Transcript: Post-Traumatic Broke Syndrome Is Controlling Millions – Morgan Housel on DOAC Podcast

The correlation between how much you spend and how happy you are, it can exist. Everyone can spend money in a way that’s going to make them happier, but it is not as simple as you think.

And as I started digging into it in my own life, when have I been envious of other people of their material possessions? Why was I envious? When have I been jealous? Why was I jealous? What kind of spending made me happy? What left me completely flat? It’s a much more complicated topic than it seems at the surface.

You know, another title for the book could have been “The Psychology of Spending Money,” because that’s what this is. So it’s a look at the psychology of greed and envy and social aspiration and climbing the social ladder, who you’re trying to impress, whether those people are paying any attention to you. That’s what this book is.

Understanding Your Relationship with Spending

STEVEN BARTLETT: So for someone like me who wants to improve my relationship with spending, I guess the question, I guess the first question is understanding the art of spending money. Simple choices for a rich life. What is it going to do for me? How is it going to make my life better? To understand this, why does it matter to the person that’s listening right now?

MORGAN HOUSEL: I think it is a very easy assumption to make if you’re unhappy with your life, that if you had more money, those problems would go away. Sometimes it can be true. It’s not automatically false. It’s just easier to assume that that’s true than it actually is. And so I guarantee you that every single person listening to this right now has some degree of that. If I had a little bit more money, my problems would go away, even if they don’t necessarily know it or not.

So much of spending is a psychological exercise. There’s an itch that you’re trying to scratch and that manifests in so many different ways. And so I’ve often thought of money, look, is money the root of society, the core of society? No. There’s obviously a million things more important than money.

But I do think it’s the clearest window that we can look through to try to figure out what’s going on in our own lives and other people’s lives in society. It shows very starkly what people value, what they’re scared of, what they’re aspiring to become. There are many more elements to the puzzle. Your health, your friends, your family. We can go on that forever.

But money is a very clear window that if you see how somebody engages with money, you’re like, oh, I understand your insecurities, I understand your aspirations, I understand your self confidence, I understand what you think of other people. You can learn a lot about that.

Money as a Reflection of Trauma

STEVEN BARTLETT: It’s kind of like a reflection of your trauma.

MORGAN HOUSEL: Yes. And it manifests in very different ways. There’s a great financial writer named Tiffany Aliche, and she grew up very, very poor and now she’s extremely successful and she calls it “post-traumatic broke syndrome.” Even though she has a lot of money right now, I don’t want to put words in her mouth. My understanding is she’s afraid to spend it because the feeling in her head is, I will never go back to that. I can’t ever go back to that poor person. Post-traumatic broke.

And so it can manifest in very different, sometimes opposite ways. And so the point is not like, if you grew up poor, you’re going to want to display it, but the point is that it’s a psychological itch. It’s not just, I want the nice car because nice cars are better. There’s a social signaling. You’re signaling to others, you’re signaling to yourself. It’s a trophy for yourself of what you’ve overcome.

The more I dug into it, the more it was so clear. Spending is not just on material stuff. It’s not just, I want to buy this car or this house or these clothes or these jewelry because it’s nice. I’m trying to send a signal to others or to myself of what I’ve overcome.

The Deserted Island Exercise

One of the ways I thought about this in my own life was if I was on a deserted island with maybe just me and my family, nobody could see how we were living. Nobody can see your house, nobody can see your car, nobody can see your clothes, nobody can see your jewelry. How would I live?

For me, and I think most people, in that exercise, you immediately gravitate away from status and towards utility. I would not want a Lamborghini. I probably want a pickup truck, something that is more utility. If nobody could see it, I would just want utility. I would not want an enormous house. I would want a house with a nice view, because I’m not trying to show off to other people. I just want something that is calming and serene to myself.

And so once you start seeing the stark difference between utility and status, once you force yourself to see it, you’re like, oh, it’s everywhere.

Is Status Wrong?

STEVEN BARTLETT: Is something inherently wrong with status? Is it wrong to buy a Rolex?

MORGAN HOUSEL: Absolutely not. Particularly at certain points of your life.

STEVEN BARTLETT: Okay, so when is it good? When is it bad? When is it indifferent?

MORGAN HOUSEL: I don’t know. It’s hard to say what’s good and bad in terms of a formula because everybody’s different. But I would say this. My own personal desire to show off materially happened when I was in my late teens, early 20s. And looking back, I didn’t know this then, but the reason why is because I had nothing else to offer the world.

I had no intelligence. I had no wisdom. I didn’t know how to love. I had nothing else to offer friends, family, spouses, whatever it would be. And so the last remaining lever if you’re trying to get attention and respect is, well, look, I have no intelligence to offer. I have no wisdom to offer. Maybe people will admire me for my car. That was why I wanted it.

And now that I hope, I hope to today, 20 years later, I have a little bit more to offer to my wife, to my friends, to my family, to employers and customers, then my desire for those things has gone down. Not to zero, but it’s gone down.

There’s a great Warren Buffett quote where he says success in life is when the people who you want to love you do love you. And key to that is you have to ask the question, who do you want to love you? And for a lot of people, the quick knee-jerk reaction is everybody.

And so you want to have a nice car, nice clothes, nice jewelry, because you think everyone’s going to stop and stare. When I drive this down the road, people are going to stop and say, “Look at that guy, look at her. That’s amazing. They’re so successful. I admire them, I respect them.” And by and large that is almost never true because no one’s thinking about you as much as you are. They’re not paying attention to your car or your clothes or your house. They’re busy worrying about themselves.

Nobody Was Thinking About You

Jimmy Carr, I think you’ve had on the show before, is that right? Love Jimmy Carr. He said this a couple weeks ago. I heard it and it was one of those, I had to stop and write it down because it was so profound. He said, “In your 20s, people worry about what other people think of them. In your 30s you say, I don’t care what anybody thinks of me. And in your 40s, you finally realize the truth, which was nobody was thinking about you the whole time. They were busy worrying about themselves.”

And look, that’s not black and white. Of course people think about you and look at you and sometimes judge you, but not nearly to the extent that we think. And that was why I get back to the exercise. If nobody was watching, how would I live? The truth is because virtually nobody is watching except the people who I really love and admire. And they’re going to admire me for things that have nothing to do with the kind of car that I drive or the clothes that I wear.

The Evolutionary Basis of Status

STEVEN BARTLETT: What’s the evolutionary basis for all of this stuff?

MORGAN HOUSEL: Life’s a competition. It doesn’t matter how well I’m doing. It matters how well I’m doing relative to you. It doesn’t matter how big my house is. If I’m trying to signal, all that matters is my house is bigger than yours. That’s true for all wealth. There’s no such thing as you are wealthy once you have X number of dollars. Does not exist. Everything is relative to other people.

And the truth is that we live in a world of such material abundance where the majority of people listening to this will have some sort of shelter and a car and can buy clothes and whatnot. And because relative to a lot of history, we live in material abundance, the competition, the arms race for bigger, nicer things is extraordinary.

And it’s way more powerful and potent today than it’s ever been for two reasons. One is social media. So I am now aware of the homes that other people live in, the cars that they drive, the clothes, the vacations that they take. I’m now aware of it in a way that we were not 15 years ago.

The other thing is, because the Internet has democratized access to audience attention, the ability to become extremely rich is much more powerful than it’s ever been. It’s still rare, of course, but it’s easier today than it’s ever been to become very, very wealthy, even if only a small number of people are doing it. Because your potential customer base is now the entire world.

You know, 100 years ago, if I was a businessman, my customer base was whoever lived in my town. Now if you’re a businessman, your customer base can be the entire world. And so it’s easier to make a huge fortune. And because of social media, once you make that fortune, people are probably going to know about it because a lot of those people who become very rich are going to say, “Look at how I’m living.”

The Inflation of Aspirations

And so you have this trickle-down aspiration of everyone else being like, my definition of wealthy. If you’re a young person today, a young person’s definition of wealthy might be a multi-billionaire with a private jet and a private island, where I think 80 years ago, people’s definition of wealthy was a three-bedroom house and one car and a happy family.

And so we live in a world where aspirations have inflated by such a dramatic degree that the arms race of spending just gets that much higher.

Disconnecting Admiration from Aspiration

STEVEN BARTLETT: I think there’s something in this idea that you almost have to develop the skill of disconnecting your admiration from your aspirations if you want to live a good life. Because so many kids will look up to you and say, “I want to be like Morgan when I’m older,” because they admire what you’ve done. But the reality is they’re just seeing the sort of shop window of your life. And so people do this with Elon all the time, right?

The Hidden Cost of Success

MORGAN HOUSEL: And Elon has even said, he’s like, “You might think you want to be me, but you don’t.” And the clip where he did that, he points to his head and he’s like, “It’s a tornado up here.”

And I think it’s true that for most people who are extremely successful, who are the ones that people tend to look up to, like the extreme outlier successes, a lot of the reason they’re so successful financially and in their career is because they’ve devoted every second of their life to that career, which most of the time comes at the expense of everything else.

So they are very successful, made a lot of money, and that came at the expense of their health, their relationships, relationships with their spouses, their children.

So I make the point in the book that of the top 10 richest men in the world, there are a cumulative 13 divorces among the top 10 richest people. And it’s a small sample size. You can’t really say that much with that. But this is a group that is almost universally admired, particularly among young men. You know, Elon Musk, Jeff Bezos, Mark Zuckerberg. How amazing would it be to have that much money?

But actually, if you dig into their actual whole life, not just their net worth, not just the house and the jet that they have, but if you look at holistically, their entire life, you’re like, “I don’t know, it’s not that great.”

It’s one thing to admire someone if you can pick bits and pieces. I want his house and her car and his career and his physique, but you can’t pick bits and pieces. You have to take the whole thing. And once you take the whole thing, you realize that a lot of the people who you may have been looking up to either did not have a better life than you did, or it was just marginally better in a way that was easy to overlook.

Would You Take the Trade?

STEVEN BARTLETT: I had this conversation with a girl in New York last week, was a shoot, a client, like a brand shoot. And she sat me down to interview me for TikTok. And she said, “What age did you become a millionaire?” And I said, about 24, 25. And she went, “Oh, I’m 24, 25 now, and I’m not a millionaire.”

And I remember saying to her, I was like, “Yeah, but would you take my trade?” And I explained to her, I was like, so I was lonely. Between the age of 18 and roughly 20, I was working in call centers. My parents wouldn’t speak to me. So I had no contact with my family really through that period. And then I started shoplifting at about 18, 19 to feed myself.

And my brother had given me this big sort of industrial packet of oats. And what I had to do is, it’s like powder. I mix the powder with water. And there’s this photo online, I think, from my previous TED Talk, my first one, where I was just drinking this powdered water.

So I said to her, “And I was a millionaire at 24, lonely, not speaking to my family, drinking powder, shoplifting, working night shifts in multiple call centers. Would you take the trade?” And she went, “No.”

MORGAN HOUSEL: Right.

STEVEN BARTLETT: Absolutely not. She wouldn’t take the trade. And I said, “You can’t pick it apart. Because if you want my outcome, you have to take the path that I took if you want my specific outcome.” And people don’t think about that.

One of the things this podcast has actually taught me is to think through the framework of trade-offs.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: So think about everything as a trade-off. Think of a Zenpeg as a trade-off. There’s a trade you’re making somewhere. And even when you aspire, you admire people. If you admire what we’ve done here, for example, think about the trade-off.

Even with this team, the team have been working here every single day, including the weekends, from morning till night, for the last 14 days here in New York, every single day. Do you want a podcast? Do you want the trade? And if you do, fine. But just be informed about, as you say, both sides of the trade.

Everyone Is Jealous of What You’ve Got

MORGAN HOUSEL: Another Jimmy Carr quote that I love. He’s a profound individual. Not only is he hilarious, he’s very smart. The quote is, “Everyone is jealous of what you’ve got. Nobody’s jealous of how you got it.” And I think it’s just so easy to overlook.

One of the things I write in the book is what’s called the reverse obituary, which is, it’s a very good, helpful exercise to write down. It’s kind of morbid, but what do you want your obituary to say? Kind of a weird thing, but for me, everyone’s different. But for me, I would want it to say, “Morgan was a good father, a good husband, a good friend, helped his community, was a good worker.” That’s what I would want it to say.

Never in a million years in that obituary would I want it to say what my income was, how big my house was, how many times I went on vacation, how many horsepower my car had. It’s ridiculous to think that that’s what it would be. I would want it, you instantly drift towards the things that you actually want in life. And of course it’s going to be different for everyone.

But I found it a helpful thing because you realize that it would be completely absurd to put the things that I might be chasing in my life in my obituary. And so if in any given day, in any given year, you’re like, “I got to earn a higher income and I want to buy a bigger house and I got to need a new car, and oh, that came out, this watch.” But at the end of your life, you know, that’s not going to matter.

What’s going to matter is, were you a good spouse, a good parent, a good worker? Were you honest? Were you a good friend? Were you funny? You know, that’s what’s going to matter. Because that’s what you want in your obituary.

The Savings Addiction

STEVEN BARTLETT: I think part of the reason people spend in the way that they do as well is linked to that, which is sometimes that behavior, which is also linked to the point about trauma at the start, might result in a savings addiction. I often wonder this because, you know, when I was younger, I had this crazy spending problem. And I’ve also seen people who don’t seem to spend anything, and they’re just hoarding capital. You talk about this a bit in the book. What is that? Equally bad behavior?

MORGAN HOUSEL: Yeah, I think it’s equally bad because both of them are the exact same thing, which is money’s controlling you. Money should be a tool that you use to become a better version of yourself, to become a happier, more content version of yourself. But when it’s controlling your personality, it’s no different than any other addiction where it’s forcing you to do things that you otherwise don’t want to do. And that can manifest on either end of the side. Either people can’t stop spending, or they cannot spend enough.

A lot of financial advisors will tell you one of the biggest problems that they have are clients who have saved enough money for retirement. Good job. You saved for 40 years. You maxed out your 401k. You did everything you were supposed to, and now you’re 70 years old and you have enough money to travel and play golf, and you won’t. You won’t do it.

