The Art of Money: Morgan Housel on Wealth, Risk, and Resilience

Foreign.

To the Man Talk show. How you doing today?

Thanks so much for having me.

Doing well. Yeah, man, I've been looking forward to this conversation. Listen to your book, heard you on a couple shows. Really love your work and the way that you frame things. I think we were, my wife and I were driving back from New Jersey at one point, which is where her family lives, and listening to a conversation with you and she's like, I really like this guy. He's got like good, he's got good insight on money. I like the way he positions things. And I was like, yeah, me too. So it feels fortunate, I feel fortunate to be speaking with you right now. I'm going to start with the question just because we're in what we're in. I wanted to start with what the hell is happening in the economy right now and what do people need to know?

Yeah, My first thought about it is it's changing so fast that whenever people listen to this, the world and the situation with tariffs and the economy will 100% be different than it is today when you and I are recording this. But that out of the way. What's so interesting about the terrorists? There's a couple of things. One, to, to preface what I'm about to say, it is completely understandable that there is a chunk, even a large chunk of the US economy that feels like the last 40 years have had, have not worked for them, at least up to their expectations. Completely understandable. And it is naive for, let's call it the other side to ignore or, or belittle that. But that is a preface to what how I really feel about this is that there is, I think, no precedent in, in any economic history potentially around the world, but definitely in the United States to where a democratically elected government and leader is virtually intentionally trying to sabotage the economy. Even if it is stated as short term pain for long term gain. It is very difficult to think of analogies of when we've had that. And I'll frame it like this. In past crises, whether it was the Great Depression or Pearl harbor or 911 or Covid or Lehman Brothers, in all of those past crises, the situation was, look, we just got hit by a giant risk that's going to do a lot of damage. But now the government is going to come galloping in and mount a giant response to fix it and counter it. This is very different because now the call is coming from inside the house, so to speak. It's a very different situation where the risk that is causing the trauma and the pain that we're dealing with right now is from the government. And so I think.

Whenever you mix economics and politics, it causes a lot of, of just kind of brain rot thinking because people get into the tribal mode of their political thought. So I, I've, I've challenged myself over the last week to try to balance it out as much as I can. You can tell that my overall thoughts is this is completely self destructive and unnecessary and is going to cause immense harm. I have to try to balance it out with yes, but there's a very large part of the country that does not see the world through the same lens that I do and wants something different. And I think there is actually a lot of political history and economic history that shows that when people feel like they are in a bad spot for a long period of time, they're willing to try anything. Even if that new thing is probably self destructive and it's probably going to do damage to not only the rest of the economy but their own life. And so the idea that these people are in a bad situation, they want something new. The idea that the solution to that should be spark a massive trade, trade war that's almost certainly going to lead to a massive global recession. The idea that that is the solution to making those people better off I think is completely and utterly shortsighted and wrong headed. But.

If there is one thing that's very interesting about it all too is that it's very rare in economics that you get just a very clear test of a hypothesis. And we're seeing that right now. We are seeing in very real time and we'll see going forward regardless of what happens, what the consequences are of sparking a massive global trade war. And I think a lot of people's ideology one way or another is going to be tested very cleanly in a way that's rare in economic history.

There's two things I wanted to just sort of pull out there. One is you're talking about a group of people that have been struggling for the last 40 years. Can you just clarify who you're referring to? And then two, intentionally crashing the economy. Why? I know that there's some speculation around why that is, but what, what would you say that is? Because I've heard rumors of like they're trying to tank the economy to a certain degree so that they can restructure some of the debt, restructure some of the financing on like 7 to 10 trillion dollars worth of the US debt. Can you just give a little bit of insight onto that as well?

Yeah, so the first part of your question, like who has struggled over the last 40 years? Well, to go back to the end of World War II, 1945. It was a very unique period in American history because at the end of the war, Europe and Japan were literally in rubble. They were bombed into oblivion during the war and they spent a good 15 or 20 years rebuilding their basic infrastructure and just like literally struggling to feed their people in the early years after the war that created this very unique period for the United States where we had virtually no competition for global manufacturing. China was still like a very poor kind of backwater and it itself was recovering from World War II. Japan and all of Europe were in their own little malaise after the war. So the US had two things going for it. One, one, no competition for global manufacturing, and two, tons and tons of GIs coming home from the war who needed to work and had all this pent up demand to buy a car, buy a house, buy a washing machine. And so that sparked this probably 20 year period from 1945 to probably the late 1960s or so of just incredible manufacturing prosperity. And because back then we didn't have the automation in manufacturing that we do today. So the factories were not run by robots, they were run by muscle, they were run by backs and biceps. And because of that, like you put all that together, you had this 20 year period where you had a lot of people, tens of millions of people in the United States making good incomes from manufacturing. And that all started to kind of unwind in the 1970s and really went into overdrive in the 1980s when two things happened. One was the beginning of automation. Made it so that we could manufacture cars and steel and whatever it was, we could manufacture the same amount with fewer people. And Europe, Japan and China starting in the 1990s really started to get their act together and became manufacturing powerhouses of their own. And then so those forces together have really kind of hollowed out US Manufacturing. Not necessarily hollowed out manufacturing, hollowed out manufacturing employment. We still manufacture a ton of stuff in the United States. We make lots and lots of, lots of stuff. It just doesn't require as many workers as it used to. So manufacturing employment has plunged since then. I think it peaked in 1979 or thereabouts and it's plunged. And so then you have a group of people that had an expectation, either of their own or from their parents, that hey, you don't need to go to college, you can go get a job at GM and earn a good living and work there for 40 years and retire with the pension. Whether that was true or not, it created a narrative that it was true. And when you take that away from people and then they realize that that opportunity was maybe not what they once thought, it leads to a very understandable, I would be in this situation too if that were me, of just a feeling of, hey, this is not working, this is not working for me and we need to do something different. You also combine that with a period where over the last 30 years, knowledge workers, college educated white collar workers have made an absolute fortune. They have made so much money. I mean, there are project managers at Facebook who with due respect, are like talented but not that talented, who are making $600,000 a year. And so you mix that world against the blue collar world of like, it just ain't what it used to be. And of course there is, it becomes a tribal war of my team versus yours. And I think that's what we're dealing with right now. Now, the second part of your question is much more difficult to answer because I don't think anybody knows the answer to it, which is, are they actually trying to intentionally crash the economy? I mean, Trump last week retweeted or whatever it's called on True Social, a video. He didn't make the video, but he promoted it, which the video said, Trump is intentionally trying to crash the stock market. I think it was in an attempt to drive down interest rates and then we can refinance the debt. And he promoted this video, which is kind of like a quasi endorsement, I guess you could say. As of this morning, who knows what it's going to be when people listening to this. But as of this morning, interest rates are actually rising right now. So if that was the intention, it's definitely not, not working. Whether, like who, who, who actually knows what that's, what that's going to cause. But the idea that slowing the economy to lower interest rates to refinance the debt, I think that is completely backwards thinking because what happens when you slow the economy is people get laid off. Those people need and are entitled to unemployment benefits. So it's always the case that when the economy slows the government, the budget deficit goes up, government spending goes up, what are called natural stabilizers when, when, when growth slows, people go on food stamps and eat unemployment benefits. So, you know, I've been following the economy, writing about investing for 20 years.

And I've been a student of economic history, mainly going back for the last hundred years. It's hard to think of any precedents over the last hundred years of what we're dealing with right now during the Great Depression, there was a very intentional trade war that began. It was called Smoot Hawley. Those were the two senators, I think, or two congressmen who started that bill. But they were very intentionally trying to do it to stabilize the economy. And they didn't have a lot of information, a lot of historical precedent for what that would do as we do today. And so other than that, there's not a lot of precedent over the last hundred years for what we're dealing with right now.

