The Dead Simple Strategy That Will Make Your Great Grandchildren Rich | ft. Morgan Housel

Morgan Housel

What matters is not necessarily what the best returns you can earn this year are. That's what everyone chases, but that's not what matters. What matters is what are the best returns that you can sustain for the longest period of time.

Sam Parr

let's just get right into it morgan what's going on man I'm happy you're here

Morgan Housel

I'm happy to be here thanks for having me guys

Sam Parr

I read the book "Your First Big Hit: Psychology of Money" a while ago. Was that 4 years ago?

Morgan Housel

about yep

Sam Parr

yeah and then this new one just came out was it called same as ever

Morgan Housel

that's right

Sam Parr

Yeah, man. The Goodreads reviews are higher on the most recent one, I think, than the first one. So, congratulations!

Morgan Housel

No thanks. It's always... I think with all books and all articles, this is probably true for podcasts too, you really never know what's going to work and what's not. Even I... I've been a writer for 17 years, and I still really don't know when I publish something—a blog or a book—how it's going to be received. Maybe you get a little bit better around the edges, but it's always like you just have to birth it into the world and then just step back and watch. It's going to do whatever it's going to do.

Shaan Puri

Well, you told me that the first version of *The Psychology of Money* had a first print run of, I think, 5,000 copies. Is that right? So you guys thought, you know, 5,000 copies is the right amount. You sold over 4,000,000! I think that proves your point. You don't really know until you know, but that number is kind of amazing, dude. Over 4,000,000 books sold! You're, I don't know, in the top 0.1% or something of authors. I don't know how much you make per book, but I think that means you've made over $10,000,000 as an author on a successful book. That's so hard to do. That's so rare. Congrats to you for doing that!

Morgan Housel

Thanks, Sean. Yeah, I mean, I was telling someone the other day that I think the closest analogy to the book industry is probably professional sports. Where 99.9% of high school basketball players will never make the NBA.

Shaan Puri

I don't

Morgan Housel

99.999... whatever it is. But then you have a couple of LeBron James and Michael Jordans who go on to make $1,000,000,000 doing it. I don't know this to be 100% sure, but adding up in my head, I'm pretty sure there are more billionaire authors than there are billionaire athletes. Even in a world in which 99.9% of books will sell, you know, a couple thousand copies or less, you have J.K. Rowling, Dave Pilkey, and James Patterson who have made over $1,000,000,000 writing books. So it's just like extremely tail-driven in the success.

Shaan Puri

I want to ask you about one of your philosophies because you're very interested in me. You have a philosophy that's very easy to sell: the philosophy of more. People do that all the time. In fact, even our podcast, I would say, falls into the bucket of the philosophy of more. Many times when we say "no small boy stuff," we're saying think big, play big, go for it. Don't sit around and wait. Don't be fearful, right? So, more action, more ambition, more whatever—that's one philosophy a lot of people fall into. Some people even go crazy. David Goggins is like "work harder," Gary Vaynerchuk, Alex Hormozi—these guys are like "just grind harder." So, people often have the philosophy of more, and some people, like Marie Kondo and others, have the philosophy of way less. You need less, minimalism, you know, escapism. Just become a sort of zen person, go whatever, get those vans, and just travel around the world, right? So, there's the philosophy of less, and you're in the middle, which usually is the dead zone for content. You're in the middle where you're like, "No, just have enough," right? Like moderation. And I can't believe you've got moderation to sell. I'm going to read you a quote, and then I want you to talk about this. You said, "More than I want big returns, I want to be financially unbreakable. If I'm unbreakable, I think I'll actually get the biggest returns because I'll be able to stick around long enough for the compound day to work wonders." I loved that quote, and I, in general, find this moderation thing interesting. Tell me about that.

Morgan Housel

This is where **moderation in finance** is actually going to lead to the biggest returns. What matters is not necessarily what are the best returns that you can earn this year. That's what everyone chases, but that's not what matters. What matters is what are the best returns that you can sustain for the longest period of time. This is why, on an annual basis, I strive for average returns in my index funds by design. Why do I do it? Because that's going to give me the endurance to hold them for 50 years. If you can earn average returns for 50 years, you're going to end up in the **top 1% of all investors**, and you do it with **zero effort**.

