#377 - Morgan Housel - The Psychology of Money, Incentives, Investing, & Human Misjudgement

Chris Powers: Morgan, thanks for joining me today. I really appreciate it. 

Morgan Housel: Thanks so much for having me, Chris. Happy to be here. 

Chris Powers: You told this story last year, and as I was doing some research, it came up again. I thought we would start with, you grew up ski racing and you had two friends that grew up doing that with you, and there was a series of things that happened that maybe changed the way you looked at life. So, can we start there? 

Morgan Housel: Yeah, I grew up as a ski racer in Lake Tahoe, California. It was an awesome way to have my childhood and my teenage years. I was skiing five or six days a week, 10 months a year. There were about a dozen of us on the Squaw Valley ski team. We skied all over the world. It was awesome. And something happened when I was 17 years old, this was 2001. I was skiing with my two best friends who were both on the ski team, and we would ski out of bounds, which is illegal. You're not supposed to do it. You duck under the ropes that say do not cross, but that's where you have the best skiing. And we knew this was dangerous. We knew you're not supposed to do it. There's no chairlift when you do this at the bottom. It just would spit us out on a backcountry road and we would hitchhike back to the mountain. But it's where you get this amazing untracked skiing, which is awesome. So, because we were young and dumb, we did it all the time. And one day in February 2001, my two friends and I, we did this run on the backside of Squaw Valley. If you're familiar, it's on the backside of the KT-22 chairlift at Squaw. And it's awesome. It's amazing. And when we were skiing down, we triggered this small avalanche. And it was the first time that I'd ever felt it in my life. I'd been skiing my whole life, but I never felt an avalanche, and it was like an unmistakable, unforgettable feeling because, all of a sudden, very abruptly, you're not in control anymore because when you're skiing normally, you push on the ground to gain traction. That's how you control yourself. But in an avalanche, the ground is pushing you. You have no control whatsoever. And so, the best you can do is like remain upright and keep skiing and just hope it ends. And this was a small avalanche. It did end. At the bottom, we like laughed and high-fived and hitchhiked back. My two friends, Brendan and Brian, who were with me, they were like, let's go do that run again. And I didn't want to. I was like, I'm not into it. I honestly don't know why. If I look back, I think the hitchhiking freaked me out. I always thought we were about to be abducted kind of thing. I just didn't like hitchhiking. And so I was like, hey, why don't you guys go do it again? And rather than hitchhiking, I'll drive my truck around and pick you guys up. And they're like, great, let's do it. We went our separate ways. 30 minutes later, I go to pick them up, and they weren't there. And I didn't think much of it at the time. We didn't have cell phones back then. This is 2001. Cell phones are still like a novelty. We didn't have any. So people were very comfortable like being out of touch. So, the fact that I didn't know where they were, it was like not that big of a deal. I just kind of like went about the rest of my day. And then later that day, I realized that no one had seen them. And Brian's mom called me, I think it was about 4 p.m., and she said, hey, Brian never showed up for work today. And I just learned that Brendan, my other friend, didn't show up for a dentist appointment today. Do you know where they are? And I said, yeah, we skied the backside of Squaw this morning out of bounds. I was going to pick them up, but they never showed up. And no one's seen them since. And Brian's mom, who was an expert skier herself, is still an expert skier herself, I think she immediately knew this is 5 Alarm Fire. And so we went out looking for them. The hours dragged on. We eventually filed a missing persons report to police. Eventually, search and rescue got on the mountain about midnight. And to fast forward from there, the next morning at about 9 a.m., search and rescue found their bodies buried under a massive avalanche. So when we had skied that run before, we very likely loosened up the snow. And then when they skied it after me, it triggered this enormous avalanche that nobody could survive. Avalanches are unbelievably powerful. They're not waves, they're tsunamis, is the best analogy. And so, look, I always use that as, I'm sure you and everyone listening to this have lost people dear to you. I know I'm not unique in that story, but it had, as it does for everybody, it had a huge impact on me. I was young and it so easily could have, should have been me with them. It was just the dumbest stroke of luck that I said, why don't you- like I don't like hitchhiking. Why don't you guys do it? We never did it. We always stuck together. And this one run that I didn't go on is the run where it all falls apart. And so, one of the things that impacted me, I didn't realize it at the time, I think it was maybe 15 years later that I started thinking about this, but after that moment in my life, my risk tolerance plunged. It hit the floor for all aspects in my life. It was like before that day, I was young and dumb and reckless as a lot of 17-year-old boys are. And after that, I was like, I'm driving the speed limit. I'm wearing my seat belt. I'm following the rules. And I'm not like a perfect rule follower, but I think that moment in my life really shaped how I think about risk, as I'm sure it has for other people who've dealt with similar things and had near-death experiences. And so, I wrote about that several years ago as just a point in my life when I really learned brute force, blunt force how risk works, and it had a huge impact on me.

Chris Powers: Do you think that's unique to you that an experience like that would make you think about risk so differently, or are there people where that could happen over and over and over again and they never really think about it any differently? 

Morgan Housel: I think it's not in the slightest unique to me. I think literally everyone has their own version of the story. It's a different story, and I think like literally everyone has that story even if they don't know it. So, a lot of people, maybe they had a really rough childhood, and they don't really remember it, they don't remember their parents fighting when they were two years old, but it had an impact on their psychology. Their brain remembers it. It had an impact on how they think about risk and love or whatever it might be. They were bullied as a kid. They might not even remember it anymore, but it impacts how they think about risk and friendships and safety and whatnot. So at the highest level, all of us, me, you, everyone listening, we are all prisoners to our past. We've all been shaped by what we've seen. And you and I can learn about how other people have dealt with risk. We can read about the Great Depression. We can read about World War II. We can read about other events that happened to other people, but nothing is going to be more persuasive than what we've actually experienced firsthand ourself. And I think you can extend that logic and that philosophy to almost every aspect in life. Why do people disagree about politics? Why do people disagree about business? Why do people disagree about marriage and friendships? Whatever it might be. 99% of the time, I think, they're not actually disagreeing with each other. They're talking over each other. People who've had different experiences in life and those different experiences have led to different needs, different wants, different outlooks end up talking over each other. And so, I think I'm not in the slightest unique in the fact that I've been shaped by my experiences. 

Chris Powers: This talking over each other, is this something that's global, or is this more of a Western thing where we need to have the last word, we need to be right, we tend to be more isolated, we're not as familial as we are- as you see in other countries? Like, have you seen this across the globe, or has it even been something that you've watched? Or is this more of a Western thing? 

Morgan Housel: I don't think it's a Western thing; I think it's a tribal thing, and it happens to be the case that in America, we have more tribes than they might in France or Germany or Italy that tend to be more homogenous. I think that's what it is. And what makes America great is that we have dozens of tribes, not just political parties, but states, cultures. I mean, compare California to Alabama. You don't have that kind of contrast in Germany or in the UK. There is contrast between London and out in the country in the UK, but it's not the extent... that's what makes America amazing. But it makes it so I think that the disagreements, the debates tend to be so much starker than they would be in Japan or China or whatnot.

Chris Powers: Is the gasoline on the fire the fact that you said earlier, you said comfortable being out of touch. Well, now everybody's in touch 24/7 at all times. Is the gasoline on this kind of tribe against tribe the fact that we are so interconnected and it's just like this boiling pot 24/7? 

