Morgan Housel – The Art of Spending Money (EP.466)
Summary
Investment Philosophy: The podcast emphasizes the importance of personalizing financial strategies, highlighting that most poor financial decisions stem from following advice suited for others rather than oneself.
Psychology of Spending: Morgan Housel discusses the psychological elements influencing spending habits, such as envy, greed, and contentment, and argues that these factors are universal across different financial backgrounds.
Financial Independence: Housel views wealth as a means to achieve independence, suggesting that each dollar saved is a step towards greater personal freedom rather than merely delayed gratification.
Contentment vs. Happiness: The discussion differentiates between fleeting happiness and lasting contentment, advocating for the pursuit of contentment through meaningful relationships and personal satisfaction rather than material wealth.
Social Influence: The podcast highlights the impact of social circles on financial expectations, advising listeners to be mindful of their social environment as it can significantly influence spending and lifestyle choices.
Role of Envy: Envy is identified as a major driver of consumption, with social media exacerbating the issue by expanding the comparison group from local peers to a global audience.
Personal Experiences: Housel shares personal anecdotes to illustrate how past experiences shape financial behaviors and emphasizes the importance of understanding one's own financial motivations and desires.
Purpose and Wealth: The podcast concludes with the notion that true fulfillment comes from combining financial independence with a sense of purpose, rather than merely accumulating wealth.
Transcript
Most bad financial decisions happen when you follow the strategy that is right for somebody else but not for you. You have to view it as an art, not a science. That's why the book is not called the science of spending money. [Music] Morgan, great to see you, bud. >> Thanks for having me. Good to be back. >> Why don't we just start with how you got from your last book, Same as Ever, to the thought of writing The Art of Spending Money? I've always been a believer that you cannot force creativity. You cannot sit down at your desk and schedule and be like, I'm going to come up with the next great idea. It always hits you in the shower when you're going for a walk and you're like, oh, I got this idea. And I so remember the moment. This was probably 2021 and I was on the treadmill at 8:00 p.m. and it just hit me out of the blue, the art of spending money. And it was very similar with the psychology of money. One day I remember just walking down the street in New York. probably had lunch with you that day and it hit I was like the psychology of money that's oh that would be a good so it always starts with just the title and the reason that I really liked the art of spending money is because I realized I think everything I write starts with introspection about my own life I'm trying to figure out my own problems my own flaws and 5 years ago I realized that I could talk to you for hours and hours and hours about my investing philosophy and why I do it but then I one day I asked myself I was like what is my spending philosophy which is something that you and I have talked about in my personal life for years. What does my wife and my personal like why do we do the things we do? And I couldn't tell you. I couldn't tell myself. I never really thought about it that much. And then it also struck me as I started thinking about this that there are tens of thousands of books written about how to get wealthy. Some of them better than others, but tens of thousands of them. Virtually none written about what to do with it. And I think part of the reason why is because a lot of people's intuition, including probably my own until a couple years ago, was nothing needs to be said about the topic. It's simple. You just spend on what you like and and then it's it's over. Like that's it. There's nothing to be said about it. But I think if you drill into a lot of people's lives, rich people, poor people, middle class people, it's never that simple. There's always a psychological element of the psychology of envy, the psychology of social aspiration, the psychology of fear and contentment. And so there's nothing in the book that tells you how to spend because you and I are different as you and I have debated in our personal lives many times about how how we spend money. But I think the psychology of those topics, envy, greed, aspiration, contentment tends to be universal for everybody. >> So as you started doing research, how did you go through the process of originally thinking, wow, there's nothing to say to an insight. Oh, there's psychology around this to then formulating what became say the core thesis of the book. >> There's a well-known thing in psychology. I forget the name of it, but once you get a nugget in your head, you see it everywhere. And so once I started thinking about the psychology of spending money, you saw I saw it everywhere including in my own life. And so I would ask when have I been envious of other people? Why why did I envy what they had? They had something I didn't and that made me feel bad and I want like like you start drilling down into it and then you start seeing it everywhere else. Every book that I would read, you would start connecting the dots of like oftentimes it's not even about spending money, but the psychology of contentment, why some people just didn't care what other people thought of them and like what was going through their head, what did they want, what was in their life background that brought them to that point. So, it was the classic thing of once I started looking for it, I couldn't I couldn't stop seeing it. And then for a lot of writing, too, this is true for everything that that any writer has ever written, including yourself, you have to tell a good story behind it. When you're writing a book about finance, if you only use finance finance examples, you put people to sleep in one chapter. You can't do it. So, I had to find examples outside of the world of finance and spending. Examples of people and stories of people who are envious, who were who are very content, and then using those to craft a narrative about what I thought were the most important elements of the psychology of spending. As you take a step back, what's the core lesson or thesis that you think someone should take out of what you learned from writing the book? >> You need to spend more time looking in the mirror, so to speak, and figuring out who you are individually, rather than what does society tell me I should want and how am I trying to impress other people who aren't even looking. What I want's different from what you want. There is no right answer to do this. There are people who live paycheck to paycheck and that's right for them. That's the right lifestyle for them to live. There's no one right one way to do this. I think this is true in investing too. Most bad financial decisions happen when you follow the strategy that is right for somebody else but not for you. And it's an easy trap to get into because it is the right advice for other people. And you're like, "This worked for him, worked for her. Of course, I should go mimic that." And it's not right for you. And so I dollar cost average into index funds. If you did that, you'd probably be bored out of your mind. And if I invested like you, I wouldn't be able to sleep at night. We're just different people. There's not right or wrong. And so you you have to view it as an art, not a science. That's why the book is not called the science of spending money. Art is individualistic and it's subjective. And you uh and you have to keep your desires and your expectations confined to your own roof without being too influenced by other people. >> The very first chapter of the book is this great line I love. All behavior makes sense with enough information. >> Yeah. so much of, you know, what I what I see in the investment world, people trying to tease out other why why people do what they do. Um, would love you to dive into that thought. I got that line from my brother-in-law who's a social worker. He works with very disadvantaged children, many of whom are abused physically and psychologically. They're they're homeless, their parents abandoned, like the the the the saddest case studies you can think of, he works with. And a lot of those kids, actually, the majority of those kids do not do well in school. They get in fights on the playground. They don't do their homework. They skip school. And very, it's very often that the teacher or the principal will be like, "Why are you doing this? How can you possibly think it's okay to behave like you do at school?" And my brother-in-law said, "They have a phrase in the social system, which is all behavior makes sense with enough information. If this kid who's skipping school and getting into fights, if you saw what he was going through at home and the abuse and the lack of love, you don't condone his behavior, but you're like, "I get it. I I understand why you would think that's inappropriate or why you would want