436. Same as Ever – A Guide to What Never Changes

Nikki Miller:

Jay Papasan:

I know. I mean, in this podcast, we get to interview some of the brightest minds in the world. And Morgan is clearly one of those people that he's looking at everything through the lens of finance first, because that's his industry. But what makes him so great and timeless is in both the Psychology of Money before the Same as Ever, it's actually life lessons about people, right? They're so broadly applicable, whether you care about finance or not, you can learn how to be a better human, be a happier human, be a better parent, all of those things when you actually dive into his books. And he makes it easy. Short chapters with great stories.

Nikki Miller:

You're exactly spot on. His writing style makes it so easy to digest and to apply it to your own life, that you get to learn based off history, based off things that have already happened. And we're talking about his new book, Same as Ever, which is this concept that most books or most of us are teaching or reading about, learning about things that change or how to predict the future or how to be different. And this book is all on a premise of what doesn't change. What if we actually predicted what was going to happen in business and life based off what absolutely we know will remain constant?

Jay Papasan:

And I'll say for our ONE Thing people, like, I was going this through line, I didn't want to totally hijack him talking about his book, but I want our ONE Thing fans to also hear everything that he preaches that I think is part of his innate beliefs is around the idea of playing a long game and trusting compounding to do the work. If you can show up and do what we would call your smallest domino, that thing that you can consistently do and survive all of the shocks, right, so it's a long game, you're going to absolutely to be the best version of yourself.

And I love that, right? Because like he even talked about it, relationships compound, we know that behavior habits compound, investments compound. And just instead of trying to get the shortcut, it's not about the shortcut. It's about doing the simple timeless things again and again, which is actually really doable. You don't have to get all out of whack. You can actually have extraordinary things for your life by just doing those things. And under all of his messages, I heard that truth.

Nikki Miller:

Absolutely. Especially when he talked about his sort of goal setting structure and how he conceptualizes systems versus goals. It's sort of the end of the conversation. And you're going to see the ONE Thing as a thread through all of this, but especially to your point, what's the one thing we could do such that by doing it brings us to that future that we're looking for. This was an incredible conversation, Jay. Let's go listen to Morgan.

Hello everyone. And welcome back to THE ONE Thing podcast. We are so excited to have Morgan Housel here. You know him already. He's the New York Times’ bestselling author of The Psychology of Money, a favorite of both mine and Jay's. And now the author of Same as Ever, which is what we're going to be talking about today. His books have sold over 4.5 million copies and been translated into 50 languages. Welcome, Morgan. We are so excited to have you.

Morgan Housel:

Nikki, Jay, good to be here. Good to see you.

Nikki Miller:

We're so excited to have you. So excited to get to, we're both big fans. So like I said, selfishly, we're so excited to have this conversation. And I loved the concept of this book. I want to talk about Same as Ever because the concept is so different from what we will more often than not see in books, which is I've read more than I can count on something that affects change or creates change or the step-by-step guide to, or how to mitigate risk or, or how to look to the future. And this book is almost the antithesis of that. This is don't look at that. Just ask yourself, the question is what never changes, what will always remain the same? What was your inspiration for writing this?

Morgan Housel:

So much of the inspiration was I've been a financial writer for my entire career. And one of the things that will stick out to anybody who spends five minutes studying that profession is how bad we are at forecasting the whole industry, the next recession, the next bear market, who's going to win the next election. All of these things collectively, we're not any good at, whatsoever.

And I think there's two things you can do with that observation. One is you can just become more of a cynic and say nobody knows anything, don't even try. And there are a lot of people like that. They just fall into pessimism. But the other thing you can do is realize that over time, there are things that never change, and we should put all of our weight into that. And then there's also lots of things that we cannot predict, that we cannot see coming. And like knowing which is which is really important.

For me, I've always been a student of history. That's what I spent a lot of time reading. Just an amateur student of history. And to me, what's always so fascinating about history, no matter what you're studying is A, the things that have changed over time, what was different about America a hundred years ago, so to speak. But also if you, no matter what kind of history you are reading, you will find all these things where you read about something that happened 50 years ago, a hundred years ago, 500 years ago, and you realize that's exactly the same thing that it is today. Nothing has changed.

So those facets of human behavior, which I can put under the umbrella of how people think about greed, risk, fear, uncertainty, opportunity. Those things are the same today that they were 500 years ago. And because of that, you can have confidence in knowing that no matter what is in our future, what surprises are going to come, you know that those things are going to be a part of them. So let's put all of our weight into that when we are trying to make sense of the future.

Nikki Miller:

Do you think, Morgan, that this -- I could see someone and you already called it out. I could see someone hearing this concept and saying, well, then I'm just going to be cynical, and no one knows anything about the future, so we might as well not forecast at all. Let's not try at all. But could you see someone potentially tampering their ability to innovate by staying in this place? I'd be curious if you've looked at the other side of it, saying what remains the same, so what keeps us from innovating?