So the, the point of the tariffs, just so I'm gauging this correctly, the point of the tariffs is to try and bring back manufacturing onto American soil so that you then create a boon of jobs and then support the economy. Which immediately brings up the point for me, which is like, well, if you bring back manufacturing into the United States, that's great, but how many of those jobs are just going to be automated? Like, so much of that has to be with robotics on the verge of just exploding and the AI revolution and like all of these things, I'm like, how many of those jobs are actually going to go to the workers that, that need them? And I'm curious about your thoughts on that.

It's, it's, it is not only a good point. I think it's the most important point during this debate. I would encourage people to go search. I'm sure you can find a video on YouTube of a Tesla manufacturing plant. It is, it is so staggering to look at, is such a modern marvel of innovation because Tesla are, you know, very widely known, made in the United States. And look at their plants. It is robots galore and very few humans. And then contrast that with like the classic Ford, like Henry Ford manufacturing plant from 1940 or whatever, where it's just hundreds of, literally hundreds of thousands of humans lifting parts with their arms. And like, you could not get any more different than what it is. And look, I actually do think there is a lot of logic to the idea that we need tariffs on some very choice goods. So, for example, during COVID during the early days of COVID when we were all trying to get masks, we obviously do not manufacture medical masks in the United States. We needed all of them from China and Korea where they're all made, it makes perfect sense to say, hey, during the next pandemic, we can't rely on China to make all of our ppe, so we need to tariff those so that we can make them the United States. Perfect sense. It Makes perfect sense that in the defense, for in the military, that goes without saying. If we get into a war with another country, we cannot rely on that country making bullets for us or whatever it might be. And so for certain things in defense manufacturing, we need to put very high tariffs on those to make sure they are made in the United States. All of that is perfectly logical. Makes economic sense, makes national security sense. The idea of blanket tariffs, that we now have tariffs on T shirts and sneakers and underwear and going down the list and everything that is, I think, virtually impossible to make economic sense of.

Yeah, what I wanted to cover some of, like this sort of global economic setting right now before we kind of dive into personal. And we'll definitely get to personal. Like how do you approach some of these things? But I'm kind of curious about this from my own sake because I, you know, I've been learning a lot about economy, finance, money, global economics in the last sort of three or four years as all this stuff has sort of been thrust into our face. And for me it's kind of like adapt or die. And so I've tried to learn quite a bit about it. I don't have a background in finance at all, but one of the things I'm curious about because I've heard a number of people talk about this, is that as China becomes a sort of global superpower and is a force in their, in their economy and manufacturing and exporting and, you know, etc. That the US has to try and do something in order to, quote, unquote, stop that. And I wonder if, like it for me, as a layman, it seems though, that the tariffing China into oblivion and then being tariffed back by them is just a zero sum game. Like, can you maybe dive into some of the nuance around a strategy there and, and how that's going to filter down to the average person? Because it seems like the brunt of this is really between the US and China. And it's almost not really so much being used as a bargaining tool, but.

Almost just like. I don't even know how to phrase it, but just almost. Almost as though they're trying to win an arm wrestling match just through like brute force and no technique.

Yeah, I think that's a bad analogy. And look, I would say to Donald Trump's credit, he has been very consistent on this for literally 45 years. I mean, he was writing op eds in the New York Times or Wall Street Journal. Maybe it was in the 1980s talking about our trade deficit back then. It was mainly with Japan and how it was robbing America. He's been extremely consistent for four decades about this. Now, I'd contrast that with other people who just became, you know, tariff, you know, pro tariff, like last week and, but, but Trump has, he's always stated this and his belief is that trade deficits are, you know, I think in his view it is a zero sum mindset where if, if one person is winning, it means the other person must be losing. And I think, I think there's actually lots of parts of Trump's personality that, that lead to that conclusion that it's always, if, if you are doing well, it means that I must be being ripped off. And I think like the, the premise of global trade that has been the backbone of the world economy for the last 80 years or more is the opposite of that. It is that, hey, you in China are really good at manufacturing plastic baubles. We in the United States, we're really good at tech entrepreneurship. What if we just like, join forces? We will come up with Google and Facebook and Apple and Tesla and Nvidia and you guys can make the cheap stuff and we'll buy your cheap stuff. You can buy our technology and like, we're both better off for it. Now, of course, as I said at the beginning of this, there are people who disagree with that and I have to respect their disagreements. But that has been the basis of the global economy for the last 80 years. Years. It's about specialization. You know, I think it is undeniable that there are a lot of countries that are much better than America at certain things. And America is much better than every other country at certain things. Just as you are much better at some things that I am, and I might be better at some things than you are, it doesn't mean that you're better than me or vice versa. It's just everyone has their own little unique skills and you gain a lot of value by just exploiting those special skills. And so the idea that we need to be as good at China, as making plastic baubles as they are, I think, I think that's wrong. Like, they're, they're better at it than we are. They can do it cheaper than we can. They have more expertise doing it than we do. We are. Like, what America's strong suit has been and still is is tech entrepreneurship. That's been true for 150 years. We're better at entrepreneurship than any other country, but other countries are better at particularly simple, low cost manufacturing than we are. Now, United States we're actually very good at high tech, high value manufacturing, airplanes kind of thing like Boeing, even though Boeing's going through a pretty tough time, you cannot pull that off in Cambodia. But Cambodia can make textiles, socks, underwear, T shirts, cheaper and more efficient than we can. And so I think if you zoom out of the zero sum mindset where if you're winning, it must be because you're screwing me, if you take that away and say, look, just, let's just accept that some people are better than we are at certain things or more able to do things that we can, that mindset will lead you to the conclusion that global trade has been good. And I'll state for the umpteenth time that a lot of people disagree with that, but that's, that's certainly been the core of the global economy for 80 years.

Yeah, it's, it's interesting because it seems as though the US has sort of helped to create this quote, unquote adversary that they're now having to contend with. And it's interesting for me, as a Canadian right now, living in the United States, being immersed in American politics, watching some of the commentary about what's happening. I'm curious just on the last piece around, what's happening right now. Are there any misconceptions or things that you think the average person should know about tariffs? Or is this just something that, like, they shouldn't have to know about or deal with?

I think they're, they're definitely going to learn about it one way or another. And, you know, look, as, as you and I sit here and record right now, most of what is taken place in terms of the response has been in the stock market. You know, if you go to the grocery store or whatnot, it's the same as it was last week, even though stock market is now 20% lower than it was five days ago. As, as you and I sit here, maybe it's going to be different by the time people listen to it. But two or three months from now, if these tariffs hold, is when the average person is going to starkly notice what's going on, when you'll realize how much we import. I mean, if you go to Target or Walmart and walk up and down the aisles and just ask yourself how much of this was imported? The answer is virtually all of it. Like, virtually all of it was imported, particularly at something like Target or Walmart, where it's like physical goods and the cost of all that stuff is going to go up. That's, that's unavoidable Just before you and I started recording, I saw a headline that the EU is now putting retaliatory tariffs on China. Just did a couple days ago. That is going to dampen demand for the stuff that the US does make. So it's true that if you go back to like zero sum thinking, nobody wins in a trade war. Like, it's, it's going to be bad for America, it'll be bad for Europe, it'll be bad for China, it'll be bad for South America. That's, that's pretty clear. I, I tweeted this a couple days ago that I think a good analogy right now is that in, in nutrition science, there are, there are very smart, educated people who fiercely disagree on what is the best diet. Should you be vegan, should you be keto, should you be like, going down? Like, there's so much disagreement on what kind of diet you should eat. But all of them, every single one of them agrees that processed sugar is bad. Like, there's, there's no debate about that. And I think that is virtually true for tariffs as well. That there are economists who fiercely disagree on what the best route for economic growth should be. Higher taxes, lower taxes, subsidies. There's so much disagreement on how to run the economy. But virtually every single one of them agrees that a trade war is bad. And I think that's the best way. And so then you can ask, well, why are we doing this? Well, there is actually a lot of evidence that trade wars are not about economic policy, they're political policy. And I think this makes much more sense through that lens, that this is not about how you should grow the economy, it's about how to maintain economic power. I mean, there's, there's a lot of examples of this throughout history where whenever you put massive tariffs on industries, the first thing that that industry is going to do is come groveling to you to strike a deal. Which if you're looking for political power and political capital, that's exactly what you want. You want people to have to come on their knees begging to make a deal. That's exactly what you want. If you're looking through a political lens, even if economically it doesn't necessarily make that much sense.

