#210 Morgan Housel – Episode Transcript

Morgan Housel is a partner at The Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal.

He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers.

Morgan is out with his first book  The Psychology of Money:Timeless lessons on wealth, greed and happiness , which Sean thought was exceptional.

In it  Housel shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life’s most important topics.

Sean Delaney: Morgan, welcome to What Got You There. How are you doing today?

Morgan Housel: Thank you so much for having me. I’m doing well, how are you?

Sean: I’m doing really well. I mean this is a hectic time for you, The Psychology of Money, your first book coming out. What’s it like just the preparation, the final few weeks before it releases?

Morgan: What’s interesting about a book is I’ve written online full-time for 13 years. I’ve published I think something like four million words online, but if you take those words and you put them in between two pieces of cardboard, people suddenly take them much more seriously. It’s a much different thing.

And of course, a book is a different thing, a book is not just a collection of blog posts. You can go deeper into a topic, you can… People’s attention span on a blog is very, very short. In a book, they’ll give you a little bit more leeway to tell a longer story and whatnot.

What’s also interesting about the book is that some people might notice this, but a lot of my blogs, even a week after I publish them, I’ll go back and change things just ’cause I’ll wake up in the middle of the night and say, “Oh, I could have added this other example, I could’ve changed the sentence,” or sometimes I’ll just read a paragraph and say, “Oh, that’s not written very well, let me change that,” but a book is done. Goes to the printer, you’re never changing it, forever hold your peace. So there’s some fear in that. The other thing is if you write a bad blog post post and everyone does, then it’s fine, there’s the next week, there’s a next blog post, you just put it behind you. If you write a bad book that’s out there, it’s printed, it’s… Your relatives are gonna read it, so there’s the stakes for a book or just higher. 

Sean: So where’s the confidence level right now in the book?

Morgan: I feel like I gave it… I did my best.

And there’s always gonna say, just like I was saying before I opened a copy of it two days ago, just to a random page, I started reading a paragraph and I thought, “Oh, that paragraph is so poorly written, I could have done some…” So I just closed it and said, I’m not gonna look at it anymore, I’m not gonna… I’m not gonna. It’s done. What’s out there is what’s out there.

I feel like I gave it a really good effort. I used a lot of the biggest things that I’ve learned in the last 13 years of doing this to put it in there. So I feel good about it, but the truth too is that books are like seed stage startups. 99 percent of them don’t work, they just don’t catch traction and 1% of them completely blow the lights out. So if you just think about those odds going into it, the odds are severely stacked against you, so you can hope for the best, but you have to assume that the baseline assumption that every author should have is that it’s gonna flop… 

Sean: Yeah, no, it’s always fun when there’s a writer and I’m intrigued by their articles for a number of years, and they’re coming out with a book. My expectations were through the roof for this and so you actually delivered it. So I’m really appreciative of that, and I know the amount of feedback you’ve gotten so far has just been tremendous so I’m just happy for your success to thus far, and we’re gonna dive into the book, but I would love even just knowing earlier on, we know what Morgan Housel is like today. What’s a sentence that your family or friends would have used to describe you growing up, maybe teenage years?

Morgan: Oh, well, my teenage years were interesting because I’ve written a little bit about this, but I haven’t gone into detail too much about it online, but I effectively didn’t go to high school, I… I really have no high school education, I grew up ski racing in Lake Tahoe, and I did an independent study program throughout my high school years that got me a high school diploma, I’ll say diploma and air quotes ’cause I did nothing for it. I did nothing. It was like I took a couple of tests that showed that I could add single-digit numbers, and they said, Here’s a diploma, go away. So I basically had an eighth grade education, had no high school education whatsoever, and then went to college, and I was able to do that, not because I was so smart that I could go to college. It was, I had to start when I was 19 or 20, I had to start back at eighth grade level, like eighth grade math kind of thing.

So my teenage years, there was no indication that I was gonna be anything other than a garbage truck driver in my career, because I had no skills, no intelligence whatsoever. If you go back to when I was in eighth grade, I did well in school. I was always able to learn, but I just stopped learning from age 14 to 19. I had no education, whatsoever. And I wasn’t reading back then either, it wasn’t like I had no intellectual curiosity during that period. I was just skiing and hanging out with my friends and getting into trouble with them, so… Forget what other people may have said, but when I look back at my teenage years, like I never in a million years what I think I would be a professional writer in my 30s, it was never, ever a part of the plan.

Sean: That’s the funniest thing when I first picked up one of your articles, I was like, Wow, this is… This is masterful, the way it connects. And I was just like, I have to assume Morgan just had such an extensive background in regards to training. So I need to know then what developed that early interest in investing and in writing?

Morgan: I think for investing, I don’t know, it started when I was like in my late teens, and my grandparents gave me $1,000 maybe for Christmas or my birthday, something like that, but when I was 17 and it was like… A thousand bucks is a lot of money. And I went to the Bank of America and I put it in a CD.