to lash out like that. And so again, it's not that you say it's fine for you to do that, but you're like, I get why you're doing it. That phrase, all behavior makes sense with enough information. You can apply that to so many avenues of life, including money. What happened in my past? So there there was a period of my adult life years ago when my wife and I were very frugal. We've loosened up quite a bit, and you were a big part of trying to prod me in a different direction. But I I've often asked because now we have loosened up a little bit and now I've asked what caused me to be in that mindset. And I bet if you got me on the therapist's couch and dug a couple layers deep, the answer would be something happened earlier in my life that left me in some aspects with low self-esteem, low self-confidence, and I had this mentality of I need to save everything because this is all going to come crashing down. I bet I bet that's what it was. Like it's hard for me to like actually zero in that specifically, but it's something like that. And so it was very common. This is not a criticism because you and I had fun conversations about this. They were always respectful, but I think it is common to be like, Morgan, why are you so frugal? Live a little. Live. And the truth was, even for me at that time, all behavior made sense with enough information. That was a product of who I was. One of the things I find really fascinating when you're talking about that is this lack of specific knowledge of why for you in your past you feel like I think I saved it because something happened where >> you know I I just felt like I had to keep all that money for my safety. >> I know you've explored that and I'm I'm kind of curious why do you think that exists if you can't even put your finger on what it is? I heard this from Peter Kaufman. He said, 'There's evidence in neurology that only 10% of your brain function is is conscious. The other 90% is processing emotions and feelings that you can't actually think about. They're there, but you don't know them. And so, a lot of people if if you think like, oh, am I scarred from my past now? Yeah, it's a bad experience as a kid, but I'm not scarred from my past. But the truth is, oh, you absolutely are. Things have happened and shaped you in ways that you can't even imagine. and everybody and that's 90% of what's going on in your brain are feelings and emotions that you can't put your finger on. And so I I always found that to be really fascinating as well. So if you ask why do I live this way and why do you live that way? Neither of us actually know. And a lot of people if you spent time with a therapist, a good therapist who can start pulling threads out of your brain, you're like, "Oh, I didn't even know this was there. I didn't even I didn't even understand this until we start talking about it, but of course it's been there influencing who I've been." So everyone can have that experience. So I think even the idea that 90% of it is not even conscious means that we can think about this all day but not really understand it. So a big part of this is yes I think you can there are parts that there are puzzle pieces you can put together but at the end of the day you kind of have to just say this is who I am for what for whatever reason this is who I am. Part of that too actually a huge part of it is the my growing belief that a lot of our personalities maybe the majority of our personalities are forged at conception and there's nothing we can do about it. It's just on the nature nurture spectrum. There's a lot of nature going on here and people are people are wired differently. I'm one of three kids to I have two two older siblings. We're all so incredibly different. My two kids are so incredibly different. Same parents, same values, same house. Couldn't end up more different. And so, of course, that's just a part of our experiences, but they we've just wired differently. Buffett talked about this quite a bit of with with finance. He's like, "Some people have the money mind where you you don't the first time they learn about compound interest when they're 8 years old, they just get it instantly. The first time they hear the principles of value investing, they're like, "Yeah, done. Got it. DCF, understood." And Mer put it more starkly. He was like, "When you teach financial matters to young people, they either understand it instantly or never. You either get it or you don't. You're wired you're wired for it or you're not." And I think there's a lot of areas in life in life that are like that. Music is one of those. Most people if you're if you're a musician you either understood it instantly when you're 60 years old or never. You're never going to be a musician. Dance is like we want to think that because we're intelligent and educated we could just go learn a new topic. And to some extent it's true. To a big extent it's not. >> One of the concepts you talk a lot about in the book is the pursuit of freedom. Money as a path to freedom. Would love to get your thoughts on what you mean by that. >> It's different for everybody. Some people like houses, some people like cars, some people like travel, but everyone's different. Virtually everybody, I would actually say everybody likes freedom, likes independence, doing whatever you want to do on your own terms, whatever that might be. And what you want to do might be different from what I do, but we're doing it on our own terms, being our own individual. That is universal. And so my definition of freedom is is different for everybody. And also independence exists on a spectrum. When I say independent, I don't necessarily mean you don't need to work anymore. Like pure financial independence. independence is always a spectrum and every dollar of wealth that you have is one more claim check of your own future that you own versus somebody else owns and so it's always on a spectrum of that and you know very few people will get to a point outside of retirement where they don't need to work anymore. They're completely free to do what they want when they want with whom they want. But the idea of you know for average ordinary people if you can you know have the independence to choose where you live and have a shorter commute that's enormous independence. If you can be laid off without frantically having to look for a new job the next morning, that's independence. If you or your family can get sick without it massively devouring your your your network, that's that's a level of independence. It's just the ability to withstand all the normal natural inevitable ups and downs in life. And some people will get to a point where they can withstand virtually any economic disaster when they they can they can live off interest and dividends and they're they're all set. There's there's that level. But I always view this is how I view debt, too. I view it as the more debt you have, the narrower the range of outcomes you can endure in life. Very simple, very elementary in that sense. But that's how I think about about wealth. Like the more wealth you have, the higher the channel, the wider the channel becomes of the range of outcomes that you can endure, good, bad, ups and downs, all of it. I never viewed it as saving money or building wealth. I viewed it as purchasing independence. Every from when I was a teenager, every dollar that I saved felt like a little bit more independence that I had. And a lot of that back too was low self-esteem. this is all going to come crashing down. I don't know if anyone's going to hire me ever again. I need to save for the apocalypse. That was probably my mentality. Maybe still is my mentality. But viewing it as not saving money, as idle money, as not delayed gratification, but viewing it as purchasing independence that I gain pleasure from today. Like it's not delayed gratification. If I save money, I benefit from that right now because I have a higher sense in my in my body of being more independent than I was before. That's always how I viewed it. You touched earlier on the concept of contentment as it relates to spending. I'd love to come back to you the research around happiness that how you spend your time, who you spend it with, the depth of relationships driving happiness more than financial means. How did you think about writing about how people spend their money as it relates to contentment and happiness? One of the biggest things is that I think a lot of the problem people get into trouble with, if only I had more money, then I'd be happy, is they're chasing the wrong emotion. Happiness is always a five-minute emotion. Happiness never hits you for more than a couple minutes at a time. I think it's very similar to humor. If I told you the funniest joke in the world, you laugh for five minutes, maybe. You don't laugh for 10 years. And if I told you that joke every day, you're like, "Stop. Stop. It's not funny anymore. Stop." Happiness is very similar. And so when like people have brief moments of like ah this is so great but not for 10 years. It's fleeting. And so when people daydream about having the nice house, the plane, the car, whatever it might be, and realizing how great that would be, by and large, what you're doing is you're imagining yourself in that house being content with it. Not being happy with it. You imagine yourself in that house being like, I'm good. I don't need anything else. I don't care that my neighbor's house is bigger. This is great. I'm totally content with this. Contentment can be a lasting enduring emotion. happiness never is. And so I think that's where people get into trouble. I think what you want to chase in life is contentment. You want to get to a level where like I I want to live a good life. I want to be able to enjoy the material abundance of this world, but I also want to get to a point where I'm like, I'm good. That's all I need. And so I I talked about my late grandmother-in-law in the book. She lived for 30 years on nothing but 1,800 bucks a month in social security. No assets, no pension, nothing. 