Transcript of Morgan Housel on The Diary Of A CEO Podcast

I see this word, but I don’t really know what it is.” And I think that’s important because I don’t think the average person understands what can happen to the economy if this persists for a long period of time.

STEVEN BARTLETT: I’m so glad you said that because I’ve been waiting for weeks now to ask somebody like yourself who studied economics to explain in a simple way what a tariff is. And feel free to use an analogy. I think about 50% of people have no idea what a tariff is. And then on a sort of an incremental scale and people’s clarity gets better and better. And I would estimate about 5% of the general population could articulate what a tariff is, 5% or less. So can you tell me what a tariff is?

What Is a Tariff?

MORGAN HOUSEL: The first I would say is tariffs have been used for hundreds of years and there is. There can be a very good useful purpose for them in the economy. I think as they’re structured right now in the United States, it’s a huge mistake. It has a potential to be a catastrophe, but they can be a useful thing in the economy. This is not a black and white thing.

What a tariff is, is this. Keep this very simple. The United States buys a bunch of computers that are made in China, bunch of iPhones that are made in China. They’re on a container ship. They ship them to United States. When they get to the port in the United States, the importer, which is Apple, bringing the iPhones in that are made in China, an American company has to pay the tariff that’s put on it.

And a lot of people, it’s very understandable why they would think this would say, well, no, in that situation, China pays the tariff. And there could be a situation where China starts discounting the iPhones that the company that’s making the iPhones would discount it. Like there can be some offset. But the person who’s paying that tax is the importer.

STEVEN BARTLETT: So often we think about we’ve applied the tariff to China, right? So what’s happening is China having to spend the 10% or I think the tariff currently is like 125, 145.

MORGAN HOUSEL: The number doesn’t matter because trade will eventually will just stop at those levels. It just won’t happen.

STEVEN BARTLETT: So if Apple import an iPhone now with that tariff level, then Apple would have to pay the 145% which arrives at the shore.

MORGAN HOUSEL: Correct. I mean, here’s an example that most people will understand. Sales tax, you know, in most states in the United States, it’s 6 to 10%. If you go to the store and buy something, you add the sales tax to that. In the UK, yeah, fair. Who pays that is not the store, it’s the customer. So even if the tax is put on the seller, the seller passes it on to you, the customer, and it says right on your receipt, you bought something for $10. And then there is a, there’s your sales tax and here’s what you’re going to pay in the end. And so it’s similar from that.

Now let me explain this. Why there would be a very useful case for tariffs to show that this is not black and white and this is not, oh, all tariffs are bad. This happened in the United States during COVID. We were virtually 100% reliant on masks. N95 masks that were made in China and Korea and not in the United States. And so when you have a medical crisis in the early days of COVID and we’re like, we need hundreds of millions of masks yesterday. They’re all made somewhere else. We do not want to be in that situation.

So it would absolutely make sense to have a tariff on masks to make sure that they are so expensive to import overseas that we have to start making them in the United States. That makes sense. Same with military equipment. You do not want to go to war with a country and be reliant on that country to make your military gear, your bullets and your bombs and your tanks and whatnot. Absolutely makes sense to have a tariff on that to make sure they’re made in the United States.

That said, so it’s not black and white, but to have a blanket tariff and say everything that comes from any country anywhere in the world, and China is going to be this, to an extreme degree, is going to have a tariff on it. And whether that’s between 10% for all countries or 145% from China, that. You know, I’ve used this analogy before that if you talk to dietitians, there is a huge amount of debate over what’s the best diet. Should you eat, should you be keto, should you be vegan? Like everything in between, there’s so much debate. All of them agree that processed sugar is bad. Nobody thinks processed sugar is good.

And tariffs are that with economists. Like, there is so much debate among economists on what should the tax rate be, what should subsidies be? Should we, you know, like a free market versus versus subsidies? There’s so much debate. No serious economist thinks that you should have a trade war. And the thing is, this is not new. We’ve been doing this for hundreds of years. And it’s very well known that in the 1930s, the Great Depression, we put huge tariffs on in the early days of the Great Depression. They didn’t know it was called the Great Depression back then because we put them on and it shut down global trade.

And it’s easy to think that if you put tariffs on your own country, that will make it easier to manufacture. Like all those jobs that we shipped overseas of building cars, they’re all going to come rushing back to America. And it very rarely happens like that when you have a trade war. But what I mean by trade war is we put tariffs on China, they respond to put tariffs on us, and you just go tit for tat, and you go back and forth, and it’s like mutually assured destruction in economic terms.

STEVEN BARTLETT: So why is Trump doing it, then, in your view? Because he’s given lots of reasons. He said that they’re ripping us off. He says lots of countries have been ripping off the United States. How do you unpack what he’s saying there? And what do you believe the true reason is underneath that?

The Manufacturing Monopoly That Can’t Return

MORGAN HOUSEL: To his credit, Trump has been very consistent on this for literally 40 years. You can go on YouTube. He gave an interview in, I think it was 1986. He went on Oprah in 1986 talking about how free trade wasn’t free and that Japan and other countries were ripping us off and that the solution to it were terrorists. So this is not a new view. This has been a lifelong quest that he’s had.

I would say not necessarily Trump’s views, but I would say it absolutely makes sense that there is a large chunk of America that looks back to the period of 1950s, 1960s, when we were a manufacturing powerhouse, and says that was better than what we have now, and we should go back to that. I get why people would say that, because it’s true that we have lost a lot of manufacturing jobs in the last 50 years. I think manufacturing jobs peaked in the late 1970s, and we’ve lost something like 10 million manufacturing jobs that we had versus what we had back then, and I get why, if I was in that situation, I would probably feel the same.

Where I would push back is the situation that we had in the 1950s and 1960s, where it was just America, manufacturing powerhouse were a very unique period that I think is virtually impossible to bring back. And I’ll tell you why. At the end of World War II, 1945, Europe and Japan were in rubble. They were decimated from the war. America was not decimated whatsoever. And so we had basically a global manufacturing monopoly for a period of time.

China was not in the equation. South Korea was not in the equation. India, Bangladesh, they were not in the equation. It was basically Japan, the United States and Europe, two of which were just struggling to feed their citizens. And once they got that under control, it was like, we have to rebuild the damage from the war.

So America had about 20 years from 1945 to the mid-1960s of we have a manufacturing monopoly. And then we had 16 million US soldiers come home from the war. And there was so much pent up demand for them to buy homes and washing machines and cars and radios and all these things. And all of them were built in America because nobody else could build them.

And that created a really special time when like, because we had a manufacturing monopoly, it was just like factories everywhere. We built up so many factories during the war, there was endless demand for those products. And this is an important part too. White collar workers during that period didn’t make that much money relative to what they did before or since. And that was important because the wages that the blue collar manufacturing workers were earning felt great by comparison.

So if you were an autoworker in Detroit and you compared your wage in 1955 to the local accountant or dentist or doctor by comparison relative to today, you’re like, oh, it’s pretty good. Yeah, the doctor makes more than me, but not that much more than me. You know, I drive a Chevy, he drives a Cadillac, his is a little bit nicer, but we’re living mostly the same lives.

And so I think that was a lot of the feeling of Prosperity in the 50s and 60s was this very unique period of manufacturing monopoly as Europe and Japan were rebuilding. And by comparison to other workers, it felt amazing.

And then at about the 1970s, Japan and Europe had gotten themselves back together from the ravages of World War II and they became manufacturing dynamos in their own right. And I don’t think we really understood this in America until three companies came in which were Toyota, Honda and Nissan, and they started selling cars in America.

And at first it was very easy to be like, look at these little, like, lawnmower toys that they’re importing, because you compared like an early Honda Civic to, like a Chevy Camaro in the 70s, and it was like, you can’t even compare them. So at first, the reaction of American car companies were like, these guys are a joke. No one’s going to buy these little cars.

But then gas prices surged in the 70s and 80s, and all of a sudden the cars that Americans wanted was the tiny little Honda Civic that got really good gas mileage. And then once they started buying them, they were like, hey, this Toyota, this Honda, this Nissan, it’s actually a pretty good car. It’s actually pretty well built. And I think there was a lot of denial among American manufacturers that these other nations that didn’t exist for 20 years in terms of a global manufacturing source were actually pretty damn good at it now.

And then one other thing happened to wrap this up, and this might be the most important part of it. The reason that you cannot reasonably expect the manufacturing powerhouse to come back as it was is, yes, we did ship jobs to China and Mexico and Canada and India that used to be in America. And that has contributed to the massive decline in manufacturing employment. But a bigger factor in there is automation. And if you look at a Tesla assembly line in the United States.

STEVEN BARTLETT: I’ll put it on the screen.

The Automation Revolution

MORGAN HOUSEL: It is what you will see. It’s amazing. It is a miracle of engineering. What you will see are armies and armies of robots and very few people. And if you compare that to the 1950s assembly line, what you see are biceps and backs and people hauling around material.

So because we got so good at automation, even if we bring manufacturing back to America, and we still do a lot of manufacturing in America, it doesn’t require the amount of employment that it used to, doesn’t require the amount of manpower. And the people who do work on Tesla manufacturing lines, by and large, are working on computers, overseeing the robots.

I mean, here’s one stat that I thought was always interesting to me. In 1950, there was a U.S. steel plant in Gary, Indiana. It produced 5 million tons of steel and had 30,000 workers. Today, it’s still operating. It produces 8 million tons of steel and has 2,000 workers. So it’s producing more steel today than it was in the 1950s. And it went from 30,000 workers to 2,000. Because what used to be done with biceps and backs and shoulders is now done with machines and robots.

And it’s no different than what happened in agriculture where a farm 200 years ago was rakes and shovels and today it’s tractors and combines like that same thing happened to assembly. So to wrap all that up, I understand and I empathize with people who say we need to bring back manufacturing to America. We lost what we once had. I get that and I respect it. But I think the unique circumstances and automation makes it just extremely unlikely to ever happen.

STEVEN BARTLETT: How did China get in there and why are they the factory of the world? What are the core components that went into them? Being able to produce all of the things that we use on a daily basis at a fraction of the price that they’re able to produce them here.

China’s Manufacturing Expertise

MORGAN HOUSEL: Tim Cook of Apple gave a really interesting interview a couple of weeks ago and he said you might think that we manufacture iPhones in China because it’s cheap labor. And he said that’s not really true anymore. It used to be, but China is not the cheap, cheap labor country anymore. That’s moved on to Bangladesh and Cambodia and other places. The reason they manufacture in China is expertise.

And I think it’s okay to admit, and people should admit that your country and also your company and you individually can be very good at some things and not very good at others. China is just extremely good and extremely talented at particularly like low end manufacturing. Low end can be anything from inflatable swimming pools on up to like basic electronics. They’re extremely good at it.

I was talking to a CEO a couple weeks ago and he said, and he’s generalizing here, but he said if you go to a Chinese factory and you say, I want this part made, and here’s step one, step two, step three on how to make it, they will do it better than anybody in the world. Nobody can beat them at that. But if you go to that same factory and you say, please go design me a new part, they’re not very good at it. Americans are way better at that. And that’s why the back of your iPhone says designed in California, made in China. Like it’s just specialization of labor.

And I think America is the best in the world at a couple things. Entrepreneurship, technology, services, and like high end manufacturing, like planes and rockets. And we’re not the best in the world at low end manufacturing. And that’s okay, that’s not an insult, that’s not a put down. There’s specialization of labor.

And so I think China just got very good at one thing during a time when we’ve always been very, very good at different things. And I think that is why global, like why for a lot of people, not for everybody. So if you disagree with this, I get it by why the economic system works so damn well over the last 30 years is because we really got good at specialization of labor. You design the iPhone, you make the iPhone. We’re both better off for it.

STEVEN BARTLETT: I want to play that clip you’re talking about with Tim Cook because I remember seeing it as well and it did. It was a bit of an aha moment for me. For anybody that doesn’t know, Tim Cook is the CEO of Apple and he’s been at the helm of Apple for more than a decade. And as you know, most of Apple’s products, from what I understand, are made in China.

[Video clip:

TIM COOK: There’s a confusion about China that. And let me at least give you my opinion. The popular conception is that companies come to China because of low labor cost. I’m not sure what part of China they go to, but the truth is China still stopped being the low labor cost country many years ago. And that is not the reason to come to China.

From a supply point of view, the reason is because of the skill and the quantity of skill in one location and the type of skill it is like the products we do require really advanced tooling and the precision that you have to have in tooling and working with the materials that we do are state of the art. And the tooling skill is very deep here.

You know, in the US you could have a meeting of tooling engineers and I’m not sure we could fill the room. In China you could fill multitude.]

Video clip ends]

MORGAN HOUSEL: When I watch that, I think I can understand why there’d be a natural reaction for people to be like, no, if they can do it, we can do it too. And again, I don’t think it’s an insult when to say like countries are we’re really good at some things and less good at others. How could that not be true?

STEVEN BARTLETT: Are they on a different living wage from what I understand, is that?

MORGAN HOUSEL: Oh yes, absolutely. I mean, so much of it is, you know, if you asked Americans to work for those wages, they’d absolutely refuse to do it just because of the expectations we have. And that’s a good thing. We should be proud of that, that we have a standard of living which does not allow or people would not put up with earning $5 a day or whatever it would be.

STEVEN BARTLETT: Which means that the products can be made cheaper, significantly cheaper.

MORGAN HOUSEL: Right, right. And, you know, this is where I understand why people might raise an eyebrow at this. But so much of why, of what the modern system, how it’s supposed to work, is when you have that specialization, products become cheaper. And then the iPhone costs $1,000 when in any other world it would cost 4,000. If we’re building it in the United States at, you know, paying wages that people would put up with in the United States.

STEVEN BARTLETT: So what’s the impact on the average person? Listen now. And if this trade war continues, if these tariffs continue, what is the impact they’re going to see in their life?

The Impact of Tariffs on the Economy

MORGAN HOUSEL: It’s so unpredictable because as I said earlier, it can literally change an hour from now. So anyone giving firm predictions of, oh, here’s what’s going to happen next? That’s not how any of this works. But you can say, though, that if the tariffs last, one of two things will happen or both these two things will happen. Things that we import will get much more expensive. Or what’s more and more likely, in places like China, if it’s 145% as well as the trade just stops, and then you’re probably a matter of weeks away from empty shelves at certain products in certain cases.