I don’t know why, I don’t think anyone told me to do that, but that’s what I did. And I knew what interest was, I knew this was gonna earn interest, and I knew what that meant, but I remember the next week logging into my account and the account balance went from $1,000 to $1,000.13, and I remember just sitting there staring at it like in stunned silence. I just got paid to do nothing. It just blew my mind, even though I knew it… I remember, I vividly remembered I can… I totally remember sitting there looking at the screen being like, “Oh my God, this is incredible,” so I think that silly little story is what got me interested in finance. The fact that you can get paid to do nothing seemed like a good career because I was capable of nothing. At the time, I had no education, so I got interested in finance, but what I wanted to do was investment banking, because every slightly ambitious young male in the mid-2000s, investment bankers had all the power, all the authority, all the prestige. They had the homes in the Hamptons and the private jets, and it looks so glorious and glamorous, so that’s what I wanted to do, and that’s when I eventually did go back to college, it was I wanna be an investment banker. But then I quickly realized I got an investment banking internship in my junior year of college, and day one, it was like get me the hell out of here. I want nothing to do with this. This is the most miserable thing I’ve ever seen in my life, just the culture of it, the hazing culture, to sit at your desk and work until 3:00 AM and ask permission to take a drink of water, kind of thing. It was just like… I wanted nothing to do with it, so I needed to do something else in investing, but I had no idea of what I was gonna do. And then a friend of mine at the time was a writer at The Motley Fool, which I had maybe heard of, but I know I wasn’t reading my life, I wasn’t reading much of anything back then, and I definitely was not writing. I was an economics major in college, which meant you didn’t… As long as you can write your name, I know there were really no writing assignments involved in that, I had no writing background whatsoever. So I apply and thinking, well, they’re not gonna hire me, but they did, and then I thought, okay, well, I’ll do this for six months and I find something else to do, but quickly, I wouldn’t say quickly, but after a while, I fell in love with writing as well. At first it was just, I love investing, and if you forced me to write about it for a job I’ll figure that out. But before long, I fell in love with writing, and now I love writing as much as I love investing. I’d say they’re co-equals in my career, and it took a while, but it was totally unexpected, just the process of writing, thinking about a topic and then thinking, how can I take this little topic, this nugget of an idea, and tell a story about it and keep people’s attention and try to tie it into other fields in a way that might be interesting, is something that I just love doing.

Sean: Yeah, and you’re masterful at that. That’s what I love. You take these ideas from a completely different realm, and tie them together so wonderfully. I’m wondering though at the Motley Fool, why did they hire you?

Morgan: It’s a good question. I spent 10 years asking that question every day myself. So I started in 2007, and I was a junior in college at the time, and they hire dozens of writers to write articles on their site, so I was a contract writer, I got paid per article, and I was one of a bunch of people who did that. When I joined, I was the banking or I covered banking, so my job was to cover the Wells Fargo earnings, that kind of thing, and in 2008, which is coming my first full year doing this, half the companies that I covered went out of business because it was 2008, how writing about banks, they all… They either went bankrupt or they merged with each other. So because of the financial crisis and because my focus was on banking, I really started writing about economics, so that for many years, if you go back to 2009 to 2014, all I was writing about was economics, like the components of GDP growth and what the unemployment rate is doing, that was all that I wrote about. That was everything. And then it kind of shifted more towards behavior, towards just asking a question of like, why did the financial crisis happen? That was probably the root question and realizing that it had nothing to do with anything that you would find in the economics textbook. It was all about just how people thought about risk and fear and greed, and these topics have nothing to do with math or economics. It’s about psychology and sociology and biology even. So I started getting interested in that and then… So that’s kind of what I’ve written about since it’s kind of like the intersection of investing history, economic history and behavioral finance, where those two things meet up is what I’m most interested in.

Sean: Do you think just the overall growth chart of your ability as a writer exponentially went up once you started writing about these things that were really deeply interesting to you?

Morgan: I don’t know, it’s hard. There’s sometimes… I think this is true for any writer or even the best writer in the world, if you’re writing 50 articles a year, there’s only gonna be three to maybe 10 of them that you feel really good about. That’s always gonna be the case.

So if I think about exponential growth of writing, I don’t know if that exists for anyone, because the best writers in the world… Well, most of the time, things that are not very good. That’s always gonna be true. There’s no false modesty in that. That’s just the way that it works.

So there are times when I look back at things that I wrote a month ago and I’m like, “Oh, that was garbage,” and then there’s times I look back and things that I wrote 10 years ago, I’m like, “That was really good.”

So it’s hard for… It’s hard for me to track the growth. It’s not like in sports or something where you can measure with statistics how you’ve done over time since writing is an art, and because it’s an art, what is good to one person is gonna be garbage to another. So it’s hard to measure how you’ve done over time. 

Sean: Yeah, if you were looking back at all your articles, is there one you’re most proud of, that you feel internally is just your best work thus far?

Morgan: I think there’s two that stick out, and they’re both kind of personal stories. One was an article I wrote in 2017 called “Overcoming Your Demons,” which was an article about… I grew, I grew up and I still have, although I’m able to control it now, a pretty severe stutter when I speak and when I was young, it was debilitating, I could barely talk.

It wasn’t till I was in my mid to late 20s that I felt like I had some control over it. It wasn’t till I was in my early 30s, I’m 36 now, and I wasn’t told like the last five years that I felt like I’ve gotten control over my stutter, and it’s not that it’s gone, it’s just you learn how to deal with it.

So I wrote about that whole journey in an article that was really meaningful to me because for my whole life, going back to when I was a child, I dealt with stuttering by just pretending it didn’t exist and sticking my head in the sand, and it was the first time writing that article that I just lay the whole story out there.

And I think other people like personal stories, particularly personal stories about challenges, because everyone’s got challenges and most people try to hide them and cover them up. So if you could be public about your challenges and come about your faults, I think people like that. They like the open honesty, ’cause everyone is struggling, but everyone puts on this facade of, “Oh, I’m doing great, and everything’s perfect.” 

So that was meaningful to me, and then the other was fairly recently, it was about two or three months ago in an article called “Three Sides of Risk,” which is a story about… And I mentioned growing up ski racing as I was a teenager, and two of my best friends were killed in an avalanche when we were skiing, and I was with him the whole day when they died, so I wrote about that whole experience and would have taught me about risk, and I tied it back to and how to think about risk and investing, just like thinking about tail risks, thinking about the crazy one in a million events that really move the needle in life. So those two articles stick out because they were both deeply personally. It wasn’t like, “Oh, I’m gonna do some research, historical research about a topic,” and whatnot. That was just, I’m gonna sit down and spill my guts from the heart about two really challenging things that I dealt with, so those were personally meaningful to me. 