Well, what about the debt? Because I think one of the things that I've, you know, when I learned how much debt the US Is carrying, that was always shocking to me because I, I can't imagine running a business the way that the US Government runs their balance sheet, you know, or like having your personal finances be in a position where you're carrying that much debt. And so I'm, I'm curious about your thoughts on how do you do debt reduction? Like does it, does it work the same way in a governmental government standpoint as it would for an individual or a corporate standp? Or is that like a completely different.

Ballgame that the last point you bring up about? Is this the same as like, as a household? Because you hear a lot of people talk like that. Like imagine you run a household and you run a deficit every year and you have $36 trillion in debt. And that analogy is very appealing to people because they can immediately contextualize how absurd it would be. But no, governments are not households. Here's the very simple difference. There will come a time in my life and your life when all of our debts must be repaid in full. Whether it's when we retire or when we die, the debts we take out have to be repaid. Governments, and by the way, corporations do not have that. They are perpetual lifespans. They never have to pay off their debts to zero. There will never be a time in our lives or our ancestors lives, our descendants lives, when the US has no debt, when it's paid off all of its debt to zero. That will never happen. And it doesn't need to happen because it's a perpetual thing. What matters is that the carrying cost of that debt is within your means. And so look at like very old companies, Ford Motor, General Motors, companies that have been around for more than 100 years. You know, Ford and GM have been in debt for more than 100 years and if they survive, they'll be in debt for another hundred years. They never have to pay it all off. Of course the debt that you take out will eventually come due and you can repay that with new debt, new debt that you take off. So it's not to poo poo debt in the slightest. There's a lot of economic history of countries having debt crises. Of course you can't just say none of it matters, that's not the point. But it's a very different dynamic debt household. What you need to have in a country is that the carrying costs, the interest cost of that debt is within your means. Now because interest rates have gone up over the last couple years, we're getting to a point where interest payments on government debt as a share of GDP are higher than they've been since I think the early 1990s and, and scheduled to, to probably go much higher. No one really knows where interest rates are going to go, but scheduled to go much higher. So does the government need to do something about its annual deficit? Absolutely. I don't think anybody disagrees with that. The problem of why nothing's been done about it yet is because, look, it's always when you look at government spending, people look at waste, fraud and abuse and they come up with things, oh, did you know we spend, you know, $6 million a year studying frog mating habits? Whatever they, they come up with things that are like, very emotional, that are, are not even rounding errors. The only thing that matters in government spending is Social Security, Medicare, Defense, and interest payments. Which interest payments is this kind of like a, a function of everything else that you spend? So the only thing that matters is Medicare, Social Security, defense. Everything else is a routing error. And those three of entitlements and defense are the things that people have more or less said you cannot touch them. And so it's a nearly impossible solution to fix until there's a crisis. My best guess, and this is just kind of like gun to my head, like, how is it going to play out? We will never cut the deficit until we have to, and we'll have to when there is a financial crisis caused by it. But you're never going to preemptively do it because it's virtually impossible for any democratically elected leader in Congress or in the White House to come to people and say, hey, even though interest rates are low and there's no economic crises, we're going to cut Social Security by 30%. People will be like, no, you won't. Absolutely not, you won't. And so it's virtually impossible to do anything about that until there's a crisis. Now, if there was a crisis and it was like, hey, the global economy, like the US Economy is, is in collapse because interest rates surge because of the deficit. So we're going to cut Social Security then. Then, like, people can't really push back anymore. And so there are a lot of things in life that people will not make a tough decision until there's a fire underneath their ass. And that's my best guess for how this will play out. It hasn't played out like that yet.

The very optimistic scenario, and this actually happened after World War II, the end of World War II. We had more debt as a share of GDP than we do today. We were just completely buried. So was the UK and it was just a debt catastrophe. And a lot of people at the time very rationally said, the US Is never going to pay this off. This is never. And by the way they were, right. We did never pay off the debt from World War II. What we did is we grew the economy so that we could just kind of grow into that debt. And so there's never been a time after World War II where in any given year the US actually paid down debt. We have never paid down debt in any given year. Debt has gone up every single year, but the debt burden has shifted consistently. Because, look, if the budget deficit as a share of GDP is, let's say it's 3%, but the economy is growing by 5%, then your relative debt burden is shrinking. So the government can spend more than it takes in every single year and decrease the burden of that debt as long as the economy is growing faster. Now, that's a big if. It did occur during the 1950s, the 1960s, where the debt burden fell even though we never paid off debt. But right now in 2024, I think the government, the budget deficit was 6 or 7% of GDP, and the economy is probably growing 4 or 5% of GDP in nominal terms. So that's a growing.

Burden. So it is absolutely possible to decrease the debt burden through growth. But that's, I think, the opposite of what's occurring right now, which is, let's start a trade war and see how quickly we can crash the economy.

What would you say? We'll just sort of close the loop on, on this component of what's happening in the market right now. And I know we're touching on some things in a very high level way and we could go way deeper in on a whole bunch of these areas. But for the average person that is out there watching the news, seeing the stock market struggle that has dealt with, you know, inflation over the last four or five years, that has just, you know, taken the cost of eggs to $5 from $5 to like 10. How do they weather the storm? Like, what are some of the pieces that the average person can do that's listening to this to.

Shield, I mean, I guess we could say shield themselves from some of the volatility that we're seeing and experiencing right now between interest rates, inflation, the tariff wars, et cetera.

It's, this is a, an unfortunate answer that a lot of people will not like. But the time to insulate yourself and to foster financial independence is when things are going very well. And so if you find yourself in the grip of an economic fall, whether that's personally or throughout the nation, and you say, what can I do to withstand this? There's a hard lesson of like, well, the answer is not, not that much. At that point, I'm trying to think of some of a health analogy of like if you smoke your entire life and then you get lung cancer and then you say, what can I do to prevent this? It's like, well, that's kind of already baked in now, you know, And I think there is a lot of that, which maybe the takeaway from that is. And this gets to it, to a much broader, like long term philosophy.

It's a really important skill in life to understand when things in your personal life are going very well and to make sure that you are like capturing that surplus and saving it for the future. Very, very simple. Just like, hey, when things are going well, save some money because they're not going to go as well in the future. That's as simple advice as you can get. But it's astounding to see how few people actually take it to heart and actually do something about it. And so this is the time when your past financial prudence really comes into play. And one way to think about this is when you save cash, like not invest in the stock market. You just save cash and put it in your checking account. It's very easy for people to look at that and say, oh, that cash is only earning maybe 0% interest rate. It's not earning any. That's just wasted. That's just idle money. And then when the economy falls or you get laid off or there's fear of a recession, you realize that actually the return on that asset was off the charts. It wasn't the interest rate that you were earning, it was the flexibility that you got when things got tough for you. And like, cash is the oxygen of independence. And independence is what you need during these financial upheaval times. So that's, that's, that's not the answer a lot of people want to hear. There are a lot of people who want to hear like, hey, I, I don't have any savings and I might be about to be laid off. What should I do? And there's, there's, there's no good answer to that question. There's absolutely no good answer to that question.