And I think it’s because they become so accustomed to the identity of, “I’m a saver. Every month I save, and every month my net worth goes up” and they cannot bring themselves into switching gears and going in the other direction.

And for a lot of those people, the money is in full control over their identity. It’s telling them how to live, what to like, what to aspire to, what to enjoy. The money is totally in control of their personality, and it’s just as dangerous and just as detrimental as when you were a teenager of “I can’t stop spending.”

And both of those, the money is playing the marionette doll of your life. It’s telling you exactly what to do and when to do it.

Can Money Make You Happy?

STEVEN BARTLETT: If I wanted to make a framework to know how to spend my money, where do I start? Do I have to get clear on something? And I guess the other question which is somewhat linked to this is this overarching debate around, can money make you happy? But I’m trying to figure out where do I start? Because one of the things I want to get out of today is I want to have a clearer framework for how to spend my money.

MORGAN HOUSEL: Well, those two points that you just brought up, I think are very related. The first, on the point of can money make you happier? The answer is yes. But there’s an asterisk next to it that we need to get to.

For years, there was a big academic debate of does more money make you happy? Some of the studies showed, yes, clearly it does. Other studies showed, no, it really doesn’t. And the academics, the economists were battling for decades. It’s kind of been cleared up in the last just the last couple of years, this last couple of decades with some nuance, which is this.

If you are already an unhappy person, if you’re already anxious, if you’re already depressed, by and large, having more money will not help you at least that much. It might help you a little bit around the margins. If you start as an unhappy, depressed, anxious person.

If you are already a happy, content, joyful, laughing person, having more money will give you a better life. So in either direction, it’s just leveraging who you already were. It’s not going to change you that much. It’s just going to leverage who you already were. Very similar to, they say this is about power. Once you gain power in politics or something, it just leverages the personality that you already had. Money is very much like that.

And so it’s not a panacea in the sense of, “Oh, if you’re miserable, if you had more money, it’s going to clear up your problems.” It can make some of your problems a little bit easier to deal with. But I mean, think about it in these stark terms.

Let’s say you are overweight and unhappy, you hate your job and you’re recently divorced and your kids won’t talk to you, but you live in a mansion, it has a Ferrari in the driveway and you got all kinds of fancy stuff. Is that a good life? If everything else in your life sucked and you woke up every morning going, “I got to go to work today, I hate my job, I can’t stand my job, I’m lonely, I’m miserable, I’m overweight, I can’t sleep, I’m addicted to alcohol,” whatever it might be. Of course it’s a terrible life, the house and the car don’t matter at all.

But you can flip that around and say, let’s say you live in a very modest middle class house and you drive a 10 year old Honda Civic, but you love your job, you love your coworkers, you have a great relationship with your spouse, your kids admire you, you have your friends over for a barbecue every Friday night. Materially it’s very modest, you have what you need, you’re not impoverished, you’re not homeless, you have the food that you want, the shelter that you want.

But you would be an absolute maniac to choose the miserable person in the mansion versus the content, happy person in the middle class house. If your goal is to live a good life, it’s psychotic to pick one over the other.

The Empty Mansion

STEVEN BARTLETT: I felt this quite starkly recently because I flew to Cape Town on my own. I’ve only ever been there with my girlfriend and with other friends. And the first time I’ve only been there a few times. I’ve got a house there and it’s a very big house. And the first time I came with my family, second time it’s with my girlfriend and my friends. This time I came on my own.

And I felt this deep existential feeling waking up walking through that house alone, thinking, “Fuck me.” It was so clear to me that the point of such a thing is to fill it with people.

MORGAN HOUSEL: And you say that’s what I make this point in the book of the very simple question, will a big house make you happier?

STEVEN BARTLETT: I think it will make you depressed if it’s empty. Because that’s how I felt. I was like, I’d rather be in a studio apartment alone than a big house on my own, right?

The Realization About True Happiness

MORGAN HOUSEL: I had a similar realization to you a couple years ago when I took my family and I went to Maui for a vacation. I love Maui. It’s my favorite place in the world. And now they have kids. So I’m building sandcastles with my kids on the beach in Maui. And I remember thinking, this is a 10 out of 10. This is peak life for me, building sandcastles with my kids. Everyone’s happy in the sun.

But then I had this realization of, if that’s a 10, playing with Legos at home on the living room floor with my kids is like a nine. It’s really close. Because realization was what I enjoy is quality time with my kids.

I think a lot of the reason that people like vacation, like travel, is not because they like getting on an airplane and flying around the world and being jet lagged and cramped into a small hotel. What they like is uninterrupted time away from work, away from all the other stresses of everyday life. That’s what they actually enjoy. That’s what they like travel. It’s not necessarily the location. It’s what the location is doing for you.

So the question of, will a big house make you happier? It will to the extent that it makes it easier to have your friends and family over, because your friends and family are the ones who are actually making you happy. And so the answer can be, will a nice house make you happy? The answer can be yes, if you’re using it for the right reasons.

There was this article in the New York Times, this is probably 10 or 15 years ago, and the article said two things happened to Julia Roberts this week. One, she won the Academy Award, and two, she found out her husband was cheating on her. And so the column said, “Pop quiz. Did Julia Roberts have a good week?” And it’s like, you’d be a fool to say yes. It was probably the worst week of her life, I imagine.

STEVEN BARTLETT: Yeah.

MORGAN HOUSEL: But what we see from the outside was dolled up in a beautiful dress, accepting the highest honor of her career and saying, wow, that must be amazing. But it gets back to, once you see the full picture, you’re like, nah, it’s not as easy as it seems.

STEVEN BARTLETT: You say on page 23 of your book, a quote that I loved. “Show off the inside of your house, not the outside.”

MORGAN HOUSEL: Right. Because the inside of your house are what your friends and your family are seeing.

Breaking Free From The Matrix

STEVEN BARTLETT: Is there a hack here? Because you have all these Internet communities that come up with these hacks, these other ways to live. They step outside of the matrix and they form their own little, they were in a little cult that are doing it differently and not abiding by the rules of the, quote unquote, matrix.

I very much feel like most of us are trapped in the Matrix. We’re trapped in this status game, competing against each other, not searching for happiness. What is the hack here? How do I get out the Matrix? And what does that look like?

The Formula: Independence Plus Purpose

MORGAN HOUSEL: I think if there is a formula that I lay out in the book, and I make the point that there’s no formula for how to spend money, but if I did try to make a formula for a pretty good life, and this extends way outside of money, the formula for a pretty good life is independence plus purpose.

If you want to say, how can I be a happy person? You need to be independent. You need to be able to do what you want to do, when you want to do it with whom you want to do it with. And you need some kind of purpose that is higher than yourself. And that could be a million different things. It could be friends, it could be family, it could be career, it could be religion, whatever it might be.

I think it is very difficult to imagine anyone having a good life without those two things. If your entire life and your schedule is dictated by somebody else, if you have to go to this job that you don’t like, you have to have a long commute that you don’t like. You have to do this when you don’t want to do it. It’s hard to be happy. And if you don’t have any kind of purpose that you’re doing it for, it’s difficult to be happy.

And so the idea that, to me, the best thing to spend money on is independence. And I view it as purchasing. I don’t view it as saving money. I view it as purchasing independence. That’s how I feel. I feel like I’m buying independence when I save.

And so to me, the biggest thing that I spend my money on, and this sounds weird, but is saving. And I view that as buying independence. I view that as every dollar that I save is a little bit more independent than I was before. It’s a little bit of my future that I now own and control.

And if you’re listening to this and you’re like, look, I’m not financially independent. I have no possibility of being financially independent. Independence exists on a spectrum. And literally every dollar that you save is a little bit more independent than you were before.

If you have $100 in the bank in savings, that can make it so that if you were to lose your job, you have a little bit more flexibility for rent or groceries or whatever it might be that you didn’t before. $1,000, $10,000. Any amount that you have is a little bit more independent than you were before.

And so when you view one of the cores of living a good life is independence. And any amount of saving money will buy you independence, I think that’s a powerful observation for people.

And then the purpose part is going to be different for everyone. For me right now in my life, it’s being a good father. That’s what I want my identity to be. That’s my overarching goal in life, is to be a good dad.

I think the vast majority of parents will tell you that there was no greater joy, purpose than watching their kids thrive. It can also bring a lot of sorrow and a lot of sleepless nights and a lot of anxiety and a lot of worry that comes along with it. But nothing that I’ve experienced or any of the other parents that I know would say that anything in their life has come before that. That has been a great thing.

So we got on this point because the formula is independence plus purpose. For me, the purpose is being a parent. That’s not going to be true for everyone.

STEVEN BARTLETT: But you’re trading independence for that.

The Right Kind of Loyalty

MORGAN HOUSEL: I’m trading, it’s internal independence that I’m giving up. I want to sacrifice for my kids. I want to, loyalty to people who deserve your loyalty is a wonderful thing. Loyalty to people who don’t deserve your loyalty sucks.

And so if you are working, if you’re giving your loyalty to a company that doesn’t respect you, that sucks. That’s terrible. Loyalty to people who deserve it is a very fulfilling thing. So my kids deserve my loyalty.

STEVEN BARTLETT: How did they earn that loyalty?

MORGAN HOUSEL: Just by being my kids. And there’s some days where I feel like they don’t appreciate it, of course, but I think that tends to be true. People get into problems when they are loyal to people or organizations or political affiliations who don’t deserve the loyalty. That’s when it gets dangerous.

The Dark Side of Independence

STEVEN BARTLETT: Do you think the promise of independence and freedom has a secret, hidden, dark trade off that people don’t talk about? Because there’s this culture right now of, you know, be your own boss and stand on your own two feet.

And when you think about what makes humans happy, it seems to be collective things. It seems to be actually, in your case, as you’re saying, dependence. Your kids depend on you and in some ways you depend on them. All the things that seem to, having my friends at my house made me happier than being in the house alone.

But the narrative, the public narrative, is all about optimizing for freedom, whatever that means. And really more so optimizing for independence. Not depending on someone else. But when you look at the people that seem to be the most unhappy, they seem to be the most independent.

MORGAN HOUSEL: Right. Because they’re, if you picture someone living in a cabin by themselves in the middle of Montana with no one around them.

STEVEN BARTLETT: Or whatever, no family, no pets, freelance work on a laptop on their own in a glass box in Dubai, no big obligations, not in a church.

MORGAN HOUSEL: But back to the formula, independence plus purpose. Those people have no purpose.

STEVEN BARTLETT: Oh, yes.

MORGAN HOUSEL: So I think it’s, I think yes, everyone is going to be, I’m dependent on my wife, my kids. You know, there is dependency there. But I’m choosing. I chose her as a spouse. I chose to have kids. And so I still did it on my terms.

And so you’re never going to be, or I think you don’t want to be 100% independent in the sense that you don’t rely on anyone and no one relies on you because then you have no purpose.

It’s choosing who you want. I think you’re not independent if you have to be loyal to a job that you hate, but you have to have it because it’s the only job you got and you have to do it. And you have to pay this exorbitant rent on an apartment that you don’t even enjoy that much. Those are dependents on things that you don’t want. But I want to be dependent on my family because that gives me purpose.

STEVEN BARTLETT: It’s like the independence to make the choice, I guess.

MORGAN HOUSEL: To make the choice of who you are going to be dependent on. Right.

STEVEN BARTLETT: Got you. And on this earlier point, you talking about saving and that your favorite form of spending is saving.

MORGAN HOUSEL: Yeah.

How Much Should You Save?

STEVEN BARTLETT: Someone’s listening now. How much money do you think they should, at a minimum, have saved?

MORGAN HOUSEL: If you try to get technical about it, I would say what are the odds that at some point in your life you’re going to lose your job and not be able to find another job for six months? The odds are not bad that that will happen to you at some point. Not very comfortable to think about. Maybe it’s already happened to you already, but the odds that at some point that will happen are pretty good.

And therefore, if you were to say, a good measure of some level of higher end independence, not a low level of independence, but a medium level of independence is six, is I could keep myself going for six months.

Now for a lot of people, that’s a daunting task. And it’s okay. You’re probably not going to achieve that when you’re 18. It’s going to take some savings to get there. But that is a level at which you can exhale to a degree that most people have never been able to do before of, there’s going to be some bad stuff happening in your life. It’s going to be uncomfortable, but it’s going to be okay.

And for most people, for most of history, it was, there’s bad things going to happen to you and you’re not going to be okay. It’s going to be very traumatic.

And one of the important things there is when you lose that job, the ability to go find a good job, even a better job, where you want, doing what you want with the people who you like working with is very important.

If you don’t have any savings, you’re going to have to by default pick the very first job that you can come across, even if it’s a terrible job in a location that you hate doing something you hate working with people you don’t like. And so the flexibility to give yourself time to find a job that is a little bit easier and better for you, that is the purpose of savings.

STEVEN BARTLETT: And that goes back to your point about independence, which is you want to, building up those savings is building up the independence or the freedom to make a choice about who you work with.

MORGAN HOUSEL: Right.

STEVEN BARTLETT: If the worst were to happen, you don’t have to necessarily go get a job at, you know, some awful place.

MORGAN HOUSEL: Some terrible place.

The Jealousy Effect

STEVEN BARTLETT: You talk about jealousy in the book as well. And I was reading some stats that, quite funny stats, but they say that essentially that if you win the lottery, the probability of your neighbor going bankrupt increases.

MORGAN HOUSEL: It’s an amazing statistic. Right.

STEVEN BARTLETT: So what’s happening there?

The Lottery Winner Effect and Social Comparison

MORGAN HOUSEL: Well, you’re looking at your neighbor who won the lottery, and your neighbor probably bought a vacation house, bought a new car, sending their kids to private school, whatever it might be. And you watching that are like, “I need that for myself. It’s unfair that they have it and I don’t.” And I’m going to go do any reckless financial decision to get that.