Sean: Yeah, both of those, absolutely unbelievable. I remember reading “Overcoming Your Demons,” and both these articles, actually, it immediately had me take action. I picked up the phone call, called some people, and then he just maybe think so deeply about certain things I’ve struggled with, dealt with, so… You absolutely connected there, we’ll make sure those are linked up in the show notes, but I’m just so impressed. You’re only 13 years into this and you’re a masterful writer. So what were you doing early in your career just to speed up that learning curve even? 

Morgan: Well, first, thanks. And if you go back to my days at The Motley Fool, particularly in the early years, 2007 to 2015 or so. I was writing three articles per day, every day without skipping a single day, and I was paid per article, so if I skip the day, I wasn’t getting paid, I was really… 

Sean: Good incentive.

Morgan: It was the volume game, and so when you’re writing that much, in a lot of ways, I look back at a lot of the articles and they’re junk because I only had 30 minutes to think about them from the time I came up with the idea at the time it was published, I was just smashing it out as quickly as I could. But that much practice, I think, is really important. If you write three articles a day for five years, anyone will gain some sort of… You’ll improve if you’re doing anything that much. So I think just the amount of just that volume game was really helpful, but then on the flip side of that, like the polar opposite of that is, this was at… When I was still at The Motley Fool, I convinced them to let me write way, way less like my pitch was… I was talking to someone the other day about this. My pitch was like, “Hey, what if I write 75% less, but you still pay me the same?” It totally worked out because that let me slow down and think about things, write longer articles, more thoughtful articles where I could do a lot of research about it that I just didn’t have time to do in the past when I was on the volume game.

So that was really important as well in terms of like, “Hey, I have no pressure to just get numbers on the board,” some of the number of articles that I wrote. If I’m gonna write one article this week, how can I think, slow down and think about it, do a bunch more research on it. So those two things like the polar opposite of being forced to just write like an animal for years, and then having the opportunity to slow down and think about it, the two ends of that were really important. 

Sean: Is that how you pitch that at the time at The Motley Fool? Just saying if I’m able…

Morgan: Yes, yes. 

Sean: I was gonna say…

Morgan: I was texting with my old boss who I’m still really good friends with, and we were talking about that phone call just like two days ago, we were talking about it, and he bought on to the idea right away. My pitch was like, if I slow down, I’ll write better things, so I’m not gonna be writing as much, but what I do write will be better and he bought that. So that was a really important shift in my whole career. If that hadn’t happened, I would still be on the volume game. 

Sean: What do you think your comparative advantage is? I read all your work and I’ve got a few ideas, but I’d love to hear you just to self-assess that.

Morgan: I don’t think any writer has a comparative advantage because it’s an art, and then… So it seems like you are complimentary of what I write, but I know there are a lot of people who would be genuine in their criticisms, and that’s… Of course, that’s gonna be the case ’cause it’s an art. This is not math, where it’s like, I discovered E=MC squared and everyone agrees on the numbers, it’s all in art. So what some people like other people don’t. And of course, if you are active on Twitter, people will tell you in very clear terms when they don’t like what you’ve written. So the feedback is always there, but if there is any comparative advantage that I have is that this is all I do. It’s 100% of what I do. Even though I work at Collaborative Fund, I’m not active on the investing side, and all I do is write and speak. That’s it.

And so I think most bloggers do it as a hobby in addition to their day job, but since I can wake up every single day thinking about what I’m gonna write next, it’s just there’s more bandwidth to focus on it. 

Sean: That is interesting. So yeah, I don’t wanna be overly complimentative and definitely I’ve come across things where it’s like… Yeah. Okay, but yeah, overall, I’m just thoroughly impressed. So that’s why I wanted to say that. 

So you start to book off and with the quote from Sherlock Holmes, and I’m just an avid reader of Sherlock Holmes and I’m just a huge fan of him, and it’s “The world is full of obvious things which nobody by any chance ever observes,” and I’m curious why you included this quote?

Morgan: Because to me, that’s what investing is. Investing is really simple, it’s not difficult at all. If you spend less money than you make, save the difference, invest in the low and a diversified low cost portfolio and be patient, that’s 90% of finance, that’s 90%. That’s what you need to know. You move for professionals amateurs, that’s 90% of finance, but I think that’s too simple, it’s too basic for people to pay attention to. They want the other, or even if they know that’s 90%, they’re gonna focus all of their attention on the other 10%, the more complex strategies and what not.

So I think investing is just this… What works is so simple, it’s almost like this tragedy that works is so simple that people won’t take it seriously because they think it has to be more complex than it should be, and so when I read that from Sherlock Homes that the world is filled with obvious things that people don’t pay attention, they’re there too obvious for people to pay attention to, it’s like that’s exactly what investing is.

You have the smartest minds in the world, PhDs from MIT, and the simple stuff that really matters and moves the needle gets ignored, and so I’ve always found it just interesting in investing. 

Sean: Yeah, you bring up an unbelievable story that really ties this in, and I’m pretty sure her last name is Groner? Is it Grace Groner?. Is that you pronounce it?

Morgan: Yes. 

Sean: I mean that’s just a wonderful story. Can you just give a little bit of context to that? And we can dive into it a little bit more.

Morgan: Grace Groner was a woman who was born on a farm outside of Chicago in 1910, and she had a really difficult life. She was orphaned as a child, she never married, she never had kids, she lived alone in a one-room shack her entire life. She worked as his secretary for her entire career. She was, by all accounts, people who know her, she was a lovely lady, but she just had this very understated, simple, basic kind of sad, lonely life.

And when she died, she died in 2010, she was 100 years old, and when she died, everyone who knew her was shocked to learn that she left 7 million to charity, and people said, “How did this widowed, unmarried secretary who just lived in a shack by herself, where did she get 7 million?” And when they dug through her papers, they realized that all she did was she took what little savings she had from her career as a secretary, she invested it in stocks and she left it alone for 70 years.

And that was it. There was nothing more complicated than that, that was it. And the skill that she had was patience, that was all she had. She didn’t work at Goldman Sachs, she didn’t go to Harvard Business School. She wasn’t following the cape ratio, like none of that. All she had was patience. And that was all that mattered. You don’t need anything else. You don’t need any fancy stuff. If you have that level of patience to where you can be frugal and invest consistently for 70 years, if you have that, nothing else is gonna move the needle. 