Morgan Housel: Yeah, there's a great quote from Benedict Evans where he says, the more people learn about other opinions online, the angrier they get that other opinions exist. I think it's really true that if you and I were in 1990 or 1980, people had very starkly different political opinions and economic opinions back then, but by and large, you were oblivious to other people. We were getting our news from the same NBC nightly news and the same New York Times, and we're all more or less reading the same stuff. So when we went out to a bar or a coffee shop or had dinner guests, then you had a lot of stark conversations, but I didn't know what you were talking about. I live in Seattle, you live in Texas. It's great now that we live in a world where I can follow you on Twitter, you can follow me, and we know what each other thinks, but that didn't exist that long ago. And so, it is, at the same time, I think the best thing that's happened to modern society. And I'm not going to say the worst, but the craziest, the most volatile thing that's happened to society. I still think it's a net positive. I would rather live in a world where people are aware of how other people think even if they're angry about it than in a world where people are oblivious to how other people think. And I think in the previous world where people were oblivious to what else was going on, it led to these like sudden catastrophic blowups, whether that was like World War II or the Great Depression or all these things, whereas like, oh my God, I had no idea this was going on in this part of the world, but now just all of a sudden, it hit me like a ton of bricks. Whereas now I think we are much more aware of how fragile and diverse and opinionated the rest of the world is. It can make you angrier, it can reduce your sleep, but I think it's a healthier way to put some sunlight on how different people are. 

Chris Powers: Okay, you've spent time obviously studying human psychology. Do you have an opinion, like is there a point in time where this all becomes normalized, where not every day is this race to be right, and it just becomes kind of this is how we live? There's lots of opinions, people can digest them. Like do we get over this kind of chasm, or do we just kind of live in this perpetual, I don't want to call it angst, but this perpetual need to be right forever?

Morgan Housel: I think individually people can. I think I've done a better job personally at becoming less angry of what I see online. And if I compare myself today to five or ten years ago, some of it might be like I have kids now and I'm busier, I don't have time to just sit there and doom scroll. But I think you get to a point where you're like, no, it's a game. It's just a game of attention and whatnot. And the truth is that the goal of the internet is to get attention. At the highest level, that's what it is. And nothing gains attention more than anger. So if you want to get attention as a contributor online, the fastest way to do it is anger. And I think once I came to terms with that game, it's not that I think all the anger is unnecessary, there's a lot to be upset about in the world, but you see the game for what it is. And I've had this experience, I'm sure you have, of people who I might really disagree with online and think that person's nuts. That's crazy. And then I have dinner with them, I go to a bar with them, and I'm like no, we actually agree on 95%. Like I have slight disagreements here and there, but you're actually very reasonable. But you seemed unreasonable online because you and others and maybe me at the time were trying to be angry because that's what is rewarded online. So I think at the society level, we'll never get away from that because that is the currency of status and you gain status from anger. So I have a hard time seeing how we will ever disengage from that, even if individually, I think more people are learning. The longer they're online, the more I think they just tire of it and they can learn what the game is. 

Chris Powers: Do you know why anger is the flavor of the day? Why is it anger that draws people the most? 

Morgan Housel: Well, I think there's two things that gain you attention. It's anger and humor. Those are the two things that draw people in. You can also gain attention by being smart, but it's really difficult because you're asking a lot of the reader. You're like, hey, like please focus deeply on what I'm saying here. And that's asking a lot of the reader. But if you're angry or funny, people can understand it instantly. If you watch a Chris Rock documentary or George Carlin special, you don't need to spend any mental bandwidth trying to figure out what he's saying. You just sit there and watch it and you're like, oh, it's funny. I get this instantly. And anger is the same. I think if someone says something online about politics or the economy that is designed to make you angry, by and large, you don't need to spend any mental bandwidth to figure out what they're saying. It's just at surface level, you're like, yep, that's bad. I'm angry. So it requires the least amount of mental bandwidth from the reader or the viewer to understand what you're saying. Anger and humor do those things. 

Chris Powers: If you appear to be more angry, like if your reputation is anger, is it easier to be- like I'm trying to think of when somebody tries to say something funny, but they're typically an angry person, does it land as opposed to somebody that's always funny, they can almost say the angry thing and people don't take it as seriously? Like, do you tend to fall into one of the two buckets? Can you be angry and humorous or usually one or the other? 

Morgan Housel: I'm trying to think of someone who is a comedian but tries to be very serious sometimes. Maybe John Stewart would fall into that category of he's funny, but he's also not afraid to say, hey, like let me get serious for a second, here's how I feel. But I feel like most of them, like the genius of a good comedian is that they can say something that is very true and profound and emotional, but still be funny about it. So if you listen to like George Carlin or whatnot, he was absolutely genius. He was one of the smartest psychologists and just sociologists, even if he wasn't actually that, but he understood how the world worked better than almost anybody, and that's true for all the top comedians. But they can present that in a way that is not trying to make themselves look smart. It's not trying to make you angry. It's trying to make you laugh. And it's like that’s why people love them so much. It's like I am smarter, but I'm just being entertained instead of angered or told that I need to like grind my mental gears to do this. One of the reasons that I think anger will never go away is because being angry at someone else can be a really seductive feeling, an intoxicating feeling because if I am angry at you, I’m not by the way, I’m just using you as an example, if I say Chris is wrong about X, Y, and Z,  what I’m really saying is I'm smarter than Chris. I have higher morals than Chris. I'm more informed than Chris. That's what I'm actually saying to myself and that feels good. So, people love being angry at other people because, by default, what they're saying is I'm smarter and more moral and better informed than other people, and they love that thought. And so, I think for that reason, anger in politics and economics and business will never go away because you would think that counterintuitive- like who would want to be angry? Like it's no fun to be angry, but no, it's actually no, a lot of people love being angry because it makes them feel good about their own beliefs. 

Chris Powers: So it's a self-fulfilling prophecy, basically. 

Morgan Housel: I think so, yeah. 

Chris Powers: Oh, that just hit me at my core. When I think about the people I get the angriest at, it's usually rooted in that, which is some inner belief that I'm better than or smarter than. 

Morgan Housel: Yeah, I mean, you see this in investing, where if you see, if I disagree with your investing take, I will usually say something along, even if I'm not saying it directly, I have better data, I have better philosophies, I have better models than you do. And that's my disagreement with you. And of course, I would feel good about that. Or in politics, it is usually rooted in, I am better informed and more moral than you are. If you're angry at the other side, that's the core of what you're saying. And I'm not saying that- there are groups of people who are more or less moral than each other; of course, that exists. But that's why anger is so seductive and intoxicating, and that's why it never goes away. Like people actually enjoy the feeling of being pissed off at other people. 

Chris Powers: So the antidote to anger is like humility basically.

Morgan Housel: Yeah, and like let's not pretend that there's an easy anecdote to it. I can sit here and say all those things. It's not to say in the slightest that I don't get angry online or that I have strong beliefs. So that is at the core because at the core is tribal. Humans have always been and will always be tribal. You need a tribe just to make sense of the world. You need a really broad blunt force model of this is how the world works, and you're trying to take a real, like infinitely complex world and distill it down to a couple of basically bumper sticker beliefs, and you do this in every aspect of your life, and I think you have to. And you want to be part of your tribe. You don't want to be kicked out of the tribe, which means that you are much more likely to just accept those bumper sticker beliefs without actually poking into them and questioning them. And everybody does this. People are a fool if you think you don't do this. If you say, oh, I'm apolitical, I don't follow... like, I think that's bullshit. Almost everyone falls into one side or another. And they do this not just with politics, but for investing, economics, schools, like social cultures, everything can be tribal at some level, even if you don't know it. And that's always been the case and I think always will be.

Chris Powers: All right, you've mentioned behavior, you've mentioned investing, so we'll move there just a little bit. You've said, and it's been widely read, that you think that behavior drives investing more than knowledge. Can you just tell when you meet somebody, how long does it take you to tell if somebody would have the mental stamina to be a great investor? Is it certain things they're doing? Is it actions they're doing? Is it things they're saying? Like I would imagine you have a pretty good filter for this at some point. 