I mean, if you’re buying a pair of slippers from China for $1, and now all of a sudden they’re $2.45. If you’re an importer for a lot of those situations, they’ll say like, we’re just, it’s just not going to work. Or if the iPhone that used to cost $1,000 is now going to cost $2,500. Apple might just say, there’s not really a market for that. We can’t really sell those. Let’s just pause and wait for things to happen.

We’re already seeing that. Imports from China have plunged in recent weeks, which is exactly what you would expect when you put that high of a tax on it. I mean, if you were buying a house for a million dollars and all of a sudden they put on 145% tax on that, you’re probably not going to buy the house. And that’s what’s happening now.

STEVEN BARTLETT: You’d be dumb not to wait.

MORGAN HOUSEL: Right.

STEVEN BARTLETT: I was sat here yesterday with the CEO and she said to me that she gets the majority of her products, pretty much all of them from China, and when she’s looking at the tariff situation, she’s figured out that if she buys those products and sells them at her current price, she’s losing money on every unit. So she’s like, I’ll lose $9 for example, like a dress. So I have no incentive now to continue to sell that dress. And if my only choice is to raise the price by like 150% to my customer.

MORGAN HOUSEL: The two likely outcomes if it persists are much higher prices and empty shelves. And I don’t think anyone knows when or to the extent that could happen. And the button on the desk that says end this all could be pressed before that happens. But if it persists, that’s what’s likely to occur.

Trust in the American Economy

STEVEN BARTLETT: What about the impact it has on trust in the United States?

MORGAN HOUSEL: Yeah, it’s huge.

STEVEN BARTLETT: Can you explain that to me?

MORGAN HOUSEL: Trust is hard because you don’t know how valuable it is until you lose it. But once you lose it, you’re like, oh, that was everything. And, you know, foreign investors, people who don’t live in the United States, have $30 trillion invested in America that’s just in stocks and bonds. That’s not housing or office buildings, just in stocks and bonds. $30 trillion that they’ve invested.

And a lot of the reason they do that. Well, there’s many reasons, one of which is because it’s by and large seen as a trustworthy economy, a stable economy, an economy of rules and predictable laws and trust that you could not say the same about Russia. And so when global investors are looking where to park their money, this has been the case for the last 80 years. America is usually at the top of that list.

There’s also a thing where a lot of the reason that they invest money in the United States is because they have to, because they have a trade deficit with us. So if China is selling us a lot more stuff than they’re buying from us, like we’re importing a lot more from China than we’re exporting back to them, they’re going to end up with a lot of US Dollars. And what they need to do something with those dollars, they have to invest them somewhere. And historically that’s been in treasury bonds, which lowered our interest rates, and that was good for everybody.

STEVEN BARTLETT: And what’s a Treasury bond?

MORGAN HOUSEL: It’s debt that the government issues from the federal government. So it’s a bond. You’re loaning money to the government and they’re promising to repay you plus interest.

STEVEN BARTLETT: Okay. So less people are going to do that if they have less trust in the United States.

MORGAN HOUSEL: Less trust and also less need to do it because they don’t have as many dollars that they need to invest.

Recession Concerns

STEVEN BARTLETT: Are we heading for a recession? Because I saw some stats earlier on that said the probability of a recession has surged by 45%, which is the highest since December 2023 because of the tariffs. That was from Reuters.

MORGAN HOUSEL: It’s interesting when people point like the odds of recession at 45% because they can’t be wrong. Like, if there isn’t a recession, they’d be like, yeah, we said it was 45%. We didn’t say it was going to happen. So my answer if you said, are we heading for a recession? Would always be yes. If you asked me a year ago, if you asked me five years ago, like, historically there’s a recession. In modern times, it’s been every four to five years that it’s occurred. And so we shouldn’t pretend that when they happen that they’re this crazy out of the blue thing. It’s an inevitable feature that you’re always going to have recessions. But is this going to cause it?

STEVEN BARTLETT: What is a recession?

MORGAN HOUSEL: A recession technically is when GDP in the economy. GDP is just like economic output, how much the economy is moving, when that declines for two quarters in a row. That’s the technical definition for most people. You don’t need to worry about technical definitions because a recession in your mind is when you are feeling worse off economically for a long period of time. When you feel like you can’t get a job or your neighbors, your roommates can’t get jobs and it’s starting to hurt on you. You know, it’s kind of like, what’s the definition of being sick? Well, it’s when you don’t feel good, but there’s. You can get more technical than that. But a recession for most people is when you don’t feel good economically.

STEVEN BARTLETT: You’re not concerned about a recession?

MORGAN HOUSEL: It’s not that I’m not concerned, but it would be like saying, if you live in Florida, are you concerned about hurricanes? The answer is yes, you should be concerned about hurricane, but you also know with 100% certainty that they’re going to come. If you choose to live in Florida and you live in Florida for 40 years, you know you’re going to get hit by one 100% chance.

And so it’s not that I don’t worry about it, it’s that I think it is inevitable always, no matter what’s going on. This has nothing to do with tariffs. That’s always been the case. And so this is where at the individual level personally, like, room for error and your finances is so critical. What I mean by that is just like savings cushion, being scared of debt.

When you’re gainfully employed and you have a good paycheck and the stock market’s going up and bitcoin’s going up, everyone feels great. You feel amazing. And it’s very rare in that situation that you want to envision yourself losing your job or losing a job and not being able to find another one for six months or needing to move or getting divorced or having a medical issue. Like, no one wants to envision that.

But the truth is, like, what are the odds that one of at least one of these will happen to you and I over the next 30 years? Major job loss or just a major impact in our businesses? Divorce, cancer, wayward children. I can go on down. What are the odds that at least one of those will occur to you and I in 30 years? 100%. And for a lot of people, they’ll experience all of those.

And so the idea that life is fragile, the economy is fragile, countries are fragile, is like, people don’t necessarily want to admit that because it’s hard to get out of bed in the morning if you admitted that to yourself. But I think it’s inevitable. And it doesn’t have to be necessarily scary if you have the right psychology around it, of just, yeah, like, when times are good, I don’t expect them to last forever. That’s not how the world works.

And the right finances around it. Of like, yeah, when times are good, I’m going to save because I know this might not last forever. And what I value more than anything with money is independence. It’s not flashy cars or homes. I want to be independent so that when the economy goes south and there is a recession and things are going bad, I want to have a level of control over where I work, where I live, what I’m able to do, my ability to support my family.

I think it’s a major psychological skill in life in general. This goes beyond money, is recognizing when things are abnormally good and preparing yourself for them to go the other way as they inevitably will.

Financial Freedom and Independence

STEVEN BARTLETT: Independence you value. It sounded like freedom to me.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: Can you tell me how to achieve freedom financially and what I should be thinking about in the context of a world that’s changing at such incredible speed when we’re talking about tariffs and recessions and now AI, I’ve been thinking over the last couple of weeks, like, what should my personal financial strategy be? How should I be thinking about it? Is it a strategy? Is it a psychology? Is it a mindset? What is it that I should be thinking about to survive this area of tremendous change and trump economics and get through the other end with that freedom and independence that you and I both desperately value?

MORGAN HOUSEL: This sounds like such a squishy BS kind of answer, but I think there’s a lot of truth to this and I’ll explain in a second. It is largely a mindset and that sounds crazy, but I’ll explain what I mean. My grandmother in law, she passed away a couple years ago. She was 92 when she passed away.

For 30 years she lived off of nothing but Social Security. I think she got $1,700 a month from Social Security. And she had nothing else. No savings, no pension, no nothing. She was the happiest person. I’ve met half a dozen billionaires in my life. I’m sure you have as well. None of them were as happy as she was.

And she was technically, she was like financially broke, but she had this level of psychological wealth that was like unparalleled. And the reason was off $1,700 a month, that was all she needed. She was perfectly happy toiling in her garden, watching birds, going for walks, hanging out, reading from books from the library, perfectly content with all of that. She didn’t need anything else. So she had very little money, but she wanted even less.

So she had a level of independence that a lot of billionaires do not. Because if you are a billionaire, if you have a billion dollars in the bank, but you are so encumbered by your business, your employees, your suppliers, your customers, you’re waking up at three in the morning sweating because you got this email and you’re stressed out about it, you actually have very little independence in that situation. Your shareholders, regulators are coming down on you.

We see this. There’s no one in particular here, but we’ve seen very wealthy people kind of become sycophants to politicians. And the truth is a lot of those, like mega billionaires, absolutely rely on politicians and regulators to keep their machine moving.

And so my grandmother in law on $1700 a month had a higher level of independence than a lot of those people do. And that’s why I say like a lot of this is a mindset. Because the truth is the vast majority of people listening to this could have a level of independence. It’s not that you can retire tomorrow, but you can have a level of financial independence.

Once you realize that the key is managing your expectations more than it is, how can I just pile up as much money as I possibly can? It’s easy to think like, how do you become financially independent? Like, save a ton of money? And they’re like, there’s truth to that. Like, of course that’s part of it, but more of it is just in like what kind of life do you want to live? Because if your expectations are growing faster than your net worth, it’s never going to feel like you’ll never be independent. Never. You have $100 billion, but if you want more and more and more, like it’s never going to feel like it’s enough. Or if you enjoy bird watching and reading books like my grandmother in law, 1700 bucks a month, you’re all set. You’re set for 30 years.

STEVEN BARTLETT: You’re rich, you’re rich, I’m free.

MORGAN HOUSEL: She was psychologically rich, even if she was financially poor. And I think that’s the biggest thing about it. Adam Smith, who was the greatest economist to ever live, this was 300 years ago, he once wrote about this. He was like, why do people work so hard? And he was just like, it’s a simple question, but why do people work so damn hard? And he’s like, it can’t just be for our sustenance because even poor people, when as he was writing about it, had homes and adequate food. Most of the time he’s like, there has to be something else.

And what that something else was, he wrote, was to be seen by other people. And it was attention and admiration. They wanted to be getting rich so that they could have a bigger house and a nice car in his day, but they wanted attention from other people. But he was like, it’s not that you needed the money. Because even in his day, 300 years ago in Scotland, I think he was, he was like, look, people have homes and food. Like what are they doing this for? And he was not criticizing that. Like his whole point was like, they’re going out and innovating, they’re going to have great technology and it’s great to go do that. But the reason to do it was not because they had to stop. Now, of course, most people, to get shelter and food, do have to keep working, but they’re working more than they absolutely need to because they want something else besides independence.

STEVEN BARTLETT: Is there an evolutionary basis for this? I was thinking the other day after watching an interview with Naval, where Naval talks about how from an evolutionary perspective, humans don’t really understand the concept of wealth. Because once upon a time, when we were cavemen and women, wealth was what you could carry.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: But we do understand the concept of status, which really meant a lot to us in our sort of tribes and was life or death for many of us. So even though billionaires get all the money in the world, the next thing they want to do is start a podcast. You know what I mean?

MORGAN HOUSEL: Right, right.

STEVEN BARTLETT: Because it’s just not enough. Like everyone I know what a lot.

MORGAN HOUSEL: Of them do too, is when they have all the money in the world, what they want is immortality. And you see these guys trying to live forever.

STEVEN BARTLETT: Yeah, yeah.

MORGAN HOUSEL: So that happens as well.

STEVEN BARTLETT: That’s interesting. But that’s linked to status, because status was longevity.

MORGAN HOUSEL: Yes.

STEVEN BARTLETT: Like if you had status, you had food, you had the reproductive potential once upon a time.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: So it’s the same evolutionary sort of desire to live. Survival.

The Status Game of Wealth

MORGAN HOUSEL: Yeah. Harvey Firestone, who was a tire magnate 100 years ago. Firestone tires during the explosion in cars 100 years ago. He wrote about this in his biography. He was like, every rich person he knows, once they get money, buys a house that is way too big than they need. Not only bigger than they need, bigger than they want. Because a giant house is just a huge pain in the ass. The roof is leaking and, like, everything’s breaking down. It’s a huge pain to manage.

So he wrote his biography. He was like, why do we do this? And he was like, he did it too. He was like, I bought a house that is way bigger than I want. And it’s a pain, it’s a burden, but we all do it. And he’s like, why? And he’s like, it has to be status. There’s no utility to a 40 bedroom house. Zero. There’s a lot of downside in upkeep. But he was like, every one of us does it. And he said even Henry Ford, who was like the cheapest SOB out there, lived in a giant mansion in Detroit. He was like, it’s so natural. And he was like, it’s just because we want to show other people. It’s not utility. It’s not making our lives better. It’s actually making our life worse. But we have this evolutionary desire to show people that we’ve made it. That’s the calling card.

STEVEN BARTLETT: But if it’s hardwired, then is there much we can do about it?

MORGAN HOUSEL: I think it’s true that virtually everyone who I really admire in life, by and large, they’re not hugely successful people that you’ve heard of. They’re just people who have met and they’re ordinary people with ordinary jobs. And I’m like, Matt, you seem like you’ve got it all figured out. They took themselves out of the system that they were supposed to be in and they’re like, I’m gonna go figure out my own way.

And there’s a really interesting story. A guy named Chuck Feeney, he started a company called DFS. The duty free stores in airports. He made, I think at the peak of his wealth he was worth about $9 billion. And this was like in the 90s when that was a lot of money, still a lot of money. The well known part of Chuck Feeney is that despite that wealth, he was an ordinary person. He lived in a one bedroom apartment, he flew coach, he drove a normal car, lived like a normal guy. And some people criticize that. From that he gave all of his money to charity. He gave 9 billion away, lived like a monk himself.

The less known part of Chuck Feeney that I think is more important is that when he first got wealth, he became wealthy in the 1980s. He lived the life of a billionaire. He had a fleet of private jets, he had mansions all over the world, he had a yacht. And after doing it for a couple years, he’s like, I don’t like any of this. He’s like, I like being an ordinary, simple person and so I’m going to go live an ordinary life. I don’t care what the world, the world tells me this is what I should want now that I have money. But he’s like, but I don’t. I want simplicity.

And what I like about that is not that he chose to live like a monk because I personally wouldn’t want to do that if I had that. I would have a jet if I had that kind of money. So it’s not to say that he did it right, but what I like that he did is that he said, I don’t care what the world tells me to like, I’m gonna do it on my own terms. And that like, that’s true independence.

STEVEN BARTLETT: That’s true status.