1,800 bucks a month, nothing else. Happiest woman you'll ever meet. happier than any of the billionaires I've ever met. One of the few people who like probably did wake up smiling every morning. Found all of her joy working in her garden, going for walks, bird watching with her friends, totally content. She had no financial wealth and she had like unlimited psychological wealth. She had nothing and she wanted nothing more. And you and I know some very wealthy people, billionaires, who want the world and wake up every morning saying this ain't enough. And by the way, like I want to live in a world where most people wake up and say this isn't enough because that's where progress comes from. That's the seed of all innovation is people waking up and saying not enough. We need we need bigger, better, more like that's great. But at the individual level, it puts you on a hamster wheel forever. And so I think if you do want to chase that, unless you are so type A that you know you want to work 100 hours a week till the day you die, what you want to seek is contentment. And look, when I say contentment, I want to be content with my house. I don't want to be content with how good I am as a writer or a father or a husband. I never want to drop my standards for that. I always want to do better. I'm never going to be satisfied with how well I'm doing there. But I I absolutely want to be content with the physical life that I live because if you're not, you're always going to drive yourself crazy. So most people fall or certainly most people like maybe listening fall in between really like not having enough money for their basics and oh there's so much money on the side that you can just you know clip a coupon from US Treasury and and have everything you want >> for that group of people in the middle. How do you think about the tradeoff of achieving contentment or autonomy or freedom with incremental income that might get you that in the future? I >> mean, so much of this is I think be careful who you socialize with because they will absolutely indisputably set your expectations. I grew up in the woods outside of Lake Tahoe and this was before San Francisco tech money invaded. So, when I grew up in Tahoe, it was a it was a poor little mountain town. And by my childhood expectations, normal people drove old pickup trucks and rich people drove new pickup trucks. That was the stratification of wealth. Like, if you had a new F-150, you're like, "That guy's rich." And then I went to college in Los Angeles. In Los Angeles is the opposite. Wealth, like the definition of wealth is sky's the limit. And there are people in LA who like were like, "Oh, my my Bentley's 2 years old, so I'm poor." kind of thing. Like that that felt like the mentality in LA. And I think honestly if I if I think about it, people were way more content in Tahoe because they were socializing with people where the stratification of wealth was so much narrower that if you were, you know, a middle manager in Tahoe, you're like, great, you're doing awesome and you're raising your kid, like everything's great. Whereas in LA, it was like, oh, you're not a billionaire. Like why? What happened to you? So I always say like be careful who you socialize with. Be careful where you live because that is absolutely going to set your expectations. One example of this, the minimum wage in professional baseball by any definition on the national stage and definitely the world stage that's rich. 7 750 a year, you're in the tippity top, particularly on global standards. Nobody in the MLB earning the minimum wage feels rich. They all feel like they're scraping by because there are people on their team in the locker right next to them making 15 million a year, 25 million a year. And so 750 is absolutely a joke. There's a great Buffett quote, too. He says, "Success in life is when the people who you want to love you do love you." And everyone's different. In my own life, I'm like, I want my wife, kids, parents, and two or three of my friends to love me. And I desperately want them to love me and pretty much nobody else. And so, I want to use my wealth and my time and my energy to help my life within the context of those six or seven people. So, being careful who you socialize with and being careful whose attention and admiration you desire is really important. So if someone's in a certain situation, it's not easy overnight to I'm going to move to a new neighborhood. I'm going to make new friends. How have you thought about the incremental changes that move someone towards what would be contentment as they're sacrificing, let's say, incremental wealth. >> If I go back to when I was uh in my early 20s, my material desires were off the charts. every I I wanted to be the guy in the yellow Ferrari with the the Gucci that like I it was my material aspirations were so high and and they're really not that much anymore. And I think the reason why is because when I was 21, I had nothing to offer the world. I had no intelligence. I had no job skills. I didn't know how to love. I didn't know how to be a good friend. I had I had nothing to offer. And so I think intuitively a lot of people including me in that situation are like no one's going to admire me for any of those skills. Maybe they'll admire me for my car. that I think that was the easy and then I think a lot of people go through this as I'm like oh now I want to gain my admiration from my family and my ability as as an author and so my desire to show off my car drops because I want people to admire me for other things than that and so I think that can that can be really true so part of the part of the equation as you're thinking about incremental wealth is again whose love respect and admiration do you want who do you want it from and if you want it from strangers then you can try to get it through your material wealth And that's not even a criticism. I think I think it's a natural thing in the world. Like status is a is not always a bad thing. Stat you're trying to fit into other groups and cooperate with other groups. Status is not always a terrible thing. But if you want to use that money in what I think is a more durable manner, then you have to answer the question, who are the five or so people whose love and attention I really admire and how can I use this this money to leverage that? And so I use the example in the book of like will a big house make you happy? It might. If having that big house makes it easier to host your friends, but the realization is the friends are making you happy. The house doesn't make any difference. But if it's a conduit to having more meaningful relationships, awesome, fantastic. And an enormous house, a super expensive house might mean that everyone wants to come over and hang out with you. Awesome. Your social life is great now. But it's not the house. It's the the lubricant into better relationships. And so I think it's answering that that very simple question. Whose attention and admiration and company do I want and how can I use my money to get me there? >> Yeah. What are some of the things you found that people misunderstand about the right way to go about spending money and how they actually do it? >> Let me give you an example of a guy who I profiled a little bit in the book, Chuck Feny, who is a a multi-billionaire, started duty-free stores where you can buy like a gallon of vodka in every international airport, made a fortune, made $10 billion from the business. The very well-known part of Chuck Feny's story is that he lived like a miser. He lived I think the the statistic was literally he took out $2 million with an M from his $10 billion fortune to live on. He lived in a tiny little apartment flew coach and that's the well-known part of his story. He gave everything away. The less well-known part of his story is that when he became wealthy in the 1980s, when he first became a billionaire, he lived like a billionaire. He had multiple mansions. He had a private jet. He had a yacht. He lived like quintessential billionaire. And he didn't like it. He it just wasn't for him. Here's a quote that I love. He said, "I realized one day that I was happy when I was giving money away and I was not happy when I wasn't giving him money away." And so he chose to live like a completely normal ordinary middle- class person and gave everything away. What I love about that is not that he lived so frugally like