Morgan Housel: What You Need to Master (And Avoid) to Get Rich, Stay Rich, and Build Wealth

not having fomo is the single most

important Financial skill I think it's

so important that you cannot ever

imagine accumulating significant wealth

over your lifetime if you are

susceptible to fomo like if there's

literally one thing like one trait that

you want that's going to allow you to

accumulate wealth it's the lack of fomo

why do index funds work so well two

reasons one is it's always going to be

the case that a very small number of

stocks account for the majority of

returns the other is I think the whether

it's like an investing debate or a

saving or spending debate they're not

actually debating it's people with

different personalities talking over

each other and once you come to terms

with that there's not one right answer

for any of this what's the difference

between being rich and being wealthy

rich is when you have enough money to

make your mortgage payment make your car

payment you can pay off your credit card

bill every month wealthy I think is when

you have a degree of Independence and

autonomy the weird thing here is that

wealth is the money that you don't spend

let's switch Garrison talk about reading

and writing how do you select what you

read I heard this idea I think it was

from Patrick oan is years ago who said

you want a wide funnel and a tight

filter you're one of the best

storytellers of Our Generation teach me

how to tell a story like Morgan hosel I

think it's two things one

[Music]

is I want to start with a bit of a

paradox the less money we seem to have

the more risks we're willing to take can

you explain that to me Daniel Conan uh

said something along the lines of when

all your options are bad your

willingness to take a risk explodes

because you got nothing else to lose and

I think you see this in a lot of areas

in life one that I see it all the time

in that is a a big news story in the

United States I don't know if it's the

same in Canada but in America we spend

something like a hundred billion dollars

a year on lottery

tickets hundred billion it's massive

that people spend on lottery tickets and

if you dig into who's buying it it's

almost exclusively poor people they buy

the vast majority of lottery tickets and

the poorer you are the more lottery

tickets you buy and these are some

people for whom they literally can't buy

food or they might be homeless and when

whatever little money they have they go

into a 7-Eleven and buy some scratcher

tickets and you might look at that and

say like you you idiots like what are

you doing you this is the dumbest idea

I've ever seen and and maybe that's the

right answer like maybe you could just

stopped there but in Conan's framework I

think it starts to make a little bit

more sense if you have someone in a

situation like this who in their mind at

least they think I can't get a raise I

can't build a career I can't get

promoted I'm kind of stuck in minimum

wage job if that's their mindset then

buying a lottery ticket might be the

only time in their life where they can

say to themselves and believe like this

is my literally ticket out of here this

is the only chance that I have to get

ahead and so it starts to make a little

bit more sense in that situation and

maybe you contrast that with someone who

has a very high net worth they might be

like look I can just put all my money in

treasuries and just live for the rest of

my life just off the interest and when

you have so much you don't need to take

the risk well it comes down to

perspective right so like if I could see

what you see and feel what you feel that

decision would be rational yeah there's

so many things in life where you can

look at other people and the decisions

they make not just in money but for

politics their health decisions whatever

it might be and fierce disagree with it

but what's easy to overlook is that if I

were in your shoes and had experienced

what you had had the same family Dynamic

that you do the same DNA that you do I

would do the exact same thing and I

think that is a more qu important

question to ask yourself like what

financial decisions would I make

differently if I were born in a

different era born to different parents

born in a different country and I think

you can't answer that question honestly

because you don't know but you know

there would be a lot of things different

that are complet outside of your control

where and when you were born would have

a massive impact you and I should not

pretend that if we were born in the

1960s in Nigeria that we would have the

same views about investing in the stock

market over time that you and I do today

this kind of gets to the topic of luck

and a lot of people when you bring up

luck they will say something that sounds

smart that I I fiercely disagree with

they say like oh you should increase the

surface area of your luck you should

like oh the harder I work the luckier I

get like some variation of that I'm like

no if you can can do something that

changes your odds of an outcome it's not

luck by definition luck to me the

biggest are where and when you were born

you can't control it Bill Gates couldn't

control it Elon Musk couldn't control it

but it has a massive income a massive

impact on where you're going to go in

life that to me is what luck is it's

what you truly have absolutely no

control over and then there's also the

the not only the country you're born

into but the socioeconomic household

you're born into the schools that you go

to how how much of this is nature versus

nurture versus chosen nurture the stat

that I I think is so astounding is that

income among Brothers is more correlated

than height or weight so basically that

means if you have a brother who is Rich

and tall you are more likely to also be

rich than you are tall it's more

correlated than the literal DNA that

you're that you're that you're sharing

with each other look is it is it a

perfect correlation no are there is it

possible to be raised by a poor family

and become rich of course is it possible

to be raised by a Rich family and and

end up in the streets of course but

there's a very strong correlation

between those two I think people get

really uh can get kind of testy when you

talk about luck because if I say that

you got lucky I look jealous and if I

say that I got lucky uh I feel

diminished in in what I'm doing in life

so it plays a massive role but it's very

easy to ignore the impact that it has in

the world how do we break down that

contribution between luck and skill or

what's repeatable on our part rather

than saying what is luck I think it's

important to just say like what is

repeatable what is something that

happened that I could do again and if we

look at Buffett this guy standing behind

our shoulder here and and let's let's

look at the course of his life I cannot

he cannot recreate the trading

conditions that existed in the 1950s

that allowed him to buy Blue Chip stocks

at three times earnings whatever it was

back then that he was doing he can't

recreate that he couldn't do it again

but could I or you or anyone else

listening try to recreate his patience

his some of his risk framework like yes

so that's something we should pay

attention to you want to find what is

repeatable and what you could do again

and those are the things you should just

pay the most attention to I think that's

fascinating right because when we look

at Buffett what we want is the outcome

and what we don't think about is all the

things that go into creating that

outcome so what stays the same between

all these different decades where he's

done this right so he's done it from

buying netet Ben Graham stocks all the

way to buying great businesses all the

way to the patience to do nothing and

then once every 10 years deploy a whole

bunch of cash yeah what is consistent

across that period in your mind two of

the big ones we could come up with

dozens of things that are consistent

with someone like Buffett but the two

big ones are endurance and maybe tied to

that capping a downside risk that allows

him to stick around for longer than

anyone else there's also a psychological

trait of wanting to keep going longer

than anyone else um I I I use a stat in

in my book that 99% of Buffett's net

worth was accumulated after his 60th

birthday like the vast majority of

people including me and maybe you if we

became a billionaire at age 60 would be

done you move to Florida and buy a

private island and like live happily

ever after for him to be that successful

and to keep going full blast for what's

now another 33 years and still going

stronger than ever is a very unique

characteristic that plays a massive role

in his success if Buffett had retired at

age 60 or 50 like a normal person would

have in that situation you would have

never heard of him the whole reason he's

so successful is just the endurance and

there's a again there's a psychological

and a financial component to that never

getting wiped out financially and the

psychology that will allow him to keep

going full blast for nearly a century on

end now but that sounds academically

correct but in temperament incredibly

difficult because I see my friends

getting rich off like Bitcoin or

something and that makes me want to

change the patience that I have I know

how to get wealthy over time we know

historically that what's worked is

saving money being very patient letting

it compound decade after decade then all

of a sudden you wake up with a a ton of

money and financial

Independence but if I see my neighbor

getting richer quicker than I am it

makes me want to accelerate that

timeline yeah and my lack of patience

sort of changes the outcome not having

fomo is the single most important

Financial skill I think it's so

important that you cannot ever imagine

accumulating significant wealth over

your lifetime if you are susceptible to

fomo like if there's literally one thing

like one trait that you want that's

going to allow you to accumulate wealth

it's the lack of fomo particularly in

modern markets that can get so crazy

with social media and Reddit and Twitter

and everything if you if you are

susceptible to fomo there's no hope for

you over time I I I I really don't think

that's an exaggeration and that being

able to see your neighbor get much

richer than you and not being being

impacted by it is is so incredibly

critical and easy to overlook these days

I don't have that many Financial skills

I could never be a stock picker I could

never be a Trader I don't have the

intellect or the the the horsepower to

pull that off but I feel like I've never

been at least that susceptible to fomo

it doesn't bother me in the slightest to

watch other people getting rich Brent

bore our our our mutual good friend had

a quote that I love he said I am

perfectly happy watching you get very

rich doing something that I would never

want to do and I think that's that's a

great way to frame it I don't get

jealous or or anxious to watch other

people get richer than I am over time my

investing strategy is to own index funds

for as long as I possibly can to be

average for an above average period of

time and I think that will actually lead

to an incredible outcome not only will

it achieve the financial goals that I

have for my family but I think over a

long period of time it will put you in

the top desile at least of people who

are who are compounding money over time

I think that's really hard to appreciate

that what's short-term optimal and

what's long-term optimal are often two

different things completely different

things Howard Marx talked about this

investor that he knew who in any given

year he was never in the top half versus

his peers he was never in the top 50% of

of other investors and over a 20-year

period he was in like the top 4% because

everyone else who was beating him in a

given year couldn't keep it going and so

like what's your ultimate goal so much

of investing is just Define the game

that you're playing and I don't look

down upon or criticize people who are

short-term Traders maybe like that's

their game and for their investors or

for their like it makes sense for them

my game is is different I think your

game is different most people's game

might be a little bit different and

what's important is that if your game is

to invest for the next 20 30 50 years

that you're not taking your cues from

people who are playing a different game

of trading for the next quarter and

that's where a lot of danger and

investing comes from you've changed my

Capital allocation strategy our

conversations our walks totally yeah how

how how so what what what did you used

to do that you don't anymore uh we used

