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if you're buying a house because you don't do it run for your life Mr Morgan
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H he's the author of the psychology of money one of the bestselling business
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books of this decade he can help anyone build wealth and change their life the world is split between people who don't
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know how to start making money and people who don't know when to stop making money and if you are stuck in a
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low-income job you feel like you don't have the opportunity to generate wealth
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but once you realize that opportunities are available for everybody you can choose where you want to live what job
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you want when you retire because you can be rich prove it people like Ronald Reed
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and he was a janitor what does it take to amass Mr Reed's $8 million Fortune
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he's a fascinating story of somebody who became Rich despite not having the skills that you normally associated with
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wealthy people then there's Warren Buffett he's worth $100 billion do but
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the real secret to their success investing my parents are a great example of this we were very poor no Financial
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background and they have like minimal financial interest but now they'd probably be in the top 3% of
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professional investors if you want to do well with money you don't need to be a
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genius if you have endurance in your investing you're going to be filthy rich
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but when most people say I want to be a millionaire what they actually mean is I
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want to spend a million dollars I want some nice clothes bigger house the nicer car ask yourself what is your
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relationship with money if your expectations rise faster than your income you're never going to be happy
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with your money that's the problem so if I have1 what's the first thing that I
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should do I keep it as painfully simple as I can so ladies and gentlemen you're about to
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meet the man whose book changed my entire life as it relates to money and finance about four or five years ago my
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brother who's a investment banker said Steve there's one book I need you to
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read about wealth investing and money in finance and he passed me a book called the psychology of money that book
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changed my fortunes it is the reason I've been a successful investor and it's
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the reason I've been able to hold on to my wealth and build it it's this man and
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that's the reason why you need to stay tuned and listen to this [Music] episode
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Morgan you wrote what I would consider to be the greatest book on money and finance ever written I say that because
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I remember when I came into money when I was 25 20 no 27 27 28 years old and my brother turned to me and said there's
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one thing I ask of you he said you have to read this book called the psychology of money it will stop you losing all of
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the money you've just earned from your career and it changed my life I've
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talked about it for years and years ever since and that's why I was so Keen to
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have this conversation with you because I really believe if people choose to listen to this conversation it stands
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the chance of changing those two so let's begin why of all the things that you could do with your life Morgan why
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are you writing books about the subject matter that you explore what is the reason well first that's a that's a big
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statement that's a lot to live up to it's kind of scary to hear that because
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I've I've often been and this gets to the why I I've defined it as selfish
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writing where I write for an audience of one and that is me and I like to think of myself as a pretty selfless person
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but for writing I don't try to say I'm going to write a book for this person or
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that person or that audience I write what I'm interested in and I write it in
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a way that I think is interesting and I try to solve my own problem problems and
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then I take a leap of faith that if this is interesting to me and it's going to
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help me maybe it'll help somebody else that's very different from the traditional writing style of saying know
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your audience know your audience very quickly turns into Pander to your audience and I think a lot of people
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maybe they don't even know it but if they read a book and they don't necessarily like it it's because they
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were being pandered to they were being spoken to in a way that a person would never speak to them in real life so I
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just this is almost like my diary I think in terms of these are the topics that I found interesting for myself and
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so I guess that's the why I feel like I've really found myself in a career
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where I can just figure out my own problems and try to figure out what I think and what's interesting to me and
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then kind of put it out to the world and then hope that other people will enjoy it let's start with the psychology of
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money what is the benefit to my life if I understand the things that are written
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in the psychology of money well let me start with I think most Finance books will their their answer to that question
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would be when you're done with this book you will know how to pick stocks better
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you will know how to balance your checking account or what credit cards that you should use for my book I think
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when you're done with it I hope that you will just look in the mirror and say who
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am I which is kind of what I did with this trying to figure out who I am and what I want and why I was insecure why I
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wanted to show off to other people the car that I drove so if you become more introspective about who you are and what
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you want out of life and what money can do for you and cannot do for you and become a little bit more introspective
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about why you think about where you are in the social hierarchy and greed and fear and why you
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think about these things that you do I I honestly think that I I I hope at least
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because it was this way for me that when you're done for with the book that's
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kind of when the learning begins because maybe this will just spark a bit of curiosity for you to then go for a walk
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and think about what you want out of life and whatnot so I think most books when you're done with the last page the
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learning is done this I hope is just sparked something in you that will get you to think more clearly about what you
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want with money and what money can and cannot do for you part of that journey of understanding what you want helps you
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to define the word on the front of this book wealth what is your definition of wealth well I I I made up these
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definitions in the book so these are just my things that I made up but I defined rich as you have enough money to
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buy what you want to pay for your mortgage to make your car payment to go out to dinner with your friends you have
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money in the bank wealth I think is very different wealth is money that you did not spend and maybe you will not spend
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so wealth is hidden it's the money that you didn't spend on a car it's the money
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that you didn't spend on a big house you didn't spend on jewelry and that's
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really important because wealth that's saved up the unspent money is what gives
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you Independence and autonomy and just the ability to wake up every morning and do whatever you want with your with your
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life and so I think separating that is really important because when most people say I want to be a millionaire
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what they actually mean is I want to spend a million dollars that's what they
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mean and when I think about being a millionaire I think it's you have a million dollars that you're not going to
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spend and that because you're not going to spend it you have this giant cushion
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that will give you Independence and autonomy and so you can wake up tomorrow and say I can do whatever the hell I
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want today I can work for who I want I can work for as long as I want I can retire when I want the World is Yours
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like every bit of savings that you have is a piece of your future that you own it's a you're just buying your time in
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the future so that it's yours and you can do whatever you want with it and that to me has always been the goal
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there's a quote from Charlie Munger where he says I never wanted to become rich I just wanted to become independent
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and that when the first time I read it it was like that's me too that's what I
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want I don't want a Lamborghini I don't want a mansion and a yacht I want to
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wake up every morning and just say whatever I want to do today it's mine nobody's going to tell me where to work
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when to work what to do it's all me and to me for not just work but for your
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family life for your health for your mental sanity there's nothing more important than that it sounds like
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you're talking about your father my dad it was he has such an interesting background my my my mother
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too their background is so crazy and I didn't realize how crazy it was until I
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was an adult the early part of my childhood when my parents were in school we were very poor my parents were
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students living off of student loans and grants we had no money and then my dad became a doctor when I was 12 or 13 and
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things changed it wasn't we were not rich but like things got very comfortable and what was really
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important is that the frugality that my parents had to have when they were poor stuck with them even after they started
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making a little bit of money they didn't buy a Lamborghini no no we grew up in a
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very like modest house it was a nice house and we took some like decent family vacations but my we always live
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well below our means way below our means did that confuse you because you must have known that your dad had the money
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yes particularly when I was probably like 16 17 and I could learn like how much does a doctor make you can go look
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it up and figure it out and and then it was like I definitely looked down on my parents at that age because I was like I
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know you can afford a better car I know you can buy me better Christmas presents
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I know we can afford a bigger house and you're and you're not doing it because
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you're mean I think that was I think that was my view and then it really clicked about 10 years ago this is not
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that long ago so my dad is an ER doctor which is one of the most stressful jobs that you can imagine it's literally
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people dying in your arms every day and he did this for 20 years and after after
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20 years of doing this night shifts children dying in your arms literally every every week he said he he had had
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enough it was it was a lot he put in his dues he did it for 20 years and he said
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I'm done I'm I'm going to retire and the reason he could do that is because he
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had saved up so much money he was living well below his means they had a very high savings rate the moment he woke up
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and said I want to be done he was done and that was it and if you contrast that with so many other people including some
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of his colleagues who were also burnt out at age 60 who were also so burnt out by having people die in their arms for
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20 years they wanted to retire and they couldn't because they had the bigger
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house because they had the nicer car that I thought that we should have had when we were growing up and when they
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quit and moved on to their next phase of Life they got so much happier and so it
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was like so that this was 10 years ago I was in you know in my late 20s at this point I was like now I get it he was
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Frugal he saved a lot and that made him independent and the Independence made him Happ than any car would have done
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made them happier than any big house would have done so it's like I think that is one of the keys to happiness
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happiness is like the most complicated topic you can imagine but one of the big puzzle pieces is independence and
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there's been a lot of work on this studies on this of like one of the things that makes people really happy in
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life is having control over what they're doing and it's more so the flip of side
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of that it's like what makes people very unhappy in life not having control over
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what happens in their future not having control over their schedule where they're going to work whether they're
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going to get laid off having that uncertainty is a massive anchor and waight on your life your health
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absolutely I mean that was a big thing for my dad too he was working night shifts for for 20 years with this it
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it's very bad for your health it's not great at all so the ability the financial ability to just wake up one
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day and say I'm done done with that is huge I I was reading studies about this
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idea of autonomy because I was trying to figure out what you have to have professionally to love your work and I
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came up with these five different points one of them was autonomy and control and
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I I came up with that because I read studies where people who work jobs where they had a low autonomy and control had
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physiological consequences they were more likely to get disease they experienced stress significantly more
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more likely to have cardiovascular problems and heart disease which is the single biggest killer of of people