but that's that was his choice. Great. What I love about it is that he chose it. He did not say because I'm a billionaire I have to live this lifestyle. He was like I don't care what anyone tells me what I should live. That's not what I want to do. I want to live like this. It's my choice. And so I love that he just made the decision for himself. He was not influenced by anyone else's expectations, any societal influences. A lot of people thought he was completely crazy that this guy's worth $10 billion flying coach in a in a one-bedroom apartment. But it was his decision. It's very rare in life that you see true independence. Someone who's whose truly their aspirations do not leave the roof of their house and and they're not influenced by anyone else's desires. It's very rare that you come across it. He was he was one of them. And it's a beautiful thing. >> And are those folks who do that, are they just wired differently? >> Of course they're wired differently. And the and the wiring that is different for most people is completely and utterly they are an internal benchmark thinker. And the external benchmark of comparing themselves to others doesn't measure whatsoever. I think it's more often that you see the opposite of somebody who is entirely external benchmark focused and probably doesn't have a lot a very a very stable internal scorecard of of how of how they're doing. Their measure of success is net worth, social media followers, attention and going to bed at night asking the question, am I doing the right thing? Am I doing the moral thing? Am I doing something that makes me happy? Would never cross their mind. I think that's actually way more common. >> How does somebody calibrate that that external piece? cuz it's it's true in almost everybody. Like there's some external validation of why are you doing what you're doing and kind of calibrating it. Is it because that's what your friends are doing? Is it because you think you're supposed to keep up? >> I'll tell you what, one of the things that that got me going on this topic of the psychology of spending was I used to live in Washington DC and I used to go down to the Library of Congress where they have this really cool section where they have every newspaper going back to sometimes the late 1700s. So you can go read like the Washington Post from 1871. And I used to love just going through and reading these things. And one day I was reading the Washington Post from 1929, obviously the peak of the Roaring 20s before the Great Depression. And I stumbled across this headline that I thought was so profound. The headline was, "The more you are snubbed while poor, the more you will enjoy displaying being rich." Yes. So many people if they have a very high propensity to show off their wealth. A lot of times it's because they are trying to fill an emotional wound that they had from earlier in their life of some time in their life when they were snubbed in some way and either for other people or even internally for themselves they want to show people or show themselves that they overcame that scar. I think everyone has some version of that my view of the world my spending desires and yours and everyone are a product of the experiences that we've had in life. Some of which were good, some of which were bad. some of which left some emotional scars on all of us. I have a a family member who grew up extremely poor. He was he was homeless for much of his childhood in and out of the foster system, then became a very successful businessman later in his life. And when his daughter was going to college, he told her, "Please pick the most expensive school that you get into." And it was almost like the higher the tuition, the better. And the reason was the idea that he was sending his daughter to an expensive school meant so much to him within the context of what he overcame. And I think that's an extreme example, but I think so many of us have some kind of emotional wound like that. And wound might be the wrong word because sometimes they're positive experiences. You grew up a super popular kid, loved by your family. You might not have very much desire to go out and prove yourself. You're just you have an innate amount of self-confidence from that from that experience. So I think the idea to answer your question, the idea that we are products of our own experiences, most of which are out of our control, I think is a good realization because it means my desires, your desires, our own view of the entire world, how we view the economy and politics are completely different from person to person. What you've experienced, Ted, is different from what I've experienced. And people in different generations, different countries, everyone's a little bit different. So part of that for me was a giving myself a little bit of grace of saying look if I do have quirky money habits and of course I do. It's not because I'm not thinking this through necessarily even though sometimes that might be the case. Something happened in my past that makes me believe this. And that's true for not just money. That can be true for political beliefs all kinds of social beliefs. Rather than looking at other people and saying why do you believe that? Why are you doing that? A way better question is what have you experienced in life that makes you believe that? An even better question is if I experience that same thing, would I believe what you do? And a lot of times the answer is yes. And so to the calibration question, I think it's less about like, oh, do I have flawed thinking and I need to push myself in this direction versus kind of embracing who you are and embracing that there is no right answer to this question. There's no right way to spend money. There's no right way to save and invest money. I dollar cost average into index funds. I know a lot of people watching this show don't do that or might even look down upon it. That's okay. The point is there is no run right way to do it and I think it bothers people in finance because finance particularly in the last century has been proposed as a math-based field like it's a cousin of physics and 2 plus 2 equals four for everybody for you and I there there is one right answer and we want to assume it's like that for money that for how we save invest and spend there should be a right way to do it and I think the reason that finance is so can be such a tense topic and subject of so much debate in a way that like meteorology is not. In finance, there's an infinite number of right answers for different people. And I think that bothers a lot of people. And so, I think the idea of embracing who you are and also being less uh judgmental of others because I I don't think it's it's it's ever appropriate to say, "I value spending my money on this and therefore other people should as well." Or, "I don't value this and therefore nobody else should as well." It's just not how the world works. What did you come to think is true about envy as it relates to people spending money? >> The author James Clear, he's unbelievably he he's the most successful non-fiction writer of the generation or maybe several generations. Book has sold over 25 million copies. Unbelievable. Dramatically more successful than I am as a non-fiction writer and we're about the same age. Somewhat similar topics. I do not have one single molecule of envy in my body for James because he is so likable. He is the nicest guy you will ever come across. You will never meet someone as successful and humble as he is. You will never meet someone who wants to help other people more than he he's just an awesome guy. And it's so it's impossible for me to envy him. He inspires me. I want to do more like he does, but I don't envy him. And I think it hit me that if occasionally, this is a character flaw of mine. If there are other authors who I envy, it's because I don't like them personally. They have they have a quirk of their personality that rubs me the wrong way. So I think so much of en there's a difference between being inspired by someone's success and being envied about what they have. And usually if you are struck with a bout of envy as all of us will be from time to time. It's usually because you say that person has something that I don't and they didn't deserve it. That's usually about where it comes from. And I bring that up because it's so common now in the age of social media. If you see someone with a nicer house, nicer car, a nicer plane, clothes, whatever it might be, than you have, you can either be inspired by their success if you admire them or if you think they didn't deserve it. It's very common to fall into the trap of envy. And so you were I think we're always making judgments about not only what people have, but whether they deserve that success to begin with. So back to the James Clear example, I am inspired by what he wants to do, by what he has accomplished. I want to be a better writer because of him and it makes me feel good about it. When you are caught in envy, then it's trying to chase what they have just because you feel like you're falling behind them and they didn't deserve it. You might be chasing something material that is not necessarily going to make you happy. Your neighbor