Morgan Housel:

Here's what's interesting. One of the inspirations I got from this book is this now famous quote from Jeff Bezos, where he says, people always ask me what's going to change about the future. And he said, I submit that what is not going to change is even more important. And he says, he rarely gets that question. And he put it in terms of Amazon, where he said, it's impossible to think of a world where in 10 years, Amazon customers don't want low prices, big selection, fast shipping. He said, you're never going to wake up in a world where customers say, Jeff, I love Amazon. I just wish the prices were higher. That will never ever happen.

And so he said, because of that, you can put all of your emphasis and investment into those things, knowing that they will be just as relevant 10 years from now, as they are today. You can't say that about most technology. Most technology, even if you hit it out of the park, and get it right, it might be irrelevant 12 months from now or six months from now. And so there are a lot of things, I think, no matter what the technology is, there's usually a component that is changing that you are innovating, but there's also all these other components that are timeless. And I think in most successful businesses, those timeless components are just as important, if not more important than the new thing that you are changing and innovating in.

Jay Papasan:

I agree. Gary and I, every year, we go through the forecast for our industry. At one point, we did like a 10-year retrospective. And I think more than half the time, they got the direction of change wrong, not just the amount of change. Like, they couldn't predict it. And you write a lot of this, like there are things that are unforecastable, like this once a decade just surprise, and it might be a combination of lots of little things that are easy to ignore that culminate in something big or just something like a 9/11 event that just comes from nowhere at all.

So if we're looking to the past, I just want to make sure I'm hearing the message of the book, which I loved. Like, we really should be focused on the enduring human lessons. People don't change that much over time. What we like and what we choose and maybe how we do it might, but the fundamentals of our behavior tend to be very consistent. And those are the primary lessons that we should be focused on going forward.

Morgan Housel:

Yeah, there's this great quote from Voltaire that I love where he says history never repeats itself, but man always does. I think that's really -- yeah, like the details of history over what companies are going to dominate, who's going to win the election, what are the new technologies? Those things never repeat themselves, but the behaviors of how people respond to it are always the same. So you have no idea, nobody has any idea what is going to be the next driver of the next stock boom, let's just say that. But you know, whatever is the driver, you know how people are going to respond to it and their sense of greed and fear and overoptimism and panic and pessimism has always been the same.

So I think when you're talking about the big events that make all the difference in the world, it's usually historically that roughly on average, once a decade, the world kind of breaks. There's one big out of the blue event that is in order of magnitude more important than all the little events that you spent your time reading about every day for the previous 10 years before that. So 9/11 was definitely one of them. Lehman Brothers going bankrupt was one of them. COVID was obviously one of them. And the common denominator of these things is that basically nobody can see them coming until the moment that they happened.

Even something like Lehman Brothers where people saw the cracks in the financial system. Well, just before Lehman Brothers went bankrupt, Barclays was all set up to buy them and they had to pull out at the very last second. Like there's all these alternative histories where it's like no one could have actually seen what actually happened and that event changed everything. And it will be like that going forward.

Like you can state so confidently that the biggest news story of the next 12 months and definitely the next 5 or 10 years is something that nobody is talking about today. And you can say that because it's always been like that. There's never been a time when it's not like that. You can say, what was the biggest global news story of the last 12 months? I think most people would say Israel and Hamas. And that was something where even the day before it happened, even if you were a geopolitical expert studying the Middle East, you did not see that coming.

And so I think it's like that every single year and it just should add a level of humility about what we can control and predict in the future. That's a very uncomfortable thing to come to terms with, to say that the biggest news event I don't see coming. It's just particularly if you are a business leader, a manager, a portfolio manager coming to terms with that is very uncomfortable. But I think when you put it in the context of, well, wait, it's not that we don't know anything. There's a lot that we know about the future. Just don't kid yourself into fooling yourself to believe that you can predict these changes.

Jay Papasan:

I think it's ironic that every single time we go through one of these cycles, like the cycles themselves play out in kind of familiar patterns. Like all the recessions share a lot in common except for the cause, right? That's the thing, like the trigger, the genesis of it starts differently, but they do kind of play out, and the same thing for Bull Runs. But like, I'm already thinking about, we've already gone back and celebrated the people who predicted the one in a million that predicted the last recession. And we tend to tee them up. And they're going to be able to see the next one, when it might have just been blind luck, you know?

Morgan Housel:

And it almost certainly was. So many of those people who picked the last recession, without naming names, they've been predicting recessions since the 70s non-stop. They never stop.

Nikki Miller:

I was just about to say, they've predicting recessions every year.

Morgan Housel:

And so even when they get the direction, right, the reason that it happened is usually wrong. And therefore, like giving them credit for getting it right is much more difficult.

Nikki Miller:

Well, I think one of the most compelling parts about both of your books, this one is no different, is the human behavior piece of it, Morgan, that we've come to realize we cannot predict the future, there's a whole element of things that we can never plan for. And yet we can look backwards, and we will convince ourselves that we, in hindsight, we would have seen that coming, we would have known, we could have caught that had we been in that same scenario. And we'll keep telling ourselves this story for eons, I'm sure.