Morgan Housel: I think this is true for a lot of things, not just investing, but it's definitely true for investing, that you really don't know how someone acts until you see them react during a crisis, during a moment of stress. So you asked how long does it take? It takes as long as you need until there's some kind of crisis, either macro crisis or in that individual's life. It is not hard in the slightest to be a long-term disciplined investor during a bull market, and virtually everybody is. It's once a decade. It's literally like one month per decade that people are actually tested – September 2008, March 2020, those moments where things are really getting bad and that's all that matters for investing. I've seen quite a few investors, I would be lying if I didn't say I might be one of these investors to some extent. I've learned a lot about myself that I write about and study for a living long-term discipline investing, optimism. I would be lying to you if I said in September of 2008 and March of 2020, I was not scared shitless. I was. And so, it's very easy for everybody to think that their behavior and their discipline and their calm demeanor is part of their personality when it's actually just a reflection of what's going on in the economy at that given moment. And so, my learnings for myself of, look, March of 2020, I was super scared. I had the smartest people I know whose opinions I really value were saying this is going to get worse than the Great Depression. And when they laid it out, I was like, I don't think you're being hyperbolic. I think you're right about this. And then I would lose sleep thinking about my own career and my kids and whatnot. So my learnings from that is maybe I have a lower risk tolerance than I think, and that's okay. Rather than fighting that, why don't I just embrace it and kind of build it into my asset allocation? That is going to be a way better system than pretending it doesn't exist and blowing myself up once every 10 years. So I think you can just be honest with yourself about what your own emotions and behaviors are. And all this has nothing to do with technical ability. You can have a PhD in finance from MIT and know everything. But once you mix in your spouse's risk tolerance, your kids, your view of your kids’ future and like everything you want, there's so many different dynamics that go on not on the spreadsheet, but like at the dinner table of what you and your family want out of life, that once you mix all of those in, you can know everything technical about investing and have the best deal flow and etc., etc., but if you don't have your psychology in order, none of it's going to matter. And one other analogy that I think is the closest field to investing is medicine, where the stakes are very high, it's very technical, but it's also very emotional. And the analogy is like you could be a Nobel Prize winning doctor from Harvard Med School. But if you're overweight and you smoke and you don't sleep and you're stressed out, none of it matters. None of it matters whatsoever. The fact that you understand biology at the finest level, none of it matters unless you're actually, your health behavior and psychology is in order and investing is totally the same. 

Chris Powers: March of 2020, man, when the NBA shut down that day, I don't know if you remember, when it shut down, I was sitting in next to my wife. I looked at her. I said this is going to be the biggest thing we've probably ever dealt with and I remember catastrophizing in my head. It was the worst behavior I've ever had. I kind of went into a spiral thinking the world's shutting down. Do you remember what it took you to pop out of that mindset? Was it a piece of news you heard? Was it a phone call you had? Or was it just observing what was going on day by day that you finally said, okay, we're good? 

Morgan Housel: I don't know if... I don't know when. There's no ringing the bell of popping out of it. It was just kind of a slow gradual you saw that things were getting better. I remember two things. A friend of mine who was very well connected in the mortgage market, he's one of the premier mortgage experts that I know, and he was like, look, the mortgage market is not going to exist next week. It's all coming around. The government announced several bailout packages. The mortgage market is not one of them. It's toast. It's out. And once that goes, the housing market goes, and then it's Great Depression 2.0. And he laid it out so clearly to me. I was like, yeah, I absolutely buy that. I think it's important to say the fact that that did not happen in hindsight doesn't mean that he was wrong. I think it was likely that that would have happened. I think it's hard to wrap your head around, but the outcome that we got was probably the most unlikely outcome in March of 2020. If you laid out the ten most likely outcomes in March of 2020, I think we got the best one that possibly could have existed And so the fact that you and I and others were probably really worried during that time doesn't mean that it was irrational. I think it was actually the right thing to do and it was the most likely outcome at the time, even if in hindsight, we ended up with, for most people, a pretty decent outcome. 

Chris Powers: Okay, I'm trying to ask this the right way. Hopefully this comes out. So you've said FOMO is probably the worst attribute an investor over the long term could have. In that moment, FOMO might have been the best thing you could have had. I remember every day not getting into the markets thinking, I can't buy GameStop at 14. Like, this is nuts. What was going on in that period? Like what's the contrast to FOMO was good in the moment, but it's terrible long term? Like how do you interpret that? 

Morgan Housel: What's so different about COVID from 2008 was 2008 was by definition a financial crisis. The main event, the thing to watch were financial markets. And in 2020, it was a health crisis at the time. So there were so many people who were not even paying attention to the market. They were worried about their kids' school shutdown, I have to learn how to work from home, my parents might get sick and die. That was what was drawing people's attention at the time. And so many people, including probably me, weren't even paying that much attention to the markets. Or that was second, that was a sideshow relative to the main event, which was the health at the time. And so I think FOMO was super different. I remember in 2009, talking to a friend and he said this is either the beginning of the next Great Depression or the buying opportunity of a lifetime, and it's probably 50/50 odds which one of those it would be. Now that's an easy thing to say because I can't be wrong in that statement. But I remember someone tweeted in 2020, they said in one year, we're going to look back at either like it's going to be so obvious, of course, this was the start of the next Great Depression, or of course, the government was going to bail everyone out and this is going to be the buying opportunity of a lifetime, and it's going to look so obvious regardless of which way it happens. So, obviously, in hindsight, it was the buying opportunity of a lifetime, and a lot of people got that right, and they really deserve the fortune that they made from that. But at the time, I don't think it was obvious whatsoever to anyone. So much of this with 2008 and 2020 comes down to government policy, particularly in markets. And in 2008 and 2020, we just got enormous firehose stimulus packages that obviously had a major impact on what happened next. But you can easily imagine a world in which that didn't happen. Anyone who follows politics knows that there's no just like, oh, they'll always do the right thing in the right time. No, they screw things up all the time, particularly during, when it's like six months away from a major election. Of course, they could have done things differently. And so just because we got the outcome that we did doesn't mean that you can always rely on that happening in the future. That's not an answer in the slightest to your question, but I don't think I had any FOMO when markets surged like later in 2020. I think that was more just relief that we were not heading into the Great Depression. That was not, oh shit, I should have bought more. That was like, oh, thank gosh that we're not in a world that's going to collapse. 

Chris Powers: Well, did you not have FOMO because you already have your investment strategy set, which is index funds and dollar cross averaging, and you have been unwilling to change that, so you don't really have an option to have FOMO? Do you ever break your rules? 

Morgan Housel: Look, in theory, because I do hold quite a bit of cash, which comes down to my like, I probably have a lower risk tolerance than others. And in theory, and I'm just saying that in theory, I would love to get to a moment where I'm like, man, pessimism is way out of control. I'm going to go in heavy here. I'm going to take some of this big cash flow that I have and go in. I would love to do that. I did not do that in 2020, at least in any major way. I think I did in a very small way, but I didn't do it in any major way because I remember at the time, the other thing that was personal for us at the time, we moved from Washington DC to Seattle in April 2020. And we had an infant and a three-year-old at the time. And so rather than like, hey, what's the best, where am I going to find the greatest IRR, I was like, I'm just trying to pack my bags and get my kids across the country alive right now. And so, that was what I was thinking. And also, I, like a lot of other people, I didn't know if my career was going to last. I didn't know if- like I don't know if my career is going to keep going. So I wasn't necessarily thinking about how can I find the greatest IRR? It was like I got to focus inwards on my family at this moment. 

Chris Powers: What do you think about Bitcoin? 