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generally I thought [ __ ] hell just not having control in your life yeah makes your body shut down yes you know
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this is something that I think everybody has experienced if they have something really stress going on at life they get
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into bed they're tired you can feel your heart pounding like the physiological
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response of stress is huge it's massive and if you have that going on every day
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for 5 years 10 years 20 years 30 years forget about it forget about it this's
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this great quote from John D Rockefeller he's the richest man in the world and he
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lived till I think he was 99 something like that he was 97 and his doctor talked about why like his key to
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longevity and the doctor said quote he never lets any anything bother him he spends plenty of time outside and he
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leaves the table when he's still a little bit hungry that was his key to longevity it was just and and when you
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read his biography you realize how true that was no matter what was going on in his life and the most stressful business
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conditions you can imagine none of it ever bothered him he just had ice in his veins and he could just keep going and
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so I I I do think that's that's definitely one of like the keys to physical health is lowering that amount
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of stress and there are not many other things in life that are going to increase the stress that you have have
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than not having control over what you're doing in life Freedom chapter seven of
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your book this is the broadest lifestyle variable that makes people happy doing something you love but on a schedule you
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can't control starts to feel the same as doing something you hate psychologists
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call this reactants that's right you know I I do think there are a lot of I think the best example are CEOs who
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might make $30 million a year $50 million a year but they have no control over their time every single second of
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day is planned and demanded by somebody else and they have to do things that they don't want to do if they wake up
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and they're tired too bad you got to go to your meetings today they wake up and
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they're exhausted too bad you have to travel to China to close this deal they
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have no control over their time and compare that to someone who makes much less but they wake up they can wake up
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and do whatever they want whatever they want to do you want to hang out with your friends you want to sleep in you
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want to take a nap at 2 o'clock whatever you want to do the person who I think
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really sticks out in that in that vein is Warren Buffett who is the the CEO who makes a zillion a year he's worth
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hundred billion do but if you dig into how he structured his day total control 100% autonomy can do whatever the hell
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he wants all day long what he wants to do is get up and go to work but he he has delegated things so effectively that
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he can do whatever he wants and that's not only the key to his I think business
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success but his health lifestyle success why he's 93 and still going as strong as
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ever I I was thinking about my calendar when you were talking about the CEO that
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makes $30 million a year but is just dragged around by his schedule sounds a lot like me to be honest I feel like the
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more successful I've got in my professional career the more my calendar the minute I wake up in the morning I'm
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just like a puppet master to these little boxes on my Google Calendar yeah they drag me around the world and
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there's very little I actually said to my assistant about a month ago I was like um Sophie please can you do me a
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favor could you just put lunch in for 30 minutes because I'm not eating could you
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just put like could you just put that in midday every day at the same time so you
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can breathe so I can have a little bit of a moment I do nothing and then also the other thing I've put in now I have a
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personal trainer 7 days a week and I've just put that in my calendar it was before then a residual beneficiary as
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was everything for me well not for me because my work is for me but um it it got the time that was left over when all
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my priorities were done and I do reflect on that and go like how like a when does
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that stop because it's clearly not going to stop when I make money because I have
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the money and B how much control do I actually have and you know what I do sometimes I think I've noticed about
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myself I think sometimes I councel things just to prove to myself that I still have control that's great see
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that's a good thing there's a quote from n talb where he says like you are
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wealthy when the money that you deny tastes better than the money you accept so you get someone comes to you with a
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business deal and you say no thanks I don't want it when that tastes better to
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you than accepting the deal it feels better to you that's like one definition
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of of Rich there's another great quote from TYB where he says the world is split evenly between people who don't
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know how to start making money and people who don't know when to stop making money and I think there are a lot
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of people that are watching this that are in kind of our field who are easily in the ladder they have all the money
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that they could ever want to spend or maybe not not that much but they have more money than they ever thought they
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would have but for every gold that they hit oh when whenever my net worth is X all my problems are going to go away
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everything's going to feel great and then they hit X and they just keep moving the goalpost down and down so I
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read in the book that like the hardest Financial skill is getting the goalpost to stop moving it's the hardest thing in
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the world it's hard for everybody because virtually everybody thinks if my net worth or my income was this level
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I'll be fine I'll feel great no more problems I'll wake up every morning with
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a smile on my face and then if you're lucky enough or you work hard enough to
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get there you realize it's not the case at all you're just going to keep pushing
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it keep pushing it keep pushing it forever have they done studies to test that in terms of analyzing whether
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people's goal posts move off into the future even when they're like billionaires and whatever I mean here's
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here's the broadest way that I would frame this up that as has been studied if you look at America today the average
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household adjusted for inflation is making twice as much money than they were in the 1950s to adjusted for
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inflation the average household double the income that they were back then and we less happy the statistics that try to
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measure happiness over time it's not an easy thing to do but we're less happy
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today than we were back then and this is why like look can money buy happiness yes and to some extent does it yes like
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people who are in abject poverty are not as happy as people who are covering the
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basics and they have food and shelter etc etc but over time when you when the society is getting richer and you're
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comparing yourself to other people and maybe the average American's income doubled but so did their neighbors so
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did their co-workers so did their siblings so you just automatically adjust to that I talked about
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Rockefeller before Johnny Rockefeller who died in I think the 1930s he was worth adjusted for inflation almost half
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a trillion dollars during his day adjusted for inflation but he never had during his life penicillin Advil
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sunscreen polio vaccine keep keep going down the list of things that virtually everyone can take advantage of today
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that he never had but you can't say that the average American is living better
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than Rockefeller today because we have all of these technologies that he never did because we just look at what other
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people have and assume that that is the Baseline so you can imagine a world in which my kids my grandkids are earning
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twice as much as me adjusted for inflation and they're no happier for it because the new technologies whatever it
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would be that would seem like magic to you and I will just become their Baseline and that's always been the case
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if there was if Thomas Jefferson or somebody came to the year 2023 he would faint at the new technologies and the
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medical discoveries that we have and these are technologies that you and I don't spend one second being grateful
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for because we've just accepted them as a new Baseline it reminds me of something in your new book which is out
00:18:26
in November which is you know I've gassed up a lot of books on this podcast before but this is one
00:18:32
of my favorite of all time it's just so easy to read and so engaging because you
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you're one of those authors in this book that realizes the world that the reader
00:18:42
living in and they are busy and they want the point and they want you to you know give them not one word more than
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you need to it is so brilliant it's so brilliant um in this book you talk about
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exactly that you say the first rule of happiness is low expectations Y and that's exactly what you're talking about
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is comparison is the thief of Joy because it just raises our own expectations right when with that out
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the window goes our happiness yeah and it's it it it seems counterintuitive to
00:19:08
people that if you want to be H for most people it's if you want to be happier
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you need to be ambitious you need more you need to make more money work harder have a more successful startup whatever
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it would be and there's that's true but that's half the equation the other half
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the equation is keep your expectations low so the gap between those two it's a
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gap between those two that actually accru to happiness over time how did you learn that I think it's just I think
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there have been a couple little stories that really stuck out to me one that I love that just knocked me on my ass the
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first time I read it was Stephen Hawking the late physicist who was without exaggeration one of the smartest people
00:19:42
to ever walk this planet he was just an absolute genius and a quirky of course is that he had a motor neuron disease
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and he was paralyzed from head to toe he had no control over his body he spoke through a computer not a single muscle
00:19:53
in his body could he actually control by himself so he was you know physiologically it's one of the worst
00:19:58
Liv that you can imagine and he did an interview with the New York Times a couple years before he died and during
00:20:03
the interview he's talking about how happy he was and how amazing his life was and the New York Times said they
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asked him they said what is your secret to happiness like if there's anyone who
00:20:13
has the right to complain about life it's it's that guy and he's talking
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about how happy he was and he said my expectations were reduced to zero when I was 21 which is when he got his disease
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and he said everything else since then has been a bonus so this is like the who whose life is like has ended up in a way
00:20:32
that most people watching that would say like that's among the worst scenarios
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you can imagine and he's probably happier than you and I because his expectations were so low that just
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waking up in the morning and seeing the sunrise and getting to go to work and talk to people was this magical gift I
00:20:48
mean you can imagine not to get too morbid about this but imagine you're on your deathbed and the doctor is very
00:20:53
confident that you're going to die tomorrow and let's say that you make it
00:20:56
one more day what is that Sunrise going to feel like what's that you know holding your your wife's hand for one
00:21:03
more day going to feel like it' be amazing just because your expectations were on the floor and so it it's always
00:21:10
like that and you go through life seeing so many people who have everything all the money the great family all the
00:21:16
health the beauty everything you can imagine and they're not happy for it and
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it's because with everything that they have their expectations rise not only to
00:21:23
that level they might rise above it so if you are some if your expectations rise faster than your inome
00:21:29
you're never going to be happy with your money no matter how much money you make
00:21:32
you can make a billion dollars a year but if you needed and wanted 1.1 billion you're broke you feel broke and the
00:21:39
reverse of that is true too there are people who make $50,000 a year but if they only need 40 to be happy they're
00:21:44
sto they feel great and so that's I think that's one of the reasons it's so
00:21:48
important is because managing your own expectations is more in your control than managing your circumstances in
00:21:55
terms of raising your income raising your investing return it's not that you can't control raising
00:22:01
your income you can be ambitious and smart and entrepreneurial of but it's more in your control to just inside your
00:22:06
head to say I'm going to try to want less that that's just a mental exercise
00:22:11
that's it's not to say it's easy it's not easy at all but you have total
00:22:15
control over doing it so how in a practical sense can one go about keeping their expectations below their
00:22:23
circumstances I guess here's here's one that really made an impact on me and
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it's great that we're in La cuz that's where this story took place I was a
00:22:31
valet here in La all throughout college at a fstar hotel here in town so a I I was young I was you know aged 19 to 24
00:22:39
or something like that and all day it was people driving in in Ferraris and Lamborghinis and rolls-royces and one
00:22:45
day it hit me just I I I remember the moment because it was like out of the blue it hit me whenever someone would
00:22:51
drive in in a rollsroyce or something never once would I look at the driver and say that guy is cool like wow look
00:22:58
at him he's so cool what I did is I imagined myself as the driver and then I
00:23:03
thought if I was a driver people would think I'm cool and I was like wait don't
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you see like the disconnect here nobody cares about the driver but they want to be the driver because they think people
00:23:12
will then care about them and once you realize that like the takeaway is nobody is thinking about you as much as you are
00:23:20
nobody cares about your stuff as much as you do nobody cares about your car or your house or your clothes or your
00:23:26
jewelry as much as you do because to the extent that they're even looking at them