Morgan Housel:

Yeah. And so many of those problems, like we might even be like accentuated today because we have problems of like social comparison has been around forever where you're measuring your wealth and wellbeing relative to other people around you. Well, what has happened in the last just 10 years is social media, just like –

Nikki miller:

Magnified it, yeah.

Morgan Housel:

Dumped gasoline in that fire and made it so much greater. And so even these things that have existed forever, the speed in which they're occurring can change over time, even though if it's the same thing. There are definitely things, whether it's social comparison or diet and exercise or like news information, like our access to information has changed so much just in our lifetimes that even if these are timeless issues, it's accentuated today relative to what it's always been.

Jay Papasan:

I love that chapter. I was actually chatting with my wife, Wendy, this morning about like what’s the, because we both read it at the same time on our Kindles while we were traveling, and we would chitchat over our Kindles. And there was -- I found it optimistic. Like nobody would want to go back in time, it would be J P. Morgan, and I can't remember exactly where it is, but so much about our world has gotten better, but this is, I'm keying off of the news and comparison.

But our ability to see every single thing that happens, and we know if it bleeds, it leads, right? So every one in a million catastrophe that happens, we're aware of. So our perception is that the world is going to hell in a ham basket. But every long-term trend you could show is we're living longer. I mean, like everything is so much better on a day-to-day basis. How do we combat that? And I know like we can go on a news diet and all of those things, but how do we combat that perception, because it is a beautiful thing to be able to see so much so quickly, but we're not adapted to that yet.

Morgan Housel:

I think that the realistic answer is at the broad macro society level, we will never become accustomed to that. You can so imagine a world in which our grandkids are living twice as well as we are. They're earning twice as much money adjusted for inflation, their life expectancy is longer, their access to medical technology is so much greater, and they're no happier for it. Not only are they no happier for it, but they don't even appreciate it. They just become so accustomed to it in the same way that you and I have become completely accustomed to penicillin and Advil and vaccines, which would have been indistinguishable from magic to someone a hundred years ago.

And so that's like the long run of history. And I think there is a thing of like, how do you combat that? I don't think you can. I think it's always been like that. And then I think there is something that's maybe not pessimistic or sad about it, but just realistic in terms of if society gets better, but nobody appreciates any of it because everybody expected all of it, is it actually a net gain? That's a question for a philosopher way above --

Jay Papasan:

Oh gosh, back in the tree falling in the forest.

Morgan Housel:

I think the one thing that is obviously just like a pure net gain or like increases in medical technology and life expectancy, but what we're doing is not necessarily increasing happiness. We're removing a lot of the suffering that was just been such a normal part of society forever, where it wasn't not that long ago that it would be common for somebody to have eight kids, six of whom died before their 5th birthday. And then, so it's not that we're happier today, but we've just removed so much suffering that used to be a normal part of people’s lives.

Jay Papasan:

I'm going to attack you again on this because I'm the author and I'm interviewing a little bit here now, but like one of my number one takeaway, like the thing I wanted to implement after reading the Psychology of the Money is I don't want to move the goalpost on myself. And I went down this long thing, the hedonic treadmill and how like in six months, whatever happens, we win the lottery, or we lose all feeling in our extremities and limbs, that will be normal to us, right? And we just reset and that's now the new normal and everything has to change from there.

And how do you, like, stop moving the goalposts? And I don't mean on a societal level, because I'm like you. I think that is one of the things that never changes, which is why you write about it. Like if I'm coaching my children, that's where I was going to go. Like, I know you've got kids, how do you coach the individual to not move the goalposts on themselves to have a little bit better perspective or can you, or is that also funeral?

Morgan Housel:

I think that last question is most important. I do think there is a nature nurture component to this where some people are much more capable than others. There's also a lot of people who don't ever want to stop the goalposts from moving. They are so addicted in a good way to the progress. And I am thrilled that those people exist. Whether it's Thomas Edison or Elon Musk, the people whose goalposts is moving at the speed of light, I'm so grateful that those people exist. And they are driven every morning by waking up with more audacious goals than they had the day before. And that's great. Like all of us benefit from that.

I do think -- so some people can do it better than others. There's also plenty of people whose goalposts has never moved once in their entire life. They just wake up smiling ear to ear. So at both ends of the spectrum, those exist. For myself and my wife, we talk about this a lot. Like our life is changed in the last five years. And then we always ask, have we moved the goalposts? Do we have different expectations? And I think the answer is yes. Maybe they've moved slower than they otherwise could have. So we have like accrued some net gain from it by keeping, like slowing down the goalposts, but yes, of course it's moved.

And one thing that helped me personally, I wrote about this in the Psychology of Money, is just recognizing the game that people are playing, that most of the time with your financial goals and particularly your material goals, you are trying to show other people that you have money, people who are not even paying attention to you. Like most people, nobody is thinking about you as much as you are. And nobody's paying attention to your stuff as much as you are. Nobody cares about your house or your car or your clothes or your jewelry as much as you do.

