Morgan Housel: How Smart Entrepreneurs and Investors Grow Wealth on Autopilot | Finance | E336

Morgan Housel once looked back at his twenties as a carefree, simple time, living in a beautiful apartment with his wife. But she quickly reminded him how anxious he truly was. His nostalgia had erased the uncertainty he once felt, just like how investors look back at past market growth and assume success was inevitable. In this episode, Morgan explains why the past is never as clear as we remember and why the future won’t be either. He also shares how entrepreneurs can build wealth despite uncertainty, the key to long-term success in the stock market, and practical strategies for sustainable financial planning. In this episode, Hala and Morgan will discuss: (00:00) Introduction (02:14) Why Most Financial Resolutions Fail (04:06) Balancing Saving and Spending Habits (09:15) The Power of Long-Term Investing (13:30) Navigating Startup Risks Wisely (15:49) What Sets Genius Entrepreneurs Apart (18:50) Why Doubt Is Necessary for Entrepreneurs (22:23) How Hindsight Can Misguide Investors (29:22) Wealth Inequality in the Social Media Era (34:36) Turning Anxiety About the Future into Action (40:23) The Financial Mistakes We Keep Repeating (48:38) Elon Musk’s Extreme Risk-Taking Strategy (50:42) Embracing Failure for Lasting Success (53:55) How Rumors Shape Financial Markets Morgan Housel is an investor, partner at The Collaborative Fund, and author of the New York Times bestsellers The Psychology of Money and Same As Ever. A former columnist for The Motley Fool and The Wall Street Journal, he simplifies complex financial ideas, emphasizing long-term thinking, compounding, and decision-making over market predictions. He is also a two-time Best in Business Award winner from the Society of American Business Editors and Writers. Connect with Morgan: Website: morganhousel.com Linkedin: linkedin.com/in/morgan-housel-5b473821 Instagram: instagram.com/morganhousel Twitter: x.com/morganhousel Facebook: facebook.com/morgan.housel.5 Sponsored By: Shopify - Sign up for a one-dollar-per-month trial period at youngandprofiting.co/shopify Airbnb - Your home might be worth more than you think. Find out how much at airbnb.com/host Rocket Money - Cancel your unwanted subscriptions and reach your financial goals faster with Rocket Money. Go to rocketmoney.com/profiting Indeed - Get a $75 job credit at indeed.com/profiting RobinHood - Receive your 3% boost on annual IRA contributions, sign up at robinhood.com/gold Factor - Get 50% off your first box plus free shipping when you use code FACTORPODCAST at factormeals.com/profiting50off Active Deals - youngandprofiting.com/deals Resources Mentioned: Morgan Housel: How to ACTUALLY Build Wealth, Investing to Gain Financial Independence | E266: youngandprofiting.co/4147SpO Morgan’s Book, The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness: amzn.to/3EoljZ0 Morgan’s Book, Same as Ever: A Guide to What Never Changes: amzn.to/4aOX7uV Morgan’s Podcast, The Morgan Housel Podcast: bit.ly/3EljBre Key YAP Links Reviews - ratethispodcast.com/yap Youtube - youtube.com/c/YoungandProfiting LinkedIn - linkedin.com/in/htaha/ Instagram - instagram.com/yapwithhala/ Social + Podcast Services: yapmedia.com Transcripts - youngandprofiting.com/episodes-new All Show Keywords: Entrepreneurship, entrepreneurship podcast, Business, Business podcast, Self Improvement, Self-Improvement, Personal development, Starting a business, Strategy, Investing, Sales, Selling, Psychology, Productivity, Entrepreneurs, AI, Artificial Intelligence, Technology, Marketing, Negotiation, Money, Finance, Side hustle, Startup, mental health, Career, Leadership, Mindset, Health, Growth mindset. Finance, Financial, Personal Finance, Wealth, Stock Market, Scalability, Investment, Financial Freedom, Risk Management, Financial Planning, Business Coaching, Finance Podcast, Investing, Saving.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Hala Taha?

  Today's episode is sponsored in part by HeyGen, Shopify, Indeed, and Northwest Registered Agent. HeyGen helps you create AI avatar videos without being constantly behind the camera. Get your first three videos for free at heygen.com/profting. Shopify is the global commerce platform that helps you grow your business. Start your $1 per month trial at Shopify.com/profting. Indeed helps you attract interview and hire all in one place. Get a $75 sponsored job credit to boost your job's visibility at Indeed.com/podcast. Northwest Registered Agent gives you the tools and guidance to build a complete business identity. Start using free resources at NorthwestRegisteredAgent.com/YeahFree.

• 0:45Hala Taha?

  As always, you can find all of our incredible deals in the show notes or at YoungAndProfiting.com/deals.

• 0:51Speaker 01

  New Year's resolutions don't tend to hold up because if you need to do something new on January 1st that you were unwilling to do on December 31st, you're almost certainly not going to stick with it. Most people have too much of their money in stocks and they should have less. And the reason why is

• 1:07Hala Taha?

  How can we actually plan out what we want to spend our money on this year?

• 1:11Speaker 01

  If you can earn average returns for an above average period of time, you will be among the top investors in the world. Most people are overconfident in what they can do. You have to have this split personality of I'm so good at what I do and I'm a complete idiot who has no idea what I'm doing. Bullshit is easier to create than it is to refute. So meme coins are an example of this. Someone creates a meme coin and you're like, that's obviously bullshit and it becomes Dogecoin.

• 1:38Hala Taha?

  So how can we use this information when we're making investors and financial decisions?

• 1:43Speaker 01

  I think

• 2:00Hala Taha?

  Yap, bam. My guest today is back for his second visit to the show. You may know him as the author of books like The Psychology of Money and Same as Ever, or as the host of the Morgan Housel podcast. I'm of course, talking about Morgan Housel. Morgan is also a partner at the Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal. I spoke to Morgan about a year ago in episode 266, and we talked about all kinds of juicy things from why finance is actually more like psychology, to physics and what Bill Gates can teach you about optimism. We'll be running that episode again as a Yap classic in the near future, and I encourage you to check it out. Today, we are going to pick Morgan's brain on a number of interesting topics related

• 2:42Hala Taha?

  to psychology, money, investing, and how you can avoid some of the biggest mental blunders when it comes to your financial decisions. Morgan, welcome back to Young and Profiting Podcast.

• 2:52Speaker 01

  Thanks so much for having me. Happy to be back.

• 2:53Hala Taha?

  Yeah, I'm happy to have you here. So you were on the show about a year ago, and we had such an interesting discussion. We talked about all kinds of things, your backgrounds, the secrets to building wealth and staying rich, and some topics you discuss in your books. And since then, you've been busy writing, recording podcasts, creating content. So I thought today, we could kick off the new year with a grab bag of things that you're thinking about now, related to money, investing, and psychology.

• 3:20Speaker 01

  Let's do it. I'm ready.

• 3:21Hala Taha?

  Okay, cool. So, speaking of the new year, what do you think the top things are that we should do to kick off the new year right when it comes to our finances? Is there any sort of exercise that we should be doing in the beginning of the year to evaluate our strategy?

• 3:35Speaker 01

  I think there's a couple of things to keep in mind. One is the very well-known idea that has been tracked for many years, that New Year's resolutions don't tend to hold up. Because if you need to do something new on January 1st, that you are unwilling to do on December 31st, you're almost certainly not going to stick with it. So there's this idea, I think it was brought up by Scott Adams, who is the guy who created the Dilbert comic. You should have systems instead of goals. One example of that is, a goal is, I'm going to lose 10 pounds. That's a goal. A system is I'm going to work out every day. That's a system. It's very different from a goal. It's a much better and more efficient way to have a new habit to do something. So I think if you do have an aspiration to have a new year's resolution,

• 4:16Speaker 01

  do it right now in December and come up with a system that you can actually stick with over the long run. And a system means that it probably should not be extreme. So if you have a system of I'm going to work out five hours a day, let's say, just using that as an example, you're also not going to stick with it. And the financial equivalent would be I'm going to save half my paycheck. Well, you're probably not. It's probably not going to work. So the more realistic it is and the more systematic it is rather than a goal, the higher the odds that you can stick with it. The other thing I would talk about here that I think is really important is whenever you are thinking about your financial future, and let's call them goals if you want to, despite what I just said, what you really have to keep in mind is the idea of what are you going to regret in the future? So if you have a savings goal, are you going to regret not saving money?

