WEBVTT - Morgan Housel on the New Way We Think About Money 0:00:10.160 --> 0:00:14.040 Hello, and welcome to another episode of the Odd Locks Podcast. 0:00:14.080 --> 0:00:16.360 I'm Joe Wisenthal and I'm Tracy Allaway. 0:00:16.800 --> 0:00:20.840 Tracy, you know what topic we'd never really talk about 0:00:21.280 --> 0:00:23.040 or really do. It's like we never really do anything 0:00:23.079 --> 0:00:25.120 related like personal finance, person. 0:00:25.000 --> 0:00:27.720 Like what to actually do with all the information that 0:00:27.760 --> 0:00:30.960 we talk about on a bi weekly basis. Yeah, what 0:00:31.080 --> 0:00:32.200 it means for making money. 0:00:32.280 --> 0:00:34.640 It's like a huge part of like financial media. But 0:00:34.640 --> 0:00:37.640 it's like, you know, I like to usually like what's 0:00:37.640 --> 0:00:39.120 going to happen with the quantitative titaning. 0:00:39.240 --> 0:00:41.279 It's a tough one because I feel like you can 0:00:41.320 --> 0:00:45.080 talk about it generally, but also there's the temptation a 0:00:45.120 --> 0:00:49.680 lot of people end up doing this to give specific recommendations. 0:00:49.400 --> 0:00:52.640 Right like get this credit card, Tesla, or yeah, either 0:00:52.680 --> 0:00:56.800 buy this dock, get this credit card, don't buy avocado 0:00:56.880 --> 0:00:59.080 toast like all this stuff, or like you know, move 0:00:59.080 --> 0:01:02.440 your money. But like it's kind of like cliche topic. 0:01:02.520 --> 0:01:04.640 But like, on the other hand, I do think it's 0:01:04.720 --> 0:01:07.240 interesting right now because we've just had this like a 0:01:07.360 --> 0:01:10.280 sort of extraordinary like three years of like inflation, which 0:01:10.800 --> 0:01:13.920 many people have never really experienced in their lives, And 0:01:14.000 --> 0:01:16.200 so to my mind, that raises some interesting questions like 0:01:16.280 --> 0:01:18.760 how is this going to like change people's behavior and 0:01:18.800 --> 0:01:20.720 what should what have people done in the past during 0:01:20.760 --> 0:01:23.560 periods of inflation? Like there are really interesting sort of 0:01:23.560 --> 0:01:27.160 like personal finance, spending investing questions that like will come 0:01:27.200 --> 0:01:28.440 out of this era well. 0:01:28.319 --> 0:01:32.520 Absolutely, and also the prospect of just finally actually earning 0:01:32.640 --> 0:01:35.720 some interest on a basic savings account. I know it's 0:01:35.720 --> 0:01:38.880 still below the level of inflation, but for people who've 0:01:38.920 --> 0:01:41.800 been earning zero percent for most of their professional lives, 0:01:41.800 --> 0:01:42.559 I think it's very. 0:01:42.959 --> 0:01:44.679 I think now it's kind of positive, right because you 0:01:44.680 --> 0:01:47.440 could play five percent in the CD and maybe inflation 0:01:47.560 --> 0:01:49.680 we three gonna have, right, you know. I asked my 0:01:49.800 --> 0:01:53.320 dad recently about his memory of the nineteen seventies. I 0:01:53.360 --> 0:01:55.000 was like, what was that like? You know, the first 0:01:55.000 --> 0:01:56.800 thing he said was like I could really get a 0:01:56.800 --> 0:01:58.400 lot of money out of bank account day. 0:01:58.480 --> 0:01:59.120 Oh, there we go. 0:01:59.280 --> 0:01:59.520 Yeah. 0:01:59.800 --> 0:02:02.600 So, you know, there's all kinds of interesting things about 0:02:02.640 --> 0:02:04.440 like how people actually deal. 0:02:04.280 --> 0:02:07.400 With right and also what happens when we have a 0:02:07.480 --> 0:02:10.360 sort of regime change and how do people react to 0:02:10.400 --> 0:02:12.760 it and how much have things actually changed? 