So it's not that they don't matter, but they matter more to you than they do to anybody else. And because of that, I think we overestimate the social benefit that we get from showing people how successful that we've been. And once you recognize that game, then I think your aspirations to play it, your desire to play it falls dramatically. So I like nice stuff as much as anyone else, but I always like remind myself, am I buying this because it's actually going to make my life better or because I'm trying to send a signal to strangers who are not even paying attention to me to begin with.

And when you identify that game, it's like, well, this is a stupid game to begin with. Someone sum this up in a way that I thought was so beautiful. They said a high-end Toyota is a nicer car than an entry level BMW because the high-end Toyota is filled with things that make driving more pleasant for you, big cushy seats and a nice sound system, whatever it is. The entry level BMW is just bragging rights and nothing else. And I think that's a good way to think about a lot of things in life. Like, does this actually make you happy or are you trying to signal your social status to other people? Framing it like that, I think is a big part of getting the goalposts to stop moving.

Jay Papasan:

Great.

Nikki Miller:

I think this question, especially the way that Jay asked this question is so important because everybody on this podcast right now has kids. I don't know how old your kids are, Morgan, but I have a young daughter. She's three. and I know Jay’s are about to go to college. I imagine yours are probably somewhere in between.

And so when I look up, I say she's going to grow up in such a different world because we all grew up in an era either just before or just at the beginning of social media. And I think social media has changed the game around the conversation that you're talking about right now. The access to how other people are living is more expansive than ever. And you said something in the book that I loved and wrote down. It said people don't communicate on social media. They perform for one another.

And we are all watching people's highlight reel of how they would like us to believe that they are living. So I love your perspective on what's same as ever, what will always remain consistent in the way that we are interacting now with social media.

Morgan Housel:

Well, I think we've always performed for each other, so to speak, because even before social media, if you went out to lunch with even your best friend and they said, how's it going? You probably just instinctively said, good. Like we've always been wanting to show that we're doing good. And it's pretty rare outside of your very close friends and family that you would actually just let loose and talk about all the demons that every single one of us has and carry around all day long. And so even though I write that about people perform on social media, what is my Instagram? It's cute pictures of my kids. It's not my kids having tantrums, which of course they'd have. And so everybody, I think it's instinctual to want to put your best foot forward.

One thing that someone told me years ago that I thought that was really brilliant was everything in life is sales. And they meant this in the sense of like what companies do, everything is sales. No matter what your job is, everything is sales. But I think it's true for people's individual lives too, that everyone, whether they know it or not, and to varying degrees is trying to sell themselves as I'm a good person, I'm smart, I'm funny, I'm productive. I'm a worthwhile mate, spouse. Like everyone is trying to put on that face. And because of that, there is so much performance that takes place. I do this, you do it, everybody does it. So I think that it's always been like that. It's just so much more potent today because of social media in a way that it's never been before.

And what's so bad about social media is that we are taking that information and giving that information to complete and utter strangers. So it was one thing when you were performing to your best friends or your coworkers, but now when you're performing for who knows who is going to see you in the algorithm, anybody, and the people who you are looking at on Instagram are complete strangers to you too. So even if they look great and they look happy and they look wealthy and they look beautiful, of course, everybody is struggling in their own little sense right now, but we're always completely blind to it.

Jay Papasan:

Well, if I have hope for our kids to bring it back to the parenting, neither of mine could care less about Instagram, Facebook, or any of those. If they are doing their peacock displays, it is maybe on, not even Slack, 'm trying to think of theirs. They have one of those, like they read Reddit, and they do one other thing that's very nerdy. The one that you have your own server for. And I was like, okay, you're not sharing pictures and I'm not seeing any selfies. I'm like, good. I can live with that.

Morgan Housel:

Here's what's really hard because I agree with that, Jay. And Nikki, you would ask, my kids are four and eight. So they’re still pre-social media. What's hard about this is that if you, as a parent say, I'm going to ban you from social media and I'm doing it to protect you, to protect your mental well –

Nikki Miller:

Well, then it's even more sexy.

Morgan Housel:

But not only that but is that child now a social outcast because their friends are like, hey, come chat with me on Snap, on TikTok, and Instagram, and they're not there. Are they kind of just outcasts from that social group? And in order to fit in, you have to have a phone at age 13. You have to be on Facebook by whatever age. And I think there is a truth to that. And it's like when everyone in society is using the same drug, if you're the only one who's not, then you become the outcast. That's what's so hard about this problem.

Nikki Miller:

And I think what's interesting is that what I just took from what you said, and when I was thinking about it, the Same as Ever is you're right, I didn't conceptualize that we had been performing for each other for centuries. What I did conceptualize is that for centuries, we have probably created stories about the people on the other side of that conversation. When I'm having lunch with my friend who says I'm good, even though I'm not good, they won't share that they're not good. So neither of us are sharing and I'm creating a story that they are actually as good as they say they are. Even though I know they're not, if I know human behavior at all.