• 5:01Speaker 01

  Are you going to regret saving too much money because it came at the expense of a vacation that you could have taken or a new car that you could have purchased? You have to understand what you're going to regret. And what I might regret is probably different from what you might regret. Everybody has a very different situation. So you just have to have a good grasp on what you are likely to look back at a year from now, 10 years from now, 50 years from now and say, man, I wish I had done that differently. It's different for everybody, but I think that's the formula you should have in your mind.

• 5:27Hala Taha?

  I think that's really smart. And I forgot who told me about this, but I was speaking to somebody about finances and they had mentioned to me that there's different buckets of your life where you're going to want to spend on different things. For example, in your 30s, you might be trying to save money for your kids. And in your 60s, you might want to travel or in your 20s, you might want to travel, but you're not going to really be doing that. Let's say if you have a family from your 30s and your 40s. What are your thoughts around that? How can we actually plan out what we want to spend our money on this year?

• 5:58Speaker 01

  What I think is interesting, if you talk to a lot of financial advisors, they will tell you one of the biggest problems that they have with their clients is you have a client who has saved diligently for retirement for decades, and they saved up a giant nest egg. They have millions of dollars saved for retirement. And then they're 65 years old and they retire, and they cannot bring themselves to spend it. They cannot do it because saving money has become so ingrained in their identity, in their personality, that they can never switch gears. That's really important, too. And it's a very big problem because in your twenties, thirties, forties, you create a very good habit of, I'm a saver. I'm a long-term investor. And you can never break away from that. You can't do it. So the idea that a good financial skill in your thirties

• 6:40Speaker 01

  can actually be a liability in your fifties or sixties is really important. I think about this in my own life where in my twenties, and let's say, early thirties, I was a very big saver. And I'm so proud of that, and that's great. Now I'm in my forties, I have two kids, and we spend more than we used to. And it is not because I broke my previous good financial habits. I don't view it that way at all. I built up money so that I could spend more of it now and have maybe a lower savings rate than I used to because I have a bigger family who are hungry, and we go on vacations and whatnot. And I think that's wonderful. The more you can use money as a tool to live a better life rather than just a scorecard of social comparison, the better off you're going to be.

• 7:25Speaker 01

  And if you always view it through that lens, like, how can I use this money as a tool for more happiness? Not just, how much can I accumulate and have a higher score than the next person? I think that's always the better way to think about it.

• 7:36Hala Taha?

  I love that. So one of the best things that I did this past year is that I actually started this dashboard. And I use Monarch Money, and they're not a sponsor of mine yet. I think they'll end up becoming a sponsor because I'm going to mention it right now. And basically, I have all my accounts on this dashboard. So I have my bank accounts, my savings accounts, my E-Trade account, my Fidelity accounts in one place. And in the past, I used to be really lazy to like, go check on this account, go check on this account. And I would just never check my accounts. And now that I have everything in one dashboard, I actually can see my net worth. And suddenly, I've become more competitive. Suddenly, I've been investing more often, more frequently, and it's become more like a game.

• 8:20Hala Taha?

  Psychologically, what do you think is happening? And do you think that this is a good strategy for people?

• 8:25Speaker 01

  I think it probably is a good strategy, but like every good strategy, you can overdose on it. So it sounds like what you've done is just you have a very keen grasp on your net worth. That's great. I think you can overdose on it if you're like, I'm only a success as long as that number goes up every month. That's dangerous because that's not how the market works and that's not how you're going to eventually be able to spend that money in a way that will make you happier. And so I think it's great. I do the same, by the way. I have checked my brokerage account probably every day for the last 20 years. That's very roughly true. But what's important is I don't use that to say, oh, I'm falling behind. I don't use it to say, oh, I should go place a trade because the market went up or down today. I just think it's interesting. And I have a very keen,

• 9:08Speaker 01

  in any day, I could tell you my net worth to a very high degree of accuracy. I think that's great. And not a lot of people, I think, can do that. I think a lot of people, if you ask them their net worth, they would have to have to think very hard about it. Or if they gave you a number, it would be wrong. And that's when things start slipping out out of hand. There's a lot of study and data on people who forget about their 401ks. And some of them will transfer to a new job, transfer their 401k where it sits in cash for years because they forgot about it. They never invested it. And the lost returns you can have that can be enormous. So having a very keen grasp on exactly how much money you have is wonderful. You just want to make sure that you don't become so ingrained in your identity that you are so obsessed with that number that you only feel like

• 9:53Speaker 01

  a success in life, it's going up and you feel like a failure and you need to change if it's going down.

• 9:57Hala Taha?

  I feel like for me, it's been good because I feel like I wasn't paying attention and now it is more fun to look at it. But to your point, I am getting a little addicted to like going and looking at it all the time. And maybe I need to like make sure that it's just like once a week instead of every day or something like that. So I don't overdo it.

• 10:15Speaker 01

  Yeah, I mean, there's some people, I probably fall in this category. They check their brokerage account once a day and they check their blood pressure never, or once every five years or something, you know, like numbers that are probably actually very important to your life, success and outcome, they're oblivious to. But something that is almost by definition going to jump around randomly every hour, they pay close Attention to it. I always used to use the example of nobody checks the value of their house every day because that would be ridiculous. But now, actually, I think a lot of people do because of Zillow. They have this number that like a stock ticker goes up and down and they check it all the time. It's true for any investment that your lifetime success is almost certainly dependent on how long you leave it alone for and just let it compound over time. And if you are the kind of person for whom checking it every single day is going to prevent you from holding

• 10:59Speaker 01

  it for a long period of time, then that's an issue.

• 11:01Hala Taha?

  Let's move on to stocks. So I personally only got back into stocks this year. During COVID, the start of COVID, I was doing really well in stocks. I was younger and but I had put a lot of my savings in stocks. And then once COVID hit, I took all my money out and I panicked. And for a long time, I just didn't invest in stocks. I only started back this year. I've always done really well. So I have 50% returns just from this year of what I've invested. So I usually do like tech stocks. Now I'm investing in AI. And so I've done really well. But why don't we pause here? What was wrong with what I did when I pulled all my money out during COVID?

• 11:40Speaker 01

  I don't know if it was wrong, because you did it because it's what you felt like you should do. Even if you could criticize that and say, oh, you sold at the wrong time, you should have held out. I usually don't say that because if you had tried to hold on, you probably would have got scared out at a lower price. The fact that you were tempted to sell means that, at least in that moment, you didn't have the right mindset to hold on. So selling may have been the right thing for you to do. One of the things I've changed my mind on about money is criticizing the decisions that people make because you made that decision because it was the right thing for you to do in that moment, even if you could go back in hindsight and say, look at all the money you would have made if you held. Let's not do that. But I think what is true is, like I just said, what's going to account for the majority of your lifetime returns is not, did you pick the right stocks? It's not, did you pick the right industry? It's how long did you hold on

• 12:25Speaker 01

  to the stocks that you owned? And one thing that's hard for people to wrap their heads around is, if you can earn average returns for an above-average period of time, you will be among the top investors in the world. So everybody's attention goes to what's big, what's hot. Tech, AI, as you just pointed, that's big and hot right now. Over the next 30 Years, those things are not going to matter that much. What's going to matter is what did you hold on to for the longest period of time? Carl Richards, who's a financial advisor, brought up the idea that for most people, a house is the best investment they will ever make. And the reason why is not because it's a good asset. It's not because it's leveraged with a mortgage. The reason why is it's the only asset that people are willing to hold uninterrupted for 20 or 30 years.