Sean: Yes.

Morgan: So I opened the book with that story because it’s like… I also point out that there’s no other industry where that’s the case, where someone with no education, no background can vastly, can do so well, while people who have the best education, the best backgrounds can go bankrupt, as Grace Groner was becoming almost a decamillionaire, long-term capital management went bankrupt during a bull market. Like there’s no other industry where those things are even possible. And I think the reason that it’s possible is because what matters in investing, what actually moves the needle is not how smart you are, it’s how you behave. It’s whether you have the patience and the ability to manage greed and fear. That’s what really moves the needle in investing.

Sean: Yeah, no, I absolutely love that story. This story is making me think different. It’s the simple idea and it’s… Oh, that was so obvious. So I’m always just curious, when you’re writing this book, you’re writing an article, what are you trying to do for the reader?

Morgan: I just, I think that’s an interesting way you phrased it, because I’m not trying to do anything for the reader.

I like this idea of selfish writing, which is when I write, I’m doing it for me, I’m doing… And I don’t feel guilty about my selfishness. I wanna write about a topic that I think is interesting. I wanna find a story that I think is interesting, and I wanna write it in a way that I like and screw everyone else. But there’s actually… So it’s a selfish process, but I think it actually works for a larger audience because if I like something, the odds are that other people might as well, and I think writers get into trouble where they start out with the process of thinking, what will other people like? Who is my audience? What are they gonna like? How can I get their attention? And I just think you don’t do your best work when you think about it in those terms. You’re gonna do your best work when all I think about what I’m writing is like, oh, that’s interesting to me. I think that’s neat. I think that’s fun. So I’m gonna do… So that’s always the process that I go through with writing, it’s just… I like doing it for myself.

Sean: It’s certainly paying off.

Morgan: And writing as a process for anyone, even if you’re not a blogger, if you’re just a journalist, not a journalist, but you’re writing a personal journal, a private journal, the process of journaling the rest of writing is such a good way to clarify your thoughts and to crystallize these vague feelings that you have in your head once you put them into words. It could be a really clarifying process for a lot of people, so that’s why I like the philosophy of selfish writing, and just doing it for yourself.

Sean: Yeah, I couldn’t agree more with clarifying your thinking. I do this with some of the companies I’m involved with when we’re trying to figure out a tough problem. I mean writing it down actually on paper is one of the most beneficial things we do. 

You were talking there just a lot about the process and you bring the most interesting ideas and stories, and weave them all together. So what’s that idea generation process like for you? Where are you plucking these ideas from? How do you come up with them?

Morgan: It’s a combination of two things. It’s one, just lots of reading and lots of walking, which for me is the thinking time just going for a walk around my neighborhood. So lots of reading and from the widest variety of fields that I can think of. Just casting the widest net.

So I don’t read any investing books and very few economics books right now. I just read a lot of different topics, history and sociology and biographies and whatnot. Just anything that I might find vaguely interesting, but I’m always thinking through the lens of investing and having that seed in my head. So if you’re reading a book about World War II or biology, or the biography of Ulysses S. Grant, which, which I just read, if you’re always kind of thinking, how does this thing that I’m reading, how do these examples, these stories about human behavior, how would those apply to investing?

If you’re always trying to view what you’re reading through that filter, it becomes pretty easy to tie these things together, because you realize that investing is not the study of finance, investing is the study of how people behave with money, and since it’s a study of behavior, it applies… There’s so many things from other fields that also apply to investing. So many lessons in rules and examples that have a direct tie into investing because they’re dealing with the same forces of greed and fear and angst and anxiousness that we deal with in investing. People deal with it in all kinds of other fields, if we can learn from them and bring the lessons into investing. And I think it’s just more interesting, but you’re also just casting a much wider net, viewing the world through a much wider lens that can help you become a better investor, even if you’re reading and thinking and learning about things that have nothing to do with investing.

Sean: Yeah, it… 

Morgan: So that’s where the idea of… That’s where the process comes from, it’s just lots of reading about various various fields and then just going for a walk and thinking about how they might apply to investing.

Sean: It almost sounds like you got the perfect formula for letting your subconscious work here with investing in the background there, and then the walking lets those ideas kind of spur and then you can kinda just pull from all these different fields. That’s what I really enjoy.

So the book of The Psychology of Money: Timeless Lessons on Wealth, Greed and Happiness, and so I’m wondering, how does that go from just different articles, ideas, even pondering throughout the year, say, you know what, I’m actually gonna sit down, write this book and put it out there, ’cause that’s all we scary putting something out there and publishing. 

Morgan: Yeah, no, it is scary. All the chapters, so there’s 19 chapters, and they’re all kind of stories that have nothing to do with investing, but we’ll teach you something about investing, and all of them on… Not all of them, but many of them came from blog posts that I had written in the past, some of whom were blogs that I wrote 10 or 12 years ago, that I was able to do in the book, expand and go deeper and tell a broader story with deeper information and whatnot. Because always when you’re writing a blog, you’re always thinking, okay, wrap it up, wrap it up, wrap it up, because people are still impatient, you gotta make your point and then get it done ’cause no one… Now, you can write a long form article, but it better be damn good or… People’s attention span is so short.

So if I can take blog posts that I really liked, that I wrote and do a deep expansion on them, that’s great, and that’s really what the book turned into. So it was a fun project to be able to expand and go deeper and tell more stories about ideas that I had already come across in the last 13 years and expand on them.

Sean: Yeah, expanding on those ideas, I have to imagine this was a hard process, and you can bring up a really interesting point that just with investing, there’s usually a cost, right, and we always think that that’s gonna be one of the financial costs, but it’s usually psychological, emotional so I’m wondering, all the years that you’ve put in, are there some major costs that you just had to factor in for yourself just to get so good at this?