Sam Parr

what's average

Morgan Housel

In the U.S. stock market, a **6.5% real return** after inflation is what has been achieved. If you could earn **6.5% returns** after inflation for 50 years, you can run the calculations, and it's going to achieve everything. It's **dynastic wealth**; it'll make your great-grandchildren wealthy. And you can do that with **zero effort**. Now, look, past performance is not a guarantee of future results. There could be a nuclear war, for example. You can come up with all these scenarios in which it’s not going to work out.

Shaan Puri

you can come up

Morgan Housel

With scenarios in which the economic conditions of the last 100 years are not going to replicate for the next 100 years, all those aside, earning average returns for an above-average period of time is way more lucrative than trying to earn superior returns for a shorter period of time. And like as always, I think it's so counterintuitive. The intuition for everyone, including educated professional investors, is: "How do I earn the highest returns this year?" And like, it's like, of course, it's like how could that be wrong? It's like, no, if you're just average for a long period of time, that's the winner. Pimco, the big bond fund, had this phrase that I love. They called it "strategic mediocrity." In any given year, they were never going to be in the top half against their peers, but in every decade, they'd always be in the top decile. Because the peers that beat them in any given year get washed out. I think that applies to a lot of things. It applies to a lot of businesses, and it applies to relationships and marriages. You don't need to be a superhero; if you're just good for a long time, that's enough.

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Shaan Puri

That thing you just said was excellent! I love that. You said, "I want average returns for an above-average number of years rather than superior returns for a short period of time." In any given year, I'm not trying to be in the top; I'm trying to be in sort of the 50%. But if I do that for 30 years, I'll be in the top 10%. It's so true—slow and steady wins the race. I think you had a stat that if Warren Buffett has, I don't know what it is, like let's say $85 billion net worth, like $81 billion of those $85 billion came after his 65th birthday. Right? And I think he said something like if Warren had just retired when he was 60, nobody would even talk about him because the compounding...

Morgan Housel

Like, obviously, he is a great investor, of course. But the whole secret—what's literally 99% of his wealth—is that he's been a great investor for 80 years. That's why he started investing when he was 11, and he's 93 today, still going as hard as ever. That's where all the money comes from. Yes, his average returns are 20% per year, which is phenomenal, of course. But if you earn 20% per year for 20 years, it's really good. If you earn 20% per year for 40 years, it's great. If you earn 20% per year for 80 years, you're worth $100,000,000,000. That's where all the returns come from. Did you...?

Shaan Puri

Hear this, Sam. They're giving that shirt away. Buffett's giving it away this year at the Berkshire conference. Just hard as ever, still going hard as ever.

Sam Parr

is that real are you being serious oh because it'll be hilarious

Shaan Puri

dude but

Sam Parr

We joke about Warren Buffett, where he talks about, you know, like... I forget how he phrases it, but he talks about how it's all about the future. It's all about the future. And we were like, "Dude, you're 93! There is no future. Like, bail and enjoy life." You could argue, well, he likes what he does, so, you know, it's cool. He's enjoying life. But I've always thought about long-term stuff. I'll map out my life and I'm like, "Man, if I only live to be 80, I only have, you know, 40 or something summers left." I don't know if I want to be... I'm not willing to pay the price of what’s considered great, like doing 20% or 30% returns for 80 years. I'm not willing to pay that price because life’s too short. When I think about what it requires to be one of the greats, that's what freaks me out. I don't want to be that old and not have enjoyed it. You know, that's why the converse to all this is Bill Perkins' book, *Die With Zero*, about spending it while you're here and enjoying it while you're here. Because when you're gone, it's pointless. You know what I mean?