MORGAN HOUSEL: That is that’s true status, too. He’s like, I don’t care. That’s the ultimate definition of FU money, of like so much money that, like, I don’t care. You tell me I’m supposed to live in a mansion in Beverly Hills, but I like my one bedroom apartment in San Francisco. I like my buddies over here. Another person who’s done that to a very real extent is Warren Buffett. Lives in the same house today that he bought when he was 27, or whatever it was.

STEVEN BARTLETT: He’s got 100 billion or something, right?

MORGAN HOUSEL: And of course, he could live anywhere. He could buy anything. But he likes being with his friends, doing it on, you know, likes playing bridge with his buddies.

Learning Money Lessons Firsthand

STEVEN BARTLETT: In the first case, though, that gentleman had to have his dream fail him first before he realized. And so this raises another question, which is, am I… Does the viewer at home have to make the hundred million dollars and then taste it by the mansion to realize that it was never about the mansion?

MORGAN HOUSEL: I think the answer to that is yes.

STEVEN BARTLETT: Oh, gosh.

MORGAN HOUSEL: That it’s very difficult. You know, there’s a thing where I forget who said this, but, like, they’re responding to the quote, money doesn’t buy happiness. And they’re like, okay, but let me go figure that out for myself first. Like, if you don’t have a lot of money and you see rich people tripping over themselves and people like Will Smith saying, like, I was no happier at all when I was rich than when I was poor. Actually, I was happier when I was poor. If you are poor, when you hear that, you’re like, bullshit. I don’t believe it. I have to go figure it out for myself. I think a lot of lessons in life you have to learn firsthand, especially when the.

STEVEN BARTLETT: All the problems staring you in your face are somewhat associated to money. Like the pain in your belly, the bills on your desk, the threats from the court. I’m thinking of myself here, that I was getting the letters coming through with the red text on them telling me that my credit cards were going to be shut down. The inability to feed yourself, to socialize with your friends, the heating in your house, your child’s pencil case costs, all of it seems to circle back to money. And so when you hear people who are wealthy being subjectively honest about their own experience and then what’s made them happy, it is hard to hear. Yeah, like I was just imagining if I was hearing this, you know, these stories when I was in that situation, I would still go for it.

MORGAN HOUSEL: Anyway, right now. Let’s say there’s a big difference between not being able to buy food for your kids and making 200 grand per year.

STEVEN BARTLETT: Yeah.

MORGAN HOUSEL: And, you know, the difference between 10 grand a year and 200 grand a year is massive. Takes away so many stresses, so many, you know, worries about being evicted and whatnot. But the difference between 200 grand and 500 grand is not that much. And the difference between 500 grand and 20 million is not that much. And the difference between 20 million and 20 billion is zero. I think that’s a lot of what it comes down to.

And even I think there is such thing as, like, a peak net worth that you would want in life, after which all the money that you accrue becomes like, a social liability. I mean, who has more social liability or, like, pressure than the mega rich? You know, Elon Musk, Bill Gates, Jeff Bezos. There’s a huge amount of pressure, like, you better donate this money and you better do a good job doing it kind of thing.

And at a much lower, like, realistic level for people, it’s when your friends learn you make a lot of money and we go out for dinner and they’re like, you’re paying. Right. And that’s a small thing, but it can really grate on people that like, oh, it’s going to change how people think about me. Now, that’s a good problem to have, of course, but it’s a thing. And I think the idea of there is a maximum amount of, like, there is a net worth level at which your happiness is going to be maximized, and it’s probably lower than you think.

STEVEN BARTLETT: Do you think it’s important for people to have an idea what their number is?

MORGAN HOUSEL: I don’t think anyone really does because I’ve done this in my own life. I’m sure you have, too. When I was 19, I was like, oh, if my net worth was this amount, I’ll be happy forever. And then I was fortunate enough to hit that amount. And I’m like, okay, but what if we got over here and you just keep going up the ladder forever?

STEVEN BARTLETT: Is there such thing as F you money? Like, is there a number where you think you’ve hit FU money? I saw some thread on Twitter and I was like, comment below what you think F you money is. And it was interesting to see the variation.

MORGAN HOUSEL: I have a friend, Ben Carlson. He’s a great financial writer. He came up, this is very subjective. There’s no science behind this. But he was like a net worth of 7 to 10 million dollars is you can live an amazing life in the United States, have an amazing house paid for, send your kids to great schools, go on great vacations, drive brand new cars on 7 to 10 million dollars.

And he brought that up. Some people might wince at this, but he brought that up of, it’s a lot less than people would think because there’d be a lot of people who would be like, oh, I’m gunning for 100 million. Even if that’s just a fantasy, it’s a dream. And $7-9 million is out of reach for a lot of people, no matter how hard they’re working.

But I think, particularly for young people who… Their definition of… I think about my son a lot this. He watches Mr. Beast.

STEVEN BARTLETT: Mr. Beast.

MORGAN HOUSEL: Mr. Beast is an amazing guy. He’s. I think he’s one of the great guys. But because of Mr. Beast, like, my son’s definition of wealth is a private island, a private jet, you know, keep your hand on the table and win a million dollars kind of thing. It’s a different level. Whereas when I was growing up, like, ordinary people drove dirty pickup trucks and rich people drove clean pickup trucks, that was like. That was the stratification of what I saw growing up. And I think because of social media and other things, kids have a very different view on what, like, financial wealth actually is these days.

Navigating Economic Uncertainty

STEVEN BARTLETT: Going back to this issue of tariffs, recession, and everything that’s going on at the moment. Are there any things practically, for those that don’t understand the economy and economics generally that we should be thinking about to make sure that we don’t get burnt?

MORGAN HOUSEL: This is less advice going forward more than just, like, something to remember next time, which is that if you are worrying about being laid off, if you’re a small business owner worried about going under, the need for room for error and cushion and savings and backup plans were just as important a month ago as they are today. You’re just learning how important they are today. And I challenge you to remember that in the future, when this is all over, whenever it’s all over, that when the economy is going well and you feel stable in your job, stable in your career, that is when you also, you absolutely need backup plans and room for error and savings and eschewing debt and whatnot.

I have a very high level of cash as a percentage of my net worth, and a lot of financial advisors would look at that and say, like, what are you saving for? Like, what’s going on here. And I’m like, I don’t know, I’m saving for a world that I know is very fragile. And I have no idea what’s going to happen to me personally or what’s going to happen to the economy. But if you’re a lay student of history, you know that things break all the time. And so my advice to you, if you’re realizing that for the first time that how fragile the world can be and how the job security that you thought you had might not have been as strong, remember this next time how important room for error and backup plans are.

STEVEN BARTLETT: And relative to your personal costs, your personal monthly costs, or overheads, as they call them, how much money do you think it’s sensible to have saved?

MORGAN HOUSEL: It’s so hard for that because everyone’s in a different situation. I’m sure people watching this will be in a massive range of incomes. I would say this is a bad answer that no one’s going to like, but pretty much as much as you can.

I mean, I’ll give you one example of this. When Covid first hit in March of 2020, the average restaurant I heard had enough cash on hand to last them for 14 days. And then all of a sudden they were looking at a six month lockdown. And so I think one answer to that question is however much you think you’ll need, it’s probably more.

The other, more practical example of this is in 2008, during the financial crisis, a lot of people were losing their jobs, not for two weeks or one month, but they were losing their job for 12 months and they got unemployment benefits, but it wasn’t enough. And so is it practical to say, like, you should have 12 months of saving? It’s probably not practical for a lot of people, but the answer is as much as you can while realizing that the world is more fragile than you probably think it is.

The Impact of Artificial Intelligence

STEVEN BARTLETT: The other protagonist of change at the moment is artificial intelligence. And I’ve spent a lot of lonely, quiet hours in my room thinking about the impact it’s going to have and trying to develop my own thesis and what it means as a creator, as a podcaster, as an investor. And I wanted to understand how significant you think artificial intelligence is and if it at all impacts your thesis around money and wealth and investing and saving.

MORGAN HOUSEL: I’m not even remotely an expert in AI, but as someone who has looked at the history of technology, one thing that sticks out clear as day when you study technology, when in hindsight, when you’re looking at a new technology that you know went on to change the world. The computer, the car, the airplane, those things when, you know, like, this was a turning point in civilization. If you go back and look at what the optimists were saying at the time, they massively underestimated it. And that’s what the optimists were saying. Forget the pessimists on it.

So go back to the 1920s and see what were the optimists saying about the airplane. They were underestimating it by a hundredfold. What did the optimists say about the car? They underestimated by a hundredfold. Computers. Same. And the Wright brothers themselves came up with the first airplane. The Wright brothers themselves only marketed their plane, primarily marketed their plane to the U.S. army, because they did not really foresee much use for an airplane outside of the military. They knew you could strap a machine gun on it, and the army might like that. But did the Wright brothers foresee Delta Airlines, like an Emirates and a 380, like, not in a million years.

And so I think it’s true that in a lot of things in life. I think it was Peter Thiel who said this. He was like, when things are going wrong, you underestimate how bad they’re going to get, but when things are going right, you underestimate how big it’s going to be. I may have butchered that quote, but it’s something like that. And it’s clear that AI is right. And so it’s almost certainly the case that even the optimists, even the Sam Altman optimists, are underestimating where it will go. And a lot of the reason for that is because new technologies is not what the inventor, whoever that might be, built. It’s what other people go on to manipulate it as. And that’s why the Wright brothers come up with a plane. And now we have the A380. Like, it’s other people manipulating things along the way to create something just gigantic.

STEVEN BARTLETT: One perfect example of that with AI is OpenAI have created this large language model which can do all these wonderful things. But then people are using that same technology to create AI agents, which are equally astonishing. I spent the last couple of weeks using AI agents to build some software. I’m someone that has no ability to code at all, but I can sit in my bedroom and speak to this agent and tell it to build me a new to-do list or a new website for the podcast that tracks who’s been on the show and follows them in the news. Like, I can tell it to do anything. And for what’s probably costing me a dollar a day, it’s building me software now.

And we’re just at the start of that exponential curve. So if we now think that these large language models are going to be able to create things, create digital things, things on the Internet, this podcast is on the Internet. We know that it can create podcasts. We know it can create videos, images, software. I look at that and go, you play this forward. And if I apply your optimism analogy, your optimism lens to it, where I go, we’re underestimating this curve. It’s really hard to see how this isn’t tremendously disruptive in the long term.

The Rapid Pace of AI Disruption

MORGAN HOUSEL: Not even the long term in the short term. I’ll give you one example. You talked about coding there. We’re doing a little remodel on our house right now. And one of the things you can do is take a real picture of a room, upload it in. We use ChatGPT for this and said, hey, paint it this color, remove this wall, put this in. It is better than any designer will be able to do it. And it’s right there. Boom, in front of you seconds, and you can multiply that story by 10,000 different versions of that stories for 10,000 different jobs.

I see it as a writer where I don’t use it to write. I write all my own words. But one thing that I’ve played around with, I don’t really use this as that much of a tool, but just more of an experiment of like, oh, I’ll upload a chapter from a book that I wrote and say, hey, give me some feedback on this. And it wasn’t that good a year ago. It’s pretty good today. It’s pretty good. So if you’re looking for like a writing assistant, it’s amazing. Now, the downside of that is everyone knows, like, the high schoolers and the college students who use it to write the essay, just write the whole thing. That’s probably not great, but if you’re using it as a helper, it’s probably the best writing teacher that’s out there.

So right there in my just like, tiny little world of I really don’t know anything about AI, but interior designer, editor, going down the list of jobs that, like, literally three months ago, I would have been like, oh, that’s a very valuable job. And all of a sudden you look at this tool for a dollar a day, as you said, you’re like, it’s pretty good.

STEVEN BARTLETT: What does history tell us about how this shakes out? Like, when these industrial revolutions come along or the technological revolutions, where does the value accrue and how do I participate in that value?

MORGAN HOUSEL: I guess one good analogy from right here, and it’s probably not as powerful as what we’re dealing with right now, but the closest is probably, you know, it wasn’t that long ago, the late 1800s, that 80% of Americans were farmers. That’s what it was. And then the Industrial revolution and the tractor and the combine came along, and all of a sudden it was like, we don’t need that many farmers doing this. What people used to do with shovels and rakes can now be done with the tractor. And a lot of those people found themselves out of work. And for them, it was very disruptive.

But they also, the farm labor, found himself pretty easy to go into the factory because they were working on. They were good at working with their hands and whatnot. And so to go from that to the factory was not an easy transition, but it was a transition they can make.

Now, that same transition did not take place from manufacturing to technology. The auto worker in Detroit could not just learn to code and work at Google like that. And so it was much less seamless. And I think what we’re dealing with now will be even more of a disruption, that the people who are being disrupted out of AI are going to have a much more difficult time historically to move in to where the economy is going next. So the idea that an industry is disrupted and you need to go figure out something else to do, I think it’s gotten progressively harder over the last 150 years.

STEVEN BARTLETT: And when we moved from machines to technology, it was a significant leap also for the user and for the customer as well as for the employees. So that transition took time. But I was reading something the other day that said now that we’re native Internet users, we all are. Billions and billions and billions of people use the Internet. This is like a new application on the Internet, which explains why it’s growing so fast that we haven’t had to learn. Yeah, you know, this generation know how to type something on a screen. So there hasn’t been this big jump in fundamental skills like there was from, like going from a machine to an iPhone.

So this acceleration will be quicker. So therefore one would assume that the transition will be more severe. And I think about even things like driving. I think Tesla are releasing in Austin this month or next month, the first autonomous vehicle, the cyber taxi, the Robotaxi, whatever it’s called, has no steering wheel. And the profession of driving, from what I understand, is the biggest profession.

MORGAN HOUSEL: The biggest profession. Truck drivers. Drivers in general. Yeah.

STEVEN BARTLETT: On my way here today, I did not touch the steering wheel, I did not touch the pedals because I’m in a Cybertruck and there’s a button on it which auto drives you to wherever you want to go. And typically I’d probably have got an Uber, but now I can sit there, do my work, and it drives for me. And that’s also AI.

MORGAN HOUSEL: Yeah. It’s crazy. And back to the analogy, like when the farmer had to go work in the factory, it was a transition. He may have had to move, but he did it. And so he went from 80% of the population were farmers to 2%, which is what it is today. But they were able to move in. The manufacturer to technology struggled. And I think it’s going to be now, like the truck driver to tell the truck driver, well, just go get a job at OpenAI kind of thing. Like, it’s funny to even think about because it’s preposterous.