0:02:12.880 --> 0:02:14.600 Well, you know, and we've been talking about some you know, 0:02:14.600 --> 0:02:16.760 some of the real estate episodes. Yeah, like how much 0:02:16.840 --> 0:02:19.360 people like anchored to the ZIP era. They're like, you know, 0:02:19.400 --> 0:02:21.560 as if like that was normal. Yeah, so it's like 0:02:21.800 --> 0:02:24.919 when have people adjusted? Is there still a big adjustment 0:02:25.000 --> 0:02:28.200 left to go? Like, there's just some really interesting questions. Absolutely, Okay, 0:02:28.240 --> 0:02:30.200 well I think we should talk about them. And we 0:02:30.320 --> 0:02:33.160 really do have the perfect guest. We're going to be 0:02:33.200 --> 0:02:37.040 speaking with Morgan Household, longtime writer, the author of the 0:02:37.040 --> 0:02:40.560 best selling book The Psychology of Money is More books 0:02:40.760 --> 0:02:44.160 coming out hugely popular in this area. Morgan, thank you 0:02:44.200 --> 0:02:45.800 so much for coming on Outlass. 0:02:45.440 --> 0:02:46.920 Well, Joe and Tracy happy to be here, Thanks for 0:02:46.919 --> 0:02:47.200 having me. 0:02:47.240 --> 0:02:49.080 Can I just say, all right, I'm gonna just say 0:02:49.280 --> 0:02:52.200 something just to let's set this scene a little bit, 0:02:52.240 --> 0:02:54.920 like I said in the beginning of the conversation, like 0:02:55.520 --> 0:02:59.040 personal finances a genre. It's this little hackney, this kind. 0:02:58.880 --> 0:03:00.600 Of cliche, but Morgan does it well. 0:03:01.360 --> 0:03:04.840 Years ago, like twenty eleven, twenty twelve, I was a 0:03:04.880 --> 0:03:08.600 business insider Morgan was it the Motley Fool? And I 0:03:08.760 --> 0:03:13.160 said to my former colleague at BI Sam Row, Morgan 0:03:13.240 --> 0:03:15.799 is the first personal finance writer that I like. And 0:03:16.200 --> 0:03:17.440 now here's this huge. 0:03:17.280 --> 0:03:20.079 That's high praise. High praise from that means I was. 0:03:20.120 --> 0:03:22.359 I just want to say I was long Morgan Household 0:03:22.720 --> 0:03:23.360 very early on. 0:03:23.520 --> 0:03:23.840 I was. 0:03:23.919 --> 0:03:26.519 I was long Joe during that period as well as well. 0:03:26.600 --> 0:03:28.680 So this is this is open up to Since then, 0:03:29.040 --> 0:03:31.040 I've always I feel like I've always done the same 0:03:31.080 --> 0:03:32.960 thing since two thousand and eight when I started this, 0:03:33.120 --> 0:03:35.560 which was you know you mentioned most personal finance writing 0:03:35.760 --> 0:03:38.000 kind of falls into two buckets. It's either here's the 0:03:38.040 --> 0:03:40.880 credit card you should you should use, or here's the 0:03:40.920 --> 0:03:44.120 hot stock you should buy. The credit card part, you know, 0:03:44.240 --> 0:03:46.000 I was never just I was never that interested in it, 0:03:46.200 --> 0:03:49.200 and the here's the stock you should buy always felt 0:03:49.360 --> 0:03:51.760 almost immoral to me because you don't know who's reading 0:03:51.840 --> 0:03:54.200 your stuff. Is this an eighteen year old day trader 0:03:54.320 --> 0:03:55.960 or a ninet year old widow? Like who are you 0:03:56.000 --> 0:03:58.640 recommending this to? So because of that, I always I 0:03:58.680 --> 0:04:01.440 just kind of naturally fell into this bucket of like 0:04:01.720 --> 0:04:03.400 what's going through people's heads. I don't want to give 0:04:03.400 --> 0:04:05.400 anybody advice. I don't want to tell anybody what to 0:04:05.400 --> 0:04:07.680 do because I don't know you, but I'm really curious 0:04:07.680 --> 0:04:10.280 what's going on inside your head. Particularly I started as 0:04:10.320 --> 0:04:12.080 a writer in two thousand and eight, so the world 0:04:12.160 --> 0:04:14.640 was falling to pieces, and it was just this idea 0:04:14.680 --> 0:04:17.239 of like, well, what the heck just happened here? Yeah, 0:04:17.279 --> 0:04:20.159 And I think once I kind of realized that you 0:04:20.200 --> 0:04:23.040 could not explain two thousand and eight through the lens 0:04:23.080 --> 0:04:25.480 of a finance or an economics textbook. It's just not 0:04:25.720 --> 0:04:29.120 in there to explain the bubble, the bus, the bailouts, 0:04:29.279 --> 0:04:32.160 