to do a lot more private Investments and

now it's mostly index funds and as

things sort of roll in uh through

dividends or whatever it just gets

reinvested in index funds but it's our

conversations that change that well

great that makes me happy and nervous

that that I'm having influence one thing

that some people will say when you talk

about index funds is like what is the

guarantee that this is going to work for

the next 50 years okay I understand it

works in the past 50 years and my

response is always like nothing there's

no guarantee that this is going to work

it's very possible that it doesn't work

out for whatever reason and there have

been periods you know from the you know

the late 1920s to the 1950s where the

returns were terrible or even from 2000

to 2010 had basically 0% real returns in

index funds so it's not perfect in the

slightest nothing guarantees that it's

going to work or be satisfactory over

time but I think when you adjust it for

the effort that is put in the lack of

effort that's put in basically zero

effort to do this and you adjust it for

the fees which round to zero now when

you adjust for all those things it's a

very appealing way to invest over time

if I was to look at your balance sheet

what is your Capital allocation strategy

I'm trying to think what like the

percentage wise it's probably something

like 15 to 20% cash the house that I

live in and then the rest the rest index

funds and shares of Marquel where I'm on

the board of directors and that's it th

those are those are my only assets cash

house index funds Marquel stock that's

it which index FS uh Vanguard Total

stock market index Vanguard value fund

and a little bit of uh an international

fund why do index funds work so well two

reasons one is it's always going to be

the case that a very small number of

stocks account for the majority of

returns so recently it's been uh Fang

plus Nvidia if you didn't own those

stocks Fang plus Nvidia over the last

decade your odds of outperforming are

are very very low it's not zero but it's

incredibly hard if you didn't own those

few and even if you look at an index

fund that owns a thousand stocks let's

say you're going to get the majority of

returns from probably fewer than 20 of

them and it's always been like that it

back in the 90s it was uh it was AOL and

Cisco and Microsoft and Dell and those

kind of companies in a previous

generation it was General Electric and

Intel and those kind of companies it's

always the case that it's very taal

driven the distribution of returns and

owning the index just guarantees that

whatever is going to be the next driver

I own because it's extremely difficult

to know what those are going to be if

you had gone back to 200 uh 4 20 years

ago and tried to predict what are the

big Winners going to be over the next 20

years well by the some of those

companies didn't even exist yet Facebook

didn't even exist yet Google was still a

private company or maybe it had just

gone public in 2004 the big winners are

I think extremely difficult to know with

any foresight what it's going to be and

if you had suggested even three years

ago that Nvidia was going to be one of

them you would have been like what in

like they make like it would have

sounded absurd so you're guaranteeing

that you're going to own the oddballs

that account for the majority of the

returns over time the other is I think

the the lack of effort that goes into it

that is needed investing is one of the

very few Endeavors in life where the

harder you try the worse you're probably

going to do and yes there are exceptions

to that Renaissance Technologies of

course you you you can name the

exceptions for people who tried very

hard and did very well but for the vast

majority of people there's going to be a

negative correlation between the effort

you put into it and the results that you

got out of it and so the the leave it

alone aspect of of investing of in index

funds is very important one little stat

that I love about this is that if you

look at both the Dow and the S&P 500

those are not static indexes they change

over time there are new constituents

that are added companies go out of

business or they merge and then new and

then new companies are added to that if

you were to look at the Dow I think one

one one of the studies showed over the

last 100 years if rather than adding a

new company when one of the original

components uh went out of business or

merged if you just left it alone don't

add anything else don't take anything

out just literally take the original

components and leave them alone you

would have done better than the

companies that were added and removed

added and removed like any activity that

goes into it tends to be detrimental

over time that's I I I've always thought

is is is very fascinating it's literally

like there's very few exceptions in the

index world to where the more effort you

put into it the better you're going to

do over time do you think we find it

boring and that's why we don't want to

do it it's a combination of boredom and

just the

counterintuition of the less effort the

better we're going to do because any

Endeavor in life whether it's your

physical fitness or whatever it might be

there is a positive correlation if you

want to become in better shape you

exercise you put more effort into it in

most Endeavors in life the harder you

try the better you're going to do and

investing is just not one of those and

it's so not intuitive that people end up

tripping over themselves I would also

say too that I am not against active

investing in the slightest at all I have

so much respect and admiration for the

people who do it well and the stats that

get thrown around that are true that you

know 90% or more of mutual funds will

underperform The Benchmark my response

to that is always like of course that's

how it is you should not expect to live

in a world in which everyone who tries

to beat the market can do it of course

that's how it is and the people who can

do it are enormously talented and I have

so much respect for them two of them are

sitting behind our shoulders here and

other people I I know people you know

people who have been and I think will

continue to be successful uh at this so

I I'm not a passive zealot the slightest

I just think for myself and many other

people it's probably the smartest way to

invest how do you keep your goalpost

from moving as you accumulate and

compound wealth hey I I think everyone's

including my and my wife's have not stop

moving nor nor should they I I I don't

personally aspire to live in a world

where if I'm lucky enough for my net

worth to go up uh 100% of it just acrs

to savings overtime that's not the life

that I want to live I want to have a

great life with some great material

possessions and travel with my kids and

live and live well over time if your net

worth grows 10% but your expectations

grow 12% that's that's when you get into

trouble it's just the gap between the

two and so look I'm making this up this

is this is not an actual analysis but I

bet over time if my net worth has gone

up by 10% per year our goal post has

grown by 5% per year I'm making those

numbers up but it's something like that

so yes my family lives a better life

materially today than we did 10 years

ago but we've still saved and lots of

money during that period I think that's

all that matters over time is that you

you know and even uh Buffett and Munger

who are you know known for being FR

Buffet lives in the same house he bought

when he was 26 yes but he also flies a

private jet and had a beautiful beach

front house in lagona Beach these guys

are not living like poppers over time

and that that's what I think is really

important it's just making sure that

there's a gap between your net worth and

your expectations seems one of the

things that we inherit from society is

that the house you live in is your Prime

financial asset yeah that seems really

recent as well maybe the last 30 40

years where that's become the vast

majority of wealth for Americans and

Canadians I know in in in United States

real home prices uh for most of modern

history in the 20th century were flat as

a pancake Robert Schiller of Yale did

did a lot of analysis on this tracking

us home prices since the 1800s and in

real terms from probably the 1940s

through the 1990s were flat as a pancake

on average across the United States and

then in the last 20 years starting with

the housing bubble that started around

2003 they exploded higher and then of

course we had the housing crash in 2008

and people thought that was the end of

the bubble but then they've exploded

higher even more and real home prices in

the US I'm sure it's the same in Canada

are much higher today than they were at

the peak of the bubble in 2006 on

average of course there's many variables

going into that a lack of building of

new homes uh that didn't keep up with

generational growth and it makes it it

kind of bifurcates the world in terms of

if you ha if you have owned a home for

any period over the last 20 years you've

probably done very well and if you are

looking for your first home today it's

harder than it's ever been particularly

now that interest rates in the US are

seven or seven and a half% for 30-year

fixed rate mortgage combine that with

home prices that are just absurd

particularly in the in the Metro areas

that people want to live in it's

completely bifurcated because if you own

a house for the last 10 years you can

sell that house and take the equity that

has grown in that house to buy a new one

to use for your down payment on the

other house that's been infl whose price

has been inflated but if you're trying

to break in for the first time like it's

it's a joke it's a complete joke so

that's it's a it's a very difficult

thing I would not I have a lot of

Sympathy for the first-time home buyer

today who is just who does not have

parental support which is the vast

majority of them uh it's harder than

it's ever been and there are few things

that make you feel like you are stable

in your adult life than owning the house

that you live in and I think it plays a

huge role in a lot of things in life a

lot of people this would have been same

for my wife and I don't want to start

having kids until they own their home

they they they want to have that sense

of stability before they start having

kids so I think the lack of housing

affordability has an impact on

demographics and having kids over time

that will Echo the next 50 or 70 years

so it plays a huge role in in what's

going on in society there's also sort of

a difference between what's optimal

financially and what's optimal

psychologically and we've had this

conversation before where you you've

told me you paid off your mortgage yep

and that makes no very little Financial

sense because you you had one of those

crazy like really low mortgages like

orate was 3.2% fixed for 30 years and we

paid it off which I I say is it's very

true is the worst financial decision

we've ever made but it's the best money

decision we've ever made and the

difference between the two is like look

on a spreadsheet it's terrible I've done

the math of like what if I had just

invested that money instead how much

would I more money would we have today

it's a lot it's it's a lot of money but

nothing that we've ever done in our

financial life has I think given us more

happiness than paying that off and a lot

of that is unique maybe to my

personality this is not advice for other

people because maybe you and other

people don't have that personality I'm a

worst case scenario thinker uh I also

have a career that can be fickle and so

and and I'm the sole bread wetter in our

household my wife is is is is home with

our kids so with all of those my

personality my career and whatnot it

made perfect sense and when we did it I

was nearly in tears with joy when we did

it knowing full well that it was a dumb

that it was a dumb financial decision so

I think once you stop viewing money as

just trying to make the spreadsheet

happy and you view as a tool to live a

better

life a lot of things change and in that

situation it was a tool that improved my

the quality of my life and my family's

life I think dramatically even if it was

the dumbest thing that we've ever done

on a spreadsheet and a lot of people

when I when I say this they'll still

push back and be like well walk me

through like why it was why it was

rational like it's not rational it's not

rational at all I I I can't explain to

you on a spreadsheet it was it was dumb

to do but it made me really happy and

like is there any worth is there any to

that you know for you like it made me

happy we can just stop right there I

