Pod Insights The Diary Of A CEO with Steven Bartlett Moment 208: The Dumbest Financial Advice Everyone Weirdly Follows That’s Keeping Them Poor! About this episode What if the key to investing wasn’t finding the next big thing—but surviving the next unknown?
Bestselling author and savings expert Morgan Housel shares the true story that changed how he sees risk forever—and how it reshaped his philosophy on money, markets, and why most people lose when they try to predict the future.
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Morgan Housel? So I grew up skiing in Le Tahoe, California, and I was a competitive ski racer. So all throughout my childhood and teenage years, I skied six days a week, 10 months a year, all over the world. And it was great. There were about 12 of us on the Squaw Valley Ski Team. We had grown up together and we'd spent our entire lives together. And when I was 17, this is in 2001, I was skiing with my two, two of my best friends, Brendan Allen and Brian Richmond. And we would ski out of bounds, which is illegal. You're not supposed to do it. We would duck under the rope that says, "Do not cross," and we'd ski out of bounds because that's where a lot of the good skiing is. And when we would do this, it would spit us out on this back country road. We'd have to hitchhike back. There's no chairlift when you ski out of bounds. You have to hitchhike your way back. So we did it one morning in February 2001. The three of us did
0:44 Morgan Housel? it. And when we did it, we triggered a very small avalanche. And I remembered it so clearly. Like, I can still feel it 21 years, 22 years later. I can still feel what it's like. It's the weirdest sensation that I've had in my life. Because when you get hit by an avalanche, rather than pushing on the snow to gain traction with your skis, the ground is pushing you. So all of a sudden, you're skiing along and you got control, and all of a sudden, boom, you have no control anymore. The ground is pushing you around. Probably similar to what it feels like if you're standing on the ground during an earthquake. Like, the ground's pushing you. But it was a pretty small avalanche, maybe came up to our knees, ended pretty quickly. And we kind of like, literally high-fived about it at the bottom and went about our day.
1:25 Morgan Housel? We get back around to the base lodge. We hitchhiked back. And Brendan and Brian said they wanted to do it again. They wanted to ski again. And I said, "Hey," for whatever reason, I just didn't want to do it. So I said, "Hey, rather than hitchhiking back, why don't you guys go do it again, and I'll drive my truck around and pick you up?" So we said, "Great." We made our plans, went our separate ways. They went skiing. I went back around to take my boots off and jump in my truck and go pick them up. 20, 30 minutes later, I go to pick them up at the pickup spot, and they weren't there. And I knew, it only took us a minute to ski down the hill. So 20 minutes later, I knew, like, they weren't coming. I was not worried. I figured that they had already hitchhiked home. But, so after waiting for another 20 or 30 minutes, I just left and went back to the lodge. I expected them to be there, and they weren't.
2:09 Morgan Housel? And I still didn't really worry. Like, we didn't have cell phones back then, and people were just comfortable being out of touch. If you didn't know where your buddy was, like, it wasn't that big a deal. So we went about the day. I started worrying a little bit. I remember I stopped at Brendan's house, expected him to be there, and he wasn't there either. And I remember calling and leaving a message on his voicemail. And I remember ending the voicemail by saying, "I hope you're okay, man." Those are my last words. I remember that very clearly. The day went on, and I think at about four or five o'clock, Brian's mom called me. And she said, "Brian never showed up for work today. Do you know where he is?" And I told her what happened. I said, "We skied the backside of Squaw, where we'd hitchhike back. I was gonna pick them up, but they never showed up, and I haven't seen them since." And I also remember so clearly Brian's mom saying,
2:54 Morgan Housel? "Oh, my God," and hanging up the phone. And that was so like, so then we started getting worried. We called the police. The police didn't take it very seriously, because they thought, "Ah, they're out at a party. They ran off with a girl for the night." Like, they weren't worried. But we finally got search and rescue involved. And rescuers with probe poles frowned Brendan and Brian, buried under six feet of snow. And they were, they'd been killed from a massive avalanche. And so, look, I think virtually everyone listening to this, I'm sure you two have lost somebody close to you, somebody that you love. So I know the experience was not unique in that way. But it was the first time that I had experienced loss, and it was the first bad thing that had ever happened to me in my life. So it had a big impact on me. And there were a lot of takeaways.