Morgan: I don’t… It sounds cliche, and I hate saying this, but writing doesn’t feel like… It doesn’t feel like work for me. It’s what I like to do, and I feel silly saying that, ’cause I feel like that’s… That’s what everyone says about their career, but it doesn’t feel… Like I really enjoy doing it, so… What were the costs?

Of course, I’ve had as many career… I’ve had career anxiety like everyone else. It’s not a walk in the park, but really the actual process of writing I enjoy doing. I guess if there is a cost, it’s this constant nagging fear that you run out of things to say, and every week… So right now, I write one article a week, and every single week without fail, I’ve just gotten used to the anxiety every week, it’s,“Oh shit, what am I gonna write this week? I’m out of ideas, I got nothing. I might just need to skip this week.” That never goes away, and look, that’s like if you compare that stress with what the stress of an ER doctor during a pandemic it’s, of course, it’s a different level, but I think if there is one cost to writing, it’s that I go through periods where I kinda get jealous of people who their job is very structured and systematic, and they come in to work Monday morning and there’s like their tasks are laid out in front of them, exactly what to do. When I was writing, it’s like you gotta make it up every week, you gotta get your brain cranking and be like, okay, what’s some creative idea that I can come up with next? So that stress never goes away, and I don’t think it ever will, but that’s a pretty low price to pay, I guess, for getting to do this.

Sean: Yeah, I agree there. I’m wondering, early on, it seems like you did such a good job with just calling broad life game selection in terms of what you wanted to do, where you took that internship in investment banking, and you’re like, wow, this is not for me at all. How important do you think figuring out what truly drives you and you’re interested in early on, how beneficial was that for you?

Morgan: The first thing I would say, to me, it’s obvious in hindsight, but my first year at The Motley Fool, it wasn’t obvious. I was not any good at writing, I had never done it before. I had a lot of career anxiety about, oh, since I’m not good at it, they’re obviously gonna lay me off, and it’s 2008, I can’t get a job anywhere else, and no one’s hiring, so that was… If I’m honest about it, I look back, it wasn’t obvious that this is what I wanted to do for years, even I think after I’ve been The Motley Fool for two or three years, I didn’t think this was gonna be my career.

And I think for a long time, for three years, the first three years I did this, I was kind of disappointed that I had not become the investment banker that I had dreamed of, and I always kinda thought, well, I’ll go back. I’ll go work for a hedge fund, I’ll go work for a private equity firm, whatever it is. It took me a while before I accepted that this is what I do, I’m a writer. This is what I wanna do. If I’m honest about it, it has probably been like the last three years…

Sean: Get out of here.

Morgan:… That I just accepted. Yes, totally. Even when I joined the Collaborative Fund, which was four years ago. The idea when I joined was I was gonna be, spend half of my time writing, half of my time doing deals. I was gonna go back to private equity like I always wanted to do, it’s honestly been in the last three years that it’s been like, no, I’m a writer, and that’s all I wanna do, is all I ever wanna do. That’s it.

There’s been a fairly recent development that I’ve just accepted that this is what I wanna do, and I think I’ve always known. I’ve known for a long time that this is what I wanna do. I just had to detach from the past of what I thought I was gonna be in the future, that I thought I was gonna be a deal maker working in banking and investing. Just letting go of that dream took me a long time, but once I’d let it go, it felt good to just embrace that this is what I wanna do.

Sean: So wait, is it like accepting or are you really happy about the path you’re on?

Morgan: I think I’m happy now, but there were definitely years of… I think 2013, not that long ago, was the hardest year for my career because that was the crossroads of like, am I really just gonna be a writer? And do I feel okay about that? Am I proud of that? Is that enough for me? Am I gonna regret just doing that? Do I wanna be a writer? It was really tough for me. I actually started on the path of getting my CFA, CFP, excuse me. I started on that path because I was like, I don’t wanna be a writer, I gotta go to do something useful. I need some initials after my name that show that I can do something. And I just started on that path, I didn’t complete it, but it was really, that was a really tough time of trying to figure out what I’m gonna do next.

Sean: Man, I’m so happy you stayed on the path though. You were mentioning a little while ago about when you write, it’s selfish. So with the book, The Psychology of Money, what was going through your head when you’re writing this, ’cause initially I’m thinking, what is Morgan gonna want the listeners or the readers get out of this book? But I guess, what did you wanna get out of that book?

Morgan: One of the main things that I wanted when I set out writing this was, so I read a lot, but I rarely finished books, maybe one in 10 books though…

Sean: I’m right there with you.

Morgan: …Like read to the last page, most people are. That’s the huge majority of readers, so I really wanted to ask how can I write a book that people will finish? I will feel really good about this book if people start quoting Chapter 19, and I know that they actually may have been that far. I’ll feel really good about that.

And I think the reason that you and I and other people don’t finish books is because almost no topic requires 60,000 words of explanation to get your point across, like the huge majority of books, you read chapter one and two and they make the point and you’re like, oh, that’s a good point, I like it. And then chapters two through 20 are just rambling, kind of repetitive and examples, and I don’t need that. So I kind of structure the book as 19 chapters, each of them can live on their own. They all have a theme that ties them together, but every one of those chapters, you could start the book on chapter 17 if you wanted to, and I did it that way because so each chapter is about the equivalent of three blog posts roughly in length, and so I made it that because I wanted to make 19 points that you might finish instead of making one point that just goes on and on and on and on and on. I’ve made the joke before that the Declaration of Independence is 4,000 words, so if people tell me that you need 60,000 words to explain interest rates like, no, make your point really quickly, and then move on to the next thing. Most books started with a blog post or a magazine article that did well, and then a publisher says, oh, let’s turn this into a book, and they take that one little idea that they had and they just wrap it in fluff. So I wanted to avoid that as much as I possibly could.

And I think there might be some chapters that could have been shorter, of course, but my ultimate goal for this book was to make a bunch of points and go deep on them and tell a story about them, which is the luxury that you have in a book, but not, I wanted to make it as a little rambling as possible so that people will actually finish it.