So much of what we think is normal, our definition of success is what other people around us have. And so if you are watching your neighborhood live a better life than you, then all of a sudden your definition of a good life is what they’re doing and you will do some reckless things to get it. I think that’s what happens.

And so one of the takeaways there is, be careful who you socialize with, because you’re going to anchor to them as the baseline level of success and happiness. Be very careful with what you do and who you look up to and who you aspire to.

I grew up in Lake Tahoe, California, and this was before tech money, when it was not a wealthy area. It is now because all the tech money from San Francisco came up. But Tahoe in the 90s and early 2000s was just out in the woods and you could buy a house for nothing. And most people in town didn’t have any money.

And then I went to college in Los Angeles, where there is a lot of wealth, there are high expectations, and there are Lamborghinis and Rolls Royces and whatnot. And one of my observations was people were happier in Tahoe.

And I think the reason why is because the definition of success in Tahoe back then was a two bedroom house and a pickup truck. That was success. In Los Angeles, the definitions of success was a mansion and a Bentley. And so it was easier for people in Tahoe to be like, “I’m good. I checked the boxes. Look, I’m successful. Look at my tiny little house and my beat up pickup truck. That’s success.”

Right. And so that was, be careful who you socialize with because you’re going to anchor to their level of success.

Understanding the Spectrum of Financial Independence

STEVEN BARTLETT: I have some graphs in front of you. I think one of them is the spectrum of financial independence.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: Could you explain to me what that is and how that’s useful to understand and why that’s useful to understand?

MORGAN HOUSEL: I think it’s… I had this friend 10 or 20 years ago and he said, “I don’t save any money because I don’t see the purpose. All I’d be able to save is 100 bucks a month. And what’s that going to do for me?” And since I don’t think it’s going to do anything for me, I might as well just go spend it.

And I think, no, that’s $100 in savings. Or if you do it for a year, $1,200 in savings is $1,200 more independence than you had before. And again, not if, but when you lose your job or your car breaks down, you’re going to realize how unbelievably valuable that money is. And it’s not savings, it’s independence that it’s giving you.

So the idea that independence is on a spectrum, it is not “you either don’t have to work or you have to work.” It’s not that stark, but most people think of it in those terms. Why would I try to become independent if I have no chance of not working?

And the simple way to view it is every dollar that you save is a piece of your future that you own, that you control, that is yours. The flip side of that is every dollar of debt that you have is a piece of your future that somebody else controls. It’s a moment in time in the future that is not yours. It belongs to somebody else.

And so I’ve always viewed it on a spectrum. When I was younger and much poorer, I was a big saver. Even though, was I independent? No, of course I had to work. I had to work to pay my rent and pay my groceries, of course. But I viewed it as every $20 that I saved, every $50 that I saved put me in a better position than I was before.

And looking back on it, I don’t think I could have articulated that 20 years ago, but it’s what I felt. A lot of that for me back then was coming from a place of fear. I didn’t have a lot of self confidence in myself, in my career. So I was like, “I need to save to prepare for when this all comes crashing down.”

And even though it didn’t come crashing down, I’m so glad that I did it because I’ve had a sense of financial security and I’ve had a sense of independence financially since I was in my early 20s. Not because I had saved a ton, I hadn’t, but any amount that I saved, I viewed as the cushion that gave me a much higher sense of confidence that if or when things go wrong, I’m not going to be flailing, I’m going to have some cushion to fall back on.

STEVEN BARTLETT: And what is this spectrum? What are the stages of the spectrum?

MORGAN HOUSEL: So let’s start at the very bottom. You’re homeless, you’re panhandling, reliant on the kindness of strangers. As you go up from there, you can be completely reliant on your boss in a job that you don’t like. Now that’s another low level.

As you go up from there, you have, look, I’m relying on my job, I’m relying on my paycheck. But I probably have some opportunities. I could go work at another job, I could choose to work here, I could choose to work there.

And then you go up from there. It’s like, I like my job and I have some savings. So if I’ve lost this job, I can fall back onto it from there. You can go up from there to have, you can live where you want, you can work where you want, you can change fields, you can go and you can do a completely different job. You can take two months off and travel if you wanted to.

You’re working your way up all the way to the highest level of financial independence, which is, I don’t need to work anymore, I’ve saved enough and I can wake up every morning and do whatever I would like to do. That’s obviously an aspiration that for most people will never be reached until they’re maybe in their 70s and they’re retiring and they have Social Security and some other savings from there.

But for most people, a good level of independence as a good goal is enough savings so that if you lost your job, if your car broke down, if you needed to replace the roof on your house, you would be able to do it without losing that much sleep. That is a realistic level that I think almost anyone can achieve.

The Path to Financial Freedom

STEVEN BARTLETT: Based on everything you know about money, if I want to get to that highest level of complete financial freedom, what’s the five things that I should be thinking about at just a sort of a very simple level? Because so many people listening right now think my goal in life isn’t to become a billionaire or tens of millionaire. My goal in life is just to get to that point of freedom as soon as I can where I can start calling the shots.

And there was someone who I was speaking to the other day and said that there’s this Internet movement of kids who are trying to get, what do they call it? It’s like they’re trying to get to the point where they can retire early. Fire something.

MORGAN HOUSEL: Financial independence, retire early.

STEVEN BARTLETT: Okay, you’re that.

MORGAN HOUSEL: Yep, yep.

STEVEN BARTLETT: How do I get there?

MORGAN HOUSEL: The first thing that I think that’s most important, this is the first and the last thing, this is the most important part, is that all wealth, your feeling of wealth is what you have minus what you want. And it’s so easy to ignore the latter.

I talk about in the book my late grandmother in law, my wife’s grandmother passed away a couple years ago. For 30 years she lived off of nothing but $1,700 or $1,800 a month in Social Security. Not a lot of money by most accounts, very little money. But she didn’t want anything more. If she made $1,700 a month, she did not want $1,701. She was perfectly happy.

She found all of her happiness working in her garden, going for walks, watching the birds, watching the sunrise, watching the sunset, talking to her friends, hanging out with her family. But if you asked her, you said “you only make $1,300 a month, you’re broke. Doesn’t that make you unhappy?” She’d be like, “what? Do you think having more money makes the sunset more beautiful? Do you think having more money makes going for a walk more pleasant?”

And I’m not saying you should live like you should be content with that amount of money. But the point is, she was content. She was totally content. And it was her choice. And I think she was happier financially than some billionaires, because there’s a lot of billionaires who have a billion dollars, but they want 2. They have 2 billion, but they want 4.

One of the things is that happiness might be the wrong word here. The word that people want is content. When you sit here and daydream about having the bigger mansion, what you’re actually doing is you are imagining yourself in the mansion, being content with it. You imagine yourself sitting in that house and saying, “I don’t want anything more than this.”

The feeling that we are aspiring to is just being content. Happiness is always a 30 second emotion. It’s like laughter. If I tell you a funny joke, you’ll laugh for 30 seconds and then that’s over. Very few times in life are you happy for more than a couple minutes at a time. But what you want that is a durable emotion is being content. Just saying, “I’m good, I’m good with this. I don’t want anything more.”

The Role of Dopamine in Financial Decisions

STEVEN BARTLETT: I interviewed Dr. Anna Lembke, and she’s the scientist who’s most renowned for talking about and writing about dopamine. And I was wondering how much the molecule dopamine dovetails into this, because I think one of the things she said to me was that dopamine is the chemical for wanting. And people have, I think, mistaken it for being the pleasure.

MORGAN HOUSEL: Happiness.

STEVEN BARTLETT: Yeah, happiness.

MORGAN HOUSEL: It’s more, more, more, more. It’s you want more.

STEVEN BARTLETT: And she told me this crazy study about this rat where they removed the dopamine receptor from its brain so it couldn’t produce dopamine. And then they put food two inches from its mouth and the rat starved to death. Because it… and I’ve always thought about that. It’s like, okay, so that’s what dopamine is. It’s the motivation to go get, to pursue. What role is dopamine playing here?

MORGAN HOUSEL: It’s huge. And that’s actually a good realization to be like a lot of this is not something you can solve on a spreadsheet. It’s not something you can solve with a formula. It’s chemicals in your brain. And obviously some people are going to be more susceptible to that than others.

I think my grandmother in law just had for whatever it was, was wired differently than most people. Part of that was she was a product of the Great Depression. She grew up during the Great Depression which probably lowered her expectations. She never had social media and whatnot. But of course I think some people are wired differently than others for a level of contentment.

But I think just there’s a big thing in psychiatry where diagnosing a mental illness is sometimes more important than the treatment. If you just get a diagnosis of, “oh, you’re ADHD,” whatever it is, just knowing, just the fact that you can stop questioning “why am I having these thoughts?” You can understand why you have those thoughts is more important than the treatment sometimes.

I think that’s true here. If you… it’s easier said than done to completely control your desires. But just knowing why you’re doing it and realizing that it’s probably not going to give you the happiness that you want, that it’s just like any addiction that the more you chase it, the further away it’s going to get, can go a big ways.

And so for me myself, there’s all the time, there are moments where I’m like, “oh, I should get that car, maybe we should get a bigger house.” I have those feelings daily so the feelings don’t go away. But I think I’m better now than I’ve been in the past at reminding myself of, it’s not going to make you happier. You know that you’ve tried this before, you’ve tried it before and it didn’t make you happy.

What is going to make you happy is spending time with your kids, having a good relationship with your wife and your own physical health and laughing with your friends and having good times with people who you enjoy. You know that’s going to make you happy. And you know that’s not… and I have to remind myself because it’s not intuitive and I have dopamine that tells me you should want more, more, more, more, more.

So you never get over it. But I think once you’ve diagnosed the problem, it becomes easier at just spotting that emotion and realizing that it’s telling you a story that’s probably not true.

Managing Addiction and Finding Purpose

STEVEN BARTLETT: I wonder if I could trade the addiction because you referred to it there as being an addiction. If it’s the dopamine equation, could I not shift my addiction to something more productive? And would that mean that my spending would get better?

So actually, when I think about me as 18 years old and having that horrific spending problem, maybe I just shifted the thing that gave me dopamine to, like, building businesses or to podcasting or to writing books or being a great dad. I don’t know.

MORGAN HOUSEL: I think it’s probably true that everybody, without exception, is addicted to something and it’s just harnessing that process for whatever it might be. So some people are addicted to… My wife’s addicted to gardening. Let’s say she couldn’t care less about investing or spending money on an ISO. She could not care less about her car or my car or your car. But if you have a good gardener, if you have a pretty garden, she’s all over.

So everybody’s got their thing, and it’s just like, can you harness that for productivity? I think a lot of extremely successful people are people who took their natural addiction and harnessed it for productivity into their business. And that’s why they’re so successful. They just became obsessed with one thing.

And it’s a good question of whether we can actually guide that addiction or if it’s just kind of pre-wired in itself. I think it’s true for myself. Someone who’s written books about money for 20 years, thought about money for 20 years. My mom tells a story that when I was three, I would sit there and count pennies. I didn’t want to count seashells. I didn’t want to count cards. I didn’t want to count rocks. I wanted to count money. And so I think I’ve always had this disposition towards being fascinated with money.

STEVEN BARTLETT: Why?

MORGAN HOUSEL: I don’t know. Because I did it when I was three. I did it before I could even think through it. But I think everyone has their little thing. It’s always been fascinating to me. I don’t think I’m obsessed with money. I don’t think it controls my life. But I’ve had to go out of my way to have a healthier relationship with it.

But I think it’s definitely been true that the reason that I’ve found myself in this career is that it’s always been my thing. And I think everybody has that thing in their life.

Trading Addictions for Productivity

STEVEN BARTLETT: You know, people talk about addictive personalities and I was reflecting. One of my best friends who was an alcoholic, had a problem with gambling, then had a problem with eating, then got obsessed with marathons and he traded each one of those things for the next thing. So now he’s obsessed with health and fitness.

And so when I was thinking about people that are struggling with money problems and even my own historical struggle with money, I think I probably just traded it for something. And actually I’m kind of happy about that because I traded it for a better addiction, one that was productive.

MORGAN HOUSEL: Your career?

STEVEN BARTLETT: My career. And I guess doing this, I’m pretty addicted to doing this, right? It makes me happier than the plasma screen.

MORGAN HOUSEL: Exactly, yeah. I think what’s true about a money addiction is that it tends to be the classic addiction of, you tell yourself, “if only I get one more hit,” so to speak, “then I’ll be satiated, then that’ll be enough.” And the answer is, no, it absolutely will not.

I’ll tell you a personal thing. I don’t think this is true, but it made me laugh. My wife and I bought a new house about a year ago. It’s an awesome house, we love it, it’s great. And my brother-in-law came over the other day and he goes, “you know, you’re only going to live here for two years before you want to buy a bigger house.”

And I had to laugh because I’m like, I don’t think that’s true. I think we’re going to live here for a while. But I know what you’re saying is right. That’s the natural guide towards it. That when we bought the house it was like, “oh, this is going to be so great. Can you imagine? We’re going to get to do this and get to do that and we have these neighbors,” whatnot.

And you become accustomed to that very quickly. And then your gaze shifts a little bit higher. You’re like, “yeah, but look at that house over there. That one’s nicer, isn’t it?” That’s always the natural thing. And that’s dopamine at work. That is dopamine purely at work. Because the truth is our previous house was great. And our previous house used to be our dream.

The Arrival Fallacy

STEVEN BARTLETT: And dopamine exists when there’s a gap between where you are and where you want to be with something. And when that gap closes, they often refer to that as the arrival fallacy, which is really kind of what you’re describing.

MORGAN HOUSEL: You tell yourself, “once I get there, then I’ll be good, then that’s enough.” And it’s a fallacy, because you know that’s not true. As soon as you get to that, whatever that mountaintop is, there’s another mountain above it.

It pushes you in a way that is not easy. Nobody should pretend that you can just go do this today, but it pushes you into appreciating what you have now and finding your joy, finding your happiness through other things that don’t have the arrival fallacy.