don't need to prove it anymore but

doesn't that make it rational if you're

playing a different game right like if

you're trying to optimize every penny

over the long term maybe that doesn't

make sense yeah but if you're optimizing

for happiness and Longevity maybe it

does make sense yes and so I think the

the qu the qualitative factors of money

are hard for people to wrap their head

around particularly in a field that has

been taught as an analytical field when

you if you get a degree in finance or

get your CFA or whatever it would be

it's purely numbers that's that's not

totally accurate there's some there's

some in there but vast majority of how

they teach Finance is just numbers and

so it can be hard for a lot of people to

wrap their head around why you would do

something where the numbers don't make

sense what can money do for us and what

can it do for us what's the LIE it tells

us what's the thing that we we feel like

it can do for us that it can't well I

think the the LIE is that a lot of

people in life if they're unsatisfied

with how their life is going it's a very

quick and easy answer to say if I had

more money things would be better and

that can be true it can solve a lot of

your problems but I think what a lot of

people want in life not everyone I don't

want to completely generalize this but

what I want that I think is is

reasonably uh common for people is I

want independence and I want to spend

time with the people who I love my

family and friends and that's pretty

much it and can you use money to do that

of course money is is kind of the oxygen

of Independence and if you can use your

Mone to spend more time with your

friends and family you and I went out to

a lovely dinner last night with each

other that cost money thank you for

buying by the way and we had a great

time with each other now if you and I

went for a walk that would have been

free it would have been great too but

using money for to spend time with whom

you want when you want for as long as

you want waking up every morning and

saying I can do whatever I want today

even if what I want to do is go to work

and and be productive is absolutely

critical and that is different from the

knee-jerk of just oh if I have more

money I can buy more things nicer things

but what you actually want in your soul

is to like is you want independence and

to spend time with people who who who

you love money can do those things but

it's not as direct as people as people

think one one example of this is like

will having a nicer house make you

happier it might but be the reason it's

going to make you happier is because it

makes it easier to have friends over

it's it's makes it more convenient to

hang out with your kids in a big nice

glorious living room so it's not that

the house will make you happier but the

house can make it more conducive to do

things in your life that those things

will make you happier I was reading Rich

Dad Poor Dad with my youngest and it we

come to the the concept of a house and

if I get this right it was sort of your

house is a liability and not an asset so

don't think of it as like a financial

asset that's going to grow and acquire

wealth for you think of it as liability

that's just a sort of table Stakes for

playing playing the game if you want or

living life and having stability and all

these other things and I thought it was

really interesting and as we talked

about it I was like you know it's just

the house what the house is effectively

it's a container and what matters is

what happens inside that container the

house in and of itself like who cares

yeah uh just recently just last month uh

I traveled with my son to the town that

I grew up in and I stopped by the house

that I grew up in for the majority of my

childhood I hadn't been there in 20

years we we pulled in the driveway of

course there's people who live there now

so we just sat in the car but I I sat

there for 10 minutes just kind of

reminiscing about as soon as you pull in

the drive all these memories start

flooding back of the things that happen

in that house good and bad fun and sad

like like so many memories in there from

my childhood and of course you can go on

Zillow and see what that house is worth

it'll give you a very specific dollar

figure for what the house is worth but

what the house is worth to me and my

parents and my siblings is complet is

invaluable and you can't put a price tag

on those kind of memories and I think

that's common for most people there's a

tangible Financial value there's this

intangible that you can't ever put a

price on that's true for vacations it's

true for a lot of things in life that

there's a financial value I if if I

asked you and said what is this house

worth again you could go on Zillow and

say but what are the memories built

inside that house worth it's like you

can't put a price on that when you've

reached Financial Independence is is

that the ultimate when you're spending

money but it's not a matter of the money

you're not quantifying it in sort of a

dollar figure you're quantifying it in a

feeling or I think there's to that it's

when you start using it as a tool to

become happier now what's going to make

people happy is very different having an

incredible Ferrari collection might make

you happy uh so if it's not to say that

the things will make you happy are not

material that you should just use us for

experiences that I think is a step too

far I think a lot of people have hobbies

that cost a lot of money that are

material that really make them happy so

it's like great it's there are a lot of

people out there who would say you know

who would really promote frugality and

be like you you don't need a big house

you don't need a nice car well big

houses and nice cars make some people

really happy other people they don't

it's whatever you can use money as a

tool for to give to live a better life

versus I think a yard stick of status

and success to compare yourself against

other people that's what gets dangerous

is when you're just using it as a

scorecard to compete with other people

how do we catch oursel in a status game

where we're playing a status game but we

don't we can't see it because we're in

it it's unavoidable at the economy level

especially at the broad macro level it

makes sense from an evolutionary

perspective that people compete with

each other there's limited resources and

like if I want if I want the food if I

want the mate whatever it would be I

need to compete with you that's always

what so it's so natural it's never going

to go away this is truly like same as

ever people are always going to be

keeping up with the Joneses and you can

imagine a world in which our kids and

our grandkids are living way better

lives than you and I are and living

longer and have better material uh

access you and I do and they're no

happier for it because they're just

competing with other people who have

even more than that that's always been

like that if people a hundred years ago

could see how you and I are living today

they would be completely dumbfounded

with virtually everything we have in our

life but I would also wager that you and

I are not that much happier than they

are there' be some aspects of life we're

healthier we don't have to wake up you

know worry that we're going to die die

from the flu next week kind of but um

people just adjust their expectations to

whoever is around them a lot of this is

like a a a DNA thing some people are

just way more susceptible to wanting to

keep up with others and other people

could just care less what other people

think about them there's probably uh six

people in my life who I'd really

desperately want their love and respect

my parents my wife my kids a handful of

friends and everyone else it's not that

I could care less But after those six or

maybe eight people it drops dramatically

and the vast majority of people on

Twitter and whatnot I could I could care

less what you think about the decisions

that I'm making so I think you define

that it's it's you know who's whose love

and admiration do I want in life

defining who those people are and what

do I have to do to earn their love and

respect the love and respect of my wife

and my kids and and my parents and

that's what I want to use money to do in

my life so like spending time with my

family taking them to cool places and

whatnot there is a financial aspect to

this but once you define that personal

game you're playing a lot of these

decisions clear up I think a lot of

people don't actually think about what

game they're playing they at people and

you know from My Lens you should be

doing something different but that

really comes CU we're optimizing for

different things yes I bet if you and I

sat down and like deeply compared our

lives there would be things that we do

very differently spending like you spend

a lot of money on this and I don't I

spend a lot of money on this and you

don't and it's not a disagreement it's

just we're different people even if you

are about you and I are about the same

age same education you know there's

probably a lot that is just like yeah

but we're we're different so I think

most Financial debates whether it's like

an investing debate or a saving or

spending debate people are not actually

disagreeing with each other they're not

actually debating it's people with

different personalities talking over

each other and once you come to terms

with that there's not one right answer

for any of this there's so many things

that we inherit though from our parents

like invisible rules about money or

practices around money I remember like

these moments in my childhood where you

know my parents had to decide between

fixing the roof and fixing the car and

they couldn't afford to do both and I

remember remember they you know they

worked for the military and the military

had sent them a financial adviser and I

remember listening to the conversation

they had with the financial adviser and

how out of the loop they were with what

was happening with my you know the the

severance pay that my mom was getting

and what was happening and they had no

knowledge of it and I was like I never

want to be in this position yeah what

are the lessons that you learned from

your parents that really stick with you

today that sort of Define how you think

about money the two things that stick

out for my parents my my parents

upbringing so my dad started

undergraduate college when he was 30 and

had three kids I'm the youngest of three

he started his undergrad uh when I was

like a month old something like that and

he became a doctor when I was in third

grade my Early Childhood my parents were

very very poor they were students and

maybe they had some like student grants

that allowed us to buy groceries and

live in a tiny little apartment we were

very happy had a great childhood but

they were very very poor and then my my

My dad became a doctor when I was in

third grade and had the so then it was

immediate shift towards very poor to

like upper middle class literally

overnight when I was in third grade and

my sibling my brother and sister were

teenagers at that point so I got to see

very like both sides of the spectrum and

I remember the year 1993 is the year

everything changed in our family what

sticks out from that is that the

frugality that was demanded of my

parents when they were poor stuck with

them after they started making more

money and so even after my dad became a

doctor they were we were very frugal we

lived a much better life than we did

when we were poor because we were we

were living in abject poverty for most

of my childhood and but but after that

it was they had a very high savings rate

we were not spending money like my dad's

uh co-workers were like you would expect

a normal doctor too it was nothing close

to that I think I looked down upon my

parents for that I was like we could be

living in a nicer house I know how much

money you make we could be living in a

better house and driving a better car

but we don't because you're cheap skates

that was my view for my teens and early

20s my dad was an ER doctor which is a

very stressful field it's literally

people dying in front of you in your

arms every day and working night shifts

and it's a very stressful field so after

about 20 years or so he had just had

enough and well before I think he

intended to retire he more or less woke

up one day and said I'm done it was a

little more planned than that but that

was that was that was close to it and

because he had saved so much he could do

that he had the independence to wake

wake up one day and say I'm going to do

like I'm proud of what I did but I'm