00:23:30
they're looking at your car looking at your house really what they're doing is
00:23:33
imagining themselves with that nice car they're not giving you the credit they're imagining themselves having it
00:23:39
so once I realize like that was the game that was being played in society once you once you recognize that's the game
00:23:45
your willingness your desire to show off plunges and of course I I like nice stuff I like nice cars I want some nice
00:23:52
clothes I live in a decent house but once you realize that it plunges and I think the most valuable Financial skill
00:23:59
that anybody can have is not needing to impress other people if you don't need
00:24:04
to impress other people that is an asset on your balance sheet that is worth a billion dollars because so much of
00:24:11
society as a whole and individual is just geared towards how can I get other people's attention how can I show off to
00:24:18
other people how can how can they like me more I both agree and understand but agreeing and understanding is different
00:24:24
from being able to do I think at the society level it will never be it'll always be like that same as ever it's
00:24:29
never it's never going to move away from that if you can manage it around the
00:24:33
edges at the individual level it's massive for your life one thing that's
00:24:36
important here is that if you are a young person and you're kind of looking for a spouse a mate a boyfriend a
00:24:43
girlfriend a wife a husband whatever it would be then your ability to look really nice and to signal and to kind of
00:24:49
put up your peacock feathers is important and I get it and I did it back in the day once you are more settled
00:24:55
down in your career in your relationships if at that point you are still hanging on to the desire to
00:25:00
impress other people that's when it's broken that's when it's just pure net
00:25:03
loss in your life because you're trying to show off to for people who you don't
00:25:07
even need or want to love you there's a great quote from Warren Buffett where he
00:25:11
says the definition of success is when the people who you want to love you do love you and so for me it's like five
00:25:19
people it's like my parents my wife and my kids and like that's it that's it
00:25:23
those are the people who I want to love me and if they love me I I probably have
00:25:27
90% of the happiness that I'm capable of and if they don't love me and then I'm
00:25:32
never going to have more than like 10% of the happiness that I'm capable of in
00:25:35
that chapter about happiness you talk about your friend Brent as well in his theory on marriage yeah my friend Brent
00:25:40
B sure has this great theory on marriage where he says marriage only works if both Partners want to serve the other
00:25:48
partner and expect nothing in return so you wake up every morning and you say I want to serve my spouse but I expect
00:25:54
nothing in return from them and if you both do that simultaneously you're both
00:25:58
pleasantly surprised because what happens is I didn't expect you to do anything for me but you did and vice
00:26:04
versa and both of you just wake up every morning you're like but you did that for
00:26:07
me you you helped me out here you you're empathetic to me there and it feels
00:26:10
great you exceeded my expectations exceed my expectations and I think what breaks down any marriage or career or
00:26:16
whatever it would be is when you become needy like nothing breaks love more than
00:26:22
being needy and really what needy is is just your expectations are so high that you wake up and you say I expect to do
00:26:28
this for me I expect you to help me I expect you to serve me that's just like
00:26:33
massively high expectations that you have in that relationship it's it's also
00:26:37
like expecting an external factor in that case your partner to validate you in some way or to and that kind of goes
00:26:44
back to your point about money where in order to stop showing off and focusing on those five people that we want to
00:26:50
love ourselves we need to understand and ideally solve our often toxic relationship with like our need for
00:26:58
validation and that I guess brings me to the first chapter in your book where you
00:27:02
talk about the stories of money that we have and where they've come from and
00:27:07
something that's always baffled me is when you go into low-income areas there's more gambling shops yeah and I
00:27:12
can attest to it when I was 18 19 years old and I'm shoplifting pizzas to feed
00:27:17
myself and I'm doing all sorts of stuff when I got my student loan in I was in
00:27:21
university for one day and they gave me like the first payment of my student loan I don't think I've ever said this
00:27:27
before I put the entirety of the payment on a bet wow and I lost it in the six in
00:27:33
the an injury time of that football match I don't bet and did you need that money for tuition like it it was then it
00:27:39
was then gone I needed it to eat yeah I wasn't speaking I had no money I don't
00:27:43
come I didn't come from money and my parents I'd gone to University with 50
00:27:46
Quid and I got this like, sent to me from student loan whatever I was so reckless with money when I didn't have
00:27:52
money the minute I got money it's like everything just chilled the [ __ ] out and
00:27:55
I I became really longterm I made responsible decisions I stopped buying flashy things I like don't even own a TV
00:28:03
now I'm very Sim I feel like the more money I have the less my material desires are for sure for sure when I say
00:28:09
that out loud I'm like oh absolutely why is that that when we have less we are
00:28:13
Reckless with our money well I think there's two sides to this one of my theories is
00:28:17
that what everyone wants in the world is respect and admiration from other people
00:28:22
and there's kind of two ways to get that you can get your respect and admiration
00:28:25
through your wisdom through your love through your humor or if you don't have
00:28:30
that to offer from the to offer to the world you're going to get it through your material possessions so if you can
00:28:36
gain respect and admiration through your business success your wisdom your love your friendship great then you're going
00:28:42
to get it and you're going to fulfill that bucket if you can't get it from
00:28:45
those things then you're like well might as well show off my car it's all I got
00:28:47
to do that's all I have I think that's one side of it so as you become more
00:28:51
successful your desire to show off diminishes because you're gaining respect and admiration through other
00:28:57
things that are not matural the other side of this that's so important is that you know I saw this
00:29:02
statistic years ago that the poorest 10% of Americans buy like 80% of the lottery
00:29:08
tickets in America and these are people who can like barely feed themselves lowest 10% they're literally struggling
00:29:15
to put a roof over the head and feed themselves are going out hand over fist buying scratcher tickets and the the
00:29:21
knee-jerk reaction when you hear that is morons what are you doing you idiot and
00:29:26
maybe that is the right reaction but I started thinking about it and it was like okay maybe if you try to put
00:29:31
yourself in those people's shoes maybe they would say something like this if
00:29:36
you are stuck in a low-income job and you feel like there's no way out you feel like you don't have the opportunity
00:29:41
to work your way up the ladder become an entrepreneur you feel like you're stuck
00:29:45
in this position buying a lottery ticket might be the only thing in life that gives you a little bit of hope it might
00:29:51
it's might be what feels like literally your only ticket to get out and that
00:29:55
might be not something that you and I feel like because because we have we we we at least feel like we might have
00:30:00
other opportunities I it's you're so right because when I gambled what I then
00:30:05
did the same day before the result of my bet or my lottery ticket came in and I said this to my team the other day is I
00:30:12
would go on right move and like auto trader and look at stuff that I would buy if I won yeah yeah I think there's a
00:30:19
sense too that if you are stuck in a lower spot in life if you have a feeling that the world is unfair and very often
00:30:26
it is so some maybe that that might be the right mindset but if you feel the world is unfair then it's very natural
00:30:32
to think I might as well cheat too if the world's unfair why not might as well
00:30:35
cheat and I think that at least at some level has some explanation for the relationship between poverty and crime
00:30:42
that word hope is is so is so true I think it's true too just a glimpse of Hope because it gives you even if it's a
00:30:48
0.00001% chance if it's the only thing in your day that made you smile a little
00:30:52
bit made you feel like you had a little bit of hope then I get why they do it the other reason the other thing I think
00:30:57
a lot about here is that if you are in a low-income job and you're working graveyard shifts and you're exhausted
00:31:03
and you're taking three buses to get your kids to school if the only thing that day that gives you a little bit of
00:31:08
pleasure is a cigarette and some alcohol I get it I totally get it and that's
00:31:13
also the relationship between health and poverty is a lot of that too so it's
00:31:16
very easy for people who are of higher means to look down at those people and point out all the bad decisions that
00:31:23
they're that they're doing in life but I think you underestimate how much that
00:31:27
desire to just have a little bit of Hope a little bit of pleasure and if those feel like your only avenues for Hope and
00:31:32
pleasure maybe that's the explanation for at least part of it quick one this
00:31:36
is really really fascinating to me on the back end of our YouTube channel it says that
00:31:40
69.9% of you that watch this channel frequently over the lifetime of this channel haven't yet hit the Subscribe
00:31:46
button I just wanted to ask you a favor it helps this channel so much if you choose to just subscribe helps us scale
00:31:52
the guest helps us scale the production and it makes the show bigger so if I could ask you for one favor if you've
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watched the show before and you've enjoyed it and you like this episode that you're currently watching could you
00:32:01
please hit the Subscribe button thank you so much and I will repay that gesture by making sure that everything
00:32:07
we do here gets better and better and better and better that is a promise I'm
00:32:10
willing to make you do we have a deal let's speak then to 18-year-old Steve that was in that little room with the
00:32:15
stack of these what they call County Court judgments and bays and stuff stack of letters on his desk what advice based
00:32:22
on all you know about money and finance can you give to somebody who is Maybe making a, $1,000 $2,000 a month covers
00:32:32
their rent just about doesn't have a lot of money left over what is the best way
00:32:36
to go from that position to a position of wealth in your view I think one of the best ways to
00:32:42
think about it at the lower levels and I explained a little bit this earlier but
00:32:45
to dig into it is a lot of what's probably giving you stress in life is that you don't have control over what
00:32:50
you're doing and if you view every dollar of savings that you have as a bit of your future that you own and control
00:32:56
then I think that mind that mindset can shift pretty dramatically and it's like
00:33:01
that's that's the ticket out the ticket out is not a nicer car it's not a bigger
00:33:05
house it's not better closeth the ticket out is Independence that's what's going
00:33:08
to give you the better career that's what's going to make you happier it's
00:33:10
what's going to make you healthier and the only thing that's going to give you
00:33:12
Independence is having enough money saved up so that you can choose where you want to live maybe even what job you
00:33:19
want you can choose at at at some point down the road when you retire if you get
00:33:24
sick it's not just going to break you immediately having that Independence is
00:33:27
going to take more weight off your shoulders than anything else you can do in life save money that's it that's the
00:33:33
the title of that chapter in the book is save money because you can't put it any
00:33:36
clearer or Starker like that's that's it he says there are three types of people
00:33:40
those who save those who don't think they can save and those who don't think they need to
00:33:46
save yep three types of people which one are you those who save those who don't
00:33:51
think they can save and those who don't think they need to save I tell you what
00:33:55
I've been all three in my life that's interesting I've always been a saver no
00:33:59
I haven't and see that I think that's actually very rare that you change who
00:34:03
you are really on the nature nurture Spectrum I actually think and this is kind of disappointing to talk about it's
00:34:09
not fun to talk about but on the nature of nurture Spectrum I think a lot of money is nature Warren Buffett talks
00:34:14
about the people who have the money mind which means like either they get it or they don't and if they get it they get
00:34:19
it instantly and if they don't they'll get it never at all I I I actually don't
00:34:23
believe in it it's that black and white Charlie merer explains it like that he
00:34:26
says when explaining financial matters to young people they either get it instantly or never at all and he's
00:34:33
putting that too starkly I think I don't think it's that black and white but on
00:34:37
the nature nurture spectrum is it 8020 is it 7030 I think it's probably something in that range so let me give
00:34:44
you a count a counterargument to that then so as I said I've been someone that
00:34:49
didn't think he could save because I didn't have money and I just thought oh
00:34:52
you know but I could have saved in it looking back now I know I could have saved I could have saved a small amount
00:34:56
but I didn't see the value in saving small numbers I didn't understand the
00:34:59
laws of compounding returns which we'll definitely talk about I have also been
00:35:03
the person that saves and I've also been the person who thought they didn't need to save I've
00:35:10
been all three my Counterpoint to this goes back to a story that I read from your early years where two of your
00:35:17
friends died on a ski trip yeah and it also links to something youve said in your new book same as ever where you
00:35:23
speak about how sometimes in life like hitting rock bottom is the greatest incentive to
00:35:31
change our lives yeah so I put those two things together and go that moment when
00:35:35
you were two of your friends died on a ski trip that you were on when you were younger it had an impact on your risk
00:35:40
appetite and your attitude towards and therefore your attitude towards money yep what what happened what happened so
00:35:46
I grew up skiing in in Le Tahoe California and I was a competitive ski racer right uh so all throughout my
00:35:51
childhood and teenage years I skied six days a week 10 months a year all over the world and it was great there about
00:35:57
12 of us on the squad Valley ski team we had grown up together and we had spent our entire lives together and when I was
00:36:02
17 this is in 2001 I was skiing with my two two of my best friends brenon Allen and and and Brian Richmond and we would
00:36:09
ski out of bounds which is illegal you're not supposed to do it we would duck under the rope that says do not
00:36:15
cross and we'd ski out of bounds because that's where a lot of the good skiing is
00:36:18
and when we would do this it would spit us out on this back country road where we'd have to hitchhike back there's no
00:36:24
chairlift when you ski out of bounds you have to hitchhike your way back so so we
00:36:27
did it one morning in February 2001 the three of us did it and when we did it we
00:36:31
triggered a very small Avalanche and I I remembered it so clearly like I can still feel it 21 year 22 years later I
00:36:40
can still feel what is like it's the weirdest sensation of that I've had in
00:36:44
my life because when you get hit by an avalanche rather than pushing on the snow to gain traction with your skis the
00:36:50
ground is pushing you so all of a sudden you're skiing along and you got control
00:36:54
and all a sudden boom you have no control everyore the the ground is pushing you around probably similar to
00:36:59
what it feels like if you're standing on the ground during an earthquake like the
00:37:01
ground's pushing you but it was a pretty small Avalanche maybe came up to our
00:37:05
knees ended pretty quickly and we kind of like literally high-fived about it at the bottom and went about our day we get
00:37:11
back around to the the base Lodge we hit shik back and Bren and Brian said they wanted to do it again they wanted to ski
00:37:17
again and I said hey for whatever reason I I I just didn't want to do it so I
00:37:22
said hey rather than hit cheing back why don't you guys go do it again and I'll
00:37:25
drive my truck around and pick you up so we said great we made our plans went our
00:37:29
separate ways they went skiing I went back around to take my boots off and jump in my truck and go pick them up 20
00:37:35
30 minutes later I go to pick them up at the pickup spot and they weren't there
00:37:39
and I knew it only took us a minute to ski down the hill so 20 minutes later I knew like they they they weren't coming
00:37:44
I I was not worried I figured that they had already hit hike home but so after waiting for another 20 or 30 minutes I
00:37:50
just left and I went back to the lodge I expected them to be there and they weren't and I still didn't really worry
00:37:56
like we didn't have cell phones back then and people were just comfortable being out of touch if you didn't know
00:38:00
where your your buddy was like wasn't that that wasn't that big a deal so we
00:38:04
went about the day I I started worrying a little bit I remember I stopped at Brendan's house and expected him to be
00:38:09
there and he wasn't there either and I remember calling and leaving a message
00:38:12
on his voicemail and I remember ending the voicemail by saying I hope you're
00:38:15
okay man those are my last words I remember that very clearly the day went on and I think at about 4 or 5:00
00:38:22
Brian's mom called me and she said Brian never showed up for work today do you
00:38:26
know where he is and I told her what happened I said we skied the backside of squa where we'd
00:38:32
hit Chik back I was going to pick them up but they never showed up and I haven't seen them since and I also
00:38:37
remember so clearly Brian's mom saying oh my God and hanging up the phone and
00:38:42
that was so like so it's then we started getting worried we called the police the
00:38:45
police didn't take it very seriously because they thought ah they're out at a
00:38:48
party they ran off with a girl for the night like they weren't worried but we
