The skills it takes to get rich are drastically different from the skills it takes to stay rich. Few understand this phenomenon more than Morgan Housel.
In this conversation, Shane and Housel discuss various aspects of risk-taking, wealth accumulation, and financial independence. Morgan explains the importance of understanding personal financial goals and the dangers of social comparison, lets everyone in on his personal financial “mistake” that instantly made him sleep better at night, and why the poorest people in the world disproportionately play the lottery—and why it makes sense that they do. They also touch on the influence of upbringing on financial behaviors, the difference between being rich and wealthy, and the critical role of compounding in financial success. Of course, we can’t have a writer as good as Morgan Housel on the podcast and not ask him about his process, so Housel concludes with insights into storytelling, his writing processes, and the importance of leading by example in teaching financial values to children.
Available now: YouTube | Apple Podcasts | Spotify | Transcript
Morgan Housel is a partner at Collaborative Fund. Previously, he was an analyst at The Motley Fool. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers and was selected by the Columbia Journalism Review for the Best Business Writing anthology. He’s the author of two books: The Psychology of Money and Same as Ever.
Here are a few highlights from the episode:
If you can do something that changes your odds of an outcome, it’s not luck.
I think not having FOMO (fear of missing out) is the single most important financial skill. I think it’s so important that you cannot ever imagine accumulating significant wealth over your lifetime if you are susceptible to FOMO.
My investing strategy is to own index funds for as long as I possibly can, to be average for an above-average period of time.
Investing is one of the very few endeavors in life where the harder you try, the worse you’re probably going to do.
What’s important is that your net worth is growing faster than your aspirations. If your aspirations are outgrowing your net worth, that’s when people get into trouble.
Nothing that we’ve ever done in our financial life has, I think, given us more happiness than paying that mortgage off.
Once you stop viewing money as just trying to make the spreadsheet happy and you view it as a tool to live a better life, a lot of things change.
Timestamps:
00:00 – Intro
01:20 – Risk and income
04:14 – On luck and skill
06:44 – Buffett’s secret strategy
09:02 – The one trait you need to build wealth
12:54 – Housel’s capital allocation strategy
13:22 – Index funds, explained
17:33 – Expectations and moving goalposts
18:51 – Your house: asset or liability?
24:13 – Money lies we believe
28:46 – How to avoid status games
31:38 – Money rules from parents
36:49 – Rich vs. wealthy
38:20 – Housel’s influential role models
39:22 – Why are rich people miserable?
42:33 – How success sows the seeds of average performance
46:24 – On risk
47:33 – Making money, spending money, saving money
49:24 – How the Vanderbilt’s squandered their wealth
1:00:45 – How to manage your expectations
01:03:00 – How to talk to kids about money
01:06:26 – The biggest risk to capitalism
01:10:30 – The magic of compounding
01:12:52 – How Morgan reads
01:19:16 – How to tell the best story
01:21:16 – How Morgan writes
01:32:16 – Parting wisdom and thoughts on success