going to go do something else now and a

lot of his peers could not do that

because they spent like doctors they

lived in big houses and sent their kids

to private school and drove fancy cars

so when they wanted to quit they

couldn't they wanted to retire they were

they were tired and they wanted to quit

but they couldn't do it and that was

such a profound shift in my thinking

this was not that long ago I don't know

12 years ago or so of when I was like oh

that's that's why you were saving so

much it wasn't because you were cheap

skates it's because you were wanted to

become independent and now you are you

want to quit so you could quit that's

why you were saving that was a profound

shift for me of like you're not saving

because you're just scared to spend

you're saving because you want something

different which is independence and

Independence is going to give you so

much more pleasure than the big house

ever would that really stuck with me how

did they talk to you when you said hey

you're just being cheap skates like

let's do this thing or let's get this

bigger house or if they heard what I

just said they would say yes in

hindsight that's all true but we didn't

know we were saving for

Independence they also my my parents are

very interesting that they have dollar

cost averaged into Vanguard index funds

for more than 40 years and never sold

anything ever so they would be like

literally in the top probably 2% of

investors during that period without any

Financial education no Financial skill

like no no nothing like that so I think

a lot of the decisions they've made made

have worked out well but it hasn't

really been conscious so I think back

when I said your cheap skat I'm sure

they just kind of shrugged and you okay

well this is what we're doing but I

don't think they actually had a plan for

what they were doing it was just again

the frugality that was demanded of them

my parents also met on a hippie commun

in the

1970s uh not exactly the breeding ground

for like good saving skills and so for

their entire adult lives for literally

decades they were they they had they had

zero money they had absolutely nothing

so they learned how to be poor and

they're also very happy and have a great

marriage if you can learn how to be poor

with dignity that skill will just like

stick with you forever so when they

started making money I think I think

it's probably true that they didn't

exactly know what to do with it because

they were so used to be they were so

used to being poor but um whether it was

conscious or not it created this thing

that has given them so much happiness

and pleasure which is Independence

what's the difference between being rich

and being wealthy the definitions are

are my own so I'm just making this up

but I think rich is when you have enough

money to make your mortgage payment make

your car payment you can pay off your

credit card bill every month like you

can afford the things that you're buying

technically wealthy I think is when you

have a degree of Independence and

autonomy the weird thing here is that

wealth is the money that you don't spend

that's what wealth is like the homes you

didn't buy and the car you didn't buy

it's money that you saved and invested

that is going to give you

Independence and that's a hard thing for

people I think to wrap their head around

that wealth is what you don't see

because I can see your your house I can

see your car I can see your clothes but

I have no idea what your net worth is I

can't see your your brokerage account I

can't see your bank account so wealth is

always hidden and it throws a lot of

people for a loop because if if I was

looking for a role model of physical

fitness well I I can see your Fitness I

can see your weight and your muscle tone

what not it's it's all visible but when

you're looking for a financial role

model who do you look up to and a lot of

people particularly young people will

look up to the guy in the mansion with

the Ferrari but that guy for all you

know is living paycheck to paycheck a

lot of a lot of those people are and the

person who is actually wealthy and

independent might be the person in the

modest house driving the modest car that

you would actually want to be if you

want to be wealthy instead of just Rich

you want to be independent instead of

just making your monthly payments the

people that you actually want to look up

to are some of the hardest people to

identify in society who do you look up

to in general who I look up to are

people who do whatever they want and

people with Independence and there's a

huge range of that I think there are

people whose net worth is you know in

the low six figures who are independent

there's a guy Nam named Mr Money

Mustache who kind of started the fire

movement I don't know 10 or 15 years ago

and his story was when his net worth was

$600,000 not not that much money he

retired and lived a great life on it and

there's other people you know obviously

Jeff Bezos and Elon Musk are independent

but I would I would venture that more

than half of Elon musda is doing things

that he doesn't want to do it's like

there's it's you know piling on all

these things that you know he's he's

still driven to do them and get them

done and of course he of course he could

quit tomorrow uh but doing things that

he doesn't necessarily want to do so

anyone who can wake up every day and say

like I can do whatever I want today if

you have Independence that that's my

personal goal so the people who have

that at any income level are the ones I

look up to why are so many people

who have money I think the the answer is

sort of maybe better than the last one

but why are so many people who actually

have a lot of objective wealth or money

if you will unhappy Andrew Wilkinson our

our friend had a saying where he says

like a lot of

people I'm paraphrasing him but a lot of

people who are very successful are just

walking anxiety disorders harnessed for

productivity and I think it was Patrick

oanes who said the single word that he

would use to describe a lot of very

successful people is not driven it's not

passionate it's tortured they wake up

every morning tortured about like I'm

trying to solve this problem I have to

get ahead I have to hit this goal and

they are literally it's they they wake

up very anxious and depressed and like

you know just tortured about about

achieving their things Elon Musk a

couple months ago gave an interview

where he said you might think you want

to be me yeah as in like the richest

person in the world richest person in

history but you don't and he was like I

think he said something like it's a it's

a tornado up here it's a mess inside of

this head you do not want to be inside

of this head I think that's really true

I think that's a profound truth that you

might think you want that kind of life

but there is a cost to that life and the

reason he's successful is because he's

probably woken up tortured for his

entire adult life trying to solve these

problems I am so glad and grateful that

people like himself exist because they

made the world a better place with new

technologies that we can all benefit

from but there's a big difference

between saying I'm glad you exist and I

would want your life those are two very

different things it's almost like we're

looking at the outcome we're like I want

the outcome I don't want I don't want

all the stuff it it we do this with

athletes too right like I want the gold

medal I don't want the 5 am. practices

seven days a week I don't want the I

think it was nval who said you can't

just pick and choose bits of someone's

life and say I want his physique and her

net worth and I want his house and like

you have to take the whole package and a

lot of the great things in anyone's life

there there there's a cost that came

with that whether it's their Career

Success that they had to put into it you

know there's stories that Bill Gates

worked I think it was 25 years without

ever taking a single day off and most of

the days he's working it would be like

he came home at midnight and crashed on

the couch for four hours and went back

to work I'm so grateful that he exists

but I would not want that for myself

that's not my definition of the life

that I would want our friend David senra

who runs the the podcast Founders has uh

profiled I think now proba

350 Founders over time and he says I

don't want to put two don't want to put

words in his mouth I'm pretty sure he

said the only founder that he has ever

read their biography and thought I want

his life is Ed Thorp and and everybody

else that he reads it I think he comes

to the same conclusion that I do I'm

glad they exist I would never want to

live their life because there's always a

hidden cost that when you dig into it

you're like yes he was very successful

because he sacrificed a million things

that would be very um that are very

important to you and I well let's talk

about that a little bit like you're

you're incredibly successful your books

have sold well over 5 million copies now

the inbound to you for requests of your

time your speaking your presence hop on

the phone for 15 minutes must be off the

charts how do you keep your surface area

small or keep doing the things that you

want to do well the only way to manage

that is to say no to virtually everyone

and that sucks for me for two reasons a

I don't have any assistant I'm

personally saying no to them I don't pwn

it off to anyone else and I don't like I

don't like making making people sad when

when you blow someone off or even

respectfully say no uh they're they're

going to be hurt a little bit I vividly

remember I'm not going to say who but

names that you and people would would

would know that I reached out to early

in my career and said hey I would can I

please pick your brain for 15 minutes

and they said no and I was hurt

I still remember it I still remember the

emails I remember reaching out to a

couple of authors probably 15 years ago

and saying my name is Morgan I'm an

aspiring author I'm trying to I'm trying

to do this I so admire you can I please

ask you you know just 10 minutes on the

phone and some of them didn't respond

and I still remember that so if if

anyone who remembers that gets in that

same position theirselves where they

have to say no to a lot lot of people it

sucks but there's no other way to to

handle it there's no other way to manage

it it seems like success and we've

talked about this before but success

sews the seeds of its own destruction

how do you think about that in what ways

does it do it the the biggest is just

that it allows you to become uh lazy and

it's going to degrade the thing that

made you great what made you what made

you like literally you um successful is

probably like some degree of like waking

up and feeling uh feeling feeling

inadequate just waking up and being like

I I know I'm capable of doing more than

I've achieved already and I got to go do

it and it's it's pretty common like

whether that was driven by um a lack of

uh self self-esteem like whatever it was

you're waking up you're like I need to

achieve more than I have today and once

you achieved some level it's easy to be

like well I've already done that and the

thing that made you successful that

drive you had is diminished you see this

in companies and in people and the other

thing that's really powerful is when you

are lower lower on the totem pole it's

very it's easier for everyone around you

to tell you what you're doing wrong

wrong and the higher you gain

particularly when you get up to the very

high levels no one wants to tell you

doing wrong because you're probably

paying those people to to be surrounded

uh you know to to surround you with

advice and they don't want to tell the

emperor he has no clothes that happens

to a lot lots of people lots of

companies and whatnot the thing that

made you great is degraded the more

successful that you become and some

people fight this very well but a lot of

people don't it's a it's a tough thing I

think the laziness aspect of it of once

you become more f independent you're not

driven for most of my career I was

writing because that was how I fed my

children I have I have to do this yes I

love it yes I enjoy it but I absolutely

have to do this once you get to a point

where it's like look I still love to do

this but I don't have to do it anymore

um is my motivation lower than it used

to I think the answer is yes like I I I

I don't like to admit that but I think

the answer is yes now I'm still as

motivated I'm still very motivated to

keep writing because I love doing it and

I think I there's a part of it that I

enjoy more now that I'm not doing it to

feed my children I'm doing it because I