3:35 Morgan Housel? I think at the time, I didn't have the cognitive tools to piece together what happened, or to learn about what happened, like, have any sort of takeaways. But as I got older and thought about it, and looking back, I put together all these, like, realizations of what that did to me, how it changed me, and what were some of the lessons from it, too. One that I talk about in the book that I think about all the time is my decision to not go with them on a second run. Was this completely brainless decision. I put no thought into that decision. It was not a cost benefit analysis. I didn't think through it. But it's the most important decision I've ever made in my life. A hundred percent chance if I was with them, I would have died. And I had skied literally thousands of runs with Brendan and Brian.
4:20 Morgan Housel? How many times did I deny a second run with them? Or say, you guys keep going, I'm gonna go in? Almost never. The one time I did, it saved my entire life. And so that, you really realize that the world hangs by a thread. Everybody thinks like, oh, you're gonna put a lot of thought into your big decisions to make sure that you're successful in life, where you go to college, what your career's gonna be, who you marry. That's all great. But the world hangs by a thread and there are tiny little know nothing decisions. Maybe that you made today of, maybe it was when to cross the street. Maybe it was when to leave to get in your car. That can utterly change the course of your life. And so, once you accept that of how much the world hangs by a thread, I think you become much more humble with your willingness to make forecasts about the future.
5:04 Morgan Housel? What the economy is gonna do, who's gonna win the election? What's gonna happen in my life, my career, my family's life? We have no clue. We have no idea. Because all we can think about are the big decisions. We cannot piece together the chaos theory of, I got in my car at the wrong time. I met the wrong person, or I met the right person. Or, you know, I decided not to take a second run. We cannot forecast the impact of those things. And so that had a big impact on me too of just, who are we to fool ourselves? That we can predict the next recession? That we can predict where our careers are gonna be in 10 years? That we can predict how long our marriage is gonna last? That we can predict how long we're gonna live? We can't. Nobody can. Because we can't predict how crazy these tiny events can turn into.
5:48 Steven Bartlett? And this comes right back to investing, doesn't it? Because most people that consider themselves to be investors, whether that's just putting a couple of quid into crypto or something else, engage in the idea that they can predict the future.
6:02 Morgan Housel? Yeah.
6:03 Steven Bartlett? And this is where it appears that most money is lost.
6:06 Morgan Housel? I mean, think about the biggest risk to the US economy over the last two generations.
6:10 Steven Bartlett? Covid?
6:11 Morgan Housel? You know, that's one of them. The others would be Pearl Harbor,
6:14 Steven Bartlett? Okay.
6:14 Morgan Housel? nine eleven, Covid, and maybe Lehman Brothers couldn't find a buyer in two thousand eight, which sparked the financial crisis of two thousand eight. Those are the biggest risks by far. And the common denominator of every one of those stories is that nobody saw them coming. They were not in any newspaper before they happened. They were not in any economic outlook. Nobody was going on TV warning you that this was coming. The common denominator of those is that they did all of their damage in two seconds. And that would be the case going forward. You can guarantee that the biggest news story and the biggest risk over the next year or the next ten years of our life, whatever it is, is something that nobody's talking about today, that you and I have can't even fathom, because it's always been like that. There's never been a time when the biggest news story was foreseeable.
6:58 Morgan Housel? And it's all, and it'll be like that going forward. So that's another just like embracing how fragile the world is. There's a great quote from a financial advisor who I really admire, and him Carl Richards, and he says, "Risk is what's left over when you think you've thought of everything." You can go out of your way to think about all of the risks that are in your life. And like, great, and like how you're going to prevent them. Great, that's a good thing to do. When you're done with that exercise, what's left over that you're not thinking about is what risk actually is. It's like by definition, we can never plan or even imagine what the biggest risks in our life are going to be.