not an economics textbook. But psychology had a lot to 0:04:32.160 --> 0:04:35.000 say about it. Sociology like keeping up the Joneses that 0:04:35.080 --> 0:04:37.360 perfectly explained the housing bubble. So there are all these 0:04:37.400 --> 0:04:40.080 other fields outside of finance that filled in the gaps. 0:04:40.440 --> 0:04:41.880 So that to me was like, ah, I'm just really 0:04:41.920 --> 0:04:45.160 interested in how you can connect psychology and sociology and 0:04:45.200 --> 0:04:48.279 political science to try to explain what people are thinking 0:04:48.400 --> 0:04:50.000 rather than what they should do. Yeah. 0:04:50.040 --> 0:04:52.880 Both Joe and I we sort of started our financial 0:04:52.960 --> 0:04:58.640 journalism careers around two thousand and eight, and it was 0:04:58.680 --> 0:05:00.320 a great time to do it because you're sort of 0:05:00.360 --> 0:05:02.599 on the same level as everyone else. No one knew 0:05:02.640 --> 0:05:05.000 really what was going on, but talk to us a 0:05:05.040 --> 0:05:08.159 little bit more than about your approach. How does taking 0:05:08.200 --> 0:05:12.640 that sociological or psychological angle actually inform the way you 0:05:12.760 --> 0:05:14.279 think about personal finance investing. 0:05:14.360 --> 0:05:16.800 We let's say there's two elements to this. One is 0:05:16.920 --> 0:05:19.200 I'm a writer, and then the other is I'm interested 0:05:19.240 --> 0:05:21.360 in behavioral finance, and you really have to mix both 0:05:21.360 --> 0:05:23.680 of those because in writing, particularly as a finance writer, 0:05:24.000 --> 0:05:26.880 if you're just writing about data and charts, like a 0:05:26.960 --> 0:05:29.240 lot of people, even in the industry, it's like it's boring, 0:05:29.279 --> 0:05:30.520 You're not going to catch you. So you got to 0:05:30.520 --> 0:05:33.080 tell a good story. And so I'm always trying to 0:05:33.120 --> 0:05:35.839 find examples from fields that have nothing to do with 0:05:35.920 --> 0:05:39.359 finance that explain how people think about greed and fear 0:05:39.400 --> 0:05:41.560 and risk, because not only do I think that gets 0:05:41.560 --> 0:05:43.800 you closer to the truth of what's happening in finance, 0:05:43.839 --> 0:05:45.840 if you can really get like, why are people thinking 0:05:45.839 --> 0:05:48.360 the way they are? But from a writing standpoint, I 0:05:48.360 --> 0:05:50.040 think it's more interesting if you can be like, oh, 0:05:50.080 --> 0:05:53.080 here's a story from World War two that explains how 0:05:53.080 --> 0:05:54.800 people think about risk, and let me tell you how 0:05:54.800 --> 0:05:58.320 that bleeds into finance. I think it's more interesting as 0:05:58.360 --> 0:06:00.000 a writer to catch people's attention that way. 0:06:00.200 --> 0:06:03.320 So we're recording this at an event in Huntington Beach 0:06:03.400 --> 0:06:06.680 at Future Proof isn't one of your most famous stories 0:06:06.880 --> 0:06:10.600 about parking cars in Los Angeles at one point being 0:06:10.640 --> 0:06:11.080 a valet. 0:06:11.200 --> 0:06:13.599 So yes, it was a hotel here in Los Angeles 0:06:13.880 --> 0:06:16.440 that I was a valet at during college, and it 0:06:16.480 --> 0:06:18.279 was a high end, five star hotel, a lot of 0:06:18.360 --> 0:06:21.800 rich people coming through, and there was one member who 0:06:21.880 --> 0:06:25.440 was just an absolute animal with money. He was very, 0:06:25.560 --> 0:06:27.479 very wealthy. I think he was worth hundreds of millions 0:06:27.520 --> 0:06:30.800 of dollars and money has never burnt a hole in 0:06:30.839 --> 0:06:34.560 someone's pocket so fast. He wandered around, he was he 0:06:34.600 --> 0:06:36.840 was always drunk, and he wandered around with a stack 0:06:36.839 --> 0:06:40.360 one hundred dollar bills I swear six inches thick, and 0:06:40.440 --> 0:06:43.520 he would just flash money like no other. And we 0:06:43.560 --> 0:06:45.400 did a