who you don't like very much is a bigger house. So, you have to have a bigger house, not because it's going to make you happy, but just because you feel like they are in an unjustified manner above you on the social pecking order and that doesn't make you feel good. >> When does that translate from an emotion to spending? >> It's all over the place. Some people are obviously much better at this than others. This is not a black and white thing. But how much of the modern consumption economy is based off of some form on the spectrum of envy? Tremendous. Huge. Particularly for young people, particularly for young men, I would say, who are desperately trying to put themselves on the social pecking order. If they're young in their career, early in their career, trying to figure out where they sit in the order, trying to fork to to show people and to broadcast their talents. tremendously common in that aspect. So, some people are are much more influenced by it than others. But there's two ways to use money. One is as a tool to give yourself a better life. The other is as a yard stick of status to insert yourself on the social pecking order. That's always been the case. That was true 100 years ago. It has gone supernova in the last 15 years with social media because no matter how well you're doing, no matter how much you make, no matter where you live or how successful you feel, there is somebody on Instagram who looks prettier, happier, smarter, more successful than you are. No matter what you're doing, the comparison group that everyone compares themselves to has grown from what used to be probably 10 or 15 people in your personal life to 10 billion people on social media, 7 billion people on social media. And so, and I think it's impacted everyone, particularly younger people for whom that's all they've ever known is a social comparison group is social media. And everyone knows what the mental health of Gen Z is. It's atrocious relative to previous generations. >> How have you thought about how people approach and think about spending money? way that I wanted to think about it in my own life, but I think it's a pretty good exercise for others was asking the question, if nobody could see how I lived, if nobody except my immediate family could see my house, my cars, my vacation pictures, nobody else was watching, how would I choose to live? And you immediately understand the difference between utility and status. If you completely remove status from this mental exercise because nobody's watching, how would you want to live? And you immediately be like, well, I would want things that actually make me happier. I would want a house with a nice view. That makes me happy. I wouldn't necessarily want a house in the most exclusive zip code. That does nothing for me. I probably wouldn't want a Ferrari. I probably want a pickup truck that has utility. And I would want comfortable clothes that have utility. I wouldn't care at all about what brand they were. And so you immediately flow to this area. And why it's an important exercise is because the truth is very people very few people are watching. There's a great quote from the comic Jimmy Carr. He said, "In their 20s, most people are worried about what other people think of them. In your 30s, you say, "I don't care what anybody thinks of me." And in your 40s, you finally realize the truth, which was, "Nobody was thinking about you to begin with." I think that is so true, and it is so common with spending, that nobody is thinking about you as much as you are. Nobody cares about your house or your car or your clothes as much as you do. They're busy thinking about themselves. And once you come to grips with that, then I think you can your desire for impressing strangers plunges. And then your desire for using money to help you and your immediate family, the people whose love and attention and admiration you actually want can increase. >> Alongside of understanding the why, what have you what did you see in terms of calibrating expectations sort of how spending flows through to what you think you want in your life. One thing is that it is extremely common and very easy that if you wake up every morning feeling a little bit unfulfilled in life. There's a hole in your soul and you're just a little bit anxious, a little bit depressed. Extremely easy to assume that the solution to that problem is more money. It's almost like a knee-jerk reaction for everyone that well I have these problems. I don't feel fulfilled. If I if only I earned more money and could live a little bit different, then I'd feel great. And I think sometimes that can be true. Everyone can spend money in a way that's going to give them a better life. This is not an anti-spending creed at all. But I think it is too easy to make that assumption. And part of the reason that it is so easy is because money is one of the only things in life that is so immediately tangible and quantifiable. And so I use the example like if I said if I woke up and said I want to be a 10% better father, great goal. I would love to do that. What does that mean? How how do you measure that? There's no way I can measure that. I don't know if I'm a better dad than you are. There's no way to quantify it. But if I wake up and say I want to increase my net worth by 10%. Measurable down to the penny. I can compare mine to yours and everybody else's. So, because it is such an easy yard stick of measurement, it becomes for many people the ultimate target of not only how well they're doing, but the quality of their own life. It's too easy of a target. And so, it becomes the knee-jerk reaction of the solution to all your problems. >> There's a lot of people, particularly in the finance world, where that measurement is some verdict of success in their eyes. and you see people who it's unclear if it's just the game or more is the goal and there's no end to more. What did you see of folks that achieved any sensible measure of success and yet that wasn't enough? >> The biggest that I've come across because they're such a famous example is the Vanderbilt family. Of all the Robert Baronss, the Rockefellers and the Carnegies did pretty well at managing expectations, keeping wealth across multiple generations. They did a pretty good job. The Vanderbilts did by far the worst. It it's just it's it's a very it's a tragic story. Not not a lot of sympathy for someone who was worth almost half a trillion dollars adjusted for inflation when he died. But effectively, when Cornelius Vanderbilt died in the late 1800s, adjusted for inflation, roughly half a trillion dollars. Within three or four generations, there was virtually nothing left. And in between there were three or four generations of Vanderbilts who'd like if you dig into their lives and their biographies almost every one of them to a tea was miserable. And part of the reason why like how how could you be miserable if you had more money you you could do anything in life. In theory that's true but the but the truth was they had virtually no independence at all. The money told them who they could be who they could socialize with where they could live uh who they could marry what what values they could have. the money controlled every aspect of their personality and they had no it was it was like they were imprisoned by it and that can be like a hard like how can that be true if it's like most people's dream is to kind of have that that much money I came up with this concept in the book called social debt which is like you have financial assets and sometimes you have financial liabilities but there's a social debt as well and social debt is a hidden liability you don't actually see it but it's very real it's when society and your own expectations tell you how to live and who to be and control your personality control your desires in ways that might be opposite of your actual personality. And the Vanderbilts are a very interesting example because the first Vanderbilt heir who did not get a trust fund when virtually all the money was exhausted is Anderson Cooper of CNN. Not only is he the most successful Vanderbilt heir in probably 150 years, he's probably the happiest. And part of the reason was he was basically the first person in his family in a century and a half for whom money did not control his personality. He was like, "I need to go make a name for myself and do what I want to do. I'm not going to be a socialite and just go to parties and host, you know, you know, whiskey tastings with my friends. I'm going to go do this thing that I love, which is journalism and TV." And so it was almost like he was a first person who was like mercilessly like let go of money controlling their personality. Now, that's an extreme example. There are plenty of other very wealthy families who do a great job. The Rockefellers did a very good job of it. So, it's not cut and dry, but the Vanderbilts had an they had a half a trillion dollars of wealth and probably a trillion dollars of social debt hanging over them that they didn't even know. They couldn't count it, but it was a very real thing. >> And how about people currently making that money? Could be first generation wealth. Obviously, a lot of people in the money management