The Savings Expert: “Do Not Buy A House!” Do THIS Instead! - Morgan Housel
The Diary Of A CEO2023-11-06
The Diary Of A CEO#steven bartlett steve bartlett#podcast#the diary of a CEO podcast#life lessons#CEO#best finance skill#how to become a millionaire#buying a house is a bad investment#interview with money expert#savings expert#finance expert#the biggest mistakes in investments#compounding and investments
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💫 Short Summary
The video discusses the importance of understanding one's relationship with money, achieving financial independence, and the value of endurance in investing. It highlights the significance of saving money, managing expectations, and finding happiness through independence. The speaker reflects on personal experiences, societal trends, and the unpredictability of life, advocating for a cautious and adaptable approach to financial planning. The segment also touches on the challenges of success, humility, and storytelling in entrepreneurship. Overall, the message encourages self-reflection, resilience, and the pursuit of meaningful work and relationships for long-term success and fulfillment.
✨ Highlights
📊 Transcript
✦
Impact of 'The Psychology of Money' on the speaker's life.
01:49The book encourages introspection on personal values, wealth, and financial decisions.
Understanding the difference between being rich and being wealthy, with wealth defined as unspent money that provides independence.
Readers are urged to reflect on their desires, priorities, and mindset towards money, prompting curiosity and self-discovery.
The goal of the book is to encourage deeper thinking about financial goals and values beyond material possessions.
✦
The importance of financial independence and frugality in achieving happiness and well-being.
07:47The speaker's parents, despite financial stability, maintained frugality from their humble beginnings.
The speaker initially resented his parents' frugality but later appreciated its value.
The speaker's father, an ER doctor, retired early due to substantial savings, highlighting financial independence.
Autonomy and control in work are essential for happiness and health, as lack of control can lead to stress-related health issues.
✦
Importance of Lowering Stress Levels for Physical Health and Well-being.
12:36Control over time and schedule is linked to happiness and success, citing CEOs as an example.
Warren Buffett's autonomy over his day contributes to both business and lifestyle success.
Pursuit of wealth and constantly shifting goalposts can result in perpetual dissatisfaction.
Comparing oneself to others and always wanting more can diminish happiness despite advancements in technology and wealth.
✦
Importance of managing expectations for happiness.
20:19Stephen Hawking's story is used as an example of finding happiness despite physical limitations by keeping expectations low.
The concept that nobody values possessions as much as the owner is emphasized, discouraging the need to show off material possessions.
Understanding this societal game can lead to reduced desire to flaunt possessions and increased contentment.
Managing expectations is seen as more controllable than changing circumstances, making it a valuable financial skill to develop.
✦
The importance of meaningful relationships and seeking validation.
26:50Focusing on a select few individuals for true happiness is crucial.
Money's impact on behavior, from reckless spending to responsible decisions.
Desire for respect and admiration often leads to using material possessions.
Low-income individuals spending on lottery tickets as a source of hope.
✦
Importance of saving money and achieving financial independence.
33:13Saving money is viewed as control over one's future.
Saving money is key to gaining independence, happiness, and health.
Perspectives on saving money - savers, non-savers, and those who don't see the need to save.
Impact of hitting rock bottom as an incentive for changing one's life.
✦
Reflections on a near-death experience with an avalanche and its impact on life decisions.
39:59The incident emphasized the significance of small decisions with major consequences.
Realization about the unpredictability of life and the impact of seemingly insignificant choices on the future.
Reminder to remain humble and cautious in making forecasts about the future.
Emphasis on the fragility of life, the need to appreciate uncertainty, and the complexity of events.
✦
Emphasis on risk and uncertainty in predicting future events.
44:22Preparedness over prediction is recommended for dealing with major global crises.
Conservative approach to investment with focus on cash reserves and index funds is advocated.
Importance of maintaining a simple and diversified investment portfolio, including a long-standing position in Ethereum.
Accepting the fragility and unpredictability of the world, urging a cautious and adaptable approach to financial planning.
✦
Endurance in investing leads to long-term wealth creation, as shown by Warren Buffett and a janitor who held stocks for decades.
50:19The focus should be on sustaining returns over time rather than seeking short-term gains.
Buffett's consistent investing over 80 years and the janitor's patience resulted in significant wealth growth.
Endurance outperforms stock picking, with patience being a controllable factor in investing.
Long-term commitment is crucial in achieving financial success through holding investments.
✦
Importance of endurance in investing and the value of consistent returns over time.
54:21Concept of financial independence and the challenge of knowing when 'enough' is truly enough.
Finding happiness and fulfillment through independence and pursuing personal joy.
Financial independence does not necessarily mean retirement but the ability to choose meaningful work.
Regrets of prioritizing work over personal fulfillment on deathbeds.
✦
Importance of Providing for Family While Alive.
59:55Emphasizes the significance of assisting loved ones during times of need rather than waiting to pass on inheritance.
Personal anecdotes shared about teaching financial responsibility to his son.
Discusses the potential impact of inherited wealth on ambition.
Highlights the importance of endurance and patience in investing, citing Warren Buffett's strategy of holding cash for long periods.
✦
Key highlights on investing and financial success.
01:04:44Low-cost index funds are now accessible to everyone through platforms like Robinhood, eliminating the need for expensive brokers.
Endurance and patience are crucial for financial and investing success, representing 99% of what is needed.
Taking outsized risks early in life is counterintuitive; focus on building financial flexibility and liquidity for unexpected events.
Choosing unconventional career paths can lead to valuable learning experiences and opportunities for growth.
✦
Importance of taking risks and embracing failure for success.
01:14:57Examples from Amazon and Netflix demonstrate how a startup mentality can lead to innovation and growth.
Complacency and laziness are highlighted as threats to success, with stories from Spotify and Jerry Seinfeld illustrating the dangers of becoming too comfortable.
Emphasis on the need to keep pushing forward, stay agile, and continuously strive for improvement to avoid stagnation and decline.
✦
Challenges faced by successful individuals transitioning from startup founders to managing successful companies.
01:17:21Loss of motivation and hunger can occur as initial drive diminishes, necessitating a shift in focus to maintain momentum.
Adapting to new roles within the company and pursuing new ventures can present challenges during this transition.
Complacency can hinder continued success, emphasizing the need to constantly seek new, ambitious goals.
Despite external success, many high achievers may experience internal struggles and a sense of unfulfillment, highlighting the importance of evolving motivations and goals.
✦
The addictive nature of pressure and challenges for successful individuals.
01:23:08Tom, who sold Myspace and now lives a lavish lifestyle, and Mark Zuckerberg, who faces immense pressure as CEO of Facebook, are examples.
The concept of engagement and challenge appetite is discussed, with Bill Gates transitioning to philanthropy after Microsoft cited as an example.
The pitfalls of overconfidence are highlighted, with the story of Jesse Livermore, a successful investor who repeatedly went bankrupt due to his inability to stop taking risks, shared.
✦
Importance of Humility in Success
01:31:50Success can lead to overconfidence, creating blind spots and the need for humility.
Entrepreneurs and investors often have partners to provide critical feedback and keep them grounded.
Denzel Washington's quote warns about the dangers of arrogance at the peak of success.
Real humility involves acknowledging hard work and fallibility.
✦
Importance of Sacrifice and Compromise in Success
01:34:20Success in investing, career, and relationships requires sacrificing and compromising.
Identifying and accepting these costs is necessary for long-term success.
Viewing buying a house as a lifestyle decision rather than a financial investment is crucial.
Emotional and social benefits of owning a home can outweigh financial considerations.
✦
The importance of storytelling in entrepreneurship, investing, pitching, and sales is emphasized.
01:42:26A compelling narrative is shown to have a greater impact than facts and figures.
Examples like Ken Burns' documentaries and successful comedians are used to illustrate the power of storytelling.
The concept that the best story wins is discussed, focusing on capturing attention and gaining agreement.
The danger of spreading false information through storytelling, such as with vaccine misinformation, is highlighted.
✦
The impact of compounding interest on our lives.
01:45:47Good news tends to compound slowly, while bad news often happens suddenly.
Understanding compounding returns is crucial for investing and health habits.
Pursuing worthwhile endeavors comes with challenges like stress, uncertainty, and doubt.
Exponential thinking and compounding effects are emphasized for long-term success.
✦
Embracing challenges and disasters can lead to technological advancements and personal growth.
01:51:32Individuals can find growth and understanding through difficult experiences.
Perspective and resilience are key in overcoming challenges.
Introspection and self-awareness are valuable tools in navigating life's uncertainties.
✦
Importance of nutritionally complete meals for health and busy lifestyles.
01:56:37Hills rtds recommended as a convenient option for staying healthy during hectic periods.
Promotion of a related podcast episode for audience engagement.
Emphasis on the value of quick, nutritious meals for overall health.
Encouragement for viewers to make quick and healthy choices for their meals.