Yeah, I appreciate that. I appreciate the honesty.

One of the things that I found interesting was last year watching somebody like Warren Buffett just cash out in stocks and sort of a mass. I think it was like $320 billion in cash in holdings, which was absolutely nuts. And for me that was, you know, alarm bells going off. I own a lot of Apple because I used to work for them. And so I was fortunate enough to be a part of their stock buy program. So I kind of got to get in at grand level back in like 2011 or something like that. And watching him just sort of sell off Apple shares and, you know, sell off some of the big companies that he's held for a very long time and amass all this capital, I was like, well, that's kind of a bit of a red flag. Like, what's going on? What is? You know, he knows something that I don't know. I remember talking to my wife about that and I was like, maybe we should move more into cash. Because obviously it seems like there's some storm coming. But it is funny because I hear a lot of people talk about if you don't have your cash invested, you're an idiot and you're losing money because of inflation and blah, blah, blah. But then I think, to your point, it's like we come into moments like this where all of a sudden if you do get laid off and your capital is locked in a mortgage or it's locked in an asset that you can't take out of whatever it Is, life insurance, etc. Then that makes it very, very challenging and you put yourself in a rich in assets, poor in capital situation. So let's talk about the individual and talk about building wealth. So you had this great quote from your book that said doing well with money has little to do with how smart you are and a lot to do with how you behave. I would love for you to just unpack that a little bit when it comes to the psychology of money for the individual.

Yeah, let me unpack it. Relative to what you just said, which I totally agree with, in terms of like, having cash sitting on the sideline and the value of that. When things, when things hit the fan, what are the odds that you and I and everybody listen to this will face at least one of the following. Job loss, divorce, cancer, wayward children, like, like, going down the list of like, bad, bad things. What are the odds that at least one of those will happen to you and I and everybody over the next 30 years? 100%. And for some people, they will experience every one of those. But the odds that at least one of them will happen are virtually 100%. Everyone is going to be, is going to deal with something in their adult life that they did not see coming. That is a major upheaval. And so, but most people don't, don't want to admit that. They don't want to say it's it's too scary to admit that that could, that could happen to you. Like nobody at the altar thinks that they are going to be one of the 50% of people who get DIV first.

It's too hard to admit the actual odds of how fragile life can be because you need to get out of bed every morning and say things are working and things are going to work out and I'm going to keep going. So because of that, I think people systematically underestimate how much cushion.

Room for error in their finances they're going to need in their life. And that's not a financial skill. That's not something you learn at Harvard and Goldman Sachs. That's just a very behavioral thing. So I, in my personal finances for a long time have had way more cash as a percentage of my net worth than most financial advisors would ever recommend. And I wrote this in my book. We paid off our mortgage in 2017 when we had a very low mortgage rate. Like, it's a very dumb thing to do financially because I could have invested that money and earned a higher return. But I think the key to doing well with money is not what you do on a spreadsheet. It's not like looking at those numbers and being like, oh, I can earn a marginally higher return if I put my money here and whatnot. That's not what makes any difference whatsoever. What makes a difference is that you understand your own relationship with risk and greed and fear and endurance and that you and your spouse or your family or whatnot have similar goals of what you want to do. Like, those are all behavioral things. The ability to take a long term mindset is not something that you could teach at Harvard Business School. It's a personality thing. And you can see this very clearly and starkly during these moments of market upheaval where people who went to Harvard and work at Goldman Sachs and some of our billionaire hedge fund managers are losing their minds right now. Because you can be extremely smart and educated, but not have the kind of mental disposition to deal with these kind of things, to deal with uncertainty and fear and greed. And so the person who is not educated, does not work at Goldman Sachs, doesn't really understand the capital asset pricing model or dividend discount ratios when I doesn't understand any of that. But they have a good head on their shoulders. They keep calm during market panics. They're not greedy, they're not trying to impress strangers. They just want to use money as a tool to give themselves a better life. That person can absolutely crush it financially and just do incredibly well financially. And the counter to that is the person who got 1600 on their SATs and went to the University of Chicago and interned at Goldman Sachs and became a hotshot hedge fund manager. That person can, and not too infrequently does blow themselves up financially because they, they don't have us. Like they have all the education in the world but they don't have the, the perception of greed and fear and risk that is so fundamental to doing well with money.

It's interesting because I think one of the things that I've seen on the rise in the last few years, I don't know how many years specifically, but in the last few years there's like this rise of, of hyper anti capitalists not in the sense of like capitalism, but more that there's this rise in the perception of like money is the root of all evil, money is bad if you want to make money, if you want to get like even stability. And I think that there's an even growing number of people who have a kind of like helplessness mindset where it's just like the economy is so that. But it's just impossible. Can you maybe speak to that mindset a little bit? Because I see that a lot, especially in the younger generation where you can look at the data like in Canada for example, you look at the data around the cost of a house and then the average income and the average income is doing this and the cost of a house is just skyrocketing up and it has become harder and harder. But there's just this kind of opt out mindset. And I wonder if you can just sort of talk to that for a minute.

I think it's always extremely complicated. It's never one cause that you can say oh, that's happening because of this. It's always. There's so many factors going into it, but I think a big cause of it is social media. And I'll unpack what I mean by that. Thirty years ago you compared your financial well being to your neighbors and your co workers and maybe your siblings and that was it. And so your sense of how well am I doing was relative to your neighbors. And so if you lived in a tiny little house, but so did your neighbors, you're like oh that's great, that's wonderful. And if you drove an old beater car, but so did all your friends, you didn't care. It's always relative to your comparison group what social media did. And it did it very quickly and very starkly. Was it increased your comparison group to a curated highlight reel of everybody's faux life, everybody's faux success, and it made it global. And so now you compare yourself to the guy on Instagram showing off his Lamborghini and his private jet and his private island and his supermodel girlfriend who has a Louis Vuitton bag and looks perfect and is all photoshopped and whatnot. That's who you're comparing yourself to. So I actually think it is easier than ever for the average median person to earn a very good income, the highest income they have ever earned in America. And at the same time, it is easier than ever to feel like that income is completely inadequate because they're comparing themselves to other people. One way to think about this, in the NFL, the minimum wage, the lowest you can earn as an NFL player, is, I think, 800,000 per year. Maybe it's 700,000. It's in that neighborhood. That's the minimum wage I guarantee, which by any account, of course, is a shitload of money. That's a ton of money. I guarantee you, though, Nobody in the NFL making 800 grand feels like they're crushing it because they're on a team with people who make 25 million, 37 million. So by comparison, they are absolutely broke. And on 800 grand, they're driving a Chevy Tahoe. Awesome. Nice car. But that guy's driving a Bentley. So by comparison, they all feel broke. And that's an extreme example of what I think has happened across the global economy, and particularly for younger people who are. Who are the most social media influenced, which is that maybe, like, actually, statistically, they're actually doing fine. Yes, you mentioned the price of housing is very different, but it's also that what counts as an adequate house is very different. So, yeah, like, look, for first, let me say, like, the inflation adjusted cost of a house absolutely has gone up very considerably. But it's also true that what people considered a great house in the 1950s was 750 square feet and your four kids shared a bedroom and you didn't have a garage. Like, that was considered a great house. Whereas today the average new house is, you know, I think it's 2,700 square feet and has three bathrooms for two people kind of thing. That's like a very different expectation of what counts as an acceptable house. Like, so there has been, of course, price inflation. In a very real and underappreciated sense, though there is expectations inflation that does so much damage. And I think expectations inflation has done more damage than price inflation in terms of how people feel today. And it's hard to see how that will ever change. Because what works on social media is, look how rich, successful, beautiful and happy I am. And until people push back against that, it's always going to be the case that even if you are doing well, you don't feel like you are. And you can easily imagine a world in which my grandkids. Your grandkids, are richer than us and healthier than us and by any objection, like by any metric, are doing better than you and I are, but they feel worse off because they're going to be comparing themselves to people who are doing, doing even better. So I think that's, that's one component. Again, it's not black and white. It's not to say that that's the only reason this is happening, but I think that's, that's probably the, the, the biggest factor among many of what leads to. That sense of this just isn't working for me anymore.