00:38:51
finally got search and rescue involved and Rescuers of probe poles frowned Brenan and Brian buried under 6 ft of
00:38:58
snow and they were they had been killed from a massive Avalanche and so look I think virtually everyone listening to
00:39:04
this I'm sure you to have lost somebody close to you somebody that you love so I
00:39:08
know the experience was not unique in that way but it was the first time that I had experienced loss and it was the
00:39:15
first bad thing that had ever happened to me in my life so it had a big impact on me and there were a lot of takeaways
00:39:21
I think at the time I didn't have the cognitive tools to piece together what
00:39:25
happened or to learn about what happened like have any sort of takeaways but as I
00:39:30
got older and thought about it and looking back I put together all these like realizations of what that did to me
00:39:37
how it changed me and what were some of the lessons from it too one that I talk about in the book that I think about all
00:39:43
the time is my decision to not go with them on a second run was this completely brainless decision I put no thought into
00:39:52
that decision it was not a cost benefit analysis I didn't think through it but
00:39:56
it's the most important decision I've ever made in my life 100% chance if I
00:40:00
was with them I would have died and I had skied literally thousands of runs with Brendan and Brian how many times
00:40:06
did I deny a second run with them or say you guys keep going I'm going to go in
00:40:11
almost never the one time I did it saved my entire life and so that you really realize that the world hangs by a thread
00:40:18
everybody thinks like oh you're going to put a lot of thought into your big decisions to make sure that you're
00:40:22
successful in life where you go to college what your career is going to be who you marry that's all great but the
00:40:27
world hangs by a thread and there are tiny little no nothing decisions maybe that you made today of maybe it was when
00:40:34
to cross the street maybe it was when to leave to get in your car that can utterly change the course of your life
00:40:41
and so when once you accept that of how much the world hangs by a thread I think
00:40:45
you become much more humble with your willingness to make forecasts about the future what the economy is going to do
00:40:51
who's going to win the election what's going to happen in my life my career my
00:40:54
family's life we have no clue we have no idea because all we can think about are
00:40:59
the big decisions we cannot piece together the chaos theory of I got in my car at the at the wrong time I met the
00:41:08
wrong person or I met the right person or you know I I decided not to take a second run we cannot forecast the impact
00:41:13
of those things and so that had a big impact on me too of just who are we to fool ourselves that we can predict the
00:41:20
next recession that we can predict where our careers are going to be in 10 years
00:41:24
that we can predict how long our marriage is going to last that we can predict how long we're going to live we
00:41:28
can't nobody can because we can't predict how crazy these tiny events can
00:41:33
turn into and this comes right back to investing doesn't it because most people that consider
00:41:40
themselves to be investors whether that's just putting a couple of quid into crypto or something else engage in
00:41:46
the idea that they can predict the future yeah um and this is where it appears that most money is lost I mean
00:41:52
think about the biggest risk to the US economy over the last two generations Co mean that's one of them the others would
00:41:58
be Pearl Harbor okay 911 Co and maybe uh Lan Brothers couldn't find a buyer in
00:42:04
2008 which sparked the financial crisis of 2008 those are the biggest Risk by far and the common denominator of every
00:42:10
one of those stories is that nobody saw them coming they were not in any newspaper before they happened they were
00:42:15
not in any economic Outlook nobody was going on TV warning you that this was coming the common denominator of those
00:42:22
is that they did all of their damage in two seconds and that would be the case going forward you can guarantee that the
00:42:28
biggest news story and the biggest risk over the next year or the next 10 years of our life whatever it is is something
00:42:34
that nobody's talking about today that you and I have can't even fathom because
00:42:39
it's always been like that there's never been a time when the biggest news story
00:42:42
was foreseeable and it's all and it'll be like that going forward so that's
00:42:46
another just like embracing how fragile the world is there's a great quote from
00:42:50
a financial adviser who I really admire Nam Carl Richards and he says risk is what's left over when you think you've
00:42:56
thought of everything H you can go out of your way to think about all of the risks that are in your
00:43:00
life and like great and like how you're going to prevent them great that's a
00:43:03
good thing to do when you're done with that exercise what's left over that
00:43:07
you're not thinking about is what risk actually is it's like by definition we
00:43:11
can never plan or even imagine what the biggest risks in our lives are going to be you say that in same as ever you say
00:43:17
I think the the chapter title is risk is the things you can't see or something
00:43:21
risk is what you don't see risk is what you don't see that was a little bit
00:43:24
terrifying and it's true and I think I think sometime you can phrase it as terrifying it's also kind of relieving
00:43:32
that like why are you going to put so much effort into trying to predict what the stock market's going to do next what
00:43:37
the econom is going to do next why are you building a forecasting model to figure out what the econom is going to
00:43:42
do over the next 10 years when you look at the last 10 or 20 years how could you
00:43:46
ever predict 911 or Co and even look like something like Co there's like a 2015 Bill Gates Ted Talk where he talks
00:43:54
about the biggest risk to society is a viral pandemic so it's not that nobody
00:43:59
saw that thing coming but the specifics of when it's going to happen how bad
00:44:04
it's going to be is it just going to shut down the economy for a week or two
00:44:08
years that is completely impossible but there's also lots of other TED Talks
00:44:11
that say everything's going to be great of course of course there's proba
00:44:14
there's a lot more so on balance the world had no idea I think on balance the
00:44:19
world breaks once per decade not exactly once per de but on average once per decade everything that you thought about
00:44:25
risk and uncertainty and stability goes to [ __ ] so how do I prepare if risk if
00:44:32
risk is what I don't see how do I prepare there's another great quote from
00:44:35
Nasim talad that I like where he says invest in preparedness not in prediction so rather than going out of your way to
00:44:41
be like here's what I think is going to happen in crypto here's what I think is
00:44:44
going to happen in the stock market just make sure that you have a big enough buffer in your finances cash liquidity
00:44:50
being scared of debt so that no matter what happens you're you at least have a
00:44:55
Fighting Chance of enduring it and make through one thing I've I've often
00:44:59
thought about is that you should have enough cash in your investing portfolio the amount of cash you should have
00:45:05
should feel like it's too much it should feel it should make you winse a little
00:45:08
bit because if you only have enough cash to put up with the risk that you can Envision and the risk that you can
00:45:14
foresee you're going to miss a surprise every single time every single surprise
00:45:18
is going to be a surprise to you but if you feel like you have too much cash then at least you have a Fighting Chance
00:45:24
of putting up with the 911 the co the Harbor whatever it might be so when people look at my asset allocation my
00:45:32
investments a lot of people look at it and say you seem really conservative why do you have this much cash what are you
00:45:38
saving for and my answer is always I don't know I have no idea what I'm saving for who are we to assume that we
00:45:45
can predict the risks that are going to be in our own personal lives and throughout the broader World nobody can
00:45:51
do it the only way to prepare for it is to have what feels like too much safety what is your capital strategy how do you
00:45:57
invest your money um this is you know this is the thing people want to know most about you I keep it as painfully
00:46:04
simple as I possibly can so literally my entire net worth is cash a house and index funds and some shares of Marquel
00:46:11
where I'm on the board of directors and that's it there's nothing else my entire
00:46:15
I can summarize everything so easily and so cleanly and truly that's it and it's
00:46:20
not even like I have 20 bank accounts I I have one bank account one brokerage account like in a house and that's it so
00:46:25
simple why why index funds you're the reason I your Capital allocation strategy is almost identical to mine I
00:46:32
want to talk about the house thing as well but um after reading your book I stopped trying to pick stocks yeah and I
00:46:39
invested all of my available Capital into index funds outside of investing it in starting companies so I'm a
00:46:46
shareholder in I don't know 50 60 70 companies I all my other available capital is invested in index funds and
00:46:53
then I have a very long-standing position in ethereum which I've held for like six years or something which has
00:47:00
done me very well yeah that is it and the ethereum investment is also based on the fact that I run a software business
00:47:07
that is in blockchain and I could see that developers are building on top of ethereum more than any other blockchain
00:47:12
so that Insight was really beneficial to me and six years so even with the big fall of the last two years you're still
00:47:20
up a lot yeah I I think your book taught me that successful investing is when you
00:47:26
lose the pass to your investment account yes that's exactly it I don't actually
00:47:30
think you said that in there but that's like when I lose the password to my investment account I'm so proud of
00:47:34
myself yeah because it means I haven't checked it in forever and so it was funny because you
00:47:39
were coming today I thought oh yeah well I have all this money in these index funds I'll check it and I thought [ __ ] I
00:47:44
don't know the password good that's why you're going to do okay the reason I do
00:47:48
this what's important is that I am not one of the people who says nobody can
00:47:51
beat the market so therefore use index funds that's not what I believe I think
00:47:54
there I think it's extremely hard to beat the market and very few people will
00:47:58
do it but I think there are really smart people who can do it and people who I know who I could invest with the reason
00:48:04
I don't is not because I don't believe it can be done it's because the variable
00:48:07
that I want to maximize for in my investments is endurance if I can just earn average returns for an above
00:48:13
average period of time it's going to lead to amount of success that will literally put you in the top 5% of
00:48:19
investors my parents are a great example of this my parents are smart people but
00:48:24
they really they have no Financial background and they like minimal financial interest I would say and but
00:48:29
they have dollar cost average into index funds for going on 40 years now and literally if you look at the returns
00:48:35
they've never sold anything ever and literally if you look at the returns they'd probably be in the top 3% of
00:48:40
professional investors what is for anyone that doesn't know what is dollar cost averaging and what is an index fund
00:48:45
dollar cost averaging means you buy the same dollar amount of Investments every single month come hell or high water
00:48:51
doesn't matter what the stock market's doing recession boom bust you say I'm
00:48:55
going to put $100 or whatever it is in the stock mark on the first of every month now most people who like have a
00:49:00
401k at work are doing this whether they know it or not they have $100 or whatever removed from every paycheck and
00:49:07
it goes into the funds that they own and they don't have to do anything whether
00:49:10
you know it or not you're actually doing it the contrast to that would say I'm G
00:49:14
to buy and sell based off of how I feel in the stock market I wake up I watch CNBC I decided to sell and I'm going to
00:49:20
put it back in when I feel better about the market it's the contrast to that an
00:49:23
index fund is just a single fund that owns hundreds or or thousands of stocks within it and if it's diverse enough if
00:49:30
it's big enough really what you're doing is you're owning a slice of the global
00:49:33
economy which is how I think about it it's thousands of individual stocks in
00:49:37
there Tesla Apple whatever it would be but really what you're doing is you're
00:49:40
owning a slice of capitalism if I was your son and I said Dad prove to me that that's a better long-term wealth
00:49:46
creation strategy than buying crypto or buying companies that I use or like how would you explain that to your to your
00:49:54
kid your ability to do well over the next one year or 5 years is going to have no role whatsoever on your lifetime
00:50:00
ability to generate wealth all that's going to matter is not what are the best
00:50:05
returns you can earn all that matters are is what are the returns that you can sustain for the longest period of time
00:50:10
all that matters is your endurance it doesn't matter if you can double your money this year or even double your
00:50:15
money again the next year all that matters is can you stick and keep it going for 50 years that's where
00:50:21
compounding comes from prove it all because the formula for compounding is returns to the power of time
00:50:27
that's not quite it but like more or less that's it so in that equation if
00:50:30
you understand the math all of the heavy lifting comes from the exponent prove it
00:50:34
because that's how exponential growth works that's how it works it's literally
00:50:38
exponential give me a case study where someone has followed that strategy and done well okay here's one way to explain
00:50:42
it that I use in the book 99% of Warren Buffett's net worth was accumulated after his 60th
00:50:49
birthday after he turned 60 years old 99% of his wealth Jesus has been accumulated after that period because
00:50:56
the longer do you hold that for the crazier the numbers get when he was 60 I think he was worth about $3 billion lot
00:51:02
of money he's a multi-billionaire but now that he's 90 he's worth over hundred
00:51:06
billion and he's given like a 100 billion away to charity so if he didn't
00:51:09
do that he'd be worth he'd go from three billion to 200 billion since he's been
00:51:12
60 because the numbers just get crazier at that point he's worth a hundred billion dollar so if his if his Market
00:51:18
if his net worth goes up 10% in one year he makes $1 billion which is three times
00:51:22
that he was worth when he was 60 so that's when you look at somebody like Buffett is he a great investor is he a
00:51:28
great stock picker of course but the real secret to his success is that he's
00:51:33
been a good investor for 80 years and if he had retired at age 60 or at age 50 nobody would have ever heard of him he
00:51:40
would have been like one of the other multi-billionaires who lives in Florida and plays golf and like you've never
00:51:45
heard of him the reason he use a household name is because he's been doing this non-stop since he's since
00:51:51
he's been 11 years old and he's never stopped it's just the endurance that's
00:51:54
made him so wealthy not necessarily the annual returns patience it's a difficult
00:51:59
thing it also reminds me of the story that you talk about in the introduction of your book about the janitor Ronald
00:52:03
James Reed yeah who when he died in 2014 age 92 had a net worth of over 8 million and he was a janitor how did he
00:52:14
do that he took what very little money he could save from his job as a janitor mopping floors at the gas station he put
00:52:21
it in stocks and he left it alone for 70 years and that's it that's all you need
00:52:25
that's all you need to do if you have endurance in your investing and you can
00:52:29
keep it going for years or decades you don't need to be a genius stock picker
00:52:34
and not only you do not need to do it if you have endurance you're going to beat
00:52:37
literally 97 or 99% of the genius stock Pickers and what's so interesting about
00:52:43
it is like picking the right stocks is hard it's supposed to be hard like there's no world in which everybody who
00:52:48
tries to beat the market is going to do it of course it's hard just like being
00:52:51
an NBA player is hard and but having endurance is like largely in your control it's so much easier to just be patient
00:52:59
than it is to pick the right stocks every single day now I think some people nature nurture some people like probably
00:53:04
Ronald Reed and my parents Ju Just understand it naturally it's not hard for them to be patient but do like there
00:53:11
are professional investors who work 80 hours a week for 30 years to try to beat the market and they can't do it not only
00:53:18
some that that explains like most of them and even the ones who can do it are maybe going to beat the market by half a
00:53:23
percent per year 1% per year but if you can have Endor that is that's a bigger benefit than you
00:53:29
can have by even being like a very successful stock picker like somebody who outperforms the market by one
00:53:34
percentage Point per year and they can do that for 10 years that's amazing that's like Mount Rushmore investor but
00:53:41
somebody who earns average returns and does it for 20 years is going to have way more money you do it for 30 years
00:53:47
you're going to be Filthy Rich you be like Ronald Reed you can be a janitor who leaves 8 million to charity when you
00:53:52
die but so in the case of Ronald Reed do you not look at him a little bit and go
00:53:56
listen bro if you had eight or9 million in the bank you should have been living it up see this is one I I do kind of
00:54:03
regret that in the book that I'm I kind of I didn't say it explicitly but I kind
00:54:07
of make him out to be a role model and I don't think that's the case he he's not
00:54:10
my role model I think he's a fascinating story of somebody who became Rich despite not having any of the pedigree
00:54:18
or any of the skills that you are normally associated with wealthy people but you're right that he lived in a a a
00:54:26
s wed housing and he worked as a janitor that's not my goal so I I I want to live
00:54:30
a nice life I want to be independent but he's the most extreme example that you
00:54:34
can come up with and I I I wish I had stated that more clearly in the book A lot of people have this conversation
00:54:39
