped you in 857 00:37:13,680 --> 00:37:16,040 Speaker 1: that decision to helps you stay in the game and 858 00:37:16,040 --> 00:37:17,960 Speaker 1: to be able to invest over the long over the 859 00:37:18,000 --> 00:37:20,759 Speaker 1: long haul. You paid off your mortgage, you own your home, 860 00:37:21,000 --> 00:37:24,040 Speaker 1: debt free now and you actually keep more cash on 861 00:37:24,080 --> 00:37:26,759 Speaker 1: hand that than most people do. A lot of you know, 862 00:37:26,880 --> 00:37:29,719 Speaker 1: traditional money people would say, no, man, you should be 863 00:37:30,120 --> 00:37:32,560 Speaker 1: keep that mortgage it's at a low interest rate and 864 00:37:32,480 --> 00:37:34,319 Speaker 1: invest more of your money. So why did why did 865 00:37:34,320 --> 00:37:36,680 Speaker 1: you make that, take that safer approach? I mean, there's 866 00:37:36,719 --> 00:37:39,480 Speaker 1: there's two there's two reasons we did that. One is because, look, 867 00:37:39,560 --> 00:37:42,680 Speaker 1: I have no aspiration to be the greatest investor in 868 00:37:42,680 --> 00:37:44,400 Speaker 1: the world. What I want to do is use money 869 00:37:44,640 --> 00:37:47,120 Speaker 1: to make myself and my family a little bit happier, 870 00:37:47,160 --> 00:37:49,640 Speaker 1: a little bit safer, a little bit more more well off. 871 00:37:49,800 --> 00:37:52,200 Speaker 1: So even if we should have used that cash to 872 00:37:52,280 --> 00:37:54,360 Speaker 1: invest in the stock market versus paying off our mortgage, 873 00:37:54,480 --> 00:37:56,000 Speaker 1: by paying off for mortgage and gave us such a 874 00:37:56,040 --> 00:37:59,040 Speaker 1: sense of security and safety. And this is our house. 875 00:37:59,040 --> 00:38:00,719 Speaker 1: No one can take this from me. This is our house. 876 00:38:00,760 --> 00:38:02,719 Speaker 1: We own it. This is it doesn't matter if the 877 00:38:02,760 --> 00:38:05,920 Speaker 1: world falls apart. We can withstand a Category five financial 878 00:38:05,960 --> 00:38:07,920 Speaker 1: storm and no one's taken this house from us. This 879 00:38:08,040 --> 00:38:10,880 Speaker 1: is ours, which that to me, it's just that to me, 880 00:38:11,000 --> 00:38:13,040 Speaker 1: that gave my wife and I particular since we have 881 00:38:13,080 --> 00:38:15,279 Speaker 1: young kids. That just gave us a sense of like 882 00:38:15,360 --> 00:38:16,840 Speaker 1: high five. This is one of the best things that 883 00:38:16,880 --> 00:38:19,040 Speaker 1: we've Even if this is the worst financial decision we've made, 884 00:38:19,040 --> 00:38:21,000 Speaker 1: I think it's the best money decision that we've ever made. 885 00:38:21,360 --> 00:38:23,360 Speaker 1: The other thing, if there is a more technical reason 886 00:38:23,400 --> 00:38:26,840 Speaker 1: for it, is because back to longevity and doing you know, 887 00:38:26,880 --> 00:38:28,319 Speaker 1: being able to stay in the game for a long 888 00:38:28,360 --> 00:38:30,239 Speaker 1: speriod of time. You're only gonna do that if you 889 00:38:30,320 --> 00:38:33,600 Speaker 1: become unbreakable financially in the short run, and if once 890 00:38:33,640 --> 00:38:35,319 Speaker 1: you've paid off your more which look, this is not 891 00:38:35,440 --> 00:38:38,440 Speaker 1: something that that everyone or many people can do. I'm 892 00:38:38,480 --> 00:38:40,040 Speaker 1: not saying that this