Morgan Housel and Lewis Howes discuss how FOMO drives dangerous financial decisions. Status anxiety makes people spend money to keep up with others, even when it hurts their wealth. Both share personal stories of falling into these traps.
I think the most dangerous trait in money, whether it's saving or investing, is fomo. Fear of missing out. It's if you are susceptible to watching your neighbors or your friends or your co workers get rich. And that just makes you boil with envy. And even if it doesn't feel like envy, you want you see it. You say, I need that as well. That is so dangerous for two reasons. One, if you watch someone getting rich fast, there's a very good chance that it's not sustainable, that there's going to be a reversion in the mean. And your friend who made 10,000% in Bitcoin, you're not going to be able to repeat that. So if you chase that after the fact, you're in trouble.
You're going to lose it.
The second thing is how fake is probably the wrong word because I think it's innocent. But people put their best foot forward, so what they are showing you is usually not indicative of what it is. In college, I was a valet here in Los Angeles, and it always stunned me that when people would come into the hotel, I work driving a Ferrari, a Lamborghini, a Bentley. When you get to know some of these people, some of them were actually not that successful. They were like a law firm associate who spent half their paycheck on a Porsche lease.
Wow.
And so when the fake it till you make it idea is so powerful in America that if you see, oh, that guy's driving a nice truck, I need to go get one too. Cause I'm just as smart as I work just as hard as that guy, that's really dangerous because you're not chasing their success, you're chasing their fakeness.
Oh, why do. Why is that in so many of us where people feel like they need to go in debt overspend to try to impress the people that don't even.
Care about them, I think it's very true that people are naturally wired for status and not for happiness. Really, you don't. You're like your inner soul, like, your evolution does not want you to be happy, so to speak. It wants you to be successful.
Why is that?
Because that's what's going to gain the attention of potential spouses, male or female. It doesn't matter who it is. Like, it's a competition for resources so that you can climb the ladder to gain the higher social status, to gain the better wife, the better husband, the better friends, whoever it might be. It's all a competition. And so. And so that's why. That's why no matter how rich society gets, I think it'll never be like that. It will never get rid of that.
Did you ever struggle with this?
I did, absolutely. I don't know if I struggled, but definitely when I was in my late teens and early twenties, I wanted to be the guy with the mansion and the Bentley and that really, I think every 19 year old does. I think part of the reason is because when you're 19, at least for myself, I had no wisdom to impart anything. So when you have nothing to offer the world, I think it's natural to be like, well, maybe they can look at my car and they'll admire me for that. I think as you get older, at least for me, it's been, I don't care if you like my car. But at least for some people, if there's wisdom I can impart a skill that I can part.
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