Morgan Housel: I don't think that much of it in the sense that I really don't think about it that much on a daily basis. The only thing that I've said I think publicly about crypto, and it really is how I feel, is that if you don't find some of it astounding, you're not paying attention. And if you don't find the majority of it absurd, you're not paying any attention. But I also think you could say that about virtually any new industry. In the early 1900s, there were 2000 car companies in America, 1,997 of which went bankrupt. And you can say the same thing about virtually everything, like airlines, computers, internet, search engines in the 90s. In any new industry, there's going to be, amid something that is amazing happening, like a lot of just crazy bullshit below it, that's going to work itself out in the end. I think if there's anything unique about crypto relative to those other industries is that a lot of what I think you could consider just flagrant nonsense, purely speculative, obviously zero utility, that also happened with the internet in the 90s and cars in the early 1900s, but most of that stuff gets flushed out very quickly. It's like a crescendo at the end of a bubble that gets flushed out. And for crypto, I think a lot of that stuff has just lasted much longer than it would have in other industries, things that are not even trying to have any utility. Just meme coins that are just- this is just- the whole idea of this is to be as absurd as we can. And so that's lasted much longer. But anyone, and I don't think a lot of people believe this anymore, but people who five or ten years ago said it's just a fad, it's just a bubble, it's going away. Bubbles don't stick around for 16 years or however old Bitcoin is right now. If people want to believe something, then it's true. That's kind of a crazy philosophical statement, but it's really, particularly in financial markets, if you believe it's true, it's true. And that's why the US dollar has value because I believe it has value and so do you. That's why it's useful. And it's so clear that lots of people not only believe Bitcoin has value, but believe it has the ultimate value and has become so ingrained in that belief that it's hard to imagine why that would ever go away in any significant amount. I don't see any need to hold it myself. A, just because it's not something that I follow whatsoever. B, I'm not trying to maximize my annual returns. I'm trying to earn good returns for the next 50 years. And this gets back to the earlier conversation of not having FOMO. It doesn't bother me in the slightest to watch someone else making a ton of money doing something that I don't necessarily understand. It doesn't bother me in the slightest. I know that if I can earn merely good index returns for the next 30 or 40 or 50 years, I will achieve every financial goal that I have and then some. My career is not as an investor, it's as an author. I care desperately about book sales and storylines and whatnot. That's where my focus goes to. And being an investor is just something, just a little bit of leverage that I have on the side of that. And if I can earn 6% real returns for the next 30 years, I'm like, we're set here. Every box is checked, no issues whatsoever. And watching other people get richer faster during some periods of time doesn't really have much impact on me. 

Chris Powers: Okay. Is that because it's not your main career? Like, do you have that kind of more competitive edge in book sales? Or do you feel the same way about books? Like I could care less if the guy or gal down the road sells more books than I do. Is that just a gift that you have? 

Morgan Housel: No, I would be lying if I said that there are authors out there who sell more books than me. I don't know if it's envy or FOMO, but more of just like, how are they doing it? What am I doing wrong? Why is their book more appealing than this? And so many of them are authors who I admire so much, James Clear is a good friend of mine. He will always sell way more books than me because he's a better author than me and he has better logic than I do and his topic is more appealing and whatnot. And so, I think I look at that and I like learning from it, but it's so different than FOMO. Particularly as an author, I think if you are trying to appeal to the lowest common denominator of the masses of being like how can I get the most people's attention right now? The way you do that is to be as absurd and angry and ridiculous and obnoxious as you can on social media, and it works, it can work for a short period of time, but very similar to investing, I don't want to maximize my book sales this year, I want to maximize book sales over the next 20 or 30 or 40 years. And I would much rather sell 1 million books every year for the next 30 years, then sell 10 million books this year and then have it collapse. And so, it's less about FOMO and just more about trying to learn what stories work with other people. 

Chris Powers: I love that you said your KPI isn't, I don't know if it's like how many books are sold, but it's how many people complete my book. I want people to finish the book. Is it harder, was it harder to write your first book, or is it harder to be writing your third book? I would assume the first one's daunting because it's your first, the third one might be daunting especially if your first one was a success like yours was. Is it harder to write this third one or was it harder to write the first one? 

Morgan Housel: I think I've always- I think what's interesting is that in a lot of areas of my life, I can be anxious, self-conscious, etc., etc. The one area where that is not present at all, where I'm completely devoid of that, is with writing. In the sense of, I've always said that I write for an audience of one, which is just me. I write stories that I think are interesting, about topics that I find appealing, and I really could not care less what other people think about it. That sounds crazy, because in other areas of my life, of course, I want people to like me and whatnot. I don't want to be hated by people. But with writing, I'm like, look, I think this story's awesome, and you might not, so be it. There's a lot of writing on there, find what works for you. So when I'm writing these things, rather than being like, oh, there's so much pressure to appeal to people and please people, I think I'm largely devoid of that when I'm writing it. I think when I'm writing it, I'm purely just in the story of like man, this story is awesome. I love this sentence. What if I change this word? Oh, that makes it sound a little bit better, I love that. And the pressure of it, yes, when the book comes out, there's some pressure on how it's going to do and whatnot. But I think all artists, and I think writing is an art, all artists do their best work when they're just stuck inside their own head rather than trying to think what other people think of their work. Easier said than done, of course, but it's true for musicians, it's true for painters, whatnot. When the Beatles sat down and wrote their songs, they were not thinking what's going to create a best- a pop chart hit, like what's going to sound the best? They just wrote their music, and they're like, oh, that beat sounded cool. Let's run with it. And I think the more that you can do that if you're an artist, regardless of what your career would be, of just living inside your own head, that's always when you're going to do your best work. 

Chris Powers: Is there something you're going to do differently on your third book launch? And I'm trying to do apples to apples here. Psychology and Money was clearly a success. But are there like lessons you took from book launch one that you're like I'll never do that again for another book or just lessons kind of learned along the way that have made you sharper that if somebody was listening to this who might write a book could avoid doing X, Y, or Z on their first book launch? 

Morgan Housel: Just before Psychology of Money came out, Jason Zweig of the Wall Street Journal told me, he said, if your book is good, you don't need to market it. And if your book is bad, no amount of marketing will help. And I think that's like 80% true. It's not 100% true, but I think that's 80% true. I think it's true for any product. Apple doesn't need to market the iPhone because it works. In other countries that are just like dumping half their revenue into marketing, their product probably sucks. So I think there's a lot of truth to that for a book that once you're done writing it, it forever holds your peace. It's going to do what it's going to do. It's going to take on a life of its own. Some of this too is I think book publishers are very much like a venture capitalist in the sense of very difficult to know what's going to work preemptively. It's very difficult to know what's going to flop preemptively. And if you are a venture capital firm, you make a hundred events- you make a hundred investments, one of which turns out to be Uber or whatnot. But the truth is when you made those hundred investments, you did not think that Uber was any different than any of the other companies that went bankrupt. You really didn't. I've noticed, so I'm a partner at a venture capital firm, and it's very interesting to look back and say the companies that did work in our portfolio, none of them were the ones that we thought were going to be the big winners, and the ones we thought were going to be the big winners, none of them exist anymore. And I think it's very true for books as well. I've told this story many times, but Psychology of Money was rejected by every single US publisher. More than 20 US publishers, every single one of them looked at the proposal for a book that was almost entirely written at the time and said this is never going to work. In hindsight, I don't criticize them for that because I think it's just very difficult to tell what's going to work and what's not preemptively. As an author, I have to think that too. I just finished a book, it comes out in October. I think it's great. I like it. But I have no clue whether it's going to catch that fire that some books do and some books don't. 

Chris Powers: So the book's done, but it's not launching for seven or eight more months? 

Morgan Housel: Yeah, which is pretty common for books. By the time you're done writing it, there's usually a six to nine month turnaround before it's edited, cover designed, printed, distributed to the warehouses. It takes a while. 

Chris Powers: Okay, in hindsight though, you didn't think Psychology of Money would be successful. Now you've had four years to look back. Why was it successful? I mean, besides the obvious, people loved what was written and that might be the answer. But from your perspective, and I'm not asking you to brag on yourself, but why was it successful in hindsight now that you have four years to watch? 