Morgan Housel

Yeah, yeah, no, there... I think there's a couple of points to make. I agree with every word you said, particularly for ordinary people like us. I do think Buffett's DNA is just that he gets more pleasure from anything in life. The most pleasure he gets is from compounding. There's nothing that makes him happier. The other thing is, even though he's worth $100 billion today, he's given away $100 billion already. With the rest of his net worth, you know, going into the Bill and Melinda Gates Foundation. I imagine... I don't know this to be true, but I imagine when he lays in bed pondering his life, he's thinking, "I put my skill to use, and I'm going to give away a quarter of a trillion dollars for the betterment of society." I was just in Omaha a couple of months ago, where he's lived his entire life. In downtown Omaha, one of the tallest buildings says the Buffett Center for Cancer Research or something like that. I imagine when he drives past that—this is the building he drove past when he was 5 years old—it gives him a ridiculous amount of pride and pleasure. So, I actually think if he were on his deathbed tomorrow... Charlie Munger just died last month. I think he would look back and say, "I lived the best life that I could have." It wasn't perfect by any means, but I think there is a difference between the Bill Perkins philosophy, which is true for 99% of people, and then there's the 1% of people who actually get so much pleasure out of compounding and thinking about what that money is going to do for society after they die.

Sam Parr

Dude, there's this crazy story about Buffett. His daughter had just had a baby and was living in a terrible apartment. She and a mutual friend of Warren and the daughter, who was actually the CEO of the Washington Post, went to the house. The CEO said, "Warren, her kitchen sucks, man." So, the daughter eventually goes to Warren and asks, "Hey, can I get like a $20,000 loan to redo my kitchen?" He was like, "Yeah, just go to the bank." She eventually goes to the bank, and then a few months later, the CEO of the Washington Post goes back to her house. The daughter is sitting in bed with a really small TV, where she would sit and nurse her child in front of it. The Washington Post lady goes to Warren and says, "Warren, give her $500 for a new TV, man. She can barely see this TV, and she's in bed like 8 hours a day. Can you just give her a new TV?" Warren was like, "No, compounding's more important for that $500 TV. I can't. I'm not going to take the money out." So, Catherine, the CEO of the Washington Post, ended up buying her a $500 TV. But that's how tight this guy was about following his code. I guess I appreciate that someone has a code, but that ain't my code.

Shaan Puri

wait so warren buffett's just an asshole is that the story is this a real story because I hate warren

Sam Parr

Warren Buffett... well, yeah, so Warren Buffett gets a pass for having this "aw shucks" attitude, but he's definitely an asshole. He's definitely an asshole, depending on how you define "asshole." I would define him as a wonderful... what do I say? All great men are also bad men. The way he handled his family, I think, was not wonderful. The way he handled business associates was wonderful. So, you know, there are trade-offs to being great.

Morgan Housel

I think, as someone who has so much respect, admiration, and reverence for him, I would also put him in the camp of someone who I’m glad exists. However, I don’t think I would want that for my own life. This is not a criticism against his life; it’s just that to each their own. Let’s not pretend that everyone should want the life of the 5 standard deviation success. There’s a cost to all of that.

Shaan Puri

I was just trying to imagine his daughter, you know, at the bus stop trying to get a bus ride to wherever she's going. She's looking up at the Buffett Cancer Research Center and just thinking, "Goddamn it."

Morgan Housel

Now, there are some other parts of the story. Buffett's first wife, Susie, you know, had $1,000,000,000 of her own, and she was much more freewheeling with money. So, I think that the Buffett children did just fine. But yeah, there are plenty of stories about Warren. He always described it as, "Capital is my tool. I'm not gonna give... these are the tools of my business. This is how I make money. I'm not gonna be willy-nilly with it." Even when Buffett was in his twenties, when he was a kid, this is back in the fifties, he was already worth tens of millions of dollars, and that was real money in the fifties. You could easily imagine a world in which he was worth the equivalent of $100,000,000 when he was 30 years old or whatever it was. Everyone would be like, "Dude, you need to give all this away. You're never gonna be able to spend this." His philosophy has always been: "People in the future will be just as needy as people are today." So, if I have an above-average ability to compound it, it actually makes sense for me to hold on to this money for as long as I can before I give it away, which I think is actually pretty rational.