• 13:09Speaker 01

  And so even if the average annual return is not that high, a mediocre average return compounded for 30 years balloons into a fortune. And so that's what I would keep in mind for you. I would A, not criticize the decision that you made. And I would B, say, look, rather than trying to pick the best industry, pick a decent industry that you can stick with for another 10 or 20 years. And that's where the big money will be made.

• 13:31Hala Taha?

  And I feel like this is why the rich get richer, right? Because during COVID, all these really rich people, they didn't need to worry about the money they had in the stock market. They were able to just let it sit there and ride it out. And so I feel like we should all strive to have money that we're okay with just letting it sit there, don't you think?

• 13:52Speaker 01

  And that's why I think most people, not everybody, but let's say a lot of people, have too aggressive of an asset allocation. They have too much of their money in stocks and they should have less. And the reason why is the only thing that matters is what do you need to have to make sure that you can hold on to the stocks that you own and are never forced to sell? You never panic sell. You're never forced to sell because you need the money for a new car, whatever it might be. Whatever that level is, that's the most that you should own. And for a lot of people, you might have a spreadsheet or a financial advisor that says, you're young, you can have 90% of your money in stocks. And maybe in theory, that's true. But if having that high amount is going to scare you out during the next bear market, then it's the wrong amount. You should have had less, maybe, maybe just 50% of your net worth in stocks.

• 14:35Speaker 01

  Whatever the amount is that you need to hold on to for the long run, that's what you should have. And it gets back to the great Charlie Munger quote where he said, "The first rule of compound interest is to never interrupt it unnecessarily." That's what matters more than anything.

• 14:47Hala Taha?

  I love that advice. For me, that was a lot of my money in the stocks. So I took it out, but I still think I did smart things with it. I basically started my company. I invested in myself. I invested in my company. My company started as a group of 10 volunteers. This year, we made over $6 million. Next year, we're on track to make eight figures. So we're crushing. And I'm really happy that I did that. You know, I'm happy that I bootstrapped my company. I never took investments. So when it comes to entrepreneurs, how should we go about prioritizing investing in our own business versus investing in things like stocks and other companies, basically?

• 15:24Speaker 01

  Such a good question because there's no one right answer because every startup is different. I think it's important to understand if you are a new entrepreneur to A, understand the base rate of success for startups. What I mean by that is how many other startups that came before you who are just as smart, had just as much money, had just as much ambition, failed. And that number is always going to be very high. And A, you need to understand that number and embrace it with both hands. And B, to be successful as an entrepreneur, you also have to say, yes, but I'm still going to plow ahead as hard as I can. That's the dichotomy. That's the contradiction of being a startup founder is, look, I know the odds of success are stacked against me and I'm still going to go ahead nonetheless. There's this great story

• 16:07Speaker 01

  many years ago that I heard from a founder where he was raising money from an investor. And the investor said, I love the idea of this company, but I think there's only a 20% chance that it's going to work. I think there's an 80% chance you're going to fail. And the founder was like, 20% chance it's going to work? You're optimistic. I think there's only a 10% chance this is going to work. And I think that mindset of an entrepreneur is saying, there's a 90% chance that I'm going to fail and I'm going to give it everything I've got nonetheless. Elon Musk talked about this where I think the figure was when he started Tesla and SpaceX, he thought there was like a 99% chance that they would fail. And he still did it nonetheless. That's what's difficult. When it comes to financial planning, the important part about that is that in the very high odds that it's not going to work, you want to make sure that

• 16:49Speaker 01

  you have some landing pad that you're going to fall back onto. Because in the situation where your business fails and then you have nothing, including Maybe marketable job skills to pull yourself back up. That's a terrible thing. And it gets back to what we first discussed about what are you going to regret? And I think for a lot of people, they would regret not starting a business. They would regret not taking a chance. They might also regret putting everything they have into that business so much so that if, or maybe even when it fails, they have nothing. They have nothing left. They're going to be left in a state of destitution. That's really important.

• 17:22Hala Taha?

  I feel like that's very, very good advice. And when it comes to entrepreneurs, we tend to have a lot of the same personality types. We're inventors, we're optimists, we're risk takers. What kind of cognitive biases when it comes to money and financial decisions should entrepreneurs be particularly aware of?

• 17:40Speaker 01

  I think this gets back again where it's like, there's no blanket advice because by definition entrepreneurs are oddballs and are marching to the beat of their own drum. Henry Ford had this idea. I read Henry Ford's biography recently. Henry Ford's a very interesting guy because he was the greatest engineer possibly of all time. He was an okay businessman and he was a devil of a human being. So it's like, there's, he has all these contradictions wrapped into one. But one thing that he always said was that money in the bank to him was such a waste. You should put that to work immediately. So cash shitting in a checking account to him was a complete waste. He was like, go build something, go build a factory, go invest in something, put that money to work. I could also argue the other side of that in terms of cash is actually the oxygen of independence.

• 18:25Speaker 01

  But I thought that was really interesting that he just viewed the opportunity cost of cash that he had as a complete waste. And I think, I actually think you see the opposite in a lot of startups these days where if you can raise money from VCs, there's a lot of it. There's just a gusher of money out there. So you have a lot of businesses that will raise $50 million from investors and then just kind of leave it in a checking account. And maybe that is not the wrong thing to do. Maybe that's actually a wise thing to do, to have that much liquidity. But I think if you view it in the idea of entrepreneurs are supposed to build and cash is a tool to help you go build something. If you raise a lot of money and you can't put it to work in a reasonable amount of time, there was probably way too much more than you needed. I think a lot of the behavioral traits that entrepreneurs have.

• 19:07Speaker 01

  Is an unreasonable amount of confidence in themselves, bordering on egomaniac. And it can be off putting to a lot of people, but that's what you need. And this is why when the personality traits of a lot of very successful entrepreneurs become public, Elon Musk, probably the greatest entrepreneur, not even probably, he was almost certainly the greatest entrepreneur of modern times. And he also has a personality that a lot of people find distasteful. And that, I think, if you look historically, is extremely common. The reason they are successful is because they're maniacs. And that's why they're successful. And it also gives them this personality trait that a lot of people don't like. Steve Jobs was like that. Bill Gates is like that. Henry Ford, as I just mentioned, one of the greatest entrepreneurial geniuses

• 19:52Speaker 01

  to ever live and a terrible human. Because antisemitism is very well documented and whatnot. Same with Thomas Edison. A lot of these people, the reason they were successful is because they did not think like most people did. And because of that, they had this side that people found distasteful. That's very common. And so for a lot of it, particularly not necessarily if you are an entrepreneur, but if you're going to work for an early-stage startup, a successful early-stage startup, you need to understand and embrace and be okay with the fact that you are probably working for a maniac. That's usually the case. And that's why the company is going to succeed, but you need to sign up for that and understand what you're doing.

• 20:27Hala Taha?

  So let's talk about overconfidence bias. This is something that you talk about. You talk about overconfidence bias, hindsight bias. Can you tell us about those two things? Because I think it's important for entrepreneurs to understand what this is.

• 20:41Speaker 01

  Well, I think for anybody, not just entrepreneurs, but any random person, to be able to wake up in the morning and put one foot in front of the next, you need to at least be able to look in the mirror and say, I know what I'm doing. And I'm making good decisions. Because if you don't, you're never going to get out of bed. You're not going to do anything. But the truth is, if you understand how volatile and uncertain and unpredictable the world can be, we don't know what we're doing. We don't know where the world's going to go next. So because of that, you need to be optimistic, but the world is very uncertain. Most people are overconfident in what they can do. I'll give you a really interesting example of this that we see very recently and is very prevalent in the news right now. For a lot of people in the economy, if you ask them, they will say, how's the US economy doing?