Morgan Housel: One thing that I've noticed more recently that I think is so interesting is that the average review of The Psychology of Money has gotten much better over time, which doesn't make any sense because it's the same book. And it was truly like when the book first came out, the average review was like pretty good, decent book. And then a year later, it was like oh, great book. And a year later, it was like book that changed my life. And now like the average review, like the hyperbole that gets thrown around, it's so disconnected from what it used to be and it's the exact same book. And I think part of the reason that happens is because when you are told by a friend or a TikTok video or someone else, when you are told that this book is amazing, you will go out of your way to try to find bits of it that you might consider amazing The opposite is true, too. If someone said this is the worst book ever written and you read it, you would probably agree with that. So people come into it with a different view based on what they've been told. I think in psychology that's called the halo effect, where it's true for individuals as well. If I say Chris is the smartest person I've ever met, and you sit down and have dinner with you, like people are much more likely to hang on your every word. Warren Buffett talked about this one time. He was like when he was young, he could sit there in front of an audience and say the most profound things, and people would just brush him to the side, and today he can go on CNBC and be like you should buy cheap stocks and people are like, oh wow, amazing. Just that's the halo effect in action. And so, I think a lot of those things snowball on themselves, like the reputation just takes on a life of its own. 

Chris Powers: All right, you've read a lot on Buffett. I wasn't going to come with a bunch of Buffett questions. I know you've talked about him. You've read him. What's something that he's been wrong about? What's something that maybe he or Munger collectively you've actually disagreed with? Or if he was sitting right here, you'd say, I challenge you on your thought on this?

Morgan Housel: I don't know if it's a challenge because I think he would agree with this. But I think a flaw in his life, and I know he would agree with this because he's talked about this, is that a lot of his professional success came at the direct expense of his personal life. I don't know if he regrets that, so to speak, but if you read The Snowball, which is kind of the most elaborate biography of him, you realize that this man whose professional success has been almost unparalleled in the investing world. His personal life has been good, not great, and bad at times. Of course, that's true for everybody, but a lot of it I think you can tie back to the fact that he did, from the time he's 11 years old, basically he's devoted 24 hours a day to reading 10ks and picking stocks, and did that come at the expense of hanging out with his children, his wife, his other- like yes. And as an outside observer, I so admire those kind of people, and you could also put Musk, Bezos, Zuckerberg, Bill Gates, all those people in those who were just like they had a single maniacal focus on one thing and they achieved unbelievable success doing that one thing but it came at the expense of everything else. For a lot of these people, the professional success comes at the expense of their personal life. And I would never want that for myself, even if I'm so glad that those kind of people exist. And so, I don't think that's a disagreement, but it's definitely not a hero worship if I look at him and say like he- or any of those people, Musk or whatnot, any of those guys. It's not a hero worship of saying they live an incredible life. It's saying they live a life that I'm so proud, I'm so happy that it exists because I get to be a beneficiary of all the new technologies that they've created, and at the same time, I would never want that for myself. I think that's the disconnect that can fool a lot of people. And it's really important. It's really important to like the never meet your heroes kind of thing. Like all those people, they have bits of their life that are admirable, and they also have bits of their life that are not. And to humanize people who you admire and to take it down a notch from hero worship to just professional admiration I think is really important. 

Chris Powers: What's the lesson there? So we can talk about Warren, we can talk about Elon. Elon's been very vocal about you don't want to know the war that goes on in my mind, you probably don't want to be me. Yet, Elon chooses to wake up every day and be that. It's obviously not about the money. He doesn't need to start another company. Is there something in there about like we are who we are and despite even reflecting on it and understanding it, it's still probably not going to change? Does that kind of go back to the same as ever?

Morgan Housel: Yeah, I think the one word I would disagree with you there is that you said Elon wakes up every morning and chooses to do those things. I think chooses the wrong word. I think he has to. I think it is just so ingrained in their mind, they can't stop, and I think a lot of times, they want to stop but they can't for a lot of those people. They are- it's beyond driven. It's to a point for so many of these people that the right word is probably tormented. And that's where as an outsider, I'm like I'm so grateful that they exist, but I would never want to be them. And it's hard to make that disconnect, particularly if you're like, oh, he's the richest man in the world, he has so many admirers, he's so popular. Yes, but the battle, the torment, the storm inside of his head, I wouldn't want. There are so many of those people historically, Steve Jobs, Thomas Edison, Henry Ford, where they were unbelievably successful at one thing, and they had these other bits of their personality that were either sad or gross or unappealing, like all these other bits of their life that came at the expense of it. I think in general, if you are very good at one thing, it tends to be the case you are very bad at another. It's like there's only so much, like we all have the same amount of bandwidth. That's not actually true, but let's use that as an example, that we all the same amount of bandwidth and some people are just choosing to go all in on one thing at the expense of everything else. I think that's generally true. David Senra, who has a great podcast called Founders, he's interviewed 350 founders, and he said the only person he's ever come across who had unbelievable professional success and basically a perfect personal life was Ed Thorpe, the investor, the blackjack player. He's like the only person in 350 people he’s profiled that said he got both of those right in equal amounts. So many other people, it comes at the expense of something that is way more important to me. I would much rather be poor and my wife and kids love me than earn more money that comes at the expense of that. 

Chris Powers: I called two people before this episode, Brent Beshore and David Senra and said give me some goodies. Do you think it also goes back to tribalism, though? Is that even though Elon acknowledges this is not the way you want to live, and when we say he wakes up and has to do it, is it this like foregone conclusion that you've bought into the tribe or like this is- like I'm trying to get to the root of why people can't change their mind on it. They're so in it, they recognize it, but they just can't ever get out of it. Same with Warren. Same with, I mean, you could go down the list, even you to some degree. Now yours is a totally different way of the way you want to live your life, but there's probably nothing I could do to make you go, yeah, you should go start a car company tomorrow. Guaranteed you'll be worth 300 billion, but you got to put 30 years into it. You'd say, no way. Is it because you're in your tribe already? 

Morgan Housel: One counter to this, and I think this is a very rare example, but Jensen Huang of Nvidia last year did an interview where the interviewer said, if you could go back to the Denny's in 1993 where you created the idea for Nvidia, what would you tell yourself? And his answer was, don't do it. And they were like, what, what do you mean? They're like, you're the most successful. And he was like, it's been too stressful. It's been too hard. Yes, I've been so successful, but I don't know if it was worth it. And that might be he's trying to be a little- He's trying to get your attention. I doubt that's actually true. But I admire him for being honest for a feeling that I think a lot of very successful people feel. At a very different degree, not nearly one one millionth of what those guys have achieved, my dad was an ER doctor for 25 years, and he would look back and say I'm so proud of my career. I helped a lot of people, helped my community. It was great. I don't know if it was worth it. It was so unbelievably stressful and so hard and so many sleepless nights and so much questioning whether I did the right thing etc., etc., but I think that's true for almost everyone in society historically who moves the needle and does something great is that there's going to be a personal expense that comes with it. And so I think we should all really celebrate and honor those people. But does it come down to tribalism. I think it's the kind of personality you need, like Elon Musk, to make a hundred million dollars when you're 30 years old and to say I'm going to put all of it on going to Mars and competing with General Motors, like that kind of thing. The kind of person who says that does not have the kind of the personality to say that's enough, I'm just going to cash out and go into annuity bonds and go sit on the beach. It would never happen. So it's cause and effect. The reason that that kind of person achieves that kind of success is the kind of person who was almost certainly never going to pull back, ever. And I'm trying to think of someone who achieved mega mega success and just cashed out and went to the beach. I'm sure we could come up with one or two examples, but not many at all.

Chris Powers: Well, what's also unique about him and you've talked about this on other podcasts is most people, when they make a lot of money, they stop taking a lot of risk. He just, I mean, he doubles down. It's like infinite double downs. He has this ability to keep going where the amount of money has never once changed the tolerance that he's willing to go at it and that's a perfect storm in and of itself. 