Sam Parr

You said a few things that I thought were contradictory in different interviews that I watched. I think in the book—I forget, I'm mixing up the book and the interviews that I watched—but you talk about financial goals. You're like, "I don't look at my portfolio." I think you said, "I don't set goals," or at least that's the vibe that I got in an interview. But then I've also read a little bit where you do have some type of goals. So, for financial goals, do you have a number in your... oh, sorry, I remember what it was. You said whenever you hit your goal, you're always going to double it. Therefore, I don't have goals. I think that's what you said.

Morgan Housel

It's such a... the reason it's hard for me to answer that is I'm sure I've said things that are contradictory. Because I, like everyone else, it's like...

Sam Parr

it depends depends on the call

Shaan Puri

you out no no no

Morgan Housel

Depends on probably the mood that I'm in that day. If I'm sitting here today and I think, do my wife and I have financial goals? Not really. It's not like, "Oh, we're trying to hit X, and once we hit X, we're gonna go buy Y." It's not really like that. But like everyone else, I think about, "Oh, if my income stays the same, what kind of life could we live with that much money?" One thing too, like we have two young kids, and we are pretty hell-bent on not spoiling them. They live an amazing life, and we live in a great house. They'll have a great education; they'll live in the top 0.01% of lives. But we don't want to raise spoiled little pricks. Because of that, we often, when we have goals, it's not like, "Oh, how can we buy a bigger house, another house, nicer cars?" It's kind of like we want to live a good but not extravagant life because we don't want to spoil our kids. But even that sometimes, I can talk to other people who are like, "No, actually, you can live the big high life without spoiling your kids. Here's how to do it." So I feel like I say, like, I think a lot of the contradictions come from humility of just like, I haven't really figured it out yet for myself. I tend to not have goals. For years, I had a goal of, "Once my net worth is X, I'm not gonna work much anymore because I could easily live for the rest of my life off of that net worth." I've exceeded that number, and I'm working harder than ever. But I don't regret that at all. Maybe that is some version of moving the goalpost, but I think more of it is after I hit some level of financial independence, after I wrote books, it was like, "Okay, I'm only gonna do the work that I enjoy now." And it's not really work; it's just like I really enjoy writing these books. I only speak at conferences that are in cities that I want to go to. It doesn't feel like work. I don't think I really understood that 10 years ago. Ten years ago, work was by and large a means to an end. I needed to do this to feed my family. Now that I've reached kind of the artistic level, I'm like, "Oh, I wanna keep doing this forever." And in that world, goals kind of go out the window.

Sam Parr

Well, we've interviewed a bunch of... I mean, we have a bunch of wealthy friends. We've had a lot of people on here. You're like a financial historian, so you've read about all these people. You also know a lot of them, and you've written about them. You probably run in an even more elite circle than we do. But a question that I've always wondered is: Is there a threshold where I'm not going to worry anymore? So far, I've not found that threshold. We had Scott Galloway on here recently, and he was like, "I'm worth over $100 million liquid, and I still freak out." Have you found any type of thresholds where the average person changes and feels more relief?

Morgan Housel

I don't know... I don't know if the average person... I can tell you myself, though. That number that I was talking about before, where for years it was like, "Once I hit this number, I'm not gonna work anymore." Once I hit that number, I still work.

Sam Parr

you say that number

Morgan Housel

I don't know. I don't know if I want to get too into details. Maybe I'll tell you off camera. It's not a ridiculous situation.

Sam Parr

at it

Shaan Puri

Like, because some people don't know how... what should I think about what that number is for me? For example, I was like, "Oh, if my life annual burn rate was X and I wanted a certain amount of money where, you know, 4% or 5% withdrawals of that would mean I'm sort of staying neutral." Let's assume I'm getting 6% real returns in the market. If I was to withdraw 4% to pay for lifestyle, you know, that number... the bank account's never gonna go down; it's only gonna go up. That's how long it...

Morgan Housel

and yours sean was how I calculated

Sam Parr

Years ago, Sean, you said yours was $6,000,000. But if I had to guess, that has changed as you've had a family.