STEVEN BARTLETT: But the thing with OpenAI, from what I understand, is they have less than 100 employees. And the reason they have less than 100 employees is because they’re using AI.

MORGAN HOUSEL: To do the work.

STEVEN BARTLETT: And they’ll increasingly do that, especially when they hit AGI.

MORGAN HOUSEL: Right. They’re probably going to four employees. Yeah.

STEVEN BARTLETT: And this is why I think they have 100 employees. I think they’ve purposefully kept it low because they think AGI is around the corner, which is this very, very advanced form of AI, which is going to be able to, like, I think they call it self reinforce, where it teaches itself synthetic data.

MORGAN HOUSEL: Right. So kind of going from there now. I think if there’s an optimistic side, it’s always been. It was the case that when farming was being disrupted, there were a lot of people who just said, these people are never going to find jobs. Like, if you put the farmer out of business. There was. It sounds comical today, but there was a big push when the car came about to be like, no, like, what are all the horses going to do? Like, have some dignity for the horse and the people who are raising horses and whatnot.

So it’s always been the case that you cannot foresee what’s gonna happen next. And the optimistic side of capitalism is as messy and as hard and as much personal damage as you can cause to families along the way, those people will eventually figure out something to do. And when people say that, it sounds so callous and coarse. And that’s why you have so much debate and angst and anger and disagreements, like with what we’re dealing with tariffs right now.

STEVEN BARTLETT: You have your son in the green room watching us right now. How old is he?

MORGAN HOUSEL: Nine.

STEVEN BARTLETT: Nine. Okay, so he’s got some decisions.

MORGAN HOUSEL: He’s wincing right now. I’m sure now that we’re talking about him.

Skills for Success in the Modern World

STEVEN BARTLETT: But in terms of him building his career, acquiring skills, generating wealth based on everything you know about how people have made money through history, what are the prevailing skills that your son would have to have to assure that he makes money regardless of what the industry is?

MORGAN HOUSEL: Learn how to communicate. Learn how to get along with people you disagree with. I think that’s a very underlooked skill in life, particularly in a social media driven world where people have very different views on fundamental topics. Learn how to get along with people who you disagree with. Learn how to communicate. Those would be the top two.

Those are extremely high level. I’m not saying go learn calculus 4 or go learn engineering, but those are timeless skills. And I think those two skills can get you pretty far in life.

And I look back at myself, I don’t know if you had a similar example of this, but I was not a good student. My ability to do math is not any good. My grades in science were not any good whatsoever. I think if there are two skills that I had, that I didn’t even know it at the time—it was not really conscious that I was doing this—but learn how to communicate and don’t be a jerk. Because that for me as a writer, that was like, learn how to communicate. And in the writing business, learn how to get along with people so you can move ahead, move your career. Like be nice to this person so you can move on up. I think you see that a lot.

STEVEN BARTLETT: What about in terms of money making money? When you think about great people through history that have accrued a lot of wealth, what principles would you instill in him so that he had a money mindset?

Teaching Children About Money

MORGAN HOUSEL: It’s hard for a parent. I’m not filthy rich by any means, but I’ve sold a couple books and it’s hard as a parent to be like, I want to use money to give you a good life, but I don’t want to spoil you. The last thing I want is for you to be a spoiled little brat. And it’s very difficult for a lot of parents to do that.

And so one of the things I want him to learn about money and I want him to learn in a very stark way, is like, learn the scarcity and the value of $1. And I think the only way to do that is to experience it firsthand.

So when he was born nine years ago, I wrote him a little letter. I published this on a blog. And one of the things I said was, I hope you’re poor one day. And I said, not struggling, not broke. But I hope the only way to understand the value of a dollar is to experience the power of its scarcity. And I hope there’s a period when my wife and I are able to say, like, look, you’re never gonna fall flat on your face. You’re not gonna be homeless. You’re always gonna have good healthcare. But I hope you’re able to experience the scarcity of a dollar. So you value it.

I did. My parents taught me that in a way that they didn’t need to, but they let me be poor for a while. And most people will experience it because that’s the situation they’re in. So that’s one thing I think about, and I think actually quite a few families deal with that is like, how can you help your kids?

And it goes beyond money. This is the helicopter parent era where I want to protect you from downside at all cost, emotional downside. And I think money is one of many topics in which you’re going to learn the best by experiencing the downside.

The Challenges Facing Modern Men

STEVEN BARTLETT: Men are struggling in a variety of different ways and obviously your son is going to be a man someday. If I think about some of the stats here, men’s labor force participation has declined dramatically over time. For prime working age men between 25 and 54, participation fell from 98% in the 1950s to about 80 something percent in 2024. 10.5% of men aged 25 to 54 were neither working nor looking for employment compared to with just 2.5% in 1954.

And we had a study that came out in the UK recently, I think it was the center of social justice that showed that for the first time in a long time in recent history, more young men are out of work than young women. And I think it was like one in seven men are out of work. So it’s a different world for a man. But we still have the sort of prehistoric caveman mindset of being a protector and a provider.

MORGAN HOUSEL: Yes, absolutely.

STEVEN BARTLETT: The world has changed.

MORGAN HOUSEL: Yeah. I think Scott Galloway recently said that a really aspirational definition of manhood is wanting to procreate, provide and protect. You want to have kids and you desperately want to provide for your family and protect your family. And I do think that there are men all over the world, to a higher degree than there’s ever been, that feel like those three things are out of reach for them.

STEVEN BARTLETT: And because of this, a lot of people get involved in get rich quick schemes. Yes, crypto coins, meme coins, all this stuff.

MORGAN HOUSEL: Daniel Kahneman, the great psychologist, passed away last year. He had a saying. He was like, when all of your options are bad, you become very risk taking because you have nothing to lose kind of thing. So whenever you see people participating in get rich quick schemes, you know it’s because they feel like all their options are bad.

If you believed that if you could go to college and learn or not go to college, but if you can go learn a skill and go work hard and earn a stable paycheck to provide for your family, 99 out of 100 men are going to say, that’s the one I want. But if you believe, whether it’s true or not, if you believe that that option is not available to you, you’re like, let’s throw it all on this new coin kind of thing.

And so I think that’s what you see quite a bit. There’s a lot of things in life where you see people making bad decisions or what you think are bad decisions, and it’s easy to mock them or look down upon or just say they’re idiots. But deep down, there’s always a reason. There’s a deeper reason why they’re doing it. And for a lot of these things with financial risk taking, it’s a lack of self confidence in their ability to earn a good, dignified, stable wage to provide for their family.

Gender Differences in Financial Risk-Taking

STEVEN BARTLETT: Testosterone plays a role, though, because when we think about who becomes gambling addicts and who takes the biggest risks with finances through history, it’s often men. Women do seem to be generally better with managing money than men.

MORGAN HOUSEL: Yeah, with men, what a lot of it is is the inability to say, that’s enough, particularly with the risks that they’re taking. So you see this with a lot of hedge funds. Hedge funds are just giant investing pools of money. Rich people on Wall Street managing money. They have quite a long history, not lots of them, but quite a long history of them blowing up.

And it’s because this very smart genius billionaire Wall Street trader who has a PhD from MIT could not say that was enough. They kept taking more risk, more risk, more risk until it blew up. And we definitely see with women managing money that they tend to not earn as high returns on any given year, but they don’t blow themselves up, so to speak, financially.

So men are much more willing to swing for the fences and women are much more willing to say, I’d like to just take a calm, casual swing, but I want to keep it going for a long period of time. Now, who’s going to do better over the course of a lifetime in that situation?

STEVEN BARTLETT: Your book profiles a few scenarios of who does better over a lifetime. And although I read your book, I think it must have been four years ago, I will always remember reading a story about it. I think he was like a stockbroker that you write about in your book.

MORGAN HOUSEL: His name is Jesse Livermore.

STEVEN BARTLETT: Tell me that story.

MORGAN HOUSEL: Jesse Livermore was a trader, a Wall Street stock trader, about 100 years ago. Did most of his work in the early 1900s through about the 1920s. And he was the best in the world at getting rich. And he had no ability whatsoever to stay rich.

I think he became the equivalent of a billionaire adjusted for inflation four separate times and went bankrupt four separate times. He eventually at his end, committed suicide when he went broke for, I think, the fifth time, and in between there, he would become literally the richest man in the world at one point, but he had no ability to say, that’s enough. So when he was the richest man in the world, he just kept taking more risk, more risk, more risk. And then it blew up. And he did it over and over and over and over again until he eventually killed himself.

STEVEN BARTLETT: Damn.

MORGAN HOUSEL: It’s an amazing story because punctuated through his story of failure and bankruptcy and eventual suicide is a level of success that like Steve Jobs could not even fathom. He has no one in history, I think, was better at getting rich than he was, and he could not keep it.

And for most people, like a much better situation, of course, is like, you don’t need to become the richest person in the world. You can just make a modest amount of money that’s going to support you and your family, but keep it. Don’t keep taking more risks that’s eventually going to blow it up. Just keep it and it’s okay.

STEVEN BARTLETT: What do you think of crypto?

Cryptocurrency: Inspiring Yet Mostly a Joke

MORGAN HOUSEL: I don’t own any, so maybe that’s the summary of how I feel about it. But I also think the only take that I’ve had on it is like, if you don’t think that some of it is inspiring, then you’re not paying attention. But if you don’t think that 99% of it is a joke, then you’re not paying attention. And I say that because most people are one or the other, the whole thing is a scam and they don’t understand any of it. It’s a bubble, it’s going to burst, or it’s literally the greatest invention of human history.

I think whenever there’s a new technology, you’re likely to get those extreme camps. But also in the history of technology, what you would see is that 99% of the new players, the new companies, the new products won’t exist in 10 years, and a couple of them will turn into Ford or Microsoft or whatever it might be. That’s always been the case. So you can’t envision a world in 20 years in which crypto is not having a big part of the global economy. And I also think you cannot envision a world in which in 20 years, 99% of what exists today doesn’t exist anymore.

STEVEN BARTLETT: Yeah, I have owned Ethereum for a long time and more recently I just changed it all into Bitcoin because I think Bitcoin is the safest bet. It seems to be where institutional money has gone to. And I’m doing the same thing as you. I’ve never like traded coins in my life or anything, but I think most of it is probably going to zero as we’ve seen. But I think Bitcoin feels like the place that the market has decided will be the stablest.

MORGAN HOUSEL: But yeah, it’s not contradictory in history to say that this new technology will change the world forever. And at the same time, you’re probably not going to make that much money on it. The best example of that were the railroads, which was probably the most transformational new industry in US History. Like to have a railroad going from the east coast to the west coast that changed everything in such a profound way. And the vast majority of railroad investors lost all their money so you could get it right. This is going to change the world forever. It does not mean that you’re going to make that much money on it.

And that’s not to say that most crypto investors… No, I actually, I would say it’s almost certain that most crypto investors will not make that much money. That’s pretty standard historical. The other thing is in cars. In the early 1900s, there were 2,000 car companies in America and 1,997 of them went bankrupt. You ended up with GM, Ford and Chrysler. The rest virtually disappeared. So it’s always the case that in a new technology that changes the world, there’s a big gap between this is going to change the world and everyone’s going to get rich on this.

Quantum Computing and Crypto’s Future

STEVEN BARTLETT: One of the things that made me question my hypothesis on crypto was Google released this new computer, I don’t know if you saw it, called Willow, the quantum computer.

MORGAN HOUSEL: That can crack in theory in the future. I’ve talked to people about this that like, you can’t believe in crypto and quantum at the same time. People who are much smarter than me say that’s not the case, that you can augment the system. I don’t really understand it, but people who are much smarter than me say they’re not worried about it.

STEVEN BARTLETT: Google built a powerful new computer called Willow that uses quantum technology. Some people worry it could one day hack Bitcoin by breaking its security system. But right now, Willow isn’t strong enough to do that just yet. And they pose that quantum computers may well become strong enough that they’ll be able to hack Bitcoin’s system that keeps it safe.

MORGAN HOUSEL: Right.

STEVEN BARTLETT: Because there is a certain amount of computer that could affect.

MORGAN HOUSEL: That doesn’t exist right now, but could in the future with quantum computers. Right.

STEVEN BARTLETT: So like all assets, I mean, if you look back through history, we’ve used different things as stores of value. And many of those things, whether it’s the tulips or whatever else, aren’t our current store of value. So it’s conceivable to think that Bitcoin as a store of value does have a shelf life.

MORGAN HOUSEL: Yes, but that’s… I mean, of course that could be the case. I mean, gold, which has been a store of value for thousands of years, has gone through periods where it surged and then fell 90% and sat there for 20 years kind of thing. So even when you have something that is a historic, very objective store of value, that doesn’t mean that you know what the price is going to do next month or next year or even the next 10 years. That’s a totally different thing.

The Secret to Building Wealth: Endurance

STEVEN BARTLETT: When you look at all these people through history that have made money, lost money, generated great wealth, are there like certain strategies they’ve deployed? Because when I think of like Warren Buffett, I’m like, okay, so he compounded for like 80 years, invested. He was an investor. Then you’ve got this other strategy, which might be entrepreneurship.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: Some incredible company like Elon Musk making SpaceX or Tesla. Do you have it distilled down into a set of different strategies that are often deployed to equal wealth?

MORGAN HOUSEL: I think if there’s one big one that is applicable to ordinary people, you could come up with different marketing things, but that’s not gonna apply to me or you. One thing that sticks out, that is a common denominator that virtually everyone listening this could learn from, is they were way more patient and had way more endurance and kept it going for longer than anyone else.

David Senrod, who’s a great podcaster, he has a podcast called Founders. He said this one time he was like, he hears from entrepreneurs who are like, “Man, I listen to your podcast. I’m a founder, I have a company, and I’m going to sell my company next year. I’m going to do it. I’m going to sell it to Google.” And David’s like, did you learn anything from the historical entrepreneurs of Rockefeller or Steve Jobs or Bill Gates? Those people ran their companies for 50 years. They ran their companies until they died, kind of thing. These are not people who are looking to be like, “I’m going to create a company and then sell it, and I’m going to start another company and sell it.” They keep it going for as long as they possibly can.