00:00if you're buying a house because you
00:02don't do it run for your life Mr Morgan
00:05H he's the author of the psychology of
00:08money one of the bestselling business
00:09books of this decade he can help anyone
00:12build wealth and change their life the
00:14world is split between people who don't
00:16know how to start making money and
00:17people who don't know when to stop
00:19making money and if you are stuck in a
00:21low-income job you feel like you don't
00:23have the opportunity to generate wealth
00:25but once you realize that opportunities
00:26are available for everybody you can
00:28choose where you want to live what job
00:30you want when you retire because you can
00:32be rich prove it people like Ronald Reed
00:35and he was a janitor what does it take
00:37to amoun Mr Reed's $8 million Fortune
00:39he's a fascinating story of somebody who
00:41became Rich despite not having the
00:43skills that you normally associated with
00:45wealthy people then there's Warren
00:46Buffett he's worth $100 billion but the
00:48real secret to their success investing
00:51my parents are a great example of this
00:53we were very poor no Financial
00:55background and they have like minimal
00:56financial interest but now they'd
00:57probably be in the top 3% of
00:59professional investors if you want to do
01:01well with money you don't need to be a
01:03genius if you have endurance in your
01:05investing you're going to be filthy rich
01:07but when most people say I want to be a
01:09millionaire what they actually mean is I
01:11want to spend a million dollars I want
01:13some nice clothes bigger house the nicer
01:14car ask yourself what is your
01:16relationship with money if your
01:18expectations rise faster than your
01:19income you're never going to be happy
01:20with your money that's the problem so if
01:22I have a100 what's the first thing that
01:25I should do I keep it as painfully
01:27simple as I can so
01:31ladies and gentlemen you're about to
01:32meet the man whose book changed my
01:34entire life as it relates to money and
01:37finance about four or five years ago my
01:40brother who's a investment banker said
01:43Steve there's one book I need you to
01:45read about wealth investing and money in
01:47finance and he passed me a book called
01:49the psychology of money that book
01:52changed my fortunes it is the reason
01:55I've been a successful investor and it's
01:57the reason I've been able to hold on to
01:59my wealth and build it it's this man and
02:02that's the reason why you need to stay
02:04tuned and listen to this
02:06[Music]
02:12episode
02:13Morgan you wrote what I would consider
02:17to be the greatest book on money and
02:20finance ever written I say that because
02:23I remember when I came into money when I
02:25was 25 20 no 27 27 28 years old and my
02:29brother turned to me and said there's
02:31one thing I ask of you he said you have
02:34to read this book called the psychology
02:36of money it will stop you losing all of
02:38the money you've just earned from your
02:40career and it changed my life I've
02:42talked about it for years and years ever
02:44since and that's why I was so Keen to
02:46have this conversation with you because
02:47I really believe if people choose to
02:49listen to this conversation it stands
02:50the chance of changing those two so
02:53let's begin why of all the things that
02:56you could do with your life Morgan why
02:58are you writing books about the subject
03:01matter that you explore what is the
03:02reason well first that's a that's a big
03:04statement that's a lot to live up to
03:05it's kind of scary to hear that because
03:07I've I've often been and this gets to
03:09the why when I I've just find it as
03:12selfish writing where I write for an
03:13audience of one and that is me and I
03:16like to think of myself as a pretty
03:17selfless person but for writing I don't
03:20try to say I'm going to write a book for
03:22this person or that person or that
03:23audience I write what I'm interested in
03:26and I write it in a way that I think is
03:27interesting and I try to solve my own
03:29problems and then I take a leap of faith
03:32that if this is interesting to me and
03:33it's going to help me maybe it'll help
03:35somebody else that's very different from
03:37the traditional writing style of saying
03:39know your audience know your audience
03:41very quickly turns into Pander to your
03:43audience and I think a lot of people
03:45maybe they don't even know it but if
03:46they read a book and they don't
03:47necessarily like it it's because they
03:48were being pandered to they were being
03:50spoken to in a way that a person would
03:52never speak to them in real life so I
03:54just this is almost like my diary I
03:56think in terms of these are the topics
03:58that I found interesting for myself and
04:01so I guess that's the why I feel like
04:03I've really found myself in a career
04:05where I can just figure out my own
04:06problems and try to figure out what I
04:09think and what's interesting to me and
04:11then kind of put it out to the world and
04:13then hope that other people will enjoy
04:14it let's start with the psychology of
04:16money what is the benefit to my life if
04:17I understand the things that are written
04:19in the psychology of money well let me
04:21start with I think most Finance books
04:24will their their answer to that question
04:26would be when you're done with this book
04:27you will know how to pick stocks better
04:29you will know how to balance your
04:30checking account or what credit cards
04:32that you should use for my book I think
04:34when you're done with it I hope that you
04:36will just look in the mirror and say who
04:39am I which is kind of what I did with
04:41this trying to figure out who I am and
04:43what I want and why I was insecure why I
04:45wanted to show off to other people the
04:47car that I drove so if you become more
04:49introspective about who you are and what
04:51you want out of life and what money can
04:54do for you and cannot do for you and
04:56become a little bit more introspective
04:58about why you think
05:00about where you are in the social
05:02hierarchy and greed and fear and why you
05:04think about these things that you do I I
05:07honestly think that I I I hope at least
05:09because it was this way for me that when
05:11you're done for with the book that's
05:12kind of when the learning begins because
05:15maybe this will just spark a bit of
05:18curiosity for you to then go for a walk
05:20and think about what you want out of
05:22life and whatnot so I think in most
05:24books when you're done with the last
05:25page the learning is done this I hope is
05:27just sparked something in you that will
05:29get you to think more clearly about what
05:31you want with money and what money can
05:33and cannot do for you part of that
05:34journey of understanding what you want
05:37helps you to define the word on the
05:38front of this book wealth what is your
05:41definition of wealth well I I I made up
05:44these definitions in the book so these
05:45are just my things that I made up but I
05:47defined rich as you have enough money to
05:51buy what you want to pay for your
05:52mortgage to make your car payment to go
05:54out to dinner with your friends you have
05:55money in the bank wealth I think is very
05:58different wealth is money that you did
06:00not spend and maybe you will not spend
06:03so wealth is hidden it's the money that
06:05you didn't spend on a car it's the money
06:07that you didn't spend on a big house you
06:09didn't spend on jewelry and that's
06:11really important because wealth that's
06:13saved up the unspent money is what gives
06:16you Independence and autonomy and just
06:18the ability to wake up every morning and
06:19do whatever you want with your with your
06:21life and so I think separating that is
06:24really important because when most
06:26people say I want to be a millionaire
06:28what they actually mean is I want to
06:30spend a million dollars that's what they
06:32mean and when I think about being a
06:35millionaire I think it's you have a
06:36million dollars that you're not going to
06:37spend and that because you're not going
06:39to spend it you have this giant cushion
06:41that will give you Independence and
06:43autonomy and so you can wake up tomorrow
06:45and say I can do whatever the hell I
06:46want today I can work for who I want I
06:48can work for as long as I want I can
06:50retire when I want the World is Yours
06:52like every bit of savings that you have
06:55is a piece of your future that you own
06:58it's you're just buying your time in the
07:00future so that it's yours and you can do
07:02whatever you want with it and that to me
07:04has always been the goal there's a quote
07:06from Charlie Munger where he says I
07:07never wanted to become rich I just
07:09wanted to become independent and that
07:11when the first time I read it it was
07:12like that's me too that's what I want I
07:15don't want a Lamborghini I don't want a
07:17mansion and a yacht I want to wake up
07:19every morning and just say whatever I
07:20want to do today it's mine nobody's
07:22going to tell me where to work when to
07:24work what to do it's all me and to me
07:27for not just work but for your family
07:29life for your health for your mental
07:31sanity there's nothing more important
07:33than that it sounds like you're talking
07:35about your
07:36father my dad it was he has such an
07:39interesting background my my my mother
07:40too their background is so crazy and I
07:43didn't realize how crazy it was until I
07:44was an adult the early part of my
07:46childhood when my parents were in school
07:49we were very poor my parents were
07:50students living off of student loans and
07:52grants we had no money and then my dad
07:54became a doctor when I was 12 or 13 and
07:57things changed it wasn't we were not
07:58rich but like things got very
08:00comfortable and what was really
08:01important is that the frugality that my
08:04parents had to have when they were poor
08:06stuck with them even after they started
08:08making a little bit of money they didn't
08:09buy Lamborghini no no we grew up in a
08:11very like modest house it was a nice
08:13house and we took some like decent
08:14family vacations but my we always live
08:16well below our means way below our means
08:18did that confuse you because you must
08:20have known that your dad had the money
08:21yes particularly when I was probably
08:23like 16 17 and I could learn like how
08:26much does a doctor make you can go look
08:27it up and figure it out and then it was
08:30like I definitely looked down on my
08:31parents at that age because I was like I
08:34know you can afford a better car I know
08:36you can buy me better Christmas presents
08:38I know we can afford a bigger house and
08:40you're and you're not doing it because
08:42you're mean I think that was I think
08:44that was my view and then it really
08:46clicked about 10 years ago this is not
08:48that long ago so my dad is an ER doctor
08:51which is one of the most stressful jobs
08:52that you can imagine it's literally
08:54people dying in your arms every day and
08:57he did this for 20 years and after 20
08:59years of doing this night shifts
09:01children dying in your arms literally
09:04every every week he said he he had had
09:07enough it was it was a lot he put in his
09:08dues he did it for 20 years and he said
09:10I'm done I'm I'm going to retire and the
09:12reason he could do that is because he
09:14had saved up so much money he was living
09:16well below his means they had a very
09:17high savings rate the moment he woke up
09:19and said I want to be done he was done
09:21that was it and if you can trast that
09:23with so many other people including some
09:25of his colleagues who were also burnt
09:27out at age 60 who also burnt out by
09:30having people die in their arms for 20
09:32years they wanted to retire and they
09:33couldn't because they had the bigger
09:35house because they had the nicer car
09:37that I thought that we should have had
09:39when we were growing up and when they
09:42quit and moved on to their next phase of
09:45Life they got so much happier and so it
09:48was like so that this was 10 years ago I
09:50was in you know in my late 20s at this
09:52point I was like now I get it he was
09:54Frugal he saved a lot and that made him
09:56independent and the Independence made
09:58him happier than any car would have done
10:01made them happier than any big house
10:02would have done so it's like I think
10:04that is one of the keys to happiness
10:07happiness is like the most complicated
10:08topic you can imagine but one of the big
10:10puzzle pieces is independence and
10:12there's been a lot of work on this
10:14studies on this of like one of the
10:16things that makes people really happy in
10:18life is having control over what they're
10:20doing and it's more so the flip offf
10:22side of that it's like what makes people
10:24very unhappy in life not having control
10:27over what happens in their future having
10:29control over their schedule where
10:31they're going to work whether they're
10:32going to get laid off having that
10:34uncertainty is a massive anchor and wait
10:37on your life about your health
10:39absolutely I mean that was a big thing
10:40for my dad to he's working night shifts
10:42for for 20 years with this it it's very
10:45bad for your health it's not great at
10:47all so the ability the financial ability
10:50to just wake up one day and say I'm done
10:51done with that is huge I I was reading
10:54studies about this idea of autonomy
10:56because I was trying to figure out what
10:57you have to have professionally to love
10:58your work and I came up with these five
11:00different points one of them was
11:02autonomy and control and I I came up
11:05with that because I read studies where
11:07people who work jobs where they had low
11:08autonomy and control had physiological
11:11consequences they were more likely to
11:12get disease they experienced stress
11:14significantly more more likely to have
11:16cardiovascular problems and heart
11:17disease which is the single biggest
11:19killer of of people generally I thought
11:21[ __ ] hell just not having control in
11:22your life makes your body shut down yes
11:25you know this is something that I think
11:27everybody has experienced if they have
11:28something really stressful going on at
11:30life they get into bed they're tired you
11:32can feel your heart pounding like the
11:34physiological response of stress is huge
11:38it's massive and if you have that going