Where would you recommend the average person start? Like, I can imagine I put myself back like 12 years ago with zero financial understanding and very little money. Some student loans, some credit card debt, and no freaking clue of, like, where to even start. And I think the big question for a lot of people is, do I just start saving? Do I try and make more money? Do I just try and pay off my debt? Is there a path that is the best, best path to take when you're sort of beginning in this area or restarting? You know, if you've sort of gone under and had a bad run? Like, what do you say to the average person if they're really struggling to get their finances under control?

The reason it's so hard to give blanket one size fits all advice is because, Connor, what, what you want out of money might be very different from what I want out of money. And not because you are that. Not because I'm right or you're right. Just because we're probably different people. Even if we're like roughly the same age and whatnot, we're different people. And so you can't say that you should go save this amount and pay off this debt because, like, everyone's different. There are a lot of people whose views that I respect who look at how I manage my household finances, what my wife and I do, and say, you're doing X, Y and Z wrong. And my response is actually like, yeah, but actually that works for me. I understand it might not work for you, but it works for me. And so How I spend my money might be different. So I have a new book coming out this mall called this this year called the Art of Spending Money. And one of the points I make is that.

Is that if I could tell you how to spend your money, I would have called the book the Science of Spending Money. But it's not a science, it's an art. And so I think the first step that people need to do for managing their finances is really take a long look in the mirror and try to figure out what you want at it. And based off of the idea that the purpose of money is to, is to use it as a tool to live a better life. Not as a tool to make the spreadsheets happy and hopefully not as a tool just to gain social status and to compare yourself against others by, but as a tool to live a better life. What I've always wanted out of money more than anything, more than I want a big house or a fast car, more than anything is I want independence. I want to use money as a tool for independence so that I can live life on my own terms rather than dictated by a boss or dictated by the stock market. I just want to wake up every morning and say I can do whatever the hell I want today. And so that's always been my goal. Other people do not have that goal. Other people say my what I want out of money is a Ferrari, is a, is a, is a, is a BMW, is a 5,000 square foot house in this neighborhood. And I have to respect that. Even if that's not what I necessarily want, I have to respect what it is for them. So at the highest level, the first step you need to do is ask yourself what you want. Now, I think it is usually the case that people don't know what they want. It took me a long time to figure out independence. And when I was 20, what I wanted was a yellow Ferrari and a Gucci jacket and going down the list, that's what I thought I wanted. It took me a long, like many years of introspection to figure it out that that's not what I want. What I want is independence for my family. So it's not something you can figure out today. It's a long journey of getting there. I would say if there is something, I would say though, that, that the idea of independence, it might not be universal, but it's pretty damn close that there's a lot in psychology that people like living life on their own terms and they don't necessarily like being told what to do. It's not quite universal, but it's close to it. And so if you can use money as a tool to gain independence rather than as something to increase your social status or to try to show off against strangers by that is I think probably the first step in using money as a tool to live a better life.

The Gucci jacket really threw me for a loop. The yellow Ferrari, I was on board with Morgan, but then the Gucci jacket, I was like, oh, I think I, I think I know who you were. At the club when I was like 19 years old, I was the guy with the. Really. I was the, I was like the. Do you remember Ed Hardy with like the shitty skulls and the. Oh, yeah, yeah, I was, I was definitely that guy.

I'll tell you something, I, I think I was probably 20 when this happened, but I, I went to the, to the mall. I lived in Orange County, California at, to the mall. So this is probably like 2004, 2005, and I think it was at Nordstrom's. I bought a pair of Dolce and Gabbana sunglasses and they were only a hundred dollars. They, they were real, they were legitimate, but they're only a hundred dollars. And I, I had never been happier. They said DNG on the side, like everyone knew that they were Dolce and Gabbana, but they're only 100 bucks. So like it didn't actually cost me that much. And I loved the fact that I, I was, I, I was a valet at the time. Had Dolce, had Dolce in up on sunglasses. And I love that people saw them and commented on it. I loved it. And it's so funny to talk about that now because I don't look down upon that guy who I was. But it's interesting that I was just like all I wanted out of, out of money was to gain strangers attention. I wanted people to look at my sunglasses and say, wow, look at Morgan, he's got cool sunglasses. And I actually view that as kind of sad that that's where I wanted to get my respect for my sunglasses. Because now I want to gain my respect from my wife loving me, from my kids admiring me. That's where I want to gain my respect from. That's where I want people to ooh and ah. Is like five people in my life who I want to love me. There's a Warren Buffett quote where he says, success in life is when the people who you want to love you do love you. And the first part is really important. Like, who do you want to love you? I want probably five people to love me. My wife, my kids, my parents, maybe one or two close friends, and that's about it. And everyone else, I honestly don't. Don't really care that much because everyone else is not really paying attention to you. They don't care about your car. They don't care about your house. They don't care about your Ed Hardy T shirt or your Dolce, Dolce and Gabbana sunglasses. They're not paying attention. They're worrying about themselves. And so I look back at that person, who I was at age 20, with a kind of sadness of, like, I didn't have a wife or kids to give me love. I had to seek attention and admiration and validation from strangers looking at my sunglasses. It's a. It's an interesting thing to contemplate.

Yeah, I mean, the Ed Hardy shirt was definitely an attention seeker. If, if nothing else, I'm curious to go back because it sounded like what you were saying was that an individual's success with money is really going to be dependent on their own personal relationship with the things surrounding money. Greed, fear, those types of things. So how can somebody start to discover those things? How do you start to come into awareness or contact with, oh, I have a certain level of greed that's probably going to bite me in the ass at some point. Or, you know, I have a good amount of fear around money, and that fear is what's preventing me from investing, you know, in a proper way. Like, I think about. I mean, I was going to tell a story, but I'll just pause there and hand that off to you.