The big wealth usually does not come. It almost never comes from, like, a great idea that surges out of the middle of nowhere. It’s usually like a pretty good idea that you can keep going for 40 years or 50 years. That’s where the big money comes from. I wrote this in the book. 99.9% of Warren Buffett’s net worth was accumulated after his 60th birthday. So when Warren Buffett was 60, he was worth $2 billion, like, incredible amount of money. He could have sold then and sold everything and retired and had an absolutely amazing life. The reason that he has accumulated, if you count the money he’s given away, $250 billion, is because he kept it going. So now he’s 93 years old and he’s still going.

Same with Bill Gates could have sold Microsoft in the 1970s and made $10 million and had a great little life, but he kept it going and kept it going. Yahoo offered Mark Zuckerberg a billion dollars cash. He was like 19 at the time. And he said, no, I’m going to keep doing this thing. That’s the common denominator that ordinary people can learn from is like endurance. And longevity is usually where the big wealth is made.

STEVEN BARTLETT: Endurance.

MORGAN HOUSEL: Keep it going.

STEVEN BARTLETT: Endurance is hard.

MORGAN HOUSEL: Yeah. Larry Ellison, who is the founder of Oracle, did an interview in the 1990s, and they asked him about Bill Gates, who was a friend, but also rival back then. And Larry Ellison was like, the secret to Bill Gates. Yes, he’s very smart, but there’s a lot of smart people out there. And he was like, no offense, but there’s a lot of people smarter than Bill Gates out there. But nobody has more endurance than Bill Gates. He will outwork you every single time. You cannot. He’ll keep it going for as long as he needs to keep it going to beat you. And that’s his skill. It’s not intelligence, it’s endurance.

The Power of Perseverance and Compound Interest

STEVEN BARTLETT: On this point of perseverance, why is perseverance so key? Like, if we break it down into what’s actually happening when you persevere?

MORGAN HOUSEL: I think it’s two things. It’s one, in any endeavor that’s going to pay off, it’s going to be difficult. It’s going to be extra. There’s going to be more roadblocks and speed bumps and collapses than you want. It’s absolutely inevitable. The unofficial model at Nvidia, the giant chip company, one of the most valuable companies in the world is “we are always 30 days from going out of business.” Now they’re not. It’s one of the most successful companies in the world, but they understand what is true for every business, which is that business is hard. Like every business is a knife fight, right? Every company that you own or start is going to be very difficult. You need the perseverance to get through that. That’s one element.

The other is compound interest. That’s what builds wealth. What compound interest is and why it is so powerful. The people who get rich from it are not the people who earn very high returns. It’s people who earn good returns for a long period of time. All compound interest is returns to the power of time. And if you remember like 8th grade math, that exponent like time that’s doing all the heavy lifting in there.

And so in investing, if you can be good, merely good, or if you can just be average for an above average period of time, you do phenomenal. And this is where this is like the most misunderstood thing about investing. Most investors are like, how do I earn the highest returns? I want to make the best investments, highest returns. And you can do well doing that. But you’re much more likely to do well if you’re like, hey, I just want average returns. But I want to be so durable and have so much endurance that I can earn average returns for 40 years. And if I can be average for 40 years, I’m going to end up in the top 1%.

STEVEN BARTLETT: How do you make that real? For someone listening who’s making, you know, a thousand dollars a month disposable income. So they’ve got a thousand dollars to play with a month potentially. If they’ve never heard about this idea of compounding interest before and the magic that it can create if left to its own devices for a long enough period of time, what is the simple way to show them the power of it?

MORGAN HOUSEL: So take index funds, which are just a very simple collection of businesses at a very low fee. You can buy one stock, but it’s a collection of hundreds and hundreds of different businesses. You own Apple and Amazon and Coca Cola. You own all the companies in the world. And so it’s the most boring, bland, average way to invest.

If you invest in that in a very simple way, and you do that consistently for 20 or 30 years with no skill, with no expertise, where you’re not getting stock tips from anyone, it’s the most boring way to invest. If you do it consistently for 30 years, you will almost certainly end up in the top 1% of investors. You almost certainly beat literally 95% of Wall Street pros who are trying to outsmart the market, trying to outwit the market, and were unable to keep it going for 30 years.

And so this is where, if you can just be average for an above average period of time, you’ll be amazing. I mean, it’s probably similar in health that, like, if you want to be healthy, yes, you can go out and become the best bodybuilder in the world, the best marathon runner in the whole world. But actually, if you just work out just like modest workouts a couple times a week for 30 years, you’re going to be one of the healthiest people in your town. If you can work out two or three times a week for 30 years consistently and eat a good diet consistently for 30 years, you’ll be one of the healthiest people that you know. And it’s the same in investing. It’s like the people who do the best are not the geniuses. It’s the people who are ordinary for a very long period of time.

STEVEN BARTLETT: I was thinking about a very simple example so that there’s a coffee in my cup today, and the coffee might cost $5. Now, with the laws of compounding return burns, if I don’t have that coffee.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: Today, in 40 years, if I got 8%, which is, I think the S&P 500.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: Gives about 8%. Then in 40 years time, instead of the coffee that I had every day with an 8% interest return, I would have $440,000.

MORGAN HOUSEL: If you did a coffee every day. Yes, yes.

STEVEN BARTLETT: Assuming the coffee cost $5.

Warren Buffett’s Perspective on Money

MORGAN HOUSEL: Now, I like coffee. You do, too. I don’t want people to listen to that and say, I should stop drinking my coffee. But it’s a powerful example. There’s a book called the Snowball, which is kind of the most detailed biography of Warren Buffett. And it would talk about how when he was in his adulthood, he wouldn’t want to get haircuts because in his mind, a haircut would cost $10,000 because it was a $2 haircut. But if he invested that money in the way that he knew he could and leave it alone for 50 years, whatever it would be. He didn’t want to get a car wash because he would tell his wife, he’s like, that’s a $5,000 car wash. He’s like, what do we mean, it costs a dollar? No, no, no. But if I invest that money and leave it alone. So he was always thinking about not what something costs today, but what he could grow that money into in the future.

STEVEN BARTLETT: I was just thinking about Warren Buffett getting his haircut. So I thought, how old’s Warren Buffett now?

MORGAN HOUSEL: He’s 93.

STEVEN BARTLETT: Okay, so let’s say for 80 years, if Warren Buffett didn’t get, say, a $5 haircut and instead took the money and put it somewhere in the S&P 500, an index fund, which, by the way, you can invest in on your phone. 80 years later, Warren Buffett would have $10.3 million.

MORGAN HOUSEL: That’s it. And that’s why he’s worth a quarter trillion dollars today, is because you go through 90 years of thinking like that. It really adds up. Now, you always have to preface this by being like, please drink your coffee and get a haircut. It’s always a balance. But also understand how incredible it can be by putting away doing very ordinary things for a long period of time can lead to magic.

STEVEN BARTLETT: It is magic as well. That’s such a perfect word for it.

MORGAN HOUSEL: Because it seems it’s magic because it’s not intuitive at all.

STEVEN BARTLETT: Yes.

MORGAN HOUSEL: You don’t understand it. You’re like, wait, what? I don’t. I can’t understand how a haircut can turn into $10 million. Yeah. It’s not intuitive. Like, we’re not. There’s a great example from my friend Michael Batnik. He said if I ask you, what is 8+8+8+8? You can figure that out in your head quickly. But if I said, what is 8×8×8×8×8? Forget about it. Can’t do it. We’re not made to think exponentially. We’re not meant to think in multiplicative terms.

STEVEN BARTLETT: Because nothing was exponential once upon a time.

MORGAN HOUSEL: That’s largely true. Yeah.

STEVEN BARTLETT: I can’t think of anything that was really exponential before.

MORGAN HOUSEL: Yeah. I’m sure we could come up with a couple examples in nature and whatnot. There’s lots of compounding in nature, and that’s kind of the core of evolution, is like, things building upon each other over time.

STEVEN BARTLETT: Maybe brushing your teeth or decay.

MORGAN HOUSEL: Yeah. But, you know, certainly the stock market is the most pertinent example in most people’s lives. But there’s also a lot of, like, bad habits compound. Smoking one cigarette is not that big a deal. Smoking one cigarette every day for 30 years, big deal. Smoking two packs a day for 30, a big deal. So there are things that, like, in small doses, they’re not that big a deal. But if you do them consistently for a long period of time, it leads to negative magic.

The Art of Saving Money

STEVEN BARTLETT: So what’s your view then, on saving money? You’re working on a book currently which is being released in October this year, called the Art of Spending Money.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: What’s your view on saving money? You told me to have the coffee, cut my hair.

MORGAN HOUSEL: Yeah. I view savings as, well, one thing most people view saving money as, like, as idle save. Like, if you’re not spending it, it’s just sitting in the bank doing nothing, and it’s just kind of wasted money sitting there. I’ve never viewed it like that at all. I view savings as little tokens of independence. And every dollar that I save is a little piece of my time in the future that I own and I control. It’s just deferred spending. And I view that as independence.

So, like, if you have a lot of savings, it’s not just like, hoarding money. And I’m not going to do anything with it. And it’s not even that I’m saving this money so that I can spend it in the future. If I save a dollar today, I have a dollar more independence today. I benefit from that today. Right now, like, I feel more independent because of it, and I am more independent because of it.

So I view, again, my top financial goal by far. And I think this is true for most people, whether they know it or not. What they really want out of money is independence and autonomy and is being able to do things on their own terms, live the life that they want to live. And I view the oxygen of independence is saving.

STEVEN BARTLETT: And what’s the opposite of that? Is it debt?

MORGAN HOUSEL: Yeah. Debt is a piece of your future that somebody else owns. It’s the polar opposite of it. When you go into debt, you’re saying, three years from now, this company owns a part of my time, they own my labor in the future. And savings is the opposite. Savings is in the future. I have this stored up. I have this consumption stored up in the future. I can do whatever I want with it.

The Psychology of Money

STEVEN BARTLETT: I think you’ve written a book called the Psychology of Money, but as you’re talking now, I was thinking, gosh, this is all psychology. Again, because at the heart of this, we will have our own unique relationship with money. And there’s lots of people that won’t even look at their own bank statements. They won’t look at their own Revolut or Monzo app in the morning. They avoid their credit cards in terms of their credit card statements. And to even start talking about these subjects of saving and spending, we probably need to preface it with some kind of mindset or mentality towards your relationship with money.

MORGAN HOUSEL: Yep. I think the most important is there are two topics in life that will impact you whether you like them or not. That’s health and money. It doesn’t matter if you’re not interested in those topics. Those topics are interested in you, and they will impact your life. You can have a wonderful life not knowing anything about chemistry or meteorology if you don’t care about those topics. You cannot have a good life if you don’t care about money and health. And that’s true for everybody everywhere.

And so I think everyone has an obligation to understand their own relationship with money. Now, some people are going to be fanatics about it. And other people just view money as just kind of like a necessary tool that they need to get through life. But you have to understand how it works and what it’s doing to you financially and psychologically.

And so much of modern ills have to do with envy, jealousy, feeling like you’re falling behind relative to other people. The core of that is usually financial. And so even if you’re not the kind of person who’s like, I don’t care about the stock market and like, I don’t really care that much about money, I like having fun with my friends. That’s great. But there is a huge component of sociology and just what’s going on in the world all the time, that is financial.

And I think money is like such an interesting window into people’s lives. You can learn so much about somebody if you understand what they do with their money, how they think about money, how much they talk about money, how much they want to show off, how much attention they’re putting into their clothes and their cars and their jewelry to show other people how much money that they have. You learn so much about someone’s psychology. You know, if I learned about your politics, I don’t know what they are, but if I learned about your politics, I might learn something about you. But if I sat down and I said, tell me everything about your money. Tell me how much you make, how much you spend, what do you value, what do you want to do? I’d learn so much about your personality.

STEVEN BARTLETT: In your work on the psychology of money. How much did you think about trauma as a protagonist in the story of one’s financial relationships?

MORGAN HOUSEL: I think less about trauma. That’s a component of it, but more so. It’s just that we are all prisoners of our unique past. No matter what that is. That’s trauma for a lot of people, different forms of trauma. But you grew up in a different country than I did. You have different parents than I do, different values. We’re slightly different ages. And so you saw a different side of the world than I did, and that taught you different values. It taught you to aspire to different things than I did.

And you and I, in a lot of ways are a lot alike. I think if we sat down and talked about broader topics, we’d agree on 90% of things. But we are different, and so we shouldn’t pretend that what I want to do with my money is what you should do. And I think a lot of times when people argue about money and they’re like, oh, you’re investing wrong, or you’re spending, you’re not spending enough, you’re spending too much. It’s not actually people disagreeing with each other. It’s people who came from very different backgrounds talking over each other, and they just have different aspirations for what you want to do.

So everyone is so different and they’re a prisoner of their past. My brother in law is a social worker and I may have brought this up when the first time I was on your podcast, but I think about it all the time. And in social work, when you’re working with very disadvantaged kids, a lot of those kids who are homeless and foster children behave very poorly at school. They do very poorly. Their grades are terrible in school, they’re always getting into fights.

And he said, as a social worker, he said, we have a saying in social work, it’s “all behavior makes sense with enough information.” So you look at this child who is getting into fights on the playground and failing all of his classes, and it’s easy for the teacher to be like, what’s your problem? This is not that hard. Just behave, just stop doing this. And then you look at what that kid’s going through at home. Maybe their parents are beating them, maybe they’re foster children, they’re orphans. Once you piece together what’s going on in their life, you’re like, I kind of understand. All behavior makes sense with enough information.

And I think you can apply that to a lot of areas in life, money especially where you’re like, you see someone driving a yellow Lamborghini. There’s a story there about someone’s past. I’m not judging it, but there’s a story in there of someone being like, I want people to know how much money I made. And it’s not a criticism, but there’s a story. There’s something that happened in your life that led you to there. And we all have that. That’s not a criticism because I have bits of my past that influence how I manage money today, too. So just recognizing that there’s no one right answer in math, two plus two is four for me and you, there is a right answer. Money’s not like that. We’re all just kind of trying to figure out what works, given the lens that we see the world through.

Money and Mortality

STEVEN BARTLETT: This is a bit of a bizarre question, but it had me thinking, as you’re speaking about mortality as it relates to money. Because one of the perspectives on money is YOLO.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: Do you know what I mean? I’m only going to live once, so I might as well have a good time. I think I definitely have more of a bias in that direction, although I’m not fully in that direction. And my brother, who’s a year older than me, is one that gave me your book and has worked as a stockbroker, an actuarial scientist. At 12 years old, he was budgeting his pocket money on an Excel document, whereas I was just spending, spending, spending.