lot of errands for this guy. As a 0:06:45.480 --> 0:06:48.120 vala tipped very well. And one day he came to 0:06:48.160 --> 0:06:50.559 one of my colleagues and he peeled off a thick 0:06:50.960 --> 0:06:53.039 stack of one hundred dollars bills and he said, go 0:06:53.120 --> 0:06:55.560 down to the jewelry store down the street and buy 0:06:55.560 --> 0:06:57.359 me some gold coins. I think there were a thousand 0:06:57.400 --> 0:07:00.000 dollars gold coins. And he came back any gold courts 0:07:00.360 --> 0:07:03.120 and this guy with a group of friends sat there 0:07:03.160 --> 0:07:07.280 at the Pacific Ocean skipping a gold coins to see 0:07:07.279 --> 0:07:09.400 how far they could go. Oh my god, And I 0:07:09.480 --> 0:07:11.880 remember thinking I was twenty one at the time, and 0:07:11.920 --> 0:07:14.280 I remember watching this and thinking like, how long can 0:07:14.360 --> 0:07:18.160 this last? And it was probably ten years later that 0:07:18.280 --> 0:07:20.040 I said, what's this guy up to? And I googled 0:07:20.040 --> 0:07:21.880 his name and sure enough, he went bankrupt. He went, 0:07:21.920 --> 0:07:23.440 his company went out of business. He went, And it 0:07:23.520 --> 0:07:24.880 was like, when I saw the headline, he was like, 0:07:24.920 --> 0:07:27.680 of course, of course this guy. So to me, it 0:07:27.680 --> 0:07:30.760 was always so interesting that he was so smart. He 0:07:30.840 --> 0:07:34.080 was an entrepreneur who made a lot of his companies 0:07:34.120 --> 0:07:37.520 built parts for satellites, and he had a patent that's 0:07:37.600 --> 0:07:39.800 in every Wi Fi device, Like he was such a 0:07:39.840 --> 0:07:44.280 genius technically, but his relationship with money was so broken 0:07:44.640 --> 0:07:47.080 and so bad. So that was like, it doesn't matter 0:07:47.120 --> 0:07:49.880 how smart you are, it's not about like what your 0:07:49.880 --> 0:07:53.120 IQ is. If your behavior with money is wrong, you're done. 0:07:53.240 --> 0:07:55.440 It's out. And then there's a flip side of that. 0:07:55.440 --> 0:07:57.000 It's true too, which is that some people who are 0:07:57.040 --> 0:08:00.160 not that intelligent by their test scores or whatever, but 0:08:00.200 --> 0:08:02.840 they have a great behavior with money can do spectacular 0:08:02.840 --> 0:08:03.240 over time. 0:08:03.480 --> 0:08:06.040 I'm probably taking the wrong lesson away from this anecdote, 0:08:06.080 --> 0:08:07.960 but did anyone go after the coins? 0:08:08.440 --> 0:08:09.000 For all I know? 0:08:09.040 --> 0:08:12.560 They're still there all right later today, Joe, this is 0:08:12.640 --> 0:08:14.920 this is this is good to know. So this is 0:08:15.160 --> 0:08:17.400 you know, obviously there are going to be individuals who 0:08:17.400 --> 0:08:19.800 maybe don't have high income but or do a good 0:08:19.840 --> 0:08:22.840 job of accumulating savings over years, or people of massive 0:08:22.840 --> 0:08:25.480 incomes that blow it all kinds of things. You know, 0:08:25.560 --> 0:08:28.640 you always hear these other stories about the cohorts and 0:08:28.720 --> 0:08:31.920 people who went through something together, like people who came 0:08:31.960 --> 0:08:34.840 out of the Great Depression and then they like you know, 0:08:34.840 --> 0:08:37.120 were like hoarders or something like that, or people who 0:08:37.160 --> 0:08:40.040 came out of whatever it is. Is that true? People 0:08:40.080 --> 0:08:43.040 say that all the time, or people experience like the 0:08:43.080 --> 0:08:45.840 inflation in Wymar Germany and support like when you in 0:08:45.880 --> 0:08:48.000 your research when you read take It, you read a 0:08:48.000 --> 0:08:50.000 ton of history, like does that seem to be a 0:08:50.040 --> 0:08:50.439 real thing? 