1. One idea that this brings up is the idea that everyone, me, you, we are all not only products, but prisoners of our past. And that what we experience, particularly early on in our teenage and young adult years, really shapes, if not scars us into who we are today. And I came across this newspaper clip. It was from 1929, which was the peak of the Roaring Twenties, just before the Great Depression. And I thought it was such a brilliant headline. The headline was, the more you are snubbed when you are poor, the more you enjoy displaying being rich. It was basically like, hey, if you were poor when you were young and people made fun of you because you were poor, you know, made fun of your clothes, whatnot, when you were a kid, then when you gain money as an adult, you're like, oh, I am like, as a sense of, like, vindiction, you are going to come out and be like, oh, look at my Ed Hardy T shirt. Look at my Dolce and Gabba sunglasses. You're trying to make up for an emotional wound that was inflicted on you when you were young. And I think every one of us, me, you, everybody has some version of that. Something happened in our childhood, in our teenage, early adult years that was good or bad. Like we had some experience that controls how we think about money. Today. I've tried to become more introspective about myself. Why do I want independence so badly? Why is that my goal? I think if I'm honest with myself, it might come from a very low sense of self esteem that I had when I was a teenager and in my early 20s of thinking like, I am not smart. Everyone else is so much smarter than me. They're going to get ahead and I'm not. I'm going to be left behind. I'm not good enough. That's probably not an uncommon feeling that people have at that age, but I absolutely had it. And I think that has given me this sense of like, I want to become independent because I don't know if I'm confident enough in my skills to, like, add value in the world for a long period of time. So I need to make enough money as quickly as I can because this is all going to come crashing down. I bet if I was sitting on a therapist's couch, they could pull that out of me. And so I bring that up just to be like, we are all products of emotions and experiences that we've had in the past. And step one of trying to understand who you are is like, really unpacking that. I've not done that at a therapist, so to speak, but like, look, I've. I've written about money for 20 years, and as a part of that, I've tried to unpack my own experiences with money and my own goals and desires and try to figure out where the hell they came from. There's a financial educator, I guess you'd call her. Her name's. Her name is Tiffany Alishay and she's extremely successful now. She makes millions of dollars now. And she came from poverty. She grew up broke. And she has what she described as post traumatic broke syndrome, where she's like, look, even though she makes millions of dollars, now she can't spend it because she's so scared of going back. I don't want to put words in her mouth. That's what I remember her saying. If I got that slightly wrong, I apologize to her. But I think there's a lot of wisdom in that of the idea of post traumatic Broke syndrome and just the idea that we're all products of who we were. I also remember this interview with Michael Dell's son. I think his name is Zach Dell. Michael Dowell is, of course, worth $100 billion now, and his son. It was an interview many, many years ago. I think he was probably a teenager at the time. And the interviewer said something to the effect of, what is it like to grow up with private jets and mansions and butlers and whatnot? And I think his response was something to the effect of, it's all I've ever known. I've never known anything different, so it doesn't have any impact on me. And I was like, God, that is such an astute, wise response. Just be like, we're all products of our past. And even people who feel like they are completely broke in the United States are living a life that to somebody in Zimbabwe or Cambodia could not even fathom how rich and successful you are. And so I think that's a very long winded answer to your question of, like, what's the first step in this? It's probably either sitting on a therapist's couch or just doing it yourself. And thinking back to what emotional scars do you have, positive or negatively? And how are you trying to use money as a instrument, as a weapon to, like, manage those past scars that you have?

I think that's. That's so good. And I get that post traumatic broke syndrome thing. I mean, it's so fascinating. Like, so my mom worked at a bank, and we didn't really have a lot of money growing up. She was like a teller, and then she helped to oversee small business. And we grew up. I grew up in a very small town. There's like 25,000 people. And I think like, my. My mom and my stepdad, they did okay, but I didn't learn a lick about money. I didn't learn a single thing. And she got me a credit card when I was 16 years old, and I couldn't pay that damn thing off for the life of me. I had 500 limit, and I had it for the first year, and it was just maxed out constantly. And I remember going to her one day and saying, you know, I can't seem to pay off this credit card. It just is always maxed out. And her response was, that's okay. Debt's just a part of life. Like, kind of like, don't worry about it. Debt's just normal. And I walked away from that conversation being like, okay. Like, I guess that's just how I'm going to live. And then, you know, for the next 10 to 15 years, 10 to 12 years, I carried a lot of debt. And on my credit card, it was always maxed out. Student loan debts, you know, small loan. And it was just. I was just carrying around a lot of debt. And then. And at one point I started to do exactly what you were talking about and was like, holy shit. Like, that doesn't have to be that way. You know, I don't have to hold that belief anymore that debt is just like this normal function of my life, my financial life. And having earned money in the last however many years and starting to do well financially, I definitely have noticed this part of me that is exactly what you're talking about, where it's like, like, I think there's this part that starts to creep in of. Of like, gotta hold on to it, you know, don't want to lose everything, like doing well financially, but don't want to have some type of collapse. And that's something that I've had to pay, like, really close attention to because, you know, we didn't grow up. We didn't grow up in, like, a really tough position, but there was definitely, you know, there was definitely a lot of things that were just not.

We.

We just couldn't get them, you know, financially. We just couldn't do any of them. Like, there was no vacations. I had never left Canada. The vacations that we did was like camping and tenting and. And that kind of stuff growing up, because that was all that we could afford. And so I definitely have that part now. But I think that kind of brings me to this, this next question, which is how. How do we raise children to be financially literate? Like, how do we set them up for success? Because there's such a wide range, like, for the parents that are out there that maybe don't have a lot, how do they set them up for success? And then for the parents that do have a good amount of wealth and money.

What can they do to sort of set their kids up for success in a world where, you know, the comparison online is just. Is crazy.

It's such a good question. And what something you just said, I think is really interesting and telling is you said when you grew up, you did not learn a lick about money. Yeah, but then. But then I was going to counter and say, oh, you absolutely did. Whether you knew it or not, you did. You formed a mental model in your head of what money was. And your mom telling you, like, debt is just a Part of life like that is absolutely something that you learned or at least you took to heart at that moment. And so I always tell parents when they ask the question, how can I teach my kids about money? I always say, you don't need to teach them. They're paying attention whether you know it or not. And every time you say, we can't afford this, they're making a mental note of it. Every time you say, oh, we, we. We bought this, or the neighbors have a nice car, but we don't, they're making a mental note of all of that. Kids are so ridiculously good at learning. That's why they can learn a new language in, like, two weeks kind of thing. They're, they're. They're sponges. They're soaking all of it up, whether you know it or whether they know it or not. And so I think the best you can do as a parent is teach by example. And because everyone knows, particularly if you have teenagers, if you sit them down and say, I'm going to teach you how to balance a checkbook, they're. They're going to turn. They tune it out immediately. And they just want to rebel against. They're not going to pay any attention to that whatsoever. And so I think, leading by example, my. My parents were and are very good with money, but they never once, never did they sit us down and say, let me teach you about saving. Let me teach you about credit cards. Not a single time. But I think their skill did rub off on me and my siblings just naturally, just because. So you, you had mentioned that your mom said, oh, debt's just a part of life. I remember my parents ca. Casually saying it wasn't part of a lesson at the dinner table, but just casually being like, oh, we always pay our credit card off. Like, credit card interest is terrible. You'd never want to pay it. Always pay it off. And so When I was 17, when my brother and sister were 17 and were 18, we finally got a credit card. It was, it was obvious. I didn't have to question it for one second. Oh, you have to pay this off every month. If you don't, you're. You're going to burn in hell or something. I don't know. That kind of thing. People have talked about, like, the hotel minibars and like, everybody, including me, was, like, told as a kid, like, if you touch those potato chips, we're gonna go bankrupt. Like, like, everyone was kind of like, even, like. And I, I think that's like, it's, it's Obviously not true. Like maybe they're five bucks or something, but everyone was just had this idea that they hold into adulthood. So even now, like I, I can afford the mini bar now, but still whenever I see it, I'm like, don't touch it. Like don't you, like, it's, it costs too much, you can't touch it. So I think those ideas just rub off on you and stick with you. And you just have to lead by example as a parent. And, and one thing that's true for wealthy parents too is that.