just love because I love the the the art

of writing rather than just the business

of writing but people's motivations

change over time now part of that is is

great I don't want to be 60 years old

and having to work to to feed myself

this week but you shouldn't pretend that

it's going to not impact the thing that

made you great I want to come to writing

later on I got a lot of questions about

your process around that but before

before we get there what is risk you can

have a million different definitions of

risk I think broadly it's anything

that's going to prevent you from

achieving the goals that you want that's

a a very basic answer but I think that's

what it is and the reason that's

important is because take volatility in

the stock market is that risk well it

could be if you're a day trader then yes

if the market goes down tomorrow that's

a risk for you if you're in if you're

going to retire in 50 years it's not

whatsoever so just defining it in

personal terms

is I think the most important but a lot

of Finance is not that they Define risk

as volatility whatever it might be

recessions all these different things

but it's a very personal answer what is

risky for me might not be for you and

vice versa and this is what gets back to

most Financial debates are people with

different time Horizons talking over

each other there's a quote I love that

is personal finance is more personal

than it is finance that is really

important for everyone you and I should

not pretend that risk for Renaissance

Technologies is going to be the same for

you and I within our personal households

like complet completely and utterly

different so anything that pulls you

away from whatever goals you personally

have is what what I would Define as risk

if you had to break down the skill

differences between accumulating money

keeping money and spending money how

would you do that I've often defined it

as like getting rich and staying Rich

are completely different skills and

there's not that many people who are

equally skilled in getting rich versus

staying Rich there's you know a sliver

Society that's very good at getting rich

that has no ability to stay rich and

there's some people who are very good at

holding on to money but much less

talented at at building it and growing

it over time when you have both skills

combined it's it's a very special thing

Buffett is obviously that Bill Gates is

that there's a handful of people who are

extremely good at getting rich and have

stayed Rich very well the example that I

always use is Bill Gates when he started

Microsoft took the most audacious

entrepreneurial swing that maybe

anyone's ever taken of saying every desk

in the world needs a computer on this

and he's saying this in 1974 whatever it

was crazy amount of risk crazy bold

Vision at the same time he said that he

always wanted Microsoft to have enough

cash in the bank to make payroll for one

year with no Revenue which is the most

conservative pessimistic way to run a

business so he's like very risk-taking

and very conservative paranoid at the

same time very good at getting rich very

good at staying Rich at the same time

it's very unique to have both of those

acting at the same time and I think at

at the individual level you can have it

too my my net worth you'd say is like is

very barbell like a lot of cash that's

the paranoid conservative side and

stocks that I hope to own hold for 50

years that's like incredibly audacious

that that this is actually going to work

out over the next half century and I I

don't think that's that's any

contradiction it's just trying to get

both of the skills of getting rich and

staying Rich work at the same time

speaking of staying Rich one of the

stories we talked about last night was

the Vanderbilts and how they basically

blew $400 billion Fortune what happened

if you look at all of the Rober Baron

very wealthy families the carnegies the

JP Morgans the Fords The Rockefellers

the Vanderbilts I think virtually all of

them did well or did a decent job at

managing that dynastic money except the

Vanderbilts the Vanderbilts completely

and utterly botched it um the stat is

you know when Cornelius Vanderbilt died

his net worth adjusted for inflation uh

because he died in the 1800s was the

equivalent of $400 billion and in three

generations there was nothing left which

is an astounding thing to think about

and in between there sat three

generations who just blew money in the

dumbest ways you can imagine and the the

reason you could say it was dumb is

because I don't think any of them were

happy I think they were pretty much all

miserable if you dig into the

biographies of these three generations a

lot of the other

Rober Baron families taught their

children taught their heirs to run the

business or to become good

philanthropists whatever it was the

Vanderbilts effectively told their heirs

your job your sole purpose on this on

this planet is to spend more money than

anyone else and to and and so they did

it they built the biggest houses that

were so big they didn't even want to

live in them because they were too big

they threw parties that were so

extravagant they were just burdens on

themselves it's they they were used like

their sole Financial metric is can you

spend more money than the other

socialite and they were all miserable

for it and the the the story that a lot

of people know now is that the first

vendable air to not get any money when

all the money was exhausted the first

air where there was nothing left was

Anderson Cooper of CNN his mother was a

woman named Gloria Vanderbilt was she

she got kind of the last trust fund in

the family and Cooper is not only the

most successful Vanderbilt Heir in like

180 years he's probably happiest and

he's talked about this that money that

you are given that you inherit can be a

burden to your ambition a burden to your

identity of building a name for yourself

and he was kind of the first vanderbel

era who was like relieved of the burden

of having to carry on this thing of like

I'm a socialite I'm a vanderbel he's

just like I got to build my own name and

my own career and I'm sure because his

mother was Gloria Vanderbilt there were

doors open to him uh that would not be

open to anyone else but he pretty much

had to build it for himself for the

first time in 150 years do you believe

that money should be able to pass

between parents and kids well able sure

it's your decision but there are

obviously downsides and I'm sure I hope

it's a long time for now that I'll leave

my kids some money not a lot I love the

buffet quote where he says leave your

kids enough money so they can do

anything but not so much money that they

could do nothing and that I think is

really important I want to use whatever

money I've saved to give my kids the

best opportunity of building the life

that they that they want but not so much

money that they are forced to live the

life that I want for them I've met some

families who are who are very wealthy

and wealth becomes like a personality

burden of because I inherited this much

money my job is to just be an heir of my

grandfather and heir of my of of of my

parents rather than finding out who I am

and discovering who I am myself that's

true at like the very high levels but

you you don't want the wealth that you

pass your kids to burden them into a

lifestyle that they don't want for

themselves you just want to be like

here's enough money so that you can have

the leverage and the tools to find out

who you want to be and live the life

that you want but not so much that it's

going to burden you into like forcing

you into a direction that you don't want

to be it's almost like there's a a

geometric progression of surface area

here where the more houses you acquire

the more staff you need the more staff

you need the more man you have the more

managers you know as you I was talking

to Sam zel we were supposed to record a

podcast it never happened because he he

unfortunately passed away but when I was

talking to him he he just wanted two

houses right he didn't want 10 houses he

didn't want all of these things he like

I can just rent them I don't want the

hassle I don't want the burden that

comes with that do do you think that we

lose sight of that and then there's sort

of like a natural entropy to wealth

right like it starts to expand yeah and

you actually have to apply a lot of

energy to keep it small yeah it's

obviously not the case that the more

money you have the less happy you're

going to be that's obviously wrong but I

think if you have more money you can

have a more complicated life and

complication can lead to a lot of

unhappiness that's definitely true and I

think this is mostly true for people who

are like middle wealth if you're like

extreme upper wealth you can just hire

out every decision people can take care

of for you it's people who have enough

money to buy a second home but they have

to manage it themselves that's when

things get like really complicated in

your life many years ago I did this

Consulting session with a group of NBA

rookies they were they were some of them

were 19 20 years old and they're Mal

making millions and a lot of them grew

up in like inner city poverty they grew

up very very poor and when they are

teenagers they signed contracts for

millions of dollars it's like such a

stark uh movement for them and the

purpose of this conversation was to talk

about money to try to prevent the very

well-known path of athletes going

bankrupt a very significant percentage

of these people who make millions of

dollars are bankrupt by the time they're

30 so like how do we prevent that and

one of these athletes who was I think it

was 19 said something that I thought was

so profound and wise he said when you

grow up in inner city poverty and then

you make millions of dollars when you're

still young that's not just your money

that is Mom's money that is brother's

money that is cousins money that is

neighbor money you can't just tell

everyone back at home good luck to y'all

I got my money I'm going to go live in

the Mansion you stay in this level of

you can't do that and he said the reason

so many athletes go bankrupt is not

because they bought themselves a mansion

it's because they bought their fifth

cousin a house and they felt so much

pressure to do it that they had this

like social burden that came with the

money and I think at many different

levels that's an extreme example but at

a lot of levels there is social debt

that comes with money so if you that at

every level of net worth like if your

net worth Grows by $1 with that comes a

couple pennies maybe of like social debt

where you are like incentivized or like

pushed towards to increase your

lifestyle or to take care of other

people in ways that might be great but

might be a burden might be a debt that

comes with it and at some point I think

that social debt explodes I mean people

who are worth you know 50 or hundred

billion dollars obiously there's not

that many of them but their social debt

to use that money wisely to donate that

money money wisely is off the charts

it's enormous the pressure that they

have to use that money well to not end

up like the Vanderbilts to you know how

much pressure does uh Jeff Bezos and

Bill Gates have to donate their money

effectively and no matter what they do

no matter what causes they give to

people are going to say well that's not

a worthy cause this was more worthy than

that enormous amount of like invisible

social debt that comes with that talk to

me more about that like I love that

concept I don't want to talk about the

extremes where like Bezos musk and that

but the the social debt like almost like

you go to a wedding and you have to give

more because you have more is that or

you go out to if your friends know you

have money you go out to dinner you're

you're forced to pay kind of thing or

like oh I heard I heard this guy just

got a huge bonus last year let's see

what he gets me for Christmas kind of

thing that there's there's a lot of that

that comes with it and of course it's a

good problem to have it's you you should

not have sympathy for people who made so

much money that they now have social

debt like boohoo you know deal with it

but it's a real thing and a lot of it is

just the um incentive on yourself or

within your own family to be like oh we

have more money now we should I guess we

should buy more stuff it's like this

pressure to do something that you may or

may not actually want one one other like

like weird Oddball story that I thought

about here on the Amtrak train from

Washington DC to Boston is where it goes

um there is always a quiet car it's it's