Morgan Housel:

Yeah. I mean, yeah, I mean I do this all the time. If I'm having a terrible day and someone asks -- if my kids ask me, if my wife asks, I'm very likely to just say I'm doing fine. I think people have this very healthy and normal desire to not be a burden on other people. And if you're just constantly dumping your demons on other people, you're becoming a burden. And so like it's always a balance and that balance is performative.

Jay Papasan:

Can I jump to another topic, even though like we have our parenting genes activated here? There was a chapter called When the Magic Happens and how innovations kind of follow bad times. Can you just kind of tap into that? There's no way I could describe the thesis of that chapter better than you, but I had a question around it.

Morgan Housel:

Yeah. I mean, I started thinking about this when I'm like a lot of people kind of became really interested in World War II history for many reasons. But one of the things that always struck me about World War II, were the technologies that you and I are benefiting from today, right now, that would not have happened if it were not for World War II. And you can go on down the list, whether it's nuclear energy, rockets, penicillin was one of them, like all the microwaves, there's all these technologies that are wonderful life enhancing technologies that happened, not in spite of, but specifically because of World War II.

One of the leaders of technology during World War II was a guy named Vannevar Bush. And he writes, and he couches it very specifically that penicillin very likely saved more lives than World War II took. And then you have this alternative history of like, what if there was no war and you saved all that suffering, but also, we didn't get penicillin. We've had all this suffering because of it.

But so anyways, that's how I got interested in this topic. But the more you look across these big traumatic events, the more you realize that there were amazing technologies and innovations and discoveries that happened because of them that went on to benefit everyone. And the big takeaway is all of society is driven by their incentives. And when everything is good, when the economy is booming and everyone has a full belly and everybody's happy, the incentive is, hey, if I create a new technology, I might get rich. And that's a good incentive. But then you have these new technologies during World War II, where it's like if we don't create this new technology, Adolf Hitler is going to control the entire planet. And that incentive will get everybody off their butt innovating as much as quickly as they possibly can.

I think you can see it already with COVID where that probably sped up scientific discovery and research around MRNA technology by 20 or 30 years. It was just sought two weeks ago. This happened two weeks ago. There was a new MRNA cancer vaccine for a certain kind of skin cancer about the reoccurrence of people who've had melanoma, what are the odds that they are going to get it again and have it reoccurred? The people who had this MRNA vaccine, it declined by 50 percent. The rate of reoccurrence. And this is something where we've been messing around with it for 24 months. Like we have not even scratched the surface.

So you can so imagine a world 20 years from now, where we look back and say, look, as deadly and traumatic as COVID was, it sped up medical research by 20 or 30 years. And because of that, we're in this like incredible position that we never would have been if it weren't for that. So the chapter is called When the Magic Happens, because when the magic happens is when the world is on fire. For all the suffering and tragedies, there's always this speed up of innovation. That after the fact, it's too much to even call it a silver lining because you can't say a silver lining of World War II, a silver lining of COVID, it's not that, but it's just about incentives, what gets people moving.

Jay Papasan:

I love that. And thank you for going and telling stories, which are -- I actually put you right up there with maybe Ryan Holiday as in some of my favorite nonfiction storytellers. You're able to tell them quickly to the point entertainingly and like the to the points, really. Like I know a lot of people who will tell a great story and struggle to connect it to the thesis. So, like, you do a great job. So thank you for that.

I look up as a businessperson, so many of the people who listen to this podcast are running businesses, they're self-employed, they're running a company, they're leaders in their company. And we know, like, the economy as a whole has been very resilient, but there are pockets of it that are in the dumps. Like, I happen to inhabit one in real estate, right? Interest rates pretty much torpedoed the entire market for the last 12 months.

So, like, I'm just thinking, these things are going to happen, these unexpected meteorite strikes. It's like, in my mind, like, is that random of a thing? And then we can also count on a certain amount of innovation in their wake. But I think there's the incentives of an Adolf Hitler are different than I might lose my company. So, like, as a businessperson, I have to think, we have to ask, like, how do we avoid this in the future? How do we shorten the pain? I think as the leaders, we have to ask certain questions so that we make that innovation possible in our little crisis. Like, how would you add to that? Or am I even going in the right direction?

Morgan Housel:

No, I think that's great. To me, I would tie this back to investing where your long-term success as an investor has less to do with the returns that you earn and more to do with how long you've been investing for. So if you can earn average returns for an above average period of time, you win, you're a champion. You're going to end up in the top one percent. If you can be average for 50 years, you end up in the top one percent. It's all about the endurance.

So I think that's the biggest point about like benefiting from these technologies. It's the obvious of like to win, you first have to survive and endure it. So to me, it's like so much of it is about room for error, which when things are going well, seems like an anchor if you have a ton of cash and no debt and whatnot. And then once a decade, when things hit the fan and you have this world breaking event, you're going to realize that it's the most important, most beneficial and highest ROI asset that you possibly have to stick around to benefit from all the changes going to come.