7:28 Steven Bartlett? You say that in Same As Ever, you say, I think that the chapter title is Risk Is The Things You Can't See? Or something along that.
7:35 Morgan Housel? Risk is what you don't see.
7:36 Steven Bartlett? Risk is what you don't see. That was a little bit terrifying.
7:40 Morgan Housel? And it's true. And I think, I think sometime you can phrase it as terrifying. It's also kind of relieving that, like, why are you going to put so much effort into trying to predict what the stock market is going to do next, what the economy is going to do next? Why are you building a forecasting model to figure out what the economy is going to do over the next ten years? When you look at the last ten or twenty years, how could you ever predict nine eleven or Covid? And even look like something like Covid, there's like a twenty fifteen Bill Gates TED Talk, where he talks about the biggest risk to society is a viral pandemic. So it's not that nobody saw. That thing coming, but the specifics of when it's going to happen, how bad it's going to be, is it just going to shut down the economy for a week or two years? That is completely impossible.
8:24 Steven Bartlett? But there's also lots of other TED Talks that say everything's going to be great.
8:27 Morgan Housel? Of course, of course.
8:28 Steven Bartlett? There's probably, there's a lot more. So on balance, the world had no idea.
8:32 Morgan Housel? I think on balance, the world breaks once per decade. Not exactly once per decade, but on average, once per decade, everything that you thought about risk and uncertainty and stability goes to shit.
8:43 Steven Bartlett? So how do I prepare? If risk, if risk is what I don't see, how do I prepare?
8:48 Morgan Housel? There's another great quote from Nassim Taleb that I like, where he says, invest in preparedness, not in prediction. So rather than going out of your way to be like, here's what I think is going to happen in crypto. Here's what I think is going to happen in the stock market. Just make sure that you have a big enough buffer in your finances, cash, liquidity, being scared of debt. So that no matter what happens, you're, you at least have a fighting chance of enduring it and making through. One thing I've often thought about is that you should have enough cash in your investing portfolio. The amount of cash you should have should feel like it's too much. It should feel, it should make you wince a little bit. Because if you only have enough cash to put up with the risks that you can envision and the risks that you can foresee, you're going to miss a surprise every single time.
9:31 Morgan Housel? Every single surprise is going to be a surprise to you. But if you feel like you have too much cash, then at least you have a fighting chance of putting up with the nine 11, the COVID, the Pearl Harbor, whatever it might be. So when people look at my asset allocation, my investments, a lot of people look at it and say, you seem really conservative. Why do you have this much cash? What are you saving for? And my answer is always, I don't know. I have no idea what I'm saving for. Who are we to assume that we can predict the risks that are going to be in our own personal lives and throughout the broader world? Nobody can do it. The only way to prepare for it is to have what feels like too much safety.
10:09 Steven Bartlett? What is your capital allocation strategy? How do you invest your money? This is, you know, this is the thing people want to know most about you.
10:16 Morgan Housel? I keep it as painfully simple as I possibly can. So literally my entire net worth is cash, a house and index funds and some shares of Markel while I'm on the board of directors. And that's it. There's nothing else. My entire, I can summarize everything so easily and so cleanly. And truly, that's it. And it's not even like I have 20 bank accounts. I have one bank account, one brokerage account and like, and a house. And that's it. So simple.
10:40 Steven Bartlett? Why, why index funds? You're the reason I, your capital allocation strategy is almost identical to mine. I want to talk about the house thing as well, but after reading your book, I stopped trying to pick stocks.
10:52 Morgan Housel? Yeah.
10:52 Steven Bartlett? And I invested all of my available capital into index funds outside of investing in starting companies. So I'm a shareholder in, I don't know, 50, 60, 70 companies. I, all my other available capital is invested in index funds. And then I have a very longstanding, large position in Ethereum, which I've held for like six years or something.
11:13 Morgan Housel? Yeah.
11:14 Steven Bartlett? Which has done me very well.
11:15 Morgan Housel? Yeah.