Sean: Yeah, I usually do a deep dive on the books I’ve read and most of the time I mentioned I don’t finish them, and it seems like it’s just a recurring theme as I get deeper and deeper into my notes, but yours, no, no, no, each chapter, it brings something new to light, which is always fun. One of those chapters that I really did enjoy that I think is just really applicable, especially right now is wealth is what you don’t see. And I would love to do even just get a high level overview, ’cause this is just so important for so many people right now.

Morgan: Well, wealth is the stuff that you didn’t buy. Wealth is what you did not spend. Wealth is the cars that you didn’t purchase and the homes that you didn’t buy and the clothes that you didn’t buy. Wealth is income that you earned and you put in the bank, and you said, I’m not gonna spend that. Not gonna do anything with it. That’s what wealth is. It’s obvious when you explain it that that’s of course, that’s what wealth is. Wealth is an asset that you haven’t spent, but what we see in the world is not wealth, but what we’ve seen the world is spending, and therefore it’s hard to learn about wealth because you don’t see it. 

I’ve used an example of physical fitness, most people will get motivated because they will see somebody else and they’ll say that guy or girl looks good, it would be great if I could look like that too, that’s where most like motivation comes from, as you look at other people who are physically fit and you say, wow, if I work that hard, I can look like that person too, but wealth you don’t have that because you don’t see wealth. You see people’s cars, you see their homes, you don’t see their brokerage accounts, you don’t see their bank accounts, and there are a lot of people in the world, I learned this when living in LA during the mortgage bubble, who have really fancy cars, very fancy homes, nice clothes, and they’re broke. They’re stretched to the limit. You see what they spend, but you never see their wealth, and therefore it just becomes hard to learn about wealth because it’s invisible, and then once you learn about people like Grace Groner, who was an orphaned, unmarried childless secretary living in a shack. But she was wealthy. She was very, very wealthy. No one, when she was alive, she was nobody’s financial role model, but she became a lot of people’s financial role model when she died because that was the only time that we saw her wealth. 

So that’s just one of the ironies of wealth that it’s what you don’t see. And if you wanna be wealthy, which is different from being rich. Like some people, if they wanna be rich in terms of, they want the nice car, they want the nice house, which look, I like nice houses and I like nice cars as much as anyone else, but I also wanna be wealthy. I want just assets that let me control my time and give me options, and let me wake up every morning and with the ability to do whatever I wanna do that day because I have enough money in the bank that I can control my time rather than having someone else dictate what I do that day. That’s what I want. So it’s what I want to do. I think a lot of people want is actually invisible in the world, that makes it hard to learn about. 

Sean: Yeah, that was one of those lines there, just having that optionality to just do what you want, that really is just a bliss, and that’s the most important thing I think about on a daily basis for myself. You’ve got another line that I just really enjoyed in the book, and I’m gonna butcher this slightly, but it was basically about the finance industry always talks about the actions you can do with the tools you have, and little about what actually goes on in your head, and I would love…

Morgan: Yeah.

Sean: When did this idea just really start formulating for you?

Morgan: I think it’s the idea that we’ve figured out finance, the laws of finance, the mathematical side, that’s all been solved.

We know exactly how net present value calculations work, the mathematical side science, we’re experts at it. We got it, we got the formulas, we got everything.

But those formulas don’t actually map to… They don’t explain what happens when you try to put those formulas to use. So we understand net present value, we understand all that. But when people are actually making investments, they’re not making them on a spreadsheet where they’re just calculating what they should do, and then the formula tells them exactly what they should do and they go do it. People make financial decisions at the dinner table where they’re dealing with greed and fear, and different emotions in their household, different goals, different dynamics that they have playing in their household, where all these different psychological, social… Family dynamics come into play. And so even though… And that’s why there’s such a disconnect between academic finance and actual financial results in the real world, is because the formulas that we know and we’re good, and I provide a lot of value and for investors are totally different from what happens when you try to put those formulas to work and you’re trying to make investment decisions. Those are two completely different things. 

Sean: Yeah, I’m even thinking about you. The first rule of compounding is never interrupted unnecessarily and you are switching from The Motley Fool to the Collaborative Fund, so I mean…

Morgan: That was hard.

Sean: Yeah, I can only imagine what that’s like. I’m wondering, I mean, you’ve gone so deep on some of these topics, what do you think switched the most in your head, and we can even call it over the last three years around finance in general based on just writing about it and researching it?

Morgan: I don’t know if this was a sudden change, but definitely the biggest, if you were to compare 10 years ago to today, and this was gradual over the time, this wasn’t happen overnight, but my skepticism of any forecast and any financial guru, I’ve gone from skeptical to cynical on it.

And I think it’s okay being skeptical of any forecast doesn’t mean that you are a fatalist, and I just say like, whatever happens happens, no one has any idea.

I think there’s a way that you can manage… You can think about the future without having any forecast, without paying for it. Like everyone who says Q4 GDP is gonna be 6.97%. I just think that’s all nonsense, ’cause it’s a forecast, it has no history of being accurate, but if you are to have an expectation rather than a forecast, if you have an expectation that we’re gonna have a recession every four to seven years, that’s my expectation, and therefore, I don’t need to know the specific forecasts about what’s gonna happen in Q4. If my expectation is that we’re gonna have recessions every seven years, then when it happens, I’m prepared for and I’m not surprised about it.

So that’s how I deal with on one hand, I think virtually every economic investing forecast is nonsense, all of them. I think every guru out there, whether it’s self-described or someone else who thinks they’re a guru, I think that’s all just marketing and an over-emphasis on luck of past decisions, but that doesn’t… I don’t think there is a way to really intelligently think about the future, and to me, it’s just having a set of expectations about how the world works without specifics in terms of when or how or why they might occur.

Sean: What’s your take with that in terms of the startup world and people wanting forecasts early on, things like that?