If you're trying to teach your kid, if you're worried about spoiling your kids and you're like, oh, I really want to make sure that my kids don't grow up to be spoiled little brats. You have to make sure that you teach those lessons by example and not by humiliation. And so it's very common for rich parents to be like, oh, I don't want you to be spoiled. So you're going to have to work super hard. Let me tell you one story. I have a friend whose grandfather was a billionaire and the grandfather in a healthy sense said, I don't want my kids or grandkids to be spoiled little bitches growing up, so I'm going to teach them grit. And so when he took them skiing, he would say to his grandkids, if you want me to buy you a lift ticket today, you first have to hike up the hill one run by yourself. And if you do that, if you hike to the top and ski down, then I'll buy you a lift ticket. He just wanted to instill a sense of gratitude and grit in his grandkids. And what my friend said was, the lesson we learned as kids was not gratitude and grit. The lesson we learned is grandpa is an asshole. That was the lesson that they took from it. And I think that's an extreme example of what happens very innocently. The parents, the grandparents, they mean well, but you can't teach those lessons through humiliation, which is what happened in that situation. You have to teach them through example. So in that situation, if the grandpa said I will, I, I said I will walk up with you, that probably would have worked. But since the grand, but since the grandpa like essentially was like sat at the bottom of the hill like laughing at the kids as they're huffing and puffing it, it doesn't work. It doesn't work at all. And I, I think that's the biggest flaw that wealthy parents fall into with their kids. In a well meaning sense. They don't want them to be spoiled, but they do it through humiliation, which is always going to backfire.

Yeah, I think it's such a conundrum of if you have money that you know you're going to be passing on to your children, how do you properly prepare them? Because I think, think we've all heard of the stories of the people that are inheriting whatever, you know, tens of millions of dollars and they're a complete show and they're entitled and they're spoiled and they don't seem to have a sense of purpose in life. And I mean, you just go down the, the list and I think that a lot of, you know, that might also just be a perspective of a certain group of people. And I'm sure that there's many, many people out there that inherit money and they're great, you know, they're just great human beings. But I think that there's a massive concern that a lot of parents have around. Well, if I leave my kids money, is that going to screw them over in some capacity? And it's funny, like with my, with I have a 4 year old son and this is a very small minute example, but it came to mind as you were talking, like he's obsessed with Mac and cheese. Well, macaroni and cheese. And so whenever we're out, he's figured out that like, like dad buys things, you know, and because like he gets new pajamas just like, where'd these come from? And I'm like, oh, dad bought those for you. And he's like, oh, okay. And then, you know, whatever it is. And so he started saying, dad, you have to buy more Mac and cheese. You gotta buy more Mac and cheese.

I was like, this is so cool. Like you're getting a concept of what money is and, and like where things come from and commerce and like that's so rad. And he's, he's like tuned in already. But I started to think about, you know, five, 10 years down the road or like five years down the road. It's like, what does that look like? Are there certain conversations that I should be having with him about, you know, what we buy and what we don't buy and then are there certain things that I just should model? So that, that's very, very helpful.

Yeah.

Anything you want to add on that?

There's a great Charlie Munger quote that has always stuck with me and I think he's being extreme with this. I don't think it's this black and white, but he said when you're Teaching financial skills to young people. They either understand it instantly or never. And I think there is some truth to the idea that some people have the money mind and some people don't. And I think that's also true for math and science and a lot of things that people either understand it instantly or never. And I have another friend whose parents are extremely wealthy. And my friend is so down to earth, so normal, so grateful, like the opposite of spoiled. And he has a sister who he says is, is, is, is not that who, who is spoiled.

And so, and, and, and, and they grew up the same parents with the same values who taught them the same things. But it's, everyone's different, everyone's wired a little bit differently. And of course there, there's a quote from one of the Rock one, no, one of the Vanderbilt heirs who said inheritance is. Let me make sure I get this right, okay? There's a quote from one of the Vanderbilt errors who said inheritance is a death to ambition as cocaine, as cocaine is to morality. So he's like, he's like, look, of course those people don't have any ambition. Like they just got buckets of money when they're 18 years old. Of course they don't have any ambition. And so it's so individualistic. I would contrast that, by the way, as if Mark Zuckerberg or Elon Musk inherited a billion dollars on their 18th birthday. It would not have slowed them down at all. They, they, like there's some people who just don't care about money. It would not. Like Mark Zuckerberg if he inherited $18 billion, would not have said, great, I'm just going to go to the beach and relax now. He still would have become a very successful entrepreneur because that's who he is in his soul. And there's also a lot of like very spoiled little brat trust funders who probably would have been little shits even if they didn't inherit money. Like, it's just, it's just who they are. And so I think a lot of this is kind of pre wired at birth and as par to like sculpt and mold our kids. We can to some extent, but on the nature nurture spectrum, I think a lot of it leans towards nature.

Well, I think where I wanted to kind of close things off is this notion of finding enough. And I think that's like a good segue into it and being able to define. I think you said something along the lines of like being able to define enough might be one of the toughest assignments in Finance. And how do you go about doing this? Because I think for the average person, when they look at something like retirement, I can't remember what it is in the States, but it's like to have a healthy retirement now is you, you need something like $1.8 million or you know, to, to like really live your best life after 65. And I think about moving forward in the future. It can, you can get stuck in this loop of never feeling like it's enough. And it doesn't matter how much money you're making, how much money you're saving, how much money you're investing, how big the house is. Like, I hear this all the time from people of just like it never feels like it's enough no matter how much we have. How do we begin to find that place? And I'm assuming it's very individualistic for each person it's going to be different. But how do we start to find that place of enough for ourselves financially?

I remember when I was in college, I worked full time throughout college, all four years. I worked 40 hours a week. And I remember talking to a classmate who said, who didn't know that I worked that much. And the classmate said, it's impossible to go to college and work full time. And I said, no, it's absolutely possible. What you can't do is work full time, go to college and have the social life of a party animal. It's impossible to go to college, work full time and go to frat parties every night. That's impossible. But you can absolutely, if you choose to work full time and go to college, you just have to cut other things out. I think a lot of that comes down to that. It's just like, it's a shifting of expectations. I think a lot about my grandmother in law who passed away a couple years ago, but she lived for I think 30 or 40 years on nothing but $1700 a month in Social Security. No pension, no savings, $1700 a month. It's all she had. And she was happier than every billionaire who I've ever met because she didn't compare herself to anybody else. And in her own Little World, $1,700 a month was plenty to go to the grocery store, get some simple food so that she could come home and toil in her garden and go for a walk and watch the sunset and live a very nice life in her own mind. But if she started looking around at her neighbors, or heaven forbid, if she got on social media, she might realize that people at least appear to be living a better life than she did. But she did it. She was in her own little humble bubble of, oh, $1,700, of course that's enough. So when you hear people say, is 1.7 million enough to retire on? Of course it is. Absolutely. It is. By any metric. The only metric that it is not enough to retire on is if your expectations inflate above whatever you can pull out of that. And that's what most people do. So it's not enough to retire on. If you want to play golf seven days a week and drive a Mercedes S Class and fly first class to seven vacations per year, then it's not. But if you adjust your expectations to something less than it, absolutely, it's more than enough to be as happy as you are capable of being happy. And so, so the concept of enough is really about expectations, management and having, like, of course I want more money, but. And that's true for everybody, of course. Like, having enough does not mean that you have no aspiration for more. It means that you go out of your way to manage your expectations with as much emphasis as you do improving your circumstances. So for me, I think this is true for a lot of people. Maybe it's true for you too, that, like, I've learned over the last 10 years that the only thing that makes me happy in life is independence. My wife, my kids, my parents, one or two friends, and that's pretty much it. And so I want to use my money to foster those things. If I can use money to spend more time with my kids, amazing. That's going to make me happy. If I can use more money to help my kids, that's going to make me happy. And so my ability to say, oh, do I want an Ed Hardy shirt? Has fallen to zero, because I know it's not going to make me happy. The Ed Hardy shirt is not going to make my wife love me more. It's not going to make my kids admire me more. It's not going to make my parents prouder of me. And so my sense of enough, it's easier for me to feel like I have enough once you really hone in on the very few basic things that are going to make you happy. For a lot of people, it might be health, too. It's impossible to be happy if you're sick. And so if you can use your money to eat healthier food, work out more often, like, that's actually going to make you happy. And when you use it for that, then your aspiration for the proverbial Ed Hardy shirt declines. So it's, it's like what is enough is different for everybody. It's very hard to have a sense of it because we're so naturally wired to want more and to compare ourselves to each other. But it's a, it's a constant pursuit of reminding yourself of what actually makes you happy and using money for that versus the constant chase of having more than other people have.