around pensions and in the UK we we can pay money from our salary into our pension but I think a lot of people
00:54:45
think gosh when I'm 60 when I'm 65 I want to be rich I want to be rich when
00:54:49
I'm 25 yeah and I can go to Vegas and you know ball out and buy nice things and have great experiences not when I'm
00:54:58
65 yeah no I think that's true I think there are a lot of people a lot of financial advisers will say that one of
00:55:03
the hardest things they do as an adviser is getting their clients to spend money
00:55:07
because they've been so conditioned to save save save save save that when they
00:55:11
finally retire at 65 they don't know how to spend they have no clue how to spend
00:55:14
money there's a great uh author I think you've had him on your show RIT Siti who
00:55:18
talks about this a lot like how you like you need to learn how to live a a rich life and figure out what that is for you
00:55:24
for some people like for me it's just like my my happy state is like sitting
00:55:28
on the couch in sweatpants reading a book going for a walk with my wife that's that's that's my rich life that I
00:55:33
love doing and to do that I need to be independent and autonomous so I can do that all day long I can do that on a
00:55:38
Wednesday afternoon rid talks a lot about like maybe your rich life I think for him it's flying first class and
00:55:44
wearing nice clothes and he talks about like he drives I think like a beat up Honda but he flies first class and he
00:55:50
dresses very nicely so you just have to figure out what is the little thing that's going to make you happy and I
00:55:55
think a lot of people's problem is that Society tells you what you're supposed
00:56:00
to do to be happy you're supposed to have a nice car you're supposed to have
00:56:03
a big house supposed to wear nice clothes that's what Society tells you to do and for some people that might be the
00:56:08
case for other people like me I think it it's not that's that that would not ever
00:56:13
make me happy what does make me happy is Independence so I can just do these little quirky things that I like to do
00:56:18
so I think you just have to figure out the little things that make you happy rather than just being forced by Society
00:56:24
into what they want you to do knowing when enough is enough this was one of the most interesting things that I think
00:56:31
really rang true to me was how do I know in my life when enough is enough I've
00:56:35
definitely been a victim to that external narrative that I need to have these things in my life to be a happy
00:56:40
person but how does one go about knowing when enough is enough I think back to the story of my father he just woke up
00:56:47
one day and it was obvious that he would he had been doing what he did for long enough and it was he had felt like he
00:56:54
had enough and whatnot and he and he broke away from it I think for for a lot of people it's just
00:57:00
I one thing that's important about the concept of having enough in Independence
00:57:03
is that when most people even if they are independent they wake up every morning what they want to do is go to
00:57:08
work one of one of the big problems with the fire movement the financial Independence retire early movement where
00:57:13
people are like they're going to be a Super Saver and then retire at age 31 whatever it' be so many of those people
00:57:18
who actually did that and retired at age 31 they once they retired after about two weeks they were bored out of their
00:57:24
mind and if they did it for six months they were clinically depressed cuz for most people you want to be productive
00:57:30
you want to keep doing it so having enough doesn't necessarily mean that you're going to stop working it just
00:57:36
means you're going to keep doing only the work that you want to do there's a
00:57:39
really interesting question that Patrick oesi asked a lot of people uh in in his
00:57:44
office he says if you won a billion dollars in the lottery but you had to stay at this job you're a billionaire
00:57:50
but you can't quit what did this company would you want to do and what would you
00:57:54
get rid of and virtually everyone has an answer for that question they say oh if
00:57:58
I didn't need the money but I have to stay I would love to work on this project I love working on this thing
00:58:03
this that and the other is all [ __ ] to me so like in any job there's going
00:58:08
to be something that you want to do there's going to be some project there's
00:58:10
going to be some position or or or maybe it's like being an artist whatever it
00:58:13
would be it's not that you stop working it's that when you have enough you get
00:58:16
to pick and choose which of those things you're going to end up doing it's often
00:58:20
too late in our lives when we realize the cost that we've paid for enough never being enough you know it could
00:58:26
could be family it could be Health whatever um I always reflect on the with Brony we wasn't it who interviewed
00:58:31
people on their deathbeds and found out that the biggest regret of the dying was
00:58:34
not living a life true to themselves working too much Etc but that's on your
00:58:38
deathbed there's nothing you can do at that point right and I think a lot about
00:58:41
this like what am I going to regret yes I think about that too I think this is this is pretty morbid to think about but
00:58:46
I think about if I were on my deathbed tomorrow would I regret working hard and saving a lot of money and my answer is
00:58:52
absolutely not it would give me so much pleasure to know that my wife and my young kids are going to be fine and the
00:58:58
opposite of that I cannot fathom being on my deathbed and looking at my wife and my 8-year-old son and my
00:59:03
four-year-old daughter and thinking you guys are screwed that would that that would that would be the biggest regret I
00:59:08
can fathom so I think a lot of people would look at someone with a high savings rate like me and would assume
00:59:13
that I'm going to regret it on my deathbed and who knows but I I I have to think it would actually be the opposite
00:59:19
what makes me gives me so much happiness and pleasure is taking care of my family
00:59:23
and if I were to go tomorrow I wouldn't regret for one second the car that I
00:59:27
didn't buy the big house I didn't buy the nice clothes I didn't buy not for a
00:59:31
second would I regret not doing those it's a really good frame to think there
00:59:34
isn't it about our financial decision- making and you know a lot of people like
00:59:38
saving up to buy a lot of nonsense that's going to depreciate and would you rather have a little Nest Egg left over
00:59:44
for the ones you love or buy that Lamborghini there's another great book called die with zero which basically the
00:59:51
title is self-explanatory and one of the concepts is even if you want to give money away way to your family don't wait
00:59:57
until you die don't make your kids wait or like hope you're going to die so they
01:00:00
can get their inheritance give it to them when it really matters which for most people is in their 30s and 40s if
01:00:05
you wait until you die at age 90 and your kids are 60 and then they get your money like what's the purpose of that
01:00:12
give it to them when they need it when they're raising kids and whatnot that's
01:00:15
when they need your money I I I really like that concept I think about that with my own kids the counter point to
01:00:20
that is though if I just give my kids money then like the chth quote they might lose it quick think about
01:00:28
that especially as you know someone that has a lot of cash they could give I think about this because at some point
01:00:33
I'm G to have kids and they're going to Daddy I want to do a driving lesson or
01:00:36
they're going to be 18 and go off to University or whatever God I hope they don't go to university um and they're
01:00:41
going to say like I've got nowhere to live or I found this nice apartment dad
01:00:46
and in those moments do I make the decision to pay for it because I can or withhold it because they need to learn
01:00:51
the hard way I have this yeah I'd call it an argument with my girlfriend where I say babe listen when we have
01:00:57
kids they're going to sit an economy and she's like absolutely not yeah and I'm
01:01:03
like no babe when they get okay we made a deal I think we got to about when they're 12 years old I'm going to put
01:01:07
them in economy so they can learn for themselves the value of things see we we made this mistake I don't think I've
01:01:14
ever talked about this but it was about a year ago we flew my son who was me I guess he was seven at the time we flew
01:01:19
first class and we explained to him that this was not normal this was not going to be the way it is as soon as as he did
01:01:26
it he went home he told all of our neighbors told all of his friends told everybody at school and that was when my
01:01:32
I like can't can't do this never again you see how quickly somebody can be
01:01:36
spoiled or use that to try to show other people that they are superior to them that's when it was like no no we can't
01:01:42
ever do this ever again and you moved his expectations in a way absolutely I didn't fly first class till I was 35 and
01:01:48
he did it at 7 and so that my when I first did it at 35 I remember feeling a I earned this I worked for this and Al
01:01:56
felt so special to me because I'd flown coach 9,000 times before that so it felt
01:02:00
amazing and so that's I I I think about that a lot there's a great quote from
01:02:03
Charlie Munger where one of his rich friends says Charlie if I give my kids all of my money is that going to ruin
01:02:10
their ambition and Charlie says of course it will but you have to do it anyways and the guy says why and Charlie
01:02:16
says because if you don't your kids will hate you and I think that's that too is
01:02:20
like lots of Charlie Monger quotes are are framed as black and white they're
01:02:24
extreme but I think that's probably like 80% true really that it's it's maybe 70%
01:02:29
true that if you are a wealthy person and I'm not talking billionaires if you
01:02:32
just have a moderate amount of wealth that you might pass along to your kids someday that your two options are kind
01:02:37
of at least to some extent hurt their ambition or risk some level of strife and it's always child dependent like I
01:02:44
always make the example that if 18-year-old Bill Gates or Mark Zuckerberg or Elon Musk inherited a
01:02:49
billion dollars would have made any difference to their ambition they would have they would not have slowed them
01:02:54
down by one second but most people including myself it would have like I was driven by fear of not making it
01:03:01
which is what most people are I was I was scared shitless that I was not going to find the right career that I wasn't
01:03:07
going to make it and that's what drove me some people don't need that but I
01:03:12
think it's very rare I think the huge majority of people if you give them an
01:03:16
easy life they will take it and embrace it with both hands making money and keeping money require two different
01:03:22
skills you you've spoken about a few of the skills that are required for making
01:03:26
money the one that really stuck out to me that you've discussed so far is this
01:03:29
idea of endurance patience regardless of what's happening in the markets regardless of the volatility lose your
01:03:35
password and sit on your hands just on that point as well I remember reading somewhere it might have even been your
01:03:40
book you know it's so crazy because the things that I know about money I can't
01:03:44
remember where I've got them from but most of them came from this book like most of the principles came from this
01:03:49
book and one of the things that I read was that Warren Buffett would go like five years without allocating capital
01:03:55
and this where he said the hardest thing to be a great investor is to be able to
01:04:00
sit on your hands and do nothing sit on your ass and do nothing that's it that's
01:04:03
that's AER quote and that's what they're doing right now right now Berkshire
01:04:06
hathway which is Warren Buffett's company has like $150 billion dollar of cash right now and that's their entire
01:04:12
uh 60-year history of Warren Buffett and Brookshire hathway is build up a shitload of cash wait 10 years for an
01:04:18
opportunity deploy it all and then go back to waiting and building up cash crazy and that's that's that's how they
01:04:24
done it good opportunities are rare of course they are they should be rare it shouldn't be that anybody can just open
01:04:29
up their stock account and find the opportunity of a lifetime what are the gonna come once a decade what are the
01:04:33
other skills then endurance patience to create to get money for the for the ordinary person endurance and patience
01:04:40
is 99% of what you need as an investor because the opportunities there to invest in a lowcost Index Fund are
01:04:46
available for everybody and you can do that from your phone like you do it from your phone open up a Robinhood account
01:04:50
buy some index funds anybody can do that and so that and but that was not always
01:04:54
the case it used to be 20 years ago that the only people who could invest were people who had a lot of money and could
01:05:00
afford a broker and had connection to a broker and you yet to like make a phone call make a phone call you had to know a
01:05:04
guy and even then you were going to pay a ridiculous fee to that person for do pieces of paper and all kinds it was a
01:05:09
joke and that's 20 years ago it's not that long ago so I think like people
01:05:13
aren't grateful enough or appreciative enough of how much things have changed
01:05:18
that open up those opportunities for everybody you talk about the skill of keeping money which is different from
01:05:22
the skill of getting money is predicated on Survival Financial survival and just
01:05:28
putting up with all the unpredictable nonsense that's going to happen between
01:05:33
now and the end of your life and we talked earlier about the surprises Pearl Harbor 9911 all these big surprises just
01:05:40
it's just your ability to endure things like that that's going to be literally
01:05:44
90% of your financial success and your investing success so gaining money is like being an optimist and taking a risk
01:05:50
like being optimistic about yourself swinging for the fences you need that to get rich staying rich is is like the
01:05:56
exact opposite you need a level of being conservative you need to be scared you need to be like acknowledge of all the
01:06:03
unknown risks that are in front of us and have a financial allocation and a mindset that's going to allow you to
01:06:09
endure them and survive them financially you need both of those skills at the same time so well your kid is 20 years
01:06:15
old he's broke do you tell him to go and take huge outsized risks he's not got a
01:06:21
family he's not got a mortgage he's not got a dog what advice do you give him at
01:06:25
that age to create wealth I would actually say I think this is a little counterintuitive that when somebody is
01:06:29
Young you you think you would say you got 50 years in front of you swing for the fences go for it it's also when your
01:06:35
life is the most fragile it's when you're most likely to be laid off most
01:06:39
likely to change your career most likely to break up or get divorced whatever it
01:06:42
would be and so for that you need quite a bit of financial flexibility just cash
01:06:47
and liquidity so once you had some level built up whatever the level might be for
01:06:51
a different person then like do something crazy I also think for careers some of the best career advice that's
01:06:58
maybe not Universal but when you graduate college and you're looking at your career don't take the safe job
01:07:04
which is usually like the big company the blue chick company go for the weird company why go for something crazy
01:07:10
because when you're older when you're 40 and you have two kids and a mortgage
01:07:14
you're not going to want to take the weird job that's when you want the stability that's when you're probably
01:07:18
going to want the job that's has good benefits and a stable paycheck cuz you
01:07:22
need that when you're 22 and you're not tied down by anything don't go work for Goldman Sachs or apple
01:07:28
or deoe or something like that go for the weird startup where you like you're
01:07:31
you're going to learn something completely different linked to that point is in the weird startup you're
01:07:37
going to be so close to the failure and failure is the knowledge you're going to
01:07:40
learn so much much and there's so many people who take the blue chip the safe
01:07:44
job out of college and it puts them on a very predictable track you're going to
01:07:48
be an analyst for two years and then if you're good you'll get promoted to
01:07:51
senior analyst and then you'll get promoted to associate it's like very stable and linear and that's the like
01:07:57
it's you're capping all of your upside where if you go for the weird company
01:08:00
you're either going to do one of two things it's either going to fail and
01:08:03
you're going to learn a lot from that or it's going to take off and you're going
01:08:06
to learn a lot from that and then maybe when you're 40 after going through all
01:08:09
that then you want the stable job at the big company it's interesting I was thinking as you're speaking that the
01:08:14
proximity from your desk and the CEOs probably needs to widen over time yes I think I think that's that's true
01:08:22
yeah absolutely and mo most people I think if they if you do it the other way around or most people would never do it
01:08:27
the other around if you start your career in the stable company you're probably never going to leave you're
01:08:32
going to get addicted to the nice paycheck the stable benefits whatnot and you're never going to take a risk and do
01:08:37
anything else maybe that's okay maybe for some people's personalities that's
01:08:40
exactly what they want but I think there is a higher level of regret for people that start in a safe company and then
01:08:46
they get the golden handcuffs they can't leave and by the time they're 40 and
01:08:50
they realize that they wanted to work at the crazy company they can't because
01:08:52
they got a mortgage and two kids and they're saving for retirement and they can't take the risk at that level of
01:08:57
their life you introduced this concept of tales long tales and this also changed
01:09:04
my life changed my investment strategy I should probably say you talk about the example of venture capital where for
01:09:09
every 50 Investments That Venture capitalists make statistically half of them will completely fail 10 will do
01:09:16
okay and one or two will make huge profits that drive 100% of the funds returns yeah this is a lesson about
01:09:23
investing in finance but it's also me a lesson about life it's always life yeah
01:09:27
it applies to everything Tales where just a couple of things that happen explain 90 or 99% of what matters it's
01:09:36
always the case you see it in business where you take in the United States there are you know thousands of public