one section of the train where you're

supposed to be completely quiet if you

want to get some work done or whatnot

and always what happens you go there for

peace and serenity but everyone on the

quiet car is so anxious and upset

because on the quiet car if someone so

much as Whispers or if your phone

accidentally goes off people lose their

minds because they have this expectation

that it's going to be completely quiet

and so the slightest little sound sets

them off and like the irony is you go

there for serenity but you're just so

angry while you're there because of

anyone's making any noise to drives you

crazy and it's this thing of just like

if your expectations

shift then the littlest thing can can

make you upset it's like when you go to

the quiet car yes it is quieter but you

also have this like sound debt that

comes with it you could say this

invisible sound debt that is a liability

now and I think it's so true with money

as well that the more money you gain the

more pressure you have to live a better

life that may or may not actually make

you happier Will Smith the actor said

that when he was poor and depressed he

could tell himself if only I had more

money all my problems would go away

right and then when he became rich and

he was still depressed he couldn't say

that anymore he was still depressed but

he was like I can't say that if I had

more money I would be happier because I

already have more money that I could

ever spend so he said what happened when

he became rich is it just removed the

hope that he had when he was poor he had

this hope like a I got to make more

money and then I'll be okay when he's

rich is like lost all the hope he's

still depressed like it's it's very

inspiring to think if I have more money

my problems will go away but then once

you have that money and you realize that

you still have just as many problems

maybe even more problems than you had

for that could be a tough thing for

people to wrap their heads around we

were talking about that a little bit

last night in the sense of people who

have money can't really talk about money

either because they have all the same

problems that everybody else has but

they don't feel like they can openly

Converse about it yeah because it's like

boohoo and and and and it's true like

they are boohoo problems there are much

bigger problems in the world if you are

you know have can't afford health

insurance you're homeless whatever they

are much much bigger problems but first

world problems are real problems in

people's head and you're right that

they're by and large can't talk about

them it's very interesting when you get

together a group of wealthy people into

a room where they can all start like in

that safety zone they can talk about

their problems and they all have the

same problems how do I not spoil my kids

how do I do this things that they can't

talk about with anyone else in their

life because it's because those those

problems are so different from the the

other like very real material Health

living problems but there are lots of

things that are very difficult to figure

out when you have a lot of money or even

just a modest amount of money

that you can't talk about even with some

of your closest friends yeah I I'm sure

you do have friends who have less money

than you and I do and you can talk about

with those friends you can talk about

anything else in life yeah problems with

your marriage problems with your health

whatever it might be and there's all

these other things that you're like I

can't talk about the things that are

actually giving me anxiety right now it

seems like the meta skill to think about

right now throughout this conversation

is how do we learn to manage our

expectations we this is maybe this is

how we started the podcast I don't want

my expectations to never remove I want

them to just grow a little bit slower

than my wealth over time I want it so

that in 50 years I hope that I'm living

a better material life to to some degree

I just want that level to not exceed my

net worth over time once your

aspirations exceed your the growth of

your wealth that's when people get they

take too much risk they go into debt

whatever it might be you've hung around

spent time with a lot of wealthy

families either giving talks or

individually the problems are the same

how do they deal with not raising

spoiled children how do they what have

you learned from that i' say most of

them how do they deal with not raising

spoiled children is uh they they don't

deal with it well it's a very hard thing

to do I had a conversation recently with

a guy who was um his father is a

billionaire and they they've lived like

billionaires his entire life he's he's

roughly our age and he's a very downto

Earth grounded polite guy and so I asked

him like how did you grow up with in

private jets and mansions and not not

become a spoiled little prick because

he's such a nice guy and he said despite

having that much money and living like a

billionaire his parents never taught him

never told him that because we have more

money we're better than anyone else and

they told him quite the opposite like

it's and he he said something I thought

was was really uh important he said the

reason that so many kids grow up spoiled

is because their parents are obsessed

with money that's why the parents are

rich is because they're obsessed with

money but it naturally grows into this

thing of like you are better than other

people if you have more money and if

people have less money than us then

we're not they they are not equal to us

and it it's so basic and almost cliche

but if you are very wealthy but you're

still teaching your kids good values

that will stick with them and the

opposite is true too if you raise your

kids even if you have a lower income but

you raise them with an obsession with

money to like that's the scorecard of

measuring other people is it's like well

what's your network what's your salary

that's what I'm going to measure You by

and rank you by that's when you get

spoiled little jerks as children how do

you in Gretchen and talk to your kids

about money well our kids are four and

eight so not not that much yet the other

thing that I've noticed I'm sure it's

the same for you and other people who

have multiple children is that my kids

could not be more different in their

personalities totally and of course

they're raised by the same parents they

shared they shared half their DNA like

it's the same house the same rules the

same upbringing and they're utterly

different people so you can't create one

philosophy one parenting Philosophy for

that the other thing is even if I know

my children today I don't know who

they're going to be when they're adults

does my daughter want to be a a partner

at Goldman Sachs does she want to work

for Green Peace does she want to be a

kindergarten teacher you have no idea

what they're going to do and the the

different you know rules are going to be

different for them I also think that

what's true is that the more you try to

tell your kids this is what you should

do the more they're going to rebel

against that particularly when they're

teenagers but the more that you can just

lead by example like a they are going to

pick up on it you don't need to sit your

kids down and say let me teach you about

money and in fact if you do that most

kids are going to yawn and and and and

say I'm not interested in this but they

are definitely paying attention to every

time you say we can't afford this

they're they're making a mental note of

it every time you say that's too

expensive every time you say I value

this I don't value that they're they're

forming a model in their head um that's

it's going to stick with them forever

and so I think just leading by example

with them is what we try to do rather

than trying to say this is what I want

to teach you these are the values I want

to instill back to my own parents I

don't think they ever sat me or my my

siblings down and said let me teach you

about money but I I learned profound

money lessons for them by just observing

when I was eight years old well let's

invert it uh well we can go from

parenting and then maybe to money

broader but like what lesson don't you

want your kids to learn about money what

be the worst thing that they could take

away from you about money don't think

that all poverty is due to laziness and

don't think that all wealth is due to

hard work it's not if you are just

ranking people by their net worth and

ranking their value by the net worth

that's that that's probably the most

dangerous thing you could do with money

it's the most profoundly wrong takea

away from money and yes a lot of wealthy

people earned it of course and a lot of

wealthy people or a lot of poor people

made some very bad decisions but once

you just use it as a yard stick to

measure people's value by you're making

a you're making a huge mistake there are

a lot of wealthy people who I cannot

stand and some of my best friends don't

make that much money and I think you you

can only have that in your life if you

divorce someone's salary and net worth

from their their personal worth in life

what else keep going I think what what's

interesting I don't know if this is a

lesson but what's interesting is that if

you want if you ask most parents what do

you want for your kids almost every

parent will say I just want them to be

happy I just want to raise happy kids

and then if you said do you want your

kids to be rich and successful be like

well sure but I just want them to be

happy I just I just want them to be

happy so I think figuring out how to use

money as a tool to make you happier

rather than just a tool to pile on to

become wealthier is is really important

that I would you know there are for sure

people who earn 30 grand per year that

are so much happier than people who earn

$3 million per year and understanding

that value of money I think is is is

really important like what what can

money do to make you happier because

there's no other purpose there's nothing

else that you should even think about

other than that what do you think is the

biggest risk to capitalism I think it's

always going to be the case it is

inevitable and it is actually ideal that

there is some level of inequality in in

the world it's it's not only it's not

only inevitable it's ideal the opposite

of that is is a nightmare but it's also

the the case that you do not want a

third of society waking up every morning

and saying this doesn't work for me this

system doesn't work for me so once you

get to some critical Lev I I maybe it's

not 30% whatever it is but if enough

people wake up in the morning and say

this sucks this system doesn't work then

it's going to reverse itself and there's

a very long history of that so the

balance of you want inequality you

because people's skills are inequal you

want you want that to be the case but

there is some barrier at which it starts

to reverse itself and it becomes a pitch

Fort pitch Forks in the streets kind of

scenario uh that that reverts now in the

history of the United States that's

happened several times

the 1920s and the Great Depression I

been thinking what we've dealt with in

the last couple years there's always a

pendulum between labor and capital

workers and investors and it kind of

swings back and forth of who's taking

the Lion Share of the spoils in this

this economy in the 1920s it was capital

from the 19 probably 50s to 7s it was

Labor uh and and since then it's been

capital and it kind of shifts back and

forth now just in the last three or four

years there's been a huge growth the

segment of society whose incomes have

grown the most tends to be the lower

incomes we're still kind of attached to

this Narrative of the rich get richer

and the poor get poorer but in the last

couple years it has kind of flipped

around at least to a degree that we

haven't seen in a very long time is that

the pendulum shifting towards another

you know 30-year Trend maybe I have no

idea but that pendulum is always there

to kind of keep itself in check and I

think if it gets too extreme you can get

very extreme outcomes we don't remember

this now but in the 1930s during the

Great Depression the words dictator and

authoritarian and even fascism were not

the dirty words that they are today a

lot of people during that era it was

very it was not uncommon for people to

say capitalism and even having a a big

democracy just doesn't work the Great

Depression in their minds proved that it

didn't work and people's push to say hey

look at all these countries in Europe

that are going towards fascism maybe we

should try that cuz this didn't work I

think that's the danger when you get too