Morgan: In any seed stage startup, if you have a forecast of where revenue is gonna be in four years, nonsense. Tear it up, it’s never… That’s not what you’re betting on, you’re not betting on the forecast. If you are doing a leveraged buyout of a giant company, then the forecasting models are really important, you better make sure that the EBITDA forecast that you have are gonna cover your debt service. You know then it’s really important, but that’s not what you’re betting on. That’s not what you’re betting on, you’re betting on human potential from there. Seed stage investing too is also the kind of thing where if you make 50 investments, you know that 30 of them are gonna fail and one or two of them might do extremely well, that’s kind of the model of how it works. So it kind of forces you to have an expectation of failure as just like a baseline scenario.

Sean: Yeah, I like that approach. The expectation, it’s funny, I’m involved in the startup world, and any time there’s an investor wanting some methodical, just forecast breakdown, we know that’s just not gonna be a good fit, ’cause he just doesn’t know what he’s talking about.

Morgan: Just terrible.

Sean: You mentioned the 19 different chapters, and you can pick them up and go and go and read whatever. What do you think is gonna be a chapter that maybe my not get the most player talk about, but you just think people need to re-explore and go a little deeper on?

Morgan: That’s a good… So the shortest chapter in the book… I’m drawing a blank in terms of what I actually called it, but it’s a chapter about man in the car syndrome respect might be the chapter in the car, which is this idea that I came across when I was a valet during college, I was parking cars in Los Angeles, where if someone drove in in a Ferrari, the person driving the Ferrari is probably thinking, everyone thinks I’m cool, ’cause look at all the heads turning. They’re all looking at me. They think I’m cool, but actually the people who are looking at the Ferrari didn’t care about the driver. Everyone who was impressed with it was thinking to themselves, if I was driving that car, people would think I’m cool. People would look at me, and the irony of that to me was… Had a really big impact on is how I think about money, that people who have nice stuff, thinks everyone is impressed with them, but people who don’t have nice stuff thinks if I was in their shoes, people would be impressed with me and maybe the easier way to explain it is like, no one cares about what you have, but everyone thinks that if they have more stuff, people will care about them, and once you get a hold of that irony to me it kind of shifted financial goals, like, what do I actually want? And look, I love sports cars, I love nice homes, etcetera, etcetera, this is not an argument to live like a monk, but to me it’s just like, what do you… What actually makes people happy in life? What is actually gonna be a way that you can use your money to live a better life? And to me, when you accept that irony, that I explained, it’s not nicer stuff, it’s controlling your time. So that you can wake up every morning and do whatever the hell you want and spend the time with who you want, doing what you want for as long as you want. That’s what I wanna use money to… For myself and my family to live a better life rather than a new Lamborghini or something.

Sean: Yeah, I’m wondering then what mindset of yours, you get the most push back on, but you’re pretty solid on?

Morgan: I think, so I’m pretty open on the fact that I dollar cost average index funds with my finances, so I get a lot of push back from active investors on that approach, but I am not a passive zealot at all. I’m not… And some people who are. Some people will say, if you are investing in active funds, you’re an idiot and you’re just subsidizing the manager’s fee, etcetera, etcetera. I’m not that. It’s just for my personal finances. I know that if I dollar cost average into Vanguard funds for the next 30 years and I never sell, I’m gonna meet every financial goal that I have for my family.

So for me, it’s like I don’t wanna do, I don’t wanna do anything else, and I wanna use the bandwidth that I save from not having to be an active investor to go think about my writing. What I’m gonna write about next, that’s what I wanna spend my time doing. So for me, it works, but I know there’s a lot of other people for whom could not look themselves in the mirror in the morning if they were not trying harder with their investments than I do. So it works for other people. And of course, there are gonna be smart investors who can outperform over time. It’s gonna be hard, it should be hard, you shouldn’t have more than 10% of managers who try to beat the market actually do it. That’s how it should be. But for me, the simplest approach where I can think about my finances in the simplest terms possible, my entire net worth is a house, a checking account, and some Vanguard funds, and that’s it, and I love that it’s that simple. I love that I can wrap my head around it in the simplest way possible.

Sean: Yeah, Morgan, I think you’re gonna hate this question, but I’m just wondering, you’re gonna look back now, why do you think you’ve been successful? 

Morgan: Well, first, it’s subjective because I… And other people might not think I am.

Sean: We can just take your book, the pre-selling that’s been going on and the interest. Believe me, I will say you’ve done pretty well for yourself in your career.

Morgan: Well, thanks, I think if there’s anything that I’m proud of, let’s say, it’s that I feel like I can do a good job of explaining complicated things in simple ways.

I think if there’s one skill that I’m like, no, put modesty aside, that’s what I’m proud of, it’s that. That’s what I feel… What I feel good about. I would say, how were they able to do that? It’s because I’ve been able to spend every single day in my career for 13 years thinking about how to do that. So if you make that the one thing that you do in your career, I’m not good at anything else, but that… ’cause that’s all I’ve ever tried to do.

And I think there’s a lot of yearning for that because a lot of people who write about finance or any other topic, they will try to look smart by writing things more complicated than they need to be with words that are bigger than they need to be with too much data just to show you, look how smart I am, look how many charts I have, look how many big words I’m using, and I think if you can not only break away from that, but do the polar opposite of that. I mean like I wanna prove my intelligence through simplicity, and that’s not intuitive, it seems like the opposite thing to do. I wanna explain how the economy works through, in a way that a 10-year-old can understand, that’s hard to do, but I think if you can do it, people… There’s demand for that. People like that yet.

Sean: That’s so hard to do. It’s even the mindset that you’re gonna do that, so I’m even wondering, 13 years ago, early in your career, why were you looking through that lens?

Morgan: I don’t think I was… If I go back and read stuff I wrote 13 years ago, it was more complicated than it needed to be. Longer than it needed to be, more wordy than it needed to be. So I think what pushed me to that, I don’t think it was like I realized that was a good thing to do. It’s that readers are so impatient that if you write something that is confusing or complicated, they’re gone, they’re out of there.