Morgan Housel

yeah

Shaan Puri

No, to be honest, can I say the honest answer? It sounds kind of ridiculous, but it's not that, "Oh, I had kids and, oh man, I really understand these diapers are expensive." That's not actually what happened. I literally remember one day thinking, "Okay, so I've done this." I was like, "I kind of feel like a guy who should have $100,000,000." I literally had a face-off with myself. I was like, "I think I'm worth that. I think I should be..." You know, I don't have to have it, but if I didn't have it, something would feel amiss. Something would feel a little wrong. Then I was like, "Okay, cool. I think I should do that." It didn't become my north star of, "I'm going to do this," but what I did do was make sure that I would only work on things that either I was doing purely for the joy of it. It didn't have to bring in any dollars. Or, if I was doing it because I thought it was going to be financially rewarding, the financial reward had to be big enough to make it worth being on that path—not a smaller path.

Morgan Housel

yeah but

Shaan Puri

then that's not

Morgan Housel

Like I came up with my number exactly as you did, Sean. It was like, if I have a 4% withdrawal rate, what is the annual income that I know is going to be easily and comfortably all that we're ever going to want to spend? I just backed into the number. And Sam, to answer your question of like, once I hit that level, I kept working as I am now. I don't think I was any happier, but I had less financial stress and less career stress.

Sam Parr

Because, but that's happiness, dude. That's happiness. I hate... you see, that's not just a cop-out. I hate when people say money doesn't make you happier, but it just gets rid of money problems. I'm like, yeah, when I worried about rent, I was unhappy. See, I think there's no... I'm more happy. I'm not necessarily happy, but I'm happier.

Morgan Housel

I think we're probably agreeing that this is like arguing over the definition of words. However, I would say there's a big difference between happiness and a reduction of anxiety. I think those are very different things. Happiness is like waking up grinning ear to ear, or it's like when you're watching the funniest comedy you've ever seen and you're just laughing on the floor. That's a happy moment, but it's always fleeting. To me, the reduction of anxiety or contentment is something that money can buy, and that is worth chasing. It's great. So, when people say "money can't buy happiness," what they're implicitly saying is that it's not worth chasing. I think it absolutely is worth chasing, but it's not going to give you happiness per se. It's going to give you contentment and a reduction of anxiety, which is wonderful. It's a massive increase in the quality of your life, but in my definition, it's not necessarily happiness. I feel like I hit that. My wife and I talked about this last night. I feel like I'm in a better mental state with less anxiety than I've had relative to, you know, 5 or 10 years ago, which is great.

Shaan Puri

You know, you wrote *The Psychology of Money* and you've studied this a lot. I want to ask you, what are the biggest, or maybe the most common, leaks? Instead of "most common," I would say the most impactful psychological leak. Meaning, what is a psychological trap or mistake people make around money? I want you to answer it for somebody who is kind of on the come-up—someone who isn't totally financially independent yet. Then, for rich people who still have a bunch of weird psychology and a strange relationship with money, I want you to tell me what you've seen or what you believe is maybe the biggest psychological mistake people have around money in each of those buckets.