11:40on every day for 5 years 10 years 20
11:43years 30 years forget about it forget
11:45about it this this great quote from John
11:46de Rockefeller he's the richest man in
11:48the world and he lived till I think he
11:49was 99 something like that he was 97 and
11:52his doctor talked about why like his key
11:55to longevity and the doctor said quote
11:58he never lets anything bother him he
12:01spends plenty of time outside and he
12:03leaves the table when he's still a
12:04little bit hungry that was his key to
12:06longevity it was just and and when you
12:08read his biography you realize how true
12:09that was no matter what was going on in
12:11his life and the most stressful business
12:13conditions you can imagine none of it
12:15ever bothered him he just had ice in his
12:17veins and he could just keep going and
12:18so I I I do think that's that's
12:20definitely one of like the keys to
12:22physical health is lowering that amount
12:24of stress and there are not many other
12:26things in life that are going to
12:27increase the stress you have than not
12:30having control over what you're doing in
12:32life Freedom chapter seven of your book
12:36this is the broadest lifestyle variable
12:38that makes people happy doing something
12:41you love but on a schedule you can't
12:42control starts to feel the same as doing
12:44something you hate psychologists call
12:46this reactants that's right you know I I
12:50do think there are a lot of I think the
12:51best example are CEOs who might make $30
12:54million a year $50 million a year but
12:56they have no control over their time
12:58every single second of their day is
13:00planned and demanded by somebody else
13:02and they have to do things that they
13:04don't want to do if they wake up and
13:05they're tired too bad you got to go to
13:06your meetings today if they wake up and
13:08they're exhausted too bad you have to
13:09travel to China to close this deal they
13:11have no control over their time and
13:13compare that to someone who makes much
13:15less but they wake up they can wake up
13:17and do whatever they want whatever they
13:18want to do you want to hang out with
13:19your friends you want to sleep in you
13:20want to take a nap at 2 o'clock whatever
13:21you want to do the person who I think
13:23really sticks out in that in that vein
13:25is Warren Buffett who is the the CEO who
13:28makes a zillion dollars a year he's
13:29worth hundred billion dollar but if you
13:31dig into how he structured his day total
13:33control 100% autonomy can do whatever
13:36the hell he wants all day long what he
13:38wants to do is get up and go to work but
13:40he he has delegated things so
13:43effectively that he can do whatever he
13:45wants and that's not only the key to his
13:47I think business success but his health
13:50lifestyle success and why he's 93 and
13:52still going as strong as
13:54ever I I was thinking about my calendar
13:56when you were talking about the CEO that
13:57makes $30 million a year but is just
13:59dragged around by his schedule sounds a
14:00lot like me to be honest I feel like the
14:02more successful I've got in my
14:04professional career the more my calendar
14:07the minute I wake up in the morning I'm
14:09just like a puppet master to these
14:10little boxes on my Google Calendar yeah
14:13they drag me around the world and
14:15there's very little I actually said to
14:16my assistant about a month ago I was
14:18like um Sophie please can you do me a
14:20favor could you just put lunch in for 30
14:22minutes because I'm not eating could you
14:24just put like could you just put that in
14:25midday every day at the same time so you
14:27can breathe so I can have a little bit
14:28of a moment where I do nothing and then
14:30also the other thing I've put in now I
14:31have a personal trainer 7even days a
14:32week and I've just put that in my
14:34calendar it was before then a residual
14:36beneficiary as was everything for me
14:38well not for me because my work is for
14:40me but um it it got the time that was
14:43left over when all my priorities were
14:45done and I do reflect on that and go
14:46like how like a when does that stop
14:49because it's clearly not going to stop
14:50when I make money because I have the
14:51money and B how much control do I
14:56actually have and you know what I do
14:58sometimes I think I've notic this about
14:59myself I think sometimes I cancel things
15:01just to prove to myself that I still
15:02have control that's great see that's a
15:04good thing there's a quote from nin talb
15:06where he says like you are wealthy when
15:07the money that you deny tastes better
15:10than the money you accept so you get
15:12someone comes to you with a business
15:13deal and you say no thanks I don't want
15:15it when that tastes better to you than
15:17accepting the deal it feels better to
15:19you that's like one definition of of
15:22Rich there's another great quote from
15:23tedward he says the world is split
15:25evenly between people who don't know how
15:27to start making money and people who
15:29don't know when to stop making money and
15:31I think there are a lot of people that
15:33are watching this that are in kind of
15:35our field who are easily in the ladder
15:38they have all the money that they could
15:39ever want to spend or maybe not not that
15:41much but they have more money than they
15:43ever thought they would have but for
15:46every goal that they hit oh whenever my
15:49net worth is X all my problems are going
15:51to go away everything's going to feel
15:52great and then they hit X and they just
15:53keep moving the goalpost down and down
15:55so I read in the book that like the
15:56hardest Financial skill is getting the
15:58goal post to stop moving it's the
16:00hardest thing in the world it's hard for
16:01everybody because virtually everybody
16:03thinks if my net worth or my income was
16:05this level I'll be fine I'll feel great
16:08no more problems I'll wake up every
16:09morning with a smile on my face and then
16:11if you're lucky enough or you work hard
16:13enough to get there you realize it's not
16:14the case at all you're just going to
16:15keep pushing it keep pushing it keep
16:17pushing it forever have they done
16:18studies to test that in terms of
16:21analyzing whether people's goal posts
16:23move off into the future even when
16:24they're like billionaires and whatever I
16:26mean here's here's the broadest way that
16:27I would frame this that has been studied
16:29if you look at America today the average
16:32household adjusted for inflation is
16:34making twice as much money than they
16:36were in the 1950s to adjusted for
16:38inflation the average household double
16:39the income that they were back then and
16:41we're less happy the statistics that try
16:43to measure happiness over time it's not
16:46an easy thing to do but we're less happy
16:48today than we were back then and this is
16:50why like look can money buy happiness
16:52yes and to some extent does it yes like
16:54people who are in abject poverty are not
16:56as happy as people who are covering the
16:58basic and they have food and shelter etc
16:59etc but over time when you when the
17:03society is getting richer and you're
17:05comparing yourself to other people and
17:07maybe the average American's income
17:09doubled but so did their neighbors so
17:10did their co-workers so did their
17:12siblings so you just automatically
17:13adjust to that I talked about
17:15Rockefeller before Johny Rockefeller who
17:17died in I think the 1930s he was worth
17:19adjusted for inflation almost half a
17:21trillion dollar during his day adjusted
17:24for inflation but he never had during
17:26his life penicillin
17:29Advil sunscreen polio vaccine keep keep
17:32going down the list of things that
17:34virtually everyone can take advantage of
17:36today that he never had but you can't
17:38say that the average American is living
17:41better than Rockefeller today because we
17:43have all of these technologies that he
17:44never did because we just look at what
17:47other people have and assume that that
17:49is the Baseline so you can imagine a
17:51world in which my kids my grandkids are
17:54earning twice as much as me adjusted for
17:56inflation and they're no happier for it
17:58because the new technologies whatever it
18:00will be that would seem like magic to
18:03you and I will just become their
18:05Baseline and that's always been the case
18:07if there was if Thomas Jefferson or
18:10somebody came to the year 2023 he would
18:12faint at the new technologies and the
18:15medical discoveries that we have and
18:17these are technologies that you and I
18:18don't spend one second being grateful
18:20for because we've just accepted them as
18:22a new Baseline it reminds me of
18:24something in your new book which is out
18:26in November which is you know I've
18:30gassed up a lot of books on this podcast
18:31before but this is one of my favorite of
18:33all time it's just so easy to read and
18:36so engaging because you you're one of
18:39those authors in this book that realizes
18:41the world that the reader living in and
18:43they are busy and they want the point
18:45and they want you to you know give them
18:47not one word more than you need to it is
18:49so brilliant it's so brilliant um in
18:52this book you talk about exactly that
18:54you say the first rule of happiness is
18:56low expectations yep and that's exactly
18:59what you're talking about is comparison
19:00is the thief of Joy because it just
19:02raises our own expectations right when
19:04with that out the window goes our
19:05happiness yeah and it's it it it seems
19:08counterintuitive to people that if you
19:09want to be H for most people it's if you
19:11want to be happier you need to be
19:12ambitious you need more you need to make
19:14more money work harder have a more
19:15successful startup whatever it would be
19:17and there's that's true but that's half
19:18the equation the other half the equation
19:20is keep your expectations low so the gap
19:22between those two it's the gap between
19:25those two that actually accru to
19:26happiness over time how did you learn
19:28that I think it's just I think there
19:30have been a couple little stories that
19:31really stuck out to me one that I love
19:33that just knocked me on my ass the first
19:36time I read it was stepen Hawking the
19:38late physicist who was without
19:40exaggeration one of the smartest people
19:42to ever walk this planet he was just an
19:43absolute genius and a quirky of course
19:46is that he had a motor neuron disease
19:47and he was paralyzed from head to toe he
19:49had no control over his body he spoke
19:51through a computer not a single muscle
19:53in his body could he actually control by
19:54himself so he was you know
19:57physiologically it's one of the worst
19:58lives that you can imagine and he did an
20:00interview with the New York Times a
20:01couple years before he died and during
20:03the interview he's talking about how
20:04happy he was and how amazing his life
20:07was and the New York Times said they
20:09asked him they said what is your secret
20:10to happiness like if there's anyone who
20:13has the right to complain about life
20:15it's it's that guy and he's talking
20:16about how happy he was and he said my
20:19expectations were reduced to zero when I
20:21was 21 which is when he got his disease
20:24and he said everything else since then
20:25has been a bonus so this is like the guy
20:28who whose life is like has ended up in a
20:32way that most people watching that would
20:33say like that's among the worst
20:35scenarios you can imagine and he's
20:36probably happier than you and I because
20:39his expectations were so low that just
20:41waking up in the morning and seeing the
20:43sunrise and getting to go to work and
20:45talk to people was this magical gift I
20:48mean you can imagine not to get too
20:49morbid about this but imagine you're on
20:50your deathbed and the doctor is very
20:53confident that you're going to die
20:54tomorrow and let's say that you make it
20:56one more day what what is that Sunrise
20:59going to feel like what's that you know
21:01holding your your wife's hand for one
21:03more day going to feel like it' be
21:05amazing just because your expectations
21:07were on the floor and so it it's always
21:10like that and you go through life seeing
21:11so many people who have everything all
21:13the money the great family all the
21:16health the beauty everything you can
21:17imagine and they're not happy for it and
21:19it's because with everything that they
21:20have their expectations rise not only to
21:23that level they might rise above it so
21:25if you are some if your expectations
21:27rise faster than your income you're
21:29never going to be happy with your money
21:31no matter how much money you make you
21:32can make a billion dollars a year but if
21:34you needed and wanted 1.1 billion you're
21:36broke you feel broke and the reverse of
21:39that is true too there are people who
21:40make $50,000 a year but if they only
21:43need 40 to be happy they're stoked they
21:45feel great and so that's I think that's
21:48one of the reasons so important is
21:49because managing your own expectations
21:52is more in your control than managing
21:54your circumstances in terms of raising
21:56your income raising your invest in
21:58returns not it's not that you can't
22:00control raising your income you can be
22:02ambitious and smart and entrepreneurial
22:03of course but it's more in your control
22:05to inside your head to say I'm going to
22:08try to want less that that's just a
22:10mental exercise that's it's not to say
22:12it's easy it's not easy at all but you
22:14have total control over doing it so how
22:17in a practical sense can one go about
22:20keeping their expectations below their
22:23circumstances I guess here's here's one
22:25that really made an impact on me it's
22:28great that we're in La cuz that's where
22:29this story took place I was a valet here
22:32in La all throughout college at a festar
22:35hotel here in town so a I I was young I
22:37was you know aged 19 to 24 or something
22:40like that and all day it was people
22:42driving in in Ferraris and Lamborghinis
22:44and rolls-royces and one day it hit me
22:47just I I I remember the moment because
22:48it was like out of the blue it hit me
22:50whenever someone would drive in in a
22:52Rolls-Royce or something never once
22:54would I look at the driver and say that
22:56guy is cool like wow look at him he's so
22:59cool what I did is I imagined myself as
23:01the driver and then I thought if I was a