Never have I, as a parent, said, “oh, if only I had one more kid, then that would be great.” There’s really no arrival fallacy for kids. You just kind of be like, “I just appreciate being around you. I just appreciate all the…” And if anything, it’s the opposite. It’s you look back and you’re like, “oh, I miss when you were younger, it was like, oh, it’s sad how fast you’re growing up.”

If anything, rather than looking ahead and being like, “oh, it’s going to be better,” then you’re looking back and you’re like, “oh, I wish I had appreciated that phase a little bit more.”

Wanting Less vs. Striving for More

STEVEN BARTLETT: When you talked about one of the ways to get to early retirement and to live a better life is to want what you have and basically want less things, I go back and forward a lot with this idea because there’s the monks who say that happiness is not wanting something. And then there’s the reality of life where striving for things seems to make me happy. And everybody describes the journey as being the most enjoyable part.

MORGAN HOUSEL: That’s your purpose. Yeah.

STEVEN BARTLETT: So, what… how do I make sense of this? That the monks are telling me not to want anything because that’s going to make me frustrated and unsatisfied. And then my lived experiences, striving for things with a group of people, seems to make me happy.

MORGAN HOUSEL: I think there’s a difference. It’s a subtle difference, but between pursuing something that you genuinely enjoy doing, which for you is this and your business and whatnot, versus being addicted to something that… chasing something that you don’t have yet.

And so I imagine, you can correct me if I’m wrong, but I imagine when you’re doing this, you don’t tell yourself, “I need to work harder so that one day the podcast can be up here.” I imagine, tell me if I’m wrong, but I imagine you come to work every day and you’re like, “I like doing this today. I like today. I liked yesterday. I’m going to like tomorrow.” And so you’re not chasing a false goal. You just actually enjoy doing it.

STEVEN BARTLETT: Do you know what? It’s a weird thing because it’s… I’m going to be honest, because it’s only a useful position to take. It’s a weird combination of both. So I say, it’s important for us to have some goal, but also live in the total understanding that the goal doesn’t actually matter.

And it’s this weird dichotomy I live in was like, if we become the biggest podcast in the world, set that as a goal because it gives us something to chase. I get that KPI and then put timeframes against and get excited by and focus on, but then also living in the total realization that it’s not going to matter at all. Nothing is going to change in my life. Zilch. What, am I going to get a better black shirt? It’s like, do you know what I mean?

The Paradox of Progress and Satisfaction

MORGAN HOUSEL: But here’s the truth. The reason that we live in a world with a ton of technology and a ton of great businesses and great medicine, whatnot, is because virtually everybody, for all of human history, has woken up every morning and said, “it’s not enough. I need more.” That’s the fuel of progress.

And I don’t want to live in a world where everyone wakes up and says, “I have all I need,” because then progress would stop that day. We’d probably start declining that day. And so there is a paradox here of, as a whole society, I’m grateful, and you should be grateful that people wake up unfulfilled, because we live in a way better world today than existed 100 or 200 years ago because of that.

And the richest people in the world, who I think are, by and large, tortured psychologically, have created amazing technology that you and I benefit from. And the reason we’re doing this podcast is because people before us who are way wealthier than you and I woke up in the morning and said, “this is not enough.”

Bill Gates, Jeff Bezos, all those people, Elon Musk, Mark Zuckerberg, they woke up and said, “I don’t care if I have $100 billion. It’s not enough. I need to create better technology.” And that’s great. We benefit from that. And so there is a paradox here that what is… And that will never change. That will never change.

So there’s a paradox that the more the better society becomes, I think it’s always going to be the case that as a whole society we’re going to have a level of angst and anxiety and not be satisfied and say “it’s not enough.”

At the individual level though, I think you can recognize that game and contextualize it within your own life and say, “look, I want more money. I want to sell more books and have a better career. I want to save more money. I also have to go so far out of my way to put it into context and say none of it’s going to matter unless I have a higher purpose beyond that money.”

So I think you can aspire for more and still go out of your way to realize what the expectations game is, even if you can’t perfectly control it. It’s similar to, I want to eat a good diet, of course I want to eat healthy food. I’m not going to pretend for a second that I don’t want Oreos and ice cream because they’re great and they’re always going to taste great.

And so I’m never going to get to a point where I say, “I don’t want a nicer house.” I’m a human and so are you and so is everyone else. You’re always going to have those feelings. But you can recognize the game. You can recognize the voice that’s talking to you and realize when that voice lies to you and when it’s telling you a story that is either false or just a little bit incomplete.

I think if you had to say, who is the happiest person in the world on average? Not naming a person, but if you had to describe the life of, who’s the happiest person out there? My guess is it’s probably something close to a middle class family that lives in a three bedroom house and has a five year old car. But they have an amazing marriage, tons of friends, they’re in good health, but they are by any other statistic ordinary.

And at the end of their life more than the people who are very, very successful, that ordinary family is going to look back when they’re on their deathbed, when they’re 95 years old and be like, “that was good, that was a good time.”

Nature vs. Nurture in Financial Behavior

STEVEN BARTLETT: Do you think this is a very strange question to ask, but do you think I could make myself like that?

MORGAN HOUSEL: No. Here’s the truth. I think on the nature-nurture spectrum, most of what we believe and the feelings that we have is forged at conception. And it’s just, we were just wired that way and there’s not much we can do about it. Some people have different aspects. Elon Musk was born wired very differently than you and I, and there’s nothing we can do about that.

So we are who we are. But I think we can put those feelings into a better context. Even if we can’t control having those feelings, we can choose, we can put… tell ourselves a more complete story about why we’re having those feelings and what those aspirations will actually do to our happiness.

STEVEN BARTLETT: So on this point of how to retire early, the first one was about managing what you want. Is there anything else there that if I’m trying to increase the probability that I get to retire early, I should know in terms of tactics and strategies?

The Reality of Early Retirement

MORGAN HOUSEL: Well, one of the things, this is a little bit different than the question that you asked, but one of the things that’s important is that a lot of the people who do retire early, who they tell themselves, “I’m going to save so much money, I’m going to retire when I’m 32, and then life’s going to be great.” What actually happens is they retire at 32 and six months later they’re bored out of their mind.

And they realize that what actually makes you happy is purpose. And for a lot of people, their purpose can be their career or they realize they had this idea that when they retired it was just going to be a great life. But the truth is all of their friends are working and don’t have time to go play golf with them on Tuesday afternoon.

And so a lot of people who retire early end up going back. They realize it was not what it was meant to, what it was made out to be. Because they had, if the formula is independence plus purpose, they gained independence, but they kind of lost their purpose. And then the four. And so it was incomplete. They didn’t get what they wanted.

The Passive Income Myth

STEVEN BARTLETT: What about passive income? People talk a lot about passive income. I had a friend DM me the other day and say, “Steve, I’ve got some debts, etc. But if I could just figure out a way to create some passive income, then that should solve the problem.” And this term passive income has become completely overused.

MORGAN HOUSEL: Because, for example, a lot of people when they talk about passive income, they’re like, “Oh, I’m going to own real estate. I’m going to have some rentals. And that’s passive income.” If you think owning a rental property is passive income, you’ve never owned a rental property because there’s nothing passive about it. It is a constant chain of broken toilets and leaky roofs and tenants who don’t pay you on time. And there’s nothing passive. That’s a full time job doing that.

And so I heard someone say this recently that there’s two ways to get wealthier. You can sacrifice more or you can want less and that’s it. And gain. Passive income is not part of that equation because that’s the first one. Sacrifice more. Sacrifice more.

STEVEN BARTLETT: What does that mean?

MORGAN HOUSEL: Work harder. Work in a job that has a lot of downsides, that might stress you out and requires you to wake up early and go to work and do some things that you don’t want to do and spend time away from your kids in a way that you don’t want to do. Sacrifice more or want less. Those are your two choices.

And I think that’s important in the passive income debate because I don’t think there’s, but they’re by and large is not a thing of passive income. Even if you’re just like you put your money in a savings account that pays 3% interest. Well, you had to sacrifice to earn that money and to save that money and to delay the gratification of that money. I really think it’s an ironclad formula. Sacrifice more or want less. Those are your two options.

STEVEN BARTLETT: It’s not nice.

MORGAN HOUSEL: That’s true.

STEVEN BARTLETT: People want… tell me which crypto to invest in to get there.

MORGAN HOUSEL: Everyone’s always going to want the easy answer. Just like for health, the answer is eat a better diet and exercise. Nobody wants that. They just say what’s the secret potion? What’s the secret formula? And maybe now we have Ozempic, maybe now it’s closer to a secret formula. But the truth is what’s the secret to better health? Sacrifice more. Because working out and lifting weights and running is a sacrifice. It’s not fun. It hurts. That’s why it’s good. Or want less. Be happier with your imperfect body. And I think that’s a great analogy between health and wealth.

Understanding the Macro Economy

STEVEN BARTLETT: How much do I need to understand what’s going on in the wider world and the economy in order to understand my own spending behaviors? What I should spend on, how to get wealthy, how to save? Is it important to have any understanding around the macro? Because most people that listen to the show will probably hear these terms being spouted out by political commentators like the Federal Reserve, interest rate, tariffs, et cetera. And should I understand any of this? Does any of it really impact me in a way that matters to me, my family?

MORGAN HOUSEL: I don’t think it’s necessary. And you could point to people I’ve written about in my books who had no financial education, no training, did not read the Wall Street Journal, could not tell you how the Federal Reserve works, but they had control of their psychology, control of their emotions. They worked hard, they saved their money, they invested it, and that’s all you need.

So the answer is, you don’t need to know how this works. Just in the same way that in order to be healthy, you don’t need a PhD in biology, you don’t need to understand how cell division works in order to be in good shape. And I think it’s the same for the economy.

And it can actually backfire for a lot of people that once they start reading the Wall Street Journal and learning a bit about finance, it increases their confidence more than their ability. So they’re like, “Oh, I read the Wall Street Journal, I should go day trade crypto now, because I read a thing that teaches me how the Federal Reserve works.” So now, it increases your confidence more than your skill.

STEVEN BARTLETT: So interesting.

MORGAN HOUSEL: And so I think it’s important to be an informed citizen. And the Federal Reserve impacts your life and tariffs impact your life. So it’s important to have some baseline understanding. But I think that’s more about being an informed citizen and an informed voter than it is having financial skill.

STEVEN BARTLETT: Of all of my best friends, there’s like five or six of them. The one that’s most cash rich is the one that knows the least about. I think he’s the most rich, period, to be honest. He’s the one that knows the least about finance and he knows least about investing. He knows the least about crypto.

The Wealth Spectrum Paradox

MORGAN HOUSEL: Well, what’s the meme of the tail spectrum of the poor person drives a Toyota, the middle person has a Porsche, a BMW, Mercedes, and the rich person goes back to Toyota. Of whether you are very uneducated or extremely wise, you tend to end up…

STEVEN BARTLETT: Oh, this one, okay.

MORGAN HOUSEL: And so I think it does tend to be the truth that the people who do the best financially either have no financial education or extreme financial education, and it’s a person in the middle that has. Their confidence is increased much faster than their ability and they’re like, “Oh, no, no. I read this thing on Reddit that taught me about day trading. So now I’m going to go bet my entire net worth on this company I’ve never heard of.”

STEVEN BARTLETT: So funny. But so what is it that the person on the left and right side of the spectrum are doing that is the same here? So for anyone that can’t see, I’ll put it up on the screen, but it just shows the bottom axis says net worth, and it basically says that people with low net worth buy a Toyota. People with in the middle, that sort of middle percentage buy Lamborghinis and Porsches and Jaguars, and then people with extremely high net worths buy Toyotas. And obviously it’s a metaphor.

MORGAN HOUSEL: It’s not exactly perfectly true. But I think people like a lot of comedy. You see it, it’s funny because people are like, “Yes, that’s true. That’s how it works.” I think a lot of it is the richer you become, you realize that the big house and the fancy car didn’t do anything for you. It didn’t give you what you thought it was going to give you. And then so you’re like, “Look, I’m just going to go back to utility.” Status didn’t do it for me, so I’m going to go back to utility.

It can also be the case that if you’re successful and rich, you can gain your admiration and your attention through the business that you built or the intelligence that you have, or the friendship that you can offer others and therefore your desire to be like, “Look at my car. Look at how cool my car is” just goes down from there.

The Boring Money Game

STEVEN BARTLETT: The way I also interpret it is that when you don’t have much money or when you don’t have a huge financial understanding, like my friend, you end up playing the really boring money games. And when you have a huge financial understanding, you probably also spend a lot of time playing the boring money games. And by boring money games, I mean index funds and the S&P 500 versus crypto.

MORGAN HOUSEL: Yeah, I think you’ll see that in investing that the absolute layperson will invest in index funds and the extremely experienced Wall Street veteran will invest in index funds as well. And it’s a person in the middle that just had a little bit of intelligence, a little bit of experience, a little bit of information that’s trying as hard as they can to outperform the market.

STEVEN BARTLETT: I kind of learned that from reading your book, The Psychology of Money because I think many people thought there was some trick or hack that this book was going to teach me to figure out how to trade coins at the right time or to do forex trading or whatever. But ultimately the book, if there was one overarching lesson it taught me, was that patience and more boring investing is the way to get to build my wealth over the long term. And that all other strategies have hidden trade offs which lead you to being broke.

MORGAN HOUSEL: I think there’s a truth too that there’s an optimal level of intelligence that you want for investing where you want to be smart enough to understand the basics, but not so smart that the basics bore you. A lot of people get so smart that they’re like, “Look, index funds compound interest. It’s too boring. I need something really complex to satisfy the intelligence that I have.”

And there’s a sweet spot where for me, I’m just like, “Oh, index funds and compound interest. That’s kind of as high as my intelligence goes here.” But I think the truth is that that is the best position to be in. Smart enough to understand the basics, but not so smart that they become boring to you. Because once they’re boring to you, you’re just like, “Ah, sweep those away. Let’s try to pull some more levers here.”