Morgan Housel

I think there's there's 2 I'll start with one that's probably the biggest which is social comparison which is always sean you just mentioned you know you wanna be a guy you should be a guy with a $100,000,000 I'm willing to bet if you told 17 year old sean that figure you would faint but it doesn't seem that ridiculous to you now because I bet you know people who are worth a $100,000,000 and so who you compared yourself to when you were 17 or 25 is different now and I think there's no end to that if and I hope you are worth a $100,000,000 someday I guarantee you you're gonna start comparing yourself to people who are worth 200 500 a 1000000000 and that never ends never ever ends the? I always make is like the the minimum wage in in the mlb is like 500,000 a year whatever it is 400 whatever whatever it is a shitload of money by any definition if you're making half a $1,000,000 a year and I guarantee you there's not a single minimum wage professional baseball player who thinks they're doing well because they're comparing themselves to their teammates who are making 10,000,000 a year and so there's no end to that but you always think there is which is why I for myself had this idea once my net worth is x I'm never gonna work ever again but once now that I'm here maybe it is because I'm comparing myself to other people other authors maybe that's at least part of it so I think even if I can write these philosophies and made a living talking about these like I'm still susceptible to that as as anyone else I think everybody is so I think it's such a natural thing I mean in all of evolution what matters is not how much success you have it matters that you have more success than the other person because in a competition for resources that's all that matters doesn't matter if you're worth a $1,000,000,000 if somebody else is worth a 1,000,000,000 and 1 they have more resources than you and from an evolutionary perspective they're gonna win and you're gonna lose so that like always chasing no matter how much you have is is a big psychological underpinning to people's anxiety the second that I would mention that's that's probably equally as important is realizing that there is not one right answer for everybody and everyone in finance is always thinking is seeking the right answer like quote unquote the right it doesn't exist I think it's much closer to like your taste in music of like there's no such thing as the best music you like this I like that to each their own and a lot of times when you have a financial debate of people like I can't believe you manage your money like that why don't you do it like me you're not actually debating it's people with a different risk tolerance different social aspirations different family dynamics who are talking over each other and I think it's like it's hard for people to come to terms of like look that works for you this works for me to each our own people don't wanna settle on that because it's easier to think that there should be a right answer like there is in math

Sam Parr

You had this quote, I think it was from the book, but it could have been from a blog post that you wrote, where you said, "The biggest risk and important news story of the next 10 years will be something nobody is talking about today." But you're in this weird position where you work at a VC [venture capital firm] where you actually do have to predict the future a bit, or at least you're around people who are trying to predict the future. What do you think? Are there any trends or topics today that you think, in 10 years, are going to be a lot more common and popular?

Morgan Housel

Well, the good news for me is that since I'm not involved in the deal side of the VC, it doesn't really rest on my shoulders to make those predictions about the risks that we know of. This is obviously very distinct from the surprises that are going to be more important. Of the risks that we know of, I've been saying for years that the biggest, by far, in the global economy is demographics. The terrible demographics that almost the entire industrialized world has, outside of India and Africa, show that almost the entire world is shrinking population-wise. The biggest economies—China, Japan, and all of Europe—are shrinking very, very fast. China's working-age population, aged 16 to 64, will decline by 200 million people between now and 2050. There's just no precedent for that in all of human history, outside of something like the Black Death plague. It's always been the case that economic growth was driven by massive population growth, and we just don't have it anymore. In the United States, we have about the best demographics relative to our peers, but it's still way less than we've had for the last 100 years. All economic growth comes from either population growth or productivity growth. When you take half of the equation of economic growth, and for the last 100 years it's been really good, and now it's at best poor, if not a headwind, it's a very different world—a totally different world. Maybe the takeaway from that is that it used to be that 4% economic growth was like, "Oh good, you're running at full capacity." Now, maybe it's 2%, just because we've taken away so much of that. So, of the things that we know are going to be a risk, that's probably the most prominent.

Shaan Puri

Can you explain that one a little more? I've heard Elon talk about this too. He mentioned that the big risk is that we're not having enough babies. At first, I thought he was just saying it to cover his tracks because he was, you know, knocking everyone up. But then I realized, no, he's serious about this. He actually believes it to be true. However, I don't fully get it. Maybe I'm just kind of dumb about this, so could you explain it like I'm a 5-year-old? If economic growth goes down but the population shrinks, isn't there kind of a per capita aspect to consider? Like, yes, what's the big deal? Why is it disastrous if economic productivity slows down but there are also fewer people to share the resources? The pie shrinks, but there are fewer people eating the pie. Does that matter, or is that the wrong way to think about it? Why is this a concern?

Morgan Housel

It's so bad... it's not the wrong way to think about it. You could look at Japan for the last 30 years, which has had abysmal demographics. But I think it's safe to say that, by and large, it's been a fairly pleasant place to live. It has not led to economic collapse.

Sam Parr

But their version of an index has been **bad** from a money perspective.