11:15 Steven Bartlett? That is it. And the Ethereum investment is also based on the fact that I run a software business that is in blockchain. And I could see that developers are building on top of Ethereum more than any other blockchain. So that insight was really beneficial to me.
11:29 Morgan Housel? And six years, so even with the big fall of the last two years, you're still up a lot.
11:35 Steven Bartlett? Yeah, I, I think your book taught me that successful investing is when you lose the password to your investment account.
11:42 Morgan Housel? Yes, that's exactly it.
11:44 Steven Bartlett? I don't actually think you said that in there, but that's like, when I lose the password to my investment account, I'm so proud of myself.
11:49 Morgan Housel? Yeah.
11:49 Steven Bartlett? Because it means I haven't checked it in forever. And so it's funny because you were coming today. I thought, oh yeah, well, I have all this money in these index funds. I'll check it. And I thought, fuck, I don't know the password.
11:59 Morgan Housel? Good, that's why you're gonna do okay.
12:01 Steven Bartlett? I'm so proud of you.
12:01 Morgan Housel? The reason I do this, what's important is that I am not one of the people who says, nobody can beat the market, so therefore use index funds. That's not what I believe. I think there, I think it's extremely hard to beat the market and very few people will do it. But I think there are really smart people who can do it and people who I know who I could invest with. The reason I don't is not because I don't believe it can be done. It's because the variable that I want to maximize for in my investments is endurance. If I can just earn average returns for an above average period of time, it's going to lead to amount of success that will literally put you in the top 5% of investors. My parents are a great example of this. My parents are smart people, but they really, they have no financial background and they have like minimal financial interest, I would say.
12:43 Morgan Housel? And but they have dollar cost average into index funds for going on 40 years now. And literally, if you look at the returns, they've never sold anything ever. And literally, if you look at the returns, they'd probably be in the top 3% of professional investors.
12:55 Steven Bartlett? What is, for anyone that doesn't know, what is dollar cost averaging? And what is an index fund?
13:00 Morgan Housel? Dollar cost averaging means you buy the same dollar amount of investments every single month, come hell or high water. Doesn't matter what the stock market's doing, recession, boom, bust. You say, I'm going to put $100, whatever it is, in the stock market on the first of every month. Now, most people who like have a 401k at work are doing this whether they know it or not. They have $100 or whatever removed from every paycheck and it goes into the funds that they own. And they don't have to do anything, whether you know it or not, you're actually doing it. The contrast to that would say, I'm going to buy and sell based off of how I feel in the stock market. I wake up, I watch CNBC, I decided to sell, and I'm going to put it back in when I feel better about the market. It's the contrast to that. An index fund is just a single fund that owns hundreds or thousands of stocks within it.
13:42 Morgan Housel? And if it's diverse enough, if it's big enough, really what you're doing is you're owning a slice of the global economy, which is how I think about it. It's thousands of individual stocks in there, Tesla, Apple, whatever it'd be. But really, what you're doing is you're owning a slice of capitalism.
13:55 Steven Bartlett? If I was your son and I said, Dad, prove to me that that's a better long-term wealth creation strategy than buying crypto or buying companies that I use or like, how would you explain that to your to your kid?
14:09 Morgan Housel? Your ability to do well over the next one year or five years is going to have no role whatsoever on your lifetime ability to generate wealth. All that's going to matter is not what are the best returns you can earn. All that matters are is what are the returns that you can sustain for the longest period of time? All that matters is your endurance. It doesn't matter if you can double your money this year or even double your money again the next year. All that matters is can you stick and keep it going for 50 years? That's where compounding comes from.
14:36 Steven Bartlett? Prove it.
14:37 Morgan Housel? All because the formula for compounding is returns to the power of time. That's not quite it, but like more or less that's it. So in that equation, if you understand the math, all of the heavy lifting comes from the exponent.
14:48 Steven Bartlett? Prove it.
14:48 Morgan Housel? Because that's how exponential growth works. That's how it works. It's literally exponential.
14:52 Steven Bartlett? Give me a case study where someone has followed that strategy and done well.