Rising Inequality and Division

STEVEN BARTLETT: What is going on in the world at the moment, Morgan? It feels like people are more divided than ever before. And I feel like a lot of these subjects we talk about are somewhat interconnected. Feels like there’s a rise in inequality. You probably know the numbers better than I do. I mean, there’s a graph in front of you there which shows. I think it’s, is it wage growth?

MORGAN HOUSEL: Yes, monthly wage growth. Monthly wage about 25 years and it…

STEVEN BARTLETT: Appears to be going down well, but this is growth.

The Reality Behind Economic Statistics

MORGAN HOUSEL: So in any given year, even if the growth is 2%, that’s 2% higher than the previous year. So this is not wages over time. Now, it is true that if you look over a 25 year period and you took the average American family, not everybody but the median, that their wages, adjusted for inflation, have gone up, not up as much as people would want over 25 years, but that they are better off than they were 25 years ago.

What is also true is that the average median family would probably disagree with that statement, even if it is true statistically for several reasons, one of which is their expectations have gone up over the last 25 years. The other is even if you’re looking at average wages, average when we talk about these statistics does not refer to any specific family. This is just a statistical number. Everyone spends their money differently.

So if I told you, hey, average family, you’re richer than you were in the year 2000, they’re like, yeah, but I’m trying to put my kids through college and have you seen the price of college? And yeah, that might be true because the price of TVs has gone down, but have you seen the price of rent and housing at the individual level? These statistics don’t really mean that much and never have.

I think a lot of economists get into a problem with that when they’re like, “well, statistically X, Y and Z has happened,” but ignoring the psychology and the individuality of what’s happening actually on the ground in people’s heads and how they spend their money, there’s just endless amount of nuance in here.

And so I think it’s always been true that we live in a world where over long periods of time there’s good economic growth, we become wealthier, we have bigger, better things, we have more income, we have better medicine. It’s equally true too that there is always something legitimate to complain about. And it’s legitimate to complain about. It’s not just like, oh, you should be more grateful, it’s a real thing.

And so when I look at a graph like this, actually what, if I was thinking just with my math head, I’d be like, oh, there’s been quite a bit of growth over the last 25 years, the growth has been gone up and down, but it’s growth. You know, never in this chart is growth below zero.

STEVEN BARTLETT: I guess the question there is, are rich people getting richer and are the poor getting poorer?

MORGAN HOUSEL: It depends. Are the rich getting richer? Yes. Are the poor getting poorer? Statistically, no.

STEVEN BARTLETT: Even adjusted for inflation, I mean.

Wealth Inequality and Wage Growth

MORGAN HOUSEL: It depends what period we’re talking about here. There was about a 20 or 30 year period where the answer was unequivocally yes. There was an interesting trend over the last 10 years where in percentage terms, the group of wage earners who had the highest percentage growth were actually the low wage. That was true for two or three years after Covid, where if you were a minimum wage worker, those were, in percentage terms, great years for you for getting wages. It’s tapered off.

So the answer to your question is the rich are getting richer. The poor, I think, are treading water. By and large, there’s always people who are doing differently than that. But when one group of society is getting richer, treading water feels like you’re falling.

And the specifics of how people spend their money. So even if on average, adjusted for inflation, their wages are flat, but if your rent skyrocketed, or you’re trying to send your kids through college, or you have a long commute and you got to put gas in your tank, the individual level things can feel very, very different from what the statistics show.

STEVEN BARTLETT: And what role do you think this sort of wealth inequality that is widening between the very very top and everybody else is playing in everything that we’re seeing play out at the moment? Because in the UK it’s almost like there’s, we’re on the verge of riots, it seems. And I think last month there was millions of people in London protesting against immigrants coming over on boats and society becoming more multicultural.

I’m so fascinated by this subject because, you know, earlier on we said that unless you have immigration in the Western world, you have population decline.

MORGAN HOUSEL: But population decline sucks because you have.

STEVEN BARTLETT: A hit on GDP.

MORGAN HOUSEL: One of the biggest problem right now throughout a lot of the world, at least one of the biggest perceived problems is immigration.

STEVEN BARTLETT: And the same is playing out in the United States. If I go on X, although I know what X is, it’s people. Maybe it’s just my algorithm, but it’s people attacking immigrants and immigration and people that are brown and black and whatever else it might be. I’m wondering how all of this is intertwined and if it is connected at all in your view.

When Society Reaches a Breaking Point

MORGAN HOUSEL: I think as an amateur student of history, across cultures, all over the place, all through history. What you want to avoid more than anything in society is when probably a third of the population wakes up every morning and says, “this isn’t working.” That’s the point at which it’s going to collapse from there is when enough people wake up in the morning and just have this feeling of, whatever this is, it’s not working out for me. You want to avoid that part.

And so, look, I tend to be a free markets guy. I’m a capitalist. I think people should be able to become very wealthy, et cetera, et cetera. You also don’t want to get to a point where people become so wealthy that a big chunk of society just wakes up every morning and says, “fuck this, this is not going to work out for me.” And I think we’re either there or precariously close to there in a lot of areas in the world.

Social media, that’s always been the case. And social media makes it a hundred times worse than it’s ever been. For example, you and I are recording this a day after Charlie Kirk was assassinated yesterday. And there were who knows what number, percentage it was. But I think it was not hard on social media to find people who were celebrating it yesterday.

Now, when Martin Luther King was assassinated, did those people exist too, who celebrated assassination? Of course. But because of social media, by and large, you did not hear from them unless you were part of that group. Whereas today, virtually everybody yesterday saw people celebrating Charlie Kirk’s assassination.

And so even if those feelings existed in the past, they’re much more apparent today. You see them today in a way that you did not before. So because of that, it’s easy to say we’re more divided today, we’re more extreme today, we’re more pessimistic than they are today. I think the nuance is that’s not actually true. You’re just more aware of it that those feelings always existed. They existed in the 1990s, they existed in the 1950s. It was just much easier to contain those.

And for the average citizen who got their information from one newspaper, one evening news program, to feel like things were much more stable and in control and that people were much more uniform in their opinions than they actually were.

The Dehumanization Effect of Social Media

STEVEN BARTLETT: Before we start recording, we were talking about the Charlie Kirk shooting and how social media’s ability to dehumanize other people at a probably a faster rate than history would have done it is pretty remarkable. And you see a lot of that, you see a lot of it taking place on both sides I think both sides describe each other as being animals and inhumane.

And one side’s calling the other side Nazis, and then the other side is calling the other side, referring to them in animal terms because of maybe the color of their skin or their behavior. We saw a lot of that when the heinous individual killed the young lady on the train in America. And the way this person is the fucking worst thing on planet Earth. But the language was very, it was putting that person in a group of other people.

MORGAN HOUSEL: Yes.

STEVEN BARTLETT: And then making the whole group a pack of animals.

MORGAN HOUSEL: Right. Because in that situation, too, we talked about this earlier. I don’t know that individual’s name doesn’t matter. But no one refers to him by his name. It’s “them.” It’s “they.” And that once you dehumanize any group of people like that, and this has been the case for all of human history, that 99.9% of people cannot kill another human, but they’re perfectly fine killing “them.” “They.” “That group.” Once you dehumanize, you can do anything.

And at a much lower level, everyone realizes this with road rage. I’ve had road rage. The person cut me off. That son of a bitch. Honk my horn. Flipped my, I don’t get too extreme with it, but things I would never do eye to eye. But once I’m looking at a car, then there’s no human there. And my ability to have a level of anger is so much higher than it would be if we were just looking eye to eye.

I had this experience a couple years ago where I was pulling into a gas station, and I inadvertently cut somebody off. It was an accident, but I totally cut them off. And he honked and threw up his middle finger at me. And since we pulled into the same gas station, we were now eye to eye. And I walked over to him, and I think he thought I was coming to confront him. And I put up my hands and said, “I just want to apologize. I didn’t mean to cut you off. I’m so sorry. It was not on purpose.”

And he, I think he was so surprised. And he was like, “wow, thank you. Thanks for,” and we had this moment of almost hugging of just, ah, I’m so, hope you have a great day. It was one of those of, once in the moment when it was you stripped the humanity outfit, when it was two cars each other, both of us were like, “fuck you.” Once we looked eye to eye, it was like, “oh, brother. It’s okay, it’s okay.”

I think that was just, for me, that was an individual example of what happens at society when you strip the humanity off it. We’re capable of so much anger and hate. Eye to eye, we’re like, “oh, that’s all good.” And I think all of us know somebody who we disagree with politically, regardless of what it might be. And it’s easy to be like, “oh, that person’s an idiot, they’re stupid, they’re ill informed.” And actually, if you sit down and talk to them, you’re like, “ah, look, we might have some disagreements here, but it’s all good. Cheers, let’s have a good night.”

Eye to eye, the vast majority of people get along and get together, but social media has turned all of life into road rage.

The Importance of Face-to-Face Dialogue

STEVEN BARTLETT: Gosh. Yeah. I mean, you know that more starkly than anyone as a podcaster, because I sit here with everybody of all political opinions. Extreme left, extreme, you know, pretty extreme right. And at this table, we get along, right? We get along. And even off camera, we get along.

MORGAN HOUSEL: I think so many people have said this in the last 24 hours about Charlie Kirk. One of the most common phrases I’ve heard was, “I didn’t agree with everything he said, but at least he was brave enough to have a conversation with people who he disagreed with.” That was what he did, by and large, was going into schools and being like, “I know you disagree with me, let’s talk.”

And he turned it from road rage into a conversation between people. And even if you disagreed with him, I think he did it very right in that sense. And I think that’s why people from all over the spectrum are devastated in the last 24 hours. It was like he was one of the people who was doing it right. Even when you disagreed with them, he was having a conversation face to face and bringing people together.

STEVEN BARTLETT: I think that absolutely hits the nail on the head, which is I think there’s things that I absolutely don’t agree with him on. But I actually think that’s just completely beside the point because I want to live in a world where there’s people that I disagree with. I actually wouldn’t choose the world where everyone I encountered agreed with my opinions. There would be no intellectual growth, there’d be no understanding, there’d be no real progress.

But also, as you’ve highlighted, the way that Charlie Kirk went about it was he went to Oxford University and went on the formalized debate panel against Otherwide.

MORGAN HOUSEL: In an office and a pine on social media. He went face to face and said, “I know you disagree with me.”

STEVEN BARTLETT: Let’s have a. Yeah, and I’ll listen to what you. He wasn’t interrupting people all the time. He’s hearing out their points. And he was making respectful about it.

MORGAN HOUSEL: Yeah. And what is missing from all political discourse today, it’s that it’s “I know you disagree, but let’s talk and let’s try to be respectful about it.” And I can’t think of anyone on either side who did that as consistently as he did, even if I disagree with him. The idea that we’re only going to talk to people who we agree with is what causes all the problems.

STEVEN BARTLETT: I don’t understand these fucking people. I don’t understand.

Reasonable vs. Rational: Finding Your Own Path

MORGAN HOUSEL: It’s much more comfortable to surround yourself with people who agree with you than to accept the nuance of life. And this is the problem with a lot of political media, is that it creates much better content when people say, this is right, this is wrong. He’s right. He’s wrong to make it very explicit binary, black and white than it is to accept the truth, which is like, it’s complicated.

STEVEN BARTLETT: I think I was traumatized yesterday when I watched that. When I saw the video of him being shot, I feel like it was this weird, deep sense of, I’ve not been able to articulate what it is, but it was. I don’t know. Charlie Kirk. I’ve never met him.

There was a time when, you know, we were potentially going to have him on the show, and we were trying to figure out, who to have here with him because he’s such an unbelievable debater that he would have ran rings around me.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: I was like, who can you put?

MORGAN HOUSEL: You’d be like, fine, I’m conservative.

STEVEN BARTLETT: But there was something really surprising in how I felt when I both heard the news and saw him being shot. This young guy, family person, who was out debating, who had ideas that many people disagreed with, but was in a forum where he was having them challenged, could be executed in public on livestream in a way that his children are going to watch that video when they grow up, probably multiple times.

And I was like, oh, God, what does this say about the society we live in and where we’re heading? You know, I know guns play a huge role in this. We have to acknowledge that because it’s very unlikely that could have happened in the UK because we don’t have guns there. So you could have thrown a rock or something, but you couldn’t have killed the guy.

But it’s almost, it feels like a crescendo of the moment where division and algorithms, and now that X has gone a certain way and other platforms are going certain ways. And if you look at the stats, there’s more social networks now that have more than 20 million active users than at any time in human history. It’s gone up by 50% in recent times, which means we’re becoming more splintered.

And then if you understand the commercial models of these algorithms, their commercial model is dependent on you spending more time there. So how do I get you to spend more time there? Well, I give you more of the things that are going to trigger your amygdala, which is your fear senses, and the things that are going to drive you into rage and debate and engagement and sharing things.

And so I don’t know, I wonder if there’s a way back from here.

The Power of Historical Cycles

MORGAN HOUSEL: I have an optimistic view and this is not a forecast because I don’t have 100% faith in this. But there are so many endless examples in history when people discount how powerful cycles can be.

And so my optimistic, my hope, it’s not even a forecast, it’s a hope is that 15 or 20 years from now, we look back at this era as when things bottomed politically from which we grew out of, we improved. We’re going to look back and be like, man, the 2000s were so bad and we are so divided, but that was also a bottom that we came out of, like a generational bottom.

And that sounds crazy today, but that’s always been the case. If you and I were talking about the economy in the 1930s, it would have been preposterous, completely insane to say the 1950s are going to be the greatest, most unbound prosperity, middle class prospective we’re ever going to have. That would have seemed insane if this was the 1970s and we just had a raft of political assassinations in the 60s. John F. Kennedy, Martin Luther King, Robert F. Kennedy, and then Richard Nixon is impeached and resigned for Watergate.

It would have been completely insane for you and I to say, hey, you know what? The 80s and 90s are going to be an era of political stability and political faith and trust in government. Insane.

It’s always when things are the lowest that you feel like you’re never going to recover. But if you understand how cyclical things can be, it’s usually the case of looking back, you’re like, man, it was bad. But looking back, that was the bottom.