industry that just generate a lot of wealth and then seem to have the motivation to keep going. And others generate the wealth and then they're done. The only formula that I kind of tried to put in the book is the the simple formula for a pretty nice life, which is independence plus purpose. It's it's a very basic formula, but it's hard to imagine anybody having a really nice life without those two things. Independence and purpose. There's financial independence, of course, but there's also like independence of thought, independence independence of philosophy, and purpose is is another enormous thing. My guess and this is probably not black and white but the vast majority of people who made some money and then quit and then walked away. What they were doing was not their purpose. They made a ton of money in a company but did they act was running that company owning that company actually what fed their soul? Probably not. And the people who do run the business until they die until the day they die that is their purpose. That is their soul. That's what they love to do. And so I think it by and large it's not about the money. I mean, anything over I would say in the tens of millions of dollars, it's not going to change your lifestyle that much. It's it's really not going to change that much. Maybe let's say a hundred million. Anything over a hundred, by and large, you're living in the same house, driving the same car. So, if you have financial ambitions more than that, I think it's either an addiction to money, which can which is a very common thing, or it's because what you're doing is actually your purpose and filling your soul and it's what you love to do. And so, take Mark Zuckerberg, Elon Musk, those guys. They if you told them they had to quit their business tomorrow, they they they would rather not live. They have to do it. It's just an extension of who they are. It's their purpose. >> What are some of your favorite stories and lessons from the book? >> This is one that has nothing to do with money, but when I heard it, I'm like, that's one of the best stories I've ever heard. Kevin Cosner, great actor. And when he, this is back in the uh late 18, late 1980s, probably. He had a friend who was homeless at the time. And because he was homeless, Kevin Cosner, who was still kind of a budding actor at the time, he and his wife invited them into his house. You're homeless. You can sleep in the basement. Come on in. And his friend is a writer. So when he was living with Kevin Cosner, he was constantly writing manuscripts all day long. And he would tell Kevin, "Please read this. Please read. This is the best thing I've ever written." Kevin's, "No, I don't want to read your manuscripts. Go away. You just you're just a smelly guy in my basement." Finally, he lived there so long that his wife said, "He's he's got to go. He's got to get out." And the guy left and continued to be homeless. He was back on the streets. As he's out on the streets, he's calling Kevin, "Please read my manuscript. It's so good. You're gonna love it." Out of desperation, Kevin was like, "Fine, I'll read the damn thing. Send it." He sends it over. And the manuscript is titled Dances with Wolves. And completely changed Kevin Cosner's life, of course, like one of the greatest novels that turned into the movie. And so Kevin Coffer kind of used as this example of like you never know where talent's going to come from. You never know where it's going to be. One of the takeaways that I had from that is like the luckier you are, the nicer you should be in life. If you are in a position to help other people and give them a chance and you never know where talent's going to come from like that, particularly for like an artistic talent like writing like that, you should give people chances when they when they have it. And just the general philosophy of the luckier you are, the nicer you should be as a base of the pyramid philosophy in life, I think it was really important. I'd love to dive into your path and your thoughts about spending where you just started because post psychology of money there's just a shift. Yeah. >> And and again we see this a lot in the investment world when someone has success all of a sudden they're in a different economic stratosphere than they thought they would be or maybe they they aspired to be there. walk me through kind of your thinking with you and Gretchen and your family going from that that scarcity mindset to what's changed over the last five or six years. >> I think people who have made an amount of money that they never anticipated can probably relate to to this to to to some degree. There is a list of things in which my image my life got better because we have more money. I could name a dozen things where like oh life's better now than it was 5 years ago. There's also a list of things that did not change whatsoever. And there's a list of things that probably got a little bit worse because of it. And I think that would be something that I would not have foreseen. There's no use being negative about it. Like we could talk about the list of things that got better, but a list of things that got a little bit worse in terms of my expectations, my my kids expectations, family expectations, the publishers expectations all shifted in a way that created a social debt, a social liability. And I think my wife and I have done a very good job at keeping those expectations in check. Even though we've loosened up at being like, "Yeah, but we just the only thing that's going to make us happy is our relationships with each other and our health." And so if you asked a very fundamental question, my my kids are young. They're six and nine. And if I said, you know, does my six-year-old daughter love me more today versus a couple years ago when we left? Of course not. Of course. Does does my son like playing football in the driveway with me more that I make now that I make more money than he did three years ago? Of course not. So the things that actually move the needle don't change whatsoever. I would also say that relative to where I was 5 years ago. I don't have more better days, but I think I have fewer bad days, which is a lifestyle improvement. That that that is a better life. That is an upgrade. But let's not pretend that when people make some amount of money, they're just going to wake up grinning ear to ear. It's it's it's just not like that. It's not how it works. I probably wake up frowning less often. So great. That's cool. But it's not necessarily the happiness that a lot of people envisioned. And I think I intuitively knew that 5 years ago before this, but it's one of those things you have to experience to actually believe it. >> What are some of the things that you would say were smart spending for you and your family? Things that you do spend on now that you didn't before. >> One is uh our our house, which is a big purchase. I I I work from home. My my wife is home. This is where we're at 99% of the time. Might as well go big on a house that is great for us and gives our kids a good life in a neighborhood that we enjoy. Like that was huge. And that I would say is all internal benchmark. You know, I we we don't have a lot of people over. We're not showing this to to anybody. This is all just for us. But we drive normal cars. We wear modest clothes. Like that stuff. The stuff that is more external benchmark we really couldn't care less about. The internal stuff is good. The other, and this is I I think people I think a lot of people with money can relate to this. The joy and legitimate pleasure that you can get from helping others is hard to describe. It's very hard to describe. And it sounds kind of like self- congratulatory if you haven't been there yet, but it is so true that if you help somebody who's in deep need, who you're actually going to make a big difference in their life, it's enormous. Spending five grand on yourself will probably do nothing. spending five grand for someone who's in need can utterly change their life and you get an enormous boost from that. We've had several experiences with that too. >> As you've internalized all these lessons through writing the book, how have you thought about imparting lessons about spending to your kids? >> One of the biggest things is I don't I don't think about doing that because I don't think you need to. The analogy I always use is there's so much evidence in politics that what you believe is extremely correlated to what your father believed. Your father in particular, not not different for everybody, but very high correlation between those two beliefs. And what's also true is that most fathers do not sit their children down and say, "This is why I vote the way I do." The kids hear every little comment. They w they they watch what you're watching on TV. They understand what you're reading in the paper and they form mental model over time even without any explicit instruction. They have an extremely strong mental model by the time they're young adults of what politics should be from their parents. And I think money is the same where you don't need to sit down your kids and tell them about money. But every time you say we can't afford this, every time you make a snide