• 21:26Speaker 01

  Most people will vote poorly. It's not doing well right now. Inflation is not going well. And then if you say, how are you doing in your life? Most people will say, great. The gap between those two is enormous. People say, the US economy is doing terrible, but I'm doing great. And you also see this in Congress, where if you ask people, how much do you like Congress? They say, I hate Congress. They're all a bunch of bums, vote them out. But then if you say, how do you like your congressman? People are like, oh, I love them. They're wonderful. That gap between the two comes down to overconfidence, where you look around the world and you say, the world is fragile and it's broken and it's uncertainty. But if you look in the mirror, you say, I got this all figured out. And I think people actually need that. That's not something we should look down upon because we need that in order to put one foot in front of the other in order to get something done.

• 22:10Speaker 01

  Entrepreneurs are like this on steroids because they are doing something that has very low odds of working, that there is no defined playbook, there is no map on what they should do, but they need to wake up every morning and look in the mirror and say, I got this. I am the best in the world at what I do. I've often thought about myself in my own job. I've talked a little bit about this. I think I have this split personality where in one day, I can be like, I'm doing great. I've got this all figured out. I know what I'm doing. I'm really good at what I do. And then not even the next day, but maybe the next hour, I can flip to, I have no idea what I'm doing. I'm no better than anybody else. What am I doing here? And I actually think that is actually a pretty healthy personality, to have the confidence

• 22:52Speaker 01

  to take a risk, but also the humility, if not the paranoia, to be like, I need to really think about what I'm doing here because I'm actually not that smart. I think if you can get those two things to coexist, that's actually the sweet spot. People get into trouble when they only have the ego or they only have the paranoia. If it's one of those two things, it's never going to work. You have to have this split personality of, I'm so good at what I do and I'm a complete idiot who has no idea what I'm doing.

• 23:19Hala Taha?

  Especially in your areas of weakness, maybe there's one part of your business where you're like, okay, I'm definitely not the best at this and I need help, right?

• 23:27Speaker 01

  But sometimes it's even the same thing for myself as a writer, where writing is an art, there's no right answer. It's just, there's some times where I write something and I'm like, that's great, that is beautiful, I love it. And then I can read that same paragraph an hour later and say, this is garbage, nobody's going to understand what this means whatsoever. But I think the confidence needed to actually write and take a risk and write a brave paragraph, you need. But you also need the humility to go back and say, no, actually, I need to change half of this so it makes better sense. You need both of those at the same time.

• 23:58Hala Taha?

  So let's talk about nostalgia. Speaking of your writing, your beautiful writing, you wrote this article on nostalgia. And it's one of the things our brains often do to revisit the past. And you say, in somewhat of a misleading way. So can you talk to us about why the good old days are not really the good old days?

• 24:16Speaker 01

  Well, I had this experience a couple of months ago. This was probably 15 years ago. My wife and I, this is before we had kids, she was my girlfriend at the time. We had this amazing apartment in the Seattle suburbs. And given we were young and we were broke, but the economy was such a mess at the time, this is after the financial crisis, that we had this incredible apartment with a view of the lake in a perfect location with restaurants nearby. And we lived there for like three years. And then, so a month or two ago, I was reminiscing. And I told her, I was like, man, that was peak living. Because we didn't have kids, we could just wake up and sleep in and go for a walk. And life was so good. And she interrupted and she was like, what are you talking about? She said, Morgan, you were more depressed and anxious and scared

• 25:00Speaker 01

  when we lived there than you've ever been in your life. Because it was just a weird time in my career. I didn't know what I was doing, I didn't really have any skills. It was a low point in my life. And I was like, yeah, you're right. So then why do I remember it as being such a great time? And I think the reason why is when I look back with hindsight, with the benefit of hindsight, I look back and I see a boy back then who had nothing to worry about, because I know that things worked out. I know that the career worked out, my relationships worked out. It wasn't always perfect, it wasn't always easy. But it all worked out. And so I look at that boy 15 years ago, and I think about someone who had nothing to worry about. But back then, I didn't know that. I didn't know it was all going to work out. So when we know how the story ends,

• 25:43Speaker 01

  it's almost impossible to remember how uncertain you were during that period of time. And that's why we look back at the past is usually better than it was. I think this is true, too. If you think about, a lot of Americans have a lot of nostalgia for the 1950s. You look back at the 1950s as like this glorious age of middle-class prosperity. And I think in part, we think that's true because we know that for the most part, it worked out. That the US economy worked out, that the global economy worked out, that there was no World War III, that there was no nuclear war, which a lot of people really worried about back then. So when you know how the story ends, the past always seems much less uncertain than it actually was. And we always fall for this when we're thinking about how glorious the 1990s were, how like the early 2000s, whatever it might be.

• 26:28Speaker 01

  There's one other example of this where a lot of people right now will say the late 90s and the early 2000s were as good as it got. That was such a great time to be alive, and that was my teenage, early 20 years. And at first glance, I'm like, yeah, that's true. The movies we had, the music we had was so great back then. But then I'm like, man, do you remember what it was like to live in America in the year after 9/11? It was terrifying. It was utterly terrifying. Every day you woke up and turned on the news and held your breath that this was not going to be another terrorist. So we remember today as being this amazing time, but I think that's just because we know how the story ends. We know that there was not another major terrorist attack, that there was not a World War III, that the economy did recover, things that we actually didn't know back then at the time.

• 27:12Hala Taha?

  Yeah. And so how can we use this information when we're making investors' decisions and financial decisions? What do we need to think about or be aware of?

• 27:21Speaker 01

  I think it's very common that you look back and you're like, yeah, the stock market has doubled in the last four years or whatever it is. And that was really obvious to see. Anyone could have seen that coming. And it was easy money to make over the last four years. And I think that is a very bad mindset to have because it was never easy. The future was never certain. It's always been this swamp of uncertainty that we live in. So when you view the past as more certain than it was, you view like investing decisions are going to be easier than they are. And the fact is, making an investment decision today feels uncertain. And we don't know what's going to happen in the next five years. And that's always been true. There's never been a period when that's not the case. So realize that the world we live in today is not any more uncertain than it was

• 28:04Speaker 01

  five, 10, 20 years ago is really important. Yes, it feels uncertain today. And that is never going to change when you're making a forward looking investment.

• 28:12Hala Taha?

  You were recently asked at a conference, how investors should feel about the stock market, given that it's gone straight up over the past 15 years. What kind of thought processes went through your head when you heard that?

• 28:24Speaker 01

  Well, first I was like, yeah, that seems right. It feels like the stock market's gone up straight up in the last 15 years or whatever. And then I was like, wait, wait, wait a minute. The last 15 years have actually been a continuous chain of uncertainty and nonsense and volatility. There's been several times when the market fell 20%. Market lost a half of its value during COVID. There was inflation, there are budget deficits. In every given period during the last 15 years, in any given day, you had a million things that you could look at and say, here's why the economy is broken. Here's why the stock market's not going to go up in the future. And there were very smart people who said the market's overvalued, hyperinflation's right around the corner, the budget deficit's unsustainable, go on down the list. And yet the market still did, if you're just connecting the dots over the period, go quote unquote, straight up.

• 29:10Speaker 01

  But during that period, it was a never ending chain of uncertainty and volatility. And this gets back to nostalgia. I think we think that the last 15 years were an easy, calm time to make money because we know how the story ends. The story ends with the stock market has gone up fourfold in the last 15 years, whatever it is. And since we know that, we view the past as being much less uncertain and much more stable than it actually was.

• 29:34Hala Taha?

  And this also goes back to your point that if you hold on to things for a long time, like an extraordinarily long time, you kind of beat the ups and downs over time.

• 29:43Speaker 01

  Yes, yes. And so if you held on tight for the last 15 years, you have done extraordinarily well, but you had to hold on tight during every single day where it felt uncertain and there were 100 reasons that you should panic during the time.