And I have no idea if the bottom was yesterday or if it’s going to come ten years from now. But I would bet that the most likely scenario, whenever that bottom comes, is that we will look 15 or 20 years back and be like, that was terrible. And at that moment, everyone assumed it would go on forever. But looking back, that was actually a bottom.

When enough people came together and said, stop, stop. This is too much. The forces that we’ve gone too far in the other direction. We need to come around from them. It is always impossible in real time to wrap your head around that and to forecast it. It’s only looking back that you’re like, yes, that was the bottom.

And you can see things getting so bad. Trust in government is so low, polarization is so high that it would not surprise me in the slightest if we look 20 years from now and be like, oh, things got better.

The Role of Social Media in Division

STEVEN BARTLETT: I understand that from an economic standpoint, I struggle with it because of the presence of how we communicate now with social media. And I was looking at some of the stats here, and it says, in 1994, only 20% of Americans held a very unfavorable view of the other party.

By 2022, that number has jumped to 72% among Republicans and 63% among Democrats, according to Pew Research. And this is particularly pronounced in the United States and in the UK and other parts of Europe.

In this report, it says that social media and also cable news’s role has only amplified echo chambers, making the divide sharper and more emotional. And I can’t, especially with AI and the way I go, well, AI is going to make those algorithms even smarter at understanding exactly what to show me to increase my engagement, therefore increase their advertising dollars.

So I’m like, what would be the mechanism in this context?

MORGAN HOUSEL: I have no statistic or even strong thing to back this up with. My gut tells me that the younger generation in particular is going to be the one that looks at social media and looks at AI and recognizes the bullshit that can come out of it.

It’s the older generation, it’s the boomers today on social media who believe everything that they see. I think that tends to be where a lot of the polarization comes from. Not to blame everything on the older generation, but I think if you were to look at statistically, who is the most gullible on social media of believing every post in their feed, it’s the older generation.

And it would not surprise me if the younger generation is much more attuned to how quickly you can be led astray into some bullshit rabbit hole that is not reflective of how the broader world works. I don’t know if that’s true or not, but if you were to ask me to articulate why we’re going to get around the social media bubbles, it would be that the generations who have been doing this the longest are going to be the best at recognizing how dangerous it can be.

What Can We Do?

STEVEN BARTLETT: You’re a very smart guy and you’re someone that studies, has studied history and understands. You wrote the book, “Same as Ever,” which shows a guide to what doesn’t change through history and how things can often stay the same.

So this is a bit of a peculiar question for you, but in the wake of what happened to Charlie Kirk yesterday, his public murder and all that’s rising from that, what should someone like me and you who have public platforms who reach people on a daily basis do to help?

MORGAN HOUSEL: I think we have to remind ourselves two things about social media. One is that it’s been designed by the smartest people of our generation to deliver you in your feed, not the best information, not the right information. Basically, what’s going to give you the most FOMO, the most anxiety, what’s going to pull out the starkest reaction in you?

And the smartest people of our generation have gone to work at Facebook and Google and TikTok to make an algorithm that’s going to give you that. That’s going to give you the thing in your feed that’s going to make you go, wow, what?

And two is that even when it’s not that, even when it is just people’s thoughts, people go on social media to perform. They go on, and I’m trying to do this on social media. So I don’t want to give you any random thought in my head. I’m going to specifically give you what I think is going to be interesting and whatnot.

So if we view social media as a proxy for the real world, and I think everyone kind of intuitively does, even if they, when you say it out loud, you’re like, no, of course it’s not the real world. But it’s easy to assume that when I open up Twitter or Facebook or Instagram, I’m just seeing a window into the world. You’re like, no, these are people performing for you.

And the smartest minds in the world ordering that performance for what’s going to give you the most anxiety.

Economic Optimism and Inevitable Chaos

STEVEN BARTLETT: Are you optimistic about the Western economy, the US economy?

MORGAN HOUSEL: I could be optimistic long term and realistic about what growth means. The reason we tend to have growth in the economy and in the stock market is because it’s specifically because there’s short term chaos.

So am I optimistic about the next 30 years? Absolutely. I know that my kids will be living a better material life than you and I are. They’ll have better medicine, they’ll have better technology, they’ll have flying cars, whatever it is.

But I’m equally confident, if not more confident, that the path between now and then is going to be chaos. And that’s not mutually exclusive. The fact that I know, I’m extremely confident that there’s going to be a lot of growth and that it’s going to be a constant chain of setback and suffering and misery between now and then.

STEVEN BARTLETT: Is there anything that you see creating a setback? I mean, there’s these new protagonists in the story. There’s AI, there’s the declining birth rates, which is going to have an impact on the population. Is there anything that you think is your most focused? There’s tariffs as well. There’s Trump economics, which can cause some instability.

MORGAN HOUSEL: Historically, the biggest risk by far has always been the thing that nobody’s talking about. So when you and I survey the world today, we talk about exactly what you just said. Tariffs, birth rate, people know about those things.

There’s never been a period when the biggest risk was something that was knowable. It’s always something like Covid, which nobody saw coming. September 11th, which nobody saw coming, the Great Depression, Pearl Harbor, all these things that were not on people’s radar that did the most damage.

And so it’s not that I don’t worry about tariffs or that I don’t worry about birth rates. I do. But I would guarantee you that the worst economic story of the next 10 years, the biggest risk, is something that you and I are not talking about whatsoever. It’s a risk that’s going to come completely out of the blue, that is not in any newspaper, it’s not in any podcast. That’s going to be the biggest risk.

The Psychology of Money: A Favorite Chapter

STEVEN BARTLETT: Is there a particular chapter in “The Psychology of Money,” which was the book that sold, I hear, almost 10 million copies and had a profound impact on my life and my family’s life. Is there a particular story or chapter in this book that is your favorite?

MORGAN HOUSEL: I think the chapter on “Reasonable versus Rational,” which, to very quickly summarize it, is don’t pretend like you are purely rational. And you’re a spreadsheet, and your financial decisions have to make perfect sense.

Everyone is a little bit flawed, a little bit emotional, different family situations, different goals. As long as your financial decisions are merely reasonable, that’s good.

And I think a lot of people, for me, and for a lot of people, they’re like, oh, thank you for giving me permission, because I have this quirky thing that I do with my money, and it doesn’t make any sense, but it’s reasonable and it makes sense for my personality.

And as long as it’s reasonable, don’t be unreasonable, but don’t think that every one of your financial decisions has to add up perfectly in a spreadsheet. You want to use money as a tool for a better life, and there’s many different ways to do that, a lot of which might make sense to me, but not make sense to you or vice versa. And so that’s fine.

And so I think that to me, of just, hey, this is not an exercise in a spreadsheet where I’m just trying to make sure all the numbers add up. I’m just trying to use money to be a little bit happier and to sleep better and to give myself, my family, a little bit of a better life. Even if it doesn’t always make sense, it’s as a tool to give me a better life.

The Regret Minimization Framework

STEVEN BARTLETT: If money is a tool for happiness, I guess you have to get really clear, which you talk about in your new book, the Art of Spending Money. You have to get really clear on what your goal is. And I think most of us have never actually done an exercise to get clear on that.

MORGAN HOUSEL: Yes.

STEVEN BARTLETT: Which is quite shocking.

MORGAN HOUSEL: Jeff Bezos talks about this in a way that I think was really profound, where he thought about building Amazon with what he called the regret minimization framework. He envisioned himself being 90 years old or whatever on his deathbed and looking back. And he said the goal for life was to be on your deathbed and have as few regrets as possible.

And he said if he started Amazon and it failed, he would not have regretted that, but if he never tried to start it, he would regret it. And so it was easy. Of course he has to do it because he wants to have as few regrets as possible.

But I just think that very simple framework of the overarching goal in life, if you have what is the base of the pyramid for how to live a good life, you want to have as few regrets as possible, not take as few risks as you can, just have as few regrets as possible.

I think what’s hard is that people by and large don’t have a good concept of what they will regret. It’s easy to do because a lot of things kind of compound slowly. So if you eat a poor diet or if you’re not treating your friends as well as you should, that’s a slow thing. You might regret it eventually, but in real time, you don’t really understand what you’re doing.

So to have a good sense of what you’re going to regret is a difficult thing. But to me, that’s the ultimate goal in life. I heard the story one time of a guy who, his last words on his deathbed were “so much wasted time.” Those are his last words. I remember thinking that’s as bad as it comes to be on your deathbed and look back and be filled with regrets of the things you didn’t do, of the way that you treated people, of the risks that you didn’t take.

And so I think that if there is an overarching philosophy, it’s that. And I ask myself a lot, do I have a good sense of what I’m going to regret? And for every decision that I make, do I ask myself, will I regret doing or not doing this thing? Easier said than done, but something I think about a lot.

Self Control Is Empathy With Your Future Self

STEVEN BARTLETT: I think it’s generally just hard for us to appreciate that there will be a future self. I was reading a study where they put people in these MRI scanners and then ask them to think about themselves and then a celebrity and then themselves in 10 years time.

And when they thought about themselves, a certain part of the brain lit up. When they thought about a celebrity or themselves in 10 years time, a different part of the brain lit up, which kind of makes you think that we don’t really… Our future self is a stranger, and so we act.

And I think this about the people that I sit here with. I think probably most of the people that I sit here with learning from, if you could distill it down to why they’re here, it’s because they were able to think about themselves in 10 years time. So they became an athlete and trained, or they became a CEO or they became an expert in something. They were able to think. And they got through the PhD and all the…

MORGAN HOUSEL: There’s a great quote from Jerry Seinfeld. He says “self control is empathy with your future self.” It’s you are making a decision to either do or not do something today because you have respect for your future self and you care about your future self. You know there’s going to be a Steven 10 years from now and you want to do something today with compassion for that person ten years from now.

STEVEN BARTLETT: I’m guessing kids help in some regard because they give you a future to think about, right?

MORGAN HOUSEL: Something that’s going to outlive you and you want to teach them something and push them into becoming someone that’s going to outlive you. So by default, you’re thinking about something that’s going to outlive yourself.

Try Something New

STEVEN BARTLETT: You talk in the book about trying new things and why that is. There’s a chapter called “Try Something New.” And I think a lot of us actually get stuck in ruts in life and we get stuck in routine. It’s weird how as we age, we like routine more. But intuitively, everyone would say that routine makes them boring, right? Life less spontaneous, less interesting, less awe, less wonder.

MORGAN HOUSEL: And there’s that thing people realize, that summer vacation when you’re 10 years old seems like it lasts forever. But when you’re an adult, summer goes by in three seconds. And you’re like, why is time going faster?

At least one of the theories for why it seems like time goes faster as you age is because when you’re a child, every day is something new. You’re experiencing something for the first time. It’s a constant chain of novelty. When you’re an adult, it’s probably the same commute, going to the same job, living in the same house, and one day blends into the next, and before you know it, ten years has passed.

And so the idea of trying something new, I think is important. The point I made in the book about trying something new is you don’t know what your thing that you really are going to enjoy in life is. It might not be intuitive. Some people value travel, by and large, I don’t. Some people enjoy spending a ton of money on wine, by and large, I don’t. But I do spend my money on things that you might not appreciate.

Everybody’s different. You can’t. There’s no formula for how to do it. You have to try a million different kinds of spending before you’re like, “oh, I like this. I don’t like that. I want to focus more on this.” It’s not intuitive what that thing is going to be.

My wife and I also had this realization in the last month. So many people, when they think about money and spending, they’re like, “I want to travel. I want to have more money so I can travel.” I think, by and large, that’s great. Travel is an amazing thing.

My wife and I realized that I think we’ve done so much of it and because we have kids right now that we’re like, I don’t think we enjoy it that much. And it wasn’t until we were looking at our summer schedule that we’re like, “okay, we got two more trips coming up,” that we were like, “ugh, really?”

And we realized the best part of the last several trips that we’ve taken is coming home. The most enjoyable part of the trip was coming home. And we were like, can we just admit that maybe we shouldn’t be doing this as much as we do, even if society tells us that we should do it?

And everyone else. I travel a lot for work. So my idea of a vacation is not going on an airplane. But you have to realize everyone’s unique and different. If travel is your thing or someone listening to this, awesome, please go do it. We had to just admit to ourselves that at least at this phase of our life, we want to do a little bit less of it. The idea that everyone’s different is important, I think.

Cultivating Self Awareness

STEVEN BARTLETT: I mean, I think exactly that. I think what underpins much of your message here is this ability to cultivate self awareness.

MORGAN HOUSEL: Yeah. And I think a lot of what throws people off with money is chasing a lifestyle that is right for somebody else, but not right for them. And that it can be very hard thing to do because you’re like, “man, this person over here, he’s working this hard, and she has this house, and they’re living this lifestyle, and it looks like they’re pretty happy.”

And then you try to do it and you’re like, “but I’m not happy.” And the truth may have been that working that hard and spending money on that was right for that person, but it’s not right for you.

STEVEN BARTLETT: That’s what we don’t understand.

MORGAN HOUSEL: And if I had Jeff Bezos’s ambition, Elon Musk’s ambition, I think I’d drive myself absolutely crazy. It’s right for them. It might not be right for us. And so when we view it as “it worked for them, so I should do it too,” no, no, no. It doesn’t work like that. You have to figure it out for yourself.

STEVEN BARTLETT: But also the inverse, right? “It didn’t work for them, so it won’t work for me” is also incorrect.

MORGAN HOUSEL: Right. I think it’s immature for people to say, “I like this thing and therefore you should too.” Or the reverse. “This didn’t work for me, and therefore nobody should do it.”

STEVEN BARTLETT: This is the whole work life balance.

MORGAN HOUSEL: That’s not how life works. Right, right.

The Work-Life Balance Debate

STEVEN BARTLETT: And this is what you see raging on LinkedIn is one group of people saying, “that amount of work and sacrifice is toxic.”

MORGAN HOUSEL: “You should do it.” Or the other side.

STEVEN BARTLETT: Which is, “you’re lazy.”