0:08:50.559 --> 0:08:53.480 Yeah, definitely. I think every generation experiences the economy in 0:08:53.520 --> 0:08:56.160 their own unique way, and those experiences, particularly what you 0:08:56.200 --> 0:08:59.040 experience in your teens and twenties, like your formative years 0:08:59.040 --> 0:09:01.000 where you're starting to pay it attention to the economy 0:09:01.280 --> 0:09:03.640 really sticks with you. Everyone is seen or probably heard 0:09:03.640 --> 0:09:05.760 of the studies about the generation that went through the 0:09:05.760 --> 0:09:07.680 Great Depression, and then right after that it was World 0:09:07.720 --> 0:09:10.880 War Two. So that was fifteen years of hell, and 0:09:10.920 --> 0:09:12.760 those people coming out of it like that stayed with 0:09:12.800 --> 0:09:15.320 them forever, and there's been academics who have measured how 0:09:15.400 --> 0:09:18.560 that impacted them. They're very scared of debt, didn't want 0:09:18.559 --> 0:09:21.040 to invest in the stock market way more so even 0:09:21.080 --> 0:09:23.640 when you talk about people in warmer Germany, or that 0:09:23.679 --> 0:09:26.240 people went through World War Two in Germany or in 0:09:26.280 --> 0:09:30.080 France or in Russia, those people were completely scarred economically 0:09:30.080 --> 0:09:32.800 for the rest of their lives. And more recently, all 0:09:32.800 --> 0:09:35.920 three of us became young adults in the early two thousands, 0:09:35.960 --> 0:09:38.160 So for me nine to eleven was the first like 0:09:38.280 --> 0:09:41.760 adult big event and then so that was massive, and 0:09:41.800 --> 0:09:45.720 I think for our parents' generation, who were adults in 0:09:45.720 --> 0:09:48.720 the nineteen nineties, when things were so at least in 0:09:48.760 --> 0:09:52.800 relative terms, calm, stable, prosperous, not just economically but politically 0:09:52.920 --> 0:09:56.200 and geopolitically, we're like so solid and there was a 0:09:56.240 --> 0:09:58.480 recession or you know, there's a hiccup at ninety four 0:09:58.480 --> 0:10:00.120 and ninety eight, but for most people that was like 0:10:00.200 --> 0:10:02.040 unless you were a bond trader, didn't matter. The nineties 0:10:02.080 --> 0:10:04.880 were great. Nine to eleven was like, oh wow, like 0:10:05.160 --> 0:10:07.000 we really got knocked down here, but that was a 0:10:07.000 --> 0:10:09.679 one time event, like America is still as strong as 0:10:09.679 --> 0:10:11.679 it's ever been. And then in two thousand and eight, 0:10:11.679 --> 0:10:14.080 I was like, wow, we got knocked down again, like 0:10:14.400 --> 0:10:16.560 two times in the last eight years. That's pretty bad. 0:10:16.920 --> 0:10:19.880 And then COVID twenty twenty, it's like the world broke again, 0:10:20.760 --> 0:10:24.280 like three times in twenty years. The world has broken 0:10:24.360 --> 0:10:25.880 in the United States, and I think that is like, 0:10:26.440 --> 0:10:29.160 what's the quote, fool me wants shame on you for 0:10:29.240 --> 0:10:31.360 me twice. Now that people have been fooled, so to speak, 0:10:31.440 --> 0:10:34.079 three times in twenty years, I think we now our 0:10:34.200 --> 0:10:39.320 generation believes that the world breaks every five to ten years, 0:10:39.320 --> 0:10:41.960 and I think that's a good I think that's the truth. 0:10:42.360 --> 0:10:45.440 I think the previous generation that was America strong and 0:10:45.480 --> 0:10:48.160 stable and nothing bad happens, that was the anomaly, and 0:10:48.240 --> 0:10:52.000 I think I think we're a more pessimistic generation because 0:10:52.000 --> 0:10:52.320 of it. 0:10:52.520 --> 0:10:55.240 So I was kind of going to go into that, 0:10:55.320 --> 0:10:57.880 you know, the one thing that I've been really fastened 0:10:57.960 --> 0:11:01.480 by over the last few years is what sort of 0:11:01.520 --> 0:11:04.160 strikes me, and particularly in like market it's an investing 0:11:04.480 --> 0:11:07.360 is this sort of like I almost call it like 0:11:07.400 --> 0:11:10.160 a sort of like nihilistic bullishness, like you saw it 0:11:10.200 --> 0:11:13.040 like buying NFTs or duage coin or whatever, where it's like, 0:11:13.080 --> 0:11:16.600 on some level it looks like optimistic speculative activity like 0:11:16.640 --> 0:11:19.120 maybe we saw in the late nineties, but it also 0:11:19.240 --> 0:11:21.080 has this sort of like edge of like none of 0:11:21.080 --> 0:11:22.120 this really means anything. 