23:03driver people would think I'm cool and
23:05it was like wait don't you see like the
23:07disconnect here nobody cares about the
23:09driver but they want to be the driver
23:11because they think people will then care
23:13about them and once you realize that
23:15like the takeaway is nobody is thinking
23:18about you as much as you are nobody
23:20cares about your stuff as much as you do
23:22nobody cares about your car or your
23:24house or your clothes or your jewelry as
23:26much as you do because to the extent
23:28that they're even looking at them
23:30they're looking at your car looking at
23:31your house really what they're doing is
23:33imagining themselves with that nice car
23:36they're not giving you the credit
23:37they're imagining themselves having it
23:38so once I realize like that was the game
23:41that was being played in society once
23:43you once you recognize that's the game
23:45your willingness your desire to show off
23:48plunges and of course I I like nice
23:51stuff I like nice cars I want some nice
23:52clothes I live in a decent house but
23:55once you realize that it plunges and I
23:57think the most valuable Financial skill
23:59that anybody can have is not needing to
24:01impress other people if you don't need
24:03to impress other people that is an asset
24:07on your balance sheet that is worth a
24:09billion dollars because so much of
24:11society as a whole and individual is
24:14just geared towards how can I get other
24:16people's attention how can I show off to
24:18other people how can how can they like
24:19me more I both agree and understand but
24:22agreeing and understanding is different
24:24from being able to do I think at the
24:26society level it will never be it'll
24:27always be like that same as ever it's
24:29never it's never going to move away from
24:31that if you can manage it around the
24:33edges at the individual level it's
24:35massive for your life one thing that's
24:36important here is that if you are a
24:39young person and you're kind of looking
24:41for a spouse a mate a boyfriend a
24:43girlfriend a wife a husband whatever it
24:45would be then your ability to look
24:47really nice and to signal and to kind of
24:49put up your peacock feathers is
24:51important and I get it and I did it back
24:53in the day once you are more settled
24:55down in your career in your
24:56relationships if at that point you are
24:58still hanging on to the desire to
25:00impress other people that's when it's
25:01broken that's when it's just pure net
25:03loss in your life because you're trying
25:05to show off for people who you don't
25:07even need or want to love you there's a
25:10great quote from Warren Buffett where he
25:11says the definition of success is when
25:13the people who you want to love you do
25:16love you and so for me it's like five
25:19people it's like my parents my wife and
25:21my kids and like that's it that's it
25:23those are the people who I want to love
25:24me and if they love me I probably have 9
25:27% of the happiness that I'm capable of
25:30and if they don't love me and then I'm
25:32never going to have more than like 10%
25:34of the happiness that I'm capable of in
25:35that chapter about happiness you talk
25:37about your friend Brent as well in his
25:38theory on marriage yeah my friend Brent
25:40bishaw has this great theory on marriage
25:42where he says marriage only works if
25:45both Partners want to serve the other
25:48partner and expect nothing in return so
25:50you wake up every morning you say I want
25:52to serve my spouse but I expect nothing
25:54in return from them and if you both do
25:56that simultaneously you're both
25:58pleasantly surprised because what
26:00happens is I didn't expect you to do
26:01anything for me but you did and vice
26:04versa and both of you just wake up every
26:05morning you're like but you did that for
26:07me you you helped me out here you you're
26:09empathetic to me there and it feels
26:10great you exceeded my expectations
26:12exceed my expectations and I think what
26:14breaks down any marriage or career or
26:16whatever it would be is when you become
26:19needy like nothing breaks love more than
26:22being needy and really what needy is is
26:25just your expectations are so high that
26:26you wake up and you say expect you to do
26:28this for me I expect you to help me I
26:31expect you to serve me that's just like
26:33massively high expectations that you
26:35have in that relationship it's it's also
26:37like expecting an external factor in
26:39that case your partner to validate you
26:42in some way or to and that kind of goes
26:44back to your point about money where in
26:46order to stop showing off and focusing
26:48on those five people that we want to
26:50love
26:51ourselves we need to understand and
26:54ideally solve our often toxic
26:57relationship ship with like our need for
26:58validation and that I guess brings me to
27:01the first chapter in your book where you
27:02talk about the stories of money that we
27:04have and where they've come from and
27:07something that's always baffled me is
27:08when you go into low-income areas
27:10there's more gambling shops yeah and I
27:12can attest to it when I was 18 19 years
27:15old and I'm shoplifting pizzas to feed
27:17myself and I'm doing all sorts of stuff
27:20when I got my student loan in I was in
27:21university for one day and they gave me
27:23like the first payment of my student
27:25loan I don't think I've ever said this
27:27before
27:28I put the entirety of the payment on a
27:30bet wow and I lost it in a six in the an
27:34injury time of that football match I
27:36don't bet and did you need that money
27:37for tuition like it it was then it was
27:39then gone I needed it to eat yeah I
27:41wasn't speaking I had no money but I
27:43don't come from I didn't come from money
27:44my parents I'd gone to University with
27:4550 Quid and I got this like, sent to me
27:48from student loan whatever I was so
27:50reckless with money when I didn't have
27:52money the minute I got money it's like
27:54everything just chilled the [ __ ] out and
27:55I I became really longterm term patient
27:58I made really responsible decisions I
28:00stopped buying flashy things I like
28:02don't even own a TV now I'm very Sim I
28:04feel like the more money I have the less
28:07my material desires are for sure for
28:09sure when I say that out loud I'm like
28:10oh absolutely why is that that when we
28:12have less we are Reckless without money
28:14well I think there's two sides to this
28:15one of my theories is
28:17that what everyone wants in the world is
28:20respect and admiration from other people
28:22and there's kind of two ways to get that
28:24you can get your respect and admiration
28:25through your wisdom through your love
28:28through your humor or if you don't have
28:30that to offer from the to offer to the
28:32world you're going to get it through
28:33your material possessions so if you can
28:36gain respect and admiration through your
28:37business success your wisdom your love
28:40your friendship great then you're going
28:42to get it and you're going to fulfill
28:43that bucket if you can't get it from
28:44those things then you're like well might
28:46as well show off my car it's all I got
28:47to do that's all I have I think that's
28:49one side of it so as you become more
28:51successful your desire to show off
28:54diminishes because you're gaining
28:55respect and admiration through other
28:57things that that are not Material the
28:58other side of this that's so important
29:00is that you know I saw this statistic
29:03years ago that the poorest of 10% of
29:05Americans buy like 80% of the lottery
29:08tickets in America and these are people
29:10who can like barely feed themselves low
29:13as 10% they're literally struggling to
29:15put a roof over the head and feed
29:17themselves are going out hand over fist
29:19buying scratcher tickets and the the
29:21knee-jerk reaction when you hear that is
29:24morons what are you doing you idiot and
29:26maybe that is the right reaction but I
29:28started thinking about it and it was
29:29like okay maybe if you try to put
29:31yourself in those people's shoes maybe
29:33they would say something like this if
29:35you are stuck in a low-income job and
29:38you feel like there's no way out you
29:39feel like you don't have the opportunity
29:41to work your way up the ladder become an
29:43entrepreneur you feel like you're stuck
29:44in this position buying a lottery ticket
29:47might be the only thing in life that
29:49gives you a little bit of hope it might
29:51it's might be what feels like literally
29:52your only ticket to get out and that
29:55might be not something that you and I
29:57feel like because we have we we we at
29:59least feel like we might have other
30:00opportunities I it's you're so right
30:03because when I gambled what I then did
30:05the same day before the result of my bet
30:09or my lottery ticket came in and I said
30:10this to my team the other day is I would
30:12go on right move and like AutoTrader and
30:15look at stuff that I would buy if I won
30:17yeah yeah I think there's a sense too
30:19that if you are stuck in a lower spot in
30:23life if you have a feeling that the
30:24world is unfair and very often it is so
30:27some maybe that that that might be the
30:28right mindset but if you feel the world
30:30is unfair then it's very natural to
30:32think I might as well cheat too if the
30:34world's unfair why not might as well
30:35cheat and I think that at least at some
30:38level has some explanation for the
30:40relationship between poverty and crime
30:42that word hope is it's so it's so true I
30:44think it's true too you just a glimpse
30:46of Hope because it gives you even if
30:47it's a
30:480.00001% chance if it's the only thing
30:50in your day that made you smile a little
30:52bit made you feel like you had a little
30:53bit of hope then I get why they do it
30:55the other reason the other thing I think
30:56of a lot about here is that if you are
30:58in a low-income job and you're working
31:01graveyard shifts and you're exhausted
31:03and you're taking three buses to get
31:04your kids to school if the only thing
31:07that day that gives you a little bit of
31:08pleasure is a cigarette and some alcohol
31:11I get it I totally get it and that's
31:13also the relationship between health and
31:15poverty is a lot of that too so it's
31:16very easy for people who are of higher
31:19means to look down at those people and
31:21point out all the bad decisions that
31:23they're that they're doing in life but I
31:25think you underestimate how much that
31:27desire to just have a little bit of Hope
31:29a little bit of pleasure and if those
31:30feel like your only avenues for Hope and
31:32pleasure maybe that's the explanation
31:33for at least part of it quick one this
31:35is really really fascinating to me on
31:37the back end of our YouTube channel it
31:39says that
31:4069.9% of you that watch this channel
31:42frequently over the lifetime of this
31:44channel haven't yet hit the Subscribe
31:46button I just wanted to ask you a favor
31:48it helps this channel so much if you
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31:52the guest helps us scale the production
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32:00that you're currently watching could you
32:01please hit the Subscribe button thank
32:03you so much and I will repay that
32:05gesture by making sure that everything
32:07we do here gets better and better and
32:08better and better that is a promise I'm
32:10willing to make you do we have a deal
32:11let's speak then to 18-year-old Steve
32:14that was in that little room with the
32:15stack of these what they call County
32:17Court judgments and bays and stuff stack
32:19of letters on his desk what advice based
32:22on all you know about money and finance
32:24can you give to somebody who is maybe
32:27you know making a th $1,000 $2,000 a
32:31month covers their rent just about
32:33doesn't have a lot of money left over
32:35what is the best way to go from that
32:37position to a position of wealth in your
32:39view I think one of the best ways to
32:42think about it at the lower levels and I
32:44explained a little bit this earlier but
32:45to dig into it is a lot of what's
32:47probably giving you stress in life is
32:49that you don't have control over what
32:50you're doing and if you view every
32:52dollar of savings that you have as a bit
32:53of your future that you own and control
32:56then I think that mind shift that
32:58mindset can shift pretty dramatically
33:00and it's like that's that's the ticket
33:02out the ticket out is not a nicer car
33:04it's not a bigger house it's not better
33:06clothes the ticket out is Independence
33:08that's what's going to give you the
33:08better career that's what's going to
33:09make you happier that's what's going to
33:10make you healthier and the only thing
33:12that's going to give you Independence is
33:13having enough money saved up so that you
33:15can choose where you want to live maybe
33:18even what job you want you can choose at
33:21at at some point down the road when you
33:22retire if you get sick it's not just
33:24going to break you immediately having
33:26that dependence is going to take more
33:28weight off your shoulders than anything
33:30else you can do in life save money
33:32that's it that's the the title of that
33:33chapter in the book is save money
33:35because you can't put it any clearer or
33:37Starker like that's that's it he says
33:39there are three types of people those
33:40who
33:41save those who don't think they can save
33:44and those who don't think they need to
33:46save yep three types of people which one
33:49are you those who save those who don't
33:51think they can save and those who don't
33:53think they need to save I tell you what
33:55I've been all three of my life that's
33:57interesting I've always been a saver no
33:59I haven't and see that I think that's
34:00actually very rare that you change who
34:03you are really on the nature nurture
34:05Spectrum I actually think and this is
34:07kind of disappointing to talk about it's
34:09not fun to talk about but on the nature
34:10of nurture Spectrum I think a lot of
34:11money is nature Warren Buffett talks
34:14about the people who have the money mind
34:16which means like either they get it or
34:17they don't and if they get it they get
34:19it instantly and if they don't they'll
34:20get it never at all I I I actually don't
34:23believe in it it's that black and white
34:24Charlie Monger explains it like that he
34:26says
