Welcome back everyone for another deep dive.
This time we're really getting into
the psychology of money by Morgan Housel.
And this one, it's not your typical Wall Street how-to guide.
Yeah, definitely not.
This is about digging deeper, you know?
Looking at the psychology behind our financial decisions.
I think what makes Housel's book so interesting is he,
it's like he peels back the layers
and shows you what's really going on behind the scenes.
Exactly, like why we make the choices we do with money.
And right off the bat, he challenges us
to rethink what wealth actually means.
Right, it's not just about being rich.
He makes this clear distinction between being rich
and being wealthy.
And those two things, they can get mixed up pretty easily.
I mean, we often think of being rich as having all the stuff,
the fancy cars, the huge house.
But Housel argues that true wealth, it's something different.
Yeah, it's more about having that financial freedom,
that feeling of autonomy where you're not stressing
about every paycheck.
Exactly.
And he brings this to life with a story about his own father.
His dad was a doctor, but he was super frugal,
saved a ton of money.
And that allowed him to retire early
from a really demanding job.
So he found happiness by having that freedom
that his wealth gave him.
It really makes you think, like, are we so caught up
in wanting things right now that we're missing out
on that bigger picture?
It's so easy to get caught in that trap,
like you were saying, with Keeping Up with the Joneses.
We forget what's truly important.
And Housel points out this kind of crazy thing.
The average American today, they make twice as much
as someone in the 1950s.
Really?
Yeah, but they're actually less happy.
Wow.
That's where this idea of expectations
and comparisons comes in.
I feel like we're constantly bombarded
with these perfect images online.
Everyone's on vacation, always wearing the best clothes.
It's hard not to compare yourself.
It's tough.
And Housel has this great story about flying first class.
He remembers being 35 and thinking
he was the most amazing thing.
Oh, yeah, I bet.
But when his seven-year-old son flew first class,
he didn't even care.
Because it was just normal for him.
Exactly, like you was expected.
So it didn't have the same impact.
That's a great point.
Like, what are we comparing ourselves to?
Yeah.
And how is that affecting not just our happiness,
but also our financial decisions?
Because it probably is.
Absolutely.
It ties into why some financial behaviors
just don't seem to make sense.
Like, lower income groups often taking bigger risks
with things like gambling.
I can totally relate to that.
Back in college, I was broke.
And in a moment of pure desperation,
I gambled my entire student loan payment on a football game.
Yeah.
Let's just say I learned a very expensive lesson that day.
Ouch.
But Housel suggests that maybe these behaviors come
from wanting respect and recognition.
If you don't have other ways to achieve that,
like through your accomplishments or your personality,
maybe material possessions or the dream of winning big,
they fill that void.
So it's not really about the money itself.
It's about what it represents.
Exactly.
Like the status or validation you hope it will bring.
It's a reminder that our financial decisions
are rarely just logical.
So true.
They're tied to our emotions, our aspirations.
Even our sense of identity.
And that leads to something I found really fascinating
in the book, the idea of endurance in building wealth.
Oh, yeah.
That's a big one.
Housel really debunks this myth of getting rich quick.
He says the key to investing, it's
not about finding that one magic stock or timing
the market perfectly.
Right.
It's about saying the course.
Patience and consistency.
That's what matters.
He has some pretty compelling evidence to back that up too.
Did you know that like 99% of Warren Buffett's wealth,
it came after he turned 60?
Really?
Yeah.
That's the power of compound growth over time.
He also tells this amazing story about Ronald Reed.
He was a janitor.
And he ended up amassing an $8 million fortune.
8 million?
Yeah.
Just by investing steadily in blue chip stocks
and leaving them alone for 70 years.
70 years.
Crazy.
Talk about a long game.
Exactly.
And it shows you, you don't need to be some Wall Street
genius to build wealth.
It's about discipline, consistency,
and letting time do its thing.
It's a message that can be really empowering.
For sure.
Because it means anyone can do it.
Right.
You just need to be patient.
And that brings up another important point that Housel makes.
The biggest risks are often the ones we don't see coming.
That's so true.
We tend to focus on the risks we can measure and predict.
But life, it doesn't always follow the script.
Things happen.
Pandemics, natural disasters, economic crashes.
And those unexpected events, they can totally derail our plans.
And to show this, Housel shares this crazy story
about surviving an avalanche.
Oh, yeah.
That one was intense.
He talks about how it was all just random chance,
a series of small decisions that ended up saving his life.
He calls it the butterfly effect.
Where tiny, unpredictable things can
have these huge consequences.
And it reminds us that we can't control everything.
So how do we deal with all this uncertainty?
Well, Housel's advice is to build a financial buffer that
feels almost too big.
OK.
Prioritize having cash on hand.
Minimize debt.
So it's not about being afraid or hoarding money.
It's about having that security and flexibility
to handle whatever life throws at you.
Exactly.
It feels like having a safety net.
That makes a lot of sense.
It gives you peace of mind.
And that feeling of security, it brings
another interesting question.
How much is enough?
Yeah.
That's something a lot of people struggle with,
especially those in the fire movement.
Financial independence retire early.
Oh, right.
The fire phones.
It sounds amazing.
Achieve financial independence.
Retire young.
Do what you love.
Yeah.
It sounds idyllic.
But Housel points out that a lot of people who do this,
they end up feeling bored or even depressed.
Really?
Why is that?
Because for a lot of people, work
gives them purpose and structure,
and it provides social connection.
So you're suddenly taking away a big part of their life.
Exactly.
And that can be tough to adjust to.
So it seems like enough.
It's not about stopping everything altogether.
Right.
It's about having the freedom to choose what you work on.
Aligning your work with your values and passions.
Exactly.