0:11:22.360 --> 0:11:25.960 You're knowingly chasing a bubble or buying a lottery because 0:11:25.960 --> 0:11:27.440 there's no other way to make money for the. 0:11:27.480 --> 0:11:30.840 Wall Street bets like bragging about going broken your robin 0:11:30.840 --> 0:11:32.680 hood thing. Like it seems like we're in this era 0:11:32.760 --> 0:11:35.440 of like speculation but not coming out of a place 0:11:35.440 --> 0:11:36.000 of optimism. 0:11:36.240 --> 0:11:39.160 Yeah. I almost think like the yolo mentality of trading 0:11:39.240 --> 0:11:41.080 NFTs or whatever it may be, is actually like comes 0:11:41.080 --> 0:11:44.320 from a very pessimistic place. If you're optimistic, then you're like, 0:11:44.360 --> 0:11:46.320 I want to own the S and P five hundred for 0:11:46.320 --> 0:11:49.800 the next fifty years. That's optimism. Pessimism is it's all 0:11:49.840 --> 0:11:51.920 going to go to hell anyways, Let's just throw it 0:11:51.920 --> 0:11:54.720 all on an NFT yeah, so it looks from the 0:11:54.720 --> 0:11:58.520 outset like a very like bullish, Like I'm so bullish 0:11:58.559 --> 0:12:00.120 on crypto. I know. I think it comes from a 0:12:00.120 --> 0:12:02.760 pessimistic place. You made this point years ago that stuck 0:12:02.800 --> 0:12:05.720 with me during the gold bubble, if we call it 0:12:05.760 --> 0:12:09.360 that around twenty eleven, that there's nothing more pessimistic than 0:12:09.440 --> 0:12:12.960 betting on a rock. It's like, if you're optimistic, you 0:12:12.960 --> 0:12:15.480 bet on people. And how pessimistic do you have to 0:12:15.520 --> 0:12:18.640 be to say a rock is going to outperform humans? 0:12:19.040 --> 0:12:20.880 It's like the most pessimistic thing. And I think there's 0:12:21.040 --> 0:12:23.319 a very like there's an analogy in there with NFTs. 0:12:23.440 --> 0:12:24.080 Yeah. 0:12:24.120 --> 0:12:27.480 Wait, I take the point about people being pessimistic about 0:12:27.480 --> 0:12:31.840 these big sort of sociological breaks breaks in society. But 0:12:32.080 --> 0:12:34.040 if you look at the legacy of the two thousand 0:12:34.040 --> 0:12:39.360 and eight financial crisis, it wasn't necessarily a terrible time 0:12:39.520 --> 0:12:43.080 to start accumulating wealth and money. You know, if you 0:12:43.360 --> 0:12:45.400 bought the S and P five hundred in two thousand 0:12:45.400 --> 0:12:49.160 and nine, right up until twenty twenty, you'd be doing 0:12:49.800 --> 0:12:53.040 reasonably well. Like, what do you think the legacy is 0:12:53.360 --> 0:12:57.440 of that particular era where we're still sifting through the 0:12:57.440 --> 0:12:59.960 wreckage of two thousand and eight, we have ultra low 0:13:00.160 --> 0:13:04.280 interest rates. Everyone's worried about deflation and subpar growth. 0:13:04.400 --> 0:13:06.400 I remember, I don't know if it was twenty eleven, 0:13:06.480 --> 0:13:08.959 So if I'm getting this date wrong, I'm sorry, but 0:13:09.000 --> 0:13:10.680 I remember I think it was twenty eleven and the 0:13:10.720 --> 0:13:13.400 market went up substantially. Does that sound right to you? 0:13:13.520 --> 0:13:16.640 Twenty eleven? I think twenty twenty five percent? It was. 0:13:16.760 --> 0:13:17.920 Maybe it was twenty ten. 0:13:17.920 --> 0:13:20.360 Twenty even bought him in October. 0:13:20.920 --> 0:13:24.080 Maybe I was twenty year year. Maybe it was twenty ten. 0:13:24.080 --> 0:13:25.760 Maybe it's twenty twelve. I forget the year, but the 0:13:25.800 --> 0:13:28.120 market went up twenty twelve. I think maybe it's twenty twelve. 