01:09:42
companies that you can buy stock in but the huge majority of the value in the US
01:09:47
Stock Market is in like 10 companies Apple Tesa Microsoft so even though you have thousands of companies 10 of them
01:09:52
are the ones that really matter and are going to drive all of the r turns over time so why you just buy those 10
01:09:57
because nobody knows what they're going to be at least in hindsight that that
01:10:00
that's the argument for owning a thousand of them is that you know that the 10 that are going to be the next big
01:10:04
ones are going to be in there all of this is a case for humility this is honestly what I took away from your book
01:10:10
you're expecting to walk away with tips all these tips these tricks these special ways to make more money than
01:10:17
everybody what I came away with is this one important lesson that I've never
01:10:23
been able to unsee which is I don't know I I think that's great and that back to
01:10:28
I wrote this book for myself that's been the biggest lesson for me is not only do
01:10:33
I know but nobody else knows either everyone everyone else is bullshitting their way through the investing Market
01:10:37
too they don't know either I'm in this crypto chat where one of my friends I
01:10:41
won't disparage him one of my friends he's the guy in the chat that's always
01:10:44
posting the forecast graphs you know those ones where they kind of like the little logger graphs where they forecast
01:10:49
where the stock or the crypto where they think it's going to go right and it's
01:10:52
always it's always up and to the right um and it's kind of like male horoscopes
01:10:58
I heard someone say that that that's such a great yeah no I think that's I
01:11:02
think what's closest to investing is something like the horoscope or even if
01:11:05
you know it's [ __ ] you want to read it why because it's comforting what a
01:11:09
lot of people want out of their investing forecasts or whatever it is is they want to reduce the uncertainty
01:11:14
that's giving them stress because everyone I think intuitively knows that the future in front of us is unknown and
01:11:19
it's unknowable but that hurts and so if it hurts you try to reduce that stress
01:11:24
by finding someone who says I do know what's going to happen you know what this applies as well is I read Amazon's
01:11:29
Jeff Bezos who's the CEO and founder of Amazon his shareholder letter where he
01:11:33
says we have to be the best place in the world to fail um we swing for the fences
01:11:38
10 times and for every 10 swings nine of them are in the Amazon graveyard he's
01:11:43
talking there about a9.com which nobody knows cuz failed the fir phone which nobody knows but the one in 10 pay for
01:11:50
the entirety of the graveyard the one in one 10 is going to be AWS which make 70
01:11:54
billion this year right he talked about that when the fir phone from Amazon which if you don't know Amazon built a
01:11:59
cell phone it's called the fir phone and it was a joke it was a disaster it was a
01:12:02
massive flop and he was doing like an analyst call and this analyst talked about like hey the Fire Phone flopped
01:12:09
like what happened there and bezo said if you think that was a big failure just wait you've seen nothing yet and like
01:12:14
that's why Amazon's successful they're willing to try a thousand things with
01:12:18
the idea that they know 990 of them are going to fail but the 10 that work are going to be massive and you can fail
01:12:25
well and have the mentality to fail and the financial backing to be able to fail
01:12:30
like make sure your bets are not that big and you can just keep taking little risks all the time the optionality that
01:12:36
you get from that like the odds that one or two of those are going to explode are
01:12:40
huge it's massive I mean it's no different than how do you win the lottery you have to buy thousands and
01:12:46
thousands or millions of tickets if you buy billions of tickets you'll probably
01:12:49
win the lottery it's probably not going to pay off because it doesn't work like
01:12:52
that but it's the same concept like if you if you if you take enough swings at
01:12:56
bat one of them is going to hit eventually and this is also a reason why some companies look
01:13:04
Innovative they look like their Geniuses but in fact their failure rate is massive massive there's a story at at at
01:13:10
Netflix several years ago where there was uh a report to the CEO and the and the report was all of the new movies
01:13:18
that we've come out that that we've that we've produced have been successful and
01:13:22
whoever presented that probably thought this is great this is what you want hear
01:13:25
and the CEO said that's terrible that means we're not taking enough risks if
01:13:29
every movie that we release is a hit we're not taking risks like you want your failure rate to be at least some
01:13:36
that that's when you know you're at least trying something new it's the same
01:13:39
like if you're managing uh a hotel you don't want every room to be sold out
01:13:44
because that means you're not pricing high enough you know you're doing a good
01:13:46
job when you have 10 empty rooms that's when you know you're pricing the other
01:13:50
rooms at a high enough rate so there's always going to be like some level of
01:13:55
what looks like failure that you need and if you don't have it you're not
01:13:58
taking a big enough risk Daniel X sat here and he said the same thing he goes one of the most important metrics that I
01:14:03
think about at Spotify is our mistake rate yeah and people will think okay so he wants to limit mistakes very much the
01:14:10
opposite he wants to make sure that the company maintains that sort of startup mentality and they increase their rate
01:14:17
of mistakes and this brings me to something which I kind of hit me like a truck um in your new book same as ever
01:14:23
which was this idea that we need to keep running now there were areas in my professional life where I've been
01:14:28
successful poas is doing well I think doing pretty well and I had a I had a car Journey with Jima who's through the
01:14:35
wall who you met and we last time we came to well I'm in the front seat of the car and I go Jima do you know what
01:14:39
our biggest um our biggest threat is now complacency when people get successful they play defense to their detriment um
01:14:50
they don't play offense as much as they need to to keep up with the rate of change in the world and then a young
01:14:57
Scrappy agile incumbent who has a high risk appetite will take their cheese right and your chapter on keep running
01:15:05
there's two quotes that I really pulled out chapter is called keep running and
01:15:09
the quot two quotes that I pulled out were competitive advantages tend to be shortlived often because their success
01:15:17
plants the seeds of their own decline one more quote it's easy to overlook how
01:15:24
many forces pull you away from your competitive Advantage once you have one specifically because you have one
01:15:31
success has its own gravity that's right and the the the the biggest source of
01:15:36
gravity there is laziness the reason you're successful is because you work so
01:15:40
hard to get to where you were and now that you feel like you've made it now that you feel like you're on the top of
01:15:44
the mountain top you get lazy and that's so many companies fall for that so many
01:15:47
careers fall for that there's a great story from Jerry Seinfeld where he said
01:15:51
that one of the reasons that he quit the show when it was still going gang Busters is because he could start to
01:15:56
sense that what made the show successful was starting to be was starting to go away he said and part of the reason is
01:16:03
was because he got so famous when he was not that famous he could go sit in a coffee shop and watch how people ordered
01:16:10
their coffee and make a joke out of it he was observing how Society worked once he got very famous he couldn't do that
01:16:16
anymore he was too famous to go sit in a deli and watch how people order their sandwiches he couldn't do it so
01:16:20
therefore he didn't have a lot of the source material that he had before and
01:16:24
so he was like look what made me so funny and the show so successful I can't
01:16:28
do anymore so like red alert let's pull the plug before it gets really bad here
01:16:33
so that's like a very specific example but what he realized that what made him
01:16:37
successful was gone and a lot of a lot of CEOs will will have this problem too where what made them successful was that
01:16:44
they were a scrappy startup founder and they were very good at building a product but now that the company is big
01:16:49
and successful they also need to be an HR Manager they need to be a finance specialist they need to be a marketer
01:16:54
they need to be all these other things and therefore their time is pulled away from what they're actually good at which
01:16:59
was building a product a good example of this if I can say it was Travis kenck of
01:17:04
uber the founder of uber probably nobody in the world was better at scaling a company like uber than he than he was
01:17:11
and there were a few people who were worse at managing a big company than he was so it's like what made Uber
01:17:18
successful is what pulled him away from being a successful manager at that he was very good at one thing he was the
01:17:24
best in the world at that one thing but you shouldn't think that like it's going
01:17:28
to last during when another phase of the company's life my person I consider a
01:17:33
mentor and a friend of mine been a long-term friend of mine a guy called Shaquille Khan he was one of the very
01:17:37
first investors in shop in Spotify um new Daniel the founder from the very Beginnings he said to me um a piece of
01:17:44
advice that stayed with me and I've also imparted on other people at a time when
01:17:49
I'd left my company I was now financially successful um financially free by all regards and and I called him
01:17:55
after leaving my company and I said D I said Shaq what should I do now with my life he said to me Stephen the reason
01:18:02
you were successful was because you were hungry you need to realize that you're
01:18:06
no longer hungry for the same reasons and what he told me to do was the hardest [ __ ] thing I've ever done in
01:18:11
my life which was nothing he said spend a year don't rush back into starting the
01:18:16
same business again because he said to me the reason why you were so unbelievably disciplined and would go to
01:18:21
the office seven days a week was because you were like an insecure kid that was like fighting to survive that's gone now
01:18:26
so sit on your hands for a year do absolutely nothing and get inspired again get get hungry again about
01:18:31
something new um because my Temptation was just to run back in and start a big marketing business again or whatever
01:18:36
yeah I that's kind of what you're you're speaking of as well is that like the
01:18:40
need to understand that our motivations evolve and change over time and the thing that made us successful might not
01:18:44
be the thing that makes us successful again in a new Venture I think there are some people who really can keep it going
01:18:49
some people who do keep running like Elon [ __ ] perfect example guy worth a quarter of a trillion dollars still
01:18:54
works 100 hours a week so there are those people who exist but I think for a lot of people this should not be a scary
01:18:59
thing the fact that after you've made it and have some success and some some
01:19:02
wealth that you're not as hungry as you used to be that's fine just you just
01:19:06
have to accept it it gets dangerous when people don't realize it and they they
01:19:11
are less hungry they're not as motivated but they're still going to try to go
01:19:15
start a new business even though they don't need it anymore and then they're
01:19:17
shocked when that business doesn't work he said to me you need to take on a moonshot and cuz he know he goes you you
01:19:24
did the first business you did well whatever Etc he goes the thing that will make you hungry and sufficiently
01:19:29
terrified is you now need to find a big scary terrifying goal that's what Elon
01:19:34
did with Twitter yeah he'd already become the richest man in the world and he probably got bored a little bit and
01:19:38
he said I need to do something that's crazy and that even for someone like me
01:19:42
is going to be an absolute stretch to pull off crazy which is buying Twitter and running into the ground I mean
01:19:46
there's no surprise that billionaires will seem to start rocket companies yeah
01:19:50
I mean the reason that they are successful is because they have that complete swing for def fenses I mean
01:19:55
most people would quit full stop when their net worth hit 10 million or less 3 million and so for someone to have a net
01:20:02
worth of 10 billion and to wake up and say I'm going to keep going as hard as I
01:20:06
possibly can that's why they have that level of success it's complete insatiable Hunger for More I sat with a
01:20:12
billionaire when I was 20 going to say 24 years old and I sat in his office and I thought okay this
01:20:17
could be really interesting I get to meet this very successful person in Manchester and I looked into his eyes
01:20:22
and said why are you doing this like you have all this money and it became completely apparent to me that it was
01:20:27
not about the money it was all about competition I then went and met another billionaire who was in Manchester runs
01:20:32
another big company Manchester everybody knows the company and it was the same thing with him it was the thing that had
01:20:37
got him to a billion was the thing that was going to keep him going after a billion yeah I mean there's there's a
01:20:44
chapter in my book about natural Maniacs like people like wild Minds people the kind of person like Elon Musk who has
01:20:49
that mindset to say you know when he was 30 years old or whatever he took on GM Ford Chrysler and NASA when he was like
01:20:57
30 the kind of person who thinks that is not the kind of person who's going to
01:21:01
say I have enough I'm going to put it all in Muni bonds and go live on the farm like it's not the person who thinks
01:21:07
they can do that and can pull that off is the kind of person who's never going
01:21:10
to stop if Elon Must List till he's 97 he's going to be starting new rocket
01:21:13
companies for sure do you think he's happy no absolutely none I think most people in that situation the word that I
01:21:19
would use is tortured I think they wake up every morning tortured at the problems that they are aspiring to solve
01:21:25
that they haven't solved yet there's almost no biography of a very successful
01:21:30
person like that of that level of success that you would read their biography and say that life sounds great
01:21:35
it's one of the things that hit me like a train truck was those two billionaires
01:21:38
I met were just the most miserable people absolutely and I met their their one of their sons and they go dad is so
01:21:44
unhappy I remember him saying that to me and just go [ __ ] he's going to that
01:21:48
office every single day has a billion dollars and his kids think he's like sad
01:21:52
there's this amazing story do you remember uh Myspace back in the day before before
01:21:57
Facebook and the guy who ran it his name was Tom I forget his last name but when
01:22:00
you signed up for Myspace Tom was your first follow he was the founder of Myspace and every he followed everybody
01:22:07
and he sold Myspace I think to Qualicom maybe no I'm sorry he sold he sold Myspace to Viacom and uh did pretty well
01:22:16
let's say I'm guessing let's say he made $50 million it's probably something in
01:22:20
in in in that range it's it's probably nothing that's dramatic 500 was it he
01:22:24
sold the company for that much actually don't but it was it was it was it was a
01:22:28
good but not extraordinary sum of money and you can see his life on Instagram it's not exaggeration he's like travels
01:22:34
around the world with his girlfriend hiking in Bali it looks like at least from Instagram he lives this amazing
01:22:39
life and then think about Mark Zuckerberg who is like every year hauled before Congress where he's like screamed
01:22:46
at for causing all of society's ills and he has so much on his shoulders and
01:22:50
Facebook stock fell 70% last year because everyone thinks it's going to and like it looks like a very stressful
01:22:56
incredible amount of pressure on his shoulders if you were to ask me which one of those lives would I take would I
01:23:02
rather be someone with $50 million who was traveling around the world hiking in Bali with my wife or would I be wor a
01:23:09
hundred billion do and wake up every morning scared shitless with so much pressure on my shoulders for me it's
01:23:15
obvious I'd much rather be Tom than Mark but that pressure is a drug in the sense
01:23:21
that when I say the pressure is a drug I mean we know from motivation psychology
01:23:25
and I mean I think I saw on the back of your your book yeah Daniel H pink y Daniel pink told me that when people
01:23:32
aren't sufficiently challenged they lose motivation and their level of challenge
01:23:35
kind of increases so to be engaged with a task you need to um and you think of this like game psychology the levels
01:23:42
need to get harder and harder for you to be engaged that's why every game we play
01:23:45
it's not on level one over and over and over again we need it to go to level two
01:23:48
crosswords get more difficult we stay engaged do you not think that's the case
01:23:52
with like a big famous CEO know that their engagement appetite their challenge appetite just grows and that's
01:23:59
the only way they can stay engaged solve bigger problems I think if you look at someone like Bill Gates I think he had
01:24:04
figured out business and in 2000 he he effectively quit Microsoft but he immediately moved on to what I think was
01:24:12
in his mind a bigger problem which was like how do I give this money away effectively and how do I eradicate
01:24:17
malaria those kind of problems and so even for someone like him who was able to extract himself from the business
01:24:22
they' immediately move on to something that I think in his mind was more problematic and a bigger challenge so
01:24:28
there's never going to be a period where someone like that were to say I've had
01:24:30
enough I'm just going to retire to read books like that will never be the case
01:24:34
it's always going to be I think they're addicted to the challenge is what it is
01:24:38
yeah and I think I I think I am I think I think everybody is to some extent and the mus and the gates those people are
01:24:44
extreme examples of it but every I think everybody needs a minimum level of stress in their life and the irony is
01:24:51
that we all kind of dream about like what can I do to at the stress so I just wake up in Nirvana every day and you
01:24:57
can't everyone needs to have some sort of conflict Strife challenge stress in
01:25:03
their life and for I think for a lot of people if they don't get it from real