inequal in society is that too many

other people can be tempted to saying

that didn't work let's try something

even more extreme it's almost like I

feel like I don't have opportunity and

the minute I I feel like I don't have

opportunity and it's almost like we want

equal opportunity and we're okay with

unequal outcomes yeah it's a it's it's

it's a really tough thing and I would

not you I think you and I if we felt

that we were trapped that there's no way

no matter how hard we work if we felt

whether it's true or not that we were

trapped in a low-income job you and I

would be prone to some extreme views too

oh totally there's a saying I that I

love that um it was from a Russian poet

who spent a lot of time in the goolag

and he says um man becomes a beast in

two weeks if you have two weeks of

deprivation two weeks without without

food two weeks in solitary confinement a

refined kind polite person becomes an

animal so like if if if you put someone

in an extreme scenario they're going to

be prone to extreme views extreme

outcomes do you think most adults

understand compounding I think it's not

intuitive to virtually anyone Michael

batnick good friend of mine has a saying

that's so simple but I think sums this

up the best he said if I asked you what

is 8 plus 8 plus 8 plus 8 you could

figure that in your head five seconds if

I said what is8 time 8 time 8 time 8

time 8 even if you're a math genius

you're like I don't know it's such a

huge number like I I have no idea what

it is basic linear math is very

intuitive very easy compounding math is

just it's so it's so unintuitive for

even people who understand it and it's

everywhere compounding is not just in

your bank account your brokerage account

there's compounding in nature there's

compounding for social trends and it's

easy to underestimate how big something

can become because compounding is so

counterintuitive you see this with Co

which was compound interest at its at

its prime like this virus that in the

early days is you know doubling every

day whatever it would be and that's how

you go from oh three people are infected

in March of 2020 to today like I I don't

know anyone who's not had covid that's

how it goes from literally three people

to the entire world in the blink of an

eye when it's doubling that quickly how

would you explain it to kids or adults

like what is the best way to teach

people the power of compounding it's

like the one formula I I tell my kids

this when they're in math and they're

learning this in sort of grade eight

grade nine they learn about compounding

and I'm like your teacher's never going

to tell you this but this is the most

important formula you're probably going

to learn in your math class yeah I don't

know if I don't know I'm I'm making this

up right now I've not thought about this

I don't know how I explain it but just

growth fuels more growth it's like the

the more you grow the more fuel you have

for more growth that's that's that's not

a very good explanation for it but

that's that's the thing to wrap your

head around is like it's uh it's not

what you start with it's just like how

long you're doing it for and it's not

even the growth it's the duration that

matters yes so I I said this earlier how

I think about my own investing

philosophy if I can be average for an

above average period of time that leads

to a way above average result it's not

it's it's not about like what are the

returns that I can earn this year if I

can earn 8% returns for 50 years the

results are ridiculous the results are

absurd and so maximizing the variable

that matters which is time and endurance

you know all compounding is effectively

is returns to the power of time and so

if you understand math that the exponent

there is what's doing all the heavy

lifting like maximize for that but where

is all of the effort in the investing

industry it's in the the smaller number

it's in returns how do I increase my

returns this year but I think when you

understand like no all the power all the

wealth all the Leverage is in the

endurance just focus on that before you

think about anything else that's a

really powerful way to think about it

let's switch gears and talk about

reading and writing how do you select

what you read I heard this idea I think

it was from Patrick oanes many years ago

who said you want a wide funnel and a

tight filter I will start reading any

book on any topic that looks even mildly

interesting to me but I will slam it

shut without mercy and move on to

something else if it's not working for

me a lot of the reason that people don't

like read why why people don't read as

much as they should or if they say ah

I'm I'm not a big reader a lot of the

reason is because they feel feel like

morally that they need to finish every

book that they start and we realize that

the majority of there's 4 million books

for sale on Amazon I I I bet 3.9 million

of those are not meant for you or for me

they they're meant for other people but

they're not they just don't work for

what what we want out of them and if you

force yourself to finish every book your

start of course it's going to be a

miserable experience but when you when

you are willing to try anything but have

a a a filter that is that just has no

mercy to to move on if you don't like it

that's when you find the great books

because if you only stick to books that

you know you're going to like about

topics that you're interested you are

missing so many other topics out there

that you don't even know that you would

like you have to try a million different

things but then cut it off very quickly

if you don't like it so that's how I try

to read if it's even slightly

interesting if someone has said oh this

is a good I I will start reading it by

the way Kindle samples are free you have

no excuse to not try any book um and and

then just mercilessly cut it off if it's

not working for you I find this really

interesting because uh with my oldest

who who reads a ton uh I just put books

on his nightst and you know some of them

I think he'll like some of them I don't

think he'll like and he randomly he'll

pick them up and he read like an immune

system textbook last year yeah and loved

it yes I think there's a lot of like

that if you ask me right now would I

like to read a book on the immune system

I I I don't know not not really but

there are so many topics like that over

the years that I never would have

thought that I would would like that I

start reading I'm like this is

incredible or it's working for me in

that moment it's a missing puzzle piece

in that moment there are a couple books

that have always been on my go-to books

that I recommend to other people oh this

is one of my favorite books of all time

a couple of those books I went back and

reread and I'm like they're really not

that good but at the time that I read

them it was a missing puzzle piece that

it was like perfect for me in that

moment even if when I read it now I'm

like this book's kind of very basic not

that well written

and so I think that missing puzzle piece

is true for a lot of people and that's

why like you need to read a lot of books

because what other people think are good

may or may or may not be the book that

you need at that moment are you a Kindle

reader mostly I'd go back and forth I'm

in a Kindle kick right now um and I've

been in physical U books before what I

love about Kindle is so easy to

highlight and go back and search which

for me as a writer is really important

when I'm writing I'm like ah what was

that quote from this book I need to go

find that really hard to do that in a

physical book uh where's Kindle it's

just so easy do you take them out of the

Kindle or just leave the highlights on

the Kindle or I use the readwise app and

so everything that I highlight whether

it's in a blog post or in Twitter or it

goes all into that David senra is the

one who said his readwise feed of all of

his highlights is his Smart Twitter feed

Twitter can be filled with so much

garbage and noise but readwise you can

flick through I think David Sun said he

has like 28,000 highlights and he can

sit there and scroll it of these like

amazing quotes and anecdotes that he's

highlighted over the years are there

passages that that stick with you or

haunt you that you've read that you

can't stop thinking about it this might

seem a weird one but I just because I'm

a writer too as you are I'm a sucker for

just a well-crafted

phrase but there was one I I I forget

who wrote this I'm sorry I can't tell

you who wrote this but it was a book

about uh D-Day and it was talking about

this one uh this one group this one one

company of soldiers on D-Day of

uh many of them died and the passage was

all of them were prepared to die that

day and all of them did die that day and

that was something it's it's such a

beautifully crafted sentence and it's

also just Haunting in its own way that

I'm I'm I'm such a sucker for that it's

not like I always say the best story

wins you could phrase that fact that

they all died a million different ways

but how whoever the author was phrase

that always really stuck with me why do

you think the best story wins what

what's behind that what we're trying to

do when we read a lot of times is just

contextualize whatever fact or story

that was within our own lives and it's

much easier to contextualize a story

than a statistic because there's a human

element to a good story and I also it's

just so much easier to remember and

stick with you I don't remember any of

the formulas that I was forced to

memorize in school forced to memorize

the night before the test I don't

remember a single one but every good

story that I was told some of when I was

6 years old I still remember so because

it's just so much easier to remember a

story than a statistic and it's easier

to contextualize it within your own life

and because there's so much emotion

embedded in it stories are like Leverage

for good statistics if you just like

there's some statist like I just said if

if I

said uh first Splatoon of Company E all

died on D-Day that's a statistic but if

you phrase that if you put a name or a

face to it it becomes a completely

different thing I always use the example

of Ken Burns who makes the best

documentaries about us history and the

vast majority of what is in his

documentaries are already known the

documentary about the Civil War or World

War II You Know How It Ends you know

what happened there's not that much new

in there but he is a better Storyteller

than I think any historian has ever been

in history he can tell a story about the

Civil War that will literally bring you

to tears even if you know what happened

you knew what happened but when you hear

the story and see the face and hear the

music in the documentary it will

literally bring you to tears and Ken

Burns has talked about how important

music is in his documentaries the

background music and he said that he

will literally edit the script so that

when the narrator says a specific

emotional word it matches up with a beat

in the background music so that the

emotion and the music is literally

aligned like that no other historian's

doing that no other historian does that

and that's why he can create he has the

leverage by telling by talking about the

Civil War that no other of the of the

his torians who are who are writing

about the Civil War can recreate take a

few seconds and think about how you

would teach me to tell a better story

you're one of the best storytellers of

Our Generation teach me how to tell a

story like Morgan hosel I think it's two

things one is um write for an audience

of one which is yourself don't think

about other people don't think about

who's going to read this don't think

don't ask yourself how is the reader

going to interpret the sentence write a

sentence that moves you that makes you

when you read it you're like I I I like

that without thinking about anyone else

I think once you start thinking about

who is my audience and what are they

going to like you start to Pander and

you start to like perform for them in a

way that is very hard to like create a

good emotional story about just write

for yourself the other is don't forget

how

impatient everyone is so this is a sense

where Maybe are thinking about the

reader but everyone is so impatient when

they're reading that you just always

have to ask yourself what is the point

that I'm trying to make make that point

and get the hell out of people's way and

move on to another point and most

storytelling you lose it once you lose

the reader Mark Twain used to he said at

one point

that when he would edit his work he

would read it aloud to his family he'd