Morgan Housel: Yeah, I think I started saying this five years ago when it seemed a little bit crazier, but Musk will either be a trillionaire or bankrupt. That sounded crazy five years ago, it's not crazy anymore because I think it's much more likely that he'll be a trillionaire than go bankrupt. But it's one of those two. It's never going to be okay, that's enough, let's de-risk and start- I guess Bill Gates maybe did that to some extent of like became the richest man in the world, and rather than starting new ventures, he just said, let's just start giving it all away as fast as I can. Maybe that's one example, even if he's had, I'm sure he lives a ridiculous, amazing life. But it's pretty rare. Actually, when I think about it, Andrew Carnegie was probably pretty close to that, of selling his company and just saying let's just try to give it all away now. So maybe there are a few examples, but I think it's much more likely that the ambition that got you there is just part of your personality that you can't detach from. 

Chris Powers: Do you know many people that have been incredible entrepreneurs but also incredible investors? And like you could say, yeah, Elon, Jeff, they have these great family offices, they make a ton of money, but there's probably people making those decisions on their behalf. Is it like- and again, this goes to psychology, what makes you a great entrepreneur, can you be both or you kind of have to be one or the other? 

Morgan Housel: I don't know if I can think of anyone who was like ridiculously talented at business who was equally talented at investing, like one in the same. One kind of oddball was Paul Allen, Microsoft founder who he made incredible investments. I think at one time, his AOL stake was worth more than his Microsoft stake. Like he was an early investor and he did super well during that. But not many. I think they are very different skills. The skill that like a founder entrepreneur needs is just the ability to get shit done and to rally people and to be an effective leader, and to be an investor, it's a very different skill. You might think it's similar, but it's just the ability to see something before other people, that’s such a bland statement, but I think that they are very different skills. It's hard to think of people who have had equal skill in one or the other. 

Chris Powers: All right. We're going to talk about you a little bit more. So you make excess money. What do you do with it? Do you already have a set plan? Do you even think about it? Or have you put a process in motion that eliminates the need to have to think about that stuff very much? 

Morgan Housel: It's pretty set. I'm not dogmatic about it, since I might change it. I'm doing it, in my personal finances, changing things this year for expenses that we didn't really plan for or foresee. But it's like, oh, actually, we're going to spend a lot of money doing X, Y, and Z, so I'll just pull it from here. So, I'm not like religious about it. I want to use money as a tool to give myself and my family a better life, and I have no desire to like make the spreadsheets work out perfectly. But it is, I do have mental accounting of like okay, I earn X dollars from books. I earn X dollars from speaking. I earn X dollars from this other stuff. The book money's going to go here, invested this way. I'm going to spend this money that I earned. I do kind of have mental buckets, but it's all very arbitrary. It's just to help me wrap my head around it. I think at the times, in my personal finances, when I've needed to break the plan in order to make my family happy, I've been able to do it every time. And I think a lot of people can't do that. They get so ingrained in their investing goals, whatever, that they're like, oh, if we bought this house, my family would be better off, but that money is earmarked for investment, so I can't do it. That's a big mistake. I think that's the wrong way to do it. So, every time that I've needed to break my plans, I've done it, and that's one of the things that I'm proud of for my personal finances. 

Chris Powers: If you won the lottery tomorrow and you won a billion dollars out of nowhere, poof, would it follow the same plan? Like, would you stay- I think what I've admired so much about you and where I'm getting at here is I think for a lot of people, more money or more things stresses them out. They feel the need to start making more decisions, and everything I've read and just heard about you is you kind of made those decisions. So, there's not a whole lot more to think about depending on the money. But if a billion showed up tomorrow, would that change any of the way you think, or would you say I’d just buy more index funds or give away more? 

Morgan Housel: It wouldn't change anything other than the jet. I would totally buy a jet and then it would do nothing. 

Chris Powers: That's time and that's freedom and that's more time with your family. 

Morgan Housel: I'll give you one personal example. It's very recent. We bought a new house, how long have we lived here? Five months ago. Pretty recent. And it is bigger and more complex than our other house, which is, A, awesome and, B, a little bit more stressful. And my wife and I were talking about this this morning of like the first chapter of my next book is called the Quest for the Simple Life which I think is a lot of people's goal. You can be rich and extravagant but still have a simple life. What a lot of people want to use money for is to remove complexity from their life. And every time you get a bigger house or a plane or more investments or whatever it might be, you're adding complexity, and that can lead to a lot of uncomfortable stress that people don't like. I don't judge other people's investments, they do it their own, but who is... Howard Lutnick, the Commerce Secretary, in his financial disclosure last week, I think he had 800 different LLCs that he invested in and controls. Maybe I don't understand, maybe I don't know the dynamics of that, and it works for him. He's obviously very successful. But I remember thinking like, look, I own like four funds and that's hard enough for me to keep track of and wrap my head around. 800? Like that's got- that's to each their own. It's obviously worked out very well for him. But my goal, and I think this is not uncommon, it's like I just want simplicity. I want to have enough money so that I don't have to think about money anymore, so I can therefore think about the things that make me way happier in my life that don't require money. And so that's what I want about it. We're happy in this house, we don't regret it, but it's way more complicated than anything else we've ever lived in. And that has sucked bandwidth away from other things that we would be doing with our kids or our health or whatever it would be. 

Chris Powers: It's an analogy. It's what you're saying, I've said in different terms. I'm in the real estate business, and if you go on site, it's usually the developer, the one making the most, that's the most stressed out. They're dealing with architects, construction, city council, you name it. It's usually the guy up on the roof, just putting the shingles on the house that has lunch under the tree. They get their paycheck, go home. Very, very simple. It's the guy that's got it all going on that's constantly stressed out. And I think there's something to that. It's probably why wealthy people tend to on average start getting more unhappy the more wealth they make than those that don't have as much wealth.

Morgan Housel: Yeah, I think what you just said is absolutely true, but what's equally true is that the guy under the tree desperately wants to be the rich developer. And so even if what you said is true and people know it's true, it's so anathetical to just how people think. Now sometimes, there's the guy under the tree who truly is happy and content, and I admire those people. I think what's also true is that the rich developer who is stressed out and not feeling it, a lot of those people, they can spiral very quickly because they can no longer tell themselves, if only I had more money, my problems would go away. Like they have more money than they know what to do with, but they're still stressed, they're still depressed, they're still anxious, and then they lose all hope because there's no telling- whereas the guy under the tree, if he's stressed, he can be like one day, I'm going to have money and then all my problems will go away. There's like a sense of hope that can be a big relief to have. And when you're rich, I think you lose that hope and it can really have an impact on people. Nobody feels that bad for them. We don't have sympathy for the richest people. But it's true that once you lose the hope of saying money will solve my problems, it's a tough thing to come to terms with. 

Chris Powers: Why is it that money also tends to want to isolate people? They get bigger houses, they put fences around them, they don't show up to places anymore. What is there in there that money also tends to isolate you from everybody? 