• 29:57Hala Taha?

  How do you think we should use nostalgia to feel better about right now and today's economic climate?

• 30:03Speaker 01

  I think there's actually a lot of calmness to be had when you accept that the world is not more uncertain today than it's ever been. And that at every point in the past, whether it was 2010, or 2005, or 1995, or 1950, whatever it might be, we look back today and say, you guys had it so good. You guys had a calm, stable world that you lived in. And that's not true whatsoever. The world is not more uncertain today than it was in 1995. It's not. We just think it is because we know what happened after 1995. And the odds of a good or bad future today, over the next 10 years, I think are the same as they were in 1995, or 2005, going back to the past. And so it's not to say that

• 30:47Speaker 01

  we know the world is going to be better in the future, or the world is going to be great over the next 20 years. We don't know that, but we've never known that. It's not any different today than it's ever been.

• 30:57Hala Taha?

  So I was online and I saw this meme yesterday, and it said that we broke records for Black Friday 2024 sales. So we spent $10.8 billion online this past Black Friday. Meanwhile, all year, everyone's saying they can't afford eggs, they can't afford their groceries. And so I feel like this really tied everything together when I was researching for this interview, because here we are, thinking it's the worst year ever, but then we surpassed Black Friday sales just this past week.

• 31:30Speaker 01

  Yeah, I think at least part of this is there's a very big difference between I can't afford eggs and the price of eggs has gone up and that pisses me off. Those are very different things. It's one thing to say, look, there are things in the economy, particularly with inflation, that make people angry and rightly angry. They should be angry about it. They should be upset about it. And also, people are doing better than ever and earning higher paychecks than ever. And the stock market's at an all time high and Bitcoin hit $100,000 yesterday. And those two things are not a contradiction, that people should be angry and most people have a ton of money right now, more money than they've ever had. And I think that's what you see when you have low economic feelings and moods and also record spending.

• 32:11Hala Taha?

  So the other thing that I was thinking related to this is that economic inequality is at an all time high. And I see this in my own personal life. I have friends who are entrepreneurs and they're doing incredible, they're making more money than ever, or doctor friends, lawyer friends are doing really well. And then I have friends who are really smart, who can't get a job right now, and who literally can't even hold a job. And so I just see this complete disparity of experiences when it comes to money. And I want to understand your thoughts about what's going on here in America.

• 32:43Speaker 01

  There are many things going on. This is not a black and white issue that you can just give one answer and say, here's what's going on. But I think one of the things that is going on that's easy to overlook is that it's not necessarily that these things are happening at record rates. It's that we are more aware of it than we've ever been. So when there was incredible wealth inequality as recently as the 1990s, most people didn't know about it because your view of the world was constrained to your neighbors, your coworkers, your friends who you talked to on the phone, and whatever you watched on the NBC Nightly News that night. That was your view of the world. And now, because of social media in particular, if something's happening in the world, if somebody in the world is experiencing the world in a different way than you are, you are going to know about it. And you're

• 33:25Speaker 01

  going to know about it in social media terms, which is the person who says the most provocative off the wall thing gets the most attention. So yes, there is a lot of wealth inequality right now. There has been for decades. People are just more aware of how the other half lives than they used to. And it used to Be that the people who lived in Beverly Hills and lived behind gated mansions, you never saw them. Nobody else ever saw how they lived. And now, if you flip open Instagram, it is an often fake view of how beautiful, wealthy and happy people are. And everyone is so aware of it. And when you are aware that there are other people who look like they are working not as hard as you, they're not as smart as you, but they at least appear to be happier, wealthier and prettier than you are.

• 34:08Speaker 01

  That leads to a lot of anxiety, a lot of social fulbo that we have just because we are more aware of it. What's interesting with wealth inequality too, is that actually in the last five years, in percentage terms, not in dollar terms, but in percentage terms, the group who has grown their incomes the most are the poorest. That has been a complete reversal from what happened over the last 30 years or so, or 40 or 50 years or so, where it was lower incomes were stagnating and the rich were just exploding. And now it's been post-COVID that a lot of low-income workers, people who used to make $7 an hour, maybe now they're making $14 an hour. In percentage terms, it's enormous, even if it's still a big gap between rich and poor. I don't know how long that will last, or if that's sustainable at all, but it's definitely taken place.

• 34:53Speaker 01

  But I think it has always countered with the idea that those people who maybe used to make $7 an hour, and now they make 14, they're still opening up Instagram and TikTok and looking at people who at least are pretending to live this gigantic life that is inflating their aspirations.

• 35:08Hala Taha?

  It's so interesting. I never even thought of that, the fact that we can just see it all more than we could in the past. It's so true. I think that's really, really eye-opening.

• 35:17Speaker 01

  When I was a teenager, my view of the world outside of the little town that I lived in was MTV Cribs. That was it. That was like the only opportunity to see how the other half lives. And what's so interesting about that specific example, if you go look, there are so many documented cases of MTV Cribs, which was like, that was the show of my teens and early twenties, that the mansions that they were showing off did not actually belong to those celebrities. You would have a rapper or whatever who would go rent a mansion to film in, but it wasn't actually them. Which highlights the idea that a lot of times when you view how the other half lives, it's not even accurate. It's not even true. It's not a depiction of how they're actually living. It's either a rented mansion, or that is actually their mansion,

• 36:00Speaker 01

  but they're actually not as happy as you think they might be. There's so much going on behind the scenes that they look like they're living this incredible life, but they're actually not.

• 36:08Hala Taha?

  So true, so true. I love that. So, moving on here, just as we have a tendency to use our brains to travel back in time with nostalgia, we also have a tendency to use our brains to travel forward in time to worry about the future. So, how can we get better at not worrying about things that are likely never going to happen?

• 36:28Speaker 01

  I think it's a hard trade-off because you should be worrying about things that might happen in your future. That's what's going to propel you into action today in your personal life and for the rest of the world. So, you can take something like climate change and say, "Look, for not everybody, but for a lot of people, it has no impact on their life today at this moment." But they should be taking action and trying to come up with new forms of energy because it's going to change 10, 20 years in the future. I think having an appropriate level of worry is what gets you going. And in your own individual life, the idea that you wake up a little bit nervous and paranoid about your own career is what's going to propel you into action to bring you success five or 10 years from now. Jeff Bezos talks a lot about when they report a good quarter for Amazon, that's actually for actions that they took five years ago. They made a change in the company

• 37:12Speaker 01

  five years ago that is now paying off in this quarter because they were worried about their future five years ago. So, I think that's always important. I think, like a lot of things, though, you can overdose on good ideas. So, if your fear and paranoia for the future is preventing you from taking action today because it seems so uncertain. So, I'll give you an example of that. People who are so worried about climate change that they don't want to have kids, that's a documented thing as well. That's an example of, okay, in my view at least, you are clearly overdosing on that worry that's preventing you from taking action to do things in your life that might actually bring you a lot of joy. Not to judge anyone's personal decisions, but I think there are certain cases when you are clearly taking it too far and it's preventing you from taking action. So, finding that balance

• 37:55Speaker 01

  between how can I be kicked in the butt to take action, but not so much it's going to paralyze me in my tracks, that's always what it is. And you also have to bring that with the idea that- What you are worried about in the future is very likely not going to happen. But there are going to be bad things that do happen that you're not even thinking about today. So if I'm thinking about the next 10 years and you said, Morgan, like, what are the biggest risks to the US economy over the next 10 years? I can name a couple of things. Inflation, budget deficits, whatever it might be, that very likely will not be the biggest risk. The biggest risk over the next 10 years is something that you and I and nobody else are talking about. It's going to be some equivalent of 9/11, Pearl Harbor, COVID, that nobody talks about until it actually happens.