0:13:28.160 --> 0:13:30.280 The market went up twenty or twenty five percent. And 0:13:30.320 --> 0:13:32.760 I think it was Gallup who pulled Americans and said, 0:13:33.200 --> 0:13:35.520 did the stock market go up or down this year? 0:13:36.200 --> 0:13:38.480 And it was like sixty percent of Americans thought the 0:13:38.520 --> 0:13:41.240 market went down during a year when it went up 0:13:41.400 --> 0:13:43.920 twenty five percent. I actually think this was two thousand 0:13:43.960 --> 0:13:46.480 and nine, which makes sense. Okay, it makes more sense, right, 0:13:46.600 --> 0:13:49.120 And so that wasn't I think this explains the question 0:13:49.240 --> 0:13:51.599 of like, in hindsight, it was a great time to 0:13:51.640 --> 0:13:53.920 accumulate assets. But during the time, even a year when 0:13:53.920 --> 0:13:56.200 the market went up twenty five percent, people were so 0:13:56.240 --> 0:13:58.880 sure that the economy was bad that they assumed the 0:13:58.960 --> 0:14:02.439 market went down. And Joe, both of you will remember this, 0:14:03.360 --> 0:14:07.080 from basically twenty nine to twenty sixteen, if you were 0:14:07.120 --> 0:14:08.960 a bullish on the stock market, you looked kind of 0:14:08.960 --> 0:14:11.000 like a fool and you got dragged on Twitter. This 0:14:11.160 --> 0:14:13.000 was like, oh, the cape ratio is too high, and 0:14:13.040 --> 0:14:15.360 there was all this. So in hindsight it was a 0:14:15.480 --> 0:14:19.120 generational buying opportunity, but it was that's all hindsight. It 0:14:19.160 --> 0:14:21.560 was very hard to be bullish during that era, and 0:14:21.640 --> 0:14:24.080 a lot of it was twenty eleven was double dip 0:14:24.080 --> 0:14:27.280 recession right around the corner, and the idea that the 0:14:27.320 --> 0:14:29.280 financial crisis of two thousand and eight was just to 0:14:29.320 --> 0:14:32.240 prelude to what was to the big crash that was coming. 0:14:32.840 --> 0:14:35.040 That was a very popular view during those years, and 0:14:35.080 --> 0:14:36.840 I think it was it was really hard to be 0:14:36.880 --> 0:14:37.560 a long term goal. 0:14:54.280 --> 0:14:58.120 So we talked about this in the intro. This phenomenon 0:14:58.160 --> 0:15:01.000 of like people started like anchoring to what they know, 0:15:01.280 --> 0:15:05.200 and I feel like for a lot of people like ZERP, 0:15:05.800 --> 0:15:08.720 really low nominal interest rates like, oh, that's normal, and 0:15:08.760 --> 0:15:10.840 what we have right now, where like the ten years 0:15:10.920 --> 0:15:13.840 yielding four percent and a mortgage is over seven percent, 0:15:14.320 --> 0:15:17.680 that feels like aberrationally high. Like again, going sort of 0:15:17.680 --> 0:15:19.720 back to the past, like does it take a while? 0:15:19.800 --> 0:15:21.560 I mean it must you sort of as you describe it, 0:15:21.640 --> 0:15:23.320 like it seems to like take a while for like 0:15:23.360 --> 0:15:25.400 at this sink in that It's like, no, that was 0:15:25.600 --> 0:15:29.119 that was then, and it wasn't necessarily like normal or abnormal, 0:15:29.160 --> 0:15:30.080 but that was a different time. 0:15:30.120 --> 0:15:31.960 I think that that does make sense. But the counter 0:15:32.000 --> 0:15:34.440 to that would be in the other direction. You know, 0:15:34.520 --> 0:15:37.200 in the late nineties, a mortgage was seven percent run 0:15:37.240 --> 0:15:39.600 by two thousand and three it was three or four percent, 0:15:39.680 --> 0:15:41.800 And I think people got used to that really quickly. 0:15:42.240 --> 0:15:44.600 That was kind of the basis of the housing bubble 0:15:44.600 --> 0:15:46.160 that peaked in two thousand and six, is that by 0:15:46.200 --> 0:15:48.160 two thousand and six people were already completely used to 0:15:48.160 --> 0:15:50.520 low interest rates that didn't exist four years prior. 0:15:50.640 --> 0:15:51.240 That's wild. 0:15:51.280 --> 0:15:54.120 So I do think people get accustomed to it fairly quickly. 