Morgan Housel: Harvey Firestone, the tire magnet who was alive 100 years ago, he wrote a biography. It's called Men in Rubber. And he talks about that specific thing in great detail. And he says, every successful businessman I've ever known has built a house that was way bigger than they needed and that they ended up regretting. They're like I hate the house because the bigger your house is, the more likely your roof is going to leak and the plumbing is going to explode and whatnot. It's just a much bigger burden than it would be. But he says every single rich person I know, including himself, does it, does that. And he even said Henry Ford who was like the cheapest, frugalist, stingiest man lives in a 50-room mansion. And so, in the biography, he starts pondering, he's like why do people do this? Maybe it like goes back to the caveman instinct of if you have more land, you're more likely to- you can farm more and like you're more likely to survive and make it through the winter. But he really doesn't come up with much. I think the obvious answer is it's not utility, it's status. The big house does not give you any utility over the slightly bigger house. Like of course, there is comfort and there's things like that. But particularly with size, just having, like let's say you have an incredibly nice house that's 4,000 square feet or an incredibly nice house that's 10,000 square feet. The extra utility that you're going to get from the big house is so minimal over the 4,000 square foot house. The only exception to that would be if your big house makes it easier to host friends and that gives you a lot of happiness, and there's like social connection and you stay up late laughing around the fire. Like there's that. But on an everyday basis, the bigger house by and large is just a liability. Again, I don't judge people. If you have a big house out there and you love it, that's great. I don't judge whatsoever. But I think that tends to be the battle between utility and status is huge. And we think that nicer, bigger stuff is going to give us more utility, but what it's really just giving us is status. And the mental payoff from utility is so much bigger than status. The mental payoff from status can be minuscule if not non-existent. So, it can drive us crazy when we have the bigger house and our life isn't even that much better. 

Chris Powers: Okay, then you have to dovetail into this real quick. I took one, a few chapters from the book the Psychology of Money. Man in the car paradox, summary, people often buy luxury items, signal wealth and success, but these displays rarely impress others. Why do we continue to think the next big thing will impress others and it really rarely ever lands, and if it does, it's so momentary and so quick that it never lasts? 

Morgan Housel: Because if you buy a Ferrari, you think that I am impressed with you. But the truth is I'm not. I look at your car and I imagine myself driving the Ferrari, and I think Chris would be impressed with me if I had this. Everyone's busy worrying about themselves, thinking about themselves. And no one is thinking about you as much as you are or me as much as I am. Everyone is kind of in their own head thinking about like, oh, like everyone thinks they're the center of attention on the stage. But when everybody thinks that, no one else is paying any attention to you. I think that's true for cars, it's true for homes, it's true for jewelry, it's true for social media followers, like everything. Rather than being impressed with you, they are imagining themselves having what you have and imagining other people being impressed with them. I think that's the paradox that has been timeless, it's always been like that. 

Chris Powers: Okay, one thing I've admired you for from afar, and you've written about this, but you clearly prioritize your time, you prioritize simplicity, you clearly have a muscle to say no. I'm sure people bring you deals all the time – Morgan, would you invest in my deal? Morgan, would you come talk here? Do you say no to everything? Do you have somebody saying no on your behalf? And how have you thought about I'm willing to say no, even if it's uncomfortable at the sake of pleasing somebody?

Morgan Housel: I think I've learned the hard way, as a lot of people have, of saying yes to things that I ended up regretting. And I think I try to make a really strong mental note of that because it's very easy, if someone invites me to speak at a place, it's very easy to say yes to that and imagine how fun it's going to be to fly across the world and do this and this. It's much harder to remember the fact of how much jet lag sucks and how much like time away from my kids sucks. It's harder to remember that, so I always try to make a mental note of that. And I think every year for the last eight years, I've said I'm going to speak at fewer events next year, and I never do. I always do it, and it's so true, that when I book an event, it's like a little dopamine rush. I'm like oh, that's cool, I'm going to get to fly to the city, and I'm going to get paid this much and that's awesome. It's also true that not every event, but a lot of the events that I do, I'm on the plane and I'm like, why am I doing this? I would rather be at home playing with my kids right now. Why am I doing this? I don't need to do this, why am I doing it? But I still keep doing it. I think for a lot of people, particularly for sole breadwinners, so the main breadwinner in their family, it is such a caveman ingrained sense in their soul that I need to work to provide to my family, even if you get to a spot where you're like, look, we're okay, and my family's going to be fine if I pulled back a little bit. You're like no, but my purpose in life is to wake up and work to provide. And look, I also enjoy the work. I like what I do. But even people who didn't or even the aspects of my job that I don't, it's so ingrained to work and work and work. And I think that's great. That's why society progresses and we have new technologies is because virtually everyone wakes up in the morning saying it's not enough, even if it actually is for them. And if everyone got to a point where they're like, look, I can pay my rent and groceries, so I'm just going to stop working now, we would have one one thousandth of the technology and the quality of life that we do now. So I've come to terms with that. Like, A, I enjoy my job, but I don't think I'll ever just stop and pull- I might do things differently and go different routes. But once I come to terms with the fact that my identity is I'm a provider for my family. I need to go out and and work to take care of my family, even if the numbers don't actually align with that philosophy, it's what I want to do, so that's why I keep doing it.

Chris Powers: I want to spend this last segment on kids. You’ve got young kids. Do you think kids need to start learning about money at an early age or is it something that should be kept out of childhood altogether? 

Morgan Housel: I think they do whether you are teaching them or not. Kids are the best learners in the world. Everyone knows that. They can pick up a new language in three months kind of thing. They're unbelievably good at looking at the world and making mental models of what's happening. And of course, they do that with money. I was talking about this the other day with someone. In the first 10 years of my life, my family was very poor. My parents were students. We had no money. But I was super happy. I was a super happy kid. I loved playing with Legos and digging holes in the backyard and riding my bike and like everything was great. I didn't become unhappy until I started comparing myself to other people and being like, man, Jimmy's got more money than we do. Bill's got a nicer bike than I do. It wasn't until I started comparing myself to others that I became less- and I'm like, God, that sucks. I was happy when I just lived in my own head and now I'm comparing myself. But the fact that all kids are like so, even at age six or age eight, they're comparing themselves. They're looking at other people's shoes, other people's clothes, the cars that your parents drop you off at school in, they're making a mental note of how this works. Every time you as a parent say we can't afford that, or, hey, we're definitely going to spend money on this, they're making a note in their head. And by the time every kid is 15, they have a very elaborate model in their head of how money works, even if they can't really articulate it or even if they know it. So I would say, as a parent, you don't need to sit your kids down and say, here's how to budget, here's how compound interest works. They're paying attention to you, whether you know it or not. And so I think the best you can do is just lead by example and always remember that they're paying attention. My wife catches me a lot, if she and I are like talking about our household finances and the door to my office is open, she's like, shh, the kids can hear us right now. I don't want them to hear. I don't want them to hear this. Because they're definitely paying attention and making a note of it that will impact them for the rest of their life. 

Chris Powers: Okay, I think we both might fit this bill a little bit. Grew up very similar to how you grew up. Now in my career, my kids are not growing up the same way that I grew up. So I've gone out of my way sometimes to almost create false realities and I think you were talking about this on like Huberman's podcast relating to like some parents that like sat in first class, and they made their kids sit in the back. Will you just kind of talk about actually what's going on there and why you totally disagree with that? 

Morgan Housel: So a lot of wealthier parents will do this with very well intentions. They'll say, I made my money, you child did not, so I'm going to live a better life than you do. The most, the clearest example of that is parents fly first class, kids fly in coach. And the parents do it with well intended ideas. They're like, I need to install grit in you to like learn, like you need to learn for yourself. And it almost always backfires because the message that the kid hears is not, wow, mom and dad worked harder than I do and they get to sit up in front of the plane, I got to work at- the message that they hear is I'm not as worthy as mom and dad, and like you think you are instilling grit, but you're actually just instilling like resentment in the child. So I think you as a parent need to pick a lifestyle that your kid can also live in because if you force them to live a different lifestyle, they're much more likely to resent you and it comes at the expense of their own self-esteem. If they are constantly being told in a visible way several times a day that mom and dad are better than me, it's probably going to impact their self-esteem more than it is going to like them be fired up and be like I'm going to work really hard so I can get what they have. That might happen to some kids, but I think you're more likely- I think this is why a lot of trust funders are broken like psychologically, and of course, we all know them, is because from the time that they've been born, they've been told either explicitly or implicitly that mom and dad or grandpa or whoever it might be is better than you. They're smarter than you, they're richer than you, they're more entitled, they have nicer things than you do. And it's very hard for a lot of kids to say like therefore I should work hard. A lot of the kids, the message that they get is I should just like cower in the corner because I'm never going to be as good as they are. So I think it's super important to, yes, like I want to instill false challenges for my kids as well, just like you said. But you have to do that in a way that doesn't make them resent you. And so, you want to teach by example rather than by humiliation. 