Jay Papasan:

Well, the other practical takeaway, misquote you here, like you talked about it from a personal finance, and I immediately translate it to business reserves, right? I think in the last book, it was like what allows you to go to sleep at night, right? But it's just enough to kind of make you wince when you think about that much dead money. Like one of the number one ways we can survive to learn from and innovate and benefit from the other side is actually to be looking at the future with like reserves or a personal savings that will allow us time to actually figure out what to do, right? And those people who don't, and they're like, oh, that's dead money. And I'm like, no, that's money that keeps me alive.

Morgan Housel:

Yes. I mean my favorite example of this is Microsoft, which is Microsoft is an astounding company because the company is about 50 years old. This is not a young startup. This company is half a century old. And I actually just saw a headline this morning, yesterday, it very briefly surpassed Apple as the most valuable company in America. A 50-year-old company to be this successful as Microsoft is extremely rare. And one of the reasons it's done that is because it has been one of the most conservatively run balance sheets of any corporate company in history. The amount of cash that it holds, its avoidance of debt, historically for the last 50 years is almost unprecedented, very conservatively run. Now the technology risks that they're taking with new products, they're swinging for the fences, the balance sheet, they're making sure that they never, ever, ever, ever go out of business and that's what's kept them around.

Jay Papasan:

Didn't you share that Bill Gates, like I want one year's expenses in the bank account. Like not the three months or the six months. Like I want a year, a single year.

Nikki Miller:

Where for most businesses in that space, especially is unheard of.

Morgan Housel:

Would be crazy. Nobody would ever do that. And I'm sure that many people along the way, particularly like private equity guys and Wall Street analysts were like you're too conservative. You should use more leverage. You can get higher ROI on that. And they're right. They may have gotten a higher ROI for a while until they went out of business. And so I think that exists at the personal level. It happens at the company level.

I heard this great interview with Jensen Wong of NVIDIA recently. And he said, NVIDIA’s unofficial corporate motto, unofficial one, is we are always 30 days from going out of business. It's like this never complacent, always assume that terrible times are ahead always. And that's what's made them thrive for 25 years now.

Nikki Miller:

Oh, that's Jeff Bezos’ day one model, right?

Morgan Housel:

Exactly.

Nikki Miller:

Same, same. I'd be curious from, oh, go ahead.

Morgan Housel:

No, it's always being terrified. And so many companies or people, individuals, once they become successful, they feel like they can justifiably take a sigh of relief and stop worrying so much. And it feels justified. But then what made you successful, the fear and paranoia that made you successful is gone. And that's the day, like the seeds of your demise are planted.

Nikki Miller:

Yeah. My favorite letter Jeff Bezos has ever written was when someone asks what happens on day two and he goes, day two is stasis followed by death. I'm shortening it, but that's what happens on day two. I'd be curious from your perspective, because other than being an incredible author, you're a financial analyst at your core and you’re a partner at the collaborative fund, and you are analyzing numbers all day, every day. And in effect, trying to predict what's going to happen in the future.

And I'd be curious how this shows up for you in the sense that what one of the things that stood out to me in the book is not only how incredibly you tell stories, but how many of the stories had to do with timing and felt for all intents and purposes, a bit random.

One of the stories that you talked about the ship, I'm forgetting the name, and you'll remember it that gets hit by the torpedo simply because the captain wanted to save money. So they were only running three instead of four. Right? So I look up and say, well, we can plan, but can we plan? And as someone who is a financial analyst, how does this show up for you because your job is predicated on being able to, to an extent, predict the future.

Morgan Housel:

I think it's all -- and so there's a quote that I love from Nassim Taleb, where he says, invest in preparedness, not in prediction. And I think that's it. So if you admit that you can't predict what's going to change next, again like we talked about earlier, you can become a cynic and throw up your hands, or you can say, look, I have no idea what's going to cause the next recession. And I have no idea when it's going to come. It might be tomorrow. It might be five years from now. But my asset allocation is preparing for any of that. I'm not going to try to fool myself into thinking that it's going to happen on this date because of this reason. But whenever it comes and by and large, however deep it comes, that it becomes, I'm going to be ready for it.

I think it's thinking about expectations instead of forecasts. A forecast, I think by and large in finance, at least, is fooling yourself into thinking that, you know, what's going to happen next. And expectation is look, I'm an amateur student of history. And I know that at least once a decade, there's going to be a very traumatic event that's going to throw everything for a loop. The stock market is going to fall 30 for 50 percent. Unemployment, it's going to go to 10 percent. At least that's like in a normal decade. And so of course I'm prepared for that at any given time.

Now, it's always going to be the case that you can never prepare for the worst-case scenario. There's like, no matter how prepared you are, if there's a nuclear war or whatever it is, all bets are off. So you can't prepare for anything. But I think most people make the mistake of only planning for the risks that they can envision, the risks that they can think about.

And if you're doing that, then 10 times out of 10, you are going to miss the surprise, be taken aback by the surprise and not prepared for it. And you see this every single economic cycle where people had the best risk analysts who are looking at all the data, the smartest people crunching the numbers, and they were prepared for every risk that they could envision, and not the one surprise that actually made all the difference in the world.