Morgan Housel

Yes, that's a slightly different topic. The reason it's been challenging is that it was so preposterously overvalued in 1990. Got it? So that's like two separate stories. But by and large, it has not led to economic collapse. The one thing I would say, though, is that when you don't have a growing economy, you have much less investment. You're not investing in new businesses, new homes, or new factories because you don't need them. You're fine with what you have. Whenever you have less investment, you have less innovation. In those situations, when was the last incredible tech company to come out of Japan? I'm sure one or two exist, but I can't name them off the top of my head. Versus if you and I were talking in 1990 and we said, "What was the last tech company?" We'd be like, "Oh my gosh, Sony, Toshiba, Mitsubishi," going down the list. They were everywhere because when Japan had a booming population, there was investment up the yin yang in new technologies. Once you remove that from the equation, you can still have a pleasant society that's in some form of stasis, but you're not going to have growth. Not just economic growth, but technological growth, medical technology growth—like all the things that we associate with a better life kind of go out the window. So maybe it is the case that for a lot of the developed world over the next 50 years, it will still be a pleasant place to live. But the idea that every generation is going to live 30% better than their parents—that idea might kind of go out the window.

Shaan Puri

Sam just asked you about trends or predictions—like, what is going to come in the future? But actually, your new book is about the opposite. It's about what's not going to change. Same as ever, right?

Morgan Housel

yep

Shaan Puri

Can you explain the premise of the book? I like the Buffett story that you kind of lead with. Maybe start with that one, but give us the teaser of like what are some of the... I buy the premise that some things don't change. What are some of the big "so what's" that come out of that? But start with the Buffett story.

Morgan Housel

yeah so I had lunch last summer maybe it was 2 summers ago with a guy who's very close friends with warren buffett and this guy was driving around with buffett in 2009 in buffett's car in omaha they're just driving around town together in 2009 the economy was a wreck and there was like businesses boarded up and it was like the economic apocalypse and this guy says warren like how do we ever recover from this like how how is the world ever gonna be the same and warren said do you know what the best selling candy bar was in 1962 the guy said no warren buffett warren says snickers and buffett says do you know what the best selling candy bar is today the guy says no he says snickers and that's that's the end of the story the premise being like don't worry about like how are we gonna change like find something that does not change and bet on that and I've also thought I've been a financial writer for 17 years and it's always bothered me how bad the whole industry is at predicting the next bear market the next recession the next pandemic the next technology nobody's any good at it that's like a little bit too harsh but that's that's directionally true nobody's any good at it and so there's 2 things you could do with that 1 you could become more of a cynic and just say nobody knows anything don't even try or kind of the buffet approach of like find something that is never gonna change and put your weight on that and so that was one observation the other was as a student of history realizing when you're reading about the economy from a 100 years ago or a 500 years ago or a 1000 years ago there's some things that you read about and you're like oh things were very different back then but there are even more things that you can read that make you stop and think that's exactly how it is today the way that people responded to greed and fear and risk and uncertainty is the exact same today as it was a 100 years ago and so putting those two things together if you can find things of human behavior that are never gonna change then you know something that is gonna be part of your future so stop pretending that you know when the next recession is gonna happen but study how people respond to recessions when they do happen because that's never changed so it's gonna be part of our future and so that's kind of the premise of the book it's just a bunch of little stories of things that facets of human behavior that have always been with us and I think always will be and you like regardless of what is gonna happen in our future you know that these little bits of behavior are going to be a part of it

Shaan Puri

and so what's something something that you like the

Morgan Housel

best

Shaan Puri

Research, or the books and insights that I get, make me feel like I have a superpower. It's almost like I could read people's minds now, right? So, it sounds like by studying what doesn't change or how human behavior works, did you come up with anything? Did you change anything that you do? Did you have a new strategy, a new plan, or anything new that you could act on? Because I, you know, I guess my skeptical view would be that I feel like I could understand how people behaved in the past, but attaching that to what the hell I am supposed to do today is not so easy of a leap. What's one change that you made for yourself while doing this?