And when you start getting the metrics of what article did well and what did it, it’s just kind of like this evolutionary force of the simple stuff.

There’s been so many times where I write an article where I’m like, this is so basic, I can’t believe I’m even writing, I’m writing this and those articles do so well, and there’s others that where I’m like, oh, I found this really interesting piece of data, and it’s kind of complicated, but I think it’s really like no one cares to read it because it’s complicated. So to me, it was just like the evolution of what does well and what doesn’t, that pushed me towards the simple stuff is what does well, so let’s do more of that.

Sean: Yeah, I’m really cognizant of the time here, I know we gotta go pretty quick here, but just a few more things I’d love to hit on with you, and you’re just such a prolific thinker. If you’re gonna write about something completely outside of investing, a new book, what topic or subject do you think you’d write in?

Morgan: Well, I actually have a book number two kind of… I haven’t started writing it, but have a kind of outline, and I’ll give you the very brief summary, it’s on what does not change in the world? What are the enduring characteristics of history, things that never change that are just fundamental parts of how people think about the world that we know since they’ve been around forever and they’re gonna be part of our future, and since they’re gonna be part of our future, we can latch on to them as like certainties that these couple of forces are gonna be part of our future. That’s what book number two is gonna be about. 

Sean: What’s it titled? Cockroaches and Sex?

Morgan: I don’t have a title, but let’s go with that for now.

Sean: It might work. One more thing, I know you’ve studied so many people, if you were gonna write a biography, who would you write it on? 

Morgan: A good question. It might be cliche too, but I would probably say Charlie Munger just because I think… That’s such a boring answer. Like 90% of people in my field would give that answer, but I still think he’s the most interesting man of our time, not just because of his success, but just how he thinks about the world and his ability to articulate how he thinks. I don’t think there’s anything about him, I don’t think there’s anyone like him, forget living, but in our… In the last 100 years, I think he is one of the most interesting men of the last 100 years. So he’s something… Obviously, someone who I admire, and I wish there was more written about his life.

Sean: Is there someone somewhat similar to him who we can just call it an undiscovered thinker who might be interesting to research a little more?

Morgan: I think maybe the closest is not anywhere near undiscovered, but I think Naval is probably someone who is in the same bucket, very different, and Naval writes a lot, tweets a lot, whatnot, but I think the common denominator there is the ability to explain complicated things, through really simple, really clear-cut ways where you can explain something in one sentence and you’re like, yes, that’s it, that’s what… I’ve had this vague idea that other people have written books about, and you just explained it in a tweet, and that’s the common non-denominator between Munger and Naval that I really like.

Sean: Okay, so we’re gonna no Munger, no Naval. If you could sit down with anyone dead or alive for an evening, just dinner interview, hanging out, enjoying their presence. Who would it be?

Morgan: I think it would be Franklin Roosevelt because he was front and center during when I think it was the most interesting period in modern history, which was the combination of the Great Depression, World War II. No one in the world had a better insight into those two things that he did, because he was the leader of both. You had a Churchill, whatnot, who was a leader during the war, but not during the Depression. To have both of those things and be the leader of both of those things, which to me is the most interesting part of human history because it was some of the most devastating parts of history. It was when people dealt with the most stress and uncertainty of any point of Modern History, dealing with that, and to me, would be just incredibly fascinating.

Sean: Yeah, that really would be.

Okay, so we’re gonna pick up The Psychology of Money, we’re gonna be done with that. Three books, one biography, one in psychology, and then we’ll just give a wild card, what’s gonna be on your bookshelf?

Morgan: I just finished, and I actually did finish a biography of Ulysses S. Grant by Ron Chernow, which was so fascinating. I consider myself someone who knows, who likes the US history, but I know so little about the Civil War. To me, a lot of people it is unfortunate, but my… But history of you to me starts in 1920. It’s so unfortunate, but that’s how it is. So there was so much that I learned about the Civil War that I thought was fascinating. And Grant too, I really knew nothing about him. And he was a really fascinating guy. So that I thought was great. So a very long book, it’s, I don’t know, more than 1,000 pages, but it’s great. 

Psychology book. What would be a good one? I’ve always loved Dan Gardner’s book, The Science of Fear. It’s not necessarily a psychology book, but I think it fits in that realm. That was a book that really changed how I thought about the world when I read it. I first read it 10 years ago. I think it’s really well written, and there’s a lot of things in there that when I read them, I was like, oh yes, of course, that’s true, but I never thought about that.

And one wild card. What’s interesting, I’m gonna open up my Kindle for you right now, so I can scan the last 20 books that I’ve…

Sean: Yeah.

Morgan: That I’ve got a read.

Sean: While you’re scanning that, how many are in your Kindle?

Morgan: It’s hard to say now. I don’t know if there’s a way to count, I’m gonna guess 200 because I go through periods when I wanna read physical books and I read Kindle… Ok, so a good book, and I see it in my Kindle, it’s called Bubble in the Sun.

I think it was published this year. It’s about the Florida land boom during the 1920s, that led to the Great Depression. I thought it was so fascinating, and so interesting. It’s a great book. 

Sean: Yeah, I’m gonna have to put that one up being in South Florida here, right around where Edison and Ford and Firestone were all doing their work in the winters.

So Morgan really… I’m so just excited, happy for you with this, just because I had just been such a fan of your work, The Psychology of Money: Timeless Lessons on Wealth, Greed and Happiness, believe me, we have everything linked up in the show notes, but anywhere else you want the listeners just staying connected with you or checking out and to find out more about the book?

Morgan: Most of where I live online is Twitter, my handle is @morganhousel first and last name. That’s where I spend too much of my time. Twitter is my drug of choice in life. So if it’s during the waking hours, I’ll probably be there.

Sean: Awesome, well Morgan Housel I can’t thank you enough for joining us on What Got You There.

Morgan: Thanks so much for having me.