is, you know, something everyone can 893 00:38:40,040 --> 00:38:41,760 Speaker 1: go out and do. I'm not I'm not that naive 894 00:38:41,800 --> 00:38:43,839 Speaker 1: about people's finances. But if you can do that, then 895 00:38:43,840 --> 00:38:47,040 Speaker 1: you've you've reduced your fixed your fixed expenses so much 896 00:38:47,520 --> 00:38:50,920 Speaker 1: that you give yourself a level of endurity, of endurance 897 00:38:51,000 --> 00:38:54,480 Speaker 1: and and and durability that I think does pay financial 898 00:38:54,520 --> 00:38:56,200 Speaker 1: dividends over the long run in the sense that it 899 00:38:56,280 --> 00:38:58,560 Speaker 1: increases the odds that I can remain invested in my 900 00:38:58,600 --> 00:39:01,440 Speaker 1: stocks for a longer period of time. And Morgan, as 901 00:39:01,440 --> 00:39:04,120 Speaker 1: you discussed in the book, retirement like that's yeah, it's 902 00:39:04,120 --> 00:39:07,319 Speaker 1: an incredibly new concepts, and so until recent decades, you know, 903 00:39:07,360 --> 00:39:09,319 Speaker 1: the concept of saving up to quit work like that 904 00:39:09,360 --> 00:39:11,200 Speaker 1: was mostly foreign. How do you how do you feel 905 00:39:11,200 --> 00:39:13,239 Speaker 1: about the way people talk about retirement these days? You know, 906 00:39:13,360 --> 00:39:14,560 Speaker 1: does it do you feel it puts a lot of 907 00:39:14,560 --> 00:39:17,440 Speaker 1: pressure on folks or like, is it even maybe the 908 00:39:17,560 --> 00:39:20,479 Speaker 1: right goal for individuals to have? I think it's it's 909 00:39:20,600 --> 00:39:22,279 Speaker 1: it's it's definitely the right I think what the right 910 00:39:22,320 --> 00:39:25,080 Speaker 1: goal is is independence. Rather than using the term retirement, 911 00:39:25,080 --> 00:39:27,279 Speaker 1: which implies you're going to quit your job and nothing else, 912 00:39:27,320 --> 00:39:30,040 Speaker 1: it's just independence. So there's there's the fire movement, which 913 00:39:30,360 --> 00:39:33,560 Speaker 1: you know, I think is interesting. I'm not necessarily part 914 00:39:33,560 --> 00:39:35,880 Speaker 1: of it myself because rather than you know, retiring and 915 00:39:35,920 --> 00:39:38,719 Speaker 1: leaving work, it's just more about it's the independence level 916 00:39:38,760 --> 00:39:41,440 Speaker 1: of it. Um. But it's interesting about finding about retirement 917 00:39:41,440 --> 00:39:43,320 Speaker 1: that you mentioned is yeah, it's a fairly new concept. 918 00:39:43,360 --> 00:39:46,040 Speaker 1: I mean, up until kind of the nineties and fifties, 919 00:39:46,040 --> 00:39:48,120 Speaker 1: the majority of people worked until they died. There was 920 00:39:48,200 --> 00:39:51,480 Speaker 1: no sense of retirement, so security didn't didn't come along 921 00:39:51,560 --> 00:39:53,960 Speaker 1: until the nineteen thirties. And even when it came along, 922 00:39:53,960 --> 00:39:57,000 Speaker 1: it was absolutely bare bones, way less even adjusted for 923 00:39:57,000 --> 00:40:00,279 Speaker 1: inflation than people get today. So the concept that the 924 00:40:00,320 --> 00:40:04,000 Speaker 1: majority of people will be able to and deserve a 925 00:40:04,080 --> 00:40:06,359 Speaker 1: retirement that will last years or decades is a very 926 00:40:06,400 --> 00:40:08,960 Speaker 1: new concept. We're talking thirty or forty years into this 927 00:40:09,040 --> 00:40:11,000 Speaker 1: that we've had. I mean, the rath ira a didn't 928 00:40:11,000 --> 00:40:14,000 Speaker 1: come about until and the four O one K really 929 00:40:14,000 --> 00:40:16,720 Speaker 1: didn't start being used in real ways until early nineteen nineties. 