14:55 Morgan Housel? Okay, here's one way to explain it that I use in the book. 99% of Warren Buffett's net worth was accumulated after his 60th birthday.
15:04 Morgan Housel? After he turns 60 years old, 99% of his wealth
15:07 Steven Bartlett? Jesus.
15:08 Morgan Housel? has been accumulated after that period. Because the longer you hold that four, the crazier the numbers get. When he was 60, I think he was worth about $3 billion. Lot of money, he's a multi-billionaire. But now that he's 90, he's worth over $100 billion. And he's given like $100 billion away to charity. So if he didn't do that, he'd be worth, he'd go from $3 billion to $200 billion. Since he's been 60. Because the numbers just get crazier at that point. He's worth $100 billion. So if his market, if his net worth goes up 10% in one year, he makes $10 billion. Which is three times that he was worth when he was 60. So that's when you look at somebody like Buffett, is he a great investor? Is he a great stock picker? Of course. But the real secret to his success is that he's been a good investor for 80 years.
15:49 Morgan Housel? And if he had retired at age 60 or at age 50, nobody would have ever heard of him. He would have been like one of the other multi-billionaires who lives in Florida and plays golf. And like, you've never heard of him. The reason he's a household name is because he's been doing this non-stop since he's been 11 years old. And he's never stopped. It's just the endurance that's made him so wealthy. Not necessarily the annual returns.
16:11 Steven Bartlett? Patience, it's a difficult thing. It also reminds me of the story that you talk about in the introduction of your book about the janitor Ronald James Reed.
16:19 Morgan Housel? Yeah.
16:20 Steven Bartlett? Who, when he died in 2014, aged 92, had a net worth of over 8 million.
16:26 Morgan Housel? And he was a janitor.
16:27 Steven Bartlett? How did he do that?
16:29 Morgan Housel? He took what very little money he could save from his job as a janitor, mopping floors at the gas station. He put it in stocks and he left it alone for 70 years. And that's it, that's all you need. That's all you need to do. If you have endurance and you're investing and you can keep it going for years or decades, you don't need to be a genius stock picker. And not only do you not need to do it, if you have endurance, you're going to beat literally 97 or 99% of the genius stock pickers. And what's so interesting about it is like picking the right stocks is hard. It's supposed to be hard. Like, there's no world in which everybody who tries to beat the market is going to do it. Of course it's hard, just like being an NBA player is hard. And, but having endurance is like largely in your control.
17:11 Morgan Housel? It's so much easier to just be patient than it is to pick the right stocks every single day. And I think some people, nature nurtures, some people like probably Ronald Reed and my parents, just understand it naturally. It's not hard for them to be patient. But they're like, there are professional investors who work 80 hours a week. For thirty years to try to beat the market and they can't do it. Not only some, that that explains like most of them. And even the ones who can do it are maybe going to beat the market by half a percent per year, one percent per year. But if you can have endurance, that is, that's a bigger benefit than you can have by even being like a very successful stock picker. Like somebody who outperforms the market by one percentage point per year and they can do that for ten years, that's amazing. That's like Mount Rushmore investor.
17:55 Morgan Housel? But somebody who earns average returns and does it for twenty years is going to have way more money. You do it for thirty years, you're going to be filthy rich. You'd be like Ronald Reed, you can be a janitor who leaves eight million dollars to charity when you die.
18:07 Steven Bartlett? You've spoken about a few of the skills that are required for making money. The one that really stuck out to me that you've discussed so far is this idea of endurance, patience, regardless of what's happening in the markets, regardless of the volatility, lose your password and sit on your hands. Just on that point as well, I remember reading somewhere, it might have even been your book. You know, it's so crazy because the things that I know about money, I can't remember where I've got them from, but most of them came from this book. Like most of the principles came from this book. And one of the things that I read was that Warren Buffett would go like five years without allocating capital and this quote where he said, the hardest thing to be a great investor is to be able to sit on your hands and do nothing.