read the story aloud and when he saw

them getting bored he he would make a

not all right cut that part they're

clearly dozing off here and when he

would see their eyes bug up he'd be like

oh this is a good thing this is a good

part and I think Mark Twain was the one

who said leave out the parts that

readers tend to skip that's the key to

good writing leave out the parts people

tend to skip I think that's important to

keep in mind too is just write for

yourself in a way that you like and get

to the point and get out of people's way

after that how did you learn to write

you didn't even go to high school right

um when I was at the mle fool for 10

years that was a 10-e period where I was

sometimes writing three posts per day

three articles per day doing that every

day for almost a decade I wrote

thousands and thousands of blog posts

and when you write online people are

merciless about the feedback they give

you uh the the readers in the comment

sections are on Twitter will tell you in

no uncertain terms this article was

and you did a terrible job or they'll

say this was really good I really

enjoyed it so having that level of

constant feedback and doing that

thousands of times over a decade will

turn anyone into a a much better writer

than they were when they started so that

was that was really what it was for me

it's a combination of of quantity and

fierce unvarnished feedback from readers

do you test ideas I think in some ways

you test ideas in Twitter and if they

work you can turn those ideas into a

blog post and if the blog post worked

you can turn it into a book idea or book

chapter that's kind of the natural

progression for a lot of these things

and just like uh it's very true in

comedy too even the best comedians The

worldclass Comedians don't necessarily

know what's funny until they've tested

it and this is why George Carlin Chris

Rock Jerry Seinfeld they test their new

jokes in tiny clubs because even Chris

Rock does not know what's funny until

they've tested it till he's tested it

and I think it's true for uh writers as

well I've had a lot of experience with

I'll write a blog post and I'm like this

is good this is some of my best work and

it flops no one else likes it and and

the opposite is true too the biggest

most popular blog post I've ever written

were always ones where when I was

writing it I was like I don't I don't

think this is any good this is so

obvious it's so boring it's too personal

no one else is going to care about this

that does well so even after doing this

for so many years I don't know if my

ability to find a topic and say like oh

that's going to turn into a good post is

is really that good which is why you

kind of have to ideas over time it's so

interesting because podcasts are like

that too I'll record an episode and I'll

be like oh my God that was mindblowing

and then you know three months later

I'll check at the stats and I'll be like

what and then I'll record a podcast

where I'm like oh you know I wasn't that

engaged and I look at the stats and it's

like off the charts yes the most popular

blog post I've ever written by far by

like an order of magnitude was a post in

2017 that I wrote about I grew up with

and still have a a stutter and when I

was a child and teenager I could barely

speak it was a it was a very severe

stutter when I was a child and I

couldn't really overcome it to where I

can talk to you like it to now until I

was 30 years old and so I wrote a PO a

post about this trial uh it's called

overcoming your demons and it was the

most popular post I ever wrote when I

published it I literally hid it from our

blog feed because I was like no one's

going to be interested in this I was

literally hidden like the the link was

out there but it wasn't even on the feed

cuz I was like I'm so embarrassed about

this that I would just be writing about

a personal thing no one else cares about

this and I really felt that way and it

turned into the most popular thing I

ever wrote hard to tell do you think you

were scared to put it out there

combination of scared also the the point

of the post was overcoming your demons

that I started with this like profound

disability that had such a big impact on

my childhood and I overcame it and now I

speak on stage and do these kind of

podcasts and I felt like it was too look

at me look at me look at me I didn't I

didn't want that but I think everyone

has their demons you do I do everyone

has something where they're like I've

got this problem in my life and a lot of

those are hidden people don't talk about

them because they're embarrassed they

don't want to talk about it's too

personal and I think when you are

vulnerable and open people love it

because even if you don't stutter you're

like oh I I I have this similar I have

this issue whatever it would be and like

thank you for telling me that your life

was not as was is not perfect thank you

for being open about the struggles that

we all have in our Liv lives I think

people like that but it's a fine balance

between that and being too personal

which we've all seen online or being too

braggy egotistical about like look how

much I overcame I'm so important I'm so

special it's a hard it's a balance

between like some people use

vulnerability strategically yes you can

tell there was that Viral LinkedIn post

a year or two ago of it was a founder

and he said I just had to lay off half

my company and he included a picture of

him with like tears running down his

face and people are like

that's terrible you like shame on you

for just trying to like pull up the

heart strings and say like oh I'm I'm so

empathetic that I cry when I feel like

it's actually a hard balance between

like why why did my stuttering post work

but that picture was just universally

panned it's a it's a balance but I think

it's hard to know where you cross the

line there I want to come back to

comedians for a second what did they

know about telling stories that we

should learn from them I forget who says

this and this is not a direct quote I'm

paraphrasing it I'm going to do a much

poor job paraphrasing it but it's like

comedy is a way to show you're

smart without being arrogant something

like that that's not the quote I'm doing

such a bad job paraphrasing this but I I

I honestly think that the best comedians

are the some of the smartest people in

society they understand psychology

George Carlin understood

psychology I think better than Daniel

conman did that's a bold statement but I

think that is I think that is actually

true they are so smart at understanding

how the world Works what make what makes

people tick how people think but they're

doing it in a way where they don't want

to just impress you with their

intelligence they want to make you laugh

what could be better than that and so

I'll give you one example my favorite

George Carin line he says have you ever

noticed that everyone driving slower

than you as an idiot and everyone

driving faster than you as a

maniac a it's it's funny but be it's

like God that is if you think about it

that's profound and understand like how

like relative views of other people

whatnot and so they are I think they're

absolute Geniuses but they want to

deliver it in a way rather than using

big words to say like look how smart I

am they just want to make you laugh and

they are also because particularly for

like a young comic if they are not

making you laugh quickly they're going

to get booed off stage so they are the

epitome of one line or just like so

succinct in their delivery so succinct

in their writing because they don't have

the luxury that a lot of authors do of

like let me write a 7,000 word chapter

a comedian on stage is like if you don't

make me laugh every 10 seconds you're

going to get booed off it's interesting

because you mentioned psychology there

they they're Keen observers of human

nature and psychology and all we've

talked about today we've talked about it

through the lens of money but it's

basically psychology well I think a lot

of things in life fall under this

umbrella of how do people make decisions

around uncertainty risk and lack of

information and that is health that is

politics that is friendships and

marriages and it's also money a lot of

things fall under the same umbrella

there's a study of like how do people

behave and one of the things I think is

important here is that you can learn so

much about money by studying and reading

fields that have nothing to do with

money I think you can learn more about

money by reading about politics military

history biology sociology than you will

by reading a finance book because you're

just trying to figure out how do people

make decisions how do you make decisions

and how do other people make decisions

and by and large you're not going to

learn that in an economics textbook but

you will learn about it by reading all

of these other fields that have nothing

to do with money what's your process for

writing I I I don't think this is a good

advice so if you're a writer out there

I'm not saying this is the right way to

do it but one of the things that I do

that I think is is not common is I write

by the time I get to the bottom of a

post it's pretty much the final draft

not because I can write a final draft in

in in the in the in one shot but because

I by and large don't move on to the next

sentence until I'm satisfied with the

previous one most writers most very good

writers will do the opposite they say

your first draft should just be a brain

dump and then you go back and edit and

it's that's never for whatever reason

it's never really worked for me so the

other thing is I can't sit I think I get

too anxious uh and jittery sitting for

too long so a lot of times I'll write

one sentence when I'm satisfied with it

I'll get up and like go do the laundry

and I'll come back and write two more

sentences and and then I'll go do the

dishes or walk my dog or something so

it's very sporadic like that and I think

that contrasts with a lot of writers who

are like oh I sit down and I can dump

5,000 words on the page and then I go

back and edit it that's that that that

is probably the the best advice to give

like that's what you should do and it's

for whatever reason this this never

really worked for me well you should do

what works for you I guess that that's

it but um most writers that I look up to

I think a much better writers than I do

it the opposite how do you hook people

you're one of the best at sort of you

and James CLE the two people who uh you

know the first sentence to your

paragraph and sort of like the first

part of your story really pulls people

in what would you what do you say what

do you think you do differently I think

it's a constant reminder of how how

impatient people are and if you don't

hook them in five seconds you're gone

and I know that because I'm a big reader

and if you don't hook me in five seconds

I'm probably gone unless you are like a

an author who I really know that I I

will give you a little bit more leeway

to be like okay I I don't know where

your article's going but I'm going to

I'm going to stick with you cuz I like

you if you're not that you got 5 Seconds

to catch your attention or else you're

out of there and I think that is a it's

it's easy to overlook that that it's not

just being

succinct you know in in the core of your

article but like it's uh it's it's

almost like an inverted period in where

it's like people are most impatient in

the first two

sentences it's like you would think it'd

be the other way around they would get

impatient after they've worked the way

through your article and they're getting

bored like no they're most impatient at

the top and there's a there's a lot of

data that can be very disheartening for

authors there was a mathematician who

looked at Kindle highlight data and he

used highlights as a proxy for how far

people make it in a book and the

Assumption was when people stop

highlighting in Kindle they probably

stopped reading and he showed that even

among bestselling books the most popular

books the average reader makes like a

quarter of the way through that's in the

best sellers that's in the good books a

quarter the way through and they're done

and so just always reminding yourself

how impatient people are it's just like

what's your point like make your point

and get the hell out of people's way I

also think Twitter has made people

better writers because the character

count limitation has forced people to be

like you have two sentences to tell me

your idea and that that that that's all

you get that's actually I think that's

been a great thing overall for making

people more succinct what makes a good

hook it could be a lot of things I could