And he thinks much more long term. He’s like, investing in his pension at 21, whereas I was, like, at the casino, not the literal casino, a figurative casino. I was taking bigger risks and just rolling the dice. And my somewhat illogical way of rationalizing my behavior and not investing as much in my pension was, I’m only going to live once anyway, so I might as well just enjoy my life. And when we talk about the coffees and saving and all this stuff, a lot of people will be thinking, yes, but. But compounding’s fine, but I want to enjoy life.

Balancing Life and Financial Decisions

MORGAN HOUSEL: I think about a thing. When I was in my early 20s, I met a coworker who was about 10 years older than me, and he had $25,000 of credit card debt, which I could not fathom at the time. That was such an incomprehensible amount of credit card debt that he was paying 17% interest on. At the time I just thought… And all the debt came from trips that he had taken. He traveled Europe and traveled through Asia and had a great time doing it. But he put it all on his credit card. At the time, I remember thinking, you idiot, do you understand what this is going to do to your future? And then he died when he was about 32.

STEVEN BARTLETT: Wow.

MORGAN HOUSEL: And then I remember thinking, like, I’m so glad you took those trips. I’m so glad you went into that credit card debt. Because the truth was, at age 32, he had seen more and done more than most people would at age 62. So I think about that a lot, like, it’s always a balance. And the truth is that you and I don’t know, are we going to live until we’re 110 or die tomorrow? Nobody knows.

Of course, one thing I think a lot about as a parent is that I’ve been a big saver my entire life. Since I got my first job at age 16, I’ve saved the majority of what I made in every job that I’ve ever been in. And it would be easy to look at someone like me and say, “Morgan, if you were on your deathbed tomorrow, you’d probably regret the vacations you didn’t take and the dinners you didn’t have.” Right? You’d regret that.

My answer is absolutely not. Because if I was on my deathbed tonight, I would take so much joy knowing that my wife and kids are gonna be okay because of what I saved. That would be the worst situation I would be in, is on my deathbed and looking at my wife and kids and knowing, you guys are screwed, I’m leaving you dead. But that might change as I get older. And so when my kids are hopefully financially self-sufficient, will I still think that? Will I still have that need to be like, I need to work and save to provide for my young kids? That’s not going to last forever. So it’ll change throughout your life.

STEVEN BARTLETT: That is literally the worst thought in the world, isn’t it? To think that you could be on your deathbed and look over at your family and know that they’re about to struggle with bills and with food and they’re probably going to have to sell the house and their lifestyle’s completely gonna change when you go. I don’t even have kids yet, but I was just thinking about my partner.

Finding Peace at the End of Life

MORGAN HOUSEL: There’s no worse nightmare than that. I think there’s an opposite of that, which is in several of the books and studies that have been done on dying, there are quite a few people who have very peaceful deaths. People who know they’re gonna die of terminal illness, and they’re pretty much at ease with it. And when you dig into what is those people’s psychology, how do you know you’re gonna die in six months and you’re kind of at ease? One of the big factors is knowing that your family’s going to be okay without you because they are sufficient and they don’t rely on you for wisdom and advice as much as they can take care of themselves. But the opposite—if you’re on your deathbed and you’re like my children, my spouse is going to have a real hard time without me—that’s the most painful thing you can imagine.

STEVEN BARTLETT: I can also imagine that one of the great regrets one might have on their deathbed is just not having lived. Because I sometimes ponder, if I die now, how would I feel? Like if I was given a diagnosis, God forbid, how would I feel? And I feel like I’ve really gone for it with my life.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: I feel like I’ve traveled, I’ve seen things, I’ve done things, I’ve met people, I’ve lived. So there’s a certain feeling of… There’s a certain smile on my face or gratitude when I think about this being the end.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: So it’s a balancing act, isn’t it, between, like I just…

Regrets and Time Well Spent

MORGAN HOUSEL: Between the two. Between my friend who buried himself in credit card debt, even though I’m glad he did it, given his short life, versus the people who save everything for the end. David Cassidy, who’s a very famous childhood actor and had an incredible acting career, he died—I don’t know when he died, ten years ago, 15 years ago, whatever it was—his last words were “so much wasted time.” Those are his last words. And you think about this is someone who was very rich and famous, had a very enviable life, and you can’t think of sadder last words than “so much wasted time.”

And I think, like, this is like the Jeff Bezos philosophy on business. He started Amazon because he was trying to imagine himself at age 90, looking back and having the fewest regrets. He was like, that should be your framework for life, is that when you’re on your deathbed, you have the fewest regrets possible. And he did it because he was like, if I don’t start Amazon, I’m going to regret it. But if I do start Amazon and it fails, I won’t regret that.

So just understanding, I think that’s a good philosophy. That’s probably the broadest definition of risk, is understanding what you’re likely to regret in the future. And I don’t think anyone has a perfect calibration on that. There’s a good chance that, heaven forbid, if you did get a diagnosis tomorrow, as you just said, that, yes, you would look back and say, “Man, I really went for it.” But you also might look back and be like, “Man, not you individually, but any of us would look back and say, like, man, I wish I was… I wish I had done this different. I wish I was nicer to that person. I wish I’d called this person more.”

STEVEN BARTLETT: You know, worked less.

MORGAN HOUSEL: Right? Maybe, yeah.

STEVEN BARTLETT: I think Bronnie Ware, that palliative nurse in Australia, when she interviewed people on their deathbeds, found that “I wish I’d worked less” was super high.

MORGAN HOUSEL: And not a single one of those people, looking back in those situations on their deathbed when they’re 90 years old, will look back and say, “I wish I worked harder.” But virtually every one of them will say, “I wish I spent more time with my kids. I wish I spent more time with my family. I wish I was nicer to myself. I wish I’d let myself be who I actually was.”

STEVEN BARTLETT: I think the top regret of the dying from her work was “I wish I’d lived a life more true to myself,” which I kind of interpret as like, I wish I’d done something else.

MORGAN HOUSEL: And this gets back to the Chuck Feeney idea of the billionaire who said, “I want to live my way.” Like, being independent is so core to people’s happiness. And as I said earlier, we come from different backgrounds, we have different aspirations, but independence is a very human, natural, universal aspiration to be able to live life in your own way.

Finding Financial Independence

STEVEN BARTLETT: I’m not sure if we talk about this much, but for that person who doesn’t have financial independence because they’re entrenched with debts and bills and all these kinds of things, how does one get out of that situation? Because we can’t necessarily just save our way out of that situation, can we?

MORGAN HOUSEL: People do. It’s difficult because it’s likely that the mindset and psychology that got you there is going to be very difficult to break. Extremely difficult to break. I heard this statistic one time—this is a completely different topic, but I think this applies to a lot of things—that the statistic that is most predictive on whether you will cheat on your spouse is how many people you slept with before you got married. The implication being it’s very difficult to just flip a switch and say, “I’m a different person now.”

And I think that idea can apply to a lot of different things in life. And the psychology of, “I spend way more than I make and I don’t care about money and debt, debt, debt”—some people can wake up one day and say, “No more of that. I’m going to run in the other way.” A lot of people find it very difficult to do.

I think one of the hard things about money that’s hard to admit for a lot of people, but there’s truth to it, is that on the nature-nurture spectrum, a lot of it does lean towards nature, that some people are just wired. Your brother was wired to plan and save and you were wired to take entrepreneurial risks in maybe a way that he wasn’t. And so a lot of it is, yes, you can learn, yes, you can learn from others and learn new ideas to think about, but we shouldn’t pretend that we can fundamentally rewire who we are.

STEVEN BARTLETT: The hardest conversations are often the ones we avoid. But what if you had the right question to start them with? Every single guest on the Diary of a CEO has left behind a question in this diary, and it’s a question designed to challenge, to connect, and to go deeper with the next guest. And these are all the questions that I have here in my hand. On one side you’ve got the question that was asked, the name of the person who wrote it, and on the other side, if you scan that, you can watch the person who came after who answered it. 51 questions split across three different levels. The warm up level, the open up level and the deep level. So you decide how deep the conversation goes. And people play these conversation cards in boardrooms, at work, in bedrooms, alone, at night and on first dates and everywhere in between. I’ll put a link to the conversation cards in the description below and you can get yours at thediary.com.

Just to close off on this point of saving money, are there any tactics or tricks or ways to think about how to save for those people that might be working in a factory and that don’t have a ton of excess income every month?

Reframing Savings as Independence

MORGAN HOUSEL: I think if you view savings as “I need to save for something in the future,” that’s hard for people to do. If you have a little bit of a mindset shift and say, “I’m going to save so I can become more independent, so that if I lose my job, I don’t have to panic and go find the first one that’s available. I can take my time and find another one.” That’s independence. If you have a medical emergency, you’re going to have some options on how to treat it and where to go. That’s independence. Viewing every dollar that you save as a token of independence, I think is a mindset shift that makes it a lot easier for people to do versus if they’re just saying, “I need to save to buy a new car.”

STEVEN BARTLETT: I asked this because earlier I looked at the most googled questions around saving and the most popular question is “how to save money.”

MORGAN HOUSEL: Yeah, yeah.

STEVEN BARTLETT: How to save money.

MORGAN HOUSEL: Now they might be asking like, what to do with my savings? Do I put it in a checking account, do I put in a savings account? Do I invest it? That might be part of it or it might be as similar as you’re saying with tariffs. People genuinely don’t know what it means.

STEVEN BARTLETT: The second most Googled is “what is a high yield savings account.”

MORGAN HOUSEL: Yeah. And I think those questions, they’re not bad questions. There’s no bad questions. I was asking those questions at one point in my life too. But it gets to the point of like, you have an obligation to understand how money works and what it’s going to do to you and how to manage it. It’s not a nice-to-have. Everyone’s going to have to deal with these topics whether they like it or not.

STEVEN BARTLETT: I love this quote from your book where you say “one of the most powerful ways to increase your savings isn’t to raise your income, it’s to raise your humility.”

Morgan Housel on Spending and Happiness

MORGAN HOUSEL: Yeah. I think you get there when you realize, like, nobody’s looking at you as much as you are and nobody cares about your Range Rover and your Rolex as much as you. They may have meant a lot to you, but no one else was thinking about them that much because they were busy thinking about themselves. They were busy thinking about their own car.

And you realize how much modern spending—and this has increased in the social media age the last 10 or 15 years—is trying to get strangers’ attention. It’s trying to put on a show, put on a performance for people that you think are paying attention to you, but they’re absolutely not. They’re not paying any attention to you whatsoever.

And so, like, raising your humility is one way to think about it, but it’s also just realizing, like, who do you want attention from? It’s different for everybody. For me, I want my wife, my kids, my parents, and, like, three friends to love me. And I desperately care about their attention. I desperately care what my kids and my wife, my parents think of me. And it’s fundamental to my happiness.

And from there, it declines real quick. You know, there’s a couple really close friends who are in there, and then there’s some, like, colleagues and whatnot. And it declines very quickly from there. And strangers? The person driving on the street could not care in the slightest. And maybe that sounds obvious, but so much of what we do with money is a performance to impress that guy who’s not paying any attention to you whatsoever.

So I want to put a lot of effort into fostering the relationships with those six or seven people. I want to put tremendous effort into that and very little from there. And here’s the thing. If I got a Ferrari, would my wife love me more? No. Would my kids admire me more? No. And so the people who I want to love me are not impacted by the fancy things that I would buy.

STEVEN BARTLETT: So what do you spend your money on?

MORGAN HOUSEL: We live a pretty decent material life, but I also spend a lot of money. So the biggest expense that I have, what I spend money on, is independence. And I view that as a thing I’m spending money on. I spend money on controlling my calendar. I spend money on the ability to say no to work that I don’t want to do. I view it as I’m financially independent and so I can do the work that I want to do. And I’ve been working that for 25 years.

What else do I do? I spend money on… Here’s what’s interesting. My son, back in the green room you asked about… There’s a thing I was thinking about just a couple weeks ago. I grew up as a skier. I was a ski racer in Lake Tahoe. And always, particularly when I was younger, there were always people on my ski team who had better gear than me. They had the newer skis and newer boots and cooler gear and whatnot. And I always… I hated it. Made me so insecure. I hated it.

And one of the things that I did was when my son started skiing a couple years ago, I was like, I’m going to buy you the best stuff. Because I was insecure. And I’m going to make up for that little chip on my shoulder. I’m going to buy you the best gear. And here’s the thing. He couldn’t care less about it. He could not care less about the fancy stuff that he has, couldn’t care less about it. So everyone’s different in that. And also gets back to like, a lot of spending is based off of a story or a scar that you had from earlier in your childhood.

Investment Strategy and Asset Allocation

STEVEN BARTLETT: And where is your capital allocation today? We spoke about this a little bit last time, but in terms of percentages, you have a ton of cash. You said roughly what percentage of your…

MORGAN HOUSEL: 20, 25%, maybe. We own a house outright and then the rest in stocks. It’s very simple. Our entire net worth is a house, cash, Vanguard index funds, and shares of Markel, where I’m on the board of directors. That’s it. That’s my entire net worth. It’s as simple and boring, as bland as you could possibly get.

And what I want to do with that, the reason I keep it so boring is the variable that I want to maximize for is endurance, as we spoke about earlier. So if my finances are so simple, then I can spend all of my mental energy. All of the strategy is how can I make sure that I can just keep this going for as long as I possibly can?

STEVEN BARTLETT: So for someone that doesn’t know what a Vanguard index fund is, if you had to explain it to your son—he probably knows, doesn’t he—to someone of your son’s age, how would you explain a Vanguard index fund? Because you said you got cash. People understand that. People understand a house. Vanguard index fund…

MORGAN HOUSEL: So an index fund is a collection of hundreds, if not thousands of businesses. So when you buy an index fund, you’re owning a little bit of Apple, Amazon, Google, Facebook, all of them. Every public company that’s available, you’re owning a tiny slice of them. One way to think about it is when you buy an index fund, you’re owning a little slice of American capitalism.

STEVEN BARTLETT: And which index funds do you invest in and why?

MORGAN HOUSEL: There’s lots of them. I mean, there’s tons of them that are equally good. So this is not to say that one is better, necessarily better than the other.

STEVEN BARTLETT: We must have a thesis.