Morgan Housel

I know this is an answer that people will find inadequate but to me it's it's incredibly powerful and important and I think the main plea in the book is for humility it's not even about the the examples that of things that are never gonna change that's obviously the core of the book but the reason we're doing that is because we have humility and not fooling ourselves to thinking that we know what's gonna change what are the 3 biggest economic stories of our adult lives by far by an order of magnitude it's september 11th lehman brothers collapsing and covid but like by an order of magnitude nothing else matters more than those three things and the common denominator is nobody saw them coming they're not in any economic outlook no analyst forecast unless you were had inside information you were part of those things nobody saw them coming and it's always been like that because you can go back another generation and it was pearl harbor collapse of the soviet union all these things that even if in hindsight you're like oh you you should have seen those coming great depression of course the fact is that very few people did if anybody in something like pearl harbor you could not have seen it coming but think about how that changed the entire fabric of society not just the economy but everything and going forward it will be like that too you can state with so much certainty that the biggest economic story of our lifetimes in the future or or even the next 12 months is something that you and I are not talking about today I I mean what what what's the biggest global news story of 2023 this is this is subjective but I would say it's israel hamas which is something that even if you were an expert in middle east politics you did not see coming on october 6th to let alone people like us so that's and I think it's it's always been like that it'll be like that next year and the reason that we that view like we we tend to ignore that is because I think coming to terms with it is too painful coming to terms with the idea and admitting to yourself that we don't know what's gonna happen next is a really uncomfortable level of uncertainty it's much easier and more comfortable to just say to pretend that we do which is why the market for punditry is always gonna exist no matter how poor the results are and so the I I think that's the biggest actionable takeaway for me is I I I don't forecast I I think I think it's much healthier to read more history and fewer forecasts and when you read history you start focusing on the indelible behaviors that never change and you become more humble in your ability to fool yourself into thinking that we do know is what what what is gonna change

Sam Parr

Morgan, I know you have to leave; you have a hard stop in 2 minutes. So let me ask a very actionable question. What 2, 3, or 4 history books can I read over the next month that do the best job of showing me a specific era or a specific topic? I'm not looking for a book like yours that aggregates a bunch of them, but rather a specific book that I can read and think, "Oh, this is exactly what I'm experiencing now," or "Things won't change."

Morgan Housel

I think one of the best World War II books is Eric Larson's *The Splendid and the Vile*. It's not only a book about military operations but also the human element on the ground. This book is pretty recent; I think it came out about four years ago. *The Splendid and the Vile* focuses on the London Blitz bombing during World War II. Eric Larson is, in my opinion, the greatest living storyteller, and he's so good at what he does.

Sam Parr

his book on the lusitania is wonderful

Morgan Housel

It's absolutely epic! So, that book is incredible: Doris Kearns Goodwin's book, *No Ordinary Time*, which is about how FDR managed World War II. It's not about the war itself; it's about how he managed the politics and the emotions of it. It is absolutely stunning. I also use that book as an example of... I think the book is 700 pages, and every single word needs to be there. There's not a single wasted word in those 700 pages. She's just such an extraordinary writer. Those are two that really stick out as some of the best.

Sam Parr

And you're doing an excellent job of giving into the stereotype of 30 or 40-something-year-old white guys obsessing over World War II.

Morgan Housel

is this that's what we're supposed to do

Sam Parr

yeah everyone talks about the roman empire fuck the roman empire world war 2 that's where it's at man

Morgan Housel

It's so true. I can't get enough of it. I will say the last thing I'll mention because I do have to jump is this: I think the reason World War II is so interesting is because it was the most documented major event. Therefore, the emotions on either end of the spectrum, from despair to elation, have more documented examples during those six years than have ever existed in all of human history. So, it's not just about understanding the military and the politics. If you want to understand human emotions, there's no better spotlight or magnifying glass than studying World War II.

Sam Parr

Well, we appreciate you coming on, man. This is awesome! We're big fans of your first book. I know I'm in the middle of reading the second one, *Same as Ever*, and you're badass. We appreciate you doing this.

Morgan Housel

thanks guys this has been fun

Shaan Puri

thanks morgan

Sam Parr

alright that's the pod