comment about your neighbor's yard, every time you choose the hotel to go on vac, they're always paying they're always paying attention. And by the time you're young adults, they have a very crystal clear mental model of how money works. Usually, people will go in one or two directions. Uh either mimicking what their parents did or realizing that their parents made catastrophic errors and running as fast away as running away as fast as they can in the opposite direction. But you're very influenced one way or another. So I would say like you don't need to impart lessons on your children. You just need to lead by example. You just need to be very cognizant of the lifestyle that you live, how you talk about yourself, how you talk about other people at the dinner table. I I talked to uh this guy a couple years ago. He's he's about my age and his father is a a very well-known billionaire investor. And he this this friend of mine grew up as a as a child of a billionaire living like a billionaire. And he is the most rational, down-to-earth, humble, empathetic person you can meet. And I asked him one day, I said like, "How did you grow grow up like this but become so down to earth?" And he was like, "Look, my parents, we I I he was like,"I always knew we had a lot more money than other people and we lived a bigger life than other people, but my parents made so clear that that's not what you judge other people by." And at the dinner table, we did not sit around and talk about how filthy rich we were. We talked about values and helping other people and being good corporate citizens. And that's what rubbed off on the kids. And I think there is a truth that whenever you have spoiled children, it's usually not because the children had a big material life. It's because the parents maybe without even knowing it. Maybe like they they didn't even know they were doing this taught their kids that you should judge other people by how much money they have. Not how not how much wisdom they have or how helpful they can be or their morals or whatever. We have more money and therefore we're up here and they're down there. That's where the spoiled kids come from. So you got to be very careful about the lifestyle that you choose to live as well. One of the things I love about getting the chance to do this with you right before the book comes out is there's a level of expectation you may have that books have, especially yours, a very, very wide degree of potential outcome. How are you thinking right now about this book compared to your other books, compared to your own expectations of what happened? Now, we've we've made bets in the past. I've always won taking the over on your book. >> I owe you dinner. It's true. Um, yeah. So, we're recording this before the book comes out, so I have no idea what it's going to do. I also have a a theory like all books are basically a seedstage startup in the sense of even if you do everything right and it's run by talented people and wellunded, it's probably going to fail. That's that's most of the case. Books are a tail driven business. The first print print run of Psychology Money was 5,000 copies because all the evidence showed us like that would be a great outcome and we're at nearly 10 million now. Nobody could have foreseen that. And there's also plenty of books that are very well backed by bigname authors at Flop. That happens all the time. And so I think I I've always had this idea of what I call selfish writing. I write for an audience of one, which is me. I write things that I think are interesting. I tell stories that I think are are fun. I write it in a voice that I think is is is fun to read and easy to read. And if if other people like that, great. If they don't, there's nothing I can do about it. So, particularly if you're in a position to sell lots of books, if you sell a million copies of your book and if 1% of people hate it, that's 10,000 people who hate it, 9,000 of whom will email you and tell you about it. And so, you you always have to be in with a mentality of like, I did the best and I'm proud of it, but I can't please everybody. And that's just how it works. And it's a tail-driven business. 90% of virality of anything in life is luck. It hits the right people at the right time. Particularly with social media, it just takes off and has its own life after that. Before I wrote Psychology of Money, Jason Swag of the Wall Street Journal told me something that always stuck with me. He said, "Morgan, if the book is good, you don't need to market it. And if the book is bad, no amount of marketing will help. You do the best you can and then it's out in the world and there's nothing you can do about it." >> I'm going to ask you a couple of closing questions relating to spending. Before that though, what's your overunder on the number of sales this book's going to generate? I don't I try not I I try I've been a very poor judge of that as you know I don't try to think about it that much I mean know if you were back to it's a seedstage startup if you were a founder of a seedstage company that incorporated yesterday and you said how much is your company going to be worth in 10 years you're a fool to answer that question because the answer is probably zero but if it hits it could easily be a h 100red billion and so somewhere between uh between 1 and 10 million copies I think this is an important topic rather than like people don't like the word luck because it makes it feel like you're you're bitter of their success. So rather than luck, I think the phrase you should use is what is repeatable. And the truth is if you sell 10 million copies of a book, it's probably not repeatable unless you're like JK Rowling and like it's just not repeatable. >> What's next after this one? >> I don't know. I remember Michael Lewis saying this in an interview many years ago. He's like, it's so often for an author that when they finish one book, they're like, great, what's next? I got to start the next one tomorrow. And some people would do a very good job at that, but he was like, that's the worst mentality. You have to wait for the idea to hit you. And like I said at the start of this, like it's going to hit you in the shower. It's going to hit you when you're walking your dog. You can't just sit down and be like, what's the next idea? Psychology of money hit me on a on a walk. This hit me on the treadmill. So I I don't know. I just have to wait. And that might happen tomorrow. It might happen 10 years from now. >> All right, Morgan. Couple of questions to ask you. What is the best money you've ever spent? >> I don't think I've ever told this story. I my my wife and I met when we were young and she was 19. I was 21. Met in college and uh we started dating in May which was important because we started dating and she was like I'm moving to England this summer. We've been dating for two weeks like I get back in September. Let's just see how it goes then. And I was so in love with her already that I didn't like that answer and I was like I'll see you in London in two weeks. And I didn't have a lot of money back then but I was like I'm I'm getting on a plane. And London is where we like actually started dating. And I bet I almost guarantee if I didn't do that, if I said, "I'll see you in September," we would have gone our separate ways. And that was more than 20 years ago. We're still still going strong. >> That's awesome. What have you splurged on that you love and don't regret? >> The cheap cheating answer would be independence, but I know that's not what you're actually getting on. I travel well and I I like that. And a lot of people think that's a complete and utter waste of money and they won't do it. I'll tell you this is this is not the question you ask, but I think this is an important part. I grew up as a ski racer in Lake Tahoe and I always felt that my friends on the team had better gear than me. That like their skiers were not their their jackets were nicer and it drove me crazy. It was like it was like a hole in my soul when I was 12 years old. I hated it. And so now that my son who's nine, he's a big skier with me now. I think to make up for that wound that I had when I was a kid, I'm like, I'm going to buy him the best new skis, new jack, the best that exists. It's all his. The irony is he could care less. He does not care at all. He could be skiing on a cardboard box wearing a burlap sack. Wouldn't bother him in the slightest. And so it's been interesting for me of like what like hey I got you a new jacket. And he's like what? Like why? I don't care. I don't. And to me that's like that's the ultimate psychology of spending money. I had this hole that he doesn't and therefore we view it very differently. >> All right. One more. What's the worst financial advice that you see people keep repeating? >> One that seems very harmless and innocent is the spend money on experiences. It be and I think it's bad for two reasons. One, a lot of times the experience that you want is what will make a good Instagram picture. That's especially true for young people. And you're not doing it for the experience. You're doing it for the material good of social status. And that is that is just as much of a trap as buying expensive clothes to get people's attention. That's one. My wife and I also came to this conclusion like a month ago. This is a recent thing. We were like, can we acknowledge to ourselves that the last five vacations we've taken, the best part of the trip was coming home. The most enjoyable part of the trip was coming home being like, "Oh, back to the comfort of home." And we're like, "Maybe we should do this less." Like, society tells us travel, travel, travel, travel. But at this phase of our life with young kids who aren't the best travelers, we're like, "Maybe we shouldn't." Maybe two months ago we canceled a vacation and we were like, "Oh, so glad I don't we we could just stay home and sit on the couch." And so that advice of spend money on experiences. Maybe part of it is the experience that I want right now is like playing Legos with my kids on the living room floor. That's an experience. I don't need to fly across the world to do it. >> Morgan, wish you best of luck with the book. Thanks again for doing this with me. >> Thanks, Ted. [Music]