18:45 Morgan Housel? Sit on your ass and do nothing, that's it. That's a Munger quote. And that's what they're doing right now, right now. Berkshire Hathaway, which is Warren Buffett's company, has like a hundred and fifty billion dollars of cash right now. And that's their entire sixty year history of Warren Buffett and Berkshire Hathaway is build up a shitload of cash, wait ten years for an opportunity, deploy it all and then go back to waiting and building up cash.
19:07 Steven Bartlett? Crazy.
19:07 Morgan Housel? And that's, that's, that's how they done it. Good opportunities are rare. Of course they are, they should be rare. It shouldn't be that anybody can just open up their stock account and find the opportunity of a lifetime.
19:16 Steven Bartlett? What are the other?
19:16 Morgan Housel? It's going to come once a decade.
19:17 Steven Bartlett? What are the other skills then? Endurance, patience to create, to get money?
19:21 Morgan Housel? For the, for the ordinary person, endurance and patience is ninety nine percent of what you need as an investor because the opportunities there to invest in a low cost index fund are available for everybody.
19:31 Steven Bartlett? And you can do that from your phone, like you?
19:32 Morgan Housel? Do it from your phone, open up a Robin Hood account, buy some index funds, anybody can do that. And so that, but that was not always the case. It used to be like 20 years ago that the only people who could invest were people who had a lot of money and could afford a broker and had a connection to a broker.
19:46 Steven Bartlett? And you had to like make a phone call.
19:47 Morgan Housel? And make a phone call, you had to know a guy. And even then you were going to pay a ridiculous fee to that person for doing it.
19:52 Steven Bartlett? You've got pieces of paper and all kinds of.
19:53 Morgan Housel? It was a joke and that's 20 years ago, it was not that long ago. So I think like people aren't grateful enough or appreciative enough of how much things have changed. It opened up those opportunities for everybody.
20:04 Steven Bartlett? You talk about the skill of keeping money, which is different from the skill of getting money, is predicated on survival.
20:11 Morgan Housel? Financial survival and just putting up with all the unpredictable nonsense that's going to happen between now and the end of your life. And we talked earlier about the surprises, Pearl Harbor, nine 11, all these big surprises. Just, it's just your ability to endure things like that. That's going to be literally 90% of your financial success and your investing success. So gaining money is like being an optimist and taking a risk, like being optimistic about yourself, swinging for the fences. You need that to get rich. Staying rich is like the exact opposite. You need a level of being conservative. You need to be scared. You need to be like acknowledge of all the unknown risks that are in front of us and have a financial allocation and a mindset that's going to allow you to endure them and survive them financially.
20:55 Morgan Housel? You need both of those skills at the same time to do well.
20:58 Steven Bartlett? Your kid is 20 years old. He's broke. Do you tell him to go and take huge outsized risks? He's not got a family, he's not got a mortgage, he's not got a dog. What advice do you give him at that age to create wealth?
21:10 Morgan Housel? I would actually say that, I think this is a little counterintuitive, that when somebody is young, you, you think you would say, you got 50 years in front of you. Swing for the fences, go for it. It's also when your life is the most fragile. It's when you're most likely to be laid off, most likely to change your career, most likely to break up or get divorced, whatever it would be. And so for that, you need quite a bit of financial flexibility, just cash and liquidity. So once you had some level built up, whatever the level might be for a different person, then like do something crazy. I also think like for careers, some of the best career advice, that's maybe not universal, but when you graduate college and you're looking. Your career. Don't take the safe job, which is usually like the big company, the blue chip company. Go for the weird company.
21:53 Steven Bartlett? Why?
21:53 Morgan Housel? Go for something crazy because when you're older, when you're forty and you have two kids and a mortgage, you're not going to want to take the weird job. That's when you want the stability. That's when you're probably going to want the job that has good benefits and a stable paycheck because you need that. When you're twenty two and you're not tied down by anything, don't go work for Goldman Sachs or Apple or Deloitte or something like that. Go for the weird startup where you like, you're going to learn something completely different.
22:18 Steven Bartlett? Link to that point is in the weird startup, you're going to be so close to the failure and failure is the knowledge.