MORGAN HOUSEL: “You have to hustle. You’re lazy if you don’t live the life that I do.”

STEVEN BARTLETT: And both sides are wrong.

MORGAN HOUSEL: Yes. It comes from a sense of immaturity that everyone else should enjoy life in the exact same way that I do.

STEVEN BARTLETT: I think there’s a few psychological forces at play here. One is if you’re looking at a bunch of people working really hard and you’re not, it’s in a weird way holding a mirror up to you and implicitly sort of indirectly saying that you’re not enough. And then maybe on the other side, there’s some other force going the other way. But I think both sides are kind of misunderstanding that everybody is not them.

The Invisible Parts of Life

MORGAN HOUSEL: Yes. I can pick apart elements of your life, say, “Wow, Stephen, his podcast is this, and he’s got homes here, and he’s doing this.” But there’s a million different components of your life and my life and everybody’s life that are invisible.

And most people, because of self-preservation or because they’re trying to get ahead in life, will not disclose what the bad parts of their life are. Of course, everybody does this. I do this, you probably do it. Everyone does that because either they don’t want to admit them to themselves or they don’t want to talk about it because they think other people are going to judge them for the bad parts of their life.

So it’s very easy to look at other people’s lives and have a sense of like, “Oh, well, theirs is better than mine” because all you can see is what they are advertising. And because of that, it’s very easy to be jealous or envious of people and say, “If only I had their life, things would be better.”

And part of it is good. Part of it’s good for me to look at. Be like, “Man, Steven’s been so successful doing this kind of content. Maybe I should do that.” That’s motivation. But once I say “Their life looks better than mine and if only I had what they had, I would be happier,” is a very treacherous path to go down.

STEVEN BARTLETT: Jack is the producer on the show. He’s done the show with me since the very beginning of us launching on YouTube. And so he understands the intricacies of my life very well. He understands my business. He understands, you know, what it takes and the trade-offs. So, Jack, would you want my life?

Jack’s Perspective on Steven’s Life

MORGAN HOUSEL: Absolutely not. No hesitation there. There’s no world where I could even imagine being in your world. The amount of people that are bidding for your attention on a daily basis is mind-blowing to me.

The podcast is such a huge part of your life, but the fact that I barely hear from you on a weekly basis can probably put into a little bit of perspective how much you have on your plate. I just couldn’t imagine having the magnifying glass on me that much. The whole world is kind of looking at me and thinking, has an opinion on you.

And you run lots of businesses, so you almost have to perform a little bit. And I think I see the worst of you. And I actually take that as a huge compliment because you can be yourself around me. I remember the time when you had to schedule your lunch.

STEVEN BARTLETT: I still schedule my lunch. It doesn’t happen, but I schedule it.

MORGAN HOUSEL: You schedule it because you don’t get time for your lunch. You went out of here, you went to the toilet, and people are asking you questions in between going from here to the toilet. It’s stuff that needs to be asked, but that is your life. That’s the kind of thing that you’ve gone into. And I don’t know if that kind of answers your question. I could probably go on for a long, long time, but I’ve got it. You should do a whole episode.

Happiness vs. Contentment

STEVEN BARTLETT: I’ve got last question then, so two more questions. But the next question is, do you think that I—do you think I’m happy in my life?

MORGAN HOUSEL: Yes. I don’t think you’re content. I think you’re happy, but I don’t think you’re content.

STEVEN BARTLETT: And what do you mean by content? What do you mean by content?

MORGAN HOUSEL: You’re always trying to chase the next thing, and I’m not sure why. You could so easily just do this podcast and it would do so well for you. It does do so well for you. You could spend all your time doing this, and I think you’re super happy when you do do this.

But then there’s also other stuff that clearly makes you happy that you want to do, but then you’ll come to me and you’re like, “We should start this new YouTube channel.” And I’m kind of like, “Yeah, great idea.” But I don’t know why you want that extra effort.

To your core, you’re a businessman, so you’re constantly trying to build and scale. But on a personal reflection of how much extra toll that takes on you. And also for Mel. I know your relationship with Mel. You don’t see her that much. So I think that’s quite an interesting one. But yes, I do think you’re happy, but I don’t think you’re content.

STEVEN BARTLETT: And last question. What would you like from my life?

MORGAN HOUSEL: What would I like from your life?

STEVEN BARTLETT: Yeah. So you said you wouldn’t want my life because—and you talked about the downsides. What elements of my life would you like?

The Beauty of Life’s Messiness

MORGAN HOUSEL: It’s actually quite interesting because I was—I think I was talking to Gemma Cozy about this last night. Your life is so engineered to be super efficient.

STEVEN BARTLETT: Yeah.

MORGAN HOUSEL: So you have someone book your cars for you, someone books your flights for you. You basically, as far as I’m aware, I don’t think you do much kind of normal admin that I would do.

STEVEN BARTLETT: I don’t even pick what I eat.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: I get the surprise. I walk out here and it’s there and I go, “Okay, well, I’m having broccoli today.”

MORGAN HOUSEL: And I think so much of the joys of what comes from life is the little messiness of life.

STEVEN BARTLETT: Yeah.

MORGAN HOUSEL: I think Morgan kind of touched on this at the start. That simple kind of family that just—they’re not super ambitious, but they’re super happy. That messiness of life is kind of—there’s so much beauty in that. I know you asked me what you would want from your life, but I think on the surface, I probably would like that stuff, but I understand and appreciate the beauty of doing those.

STEVEN BARTLETT: I ask the question around, “Do you think I’m happy?” Because even though you heard all of that stuff and you go, “Fuck me, this guy, he doesn’t have much time and he’s always working.” And we took a toilet break, which the audience probably won’t know, but as I walked out of there, two different team members came up to two different issues.

They said, “Someone wants to come on the podcast tonight.” I’ve got this huge meeting in New York City tonight with this major investor for four hours. Then they asked me in the hallway, they said, “Do you want this major guest to come on the show tonight or to cancel this huge meeting with US investor?”

MORGAN HOUSEL: And you have to make the decision in four seconds.

STEVEN BARTLETT: Four seconds. So you saw me sit down and go tell the team, “Yes,” which was me making that executive decision. And I was on my phone for two and a half seconds trying to make the decision. But it also means that date night is impacted with my girlfriend.

That was a little representation of my life. And I asked Jack if he thinks I’m happy, because my opinion—I could be living in a delusion—is that I am happy. And the way that I would hazard a guess that I’m happy is I am not unhappy and I don’t have unhappiness.

The Cost of Ambition

MORGAN HOUSEL: My guess, too, is that if you said, “I’m going to quit the podcast, quit all this, close the business down,” you would be beside yourself with anxiety.

STEVEN BARTLETT: Oh, God.

MORGAN HOUSEL: And so it’s less about “Does doing this make you happy?” I think the better answer is not doing this would make you miserable. But that’s who you are. And that’s how—and I, again, I’m so grateful that people like you exist because I get to benefit from the sacrifices that you made.

STEVEN BARTLETT: It’s no sacrifice to me.

MORGAN HOUSEL: Yes, I get that. But what, from my perspective, would be a sacrifice I get to benefit from. Because you—great content, too, and whatnot. And so I like living in a world where most people wake up in the morning and say, “This isn’t enough.”

And I think I do that, too. I want to write more books, better books. But if you don’t have some capacity to say, “Look, I have ambitions, I have goals that I want to achieve, I want to work hard to achieve those. I want to sacrifice to achieve those.” But I’m never going to have a good life unless I can take a step back and be like, “Man, look what I have right now,” even if it’s not that much.

Lessons from the Elderly

There’s a very good book written by a gerontologist named Carl Pillemer. He wrote a book called “30 Lessons for Living,” where he interviewed a bunch of elderly Americans. They were like 90 to 100 years old. And he just said, “Tell me the secret to a good life. You’ve experienced a lot of life. Tell me what you know.”

And he has a section where he says, of the thousand people who he interviewed, not a single person looking back at their life said, “I wish I made more money.” Not a single person said, “I wish I would picked a career that paid more money.” Not one.

But almost every single one of them looking back at their life said, “I wish I was nicer to people. I wish I was more helpful to my friends. I wish I spent more time with my family.” That was universal.

So if you want to talk about regrets, what are we most likely—what are you and I most likely to regret when we’re 90? It’s not making more money. It’s spending time with the people around us that we love and appreciate.

Switching Between States

STEVEN BARTLETT: I find myself switching between states and sometimes it’s because of a thought, but I find myself switching between these states of being in a moment, in a mode of gratitude. So last night I did the Jimmy Fallon show here in New York. My team were there. It was this really wonderful moment.

You know, I woke up this morning feeling incredibly grateful. Last night I was listening to some of my favorite music. I felt incredibly grateful. I’m really happy.

MORGAN HOUSEL: Happy.

STEVEN BARTLETT: And then I know that I’m going to switch into the lack of contentment that Jack’s referring to.

MORGAN HOUSEL: Happiness is always a five-minute emotion.

STEVEN BARTLETT: Yeah. And today I’m back to business and it’s like, build, build, build, build, build. And then I have this moment last night where I was making the Instagram posters to announce that I’d been on Jimmy Fallon and I noticed my girlfriend next to me in bed had fallen asleep.

And this thought comes through my head all the time now, probably from doing this podcast, which is exactly what you said, which is, “I am going to regret not spooning her and cuddling her while I have the chance.” Especially I think, because Charlie Kirk had just been shot and I’d seen his family. Maybe that’s why it was front of mind for me.

And I remember putting the phone down and thinking, “The thing I’m going to regret is not cuddling her.” And so I put the phone down and cuddled her. And so, yeah, I’m strange, I think, because I flock between these states and sometimes on an hourly basis, sometimes on a daily basis, sometimes on a minute-by-minute basis.

The Power of Awareness

MORGAN HOUSEL: The fact that you’re just merely aware of those states and the false story that those states can tell you puts you way ahead of most people, I think, to some extent.

There’s an interesting book called “10% Happier” and it’s about meditation. And the point the title came from, everyone’s like, “Oh, can meditation change your life?” And his point was like, “It can make you 10% happier, but that’s pretty cool.” And I think that’s true for money as well.

Can it completely change your life and turn you into a much better person and way happier? I kind of feel like, no, but it can make you 10, maybe 20% happier in life. I think that’s probably right.

But just being aware of its limitations is a huge relief, I think. Be like, “No, if you want a happier life, you’re going to have to find it through your purpose and your friends and your family and your health and your other philosophies of life that have nothing to do with money.”

It can help. It can make you 10, 20, maybe 30% happier. But understanding its limitations and what it’s not going to do for you is pretty important.

STEVEN BARTLETT: That lack of contentment I think I sometimes feel guilty about because I sit with so many people, especially people that are monks and such, and they tell you that wanting will make you despair and make you unsatisfied. But I find myself as being one of those people that you described that constantly wants to chase and pursue and pursue. And I think that I do have—am I supposed to feel guilty about that? Is there something wrong with me?

The Drive for Competition and Success

MORGAN HOUSEL: No. I mean, I think that’s how humans have evolved. Because at the core of it is competition. Everyone has that drive. It’s not necessarily because you want to build another business or grow your podcast. It’s competition with others who might be doing that better than you or who might take your place if you were to step back. That gives you the anxiety. I think that’s what everything is at its core.

And that’s why I like asking the question: if nobody was watching, what would you want to do? If nobody was watching your podcast, would you still want to do these interviews? If nobody could see your house, would you still buy a house that was as big as the one you did?

Sometimes the answer is yes. The answer might be yes to both of those questions, but it’s an important question to ask. Are you doing this because it actually fulfills you or because you are competing with other people and you think you’re gaining their attention by doing these things?

STEVEN BARTLETT: I think everyone who is answering honestly would say for most of the decisions in their life, especially the big ones, the answer is both.

MORGAN HOUSEL: Yes.

STEVEN BARTLETT: So, like choosing Harvard versus the other university, which might have been better, but it’s Harvard. Or buying the house where you bought it, or that watch that you bought, or the Apple watch instead of the whatever.

The Importance of Signaling

MORGAN HOUSEL: And signaling is important. You can’t just discount it, because if you want to attract the right friends, the right spouse, the right employers, there’s a signaling aspect. A college degree is signaling. It’s not the education you obtained. You’re giving a signal to an employer that for four years I showed up and did the material and got the right answers. It’s signaling.

Signaling can be very, very important. It’s not to discount it, but there’s a right and a wrong kind of signaling. There’s a right kind of, like, I’m doing this, I’m dressing in a way and displaying myself and cutting my hair in a way that’s going to attract the right friends and the right mates, the right boyfriend, girlfriend, whatever it might be.

There’s also signaling of, like, I’m going to aspire to buy this car that’s a huge pain in the ass and I actually hate driving. But I think strangers are going to look at me and pay more attention to me. That’s the wrong kind of signaling.

Workaholics Can Be Happy Too

STEVEN BARTLETT: I think this is the thing that both sides misunderstand in the debate: someone who is a workaholic, believe it or not, can be happy. Yeah, absolutely. And someone who does no work or works one day a week can be happy. And this is like a really difficult concept for either side to understand about the other side.

And that’s why, as well, I asked the question about Jack. Like, do you think I’m happy? Because Jack would know that if I walk out of here and he sees me as this depressed person who never smiles, never laughs and has no joy in my life, doesn’t have… you know, then I would very much fit the stereotype of like the tortured workaholic or whatever. But it’s surprising.

MORGAN HOUSEL: I think we all just want contentment. So, like, I think we get into a lot of trouble when we chase happiness, when what we’re actually going for is contentment. We actually just want to get to an area where we’re like, “I’m good. I’m all set.”

Money and Kids: Leading by Example

STEVEN BARTLETT: What’s the most important thing or the most interesting thing in your book that you can remember that we didn’t talk about, that maybe we should have talked about?

MORGAN HOUSEL: I think the relationship between money and kids is an interesting one, where every parent wants to use their hard work, what money they might have—it doesn’t have to be a ton, you don’t have to be rich—but they want to use their hard work in order to give their kids a better life.