34:27when explaining financial matters to
34:29young people they either get it
34:30instantly or never at all and he's
34:33putting that too starkly I think I don't
34:35think it's that black and white but on
34:37the nature nurture spectrum is it 8020
34:39is it 7030 I think it's probably
34:41something in that range so let me give
34:44you a count a counterargument to that
34:46then so as I said I've been someone that
34:49didn't think he could save because I
34:50didn't have money and I just thought oh
34:52you know but I could have saved in it
34:53looking back now I know I could have
34:54saved I could have saved a small amount
34:56but I didn't see the value in Saving
34:57small numbers I didn't understand the
34:59laws of compounding returns which we'll
35:00definitely talk about I have also been
35:03the person that
35:04saves and I've also been the person who
35:09thought they didn't need to save I've
35:10been all three my Counterpoint to this
35:12goes back to a story that I read from
35:14your early years where two of your
35:17friends died on a ski trip yeah and it
35:19also links to something you said in your
35:21new book same as ever where you speak
35:23about
35:24how sometimes in life
35:27like hitting rock bottom is the greatest
35:31incentive to change our lives yeah so I
35:33put those two things together and go
35:34that moment when you two of your friends
35:36died on a ski trip that you were on when
35:37you were younger it had an impact on
35:39your risk appetite and your attitude
35:42towards and therefore your attitude
35:43towards money yep what what happened
35:45what happened so I grew up skiing in in
35:47laho California and I was a competitive
35:49ski racer right uh so all throughout my
35:51childhood and teenage years I skied 6
35:53days a week 10 months a year all over
35:55the world and it was great there about
35:5712 of us on the squad Valley ski team we
35:58had grown up together and we' spent our
36:00entire lives together and when I was 17
36:03this is in 2001 I was skiing with my two
36:05two of my best friends brandan Allen and
36:07and and Brian Richmond and we would ski
36:10out of bounds which is illegal you're
36:12not supposed to do it we would duck
36:13under the rope that says do not cross
36:15and we'd ski out of bounds because
36:16that's where a lot of the good skiing is
36:18and when we would do this it would spit
36:20us out on this back country road where
36:22we'd have to hitchhike back there's no
36:24chairlift when you ski out of bounds you
36:25have to hitchhike your way back so so we
36:27did it one morning in February 2001 the
36:29three of us did it and when we did it we
36:31triggered a very small Avalanche and I I
36:34remembered it so clearly like I can
36:36still feel it 21 year 22 years later I
36:40can still feel what is like it's the
36:41weirdest sensation of that I've had in
36:44my life because when you get hit by an
36:46avalanche rather than pushing on the
36:47snow to gain traction with your skis the
36:50ground is pushing you so all of a sudden
36:53you're skiing along and you got control
36:54and all a sudden boom you have no
36:55control anymore the the ground is
36:57pushing you around probably similar to
36:59what it feels like if you're standing on
37:00the ground during an earthquake like the
37:01ground's pushing you but it was a pretty
37:03small Avalanche maybe came up to our
37:05knees ended pretty quickly and we kind
37:07of like literally high-fived about it at
37:09the bottom and went about our day we get
37:11back around to the the base Lodge we
37:14hitchike back and brenon and Brian said
37:16they wanted to do it again they wanted
37:17to ski again and I said hey for whatever
37:19reason I I I just didn't want to do it
37:22so I said hey rather than hit checking
37:23back why don't you guys go do it again
37:25and I'll drive my truck around and pick
37:26you up so we said great we made our
37:29plans went our separate ways they went
37:30skiing I went back around to take my
37:32boots off and jump in my truck and go
37:33pick them up 20 30 minutes later I go to
37:36pick them up at the pickup spot and they
37:37weren't there and I knew it only took us
37:40a minute to ski down the hill so 20
37:42minutes later I knew like they they they
37:44weren't coming I I was not worried I
37:46figured that they had already hitch hike
37:47home but so after waiting for another 20
37:50or 30 minutes I just left and I went
37:51back to the lodge I expected them to be
37:53there and they weren't and I still
37:55didn't really worry like we didn't have
37:56cell phones back then and people were
37:58just comfortable being out of touch if
37:59you didn't know where your your buddy
38:01was like wasn't that that wasn't that
38:02big a deal so we went about the day I I
38:05started worrying a little bit I remember
38:07I stopped at Brendan's house and
38:08expected him to be there and he wasn't
38:10there either and I remember calling and
38:12leaving a message on his voicemail and I
38:13remember ending the voicemail by saying
38:15I hope you're okay man those are my last
38:17word I remember that very clearly the
38:19day went on and I think at about 4: or
38:225:00 Brian's mom called me and she said
38:24Brian never showed up for work today do
38:26you know where he is and I told her what
38:29happened I said we skied the backside of
38:31squa where we'd hit Chik back I was
38:34going to pick him up but they never
38:35showed up and I haven't seen them since
38:37and I also remember so clearly Brian's
38:39mom saying oh my God and hanging up the
38:41phone and that was so like so it's then
38:43we started getting worried we called the
38:45police the police didn't take it very
38:46seriously because they thought ah
38:47they're out at a party they ran off with
38:49a girl for the night like they weren't
38:50worried but we finally got search and
38:52rescue involved and Rescuers of probe
38:54poles frowned brenon and Brian buried
38:57under 6 ft of snow and they were they
38:59had been killed from a massive Avalanche
39:02and so look I think virtually everyone
39:04listening to this I'm sure you to have
39:05lost somebody close to you somebody that
39:07you love so I know the experience was
39:09not unique in that way but it was the
39:12first time that I had experienced loss
39:14and it was the first bad thing that had
39:16ever happened to me in my life so it had
39:18a big impact on me and there were a lot
39:20of takeaways I think at the time I
39:22didn't have the cognitive tools to piece
39:25together what happened or to learn about
39:27what happened like have any sort of
39:29takeaways but as I got older and thought
39:31about it and looking back I put together
39:34all these like realizations of what that
39:36did to me how it changed me and what
39:39were some of the lessons from it too one
39:42that I talk about in the book that I
39:43think about all the time is my decision
39:46to not go with them on a second run was
39:49this completely brainless decision I put
39:51no thought into that decision it was not
39:53a cost benefit analysis I didn't think
39:55through it but it's the most important
39:57decision I've ever made in my life 100%
39:59chance if I was with them I would have
40:01died and I had skied literally thousands
40:04of runs with Brendan and Brian how many
40:06times did I deny a second run with them
40:09or say you guys keep going I'm going to
40:10go in almost never the one time I did it
40:12saved my entire life and so that you
40:15really realize that the world hangs by a
40:17thread everybody thinks like oh you're
40:19going to put a lot of thought into your
40:21big decisions to make sure that you're
40:22successful in life where you go to
40:23college what your career is going to be
40:25who you marry that's all great but the
40:27world hangs by a thread and there are
40:29tiny little no nothing decisions maybe
40:31that you made today of maybe it was when
40:34to cross the street maybe it was when to
40:36leave to get in your car that can
40:38utterly change the course of your life
40:41and so when once you accept that of how
40:44much the world hangs by a thread I think
40:45you become much more humble with your
40:47willingness to make forecasts about the
40:49future what the economy is going to do
40:51who's going to win the election what's
40:52going to happen in my life my career my
40:54family's life we have no clue we have no
40:57idea because all we can think about are
40:59the big decisions we cannot piece
41:02together the chaos theory of I got in my
41:05car at the at the wrong time I met the
41:08wrong person or I met the right person
41:09or you know I I decided not to take a
41:11second run we cannot forecast the impact
41:13of those things and so that had a big
41:16impact on me too of just who are we to
41:18fool ourselves that we can predict the
41:20next recession that we can predict where
41:22our careers are going to be in 10 years
41:24that we can predict how long our
41:25marriage is going to last that we can
41:27predict how long we're going to live we
41:28can't nobody can because we can't
41:30predict how crazy these tiny events can
41:33turn into and this comes right back to
41:35investing doesn't it
41:37because most people that consider
41:40themselves to be investors whether
41:41that's just putting a couple of quid
41:42into crypto or something else engage in
41:46that idea that they can predict the
41:47future yeah um and this is where it
41:50appears that most money is lost I mean
41:52think about the biggest risk to the US
41:54economy over the last two generations
41:57that's one of them the others would be
41:59Pearl Harbor
42:00911 and maybe uh Lan Brothers couldn't
42:03find a buyer in 2008 which sparked the
42:05financial crisis of 2008 those are the
42:07biggest risks by far and the common
42:09denominator of every one of those
42:10stories is that nobody saw them coming
42:13they were not in any newspaper before
42:14they happened they were not in any
42:16economic Outlook nobody was going on TV
42:19warning you that this was coming the
42:21common denominator of those is that they
42:22did all of their damage in two seconds
42:25and that would be thee going forward I
42:27you can guarantee that the biggest news
42:29story and the biggest risk over the next
42:31year or the next 10 years of our life
42:33whatever it is is something that
42:35nobody's talking about today that you
42:37and I have can't even fathom because
42:39it's always been like that there's never
42:40been a time when the biggest news story
42:42was
42:43foreseeable and it's all and it'll be
42:45like that going forward so that's
42:46another just like embracing how fragile
42:49the world is there's a great quote from
42:50a financial adviser who I really admire
42:52named Carl Richards and he says risk is
42:54what's left over when you think you
42:56thought of everything you can go out of
42:58your way to think about all of the risks
43:00that are in your life and like great and
43:02like how you're going to prevent them
43:03great that's a good thing to do when
43:04you're done with that exercise what's
43:07left over that you're not thinking about
43:08is what risk actually is it's like by
43:10definition we can never plan or even
43:12imagine what the biggest risks in our
43:13lives are going to be you say that in
43:15same as ever you say I think the the
43:17chapter title is risk is the things you
43:19can't see or something risk is what you
43:21don't see risk is what you don't see
43:23that was a little bit terrifying and
43:26it's true and I think I think sometime
43:27you can phrase it as terrifying it's
43:30also kind of relieving that like why are
43:33you going to put so much effort into
43:35trying to predict what the stock
43:36market's going to do next what the
43:37econom is going to do next why are you
43:39building a forecasting model to figure
43:41out what the economy is going to do over
43:43the next 10 years when you look at the
43:44last 10 or 20 years how could you ever
43:47predict 911 or coid and even look like
43:50something like Co there's like a 2015
43:52Bill Gates Ted Talk where he talks about
43:54the biggest risk to Society is a viral
43:57pandemic so it's not that nobody saw
44:00that thing coming but the specifics of
44:02when it's going to happen how bad it's
44:04going to be is it just going to shut
44:06down the economy for a week or two years
44:08that is completely impossible but
44:10there's also lots of other TED Talks
44:11that say everything's going to be great
44:13of course of course there's prob there's
44:14a lot more so on balance the world had
44:17no idea I think on balance the world
44:19breaks once per decade not exactly once
44:22per DEC but on average once per decade
44:24everything that you thought about risk
44:26and uncertainty and stability goes to
44:29[ __ ] so how do I prepare if risk if risk
44:32is what I don't see how do I prepare
44:34there's another great quote from Nasim
44:35talb that I like where he says invest in
44:37preparedness not in prediction so rather
44:40than going out of your way to be like
44:42here's what I think is going to happen
44:43in crypto here's what I think is going
44:44to happen in the stock market just make
44:45sure that you have a big enough buffer
44:47in your finances cash liquidity being
44:50scared of debt so that no matter what
44:53happens you're you at least have a
44:55Fighting Chance of enduring it and
44:56making through one thing I've I've often
44:59thought about is that you should have
45:01enough cash in your investing portfolio
45:03the amount of cash you should have
45:05should feel like it's too much it should
45:07feel it should make you wise a little
45:08bit because if you only have enough cash
45:11to put up with the risk that you can
45:13Envision and the risk that you can
45:14foresee you're going to miss a surprise
45:16every single time every single surprise
45:18is going to be a surprise to you but if
45:20you feel like you have too much cash
45:22then at least you have a Fighting Chance
45:24of putting up with the 911 the coid the
45:26Pearl Harbor whatever it might be so
45:29when people look at my asset allocation
45:32my investments a lot of people look at
45:34it and say you seem really conservative
45:36why do you have this much cash what are
45:38you saving for and my answer is always I
45:40don't know I have no idea what I'm
45:42saving for who are we to assume that we
45:45can predict the risks that are going to
45:46be in our own personal lives and
45:49throughout the broader World nobody can
45:51do it the only way to prepare for it is
45:52to have what feels like too much safety
