Transcript
0:00 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
0:22 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
0:45 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
1:07 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
1:38 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
2:00 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
2:24 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
2:48 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
3:09 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
3:31 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
3:53 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
4:15 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
4:37 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
5:00 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
5:24 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
5:50 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
6:13 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
6:39 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
7:01 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
7:23 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
7:48 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
8:13 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
8:44 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
9:12 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
9:37 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
10:01 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
10:27 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
10:51 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
11:17 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
11:38 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
12:03 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
12:23 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
12:49 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
13:13 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
13:41 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
14:05 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
14:29 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
14:51 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
15:14 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
15:37 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
15:59 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
16:20 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
16:43 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
17:06 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
17:29 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
17:56 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
18:15 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
18:39 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
19:04 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
19:35 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
19:58 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
20:21 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
20:45 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
21:06 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
21:27 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
21:55 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
22:17 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
22:42 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
23:06 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
23:24 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
23:45 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
24:09 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
24:28 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
24:50 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
25:09 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
25:29 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
25:51 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
26:13 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
26:35 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
26:56 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
27:18 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
27:40 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
28:02 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
28:23 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
28:45 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
29:07 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
29:28 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
29:49 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
30:14 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
30:38 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
30:59 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
31:18 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
31:42 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
32:07 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
32:31 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
32:53 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
33:17 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
33:39 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
33:57 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
34:20 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
34:40 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
35:01 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
35:27 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
35:52 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
36:11 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
36:37 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
36:58 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
37:20 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
37:42 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
38:04 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
38:25 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
38:49 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
39:11 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
39:33 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
40:02 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
40:24 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
40:48 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
41:07 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
41:31 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
41:53 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
42:19 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
42:48 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
43:11 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
43:35 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
43:55 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
44:18 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
44:42 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
45:06 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
45:28 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
45:49 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
46:13 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
46:35 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
46:59 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
47:24 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
47:48 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
48:12 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
48:40 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
49:07 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
49:30 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
50:02 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
50:25 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
50:52 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
51:15 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
51:43 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
52:03 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
52:27 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
52:55 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
53:15 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
53:37 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
53:59 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
54:22 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
54:46 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
55:12 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
55:37 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
56:04 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
56:26 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
56:48 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
57:07 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
57:25 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
57:48 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
58:15 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
58:37 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
59:02 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
59:19 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
59:37 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
60:00 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
60:21 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
60:40 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
61:02 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
61:29 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
61:53 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
62:18 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
62:42 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
63:02 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
63:22 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
63:43 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
64:05 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
64:27 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
64:47 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
65:10 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
65:31 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
65:53 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
66:12 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
66:34 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
66:59 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
67:23 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
67:50 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
68:11 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
68:41 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
69:06 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
69:30 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
69:56 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
70:21 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
70:47 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
71:10 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
71:32 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
71:53 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
72:17 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
72:44 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
73:07 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
73:27 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
73:48 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
74:11 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
74:33 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
74:52 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
75:13 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
75:34 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
75:56 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
76:19 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
76:42 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
77:09 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
77:30 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
77:53 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
78:19 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
78:43 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
79:08 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
79:34 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
80:01 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
80:28 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
80:52 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
81:12 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
81:34 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
82:02 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
82:27 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
82:53 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
83:15 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
83:34 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
83:57 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
84:17 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
84:38 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
85:02 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
85:23 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
85:49 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
86:13 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
86:35 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
87:01 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
87:24 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
87:47 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
88:13 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
88:41 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
89:03 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
89:24 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
89:48 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
90:05 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
90:27 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
90:48 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
91:09 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
91:31 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
91:54 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
92:19 think it could be funny it could be profound we I think we were talking about this last night about I I forget who said it that like good writing fits one of the acronyms of like OMG LOL you know like like something like that it should be shocking or funny or profound or scary something like that that's going to invoke em emotion yeah yeah something like that I want to end with two questions so one being what you can
92:46 um leave everybody some parting wisdom on money and life what would it be I think the most important is is to realize how personal it is and therefore you really got to be careful taking your cues from other people you and I again same same age same like like going down the list you and I are very similar people probably have very different views about what to do with money and that is fine just like you and I might
93:09 have different views about food you like this food I like that doesn't mean that you're wrong it's got different tastes whatnot people understand that with food but there is a a common sense with money that there is one right answer for everybody and so I think you really have to be introspective look in the mirror and just say like what works for myself and my own family and even if there are holes and flaws and other people
93:30 disagree with that if it works well for me that's that's as good as you can do that's an important thing and final question what is success for you I heard I think Jim o shanesy said uh that his goal as a parent was not to raise good kids it was to raise good adults like he he wanted to be the kind of father that when his kids became adults they were well balanced that's different from raising good kids you want to raise a
93:53 good adult so that would be a big like maybe the top box to check in my life is looking back and being like my wife and I did our best to cre to raise kids that became good self-sufficient well-balanced polite happy adults that's excellent thank you very much Morgan thanks Shane
Summary
- FOMO is the most critical financial skill for accumulating wealth; it can prevent significant financial growth.
- The difference between being rich (having enough to cover expenses) and being wealthy (having independence and autonomy).
- Index funds work well because a small number of stocks drive most returns, and investing requires minimal effort for long-term gains.
- Wealth is often hidden; visible indicators of wealth (like cars and houses) can be misleading.
- The impact of luck and circumstances on financial outcomes is significant; many factors are beyond individual control.
- Personal finance is more about individual choices and values than universal rules; each person's financial journey is unique.
- Good storytelling can make complex financial concepts more relatable and memorable.
- The importance of teaching children about money through example rather than direct instruction, focusing on values rather than materialism.