Chris Powers: Okay, and you've observed a lot. Are there best practices or are there things you've seen that might give people better odds of teaching their kids? And I'm not saying they have to be super wealthy, but it's easy to grow up when your parents are telling you like, look, we can't go to dinner, we can't afford it. It's like, you kind of get that. But when that's not the equation and you're trying to teach the value of a dollar, but also not spoil them, it can be this thin line you walk on. Or maybe it isn't. Like, is there anything that comes to mind of you have better odds of success doing this than not?

Morgan Housel: I so wish there was an easy answer to that of just to say, oh, if you just do X, Y, and Z, your kids won't be spoiled little brats. I'm not sure there is much of one. There's a Charlie Munger quote where he said, when you're teaching money to young people, they either understand it instantly or never. Just like some people just get it and some people don't. And I think on the nature-nurture spectrum, our money beliefs have a lot of nature in them. And so it's like it doesn't matter what you teach the kids or tell them, some of them are going to get it and some of them won't. And I know a couple of very, very wealthy families where one of the children is very grounded and down to earth and humble, and the other is a spoiled brat. And I'm sure they had the same upbringing from the same parents with the same values and whatnot, but one of them was just wired a little bit differently. It may have been that the spoiled brat was bullied as a child, and therefore they really want to right that wrong by showing off to be like look at my car, like you're making fun of me then, but look at me now. And so there's so much in our past that is beyond what a parent is teaching you that's going to impact how you think about money. I'm not quite a fatalist on this obviously, like I want to teach my kids good values, but I think there's a lot that's out of your hands. I'm the youngest of three, and I think about money way differently than my brother and sister do. Even though we have the same parents who taught us the same things, who bought us the same things, who showed us the same things, we ended up on totally different sides of the spectrum. And I wouldn't be surprised if my two kids are like that as well. Where it's like, yeah, you can go out of your way to try to teach them, but they're going to be who they want to be. And by the way, as a parent, that's what I want. I want them to become the best version of whoever they want to be. So, I don't know if there's any easy answer to that question other than trying to lead by example and teaching your kids that, yes, we're fortunate to have this money. Other people don't, but they're just as good as us. And the kid at school who is poorer than you, he might be smarter than you, he might be funnier than you, he might be better looking than you, he might go further in life than you. Just because you in third grade, your parents drive a nicer car does not mean anything about where you guys are going to end up in the future. 

Chris Powers: Why does simplicity feel irresponsible to most people? 

Morgan Housel: I think like if you are complex with your financial decisions, it feels, it checks the box of saying like I'm going out of my way to do something really important here. So take the way that I invest. I dollar cost average in the Vanguard index funds and I call it a day and that's it. And I think, look, I'm not saying that's the right way that everyone should invest. In fact, it's not. 

Chris Powers: I'm so jealous, by the way. I'm so jealous. 

Morgan Housel: But I think a lot, particularly intelligent people and financial professionals can't do that because they're like, man, I got an MBA. I went to school for 20 years. I work 80 hours a week. I can't tell myself that that's all I should do. I need to sit here and fiddle with the knobs and pull the levers and like have a spreadsheet that goes out through the 20th decimal place to make myself feel like I'm doing the right thing here. And look, we're just talking about kids, parenting might be the same of most parents desperately want more than anything for their kids to just end up happy. And because they want it so badly, they are so tempted to micromanage every aspect of their life from birth and be like, okay, little Jimmy, I'm going to sign you up for chess lessons when you're two years old to make sure that you're going to be happy one day. Whereas I think closer to the truth is just like love them and support them and then let them be. Just like let them go, like they'll figure it out. He'll figure- like Jimmy will figure out what's best for him. But that can feel reckless as a parent if you just wake up every morning and you're like, all right, son, all right, daughter, go figure it out for yourself. It might suck, but you gotta figure it out for yourself. That can feel reckless as a parent, even if that's actually the right thing to do in the majority of cases. So I think it's the same for money. 

Chris Powers: All right, last one from our mutual friend in Columbia, Missouri. How much is enough and have your goalposts changed? 

Morgan Housel: How much is enough? I think there actually is a ideal net worth for most people at which more money just becomes a social liability in their life. It doesn't provide any extra utility, but it does become a psychological ability- a psychological liability. And I think that level is much lower than people think. My friend Ben Carlson wrote an article on this this morning and he, this is very arbitrary, this is not scientific, and maybe a lot of people will obviously disagree with this. His idea was the perfect net worth is seven to ten million for most people in the United States, after which becomes a social liability. Of course, he lives in Grand Rapids, Michigan. You can't get a kitchen remodeled for seven million dollars in Seattle. And so, it's going to be different depending on where you live. 

Chris Powers: That's just the cost of permits in Seattle. 

Morgan Housel: Exactly, right. And so it's obviously very different for every person, but I think the idea that there is a maximum net worth after which it just, it doesn't do much for you is very true. And so it's different for everybody, but enough is when you have enough money to where you don't have to think about money anymore. It becomes like oxygen. It's very important. It might be the most important thing in your day, but you don't wake up every morning thinking about oxygen. It's just there to allow you to do the things that you would otherwise want to do. When money is that, and for a lot of rich people, it's not. They wake up every morning thinking about oxygen, they wake up every morning thinking about how they can become wealthier. It is enough and it's perfect when you can wake up and say I have enough money to go do these things that I want to do that are not money related. That's when it's enough. Have my goalposts changed? They definitely changed when I had kids, which a lot of people I'm sure can relate to, of when all of a sudden, it's not about me anymore, it's about my kids. And they've changed also as I think I became more mature, when the goal before was a fast car and a mansion, and now the goal is independence and happy kids. So that is a goalpost change, but I think it's not changing because I'm getting more greedy, it's just because I'm learning more about what I want out of life. 

Chris Powers: All right. Well then, let me ask you this. I have this note. You call it the end of history illusion. Most people don't think change will happen to them in the future. Can you maybe expand on that? You know that exists, but I think we all still- I would assume you probably suffer from it. Why do most people not think things will change in the future? 

Morgan Housel: So the end of history illusion is the idea that if you and I look back at who we were 20 years ago, I can name a hundred things of how I'm different today and I've changed my mind and realizing that I was dumb and naive 20 years ago. I'm sure you could do the same. But both of us, if you asked, who will we be 20 years from now? What will our goals be? What will our political beliefs be? You and I will by and large say, I'll be the same person I am today. So that's the illusion. We are very cognizant of how much we've changed in the past and we're ignorant of how much we're going to change in the future. And so, coming to terms of that, I think I'm much more- the idea of firm beliefs weakly held is something I believe. Like there are things that I believe for my goals and my beliefs of how I think the world works and like who my friends are that I feel pretty strongly about today, and I don't want to fool myself that I'm not going to look back 20 years from now and say either like the circumstances of my life changed or I realized what I was missing and how naive I was and I've changed. So I am very open to my investing beliefs changing. I'm open to my political beliefs changing. I'm open to my general life philosophies changing because as soon as I'm not, I've just shut down all ability to learn and I'm just going to become an old angry person online telling everybody else that they're wrong because they disagree with me. I never want to be that person. I always want to be open to why I'm wrong and changing my beliefs as I go. And so, it's much easier said than done but that's something that I want to do. 

Chris Powers: Morgan, you're the man. I really appreciate your time today. This has been awesome.

Morgan Housel: It's been fun. Thanks, Chris.