930 00:40:16,880 --> 00:40:19,480 Speaker 1: So these things are more or less brand new. And 931 00:40:19,520 --> 00:40:21,960 Speaker 1: that's important because we don't have a lot of generational 932 00:40:22,000 --> 00:40:24,920 Speaker 1: knowledge transfer in terms of your parents teaching you how 933 00:40:25,000 --> 00:40:26,840 Speaker 1: to do it because their parents taught them how to 934 00:40:26,880 --> 00:40:28,960 Speaker 1: do it. We're dealing with these things that are one 935 00:40:29,000 --> 00:40:32,160 Speaker 1: generation old. So we are we are we're all newbies, 936 00:40:32,239 --> 00:40:35,440 Speaker 1: we're all freshmen doing this. It should make sense that 937 00:40:35,520 --> 00:40:38,400 Speaker 1: if you take something that we'd have no generational experience doing, 938 00:40:38,760 --> 00:40:41,560 Speaker 1: and then we are dealing with the emotions of trillions 939 00:40:41,600 --> 00:40:44,240 Speaker 1: upon trillions of dollars of our retirement and our future 940 00:40:44,280 --> 00:40:46,600 Speaker 1: well being, it should not surprise people that people screw 941 00:40:46,680 --> 00:40:48,799 Speaker 1: up a lot of times doing this. We're brand new 942 00:40:48,840 --> 00:40:51,600 Speaker 1: at this, very different If you take something like driving 943 00:40:51,640 --> 00:40:53,640 Speaker 1: a car, Let's say my parents taught me how to 944 00:40:53,719 --> 00:40:55,799 Speaker 1: drive a car, their parents taught them how to drive 945 00:40:55,800 --> 00:40:58,520 Speaker 1: a car, etcetera. Was right now, we're just coming into this. 946 00:40:58,560 --> 00:41:00,880 Speaker 1: I think this also affects something like saving for college, 947 00:41:00,880 --> 00:41:03,960 Speaker 1: where if you go back forty years ago, a fewer 948 00:41:04,040 --> 00:41:07,000 Speaker 1: people wanted to go to college or the the the 949 00:41:07,120 --> 00:41:09,239 Speaker 1: expectation that you would go to college was just much 950 00:41:09,280 --> 00:41:11,920 Speaker 1: lower than this today, and colleges, adjusted for inflation, were 951 00:41:11,960 --> 00:41:15,120 Speaker 1: much cheaper. So the idea of saving a significant amount 952 00:41:15,160 --> 00:41:17,320 Speaker 1: of money for your kids to go to college was 953 00:41:17,360 --> 00:41:20,319 Speaker 1: just not really part of the social conversation. And that 954 00:41:20,400 --> 00:41:23,120 Speaker 1: kind of led to I think my generation. I'm I'm 955 00:41:23,160 --> 00:41:25,040 Speaker 1: thirty six years old, so it was kind of my 956 00:41:25,200 --> 00:41:29,080 Speaker 1: parents generation that did not buy and large did not 957 00:41:29,160 --> 00:41:31,800 Speaker 1: say for their kids college because when they were growing 958 00:41:31,840 --> 00:41:33,839 Speaker 1: up with their parents taught them was you don't need 959 00:41:33,880 --> 00:41:35,920 Speaker 1: to It's just not something that you are that that's 960 00:41:35,960 --> 00:41:38,520 Speaker 1: not that's not part of the financial quiver. So it 961 00:41:38,560 --> 00:41:40,200 Speaker 1: was kind of my generation that I think we'll get 962 00:41:40,200 --> 00:41:42,719 Speaker 1: stuck with the highest level of student debt because our 963 00:41:42,760 --> 00:41:44,719 Speaker 1: parents didn't prepare for it. And I don't blame them 964 00:41:44,760 --> 00:41:46,680 Speaker 1: for that because they didn't have any any kind of 965 00:41:46,719 --> 00:41:49,120 Speaker 1: generational knowledge transfer to them. And I think if you 966 00:41:49,160 --> 00:41:51,640 Speaker 1: look at my generation, how we're dealing with our kids. 967 00:41:51,960 --> 00:41:56,120 Speaker 1: I think we learned from our personal experiences the trauma 968 00:41:56,160 --> 00:41:59,200 Speaker 1: and tragedy of excessive student debt, and we are buying 969 00:41:59,320 --> 00:42:01,839 Speaker 1: large and generals in here saying never will we put 970 00:42:01,840 --> 00:42:04,279 Speaker 1: our own kids through that. So we have a much 971 00:42:04,360 --> 00:42:07,279 Speaker 1: higher degree of savings and five plans for our own 972 00:42:07,360 --> 00:42:09,799 Speaker 1: children going forward. So that too, it's just like a 973 00:42:09,840 --> 00:42:13,600 Speaker 1: generational difference that it's not that one one generation screwed 974 00:42:13,640 --> 00:42:15,319 Speaker 1: up or wasn't smart enough to do it. It's just 975 00:42:15,360 --> 00:42:17,680 Speaker 1: what we've experienced in our own lives that gives us 976 00:42:17,680 --> 00:42:19,600 Speaker 1: this roadmap of what we are expected to do with 977 00:42:19,640 --> 00:42:21,279 Speaker 1: our money. Plus, by the way, I think part of 978 00:42:21,320 --> 00:42:23,480 Speaker 1: the reason our parents didn't save as much for colleges 979 00:42:23,520 --> 00:42:27,960 Speaker 1: because the price wasn't nearly as extreme, right thirty years ago, right, 980 00:42:28,000 --> 00:42:31,439 Speaker 1: and so garticularly at state universities. Most state colleges could 981 00:42:31,440 --> 00:42:33,239 Speaker 1: go back to the seventies and days were free, there 982 00:42:33,239 --> 00:42:35,080 Speaker 1: were tuition free, you could you could go to them. 983 00:42:35,160 --> 00:42:37,000 Speaker 1: That was a big shift that took place, to say 984 00:42:37,000 --> 00:42:39,319 Speaker 1: nothing of private universities that we kind of had a 985 00:42:39,440 --> 00:42:42,360 Speaker 1: growing expectation that you know, if you get into Pepperdine, 986 00:42:42,360 --> 00:42:44,120 Speaker 1: you should go to pepperdine whether you can afford it 987 00:42:44,239 --> 00:42:46,960 Speaker 1: or not. Uh So, I think that expectation didn't buy 988 00:42:46,960 --> 00:42:49,640 Speaker 1: and large didn't exist forty years ago. Plus you had 989 00:42:49,800 --> 00:42:52,960 Speaker 1: the state college kind of uh safety net where you 990 00:42:52,960 --> 00:42:55,680 Speaker 1: could go tuition free. Yeah. Yeah, Well we covered a 991 00:42:55,680 --> 00:42:57,319 Speaker 1: lot here, Morgan, Thanks so much for your time, But 992 00:42:57,360 --> 00:42:59,279 Speaker 1: we've got one last question for you. What is the 993 00:42:59,320 --> 00:43:01,840 Speaker 1: most practic coal action step you'd recommend for folks to 994 00:43:01,880 --> 00:43:04,600 Speaker 1: take in order to move from knowing the right things 995 00:43:04,640 --> 00:43:06,760 Speaker 1: to do with their money to doing the right things. 