22:24 Morgan Housel? You're going to learn so much more. And there's so many people who take the blue chip, the safe job out of college and it puts them on a very predictable track. You're going to be an analyst for two years and then if you're good, you'll get promoted to senior analyst and then you'll get promoted to associate. It's like very stable and linear. And that's the like, it's you capping all of your upside. If you go for the weird company, you're either going to do one of two things. It's either going to fail and you're going to learn a lot from that. Or it's going to take off and you're going to learn a lot from that. And then maybe when you're forty, after going through all that, then you want the stable job at the big company.
22:56 Steven Bartlett? It's interesting. I was thinking as you're speaking that the proximity from your desk and the CEOs probably needs to widen over time.
23:04 Morgan Housel? Yes, I think, I think that's, that's true. Yeah, absolutely. And most people, I think if they, if you do it the other way around, or most people would never do it the other way around. If you start your career in the stable company, you're probably never going to leave. You're going to get addicted to the nice paycheck, the stable benefits, whatnot, and you're never going to take a risk and do anything else. And maybe that's okay. Maybe for some people's personalities, that's exactly what they want. But I think there is a higher level of regret for people that start in a safe company. And then they get the golden handcuffs, they can't leave. And by the time they're forty and they realize that they wanted to work at the crazy company, they can't. Because they got a mortgage and two kids and they're saving for retirement and they can't take the risk at that level of their life.
23:42 Steven Bartlett? You introduced this concept of tails. Long tails, and this also changed my life, changed my investment strategy, I should probably say. You talk about the example of venture capital where for every 50 investments that venture capitalists make, statistically, half of them will completely fail. 10 will do okay, and one or two will make huge profits that drive 100% of the fund's returns.
24:06 Morgan Housel? Yeah.
24:06 Steven Bartlett? This is a lesson about investing in finance, but it's also, for me, a lesson about life.
24:10 Morgan Housel? It's always life. Yeah, it applies to everything. Tails where just a couple of things that happen explain 90 or 99% of what matters. It's always the case. You see it in business where you take, in the United States, there are, you know, thousands of public companies that you can buy stock in. But the huge majority of the value in the US stock market is in like 10 companies. Apple, Tessa, Microsoft. So even though you have thousands of companies, 10 of them are the ones that really matter and are going to drive all of the returns over time.
24:40 Steven Bartlett? So why don't you just buy those 10?
24:41 Morgan Housel? Because nobody knows what they're going to be, at least in hindsight. That's the argument for owning a thousand of them, is that you know that the 10 that are going to be the next big ones are going to be in there.
24:50 Steven Bartlett? All of this is a case for humility. This is honestly what I took away from your book. You're expecting to walk away with tips, all these tips, these tricks, these special ways to make more money than everybody. What I came away with is this one important lesson that I've never been able to unsee, which is, I don't know.
25:10 Morgan Housel? I think that's great. And that back to, I wrote this book for myself. That's been the biggest lesson for me, is not only do I know, but nobody else knows either. Everyone, everyone else is bullshitting their way through the investing market, too. They don't know either.
25:23 Steven Bartlett? I'm in this crypto chat where one of my friends, I'm going to disparage him, one of my friends, he's the guy in the chat that's always posting the forecast graphs, you know, those ones where they kind of like the little log of graphs where they forecast where the stock or the crypto is going to go.
25:34 Morgan Housel? Where they think it's going to go, right? And it's always.
25:37 Steven Bartlett? It's always up and to the right. And it's kind of like male horoscopes. I heard someone say that.
25:43 Morgan Housel? That's such a great, yeah. No, I think that's, I think what's closest to investing is something like the horoscope, or even if you know it's bullshit, you want to read it.
25:51 Steven Bartlett? Why?
25:51 Morgan Housel? Because it's comforting. What a lot of people want out of their investing forecasts, or whatever it is, is they want to reduce the uncertainty that's giving them stress. Because everyone, I think intuitively knows that the future in front of us is unknown, and it's unknowable, but that hurts. And so if it hurts, you try to reduce that stress by finding someone who says, I do know what's going to happen.
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