45:55what is is your Capital allocation
45:57strategy how do you invest your money um
45:59this is you know this is the thing
46:00people want to know most about you I
46:02keep it as painfully simple as I
46:05possibly can so literally my entire net
46:06worth is cash a house and index funds
46:10and some shares of marel or I'm on the
46:12board of directors and that's it there's
46:14nothing else my entire I can summarize
46:16everything so easily and so cleanly and
46:19truly that's it it's not even like I
46:20have 20 bank accounts I I have one bank
46:22account one brokerage account like in a
46:24house and that's it it's so simple why
46:26why index funds you're the reason I your
46:30Capital allocation strategy is almost
46:31identical to mine I want to talk about
46:33the housing as well but um after reading
46:35your book I stopped trying to pick
46:37stocks yeah and I invested all of my
46:40available Capital into index funds
46:43outside of investing it in starting
46:45companies so I'm a shareholder in I
46:47don't know 50 60 70 companies I all my
46:50other available capital is invested in
46:52index funds and then I have a very
46:55longstanding standing large position in
46:57ethereum which I've held for like six
46:59years or something which has done me
47:00very well yeah that is it and the
47:02ethereum investment is also based on the
47:05fact that I run a software business that
47:07is in blockchain and I could see that
47:09developers are building on top of
47:10ethereum more than any other blockchain
47:12so that Insight was really beneficial to
47:15me and six years so even with the big
47:18fall of the last two years you're still
47:20up a lot yeah I I think your book taught
47:23me that successful in investing is when
47:26you lose the password to your investment
47:27account yes that's exactly it I don't
47:30actually think you said that in there
47:31but that's like when I lose the password
47:32to my investment account I'm so proud of
47:34myself because it means I haven't
47:36checked it in
47:37forever and so it was funny because you
47:39were coming today I thought oh yeah well
47:41I have all this money in these index
47:42funds I'll check it and I thought [ __ ] I
47:44don't know the password good that's why
47:46you're going to do okay the reason I do
47:48this what's important is that I am not
47:49one of the people who says nobody can
47:51beat the market so therefore use index
47:52funds that's not what I believe I think
47:54there I think it's extreme hard to beat
47:56the market and very few people will do
47:58it but I think there are really smart
48:00people who can do it and people who I
48:02know who I could invest with the reason
48:04I don't is not because I don't believe
48:06it can be done it's because the variable
48:07that I want to maximize for in my
48:09investments is endurance if I can just
48:12earn average returns for an above
48:13average period of time it's going to
48:15lead to amount of success that will
48:17literally put you in the top 5% of
48:19investors my parents are a great example
48:22of this my parents are smart people but
48:24they really they have no fin background
48:26and they have like minimal financial
48:27interest I would say and but they have
48:30dollar cost average into index funds for
48:32going on 40 years now and literally if
48:34you look at their returns they've never
48:35sold anything ever and literally if you
48:37look at the returns they'd probably be
48:38in the top 3% of professional investors
48:41what is for anyone that doesn't know
48:43what is dollar cost averaging and what
48:44is an index fund dollar cost averaging
48:46means you buy the same dollar amount of
48:49Investments every single month come hell
48:51or high water doesn't matter what the
48:52stock market's doing recession boom bust
48:55you say I'm going to going to put $100
48:56or whatever it is in the stock mark on
48:58the first of every month now most people
49:00who like have a 401k at work are doing
49:02this whether they know it or not they
49:04have $100 or whatever removed from every
49:07paycheck and it goes into the funds that
49:09they own and they don't have to do
49:10anything whether you know it or not
49:11you're actually doing it the contrast to
49:13that would say I'm G to buy and sell
49:15based off of how I feel in the stock
49:17market I wake up I watch CNBC I decided
49:19to sell and I'm going to put it back in
49:20when I feel better about the market it's
49:22the contrast of that an index fund is
49:24just a single fund that owns hundreds or
49:26thousands of stocks within it and if
49:28it's diverse enough if it's big enough
49:30really what you're doing is you're
49:31owning a slice of the global economy
49:34which is how I think about it it's
49:35thousands of individual stocks in there
49:37Tesla Apple whatever it would be but
49:39really what you're doing is you're
49:40owning a slice of capitalism if I was
49:42your son and I said Dad prove to me that
49:44that's a better long-term wealth
49:46creation strategy than buying crypto or
49:49buying companies that I use or like how
49:51would you explain that to your to your
49:54kid your ability to do well over the
49:56next one year or 5 years is going to
49:58have no role whatsoever on your lifetime
50:00ability to generate wealth all that's
50:02going to matter is not what are the best
50:05returns you can earn all that matters
50:07are is what are the returns that you can
50:08sustain for the longest period of time
50:10all that matters is your endurance it
50:12doesn't matter if you can double your
50:13money this year or even double your
50:15money again the next year all that
50:16matters is can you stick and keep it
50:19going for 50 years that's where
50:21compounding comes from prove it all
50:23because the formula for compounding is
50:25returns to the power of time that's not
50:27quite it but like more or less that's it
50:29so in that equation if you understand
50:31the math all of the heavy lifting comes
50:33from the exponent prove it because
50:35that's how exponential growth works
50:36that's how it works it's literally
50:38exponential give me a case study where
50:39someone has followed that strategy and
50:41done well okay here's one way to explain
50:42it that I use in the book
50:4499% of Warren Buffett's net worth was
50:47accumulated after his 60th
50:49birthday after he turned 60 years old
50:5299% of his wealth Jesus has been
50:54accumulated after that period because
50:56the longer you hold that four the
50:58crazier the numbers get when he was 60 I
51:00think he was worth about $3 billion lot
51:02of money it's a multi-billionaire but
51:04now that he's 90 he's worth over hundred
51:06billion and he's given like a 100
51:07billion away to charity so if he didn't
51:09do that he'd be worth he'd go from three
51:10billion to2 200 billion since he's been
51:1260 because the numbers just get crazier
51:15at that point he's worth a hundred
51:16billion doar so if his if his Market if
51:18his net worth goes up 10% in one year he
51:20makes1 billion which is three times that
51:23he was worth when he was 60 so that's
51:25when you look at somebody like Buffett
51:27is he a great investor is he a great
51:28stock picker of course but the real
51:31secret to his success is that he's been
51:33a good investor for 80 years and if he
51:36had retired at age 60 or at age 50
51:38nobody would have ever heard of him he
51:40would have been like one of the other
51:42multi-billionaires who lives in Florida
51:44and plays golf and like you you've never
51:45heard of him the reason he's a household
51:48name is because he's been doing this
51:49non-stop since he's since he's been 11
51:51years old and he's never stopped it's
51:53just the endurance that's made him so
51:55wealthy not necessarily the annual
51:57returns patience it's a difficult thing
51:59it also reminds me of the story that you
52:00talk about in the introduction of your
52:01book about the janitor Ronald James Reed
52:05yeah who when he died in 2014 age 92 had
52:09a net worth of over 8
52:11million and he was a janitor how did he
52:14do that he took what very little money
52:16he could save from his job as a janitor
52:18mopping floors at the gas station he put
52:21it in stocks and he left it alone for 70
52:23years and that's it that's all you need
52:25that's all you need to do if you have
52:27endurance in your investing and you can
52:29keep it going for years or decades you
52:31don't need to be a genius stock picker
52:34and now do not need to do it if you have
52:36endurance you're going to beat literally
52:3797 or 99% of the genius stock Pickers
52:42and what's so interesting about it is
52:43like picking the right stocks is hard
52:45it's supposed to be hard like there's no
52:47world in which everybody who tries to
52:49beat the market is going to do it of
52:50course it's hard just like being an NBA
52:51player is hard and but having endurance
52:54is like largely in your control it's so
52:57much easier to just be patient than it
52:59is to pick the right stocks every single
53:01day now I think some people nature
53:03nurture some people like probably Ronald
53:05Reed and my parents Ju Just understand
53:07it naturally it's not hard for them to
53:08be patient but do like there are
53:11professional investors who work 80 hours
53:13a week for 30 years to try to beat the
53:16market and they can't do it not only
53:18some that that explains like most of
53:20them and even the ones who can do it are
53:21maybe going to beat the market by half a
53:23percent per year 1% per year but if you
53:25can have endurance that is that's a
53:28bigger benefit than you can have by even
53:30being like a very successful stock
53:31picker like somebody who outperforms the
53:33market by one percentage Point per year
53:36and they can do that for 10 years that's
53:38amazing that's like Mount Rushmore
53:40investor but somebody who earns average
53:42returns and does it for 20 years is
53:45going to have way more money you do it
53:46for 30 years you're going to be Filthy
53:48Rich You' be like Ronald Reed you can be
53:50a janitor who leaves $8 million to
53:52charity when you die but so in the case
53:53of Ronald Reed you're not looking at him
53:55a little bit and go listen bro if you
53:57had eight or9 million in the bank you
53:59should have been living it up see this
54:01is one I I do kind of regret that in the
54:04book that I'm I kind of I didn't say it
54:06explicitly but I kind of make him out to
54:08be a role model and I don't think that's
54:10the case he's not my role model I think
54:12he's a fascinating story of somebody who
54:14became Rich despite not having any of
54:17the pedigree or any of the skills that
54:19you are normally associated with wealthy
54:21people but you're right that he lived in
54:24a a
54:26squalid housing and he worked as a
54:27janitor that's not my goal so I I I want
54:30to live a nice life I want to be
54:31independent but he's the most extreme
54:33example that you can come up with and I
54:35I I wish I had stated that more clearly
54:37in the book A lot of people have this
54:38conversation around pensions and in the
54:40UK we we can pay money from our salary
54:42into our pension but I think a lot of
54:44people think gosh when I'm 60 when I'm
54:4765 I want to be rich I want to be rich
54:49when I'm 25 yeah and I can go to Vegas
54:52and you know ball out and buy nice
54:55things and have great experiences not
54:57when I'm 65 yeah no I think that's true
55:00I think there are a lot of people a lot
55:01of financial advisers will say that one
55:03of the hardest things they do as an
55:05adviser is getting their clients to
55:06spend money because they've been so
55:08conditioned to save save save save save
55:10that when they finally retire at 65 they
55:12don't know how to spend they have no
55:13clue how to spend money there's a great
55:15uh author I think you've had him on your
55:16show RIT Siti who talks about this a lot
55:19like how you like you need to learn how
55:20to live a a rich life and figure out
55:23what that is for you for some like for
55:25me it's just like my my happy state is
55:28like sitting on the couch in sweatpants
55:29reading a book going for a walk with my
55:31wife that's that's that's my rich life
55:33that I love doing and to do that I need
55:35to be independent and autonomous so I
55:37can do that all day long I can do that
55:38on a Wednesday afternoon rid talks a lot
55:40about like maybe your rich life I think
55:42for him it's flying first class and
55:44wearing nice clothes and he talks about
55:46like he drives I think like a beat up
55:48Honda but he flies first class and he
55:50dresses very nicely so you just have to
55:52figure out what is the little thing
55:53that's going to make you happy and I
55:55think a lot of people's problem is that
55:57Society tells you what you're supposed
56:00to do to be happy you're supposed to
56:02have a nice car supposed to have a big
56:03house supposed to wear nice clothes
56:05that's what Society tells you to do and
56:07for some people that might be the case
56:09for other people like me I think it it's
56:11not that's that that would not ever make
56:13me happy what does make me happy is
56:15Independence so I can just do these
56:16little quirky things that I like to do
56:18so I think you just have to figure out
56:20the little things that make you happy
56:22rather than just being forced by Society
56:24into what they want you to do knowing
56:27when enough is enough this was one of
56:29the most interesting things that I think
56:31really rang true to me was how do I know
56:34in my life when enough is enough I've
56:35definitely been a victim to that
56:36external narrative that I need to have
56:38these things in my life to be a happy
56:40person but how does one go about knowing
56:43when enough is enough I think back to
56:45the story of my father he just woke up
56:47one day and it was obvious that he would
56:50he had been doing what he did for long
56:52enough and it was he had felt like he
56:54had enough and what not and he and he
56:56broke away from it I
56:57think for for a lot of people it's just
57:00I one thing that's important about the
57:01concept of having enough in Independence
57:03is that when most people even if they
57:05are independent they wake up every
57:07morning what they want to do is go to
57:08work one of one of the big problems with
57:10the fire movement the financial
57:11Independence retire early movement where
57:13people are like they're going to be a
57:14Super Saver and then retire at age 31