0:15:54.200 --> 0:15:55.920 And a lot of that, I mean, at the corporate level, 0:15:55.960 --> 0:15:58.560 a lot of that debt rolls over every five years, 0:15:58.640 --> 0:16:00.640 so there's gonna be like that, the credit cycle is 0:16:00.640 --> 0:16:02.920 going to wash out in a fairly quick period of time. 0:16:03.200 --> 0:16:05.960 But interest rate cycles are also pretty long. Like interest 0:16:06.040 --> 0:16:08.560 rates bottomed after World War Two in the early fifties 0:16:08.680 --> 0:16:11.280 and then peaked in the late or the early eighties, 0:16:11.320 --> 0:16:13.280 Like it was a really long cycle for them to 0:16:13.280 --> 0:16:14.920 go from three percent to fifteen percent. 0:16:15.480 --> 0:16:19.800 What sort of different behavioral patterns do you observe between 0:16:20.080 --> 0:16:23.360 eras of low interest rates versus eras of high interest rates. 0:16:23.400 --> 0:16:26.000 I think because the interest rate cycles are so long, 0:16:26.080 --> 0:16:27.960 and there's only been a couple cycles in the post 0:16:28.000 --> 0:16:30.480 World War two era, it was like they went, what. 0:16:30.400 --> 0:16:32.640 Were people in the nineteen sixties doing? Tell us? 0:16:32.720 --> 0:16:35.000 So much of that debt, though, didn't really exist, like 0:16:35.320 --> 0:16:37.120 at the end of World War two and forty five, 0:16:37.200 --> 0:16:40.200 consumer credit barely existed at all. In fact, a lot 0:16:40.240 --> 0:16:43.200 of the GI Bill was introducing new forms of consumer 0:16:43.280 --> 0:16:45.720 credit to make sure the economy didn't collapse after World 0:16:45.720 --> 0:16:47.680 War Two. It was like, we want you to be spenders, 0:16:48.040 --> 0:16:50.560 so like credit cards and installment loans. A lot of 0:16:50.560 --> 0:16:53.440 that just exploded after World War Two. But then the 0:16:53.600 --> 0:16:55.760 rates were so high during that period that it really 0:16:55.800 --> 0:16:58.800 wasn't until the nineties that consumer credit just like exploded, 0:16:59.000 --> 0:17:02.200 So we don't have that much history about what it is, 0:17:03.000 --> 0:17:05.080 and so I don't think there's a ton of precedent 0:17:05.320 --> 0:17:07.119 for what we're dealing with in terms of like the 0:17:07.160 --> 0:17:10.359 consumer credit. But there's also a thing where you've seen 0:17:10.520 --> 0:17:11.959 I know, Joe, you've seen this chart. I think you've 0:17:12.000 --> 0:17:15.040 tweeted this chart of as a percentage of income, household 0:17:15.040 --> 0:17:18.280 debt payments right now are actually very low, like historically 0:17:18.520 --> 0:17:20.680 near the bottom that they've been in the last forty years. 0:17:21.080 --> 0:17:22.840 So if you just look at the nominal amount of 0:17:22.880 --> 0:17:25.840 household debt, it looks scary, but actually, as like a 0:17:25.840 --> 0:17:28.840 percentage of income, it's actually very low right now. 0:17:29.280 --> 0:17:34.639 You know, Obviously, economists, like macroeconomists, the last real inflationary 0:17:34.640 --> 0:17:37.639 period that anyone remembers was the seventies. And interestingly, like 0:17:37.720 --> 0:17:40.520 I sort of the grandees of economics, many of them 0:17:40.800 --> 0:17:44.439 came during the seventies, So like looms very large. But 0:17:44.560 --> 0:17:49.000 setting aside like how academic economists think from the from 0:17:49.040 --> 0:17:51.760 your perspective, we're looking at sociology and history, etcetera, Like, 0:17:52.119 --> 0:17:54.040 does this remind you of the seventies or is that 0:17:54.119 --> 0:17:57.119 just sort of like a fake analogy because inflation was 0:17:57.200 --> 0:17:57.800 high then too. 0:17:57.920 --> 0:18:00.280 I think the seventies were really unique too, because because 0:18:00.280 --> 0:18:04.119 in addition to inflation that was so crippling, there was 0:18:04.160 --> 0:18:07.320 so much social unrest between Vietnam. All of that blended 0:18:07.320 --> 0:18:09.639