So good. I feel like I might have to get a Ned Hardy shirt just to hearken back, just to do the good old days and, and show my wife what a 20 year old Alberton looks like when he goes clubbing. As you were talking, kind of reminded me if you've watched White Lotus at all.

I, I, it's on my list, but I, I have not because I'm watching other shows. But it's definitely so good. Good.

It's so good. In this season I'll just give like one context because as you were talking, there's this family in this most recent season, they're called the Ratcliffe's and it's husband and wife and then they have two sons and a daughter. And the father basically gets into this like I won't give hopefully too much away, but he gets into this like big financial trouble and he's like this super wealthy fun guy, you know, like finance guy. And he gets into some trouble where it basically looks like he's going to lose everything, you know, he's going to lose absolutely everything. And he starts to contemplate like taking his own life. And as he's doing this, he's asking inadvertently or it's not asking inadvertently. There's these interactions with his family where his wife basically says like I could never live with less than we have. And then one of his sons says like I could never live with less than we have. And, and this sort of unfolds where one of his sons finally says like, yeah, I could live without nothing. Like it wouldn't really be that big of a deal. And it's like this saving grace moment for him, which I found fascinating. One final question. Okay. Because I, I would be remiss if I didn't ask. And this legitimately could be its own whole conversation. I realize that. But I have to ask it, which is talk to me a little bit about the psychology of cryptocurrency. And there's this, I think that we could divide that into two things which is like the psychology around bitcoin and then the psychology around just like the rest of crypto coin cryptocurrencies in general, because meme coins seem to be this like, wild, wild, wild west form of the psychology in relating to money. I'm so curious to get your thoughts on that.

Well, it's always been the case that if you provide people with an opportunity to get rich quick, they're going to be attracted to it. Now it's an opportunity, it's not a guarantee in the slightest. It's a very, very small sliver. But maybe I would tie this back to what you and I talked about, about earlier in the podcast, which is that a lot of people feel like the system isn't working for them. And a lot of people just feel like this is like, look, the traditional idea of go to college and get a job didn't work or I didn't do it. And so I, I, I, I don't have any other options. There's a lot of evidence in psychology. This was a point from Daniel Kahneman where he said, if, if you feel like all of your options are bad, people become incredibly risk seeking. So if you feel like, if, if you feel like there's no good options for you, you're like, spin the wheel. Let's just see where it takes me. Let's just see what happens here. I think that's probably been a big rise in crypto, particularly the meme coin idea, where by, by design, there is no inherent value. It's not like it's different if you're talking about bitcoin. Like, it's not, it's not totally different, but there, there is some logic there about scarcity and value and whatnot. But for meme coins, it's purely just like, let's, let's, let's just dump our money into it and see what happens here kind of thing. And it's, it's a fascinating thing. I think the closest analogy to this, I wrote about this in psychology money is lottery tickets, where the, if you look at who buys lottery tickets, it's by far, it's overwhelmingly the poorest Americans, the people who can literally barely feed themselves, spend the most money on lottery tickets, and it's not even close. And so you ask, like, why the hell would you do that? Like, you can't feed your kids and you're buying scratcher tickets. Like, what in the world are you doing? And I had a friend who explained this to me one time. I thought it was so wise, his explanation, he was like, so he's a financial advisor, he's very successful now, but he grew up in abject poverty. He was homeless for a lot of his childhood. And he said he remembers being a kid where his refrigerator was empty and his mom had $3 in the bank. And he said, $3 is not going to fill the refrigerator, but it will buy three lottery tickets that have the possibility of filling the refrigerator. And in that mindset, even if you say it's still the wrong thing to do, you can understand why somebody would do it. If all of your options are bad, you become incredibly risk seeking. And I think that probably explains a lot of what's going on in meme coins of if particularly young people feel like there's no path to working hard and having a good, dignified paycheck, at least whether that's true or not, if they feel that way, they become much more likely to be like, let's just buy Fartcoin and see what happens. You know, even if it doesn't, like, it doesn't make any sense, but it's. It's an. It's a window into what people think about the world.

I mean, I kind of want to own Fartcoin now.

That's a real thing, by the way. That's a real thing. Yes. Yes.

Oh, my God, that's amazing. I'm going to go buy some barcoin.

But I think that gets to the point, the more ridiculous it is, the more attracted they are to it. You know, I don't know who the audience is of this podcast, but I remember, I think it was two years ago that one of the big coins was called Cum Rocket. People loved it. So it's like, it's like the more ridiculous you make it, the more popular it becomes.

I mean, this is kind of like I followed along with like the Gamestop, Sega, you know, and, and watched all that unfold. And that was. That was kind of in that same vein. And I'm assuming that part of what you're saying, and we can wrap up on this, but I'm assuming that part of what you're saying is like, in order. And just from reading your book, it seems like this is a big part of your philosophy is like in order to find wealth, you kind of have to attack or start to get around that lottery mindset that causes so many people to push all the chips in on something and hope to win big. And then, you know, more often than not, you're gonna lose the house. Is that part of what you're saying? Because I see that a lot, especially in the younger generation. It's like it just gamble everything on red, you know, and away we go or on Fartcoin.

I remember five years ago, so I read this heartbreaking story that was with a family in Yemen and I think they had a five year old boy who was dying of some illness. Forget what the illness was, but he was a five year old boy was dying. And in this, in this community in Yemen, it was believed, has been believed for a long time. I think that if you're, if your kid is dying, if you take a burning stick and shove it in the kid's chest, that the kid will heal. Obviously complete and utter bullshit. But that's, that's what they believe. And so the, the, the, I think it was in the New York Times they asked, they, they, they did that to this five year old kid who was dying. They took a burning stick and shoved it in his chest. And the reporter asked the mom like, how in the world could you possibly do this to your kid? And the mom said, I thought it was one of those like stop you in your chat quotes. She said when you, when your child is dying and you have no money, you will believe anything. And I was like, oh, like would. If I was in that situation, what would I do? That. If you have no money and your kid is dying and somebody says hey, this might work, even if it's obviously bullshit, would you do it? And I think that that is the same mentality, that's the same psychology that causes a 19 year old to put all their money in fart coin. It's the exact same psychology when you feel like you don't have any good options and nothing is working. You'll believe anything. You'll believe that you can make money on Fartcoin. It's the same psychology.

My, my inner teenager is just. I can't stop laughing at that.

I'm with you man.

Thank you. Thank you so much much for joining me on the show and giving me some really solid insight and some really good laughs. Actually, I wasn't expecting that. I wasn't expecting to like full heartedly chuckle as much as I did this morning. So thank you so much for that. For everybody that's listening to this. Where can they fall along with your.

Work, I've written two books, the Psychology of Money and Same as ever. And I have a new book coming out in October. It's called the Art of Spending Money. That's where most of my thoughts reside.

Beauty. Well, I look forward to having you back on for that one for everybody that's out there. Don't forget to man, it forward, share this episode with somebody that you know will enjoy it. This might be one of those things that you listen to with a friend or a partner and dive into your own psychology of money. As for me, this is Connor Beaton signing off. We'll see you next week.

Sam.