57:16whatever it' be so many of those people
57:18who actually did that and retired at age
57:2031 they once they retired after about 2
57:23weeks they were bored out of the mind
57:25and if they did it for 6 months they
57:26were clinically depressed cuz for most
57:29people you want to be productive you
57:31want to keep doing it so having enough
57:33doesn't necessarily mean that you're
57:34going to stop working it just means
57:36you're going to keep doing only the work
57:37that you want to do there's a really
57:39interesting question that Patrick oesi
57:41asks a lot of people uh in in his office
57:44he says if you won a billion dollars in
57:46the lottery but you had to stay at this
57:48job you're a billionaire but you can't
57:50quit what if this company would you want
57:53to do and what would you get rid of
57:55and virtually everyone has an answer for
57:57that question they say oh if I didn't
57:58need the money but I have to stay I
58:00would love to work on this project I
58:02love working on this thing this that and
58:04the other is all [ __ ] to me so like
58:07in any job there's going to be something
58:08that you want to do there's going to be
58:10some project there's be some position or
58:12or or maybe it's like being an artist
58:13whatever it would be it's not that you
58:14stop working it's that when you have
58:16enough you get to pick and choose which
58:18of those things you going to end up
58:19doing it's often too late in our lives
58:20when we realize the cost that we've paid
58:23for enough never been enough you know it
58:26could be family it could be Health
58:27whatever um I always reflect on the with
58:30Brony wear wasn't it who interviewed
58:31people on their deathbeds and found out
58:33that the biggest regret of the dying was
58:34not living a life true to themselves
58:36working too much Etc but that's on your
58:38deathbed there's nothing you can do at
58:39that point right and I think a lot about
58:41this like what am I going to regret yes
58:43I think about that too I think this is
58:45this is pretty morbid to think about but
58:46I think about if I were on my deathbed
58:48tomorrow would I regret working hard and
58:51saving a lot of money and my answer is
58:52absolutely not it would give me so much
58:54pleasure to know that my wife and my two
58:56young kids are going to be fine and the
58:58opposite of that I cannot fathom being
59:00on my deathbed and looking at my wife
59:02and my eight-year-old son and my
59:03four-year-old daughter and thinking you
59:05guys are screwed that would that that
59:07would that would be the biggest regret I
59:08can fathom so I think a lot of people
59:10would look at someone with a high
59:11savings rate like me and would assume
59:13that I'm going to regret it on my
59:15deathbed and who knows but I I I have to
59:17think it would actually be the opposite
59:19what makes me gives me so much happiness
59:21and pleasure is taking care of my family
59:23and if I were to go to tomorrow I
59:25wouldn't regret for one second the car
59:27that I didn't buy the big house I didn't
59:29buy the nice clothes I didn't buy not
59:31for a second would I regret not doing
59:33those it's a really good frame to Think
59:34Through isn't it about our financial
59:35decision- making and you know a lot of
59:37people like saving up to buy a lot of
59:39nonsense that's going to depreciate and
59:41would you rather have a little Nest Egg
59:44left over for the ones you love or buy
59:46that Lamborghini there's another great
59:48book called die was Zero which basically
59:51the title is self-explanatory and one of
59:53the concepts is even if you want to give
59:55money away to your family don't wait
59:57until you die don't make your kids wait
59:59or like hope you're going to die so they
01:00:00can get their inheritance give it to
01:00:02them when it really matters which for
01:00:03most people is in their 30s and 40s if
01:00:05you wait until you die at age 90 and
01:00:08your kids are 60 and then they get your
01:00:10money like what's the purpose of that
01:00:12give it to them when they need it when
01:00:13they're raising kids and whatnot that's
01:00:15when they need your money I I I really
01:00:17like that concept I think about that
01:00:19with my own kids the Counterpoint to
01:00:20that is though if I just give my kids
01:00:22money then like the ch
01:00:25quote they might lose it quick just
01:00:27think about that especially as you know
01:00:29someone that has a lot of cash they
01:00:31could give I think about this because at
01:00:33some point I'm going to have kids and
01:00:34they're going to Daddy I want to do a
01:00:35driving lesson or they're going to be 18
01:00:37and go off to University or whatever God
01:00:39I hope they don't go to university um
01:00:41and they're going to say like I've got
01:00:42nowhere to live or I found this nice
01:00:44apartment dad and in those moments do I
01:00:47make the decision to pay for it because
01:00:48I can or withhold it because they need
01:00:51to learn the hard way I have this yeah
01:00:54call it an argument with my girlfriend
01:00:56where I say babe listen when we have
01:00:57kids they're going to sit in economy and
01:01:00she's like absolutely not yeah and I'm
01:01:03like no babe when they get okay we made
01:01:05a deal I think we got to about when
01:01:06they're 12 years old I'm going to put
01:01:07them in economy so they can learn for
01:01:09themselves the value of things see we we
01:01:13made this mistake I don't think I've
01:01:14ever talked about this but it was about
01:01:15a year ago we flew my son who was me I
01:01:18guess he was seven at the time we flew
01:01:19first class and we explained to him that
01:01:22this was not normal this was not going
01:01:24to be the way it is as soon as he did it
01:01:26he went home he told all of our
01:01:27neighbors told all of his friends told
01:01:29everybody at school and that was when my
01:01:32like can't can't do this never again you
01:01:35see how quickly somebody can be spoiled
01:01:37or use that to try to show other people
01:01:39that they are superior to them that's
01:01:41when it was like no no we can't ever do
01:01:43this ever again and you moved his
01:01:44expectations in a way absolutely I
01:01:46didn't fly first class till I was 35 and
01:01:48he did it at 7 and so that my when I
01:01:50first did it at 35 I remember feeling a
01:01:53I earned this I worked for this and it
01:01:55also felt so special to me because I'd
01:01:57flown coach 9,000 times before that so
01:01:59it felt amazing and so that's I I I
01:02:02think about that a lot there's a great
01:02:03quote from Charlie Munger where one of
01:02:05his rich friends says Charlie if I give
01:02:08my kids all of my money is that going to
01:02:10ruin their ambition and Charlie says of
01:02:12course it will but you have to do it
01:02:14anyways and the guy says why and Charlie
01:02:16says because if you don't your kids will
01:02:17hate you and I think that's that too is
01:02:20like lots of Charlie Monger quotes are
01:02:22are framed as black and white they're
01:02:24but I think that's probably like 80%
01:02:26true really that it's it's maybe 70%
01:02:29true that if you are a wealthy person
01:02:31and I'm not talking billionaires if you
01:02:32just have a moderate amount of wealth
01:02:34that you might pass along to your kids
01:02:35someday that your two options are kind
01:02:37of at least to some extent hurt their
01:02:39ambition or risk some level of strife
01:02:42and it's always child dependent like I
01:02:44always make the example that if
01:02:4618-year-old Bill Gates or Mark
01:02:47Zuckerberg or Elon Musk inherited a
01:02:49billion dollars would have made any
01:02:51difference to their ambition they would
01:02:53they would not have slowed them down by
01:02:54one second but most people including
01:02:57myself it would have like I was driven
01:03:00by fear of not making it which is what
01:03:02most people are I was I was scared
01:03:04shitless that I was not going to find
01:03:05the right career that I wasn't going to
01:03:07make it and that's what drove me some
01:03:09people don't need that but I think it's
01:03:12very rare I think the huge majority of
01:03:14people if you give them an easy life
01:03:17they will take it and embrace it with
01:03:18both hands making money and keeping
01:03:20money require two different
01:03:22skills you you've spoken about a few of
01:03:24the skills that are required for making
01:03:26money the one that really stuck out to
01:03:28me that you've discussed so far is this
01:03:29idea of endurance patience regardless of
01:03:32what's happening in the markets
01:03:33regardless of the volatility lose your
01:03:35password and sit on your hands just on
01:03:38that point as well I remember reading
01:03:39somewhere it might have even been your
01:03:40book you know it's so crazy because the
01:03:43things that I know about money I can't
01:03:44remember where I've got them from but
01:03:46most of them came from this book like
01:03:48most of the principles came from this
01:03:49book and one of the things that I read
01:03:51was that Warren Buffett would go like
01:03:53five years without allocating capital
01:03:55and this quote where he said the hardest
01:03:57thing to be a great investor is to be
01:04:00able to sit on your hands and do nothing
01:04:01sit on your ass and do nothing that's it
01:04:03that's that's AER quote and that's what
01:04:05they're doing right now right now
01:04:05Berkshire hathway which is Warren
01:04:07Buffett's company has like $150 billion
01:04:09dollar of cash right now and that's
01:04:11their entire uh 60-year history of
01:04:14Warren Buffett and Brookshire hathway is
01:04:15build up a shitload of cash wait 10
01:04:18years for an opportunity deploy it all
01:04:20and then go back to waiting and building
01:04:22up cash crazy and that's that's that's
01:04:24how done it good opportunities are rare
01:04:26of course they are they should be rare
01:04:27it shouldn't be that anybody can just
01:04:29open up their stock account and find the
01:04:30opportunity of a lifetime what are the
01:04:32it's GNA come once a decade what are the
01:04:33other skills then endurance patience to
01:04:35create to get money for the for the
01:04:38ordinary person endurance and patience
01:04:40is 99% of what you need as an investor
01:04:42because the opportunities there to
01:04:44invest in a lowcost Index Fund are
01:04:45available for everybody and you can do
01:04:47that from your phone like you do it from
01:04:48your phone open up a Robin Hood account
01:04:50buy some index funds anybody can do that
01:04:52and so that and but that was not always
01:04:53the case it used to be like 20 years ago
01:04:56that the only people who could invest
01:04:58were people who had a lot of money and
01:04:59could afford a broker and had connection
01:05:01to a broker and yet to like make a phone
01:05:02call make a phone call you had to know a
01:05:04guy and even then you were going to pay
01:05:05a ridiculous fee to that person for do
01:05:08pieces of paper and all kinds H it was a
01:05:09joke and that's 20 years ago it's not
01:05:11that long ago so I think like people
01:05:13aren't grateful enough or appreciative
01:05:16enough of how much things have changed
01:05:18that open up those opportunities for
01:05:19everybody you talk about the skill of
01:05:21keeping money which is different from
01:05:22the skill of getting money
01:05:24is predicated on Survival Financial
01:05:28survival and just putting up with all
01:05:30the unpredictable nonsense that's going
01:05:32to happen between now and the end of
01:05:34your life and we talked earlier about
01:05:36the surprises Pearl Harbor 911 all these
01:05:39big surprises just it's just your
01:05:41ability to endure things like that
01:05:43that's going to be literally 90% of your
01:05:45financial success and your investing
01:05:46success so gaining money is like being
01:05:48an optimist and taking a risk like being
01:05:51optimistic about yourself swinging for
01:05:52the fences you need that to get rich
01:05:54staying rich is like the exact opposite
01:05:57you need a level of being conservative
01:05:59you need to be scared you need to be
01:06:01like owledge of all the unknown risks
01:06:04that are in front of us and have a
01:06:06financial allocation and a mindset
01:06:08that's going to allow you to endure them
01:06:09and survive them financially you need
01:06:11both of those skills at the same time so
01:06:14well your kid is 20 years old he's broke
01:06:18do you tell him to go and take huge
01:06:19outsized risks he's not got a family
01:06:21he's not got a mortgage he's not got a
01:06:23dog what advice do you give him at that
01:06:25age to create wealth I would actually
01:06:27say I think this is a little
01:06:28counterintuitive that when somebody is
01:06:29Young you you think you would say you
01:06:31got 50 years in front of you swing for
01:06:33the fences go for it it's also when your
01:06:35life is the most fragile it's when
01:06:36you're most likely to be laid off most
01:06:39likely to change your career most likely
01:06:40to break up or get divorced whatever it
01:06:42would be and so for that you need quite
01:06:45a bit of financial flexibility just cash
01:06:47and liquidity so once you had some level
01:06:49built up whatever the level might be for
01:06:51a different person then like do
01:06:53something crazy I also think like for
01:06:56careers some of the best career advice
01:06:58that's maybe not Universal but when you
01:07:00graduate college and you looking at your
01:07:02career don't take the safe job which is
01:07:04usually like the big company the blue
01:07:06chick company go for the weird company
01:07:08why go for something crazy because when
01:07:10you're older when you're 40 and you have
01:07:12two kids and a mortgage you're not going
01:07:14to want to take the weird job that's
01:07:16when you want the stability that's when
01:07:18you're probably going to want the job
01:07:19that's has good benefits and a stable
01:07:21paycheck cuz you need that when you're
01:07:2322 and you're not tied down by anything
01:07:26don't go work for Goldman Sachs or apple
01:07:28or deoe or something like that go for
01:07:29the weird startup where you like you're
01:07:32going to learn something completely
01:07:33different linked to that point is in the
01:07:36weird startup you're going to be so
01:07:37close to the failure and failure is the
01:07:39knowledge you're going to learn so much
01:07:42and there's so many people who take the