996 00:43:07,280 --> 00:43:09,439 Speaker 1: You've got to know yourself, just be more introspective about 997 00:43:09,480 --> 00:43:11,840 Speaker 1: what you're about who you are, and rather than reading 998 00:43:11,840 --> 00:43:13,680 Speaker 1: a financial book, even though I just wrote one, So 999 00:43:13,680 --> 00:43:16,520 Speaker 1: I'm speaking against myself here. I've been reading a finance 1000 00:43:16,560 --> 00:43:18,160 Speaker 1: book to try to figure out what you should do 1001 00:43:18,160 --> 00:43:20,840 Speaker 1: with your money. You should become more introspective about yourself, 1002 00:43:20,880 --> 00:43:23,000 Speaker 1: your own goals, your family's goals, and realize that that 1003 00:43:23,080 --> 00:43:27,439 Speaker 1: personal finance is way more personal than it is finance. Morgan, 1004 00:43:27,520 --> 00:43:31,000 Speaker 1: this has been a fantastic conversation. We really appreciate your time, 1005 00:43:31,040 --> 00:43:33,200 Speaker 1: and where can folks find out more about you and 1006 00:43:33,280 --> 00:43:35,920 Speaker 1: your book. Most of what I do the the book 1007 00:43:35,960 --> 00:43:38,120 Speaker 1: is on Amazon. It's called The Psychology of Money. Most 1008 00:43:38,120 --> 00:43:39,640 Speaker 1: of what I do on a day to day basis, 1009 00:43:39,640 --> 00:43:42,240 Speaker 1: I spend my time on Twitter. My handle is Morgan Household. 1010 00:43:42,280 --> 00:43:45,000 Speaker 1: First and last name. Awesome, Morgan, Thanks so much, man, 1011 00:43:45,000 --> 00:43:46,799 Speaker 1: it has been a great conversation. We really appreciate your time. 1012 00:43:47,080 --> 00:43:49,720 Speaker 1: This has been fun. Thanks again, Yeah, thinks again, Morgan. 1013 00:43:50,200 --> 00:43:52,680 Speaker 1: Joel Man, what a great conversation we just had here 1014 00:43:52,719 --> 00:43:55,840 Speaker 1: with Morgan Household discussing his his new book, The Psychology 1015 00:43:55,880 --> 00:43:58,319 Speaker 1: of Money. We talked through a ton of different stuff, man, 1016 00:43:58,360 --> 00:44:00,520 Speaker 1: he had a lot of nuggets of whiz them. But 1017 00:44:00,560 --> 00:44:02,840 Speaker 1: we always end our interviews here with one big takeaway, 1018 00:44:02,840 --> 00:44:04,759 Speaker 1: and so I want to get your big take away. 1019 00:44:04,800 --> 00:44:07,000 Speaker 1: What was What was something that stood out to you? Yeah, 1020 00:44:07,040 --> 00:44:09,720 Speaker 1: that's a tough one because this interview was was packed 1021 00:44:09,760 --> 00:44:11,800 Speaker 1: with a bunch of stuff, just like the book is. Honestly, 1022 00:44:11,880 --> 00:44:14,080 Speaker 1: it's just it's a heavy hitter with just so much 1023 00:44:14,120 --> 00:44:17,720 Speaker 1: good information, so many good stories. It's just incredibly well written. 1024 00:44:18,440 --> 00:44:20,359 Speaker 1: But I think that the biggest takeaway that I got 1025 00:44:20,360 --> 00:44:22,960 Speaker 1: from this episode was and it was when I was 1026 00:44:23,000 --> 00:44:25,359 Speaker 1: reading the book. It really struck me too. Don't try 1027 00:44:25,400 --> 00:44:28,000 Speaker 1: to overcome your flaws, know them and embrace them, the 1028 00:44:28,040 --> 00:44:31,359 Speaker 1: emotional aspects of our personalities. Yeah, and I think that's 1029 00:44:31,440 --> 00:44:33,160 Speaker 1: that's something that you know, we want to change, we 1030 00:44:33,160 --> 00:44:34,880 Speaker 1: want to do better, and there's nothing wrong with that. 1031 00:44:35,120 --> 00:44:39,440 Speaker 1: But there's something really powerful about knowing ourselves deeply, realizing 1032 00:44:39,480 --> 00:44:41,320 Speaker 1: that those flaws exist, and knowing that that we can't 1033 00:44:41,360 --> 00:44:45,200 Speaker 1: necessarily change them completely, and so we adjust accordingly. When 1034 00:44:45,200 --> 00:44:47,520 Speaker 1: it comes to investing or saving or how we think 1035 00:44:47,520 --> 00:44:50,319 Speaker 1: about our money. We need to incorporate some of those 1036 00:44:50,320 --> 00:44:52,439 Speaker 1: baseline tendencies that we have. We need to think about 1037 00:44:52,440 --> 00:44:55,040 Speaker 1: our personality a little bit more, and we need to 1038 00:44:55,040 --> 00:44:57,600 Speaker 1: bring that to the table when we're thinking about the 1039 00:44:57,600 --> 00:44:59,719 Speaker 1: the decisions we're gonna make. Morgan did that when he 1040 00:44:59,760 --> 00:45:02,480 Speaker 1: paid off his mortgage. Morgan does that when he invests 1041 00:45:02,520 --> 00:45:05,640 Speaker 1: in index funds. So much of personal finance is personal, 1042 00:45:05,960 --> 00:45:08,520 Speaker 1: and a lot of it does calm down to you 1043 00:45:08,719 --> 00:45:11,440 Speaker 1: and how you interact with the world around you and 1044 00:45:11,560 --> 00:45:13,360 Speaker 1: with your money in particular. I mean, that's why we 1045 00:45:13,480 --> 00:45:15,960 Speaker 1: enjoy talking about money so much, because it's so nuanced 1046 00:45:15,960 --> 00:45:18,000 Speaker 1: depending on who it is you're talking about, and as 1047 00:45:18,040 --> 00:45:20,120 Speaker 1: we're kind of covering each topic. I love the example 1048 00:45:20,200 --> 00:45:22,279 Speaker 1: he gave to like Essentially he was talking about, like 1049 00:45:22,280 --> 00:45:24,240 Speaker 1: if you panicked back in the spring with the market, 1050 00:45:24,280 --> 00:45:27,239 Speaker 1: you know, completely nose dived, that you probably need to 1051 00:45:27,280 --> 00:45:29,640 Speaker 1: be maybe be in something that's a little more conservative, right. 1052 00:45:29,880 --> 00:45:31,759 Speaker 1: But in my mind, I was thinking about how my 1053 00:45:31,840 --> 00:45:34,000 Speaker 1: tendencies are kind of the opposite, and I realized that 1054 00:45:34,320 --> 00:45:37,480 Speaker 1: essentially the system I've set up gives myself some flexibility 1055 00:45:37,680 --> 00:45:39,920 Speaker 1: because I know that, like my tendency is that when 1056 00:45:40,000 --> 00:45:42,680 Speaker 1: when I see an opportunity, when I see something on sale, 1057 00:45:42,800 --> 00:45:45,480 Speaker 1: I'm gonna pounce. Uh, And I mean that happened back 1058 00:45:45,480 --> 00:45:47,880 Speaker 1: in the spring. I've kind of laid out at one point, 1059 00:45:47,920 --> 00:45:50,000 Speaker 1: like my complex system of if the market is you know, 1060 00:45:50,000 --> 00:45:51,560 Speaker 1: more than ten percent down, this is how much I 1061 00:45:51,560 --> 00:45:53,160 Speaker 1: can kind of put towards it. It can for you 1062 00:45:53,239 --> 00:45:55,080 Speaker 1: up to make some some purchases and make some movements 1063 00:45:55,320 --> 00:45:58,759 Speaker 1: while sticking to a system that you've essentially predetermined. It's 1064 00:45:58,760 --> 00:46:00,920 Speaker 1: when you let your emotions the best of you and 1065 00:46:00,960 --> 00:46:04,160 Speaker 1: you start making unwise decisions in the moment that can really, yeah, 1066 00:46:04,239 --> 00:46:05,920 Speaker 1: really bite you in the butt. Well, you've also been 1067 00:46:06,040 --> 00:46:08,600 Speaker 1: conservative in other areas of your financial life that allow 1068 00:46:08,640 --> 00:46:11,239 Speaker 1: you to be more aggressive there and again that that 1069 00:46:11,360 --> 00:46:13,640 Speaker 1: save like a pessimist and invest like an optimist. That's 1070 00:46:13,640 --> 00:46:16,359 Speaker 1: like the best line. Yeah, so it makes so much 1071 00:46:16,360 --> 00:46:18,080 Speaker 1: sense to me. I love it. Yeah. So my big 1072 00:46:18,080 --> 00:46:21,000 Speaker 1: takeaway to also had to do with investing, and he 1073 00:46:21,000 --> 00:46:22,960 Speaker 1: he said a line and he said that volatility is 1074 00:46:23,000 --> 00:46:25,720 Speaker 1: the cost of admission to investing in the stock market. 1075 00:46:25,920 --> 00:46:28,759 Speaker 1: And that's a perfect summary of the market in the 1076 00:46:28,760 --> 00:46:30,759 Speaker 1: short term, right, if you are going to invest for 1077 00:46:30,880 --> 00:46:32,680 Speaker 1: the long term, you know, if you have a more 1078 00:46:32,719 --> 00:46:34,880 Speaker 1: optimistic view of the market, which we do. You know, 1079 00:46:34,960 --> 00:46:37,600 Speaker 1: we see the economy and progress, we see all these 1080 00:46:37,600 --> 00:46:40,719 Speaker 1: things happening and moving forward. But what that means is 1081 00:46:40,760 --> 00:46:42,719 Speaker 1: in the short term there's gonna be volatility and you 1082 00:46:42,760 --> 00:46:44,359 Speaker 1: have to be okay with that. That's the price you 1083 00:46:44,400 --> 00:46:47,399 Speaker 1: pay in order to invest. That's so important to keep 1084 00:46:47,400 --> 00:46:50,240 Speaker 1: in mind when you do see big fluctuations in the market, 1085 00:46:50,680 --> 00:46:53,040 Speaker 1: that they're not something necessarily to respond to, so to 1086 00:46:53,080 --> 00:46:55,919 Speaker 1: react negatively to and instead just to kind of weather 1087 00:46:55,960 --> 00:46:58,520 Speaker 1: that storm. Yeah, it's not broken, he said. It's part 1088 00:46:58,520 --> 00:47:01,359 Speaker 1: of understanding the long history of volatility. That's the way 1089 00:47:01,400 --> 00:47:03,480 Speaker 1: the system works, and it's part of wealth building that 1090 00:47:03,560 --> 00:47:06,000 Speaker 1: volatility is essentially built in and you're going to experience 1091 00:47:06,000 --> 00:47:08,680 Speaker 1: it from time to time, and that's part of behavior again. 1092 00:47:08,719 --> 00:47:10,239 Speaker 1: You have to know that that's going to happen and 1093 00:47:10,280 --> 00:47:12,040 Speaker 1: know how you react to that so that you can 1094 00:47:12,080 --> 00:47:14,960 Speaker 1: invest accordingly. And I think that's why index funds can 1095 00:47:15,000 --> 00:47:17,680 Speaker 1: be so helpful for us, because it's a one less 1096 00:47:17,680 --> 00:47:20,040 Speaker 1: decision we actually have to make. And I know for me, 1097 00:47:20,160 --> 00:47:22,080 Speaker 1: I'm not really great when I have a lot of decisions, 1098 00:47:22,400 --> 00:47:24,319 Speaker 1: so so that takes care of one for me, right there. 