01:25:06
places they just make up fake problems in their life that's that's a big
01:25:09
problem with people for people who richer people who have a lot of things they will start worrying and stressing
01:25:14
about the most minute things because they need that stress in their life on that point as well just popping back to
01:25:20
we were talking about the complacency the other thing that I think successful people become a victim of is their own
01:25:27
correctness I think about that with me like I've been right about several decisions in a row so surely that
01:25:32
creates evidence that I'm probably right again and that can be your downfall as
01:25:36
well or what a lot of it is is you were right on this topic and then therefore you assume that you're going to be right
01:25:41
on another topic and you didn't know the role luck might have played you didn't
01:25:44
know what luck would play but let's say you're a very successful investor and
01:25:48
then and they'll say you're like massively successful a lot of those people will think therefore I can also
01:25:53
be an effective politician therefore I can also be an expert on Co whatever it would be because they think
01:25:58
they're so smart in this area that they must be smart in other areas a lot of
01:26:02
doctors have this problem with investing where they think I'm a doctor I'm very
01:26:06
successful I got a PhD from a great school therefore I can pick the stocks because I'm a smart person and that
01:26:12
level of overconfidence is their undoing can success I think your book the one of
01:26:16
the key things that stayed with me and I didn't need to recap myself on was the
01:26:19
stories you told about people that accurately predicted what was going to happen in the stock market against
01:26:26
all conventional wisdom they all from what I recall they went on to lose their money eventually anyway a lot of them
01:26:32
yeah yeah what is that story you told in your book there's a story about a guy
01:26:34
named Jesse Livermore who was back in the 1920s he was the most successful investor in the world and what's so
01:26:40
amazing about Jesse Livermore is that I think four different occasions in his life he became the equivalent of a
01:26:45
billionaire adjusted for inflation and then went bankrupt four separate times in his life so he was the person who was
01:26:51
like better at anyone in the world at making money and had no skill whatsoever at keeping money and that's someone who
01:26:59
like even when he became at one point he was the richest man in the world and rather than saying I have enough it's
01:27:05
enough he have said let's cap te bigger bets let's swing even harder next time
01:27:09
it goes never enough and he eventually the last time he went broke he eventually ended up killing himself it's
01:27:15
the most amazing like just fascinating life that you can imagine of someone who is so good at making money but never
01:27:23
knew when to stop and it is actually the more money he made the more risk he wanted to take so it was always like his
01:27:29
I I think his outcome was always predestined because there was never going to be a moment like the Richer he
01:27:35
be the more successful he became the higher the odds that he was going to fail and I think there's some version of
01:27:43
that for a lot of people because it because their success increases their confidence more than their ability and
01:27:49
they don't even know that that's a problem that you can't self diagnose
01:27:52
like if you're confident you think it's earned and you think it's real and and
01:27:56
then because you're successful a lot of people who when you were poorer or less
01:28:00
successful they would tell you you're being an idiot you're wrong you're not
01:28:04
right about this but when you're rich maybe because you employ them or because
01:28:08
they think that you're so smart even when you say something stupid they might
01:28:12
go yeah maybe it's right go for it and therefore you don't have people who are
01:28:16
telling you how overconfident you are that again it comes down to humility doesn't it a lot of it yeah and like I
01:28:22
think that's that's that's so much of it and like and I think you have to go out
01:28:25
of your way sometimes for that humility that when you have some level of success
01:28:29
in your life whatever that level is just always remind yourself I think I remember there was a quote that I think
01:28:34
it was um Roman Warriors that when they would come home from a battle that they won and they were in like the Parade of
01:28:42
you know like we won the battle and we're going to go in the parade that like we're we're the victors were so
01:28:46
great that they would have someone by their side whispering in their ear something something along the lines of
01:28:53
you're not that great because they're in this parade where they're glorious and like Victorious but
01:28:58
they need to someone to bring them back down to earth and be like hey you're
01:29:01
just a you're just a dude you're just a guy you're not that special you're very
01:29:05
fallible like make the like tame it down they would actually hire people to do that for them and I think if you look at
01:29:11
a lot of like the great entrepreneurs a lot of the great investors they will have some sort of partner with that
01:29:18
Charlie Munger is that to Warren Buffett like when Warren Buffett comes up with an idea a big part of Charlie munger's
01:29:23
job is to tell him when he's being an idiot and to have someone like Warren Buffett who will trust a person like
01:29:28
that and to have someone like Munger who is willing to do something like that is
01:29:32
so critical just a quick Interruption for a brand that is very close to us here at the dire of a CEO who are
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01:31:04
we would include in health and fitness I think sleep now is the the most important factor the thing that I'm
01:31:10
thinking about most often every single day when I wake up in the morning the first thing I do is I check my sleep and
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pod cover send me a DM and let me know how you get on confidence which comes from success often really does create
01:31:52
blind spots and that's something I think about so much like how do I stay aware
01:31:57
of those blind spots in my life that you know the success I've had in various
01:32:01
areas has undeniably created and honestly a lot of I just go just save loads of money Steve because the day
01:32:07
you're wrong you don't want to go broke I also think about that like whenever
01:32:11
the curtain comes down on my career I want to make sure that I can say like hey thank you for for for letting me
01:32:18
have this I'm so grateful for it but I I've saved enough that like I'm ready to
01:32:21
pass a baton to someone else and that's a form of humility too there's a quote
01:32:26
from Denzel Washington where he's talking to Will Smith After Will Smith slapped Chris Rock remember that whole
01:32:31
debacle after that show Denzel Washington comes up to Will Smith and he says will when you're at your highest
01:32:36
moment in your career that's when the devil's going to get you and it's like
01:32:41
when when when you when your career is so high and you're so famous you think
01:32:44
so highly of yourself that you can do anything that's when you're going to get
01:32:47
yourself into trouble what a powerful quote and I think just paying attention to that
01:32:52
that's the natural humility that goes into it and it's not false humility it's
01:32:56
not like oh I you know false humility is like I I didn't do any of this I just
01:33:00
got lucky that's all false humility I think real humility is like I built this
01:33:04
through hard work and I made some good decisions but I'm just I'm just a guy
01:33:08
I'm as fallible as anybody else I think that's it's that's not just important I
01:33:12
think that's critical to any amount of sustainable success you taught me that
01:33:16
the price you pay to be wealthy is the volatility you have to incur along the way kind of how I think about it in my
01:33:24
head that's the cost of admission to being to being wealthy and to to be to any level of success is putting up with
01:33:30
an enduring unknowns and volatility and Booms and busts and then other [ __ ] that you put up with in the investing
01:33:37
market and in your career and in your relationships there's always a cost for
01:33:42
anything good in life there's a cost that you have to pay like of course like
01:33:46
nothing's free like that but most of the costs that you pay are not they don't
01:33:50
have a price tag that you can just measure very cleanly like the cost of doing well at investing is putting up
01:33:55
with volatility the cost of a successful career might be long hours where you were pulled away from your family the
01:34:01
cost of a relationship is like always needing to sacrifice and compromise for the other person nothing is ever free
01:34:08
and so much of the success in life is just identifying what the cost is and being willing to pay it because for all
01:34:14
of those things I just laid out investing career relationships the cost of admission is worth it putting up with
01:34:20
the volatility is worth it over time because if you can put put up with the stock market falling 30% if you could
01:34:26
just say ah it's not that big a deal I'm just going to hold tight 10 years from
01:34:29
now the cost is well worth doing that be rich if you can put up with the compromise that takes to have a
01:34:34
successful relationship by and large that's going to be a cost that's worth
01:34:38
paying because you know like so much of what matters in life is just the relationships that you have and once you
01:34:44
identify the cost of that relationship you're like oh I'll pay that cost all
01:34:47
day long so worth it this requires you to be cognizant of time Horizons and your own time Horizons which is
01:34:52
something you talk a lot about in chapter 16 of the psychology of money why is it important for us to know our
01:34:58
time Horizons and what do you mean by time Horizon it's the the amount of time
01:35:02
between now and whatever your goal is which is very different for everybody not just by your age but like if you
01:35:08
want to retire early or whatever would be like everyone's going to have a slightly different time Horizon what's
01:35:12
yours mine I mean I you would break it up into different chunks like I want to get to a point or maybe I'm nearing a
01:35:18
point in my career where I'm just doing things because I enjoy them there's
01:35:24
really no Financial incentive to what I'm doing that's one time Horizon another is like okay once my kids start
01:35:31
getting older I I want to make sure that like I'm always there for them when they
01:35:34
need me teenage years are so difficult for people like I'm always 24/7 I'll be
01:35:39
there for you which means I'm going to have to pull back there's going to be a
01:35:41
point where I just say look I've accomplished what I want to with writing and I want to be able to move on to
01:35:47
something else and there's going to be a point where I say I really don't want to
01:35:49
work that much anymore I just want to move on and maybe I need to take care of my parents would it be so like there's
01:35:53
multip multile different time Horizons at different goals of your life is buying a house a good or bad financial
01:35:58
decision I'll tell you my own experience which was in my 20s and early 30s my
01:36:03
wife and I lived in like seven different cities and there was nothing better for
01:36:07
us some of those were just like let's try this new city for fun some of it was
01:36:11
moving for work we moved for her school and our ability to just get up and go hand the keys back to the landlord
01:36:17
nothing was more valuable than that once we had our son our first kid then very quickly nothing became more valuable to
01:36:24
me than having an established secure home base that nobody could take away from me that was The Cure and also like
01:36:32
kids are loud and they scream and I didn't want Neighbors in an apartment building that I was going to have to
01:36:36
like try to keep my kid quiet from so I was I want my own house that's mine and
01:36:40
it's just a standalone house my kid can scream as loud as he wants not bothering
01:36:44
anybody else that became important to me like instantly so it's Le I think people
01:36:48
get caught up when they're like well the housing market returns 4 and a half% per
01:36:52
year that's it's like with the spreadsheets like just do what's going
01:36:56
to work for you I know I know RIT Siti has a lot of thoughts about this on renting versus buying and I think one
01:37:03
one of like the differences between remit and myself is I have two young kids and so like that that if I didn't
01:37:10
have kids I think I would be like rent rent forever really and try and try different cities move all move all
01:37:15
around what could be better than that but when you have kids what's more important to me is stability I want my
01:37:21
kids to go to a stable School know their neighbors have friends that they can be
01:37:24
friends with for years that's important if we just think about investing then in
01:37:28
terms of is buying a house a good Financial investment my brother who works in my company and he's the one
01:37:33
that introduced me to your book many many years ago said to me something along the lines of Steve don't buy
01:37:40
houses to make money because you have the ability to play a different set of games that very few people can play yeah
01:37:47
and what I mean by that is he kind of explained it to me goes listen everyone can buy a house so the returns there
01:37:52
aren't going to be huge go find a game that like only you can play you'll get
01:37:56
bigger returns if you're buying a house because you think it's going to be a
01:37:58
good Financial investment stop like even if it turns out in hindsight that it was
01:38:03
it doesn't matter I think these are just purely lifestyle decisions and I think
01:38:07
so many people get screwed up when they're in a spot in their life where they should be renting because they need
01:38:12
to be mobile they need to move around to a new job new career new school whatever
01:38:15
it is but they end up buying because they think they're going to make money doing it and that's like that's the
01:38:20
problem so I own a house and if I ended up losing money on it I I I I don't think I'd care that that's not why I'm
01:38:26
owning it I'm owning it just cuz I want the stability for my family I've just
01:38:29
made an offer on my first ever house and I cuz I played I played other money games for the last decade of My Life um
01:38:35
and now I have a partner and we've been together many years and we're both like
01:38:38
31 years old and we're getting into that position now you know Y and my brother
01:38:42
explained to me he goes listen this is a bad financial decision but it's a good
01:38:49
emotional social life decision and you need to know how to separate the two don't mark this down as a way that
01:38:54
you're trying to make money like you might make money in 20 years time if you
01:38:58
just like if you're still living there look at it as you know you need somewhere to live and he must have got
01:39:02
that from you when I when I when we bought our last house which was after I wrote this book so this is a different
01:39:07
experience um I thought at the time and still think today I I probably paid a little bit too much I mean I paid the
01:39:12
market rate but if you said like oh did you get a good deal I say no no not didn't bother me in the slightest that's
01:39:17
not what I was doing it for it would I mean it would be like if you ask like if someone is deciding whether or not to
01:39:24
have kids and they think about the cost of kids like forget of course you're
01:39:28
going to dump hundreds of thousands or millions of dollars into your kids and it's G it's like if if money is coming
01:39:35
into the equation like stop right there this is it should not do it you're doing
01:39:38
it for very different reasons this is not an investment people people buy houses because they think that they're
01:39:43
making loads of money from because there have been periods in time in which people have made loads of money
01:39:46
historically like that's the anomaly historically in the US and the UK housing prices adjust over inflation go
01:39:52
nowhere it's just been the last 20 or 30 years that there's this very brief
01:39:56
window of time that owning a house was a great investment Robert Schiller won the
01:40:01
Nobel Prize about a decade ago for his work in showing that over the last 150 years in the United States adjusted for
01:40:08
inflation most home prices have been flat as a pancake it's just the last 20
01:40:12
years that have inflated people's expectations of what a house can do statistically there's going to be at
01:40:18
least one person listening to this that has made an offer as we speak for a house under the assumption that it's
01:40:25
going to help them stack wealth if they were purely doing it for those reasons what would you tell them
01:40:33
to do instead if that's purely the reason run for run for your life don't
01:40:37
do it particularly I mean it it used to be and maybe it still is like this in many cities in America in the UK but it
01:40:44
used to be that rentals were almost without exception shitty houses there were no good rentals a big change at
01:40:51
least in America in the last 20 years is that most cities have tons and tons of luxury apartments to live in and that
01:40:56
are great places to live and they're in the city centers and they got beautiful
01:41:00
granite countertops and they're great places to live don't fall for the idea
01:41:04
that you can't live well if you're renting I think that's that's that's the
01:41:08
problem and realize that if you're doing it for financial reasons you're probably
01:41:12
about to borrow a shitload of money for an investment that historically has been
01:41:17
a very bad investment like if you put it in those terms like what are we doing here man going to borrow hundreds of
01:41:24
thousands of dollars for an investment that historically has been a loss that's
01:41:29
what you're doing here does you feel good about that that's what I'd say to
01:41:33
that person God speed I I would love to be in the room somewhere where that person has just
01:41:39
looked at their partner after persuading them to make that offer because it was going to make them Rich sorry guys the
01:41:45
um this new book same as ever essentially it's 23 short stories about things that never
01:41:53
change in the world y well there's a couple of really interesting things that
01:41:56
I pulled out one of them again which really hit me in the face was this idea that the best story wins I know this I
01:42:03
know this intuitively I talk about it on stage but I don't think people understand the power of the best story
01:42:09
wins because when you think about entrepreneurship or investing or pitching or sales what most people do is
01:42:14