• 38:38Speaker 01

  So when you embrace the idea that the biggest risk is something that you and I are not even thinking about right now. It's not in the news. Nobody's talking about it. Then you kind of throw up your hands in a good way. And you're like, look, I know the world is fragile. I know the world is uncertain, but I'm not going to waste my time trying to predict exactly what it's going to be, because nobody knows what it's going to be.

• 38:55Hala Taha?

  It's so true. I even think about it with AI. All year, all we've been talking about on the podcast is AI. It's such a hot topic. I started this podcast six years ago. I've talked to the smartest people in the world. Nobody talked about AI for the first five years of the podcast.

• 39:11Speaker 01

  Yeah, yeah.

• 39:12Hala Taha?

  And it's just insane to think about how much like it's just taking over out of nowhere. It's like COVID, just popped out out of nowhere.

• 39:18Speaker 01

  Totally. I think a lot about too, in the early days of the internet, let's call that 1990s, let's say. The biggest fear, the worry for the internet was that it was going to put brick and mortar stores out of business. To some extent, it kind of did, but not really. Costco is still an absolutely booming empire and whatnot. But what did happen was what virtually nobody talked about was it was going to have an incredible impact on teenage, particularly mental health, on teenage anxiety, depression, suicide and whatnot, that we know is at least heavily caused by social media addiction. That probably is right now the biggest risk that the internet poses on society. And virtually, nobody was talking about it 20 years ago. And so that's just one example of what is actually the biggest risk is what no one's talking about right now.

• 40:03Hala Taha?

  So are there any positive things that we can learn from our own nostalgia, our own uncertainty and the emotions that they produce?

• 40:11Speaker 01

  I think what's true historically is that the biggest inventions, the biggest innovations, come specifically because there is a problem in the world. And when the world is on fire, so to speak, that is what gets people's butts into gear to go innovate. So the most innovative decades that we've ever had in America are the 1930s and the 1940s. And it's not even close. The inventions that we came up with, the added productivity that they added to our life, 30s and 40s is where it's at.

• 40:38Hala Taha?

  Really?

• 40:39Speaker 01

  What are the 1930s? It's the Great Depression and World War II. Because what happened during those periods were if you were an entrepreneur or a business owner in the 1930s during the Great Depression, every single morning you woke up scared out of your mind and you said, I need to get more productive because if I don't, we're going to go bankrupt next week. So I need to figure out how to run my business way more efficiently and come up with new technologies, new ways to do things. And the accumulated impact on that was enormous. In World War II, it was if we don't come up with new innovations, Adolf Hitler's going to take over the planet next year. And that spawned a ridiculous wave of innovations, everything from nuclear energy to rockets to jets to penicillin, microwaves, radar, going down the list because people were so scared.

• 41:23Speaker 01

  So that's the contradiction of you actually don't want most of society to wake up every morning and say, everything is great. Because that can lead to a period of getting fat, happy, and lazy. What you want is a low level of anxiety, not too much. The most innovation happens when people wake up in the morning and they say, I have to get more innovative. Not, it would be fun if I became more innovative, but I have to do it because there's this existential threat. That's when you look back 20 years later and you're like, man, that period was tough. It was stressful, but look at all the good things that came out of it. That's always the long history of innovation.

• 41:55Hala Taha?

  This is a really good tie-in to the next topic that I want to speak about, which is cumulative versus cyclical knowledge. Because innovation can compound in certain fields and in some fields, it doesn't really compound. For example, in finance, people just tend to make the same investment mistakes from one generation to another. And in a recent blog post, you made this fascinating comparison between medical knowledge and finance knowledge and how one field is cumulative and one field is cyclical. Can you break that down for us?

• 42:25Speaker 01

  Yeah, so in medicine, we have learned a tremendous amount about biology and chemistry and anatomy over the last 200 years, and it is cumulative. What I mean by that is if in the 1920s, we discover penicillin, the next generation gets to start their career understanding what penicillin is. All the knowledge is cumulative over time. What one generation learned, the next generation starts with as a baseline of knowledge. And that's when knowledge just explodes exponentially. Other fields like finance are not like that. And by and large, the lessons that were learned in the 1920s and the 1930s, or the Great Depression and the roaring 20s, we have to relearn those lessons. We don't have that knowledge passed down from generations that were like, great, we'll never do that again.

• 43:08Speaker 01

  No, we keep doing the same thing over and over and over again. And it would be the equivalent of every generation of new doctors had to find new medicines, had to rediscover medicines that the previous generation already discovered. That's ridiculous, but that's what happens in finance. A lot of it is because finance is not a science. It's behavioral. And I can read about what it was like to experience the Great Depression and the stupid risks that people took in the 1920s and how it all blew up in the 1930s. I can read about that. But for a lot of people, they're only going to really understand it when they've experienced it firsthand themselves. And that's why we keep doing the same things over and over and over again. And so any field that is behavioral, and finance is definitely that, it's probably the greatest example of a field that's purely behavioral, there is virtually no accumulated

• 43:53Speaker 01

  knowledge over time. All the lessons have to be learned over and over again. And you can easily imagine a world where, look, my grandparents lived through the Great Depression, and then my generation made some really stupid mistakes during the housing bubble and maybe during the dot com bubble, and my kids and my grandkids are going to make a bunch of stupid mistakes themselves. There's very little looking back and saying, hey, we learned from that, so let's never do that again. It's the same mistakes over and over again.

• 44:18Hala Taha?

  And it's also because there's just so many people participating, right? It's not just financial advisors participating, it's everybody's participating in the finance world. So do we just have to accept a level of vitality in this?

• 44:32Speaker 01

  I think that's definitely the case. It's true that in the 1920s, during the peak of the stock market bubble in 1929, 5% of Americans owned stocks. That's it. 95% of Americans did not own a single share of any stock. And today, it's about 55% of Americans own some stocks, maybe in their 401k or their brokerage account. So it's a way higher exposure today than it used to be. And I think that's good. That's great. But it also makes it so like, yes, there's so much participation in the stock market that when the stock market falls 50%, it has a much greater impact on society than it used to because there's a greater participation rate. And so a lot of those mistakes that we're still making today, when they occurred 50 or 70 years ago, it was bad for a small sliver of society. Whereas today, when the stock market falls 50%,

• 45:17Speaker 01

  it is crushing and completely derails half the country's ability to retire on time, something like that.

• 45:23Hala Taha?

  Do you feel like with influencers like you, for example, that are spreading information about how to take control of your personal finances? And this wave of people wanting to learn about how to manage their own personal finances and wealth outcomes, do you think that's going to help at all?

• 45:40Speaker 01

  I think it can help. It can also be very dangerous. And one thing that I've tried to do in my career is not pretend that I know who you are because I don't. I don't know what your goals are. I don't know what your income is. I don't know what your personality is. I don't know what your family situation is. So who am I to give you medical, to give you financial advice? I said medical there because what I was going to say is, imagine a world where there was the equivalent of CNBC for medicine. And you had doctors going on saying, you should take this medicine. You should get this surgery. And what you would do as a viewer is you would be like, you don't even know me. You don't even know if I'm sick and you're recommending that I go take this pill? That would seem ridiculous, but we do that with finance, where you have a financial influencer who says, you should buy this stock. You should have half your money in Bitcoin.

• 46:25Speaker 01

  And that might be good advice for some people and disastrous for others. You have to understand that person individually. This is why I think despite the massive growth in like digital financial advice and whatnot, there is still a huge, incredible need for a face-to-face human financial advisor. Actually get to know you because it's never going to be the case that an app can know everybody and give blanket advice. There is no blanket financial advice. And what works for me might be disastrous for you and vice versa. That's the limitation of giving advice to a very big audience is that there is no one size fits all piece of advice that you can give anybody.

• 47:02Hala Taha?