When a lot of times what the kid needs to do is learn on their own, and they’re going to learn vicariously the values that you have about money. They’re going to learn just by watching. You don’t need to sit your kids down and say, “Let me teach you how to budget. Let me teach you how to save. Let me teach you how to invest.”

They’re going to watch you and figure it out. And so you have to just lead by example with those kids. You cannot lecture values into them. They’re just going to watch how you spend, what you value, how you save, how you judge other people and talk about other people. And they’re going to form a philosophy of money based off of that.

Money Attachment Styles

STEVEN BARTLETT: I often think about money in terms of like attachment styles. You know, in like dating psychology and romance, they talk about anxious, avoidant and then what’s the middle person called? They’re like basically neutral.

But I think I had an avoidance money attachment style. I think money was the third parent in my household and I learned that money causes problems, that it doesn’t come around as much as we would like, that it’s really why we argue in the household, that it’s the reason why I am embarrassed when we pull up in that terrible car and I try and get my… I hope the traffic lights change in a certain way so that I can be dropped off further away from the school so no one sees me.

Like my relationship with money was established at such a young age. And it’s almost like I had like an unhealthy, like they say, relationship. Yeah, like an attachment style to it. I just wonder, like, is that a useful frame to think through that you have this… yeah, like this romantic-esque relationship with this thing. And in order to change that, you need to unlearn the lessons.

MORGAN HOUSEL: I think a lot of like the lessons that we learn about money when we’re younger are because, like I said earlier, it’s because when you’re young, particularly you’re a teenager, you’re in your early twenties, most people in that situation have very little other skills to offer the world. Yeah, humor, intelligence. Some people more than others.

But in that situation, you’re always going to gravitate towards, “If only I had a nicer car when I was being dropped off at school, then they would pay attention to me.” But the truth is, if you are the funniest kid in class, it doesn’t matter if you’re dropped off in a junky car. People still respect you because they’re like, “Man, he’s a star of the football team. That kid’s hilarious. It doesn’t matter what kind of car he’s driving.”

You gain your attention and your respect from something else. But if you’re not the star football player, if you’re not funny, if you have nothing else to offer, then you seek your admiration through, “Oh, he’s dropped off in an Escalade. He’s cool.” That’s where you want your attention to come from.

There Is No Formula for Happiness

STEVEN BARTLETT: Is there anything else we should have talked about that we haven’t talked about, Morgan, for people that are trying to get a grip of their life, be happy, make better money choices?

MORGAN HOUSEL: To me, like, the common denominator between all three of those books that you’re holding is the idea that we talked about quite a bit on all the shows we’ve done together, which is that there is no formula for it. And that’s very disheartening for a lot of people to hear. There’s no formula for, “Here’s what I want you to go out and do,” which is a lot of what people want out of content, whether it’s a book or a podcast. Like, “Just tell me what to do.”

And the answer is like, I can’t because I don’t know you and you don’t know me. We’re all different. But I think that’s actually the biggest relief. That’s actually the best news, that you don’t have to follow somebody else’s playbook. You can do it your own way.

And it’s easier to do it your own way when you come to terms with the fact that nobody is paying as much attention to you as they think they are. You can do it your own way, free of judgment and other people making fun of you or judging how you’re living life because they’re too busy worrying about themselves. You have to figure out what works for you and do it. And that’s as close as we can get as a formula for living a better life.

STEVEN BARTLETT: It’s funny because the book is called “The Art of Spending Money,” but much of the through line throughout the book is really about happiness. And I guess that’s really what money is for many people.

MORGAN HOUSEL: A tool to become happier.

STEVEN BARTLETT: A tool to become happy.

Happiness and Expectations

STEVEN BARTLETT: I remember when I interviewed Mo Gawdat, who wrote a book about happiness, he said to me a line that’s always stayed with me. He said, “Happiness is when your expectations of how your life is supposed to be going are met.”

And so with through that lens, I look at everything. I look at, like the food that you’re given in a restaurant, and if you expected it to be this, and it doesn’t come like that, there’s unhappiness, even if it’s like a five star, a five wagyu steak or whatever. And then your relationships. All of my arguments I’ve ever had with my girlfriend all stem back to unmet expectations.

MORGAN HOUSEL: Expectations. I was saying if you ride the Amtrak Train from, like, New York to Washington, D.C., on every train, they have what’s called the quiet car. And in the quiet car, you’re not supposed to talk at anything above a whisper. No phone calls, no talk with your friends. It’s the quiet car.

And people go there for peace and quiet and serenity. And the irony is that people are so uptight in there because if they hear one peep out of everyone, they’re like, “Would you shut up? We’re in the quiet…” They’re so frustrated about it. Because your expectation is, “I’m going to get quiet.” And if it’s anything other than quiet, you lose your mind.

And it’s like, at that point, that’s when your high expectations are actually working against you, and people are actually calmer in the normal car where there’s chaos all around them because that’s what they expect.

STEVEN BARTLETT: So that’s the unhappiness car.

MORGAN HOUSEL: Right. Your expectations are a debt that has to be repaid.

STEVEN BARTLETT: That gives us a controllable element to our happiness, doesn’t it, with your expectations?

MORGAN HOUSEL: Because your expectations are more in your control than things like what the economy or the stock market’s going to do next. Nobody has any control of what the stock market’s going to do next. But you do have more control over your expectations of how much money do you expect to make next week? What do you expect out of the stock market? What do you expect out of your career? What do you expect out of your spouse? That is more in your control than influencing other people’s behavior.

The Power of Gratitude

STEVEN BARTLETT: And this is probably why all these Eastern traditions talk about gratitude, because gratitude is the very realization that expectation I once had are currently being met.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: And it just… even when you start to think about dreams you once had that you are now living out, for me, it makes me feel that feeling of contentment. It makes me feel really, really good inside.

So, like, even yesterday, where I took a moment and I was on the Jimmy Fallon show, and it’s like this crazy thing to me that I could never have imagined someone like me doing. And I took a minute to just, like, think about how far beyond my expectations this stuff was, you feel overwhelmingly good about it.

MORGAN HOUSEL: But the truth was relative to if you just thought about yesterday, you expected to go on the Jimmy Fallon show that met your expectations for the day. If you looked at your calendar for the day, it was, “I need to go to Jimmy Fallon. I need to perform. I need to say the right things.” But over the longer scope, that’s off the charts of your expectations.

STEVEN BARTLETT: And that’s the zooming out is where we see the gratitude fills us up.

MORGAN HOUSEL: And it’s very difficult to say this without sounding ridiculous, but you can even zoom out and be like, “I’m so grateful to live in a world with antibiotics and Advil.” Like, it sounds crazy because we expect them. Whenever we take penicillin, we’re like, “Yeah, like, it’s just a thing that exists.”

But can you imagine living in a world without that, as 99% of humanity did before us? Like, it’s impossible to think of, like, the most basic things that we take advantage of. But that’s where gratitude… like, you have to zoom out to become more grateful of these things. And you’re not going to be content until you can exercise that level of gratitude.

STEVEN BARTLETT: You said something earlier which dovetails into this where you said that at different levels, people will aspire. You know, the billionaire wants two billion. And I was reading a study many years ago that said roughly all the way up the income, wealth spectrum, people want like three times more than they have now.

MORGAN HOUSEL: To be happy is what seems like the amount that’s going to keep you happy. So if you have $10,000, people are like, once I have 20, then I’ll be good. If you have $20 million, people are like, ah, 40 seems like the right amount. It’s always two or three times what you have.

STEVEN BARTLETT: And that’s just the intentional creation of an expectation gap. It’s like creating misery for yourself.

MORGAN HOUSEL: Yes. It’s this idea that, like, if only I had a little bit more money, then these problems that I have, this anxiety, this unfilled hole that I have, will finally be filled. And it’s a lie we tell ourselves, of course.

STEVEN BARTLETT: And everyone listening right now has that. Everyone has a number in your head where you think, if I got there.

MORGAN HOUSEL: Then it’d be good. I have that, you have that, we all do. And if you and I have met that number, previous versions of that number, it’s the same thing. We’re like, okay, but double would be great.

I met someone the other day whose income, annual income is almost exactly 2x mine. We were being very open with each other. He’s a good friend of mine. And the instant feeling I had, I didn’t say this, but the instant feeling I had is like, okay, if I had that, everything would be great. And it’s absurd. We do that all day. And I’m sure if my friend met someone whose income was 2x of his, he would be like, that’s the level.

STEVEN BARTLETT: That’s the one because your overheads go up, but then your competition comparison group also increases. So you’re now poorer in a different class of comparison. Like, yeah, you’re like, when you bought that new house you just bought, that must have moved you to a new neighborhood.

MORGAN HOUSEL: And there’s houses in the neighborhood nicer than ours. Yeah, my wife and I talk about that. Really? It’s absurd. Now, I think because I write about this stuff, I think I’m a little bit better at catching myself in those moments, but I won’t pretend that I don’t have those moments. They’re almost unavoidable.

The Humble Bubble

STEVEN BARTLETT: What has worked for you? Is there anything that has actually worked for you in terms of detaching you from comparison and what people think? Is there anything at all that’s worked?

MORGAN HOUSEL: I like this term “humble bubble.” I want to live in a humble bubble. It has to be humble because I don’t want to live in a bubble where I don’t have empathy for other people. I want to take in the experience of others so I can try to understand the world that I live in.

But I want to live in a bubble in the sense of, I want my expectations not to leave my own house. Easier said than done. But when my expectations don’t leave my own house, I’m like, I want good health for myself, I want happy kids, I want a good marriage. And those things don’t leave my roof.

Once my expectations leave my bubble, once they expand outside of my house, I’m like, oh, look at his house and whatnot. It’s like I just wanted, I always think about that humble bubble of, the only thing that’s going to make me happy exists underneath my roof. And I know that. And as soon as my aspirations leave that, I know it’s just going to spin out of control. I try to think about that a lot.

And as I mentioned before, the idea of if nobody was watching, what would I care about? That’s the most powerful exercise to me. If nobody could see anything that I was doing, how would I choose to live?

STEVEN BARTLETT: I’ve always wanted to counter this point with some thinking, which is, but if I put myself in a higher status position, I’m going to get more opportunities, which means more money, which is then going to better allow me to focus on utility. Not that that’s how it ever plays out for anybody. But the thinking is, well, actually, status does equal revenue in a lot of the world.

MORGAN HOUSEL: And revenue can give you independence. I think to many extent that’s been my goal. How can I be successful in my career so that I can make enough money to not have to work in the career anymore? It’s not that stark, but it’s kind of like that.

The flaw in it is that I like writing, you like podcasting. And so if we get more successful, I’m not chasing success so that I can stop doing what I’m doing. I just want to do things that I enjoy.

Regrets and Alternative Paths

STEVEN BARTLETT: We have a closing tradition where the last guest leaves a question for the next. As you know, do you have major regrets in life? Then it says they prove no real purpose. Do you still have regrets?

MORGAN HOUSEL: Nothing huge. There are some regrets. I was thinking about this the other day. My wife and I, we have two kids and we’re done having kids. And there’s part of me that’s like, what would have life been like if I had four kids, three kids, if we’d done that?

Both of my kids have given me so much meaning and purpose. And I wonder what a life would have been like if I had more. And I can’t imagine having just one kid. I can’t imagine just having zero kids. But there’s an alternative life in which I had four or five kids. And life gets crazy at that point and that’s not a regret.

But you realize, once you’ve kind of closed that door on your life, you’re like, man, what would have life been if I had done it differently? Because it’s given me more purpose than anything that I ever could have imagined and I could have had more and maybe it would have been worse, but I wonder what that would have been.

I think it’s not until we’ve chosen to close that door, that chapter of our life, that we’re like, man, what if we had done it a little bit differently?

STEVEN BARTLETT: Do you wish you had frozen embryos? Because that would have kept the door open, theoretically.

MORGAN HOUSEL: Not really, because I think there is a point of view. You need youthful energy to be a parent. I couldn’t imagine having a newborn at 50 or 60. I think you need the energy of a 30 year old or 25 or a 30 year old to do that.

And it’s not a regret because I’m very satisfied with the family that I have now. But it’s one of those things of, you realize there’s an infinite number of paths your life can go down and we could have had no kids. We could have had four kids. We chose this path, but it’s one of just one. It’s one of multiple paths that it could have gone down.

STEVEN BARTLETT: Morgan, thank you. Thank you for doing what you do. You’re my favorite author of all time and I think I’ve told you this before, but it’s the way that you write. I find it so unbelievably engaging.

The message within your book is a profound one. All of your books are profound ones, but it’s actually the way that you tell the stories. And if anybody’s listened to you speak today, they’ll understand exactly what I mean. Your books are a mirror of that.

The Psychology of Money, as I told you before, is the book that changed my financial life. The one book my brother who’s a very smart person told me to read. And there’s no wonder that it’s one of the best selling books of all time. I think it might be the bestselling book of all time in its category.

And your new book, The Art of Spending Money, continues on the same trend. Incredibly accessible, incredibly engaging, incredibly human. But within there there’s a profound lesson that stands the chance of changing our lives for the better.

So I highly recommend everybody goes and gets this book, The Art of Spending Money, which comes out tomorrow, October 7th. So I’m going to link it below for anybody that wants to grab a copy of this book.

And if you’re someone that does want a happier life, it is a book about spending, but it’s also more broadly a book about happiness and regret. And it tells stories that allow you to make better decisions in your life.

And it’s through stories, not through frameworks alone or data, that I think we’re most influenced. And you can probably relate to this. If you’re listening to this, you probably have heard stats before. You probably know you should save. But it’s sometimes hearing real stories from real people that stick into your amygdala and create that behavioral change.

And that’s exactly how Morgan writes. He writes through the context of great stories that stand the chance of changing your life. So it’s a wonderful, wonderful book to read and I highly recommend you do.

MORGAN HOUSEL: Thanks so much for having me.

STEVEN BARTLETT: Thank you so much, Morgan. Hope to see you again sometime soon.

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