they lead out with facts stats and figures yeah and even one of the things I've noticed about you from our
01:42:20
conversation now is you have a remarkable ability to tell stor thank you and there's a huge power in that
01:42:26
prove to me that the best story wins I mean it's it's always the case that it's
01:42:31
not the right answer or the best answer or the mathematically accurate answer it's just whoever gets people to nod
01:42:37
their heads in the right direction that's who's going to win over time some
01:42:40
of the examples of this that I Love Ken Burns one of the most famous uh documentary filmmakers of all time most
01:42:47
of what is are in his documentaries is is information that people already know he'll make a
01:42:52
documentary about Civil War World War II Vietnam whatever it would be there's not
01:42:56
you're not learn necessarily learning something new in there but he is massively successful massively popular
01:43:04
because he's probably the greatest Storyteller of our time so even when you're taking information that people
01:43:08
already know if you can spin a good story about it you get people lining up and they will knock your door down to
01:43:15
listen to you one other example of this are people who tell comedy if you're a
01:43:20
good comedian like that's all just storytelling and a lot of what a good comedian does is takes something that's
01:43:25
very obvious and simple but you can make you can tell a good story about it you can make people laugh and all of a
01:43:31
sudden you get their attention and they'll remember it you said in the book not the best idea or the right idea or
01:43:35
the most rational idea just whoever tells a story that catches people's attention I think there are dangerous
01:43:41
stories which is when people want to is when people tell you what you want to hear oh I got a dangerous story The
01:43:46
vaccine gives you autism I think I think it's a story that people wanted to hear
01:43:50
some people wanted to hear that and if you tell people what they want to hear you can be wrong forever and people
01:43:56
won't care because you tell them what they want to hear T shrot who's a neuroscientist sat here and she told me
01:44:00
a story of Donald Trump stood on the debate stage and they panned over to Dr Tucker Carson I believe he's called and
01:44:06
asked him about the vaccine and he basically gave stats facts and figures He said That vaccine doesn't give kids
01:44:11
autism and then they like pan over to Donald Trump and Donald Trump tells this elaborate story about a friend of his
01:44:18
one person one friend of his clearly doesn't exist one friend of his and he describes the needle like this he goes
01:44:26
this huge needle yeah and he so vivid Vivid personal and emotional yep and you get people nodding their heads to that
01:44:33
and and and capturing their attention tally said I'm a neuroscientist I knew
01:44:36
it was wrong however there was something about hearing it that even as a neuroscientist I look to my daughter and
01:44:42
go [ __ ] I think we've always been storytellers and that's what's really
01:44:46
set humans apart that's the whole idea from youval no Harari is that like what
01:44:49
sets humans apart is our ability to tell and remember stories and it's made it so
01:44:54
it's just a tool to simplify facts in the world like most people the other thing is powerful about stories is that
01:45:00
you remember them you think about in school when you had a math test and the teacher just said memorize this formula
01:45:07
to regurgitate it on the test literally 5 minutes after the test is done you forget it you have no idea what it was
01:45:12
but if you remembered a good story even that you were told when you were two years old you remember it for the rest
01:45:17
of your life so it's just a tool for getting people to remember how the world
01:45:21
works and they be so persuasive and so good at eliminating the uncertainty that grates on all of us that people will
01:45:30
listen to and believe things even when they're just obviously flagrantly not
01:45:34
true if it's what they want to hear people talk about um when we're talking
01:45:39
about investing but generally life people talk about compounding interest and we all know the I think a lot of
01:45:43
people should know the power of compounding interest now but we rarely think about how compounding interest can
01:45:49
negatively slowly impact our lives and in your chapter about tiny and magnificent you explore that and again
01:45:56
this hit me like a truck in the face because I I think I spend my time now thinking about how getting things to
01:46:02
compound in my fa favor will change my life but I don't spend a huge amount of
01:46:05
time thinking about how things are compounding against me right now yeah what what's really true is that most
01:46:10
good news happens slowly and most bad news happens very fast so bad news is like Co literally happens overnight boom
01:46:17
you got a you got a virus it's going to kill millions of people shut down the
01:46:20
economy happens literally overnight 911 Happ happens start to finish it's like
01:46:24
30 minutes like boom just happens immediately good news is usually slow compounding over time so I use the
01:46:30
example of the book of like the Improvement in heart disease mortality over the last 70 years is Bonkers we've
01:46:36
made so much progress and saved literally tens of millions of lives in the fact that we've gotten better at
01:46:43
treating heart disease and but nobody talks about it it's like it most people
01:46:48
are aren't even aware that it's happened because if you look at what happened it
01:46:51
was the mortality improved it got better by about 2% per year now if you compound
01:46:55
2% per year for 70 years it's off the charts we're like living in such a
01:47:00
better world now than we were 70 years ago but in any given year you didn't even notice it you're never going to see
01:47:05
a news headline like breaking news heart disease mortality improves by 1.4% that's not a headline like all the
01:47:11
headlines are bad news because bad news happens fast so once you realize that then it's like most of the news is going
01:47:18
to skew negative not because there's some producer who's trying to toy with
01:47:21
your brain it's just because what is obviously happening today tends to be the bad news where the good news is just
01:47:28
very slowly compounding over time that can go in the other direction of like bad news that compounds over
01:47:35
time I think about our health smoking Health like that's like in like one cigarette is not going to do anything
01:47:41
bad for you but one cigarette per day for 30 years is catastrophic and so that's that's really what it is like
01:47:47
same with like getting one bad night sleep not that big a deal but if you're
01:47:50
sleeping 6 hours a night every night for years on end you're going to reduce your
01:47:54
life expectancy by a tremendous amount this idea of compounding interest and compounding returns and how important it
01:48:00
is I've spent so long trying to explain to people that compounding interest and
01:48:04
compounding returns this very hard thing to think about is so important I imagine
01:48:09
you have two what is your go-to way of explaining to like your eight-year-old kid or someone else the power of
01:48:15
compounding we were actually going to get like a bowl of rice here and I was going to do some experiments the rice is
01:48:19
the best the the rice board experiment if you if people aren't familiar with it
01:48:22
it's this story that's probably not true that back 500 years ago someone uh you
01:48:27
know told the king they said hey here's a here's a chess board I'm going to put
01:48:31
one grain of rice on the first Square two on the second Square four on the third and then let's do that
01:48:38
and by the end of the chessboard that's like it's like more rice than exists in
01:48:43
the entire world because like if you double something again and again and again it's just completely
01:48:47
counterintuitive how big it can grow the one way that I I I had a friend of mine
01:48:51
Michael batnick explained this to me years ago I think he wrote this in a blog post he said if I ask you what is 8
01:48:57
plus 8 plus 8 plus 8 you can do that in your head like it's it's not it's not
01:49:01
that hard but if I say what is 8 time 8 time 8 time 8 like forget about it even if you are really mathematically
01:49:07
inclined there's no way you can like very few people could figure that out in
01:49:10
their head so our minds are just not good at exponential thinking that's just
01:49:15
not it's it's just not something that we're really geared towards doing like 8
01:49:18
plus 8 plus 8 it's like so simple linear thinking so simple exponential thinking
01:49:22
not intuitive in the slightest and because it's not intuitive it's so common to underestimate what smoking is
01:49:28
going to do to you that compounds over time what investing is capable of doing to your wealth because it's so
01:49:34
counterintuitive that 99% of Warren Buffett's net worth came after he was 60
01:49:38
years old not intuitive at all and so since exponential thinking is not intuitive both on the positive and the
01:49:44
negative side we go through life underestimating what's going to happen to us in good things and bad things it's
01:49:50
like a religion we have to adopt I think I think that's a great way it's it's
01:49:53
like a mathematical religion because just like a lot of religion it's like it's not intuitive and it almost takes
01:49:58
like a leap of faith to be like I know it's seems crazy but this is this is what I believe I think there's a sense
01:50:04
of that to compounding where like it's just math you can just put the numbers
01:50:07
in a spreadsheet and they'll tell you what it is but since it's not intuitive
01:50:11
there's almost like a religious aspect that you need to believe how powerful it
01:50:14
can be over time two of the chapters in your book same is ever speak to the importance of discomfort one of the
01:50:20
chapters is called when the magic happens and you say in that chapter stress pain discomfort shock and disgust
01:50:24
for all its tragic downsides it's also when the magic happens and then the other chapter where
01:50:31
you kind of speak to this is It's supposed to be hard most things worth pursuing charge their fee in the form of
01:50:36
stress uncertainty dealing with quirky people bureaucracy other people's conflicting incentives hassle nonsense
01:50:43
long hours and constant doubt that's the overhead cost of getting ahead what's
01:50:47
interesting is I never tied those two chapters together but you're right they're they're almost the exact same
01:50:51
idea that for the the whole economy for the whole world when the biggest improvements in society takes place is
01:50:56
when there's some sort of disaster like for all of its obvious downside and death and destruction nothing has been
01:51:03
more technologically Progressive for the world than World War II the number of inventions that came out of World War II
01:51:09
from atomic energy to Jets and like go on down the list penicillin all of these lists for things that you and I are
01:51:16
taking advantage of today happened not in spite of but because of World War II because there was this period where
01:51:21
everyone in the world came together and they're like holy [ __ ] we got a big
01:51:24
problem to figure out let's put our heads together and figure this out right
01:51:27
now but that's also on a personal level on a personal level it happens as well
01:51:30
too like there there's there's there's a book written many years ago called the
01:51:34
upside of down that's I thought that just a brilliant title like the like the
01:51:37
upside of being down and it happens a lot that when you have maybe it's a job
01:51:41
layoff or a breakup or a medical emergency whatever it can be that it changes you for the good and it's hard
01:51:48
it's always impossible to see that silver lining in the moment you don't
01:51:51
ever imagine there's going be a silver lining in that moment but when you look
01:51:55
back in hindsight it will be I saw this recent example of this that really knocked me on my ass it was Steven coar
01:52:01
who I might be getting these details wrong but I think when he was uh a young child his father and brother died
01:52:08
tragically and he said at one point that uh I don't want to put words in his
01:52:13
mouth but he said something along the lines of like he is grateful for that and he was asked like what do you mean
01:52:18
you're grateful for that and he said look of course I wish it never happened
01:52:22
but it allowed him to understand the emotions of other people and get closer to other people who had also experience
01:52:29
something like that and so even in like the deepest darkest moment of his life that he says he of course he wishes it
01:52:35
didn't happen it taught him something about Humanity that he's Greatful for
01:52:38
today that's an extreme example but I think for a lot of people being laid off
01:52:43
from a job in the moment is going to be the hardest thing they've ever dealt
01:52:46
with and in hindsight it's going to be one of the best things that ever happened to their career a breakup might
01:52:51
be the hardest thing you've ever been through and in hindsight it might be the
01:52:54
best thing that's ever happened to you so I that's always like that's when the
01:52:58
magic happens is when things get really tough It's just always impossible to see
01:53:01
that when you're going through it a lot of people would have clicked on to this
01:53:04
conversation and if they've gotten to the end of the conversation well done to
01:53:07
them what conclusion can we offer them based on everything we've talked about
01:53:11
as it specifically relates to wealth creation and money first I think for both of these books we're almost ending
01:53:18
exactly where we started which is like I hope they get you to think about your life in different way both of these
01:53:24
books and the Publishers hated this there's no advice in the books never do I say and therefore you should do this
01:53:31
and the publisher wants you to do that and I said no no no because I don't know
01:53:34
you I don't know the person reading this book who am I to say what you should do
01:53:37
with your own life I don't even know to do with my own life but I hope it gets
01:53:40
you thinking about what you want and who you are and what you are capable of what
01:53:46
you're not capable of if it gets you thinking about your life then I think I've been successful doing this rather
01:53:52
other than trying to assume that I can give you specific advice about what to do Morgan we have a closing tradition on
01:53:58
this podcast where the last guest leaves a question for the next guest not knowing who they're going to be leaving
01:54:01
it for and the question that's been left for you is what is your biggest regret in life
01:54:08
and how has that experience changed you I think I've uh always been prone to
01:54:17
mild depression not not significant but mild depression and anxiety and I wish I
01:54:23
could go back to different periods of my life in a time machine and just say it's
01:54:28
going to be okay it's not going to be easy it's not going to be perfect but
01:54:32
it's gonna it's it's going to be fine and I I I look back not with regret but
01:54:38
how much time have I wasted worrying about things that never happened and were almost certainly never going to
01:54:43
happen a tremendous amount and even if I recognize that today I know I'm going to
01:54:49
worry about something tonight and tomorrow and next week about something I really shouldn't be worrying about I
01:54:54
don't know if I regret it because I think having a sense of worry has kept me safe A lot of times it's kept me out
01:54:59
of trouble in in a lot of things but I do look back at the course of my life and think man like I could have been
01:55:05
happier than I was if I had accepted a certain level of just telling myself it's going to be
01:55:12
okay well you're not going to have to worry about your book because it's
01:55:15
superb thank you genuinely I I you know hope my audience trust me um but I I would really implore them to get both
01:55:22
books I mean the psychology of money I think is the best book on money ever written it's pretty much also the only
01:55:26
book I've ever read on money and then same as ever is just it's everything it's advice on
01:55:33
money life relationships everything that matters because there are a set of enduring principles that speak to the
01:55:39
fundamentals of life in a way that is completely enduring you have a wonderful ability to write enduring things and you
01:55:44
tell wonderful stories like you say I actually didn't even notice that you didn't give me advice when you said that
01:55:48
You' not given me advice any and I never will to anybody bullshitting but you
01:55:51
know think about it you didn't I I garnered my advice from the stories you told and the evidence you provided
01:55:57
Morgan thank you so much I'm so glad we' managed to have this conversation and
01:55:59
it's been a huge honor and pleasure um to meet you thank you as well because I
01:56:04
can't imagine how many millions of pounds you've Saved Me by writing this
01:56:06
book genuinely it's such an honor to do this with you Stephen this been a lot of
01:56:10
fun thank you as you'll know this podcast is sponsored by hu and we're going into
01:56:17
that last quarter of the year it's getting a little bit colder back into our routines back into our work rhythms
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and it's in those moments that I need to focus most on my diet as I get back into
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the swing of work I need to get back into a routine as it relates to my diet and that's really where hu's RTD they're
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ready to drink range comes in handy in a bottle you have a nutritionally complete
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meal that you can consume in a minute so this is a real Lifesaver in terms of my
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health it is my Ally and my friend and my companion on my busiest days and it means that even when I'm pursuing all of
01:56:47
my professional goals my health goals can be pursued at the same time there's
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a link in the description below if you've never tried heels rtds this is the time if you're falling off of the
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wagon this is the sign you needed to get back on there's a link below in the
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description order yourself a pack stay healthy throughout this busy period do you need a podcast to listen to next
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we've discovered that people who liked this episode also tend to absolutely love another recent episode we've done
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so I've linked that episode in the description below I know you'll enjoy it
01:57:19
[Music] a