And Housel tells this funny story about his friend Shaq.
After Shaq sold his company, he
told Housel to take a year off and do nothing.
Nothing.
Yeah.
Like absolutely nothing.
That's pretty different advice.
Shaq's point was that if you're always hustling and striving,
you can burn out.
You lose perspective.
Exactly.
You need time to rest and recharge
to rediscover what you're passionate about.
That really resonates with me.
We're in this culture that glorifies being busy all the time.
But taking time to yourself is so important.
It's essential.
It makes you wonder, what would you
do if money wasn't a factor?
That's a great question to think about.
What kind of work would you do?
What would truly excite you?
And Housel doesn't shy away from talking
about the complexities of success either.
He even says that success itself can be a trap.
How so?
Well, he says that success can lead to complacency.
We start believing our own hype,
overestimating our abilities.
And underestimating the role of luck.
Right.
We become blind to our weaknesses
and less willing to change.
He uses this great example of Jerry Seinfeld.
Remember how he ended Seinfeld when it was at its peak?
Yeah.
It was one of the most successful sitcoms ever.
And he just walked away.
Why would he do that?
Because he felt like the creative spark was fading.
He knew that success was actually
holding him back as a comedian.
So it's about recognizing when it's time to reinvent yourself.
To evolve.
Even if it means getting outside your comfort zone.
It's a powerful message.
And this all ties into another concept
that Housel talks about, the compounding of good and bad.
OK.
That sounds interesting.
Tell me more about that.
Think about how positive changes usually happen.
They're slow and gradual, almost invisible.
Like what?
Like improvements in health care.
Right.
Or reductions in poverty.
Oh, OK.
Those things happen incrementally.
We barely notice them.
It's like watching grass grow.
Exactly.
But negative events, those tend to be more dramatic and sudden.
Like a pandemic or a stock market crap.
Right.
They grab our attention because they're disruptive.
And we're wired to react more strongly
to those immediate threats than to those slow, gradual trends.
And this happens in our personal lives, too.
Think about unhealthy habits, sleep deprivation, chronic stress.
Those things might not have immediate consequences.
But they build up over time.
And eventually, they have a big impact
on our health and well-being.
It's a good reminder to pay attention to those slow burns.
The seemingly small things that can actually
have a huge effect in the long run.
And this leads to one of the most thought-provoking ideas
in the book, the power of narrative
in shaping our decisions.
The best story wins.
I can see how that applies to things like marketing or politics.
But how does it work with personal finance?
Well, think about someone like Ken Burns,
the documentary filmmaker.
His success, it doesn't come from uncovering
brand new information.
It comes from his ability to tell a captivating story.
So he brings history to life through storytelling.
Exactly.
And that's what makes him so successful.
So it's not just about the facts and figures.
It's about how they're presented,
the story that's built around them.
And this can be both good and bad.
Howzel warns us about charismatic people
who use storytelling to spread misinformation,
especially in the world of finance.
It's easy to get caught up in a good story,
even if it's not true.
So we need to be careful.
We need to think critically, evaluate information objectively,
separate fact from fiction.
And resist getting swept up by a story
just because it sounds good.
Exactly.
It's about understanding how narratives, both positive
and negative, they can shape our perceptions
and influence our financial choices.
And this goes back to what we were talking about earlier
with expectations.
If we set realistic expectations
and don't fall for those get rich quick schemes,
we're less likely to be misled by those false narratives.
Precisely. It's about recognizing the stories we tell ourselves
about money success and happiness.
Are those stories helping us or holding us back?
That's a key question.
And it leads to this really important question.
What story are you telling yourself about money?
Is it a story of scarcity and limitations?
Or is it a story of abundance and possibilities?
Because those stories, they often have more influence
than the numbers themselves.
It's like those stories become our own personal financial
blueprint.
And just like compound interest can grow your wealth over time,
those negative patterns and beliefs,
they can also compound.
And they end up eroding your financial well-being.
That's a good point.
It makes you realize how important it is
to really look at those subtle habits and mindsets
that might be holding us back, those slow burns
as we were talking about.
Exactly.
And I think that's what makes this deep dive
with Morgan Housel so powerful.
It goes beyond just giving you investment tips or strategies.
It's about understanding that human element of money.
Yeah, the emotions, the biases, the stories we tell ourselves.
It's about recognizing that financial success isn't just
about the numbers.
It's about making choices that are aligned with your values.
And that ultimately lead to a richer, more fulfilling life.
Couldn't have said it better myself.
So keep questioning those narratives.
Stay curious.
And remember, the journey to wealth,
it's as much about self-discovery
as it is about dollars and cents.
Such great advice.
Thanks for joining me for this deep dive.
And to all our listeners out there,
we'll see you next time.
It's like we're constantly writing our own financial stories,
even if we don't realize it.
And just like compound interests can multiply your money
over time, those negative patterns and beliefs,
they can multiply too.
And they end up hurting you financially.
It makes you realize how important
it is to really look at those little habits and ways
of thinking that might be holding us back, those slow burns
we talked about.
Yeah, for sure.
And I think that's what's so powerful about this book,
the psychology of money.
It's not just about investment tips or strategies.
It's about understanding how much our emotions and biases
affect our relationship with money.
It's about recognizing that financial success
isn't just about the numbers.
It's about making choices that align with what you believe in
and ultimately living a more fulfilling life.
Exactly.
Well said.
So keep questioning those stories.
Stay curious.
And remember, the journey to wealth,
it's about self-discovery as much as it is about money.
Absolutely.
Couldn't agree more.
It's been great having you on the show.
Thanks for sharing your insights.
My pleasure.
Thanks for having me.
And to all our listeners out there,
keep exploring those narratives.
And we'll see you next time for another Deep Dive.