  So we were talking about AI earlier and Elon Musk has some predictions about what's going to happen with AI that I think are really interesting. He says that humans aren't going to work like we used to, and we're going to have to reimagine the ways that we find purpose. And he also mentions that to address this job displacement caused by AI, that there's going to be a universal basic income, or he at least advocates for one. Then he also has suggested that with AI's efficiency, that it could lead to a universal high income where abundance created by AI allows for higher standards of living for all. So do you feel like changes like this are actually going to make finance more cumulative and less cyclical?

• 47:44Speaker 01

  When I hear that, I have two thoughts. One is, yes, I believe that to be true, that makes sense. And B, people have been saying that for literally centuries. John Maynard Keynes, one of the most famous financial minds of the 1920s, 1930s, he very famously predicted that I think it was by the year 2000, the average work week would be 15 hours a week because he calculated we were going to become so productive and so efficient that people just wouldn't need to work that much anymore. Of course, that did not happen because there's such a long history of if people's incomes go from $20,000 to $50,000, they don't say, great, that's enough. I can just retire on 50,000. What they do is they say, great, now I make 50,000 and I aspire to make 100. And once they make 100, they're like, great, now I aspire to make 200.

• 48:29Speaker 01

  So you can imagine a world where AI makes us all much richer and way more productive. I think it's much harder to imagine a world where because of that, we all say, great, I don't need to work anymore. I think if we do that, we're just going to find some other new technology to want to work on. And that's always been the history of new technology. Maybe this time will be different, but I feel like that's always what it is. And if you double people's income, it's great. They live a better life and they are not satiated in the slightest. They're always going to want more. And I think the reason why is because people's ability to feel wealthy has very little to do with. The actual material life that they're living. And it has a lot to do with whether I have more money than you do. It's all about social comparison. And so if my income doubles and your income doubles,

• 49:14Speaker 01

  by and large, I will not feel better off because I'm still comparing myself to you. So if AI makes everybody richer, it's probably the case that nobody feels better off. Because by comparison to their peers, they're not any better off.

• 49:26Hala Taha?

  Oh, my God, that is so fascinating. And it's so true. All of our decisions are based on status and whether things increase or decrease our status. So if everybody's making the same amount of money, we're going to find some other way to try to increase our status.

• 49:40Speaker 01

  Everyone just wants to be the top 1%. But this was a Charlie Munger quote. He's like, the iron rule of math is that only 1% of people can be in the top 1%. It's always going to be that the other 99% feel like they're falling behind, even if their incomes are going up and up and up.

• 49:57Hala Taha?

  So Elon Musk is somebody that we mentioned quite a few times already in this interview. And let's stick on him here. So he is somebody who takes a lot of risk. What can we learn about failure and risk and resilience when it comes to Elon Musk and his experiences?

• 50:18Speaker 01

  I'm probably going to get some of these numbers wrong, but I think this is roughly accurate. He made about $200 million from PayPal. I think he was about 30 years old, cashed out $200 million. Obviously, anybody could have and would have just sailed off into the sunset and bought a private island and a private jet and lived out the rest of their days in luxury. What he did is he plowed every single cent of that money into Tesla and SpaceX, which at the time were nothing. And by his estimation, as I mentioned earlier, there was like a 99% chance that those were not going to work. Now, both of them worked. He's now the richest man to ever live. Everyone knows what happened. It's also important to realize that the vast majority of people, including myself, do not have that personality. That you could have made $200 million and said, I'm going to bet it all on companies that have almost no chance of survival.

• 51:03Speaker 01

  Even if it did work out in the end, we know how it worked out. And so more than the fact that he is a genius. Entrepreneur, a genius engineer, go on down the list. He has a level of risk-taking that is truly one in a billion that I don't have. And so I think for lots of entrepreneurs, not just Musk, but many of those people, I can look at them and say, I am glad they exist because the products that they created make the world better. And at the same time, I would never want to live that life for myself. Where I'm lucky enough to make a fortune and I literally go put all of it on black. That's not what I have. But he does have it. Back to like, people like Henry Ford. He was like, look, if you have cash in the bank, you need to put it to work immediately. Otherwise, it's a total waste. I don't have that personality, but I'm glad that he did.

• 51:47Speaker 01

  Because he made the world better for it. That's a lot of the contradiction here. I think it's important for people to wrap their heads around is that it's not a contradiction to say, I'm so glad that person exists because their technologies made the world better. And at the same time, they have parts of their personality that I find distasteful. And I would never want to take that much risk in my own life. That's not a contradiction. That's actually a very important thing to acknowledge for lots of those entrepreneurs outside of Elon Musk.

• 52:14Hala Taha?

  I have a quote from one of your articles that I think is really insightful for entrepreneurs. So I'm going to read it. "We live in a tail-driven world where a few events drive the majority of outcomes. It's a world that demands you become comfortable with a lot of things not working, lots of things failing, and constant disappointment. Because success means that you tried 10 things and eight of them fail miserably, but two change your life."

• 52:37Speaker 01

  Yeah, it's a hard thing to wrap your head around. And this is true for a lot of things in life, for your relationships and whatnot, that you might need to try out 10 different things before you find one that works. And understanding the idea that if you'd start 10 businesses, let's say, and nine of them fail and one is a success, that's a good outcome. That means you did it right. But that means you have to be comfortable with nine of the things not working. And you might need to date 10 people before you find your spouse. Like, that idea exists everywhere in your life. And so getting used to the idea that the path to success often looks a lot like failure is very hard to wrap your head around. It's true for stock picking as well, where if you pick 10 stocks, there's a very good

• 53:19Speaker 01

  chance that in the next 10 years, three to five of them won't even exist anymore. Those companies will go out of business. Even for big mega companies, they just won't exist anymore. And a couple of them will do okay. And if you're good and if you're lucky, one of them will generate all of your returns. That's always how it exists. I mean, if you go back 20 years ago, a lot of the biggest stocks in the world were AIG, Enron, General Motors, companies that either don't exist or barely exist anymore. And that's always been the case. And you can so imagine a world 20 years from now where one of Amazon, Google, Microsoft, Nvidia, Facebook, don't exist anymore. That sounds crazy, but that has always been the path of history. Or they still exist, but they're shells of their former selves.

• 54:03Speaker 01

  And there's going to be some new company that you and I aren't talking about today that's going to be worth $10 trillion. That's always been the case as well. So, understanding that you can fail half the time and still do very well. It seems like a contradiction, but that's always how it works in a tail-driven society.

• 54:19Hala Taha?

  Such an important lesson for all of us to take heed to. So I want to close out this interview with your universal laws of the world, which you recently wrote about. Can you tell folks what inspired you to do this and what some of these universal laws are?

• 54:34Speaker 01

  I've always liked the idea that fields are more interconnected than we think. So, in school, the biology department's over here. And then in a separate building, you have the math department. In a separate building, you have the history department. But there's actually so many interconnections between those fields. And there's so much that we can learn from biology that teaches us about investing. And there's so much that we can learn from history that teaches us about medicine, like all these interconnections. So I think it's fun to look at some other laws and rules from other fields that you're like, "Look, that's from a different field, but it teaches me a lot about this field." There's lots of different laws from evolution that can teach you a lot about investing, from biology that can teach you a lot about investing. And I think if you are only looking through the narrow lens of your field, whatever your field is, if you're an investor, you're only looking through finance.

• 55:17Speaker 01

  If you're a lawyer, you're only studying law, that you can actually learn so much if you expand your horizons and you realize how interconnected the world truly is.

• 55:27Hala Taha?

  So you have this bullshit asymmetry principle. What's that about?

• 55:32Speaker 01

  That was from a guy who'd coined it Brandolini's Law, which is that it is much easier to create bullshit than it is to refute it. So if somebody lies or says something completely untrue, that's very easy. To refute it is extremely difficult, and it's always been like that. Social media makes it 100 times more potent than it used to be. And you see this online. If somebody tweets something that is obviously false, profoundly false, it might get 100,000 retweets. And then when it is corrected and the truth comes out, that correction will get a half a percent as much attention and as many eyeballs as it did. That's always been the case, but it's so much more potent now than it used to be. That bullshit is easier to create than it is to refute.