01:07:43blue chip the safe job out of college
01:07:45and it puts them on a very predictable
01:07:47track you're going to be an analyst for
01:07:48two years and then if you're good you'll
01:07:50get promoted to senior analyst and then
01:07:52you'll get promoted to associate it's
01:07:54like very stable and linear and that's
01:07:57the like it's you're capping all of your
01:07:58upside if you go for the weird company
01:08:00you're either going to do one of two
01:08:01things it's either going to fail and
01:08:03you're going to learn a lot from that or
01:08:05it's going to take off and you're going
01:08:06to learn a lot from that and then maybe
01:08:07when you're 40 after going through all
01:08:09that then you want the stable job at the
01:08:11big company it's interesting I was
01:08:13thinking as you're speaking that the
01:08:14proximity from your desk and the
01:08:17CEOs probably needs to widen over time
01:08:20yes I think I think that's that's true
01:08:22yeah absolutely and most people I think
01:08:24if they if you do it the other way
01:08:26around or most people would never do it
01:08:27the other way around if you start your
01:08:29career in the stable company you're
01:08:31probably never going to leave you're
01:08:32going to get addicted to the nice
01:08:34paycheck the stable benefits whatnot and
01:08:36you're never going to take a risk and do
01:08:37anything else maybe that's okay maybe
01:08:39for some people's personalities that's
01:08:40exactly what they want but I think there
01:08:42is a higher level of regret for people
01:08:44that start in a safe company and then
01:08:46they get the golden handcuffs they can't
01:08:47leave and by the time they're 40 and
01:08:50they realize that they wanted to work at
01:08:51the crazy company they can't because
01:08:52they got a mortgage and two kids and
01:08:54they're saving for retirement and they
01:08:55can't take the risk at that level of
01:08:57their life you introduced this concept
01:08:59of
01:08:59tales long tales and this also changed
01:09:04my life changed my investment strategy I
01:09:05should probably say you talk about the
01:09:07example of venture capital where for
01:09:09every 50 Investments That Venture
01:09:11capitalists make statistically half of
01:09:14them will completely fail 10 will do
01:09:16okay and one or two will make huge
01:09:19profits that drive 100% of the funds
01:09:21returns yeah this is a lesson about
01:09:23invest in finance but it's also for me a
01:09:25lesson about life it's always life yeah
01:09:27it applies to everything tals where just
01:09:30a couple of things that happen explain
01:09:3390 or 99% of what matters it's always
01:09:37the case you see it in business where
01:09:38you take in the United States there are
01:09:40you know thousands of public companies
01:09:42you can buy stock in but the huge
01:09:45majority of the value in the US Stock
01:09:47Market is in like 10 companies Apple
01:09:49Tesla Microsoft so even though you have
01:09:51thousands of companies 10 of them are
01:09:52the ones that really matter and are
01:09:54going to drive all of the returns over
01:09:55time so why you just buy those 10
01:09:57because nobody knows what they're going
01:09:58to be at least in hindsight that that
01:10:00that's the argument for owning a
01:10:01thousand of them is that you know that
01:10:03the 10 that are going to be the next big
01:10:04ones are going to be in there all of
01:10:06this is a case for humility this is
01:10:08honestly what I took away from your book
01:10:10you're expecting to walk away with tips
01:10:14all these tips these tricks these
01:10:15special ways to make more money than
01:10:17everybody what I came away with is this
01:10:20one important lesson that I've never
01:10:23been able to unsee which is I don't know
01:10:26I I think that's great and then back to
01:10:28I wrote this book for myself that's been
01:10:30the biggest lesson for me is not only do
01:10:33I know but nobody else knows either
01:10:35everyone everyone else is bullshitting
01:10:36their way through the investing Market
01:10:37too they don't know either I'm in this
01:10:39crypto chat where one of my friends I
01:10:41won't disparage him one of my friends
01:10:43he's the guy in the chat that's always
01:10:44posting the forecast graphs you know
01:10:46those ones where they kind of like the
01:10:47little loger graphs where they forecast
01:10:49where the stock or the crypto is go
01:10:50where think it's going to go right and
01:10:51it's always it's always up and to the
01:10:54right um and it's kind of like male
01:10:58horoscopes I heard someone say that that
01:10:59that's such a great yeah no I think
01:11:01that's I think what's closest to
01:11:03investing is something like the
01:11:04horoscope where even if you know it's
01:11:05[ __ ] you want to read it why because
01:11:07it's comforting what a lot of people
01:11:09want out of their investing forecasts or
01:11:12whatever it is is they want to reduce
01:11:13the uncertainty that's giving them
01:11:15stress because everyone I think
01:11:16intuitively knows that the future in
01:11:18front of us is unknown and it's
01:11:20unknowable but that hurts and so if it
01:11:22hurts you try to reduce that stress by
01:11:24finding someone who says I do know
01:11:26what's going to happen you know what
01:11:27this applies as well is I read Amazon's
01:11:29Jeff Bezos who's the CEO and founder of
01:11:30Amazon his shareholder letter where he
01:11:33says we have to be the best place in the
01:11:35world to fail um we swing for the fences
01:11:3810 times and for every 10 swings nine of
01:11:41them are in the Amazon graveyard he's
01:11:43talking there about a9.com which nobody
01:11:45knows because failed the fir phone which
01:11:47nobody knows but the one in 10 pay for
01:11:50the entirety of the graveyard the one in
01:11:52is going to be AWS 7 billion this year
01:11:54right he talked about that when the fire
01:11:56phone from Amazon which if you don't
01:11:58know Amazon built a cell phone it's
01:11:59called the fire phone and it was a joke
01:12:01it was a disaster it was a massive flop
01:12:03and he was doing like an analyst call
01:12:06and his analyst talked about like hey
01:12:07the Fire Phone flopped like what
01:12:09happened there and bezo said if you
01:12:11think that was a big failure just wait
01:12:12you've seen nothing yet and like that's
01:12:14why Amazon's successful they're willing
01:12:16to try a thousand things with the idea
01:12:18that they know 990 of them are going to
01:12:21fail but the 10 that work are going to
01:12:23be massive and if you can fail well and
01:12:26have the mentality to fail and the
01:12:28financial backing to be able to fail
01:12:30like make sure your bets are not that
01:12:32big and you can just keep taking little
01:12:33risks all the time the optionality that
01:12:36you get from that like the odds that one
01:12:37or two of those are going to explode are
01:12:39huge it's massive and mean it's no
01:12:42different than how do you win the
01:12:43lottery you have to buy thousands and
01:12:46thousands or millions of tickets if you
01:12:48buy billions of tickets you'll probably
01:12:49win the lottery it's probably not going
01:12:50to pay off because it doesn't work like
01:12:52that but it's the same concept like if
01:12:54you if you if you take enough swings at
01:12:56bat one of them is going to hit
01:12:58eventually and this is also
01:13:01a reason why some companies look
01:13:04Innovative they look like their Geniuses
01:13:05but in fact their failure rate is
01:13:08massive massive there's a story at at
01:13:10Netflix several years ago where there
01:13:12was uh a report to the CEO and the and
01:13:15the report was all of the new movies
01:13:18that we've come out that that we've that
01:13:19we've produced have been successful and
01:13:22whoever presented that probably thought
01:13:23this is great this is what you want to
01:13:25hear and the CEO said that's terrible
01:13:27that means we're not taking enough risks
01:13:29if every movie that we release is a hit
01:13:32we're not taking risks like you want
01:13:34your failure rate to be at least some
01:13:36that that's when you know you're at
01:13:37least trying something new it's the same
01:13:39like if you're managing uh a hotel you
01:13:42don't want every room to be sold out
01:13:43because that means you're not pricing
01:13:45high enough you know you're doing a good
01:13:46job when you have 10 empty rooms that's
01:13:49when you know you're pricing the other
01:13:50rooms at a high enough rate so there's
01:13:52always going to be like some level of
01:13:55what looks like failure that you need
01:13:57and if you don't have it you're not
01:13:58taking a big enough risk Daniel X sat
01:14:00here and he said the same thing he goes
01:14:02one of the most important metrics that I
01:14:03think about at Spotify is our mistake
01:14:06rate yeah and people will think okay so
01:14:08he wants to limit mistakes very much the
01:14:10opposite he wants to make sure that the
01:14:12company maintains that sort of startup
01:14:14mentality and they increase their rate
01:14:17of mistakes and this brings me to
01:14:19something which I kind of hit me like a
01:14:21truck um in your new book same as ever
01:14:23which was this idea that we need to keep
01:14:25running now there were areas in my
01:14:27professional life where I've been
01:14:28successful poas is doing well I think
01:14:31doing pretty well and I had a I had a
01:14:33car Journey with Jima who's through the
01:14:35wall who you met and we last time we
01:14:37came to La I'm in the front seat of the
01:14:38car and I go jamim do you know what our
01:14:40biggest um our biggest threat is now
01:14:43complacency when people get successful
01:14:46they play defense to their detriment um
01:14:50they don't play offense as much as they
01:14:52need to to keep up with the rate of
01:14:54change in the world and then a young
01:14:57Scrappy agile incumbent who has a high
01:15:00risk appetite will take their cheese
01:15:03right and your chapter on keep running
01:15:05there's two quotes that I really pulled
01:15:06out chapter's called keep running and
01:15:09and the quot two quotes that I pulled
01:15:10out were competitive advantages tend to
01:15:14be shortlived often because their
01:15:16success plants the seeds of their own
01:15:20decline one more quote it's easy to
01:15:23overlook how many forces pull you away
01:15:26from your competitive Advantage once you
01:15:28have one specifically because you have
01:15:30one success has its own gravity that's
01:15:33right and the the the the biggest source
01:15:36of gravity there is laziness the reason
01:15:38you're successful is because you work so
01:15:40hard to get to where you were and now
01:15:42that you feel like you've made it now
01:15:43that you feel like you're on the top of
01:15:44the mountain top you get lazy and that's
01:15:46so many companies fall for that so many
01:15:47careers fall for that there's a great
01:15:49story from Jerry Seinfeld where he said
01:15:51that one of the reasons that he quit the
01:15:53show when it was still going gang
01:15:54busters is because he could start to
01:15:56sense that what made the show successful
01:15:59was starting to be just starting to go
01:16:01away he said and part of the reason is
01:16:03was because he got so famous when he was
01:16:06not that famous he could go sit in a
01:16:08coffee shop and watch how people ordered
01:16:10their coffee and make a joke out of it
01:16:12he was observing how Society worked once
01:16:14he got very famous he couldn't do that
01:16:16anymore he was too famous to go sit in a
01:16:17deli and watch how people order their
01:16:19sandwiches he couldn't do it so
01:16:20therefore he didn't have a lot of the
01:16:22source material that he had before and
01:16:24so he was like look what made me so
01:16:26funny and the show so successful I can't
01:16:28do anymore so like red alert let's pull
01:16:31the plug before it gets really bad here
01:16:33so that's like a very specific example
01:16:35but what he realized that what made him
01:16:37successful was gone and a lot of a lot
01:16:39of CEOs will will have this problem too
01:16:41where what made them successful was that
01:16:44they were a scrappy startup founder and
01:16:46they were very good at building a
01:16:47product but now that the company is big
01:16:48and successful they also need to be an
01:16:50HR Manager they need to be a finance
01:16:52specialist they need to be a marketer
01:16:54they need to be all these other things
01:16:56and therefore their time is pulled away
01:16:58from what they're actually good at which
01:16:59is building a product my good example of
01:17:01this if I can say it was Travis kalanick
01:17:03of uber the founder of uber probably
01:17:06nobody in the world was better at
01:17:08scaling a company like uber than he than
01:17:10he was and there were a few people who
01:17:12were worse at managing a big company
01:17:16than he was so it's like what made Uber
01:17:18successful is what pulled him away from
01:17:21being a successful manager at that he
01:17:22was very good at one thing he was the
01:17:24best in the world at that one thing but
01:17:27you shouldn't think that like it's going
01:17:28to last during when another phase of the
01:17:30company's life my person I consider a
01:17:33mentor and a friend of mine been a
01:17:35long-term friend of mine a guy called
01:17:36Shaquille Khan he was one of the very
01:17:37first investors in shop in Spotify um
01:17:39new Daniel the founder from the very
01:17:41Beginnings he said to me um a piece of
01:17:44advice that stayed with me and I've also
01:17:47imparted on other people at a time when
01:17:49I'd left my company I was now
01:17:51financially successful um financially
01:17:53free by all regards and I called him
01:17:55after leaving my company and I said D I
01:17:57said Shaq what should I do now with my
01:18:00life he said to me Stephen the reason
01:18:02you were successful was because you were
01:18:04hungry you need to realize that you're
01:18:06no longer hungry for the same reasons
01:18:09yeah and what he told me to do was the
01:18:10hardest [ __ ] thing I've ever done in
01:18:11my life which was nothing he said spend
01:18:14a year don't rush back into starting the
01:18:16same business again cuz he said to me
01:18:18the reason why you were so unbelievably
01:18:20disciplined and would go to the office s
01:18:22days a week was because you were like an
01:18:23insecure kid that was like fighting to