1099 00:47:24,600 --> 00:47:26,040 Speaker 1: All right, man, let's get back to the beer that 1100 00:47:26,080 --> 00:47:28,160 Speaker 1: we had on the show today. Today we drank a 1101 00:47:28,160 --> 00:47:32,080 Speaker 1: beer called Polygamy Porter by Wasach Brewery. There's a beer, 1102 00:47:32,120 --> 00:47:34,120 Speaker 1: of course, had a Utah. Our friend Sam, who works 1103 00:47:34,160 --> 00:47:36,399 Speaker 1: for the brewery, sent this one our way. Uh great 1104 00:47:36,400 --> 00:47:38,759 Speaker 1: little Utah pun in the name of this beer. Yeah, 1105 00:47:38,760 --> 00:47:40,680 Speaker 1: I think they're kind of poking fun a little bit 1106 00:47:40,719 --> 00:47:43,239 Speaker 1: at polygamy. But yeah, this is a beer that you 1107 00:47:43,239 --> 00:47:44,759 Speaker 1: and I got to share. I'll go ahead and say 1108 00:47:44,800 --> 00:47:46,839 Speaker 1: that as you pour it. Obviously it poured nice and dark. 1109 00:47:46,880 --> 00:47:50,000 Speaker 1: This is a porter. Uh, it was lighter in body, 1110 00:47:50,080 --> 00:47:51,799 Speaker 1: you know, it wasn't one of these dark beers that 1111 00:47:51,920 --> 00:47:54,760 Speaker 1: that's that's really heavy, but it did have those darker flavors, 1112 00:47:54,760 --> 00:47:57,240 Speaker 1: so you kind of had that nice, light, roasty flavor 1113 00:47:57,280 --> 00:47:59,080 Speaker 1: going on. You got some of those chocolate notes as well. 1114 00:47:59,280 --> 00:48:00,840 Speaker 1: I feel like this is the perfect beer as the 1115 00:48:00,840 --> 00:48:03,400 Speaker 1: weather starts to turn a little bit colder, where you 1116 00:48:03,400 --> 00:48:05,759 Speaker 1: can get some of those darker flavors without feeling like 1117 00:48:05,760 --> 00:48:08,000 Speaker 1: you're eating a meal, you know, when you have a beer. 1118 00:48:08,040 --> 00:48:10,640 Speaker 1: So yeah, those bigger stouts can feel like that, but 1119 00:48:10,640 --> 00:48:12,680 Speaker 1: but this one doesn't. Right, it's a little bit light. 1120 00:48:12,840 --> 00:48:15,400 Speaker 1: I feel like it was chocolate caramel. It was really 1121 00:48:15,480 --> 00:48:17,960 Speaker 1: smooth and and it just had a great flavor going on. 1122 00:48:18,200 --> 00:48:21,000 Speaker 1: So yeah, I really enjoyed this one. From Wassa to Brewery. 1123 00:48:21,040 --> 00:48:23,719 Speaker 1: Big thanks to Sam again for sending this one our way. 1124 00:48:23,920 --> 00:48:25,920 Speaker 1: All right, man, that's gonna do it for this episode. 1125 00:48:25,920 --> 00:48:28,239 Speaker 1: For people who want show notes, including a link to 1126 00:48:28,560 --> 00:48:31,400 Speaker 1: Morgan's book, that will be up on our website at 1127 00:48:31,400 --> 00:48:33,400 Speaker 1: how to money dot com. And if you have a 1128 00:48:33,400 --> 00:48:35,520 Speaker 1: friend or you know somebody who might benefit from hearing 1129 00:48:35,560 --> 00:48:37,959 Speaker 1: an episode like this talking about the psychology of money, 1130 00:48:38,000 --> 00:48:40,440 Speaker 1: we would be incredibly thankful if you forwarded this episode 1131 00:48:40,440 --> 00:48:42,279 Speaker 1: along to them. Reviews always help, but you know what, 1132 00:48:42,320 --> 00:48:44,400 Speaker 1: word of mouth is also a really good thing, So 1133 00:48:44,480 --> 00:48:46,400 Speaker 1: thanks in advance for that, Joel. That's gonna be it 1134 00:48:46,440 --> 00:48:49,040 Speaker 1: for this episode, Buddy, Until next time, best Friends Out, 1135 00:48:49,080 --> 00:48:50,200 Speaker 1: Best Friends Out,