MORGAN HOUSEL: Most of what I buy is called the Vanguard Total Stock Market Index. Ticker is VTI, not a recommendation for others, but it’s the broadest index. It basically owns every stock that’s available to buy in the world. And it does it at a very, very low fee. And so I’m not making any bet on AI. I’m not making any bet on this industry or that company. You’re owning a little bit of slice of American business.

STEVEN BARTLETT: And what has that yielded on average, over the last couple of years?

MORGAN HOUSEL: If you look at a good historical comparison to what it would be, which is the S&P 500. If you go back, you can go back 100 years. There’s a guy from Yale University named Robert Shiller who has data going back to the 1880s on US stocks. And basically what it shows is over time, on average, which that phrase is doing some heavy lifting here, but on average, 8 to 10% per year.

And why that is, there’s a big asterisk. There is you almost never earn 8 or 10% in any given year. You’re much more likely to be up 30% or down 15%, and it averages out to 8 or 10% per year. But it’s always chaos in any individual year.

STEVEN BARTLETT: And is there a reason why you don’t just bet on technology, for example?

MORGAN HOUSEL: Well, there’s a lot of technology in that index fund that’s the highest weight because those are the biggest companies in America, Amazon, Google and whatnot. But there’s also tremendous amount of value that can be created by a company like Procter and Gamble selling toothpaste and deodorant.

And there can actually be more value in those kind of companies than technology because I would bet good money that in 30 years people will still be using Old Spice deodorant. I would not bet good money that in 30 years Google is going to be the dominant way that people find information. And so companies that sell the same product for a long period of time have endurance and longevity, can actually create a ton of value for their investors.

Real Estate and Housing Philosophy

STEVEN BARTLETT: You mentioned the other thing is houses. You have a house?

MORGAN HOUSEL: Yep.

STEVEN BARTLETT: House sales in 2024 total just 4 million, the lowest rate since 1995.

MORGAN HOUSEL: Yeah, I mean, it’s one of the biggest social problems. And it is, it’s so much bigger than housing and so much bigger than money. I think you can tie everything from homelessness to heroin to suicide to the fact that we in America and a lot of areas around the world have not built enough homes in the last 50 years.

That has pushed the price higher and higher and higher. And it’s pushed out what was a small sliver and now a growing large chunk of society who rightly feels like they cannot afford a basic middle class home. And it’s a huge… It’s probably the biggest, one of the biggest societal problems that we face right now is a housing shortage that has pushed housing out of affordability for tens of millions of people.

STEVEN BARTLETT: Do you recommend people try and buy houses or is it just to rent those houses? Here’s what…

MORGAN HOUSEL: So I’ve purchased three homes in my life.

STEVEN BARTLETT: Yeah.

MORGAN HOUSEL: Every one of those three homes, I don’t feel like I got a good deal. It wasn’t like, “Oh, this is a bargain. Got it. This is a great deal.” This is not… None of the three were like that. I bought them, I could afford them. They were in my… I was not going, you know, doing something that I should not have been doing financially.

But the reason I bought them is because they were a good, safe home for my family in a community that we wanted to live. And I was not thinking about, is this going to be a house that I can make a fortune on. Is this going to go up in value? Is this going to go down in value? That was never part of the equation. It was, yes, I can afford this. And it’s not imperiling my finances at all. But the reason I’m doing it is because it’s a safe, good place for my family to live.

And I think generally that’s the way to do it. And once people start thinking through the lens of, is this a good investment, is this going to go up? Are home prices going to fall? Maybe I should wait six months because they’re going to fall. That’s when you’re just, you’re shooting yourself. You’re just rolling the dice at that point.

And people get into a lot of trouble doing that when they’re like, “Oh, I know, like I’m going into a ton of debt, but I think home prices are going to double in the next three years. So it’s okay.” That should never be part of the equation. It should be, I can afford this, and this is where I want to raise my family for the next five or 10 years. I think that’s the formula.

STEVEN BARTLETT: So it’s more about freedom and security than making a quick return.

MORGAN HOUSEL: Absolutely. Here’s what’s interesting, like the psychology of housing too. We bought a new house eight months ago and sold our previous house. And that house, the house that we just sold, we did end up making a little bit of money on because Seattle real estate has gone crazy in the last five years.

And really interesting something that happens. This is just eight months ago when we sold the house, the day that we closed on selling that house, and I got the proceeds wired to me in my bank account, logged in my bank account. I see that number from selling the house. The numbers meant nothing to me. But the house that we sold meant everything to me.

It was like my daughter took her first steps at the bottom of those stairs. My son has his first day of kindergarten, Christmases, Thanksgivings, like… And it was like, these numbers don’t mean anything to me. These numbers are just going into the new house. But that house that I left behind meant everything to me. So that gets back to like, don’t think of it as a financial transaction. It should be, this is where you want to raise your family and build some memories.

STEVEN BARTLETT: How does it compare to investing in that Vanguard thing? If we look at the returns on…

MORGAN HOUSEL: Housing, I have no memories of my daughter’s first steps in my Vanguard Index fund. That’s really it. You are investing in a Vanguard Index fund because you think you’re going to make money over time, whereas you should not have that mentality when you buy a house. It should be within your financial means, but you should be doing it because it’s a good place to raise your family for a long period of time.

STEVEN BARTLETT: It does beg a question for younger people who are thinking about building their wealth. Because the first thing and the most common thing we’re taught as it relates to wealth creation is to go buy a house. Like, it’s the thing that everybody knows. You leave university, you get a job, and you save as much money as you can to put that deposit down.

The Housing Debate: Then vs. Now

MORGAN HOUSEL: Yeah, that was true in previous generations because if you go back to the 1950s, 60s, 70s, we were building so many more homes than we are today that they were much cheaper. Even when interest rates were higher, they were much cheaper. And so the advice of, hey, you got an entry level job, you should go buy an entry level house, probably made sense in the 60s and 70s in a way that it doesn’t today.

The other element here that is very easy to overlook in the housing problem, the housing debate, is that the homes that we found adequate in the 50s and 60s, we would not find adequate today. So Levittown in New York was the prototypical example. That’s when like end of World War II, build the middle class community, build this huge new community called Levittown in New York. And that was like the typical white picket fence, middle class home that we long for today. And they were cheap, they were affordable.

The average new house in Levittown was 700 square feet. It had two bedrooms for an average of a family of five or six moving into it. One bathroom for those six people, no air conditioning, no garage. It would be a house that, if I showed you today you would be like, it’s a crack house. Like nobody would say, that is a beautiful middle class house.

So expectations over time have increased tremendously. Now the average new middle class house is 2,200 square feet where it used to be 700. So like what an entry level house is, the definition of that has expanded tremendously over time.

STEVEN BARTLETT: And if your children come to you and they say, dad, I’m 25 years old and I’ve just got some excess cash, I’ve got $20,000, $40,000. I’m thinking of putting a deposit down.

MORGAN HOUSEL: For a house? My wife and I rented for years. And looking back at the time and looking back, it was the best thing that we ever did. We rented for 10 years before we bought a house because we lived in five different cities and we could just easily just pack up and go. We weren’t tied to anything. We had flexibility.

And it was pretty much the week that our son was born, when we had our first kid that it was like a switch in my head. I was like, I need to go have my own house. Because the flexibility that I enjoyed when we were childless, it was the opposite. It was like, I value stability now. I want a stable house for my family. And it was like instantly that switched.

And so that was not a financial decision of like, I need to go out and buy because I have some extra savings. It was like, I want my house, that’s mine. And there’s not going to be a landlord that sends me a letter and says, oh, sorry you’re evicted, or sorry, we’re selling the building, you need to leave. This is my house. That was the shift for me.

STEVEN BARTLETT: It feels like when we rent, we’re wasting money though.

MORGAN HOUSEL: But it’s not in the slightest. I mean, for anyone who’s owned a house, you know, the expenses that go into a house, it’s not just the mortgage, it’s the broken water heater, it’s replacing your roof, it’s the expenses that go into it. You want to talk about throwing your money away, try replacing your roof on a house that you own. That feels like throwing money away.

STEVEN BARTLETT: And it’s hard for the brain to conceive, you know, that renting might be the same as buying a house. When you net out and you factor in opportunity cost and flexibility and the ability to get on a plane and go to London to do that job.

MORGAN HOUSEL: And you can’t quantify that flexibility. So my wife and I lived in five different cities. Some of those were because we got jobs in different cities, we had to move. You can’t quantify that flexibility or it’s very hard to. But in the moment, it was everything.

STEVEN BARTLETT: Yeah, it was.

MORGAN HOUSEL: I remember when my wife got into grad school and it was like, great, pack up this city and move to this city. And it’s just like, no handcuffs, just get up and go, versus if you own your house. Like anyone’s trying to sell a house, like, it’s a nightmare. And so you can’t quantify that. But it meant everything in the world to us.

The Value of Flexibility

STEVEN BARTLETT: Now, my brother said this to me. He’s a very smart guy. Now I reflect upon it. He said this to me when I was younger because I think at 25, when I got some money, I was telling him, maybe I’ll buy this house, we should look at this house. And he explained to me in simple terms that the flexibility that I had to get up and move was actually worth so much more than maybe some of the equity that I might accrue from buying a house.

And now I look back on it from that day onwards. I then moved to New York and I lived there for three days. Then the pandemic happened and I suddenly quit my job out of the blue unexpectedly. And I moved to Portugal, then went to Germany, then went to Bali for several months, then flew back to the UK. London. Now I’ve just moved to LA.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: And that’s all in the space of four years.

MORGAN HOUSEL: Incredible.

STEVEN BARTLETT: And I’ve gone with the opportunity. So when the opportunity comes knocking and, oh, the podcast starts doing well and then this happens and then Dragon’s Den this. I’ve just moved with the opportunity. And if I bought a house, you’d be locked down.

MORGAN HOUSEL: There are so many people today who bought homes in 2021, 2022, and their mortgage rate was 2 or 3%. They have a 2 or 3% mortgage. And a lot of those people want to move today because they can get a better job in another city. They want to move and they feel like they can’t because they have golden handcuffs for this super cheap mortgage. Because if they sold their house and bought a new one, their new mortgage rate would be seven and a half percent. And so those are people who, a lot of those people look back and when they bought in 2021, they’re like, we won the lottery 2% mortgage. This is amazing. And looking back, they’re like, gosh, would have been so better off renting if we had the flexibility to move.

STEVEN BARTLETT: So interesting.

MORGAN HOUSEL: So much of economic prosperity over history is your ability to move. And that’s been true for hundreds of years. Like if you want to see a basic measure of how wealthy any economy is, like how often do people move? Because moving is usually a symbol of opportunity. And the more that they’re locked down and feel like they can’t move, the more stagnant and sclerotic that economy is going to be.

$3 Questions vs. $30,000 Questions

STEVEN BARTLETT: What’s this idea that you have of asking $3 questions I heard you talking about?

MORGAN HOUSEL: I stole that from an author named Ramit Sethi. He’s a very well known author and he says too many people ask three dollar questions when they should be asking $30,000 questions. What he means by that is when people say how can I save more money? They say I should stop drinking coffee. That’s a $3 question. And that does not make any difference to you.

What you should be asking are $30,000 questions like where should I go to college? Should I go to the cheap school or the expensive school? Where should I live? The cheap city or the expensive city? Should I rent or should I buy? Those are $30,000 questions. And we spend a lot of mental energy on $3 questions that don’t move the needle that much in our finances.

For most people there are only a couple of expense items that actually matter to your finances. That is your housing payment, either rent or mortgage, your car payment, child care, health care, and that’s pretty much it. And yes, you’re going to spend money on other things, but those four, that’s the vast majority of what people spend money on. But when you hear people talk about how do you save money, it’s like, oh well, stop going to Starbucks. You can pack your own lunch to work. It doesn’t make that much of a difference. It’s those big four things.

STEVEN BARTLETT: So am I right in thinking that you think we should avoid either extreme end of the financial approach that people take? So you’ve got YOLO on one end and you’ve got caring about every coffee on the other end of the spectrum.

MORGAN HOUSEL: I think those are what you are most likely to end up regretting.

STEVEN BARTLETT: What do you mean?

MORGAN HOUSEL: There are a lot of people in the FIRE movement. FIRE stands for Financial Independence, Retire Early. It’s this big movement started 10 or 15 years ago of people who are like, I’m going to save as much money as I can in my twenties, learn how to live as cheaply and frugally as I can, and retire at age 27 with, you know, 600 grand in the bank. And I’m going to retire off of that.

And it was a huge movement. So many of those people ended up regretting it because they retired at 27 and six months later they’re bored out of their mind, if not depressed, because they wake up and they’re like, what do I do now? Do I just go play golf or something? All my friends are out working. What do I do now? And so I think the extreme ends of like, oh, YOLO, I’m just going to spend it all, live for today. I’m going to go party and travel and whatnot. There’s somewhat of a chance that you’re going to end up regretting that because you didn’t save enough for a time in your life when you want to retire and you can’t.

Rethinking Retirement

STEVEN BARTLETT: On the subject of retirement, me and my friend Jack over there, we were talking about people who retire and the impact it can have on the individual. And I think I’d be quite scared to retire because there seems to be lots of data that suggests that once we retire it’s quite downhill from there in many respects for many people in terms of purpose and meaning and connections. How do you think about retirement? Is that something we should be aiming at?

MORGAN HOUSEL: My dad, I think, retired and went back to work three different times. We eventually had to tell him, like, no more retirement parties. You only get one. But he would retire and then a month later he’d be like, man, I really miss work. And in his line of work, he could go back part time and whatnot so that it worked out for him.

But I think he starkly saw what a lot of people overlook, which is how much of his identity was his job and how much, like when he retired the first time and he woke up and looked in the mirror and said, I’m not the person who I used to be. I used to be this, but I’m not anymore. And he didn’t like it.

It’s easy – every job has downsides that are stressful and you don’t want to do them and they’re a pain and you hate them and you can’t wait to live in a world where you don’t have to do the stressful parts of your job. But for a lot of us, what we really want to do in our soul is be productive in the world and add value to the world. Add value for our family. Add value to the world. And one of the quickest ways to become depressed is to be very productive and then immediately stop. That’s a quick path to depression for a lot of people.

And so some people are very good at retirement. My mom, on the other hand, was very good at retirement. She retired, never looked back, and had a very full life in retirement. She keeps herself very busy with hobbies and friends and whatnot. So some people are very good at it. Other people who found their identity in their work – that’s a lot of people. That’s me. I think that’s probably you – would go crazy if we ended up retiring.