Jay Papasan:

Love that. That leads me, like, one of the questions I wrote down, if we can only take certain lessons from the past because of the surprises that are destined into the future, and we can't truly forecast, but we can have expectations about what could not change and the patterns of things after the surprise happens. And if this is too personal, you don't have to answer, but like, what's your goal setting process? Do you just set annual goals? Do you forecast? Do you look at a lot farther? Because goals, right, are expectations you're planning for yourself, your family, your finances, little different than forecasting. High level, what's your goal setting process?

Morgan Housel:

Yeah. I didn't come up with this. I forget who did, but the idea of systems versus goals, I think is really important. And a goal is I want to lose 10 pounds. A system is I want to exercise every day. Very, very different thing. A lot of it is because once you hit a goal, you say, what do I do now? So once you lose 10 pounds, what do I do? Can I go eat cake again? It's like, but that happens with a lot of financial goals.

So I really don't have any goals at the individual level, but I think I have systems of how I like to read, how I like to learn, and of course, I mean maybe there are goals of like what I want to write. I have a book to finish by this date. There are those kinds of goals, but by and large, I think I'm much more attuned to just like, what system can I implement to keep it going? I'm not interested in anything that's not sustainable.

And a lot of goals are like, I'm going to grind at 120 percent to meet this goal. I'm usually not interested in that. It's like, what can I keep going for 50 years? Whether it's like a friendship or a relationship or a career or an investing strategy, it's just like, what is the most sustainable? I want to do that. By and large, the reason is because that's how compounding works. It's not what can you do this year? It's what can you maintain for the next 30 years?

And again, I think that's true for relationships. It's true for investments. It's true for businesses. It's just like, how long can you keep it going? So I think that that's really where once you understand the math behind compounding, it's much more about systems than short term goals.

Jay Papasan:

Yep. I love that. I think, I mean, James Clear is definitely with his bajillion copies of books, popularized Identity-Based Habits. He sourced from a lot of the best people out there too. So I don't know if that's his original or not. That's my first association.

Morgan Housel:

Yeah. Just to correct you, too. He sold five bajillion is what he said.

Jay Papasan:

There we go. Yeah, yeah, yeah.

Nikki Miller:

It's in a category all his own.

Jay Papasan:

Oh yeah, yeah, yeah. He definitely won the bookseller contest for the last few years for sure.

Morgan Housel:

Yes. He's in a league of his own.

Jay Papasan:

And that's also an example of, I believe timing finding you, right? This idea of, you play a really long game and he's a perfect example. He was blogging for 8, 12 years.

Morgan Housel:

Yes.

Jay Papasan:

So like the things that showed up and people said, oh my gosh, he's an overnight success. It's like, no man, that guy's been grinding for a decade. Forever.

Morgan Housel:

Yes.

Jay Papasan:

And then he wrote an amazing accessible book that happened to show up right before the world went into COVID, had an extra two hours a day without their commute to kind of focus on building themselves. So, like, kind of timing found him. I remember watching his numbers before and after. And it wouldn't happen and keep going if it wasn't tremendous work, and it was. But, like if there hadn't been a COVID, like how many bajillion, would it just be one bajillion copies, right, instead of the five?

Morgan Housel:

But I think when I think about something like Atomic Habits, not to get too specific on this point, it, it did well because it's a great book and it's timeless. Like if he wrote Atomic Habits 20 years ago or 20 years from now, I think it would have done just as well. Maybe COVID gave it a boost. But most books that have that kind of runway and sell to that level are because they are timeless. I can't think of, I'm sure there are a couple examples, but it's hard to think of a time sensitive book that was a blockbuster success. And everyone that is a blockbuster success could have been written in any decade and would have done just as well. I think that's by and large true. Anything that --

Jay Papasan:

Anything that’s a long running success, for sure. Anything that's a long running success, it has to have a timeless element to it. It's just got to. It's got to be a little Same as Ever.

Morgan Housel:

There's this quote that I love from Talib again, where he says, if you want to be read 20 years in the future, make sure you would have been read 20 years ago. So I always -- and for a while in my career, I was a columnist for the Wall Street Journal, and it always bothered me that the strategy that they, and all news organizations have is everything you write has to be tied to news that occurred in the last 48 hours.

And so I would write a column that I thought was about timeless investing principles. And sometimes the editors would say, hey, nice column, what does this have to do with the news of today? And I would always be like, it doesn't and that's why it's important. Like if it's only relevant for 24 hours, in my mind it's not relevant at all.

And so I think a really good filter when you're reading is to ask yourself, will I still care about this topic a year from now, 5 years from now, 10 years from now? And a lot of times, particularly with news, the answer is no. It's not that the story is not important. It's just that you're not going to care about it a year from now. So that's like, it's just shifting your mindset to what is actually going to matter over the course of your life.