• 56:17Hala Taha?

  Hmm, so interesting. And so how does that relate to finance? People giving advice and then everybody believes it? And then you just can't take it away, basically?

• 56:26Speaker 01

  Yeah, rumors and whatnot. What's interesting in finance is that a lot of what might seem like bullshit and rumors can become true because it's a story-driven thing that enough people latch on to. So meme coins are an example of this. Someone creates a meme coin and you're like, that's obviously bullshit. It's obviously has no fundamental backing. It's obviously a joke and it becomes Dogecoin.

• 56:48Hala Taha?

  Yeah, like NFTs.

• 56:51Speaker 01

  Exactly. If enough people believe it, at least for a short period of time, it can become self-fulfilling. And even if it's based in bullshit and long-term is bullshit, it becomes self-fulfilling for a very long period of time if enough people think it's true.

• 57:04Hala Taha?

  That's so crazy. All right, last one, Littlewoods Law. Why do miracles happen all the time?

• 57:10Speaker 01

  Littlewoods Law was this idea from a mathematician where he was like, a lot of what people consider miracles are actually just basic statistics. Because if something has a one in a billion chance of occurring, well, how many people are in the world? Eight billion. So by definition, there should be eight one in a billion things happening every day, day after day after day. And so in the news, we're always going to hear about this amazing ridiculous thing, good or bad, that happened to somebody. And you're like, that's a miracle. How could that possibly have ever happened? Well, a lot of the answers to that is just there are so many people in the world doing so many things, things that seem completely preposterous actually happen all the time. And in a global news world, you are definitely going to hear about it. And it leads people to this idea that the world is probably more fragile

• 57:55Speaker 01

  and more uncertain than it actually is. It is very fragile and uncertain, but when you only hear about the one in a billion things that are guaranteed to happen because there are so many people, it gives us this idea that those things happen more frequently than they actually do.

• 58:08Hala Taha?

  I actually want to ask one more law because I feel like it's important for entrepreneurs, and that's Parkinson's Law. Tell us about that.

• 58:16Speaker 01

  It's the idea that work expands to the time that you have. And so if you give someone a two-month deadline, they're going to take two months to do that project. If you give them a one-week deadline, they'll get it done in a week. Back to Elon Musk, who we've been talking a lot about. He's been known for this very often, particularly in SpaceX and Tesla, where an engineer says, Elon, this part is going to take a million dollars to build, a million dollars to create and design this part. And he basically comes back and he's like, your budget is $50,000. Go get it done. And they do. They do get it done. Steve Jobs did this a lot, too, where he was like, the iPhone or the iPod has to, it cannot be bigger than this. And the engineers are like, we can't do it. He's like, yes, you can. Go figure it out. And they do it. They get it done. If you give someone a tight deadline, they will

• 59:01Speaker 01

  probably find a way to get it done. But if you give them the expense and the time, a larger budget or a larger period of time, they're going to fill up their needs in that time. And you see this in so many different careers where the amount of time and money that you need to get something done is just the amount of time and money that your boss gave you to get it done.

• 59:19Hala Taha?

  Morgan, this has been such an awesome conversation. You have so much value to share beyond just finance. And I feel like we really got to hear a lot of your perspectives today, and I personally really enjoyed it. I end my show with two questions that I ask all my guests. The first one is, what is one actionable thing our young improfitters can do today to become more profitable tomorrow?

• 59:40Speaker 01

  One is figure out what is unique to you that does not apply to other people in your circle who you are currently looking up to and trying to copy. What is very unique about your goals or your personality that you're like, look, this person who I look up to, this strategy worked for them, but it probably doesn't work for me. And it's not a contradiction. I'm not going against them to say, I know that worked for you, but I have a different personality, so I'm going to do it my own way. Whatever that might be, everyone is different. I think that's what's most important.

• 1:00:05Hala Taha?

  Can you give us an example?

• 1:00:06Speaker 01

  I probably don't take as much investing risk as somebody of my age and income could. But that's because I have no aspiration to be the world's greatest investor. My only aspiration is to give myself and my family independence. And that might not be your goal. It might not be some of the listeners' goals. So if we are doing things differently, it's not necessarily because we disagree with each other. We might just have a slightly different personality and different goals over time.

• 1:00:31Hala Taha?

  And what is your secret to profiting in life? And this can go beyond business and finance.

• 1:00:36Speaker 01

  Independence, always. Not just financial independence, but hanging out with only people who I want to hang out with, only doing work that I want to do. If you could wake up every morning and say, I can do whatever I want today, regardless of what that might be. Having a sense of independence is not only the most enjoyable, but it's going to push you towards doing your best work.

• 1:00:54Hala Taha?

  Love it. And where can everybody learn more about you and everything that you do?

• 1:00:58Speaker 01

  My books, The Psychology of Money and Same as Ever, and I also have a podcast and a blog. Twitter, my handle is Morgan Housel, my first and last name.

• 1:01:06Hala Taha?

  Awesome. What's your podcast called?

• 1:01:07Speaker 01

  It's called The Morgan Housel Podcast. Very creatively named.

• 1:01:11Hala Taha?

  Easy to find. I'll stick all the links in the show notes. Morgan, it's always a pleasure to have you on the show. Thank you so much.

• 1:01:17Speaker 01

  Thanks so much.

• 1:01:22Hala Taha?

  Well, young improfitters, I have to say, I feel so much better and relaxed about my financial situation after speaking with Morgan, because he just taught me so much and I love his approach to money. And I love his belief that money should be a tool for a better life and not an end to itself. When it comes to your finances and your investments, you're never going to be able to anticipate the market. It's just never going to happen. But you can understand the big picture, not to mention human psychology, including your own. And so here were some of my favorite pieces of advice from Morgan from the conversation today. First, invest for the long haul and don't panic sell.

• 1:02:05Hala Taha?

  There's a reason why a house is the best investment that many people will ever make. And that's because they tend to buy and hold it. That's because they're living in it. So don't be afraid to buy and hold, but also don't be afraid to take your money and then invest it in yourself instead, like I did. Even if you don't believe, like Henry Ford did, that any cash that just sits around is going to waste, you should still think about putting that money to use. Maybe to start a side hustle or a business or to learn a new skill that could help you start a business one day. Morgan calls cash the oxygen of independence, and I think that is especially true for entrepreneurs. So yap, bam, don't look back in 20 years and wonder if you should have taken that shot at starting a business.

• 1:02:50Hala Taha?

  Invest in yourself now. That might sound overly optimistic, but remember that sometimes overconfidence can be your superpower as an entrepreneur. Just be smart about it and also recognize that you may well fail nine times out of 10. But that 10th time, young improffitters, well, that could be the time that changes everything. Thanks for listening to this episode of Young and Profiting Podcast. If you listen, learned, and profited from this conversation with Morgan Housel, then share this episode with your friends and family. And if you enjoyed this show, I have two asks. First off, if you're not subscribed to the channel yet, make sure you do that so you never miss an episode. Second, drop us a five-star review on Apple Podcasts, Spotify, Castbox, Player FM, wherever

• 1:03:35Hala Taha?

  you listen to your podcasts. I love getting your reviews. I read them every day. They always make my day, so take the time to write us a review, give us some feedback, help us grow our social proof. I'd really appreciate it. If you want to watch your podcasts as videos, I'm doing a lot more in-person content. You can find all of our videos on YouTube at Young and Profiting. You can also find me on Instagram at @yapwithhala or LinkedIn by searching my name. It's Hala Taha. And of course, I want to thank my Yap production team. You guys are so awesome. Thank you for all your hard work. I see you guys hustling every day. You make this show possible. I couldn't do this without you. This is your host, Hala Taha, AKA The Podcast Princess, signing off.