STEVEN BARTLETT: You can’t say your own book, but if you had to recommend a book that would equip us to understand money, wealth creation and all these kinds of things, what book would you recommend?

MORGAN HOUSEL: Oh, I would say my own book. No, no. I think a couple that were really important for me. You know, it’s not bedtime reading, but a guy named Benjamin Graham wrote a book called the Intelligent Investor. He wrote it in the 1930s, so it is written in 1930s English, and he was a professor. So it’s written. It’s not quite a textbook, but it’s not bedtime reading. But there is more wisdom about investing in that book than any other book that’s been written in the last hundred years. And even though he wrote it almost 100 years ago, 90% of it is timeless. He says certain things that are obviously dated, but there’s more wisdom in there than anything else that’s ever been written. That’s why the book still sells a lot 90 years after it’s been written. That was a big one.

Learning about World War II and the Great Depression was very influential to me and many other people because both of those events, particularly World War II, saw the highest range of human emotions that I think has ever been documented. From the most agony and despair and torment to the most like, elation and happiness that it’s over. Like so many, the fullest range of human emotions were documented during that period, from probably 1929 to 1945, those 16 years.

I think if you learn about what happened in the United States and all over the world, of course you learn so much about humanity. Like World War, when you study World War II. You’re not really learning about military tactics, even though that’s part of it. You’re learning about the psychology of how people deal with uncertainty, dread, risk, doubt, fear. You can learn more about those topics during that 15 year period than anything else.

STEVEN BARTLETT: One of the things that I learned from listening to your podcast, which is fantastic, I highly recommend people go listen to the Morgan Housel Podcast was you were talking about the dangers of rapid growth.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: And I actually, I took something that you said in the podcast around the danger of rapid growth. I sent it to my CEO and my chief Revenue officer because it’s a cautionary tale for a generation of entrepreneurs who are obsessed with growth. All costs to slow things down.

MORGAN HOUSEL: Yeah.

STEVEN BARTLETT: What in your view, what is the. And this could be the dangers of rapid growth in any field. It could be someone running a podcast or someone building a business or anything, someone investing money. Why do we need to be cautious about rapid growth?

The Dangers of Rapid Growth

MORGAN HOUSEL: There’s a really interesting analogy that I like with tree growth in nature, that if you plant a tree out in the middle of an open field, because it’s out in the middle of an open field, it’s gorging on sunlight because there’s no other trees shading it. It’s just gorging on sunlight because it gorges on sunlight. It grows very, very fast. It can grow like 10 times faster than a tree that’s covered in shade. So you might think, like, that’s great. That’s amazing. It’s growing so quickly. If you’re a farmer, you love that.

But when a tree grows that quickly, it never has a chance to grow dense and hard. It never has a chance to grow a very established root structure. And so those trees, even though they grow very quickly, they die very quickly. They’re very susceptible to rot because they never have a chance to grow hard. It’s just kind of like mushy, soft wood inside. And if you see a lot of the lumber that is harvested these days and you compare it to lumber from, like, old growth forests, you might as well be looking at a completely different tree. A lot of the wood that we harvest today that was grown very quickly is soft and weak compared to the old, dense hardwood that they used to make.

And I think that’s a good analogy that, like, fast growth is fun, it’s exciting, but there’s always. It’s like speed always comes at the expense of durability, always. There’s a theory in finance, it’s kind of like a tongue in cheek theory. That however fast you grow, that’s the half life for how quickly you can die. It’s like the faster you grow, the quicker you can die as well. And you see that in nature. You see it with businesses as well.

The hard thing is that if you’re an entrepreneur, if you’re the CEO or working at a company, there is nothing more thrilling and exciting and get you up in the morning than fast growth. You love it. You love every second of it, even if it’s a danger.

STEVEN BARTLETT: You just reminded me of an idea I wrote about in my last book about the music industry where they found the same thing. The faster a song went to number one in the charts, the quicker it falls.

MORGAN HOUSEL: Absolutely.

STEVEN BARTLETT: Because people getting bored of it basically very, very quickly. It’s everywhere, it’s on every radio station everywhere. And then it falls out the chart all the time, same speed.

MORGAN HOUSEL: And the companies that can like produce tons and tons of money, even like look at Apple, it was created in the 1970s, didn’t really find its stride, so to speak, until the mid-2000s. And so it’s not, it’s like sometimes there’s companies like Facebook, I guess that and OpenAI, that found product market fit, found like incredible success virtually overnight the day that they were invented.

But one of the problems with rapid growth too is that the difference between building a product that’s going to grow very quickly, that is a very different skill than managing a company that now has a thousand employees. Those are night and day, different skills. And so you might be a very talented entrepreneur who can build a product and get thousands of people to buy it. That does not necessarily mean that you have the skills to manage a 50 person team or a thousand person team.

On Happiness and Contentment

STEVEN BARTLETT: How does your work dovetail with the subject of happiness, Morgan? Because at the very heart of it, clearly everyone who’s clicked on this conversation and got this far, although they might be thinking it’s money that they’re looking for or wealth that they’re looking for, probably at the end of the day they just want to live happy life. They think money or wealth is a pathway to a happy life. With all the work that you’ve done and the people that you’ve studied through history and all that you’ve written, what is your current view on how to live a happy life?

MORGAN HOUSEL: What’s interesting is that like when you say happy, when anyone says happy, you’re like, how can you disagree with that? Everybody wants to be happy. But a lot of why people run into problems when they’re seeking happiness is because happiness is not the emotion that you want to go for. Happiness is always a five minute emotion. It comes and goes, you experience it, but it’s a thrill and then it kind of wears off very quickly. If you hear a funny joke, you go to a comedy show, it’s funny, you laugh at a joke for 20 seconds and then it’s not that funny anymore.

What you want to go for, I think is contentment. And a lot of people like money can buy a good life. But when you imagine yourself with the new house, the new car, the nice vacation, when you dream about those making you happy, what you’re actually envisioning is yourself being content with those things. You envision yourself on the beach in Maui being content with it. And that’s why it feels so good.

The feeling that you want, the feeling that you’re actually chasing, whether you know it or not, it’s not happiness, it’s contentment. And I think that little shift too is because most people are out there seeking happiness, but they’re like, I’m not, I don’t feel that much better than I used to. Because what you actually want to seek is what my grandmother in law had, which was being content with the little bit that she had. And that’s why she was so happy. And maybe again, that’s the wrong word, but she was content. She was perfectly content with her very simple, very basic, boring life. Boring in other people’s eyes. She was content. And that’s why a lot of people would look at her, including me, with a sense of envy is probably the right word. How did you do that? How are you so happy? It’s because she was content with what she had.

STEVEN BARTLETT: I was thinking about the goals that I wrote in my diary at 18 years old where I said that I wanted to be a millionaire. Girlfriend range over six pack. And actually when I envisaged that life, what I envisaged was contentment.

MORGAN HOUSEL: Yes, everyone, everyone. When you imagine yourself driving in the Ferrari and you’re like, oh, that would be so great. What you’re actually imagining yourself is yourself in a Ferrari, being content with that Ferrari. But what ends up happening is when, if you are in the Ferrari, you’re like, oh, look at that Lambo. Oh, that’s nicer than mine, isn’t it? You’re not content with it.

STEVEN BARTLETT: When I get the Lambo, I will be content, right?

MORGAN HOUSEL: And then you want the Rolls Royce, whatever it is, like you’re always is, whether you know it or not that’s what you’re actually seeking is you just want to be content with what you have. Because that’s true joy.

STEVEN BARTLETT: How does one be content?

MORGAN HOUSEL: Now, people have been talking about that for thousands of years. The philosopher Arthur Schopenhauer has this quote that I love. He said, if you only want to be happy, that is very easy to achieve. But people want to be happier than other people and that is much more difficult.

I think that’s what it is. It’s like so much of it is just a comparison game. And for a lot of people it’s like, I don’t necessarily want a nice house. What I want a house is a house that’s nicer than yours. I don’t necessarily want an expensive car, I want a car that’s more expensive than yours. It’s a weird thing to say, but at the core that’s what a lot of people want.

And so being content to answer your question is moving from the external benchmark of comparing myself to you and others, and towards the internal benchmark of as I said earlier, the only thing that’s actually going to make me happy in life is my family, my health. That’s pretty much it. I think I can end it right there and put a period there and say that’s what’s going to make me happy. It’s the internal benchmark. It’s not comparing what I have to what you have. It’s just if nobody else was looking, would I be happy with this? Because the truth is nobody else is looking.

STEVEN BARTLETT: Another really interesting example is just if everyone else was made extinct on planet Earth and it was just you do.

MORGAN HOUSEL: Right, what would you do? What kind of life, if nobody was watching, what kind of life would you live? And I think in that life would you want a Ferrari or would you want a Toyota pickup truck that has utility, that actually like makes your life easier kind of thing.

There’s a great thing that I heard a couple years ago which is that a high end Toyota is a much nicer car than an entry level BMW. Because a high end Toyota is like you got the cushy seats and the moonroof and the good sound system. An entry level BMW is just status or the appear like you think it’s status. It’s just you’re buying it for the chance that you’re going to influence somebody else’s view of who you are. And people like massively overestimate how much it’s going to actually influence other people.

STEVEN BARTLETT: Do you not think there’s something hardwired into humans that makes us want to strive, though?

MORGAN HOUSEL: Yeah, because life is always a competition for resources. It always has been. There’s a limited amount of food, a limited amount of land, a limited amount of mates, a limited amount of potential. And so what has mattered historically is not whether I’m a good hunter, it’s whether I’m a better hunter than you.

STEVEN BARTLETT: And the reason I’m here now is.

MORGAN HOUSEL: Because my ancestors out competed everybody else in that situation. Yes.

STEVEN BARTLETT: So I was. I have competition in my DNA.

MORGAN HOUSEL: Absolutely. And always will. We’re never going to get to a world. This is what Adam Smith wrote about 300 years ago. He’s like, if people just needed basic food and shelter, they could stop right now because virtually everybody has those. But we keep going because we want to be seen by the people who we’re competing with. And showing you, look, I’m better than you, I made more money than you, I’m more worthy for a spouse or attention than you are.

It’s always a competition. It’s kind of a sad thing to think about. And of course, I think people are intelligent enough to know how silly that game can be and to take themselves out of the game to some extent. But we’re never going to be at a time when that’s not the case. That’s definitely hardwired in us.

STEVEN BARTLETT: What is the most important thing we didn’t talk about that we should have talked about? Is there anything comes to mind for the person at home that’s dealing with all of this tariff craziness? AI, all of this stuff?

The Uncertainty of Today vs. The Past

MORGAN HOUSEL: It might seem like the world is more uncertain today than it’s ever been. And I don’t think that’s the case with tariffs and AI. It has been more uncertain at many points in the past. It just doesn’t feel that way because we know how the story ended in the past and we don’t know how this story is going to end. So it’s always the case that the world that we’re living in today feels especially fragile and especially uncertain. And I think historically it’s not. It’s uncertain and fragile in its own unique new way, but it’s always the case that it feels like the world used to be great, we used to have it, and now it’s not anymore. There’s a great Jon Stewart quote where he says the reason the world felt like a better place during your childhood is because you were a child. And just because we know how the story ended. It makes it feel like today is a very uncertain place, even if it’s kind of par for the course.

STEVEN BARTLETT: Historically, we have a closing tradition where the last guest leaves a question for the next one, knowing who they’re leaving it for. And the question left for you is, what is one thing you valued starting out that you no longer value?

MORGAN HOUSEL: One thing that I… This was not necessarily changing my mind, as it was just kind of growing as an adult was when I was in my 20s. I really valued travel and getting out and seeing the world. As you should in your 20s. When I became a father, I valued being at home with my kids. And it’s almost like in my twenties, a terrible night would be at home on the couch. That’s a failed night. And in my 30s, there’s nothing. Or in my 40s now, there’s nothing better than being at home on the living room floor playing Legos with my kids. Nothing better. So that was a shift in values, but it wasn’t because I changed my mind. It’s just a different state of life.

Final Thoughts and Appreciation

STEVEN BARTLETT: Morgan, thank you for doing what you do. It’s so incredible because, you know, you referenced that book, the Intelligent Investor. I tried reading that book, and I just bounced off it straight away. It’s really, really tough. But your book, the one that my brother gave to me all those years ago, has probably made me millions and millions of pounds because I read it when I was young enough, because it helped me to have a lens and a framework to think about a lot of this tempting get rich quick investing mentality that you see today. I wouldn’t even call it investing.

It helped me to understand the emotional elements of saving, spending, investing, and ultimately, it gave me a strategy for what to do if I ever made money. And although it’s a boring strategy, it’s a timeless one. And that is part of the reason why so much of my money currently is in really safe places like index funds. And it’s so important to read books like this because when you read it and you hear the stories of these individuals and what happened and what didn’t happen to them, whenever you experience an emotion that is similar or you find yourself in a similar situation where you can relate to one of these characters in the story, you have a blueprint for what happens next.

And so you ultimately can, like, “Oh, my God, that was like that guy in the book who couldn’t stop gambling even after he’d won. Or he predicted the stock market correctly once, and then he predicted it incorrectly the next time and then ended up killing himself.” And it’s for so many moments in my life, whether it was crypto or investing in certain particular stocks, when I used to pick stocks or starting businesses, it’s given me this wonderful framework. And Same As Ever, is the book that I wish I had written myself. And it’s written in a style that I wish I’d written myself. And in fact, my last book, which many of my listeners would have listened to, was very much inspired by your writing style because it is so accessible, it is so story driven. The subjects you talk about in this book are so diverse, but they’re so pertinent to everything all the time. And they’re such wonderful books. You’re the author I admire the most of all authors that I’ve ever met.

MORGAN HOUSEL: That means the world to me because.

STEVEN BARTLETT: Of the way you write your books so well.

MORGAN HOUSEL: Thank you. That means the world to me. I think you’re the absolute best in the world at what you do. Keeping a conversation going for a couple hours is an unbelievably difficult skill. And there are virtually no one else on the planet can do it better than you. Thank you, Steven.

STEVEN BARTLETT: I hope everybody goes and gets your books. Thank you so much, Morgan.

MORGAN HOUSEL: Thank you.

STEVEN BARTLETT: I’ll see you again soon.

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