Nikki Miller:

Well, it helps us to cut out a lot of the things that we think matter in this moment and don't actually, if we put them in that type of timeframe. And to what Jay was just mentioning, I think that your systems versus goals comes back to the same principle of Same as Ever, what can I do such that by doing it, I will remain consistent over long enough that it will reproduce the results I'm looking for, because I'm sure we all see this in what we do. People set these enormous goals and then get disappointed or frustrated or it feels too far away. So they stop whatever the habit would have been had they stuck with it for long enough and they just didn't give it enough time.

So it's what can I do on a day to day basis that will remain the same? Because I don't think you're going to look up 10 years from now and say, I wish I hadn't worked out every day, or I wish I hadn't written every day, which I imagine is a big one for you, or I wish I hadn't done whatever it is every day that would bring me closer to the future that I envisioned for myself.

Morgan Housel:

And a lot of these at the corporate level, but I think this is true for individuals as well is the more audacious and short term your goal is, the more that you are likely to cut corners or do something just to meet that goal, even if it's going to come at your long-term detriment. So the best example of this is General Electric, which under Jack Welch, back in the ‘90s was a lot of like, okay, our goal is -- our earnings per share are going to be 72.1 cents per share this quarter. And they did everything known to man to hit that number, even if it came at their long-term detriment.

And so rather than having that short term goal, if a company's or a person's goal or system was, I'm going to do the best I can all the time. Like if that was Jack Welch's goal, GE would be in a better position today than it is. So I think that's where a lot of this comes down to too. It's like the crazier your goal is, the more you're going to cut corners to get it, to reach it.

Jay Papasan:

I'd contrast that to Patagonia's leadership. I can't say the guy's name, but like, after making some of those decisions, trying to expand too quickly, he's like, we're not going to make any decisions except on a hundred-year time frame or something crazy.

Morgan Housel:

Yeah. And there's probably some reasonable balance in between Jack Welch and Patagonia. There's some balance in between there. But I think it's, yeah, it's just so much more sustainable over time. And to take a company as powerful and big and profitable as General Electric and look at it where it is today, I think not all of it, but at least a big part of that was because they were so relentlessly goal oriented when in -- I'm saying this with hindsight, with hindsight, but like their goals should have just been we're always going to do the best that we can in every situation.

Nikki Miller:

Morgan, I know Jay and I would keep you here for a 10-hour podcast if we could, because this has been incredible, and we want to make sure we honor your time. And before we leave off, we always like to know what's the one thing, if our listeners take just one thing out of this podcast, what would you want that one thing to be?

Morgan Housel:

I think if there's a common denominator with both my books, it's that you could summarize it as to each their own. And I think for a lot of things in finance and business, people are looking for the right answer. What is the right answer to this problem? How much money should I save? How should I invest? And the truth is that there's no right answer for any one person. Everybody is different. I have a different risk tolerance than you do. I have different social aspirations than you do. Everybody is different.

So rather than trying to find the right answer, you have to be a little introspective and just figure out who you are. And like, what do you want? Even if it's the wrong answer for somebody else, it might be right for you. And a lot of people go astray in finance when they take their cues and get their information from people who have very different goals and aspirations than you do.

And so a lot of it is a plea for humility that we don't know exactly what's going to happen next. But then the other part is like, you really have to figure out what works for you and find that path. And there are so many things that I do with my money that would not be right for you and vice versa. And I can say that without even knowing you that well, because it's true for everybody. So it's just that plea for looking in the mirror a little bit, trying to figure out what you specifically want out of life.

Jay Papasan:

I love that answer. I love that. Thank you for sharing it. If people would spend as much energy as they do, searching for the right answer as they, you know, making the answer that's right for them right, it would just be a different kind of existence.

Morgan Housel:

Totally. I also think there's a thing to say with like modern financial commentary that I think a sign of immaturity is thinking that because you don't like something or don't want something that nobody else should like it or want it as well. Like not realizing the differences between people, but there's so much of that, especially in finance. There's some fields where we understand it. If I say, I like Italian food and you say, no, I think Mexican food is the best. We're not arguing with each other. We're just like, yeah, okay, that's what you like. This is what I like. But in finance, people tend to not understand that, and it tends to be, like it's going to turn into a vicious debate over on what is the right answer.

Nikki Miller:

I also think Morgan is why your books resonate so well, because I think the majority of authors are putting out a concept or a book that says, follow this model. This is the way. This is the only way. And they believe that. And by the way, they have to wholeheartedly believe that in order to sell it. And yet yours is here's a lot of stories that you can interpret based off what would work best for you, which is my favorite part about reading your book.

So thank you. Thank you for another incredible book. And thank you for being here today. If people were -- we're going to drop the book in the show notes. I'm so excited for our listeners to get to read it if they haven't already, but where can they find you if they want to connect?

Morgan Housel:

I spend a lot of my time on Twitter. That's where everything that's going through my mind kind of ends up for better or worse. So on Twitter, my handle is my first and last name, @MorganHousel.

Jay Papasan:

Okay.

Nikki Miller:

Awesome. Thank you so much for being here today. And we'll see everybody next time.

Outro:

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