Morgan Housel – The Art of Spending Money (EP.466)
Summary
Transcript
Most bad financial decisions happen when you follow the strategy that is right for somebody else but not for you. You have to view it as an art, not a science. That's why the book is not called the science of spending money. [Music] Morgan, great to see you, bud. >> Thanks for having me. Good to be back. >> Why don't we just start with how you got from your last book, Same as Ever, to the thought of writing The Art of Spending Money? I've always been a believer that you cannot force creativity. You cannot sit down at your desk and schedule and be like, I'm going to come up with the next great idea. It always hits you in the shower when you're going for a walk and you're like, oh, I got this idea. And I so remember the moment. This was probably 2021 and I was on the treadmill at 8:00 p.m. and it just hit me out of the blue, the art of spending money. And it was very similar with the psychology of money. One day I remember just walking down the street in New York. probably had lunch with you that day and it hit I was like the psychology of money that's oh that would be a good so it always starts with just the title and the reason that I really liked the art of spending money is because I realized I think everything I write starts with introspection about my own life I'm trying to figure out my own problems my own flaws and 5 years ago I realized that I could talk to you for hours and hours and hours about my investing philosophy and why I do it but then I one day I asked myself I was like what is my spending philosophy which is something that you and I have talked about in my personal life for years. What does my wife and my personal like why do we do the things we do? And I couldn't tell you. I couldn't tell myself. I never really thought about it that much. And then it also struck me as I started thinking about this that there are tens of thousands of books written about how to get wealthy. Some of them better than others, but tens of thousands of them. Virtually none written about what to do with it. And I think part of the reason why is because a lot of people's intuition, including probably my own until a couple years ago, was nothing needs to be said about the topic. It's simple. You just spend on what you like and and then it's it's over. Like that's it. There's nothing to be said about it. But I think if you drill into a lot of people's lives, rich people, poor people, middle class people, it's never that simple. There's always a psychological element of the psychology of envy, the psychology of social aspiration, the psychology of fear and contentment. And so there's nothing in the book that tells you how to spend because you and I are different as you and I have debated in our personal lives many times about how how we spend money. But I think the psychology of those topics, envy, greed, aspiration, contentment tends to be universal for everybody. >> So as you started doing research, how did you go through the process of originally thinking, wow, there's nothing to say to an insight. Oh, there's psychology around this to then formulating what became say the core thesis of the book. >> There's a well-known thing in psychology. I forget the name of it, but once you get a nugget in your head, you see it everywhere. And so once I started thinking about the psychology of spending money, you saw I saw it everywhere including in my own life. And so I would ask when have I been envious of other people? Why why did I envy what they had? They had something I didn't and that made me feel bad and I want like like you start drilling down into it and then you start seeing it everywhere else. Every book that I would read, you would start connecting the dots of like oftentimes it's not even about spending money, but the psychology of contentment, why some people just didn't care what other people thought of them and like what was going through their head, what did they want, what was in their life background that brought them to that point. So, it was the classic thing of once I started looking for it, I couldn't I couldn't stop seeing it. And then for a lot of writing, too, this is true for everything that that any writer has ever written, including yourself, you have to tell a good story behind it. When you're writing a book about finance, if you only use finance finance examples, you put people to sleep in one chapter. You can't do it. So, I had to find examples outside of the world of finance and spending. Examples of people and stories of people who are envious, who were who are very content, and then using those to craft a narrative about what I thought were the most important elements of the psychology of spending. As you take a step back, what's the core lesson or thesis that you think someone should take out of what you learned from writing the book? >> You need to spend more time looking in the mirror, so to speak, and figuring out who you are individually, rather than what does society tell me I should want and how am I trying to impress other people who aren't even looking. What I want's different from what you want. There is no right answer to do this. There are people who live paycheck to paycheck and that's right for them. That's the right lifestyle for them to live. There's no one right one way to do this. I think this is true in investing too. Most bad financial decisions happen when you follow the strategy that is right for somebody else but not for you. And it's an easy trap to get into because it is the right advice for other people. And you're like, "This worked for him, worked for her. Of course, I should go mimic that." And it's not right for you. And so I dollar cost average into index funds. If you did that, you'd probably be bored out of your mind. And if I invested like you, I wouldn't be able to sleep at night. We're just different people. There's not right or wrong. And so you you have to view it as an art, not a science. That's why the book is not called the science of spending money. Art is individualistic and it's subjective. And you uh and you have to keep your desires and your expectations confined to your own roof without being too influenced by other people. >> The very first chapter of the book is this great line I love. All behavior makes sense with enough information. >> Yeah. so much of, you know, what I what I see in the investment world, people trying to tease out other why why people do what they do. Um, would love you to dive into that thought. I got that line from my brother-in-law who's a social worker. He works with very disadvantaged children, many of whom are abused physically and psychologically. They're they're homeless, their parents abandoned, like the the the the saddest case studies you can think of, he works with. And a lot of those kids, actually, the majority of those kids do not do well in school. They get in fights on the playground. They don't do their homework. They skip school. And very, it's very often that the teacher or the principal will be like, "Why are you doing this? How can you possibly think it's okay to behave like you do at school?" And my brother-in-law said, "They have a phrase in the social system, which is all behavior makes sense with enough information. If this kid who's skipping school and getting into fights, if you saw what he was going through at home and the abuse and the lack of love, you don't condone his behavior, but you're like, "I get it. I I understand why you would think that's inappropriate or why you would want to lash out like that. And so again, it's not that you say it's fine for you to do that, but you're like, I get why you're doing it. That phrase, all behavior makes sense with enough information. You can apply that to so many avenues of life, including money. What happened in my past? So there there was a period of my adult life years ago when my wife and I were very frugal. We've loosened up quite a bit, and you were a big part of trying to prod me in a different direction. But I I've often asked because now we have loosened up a little bit and now I've asked what caused me to be in that mindset. And I bet if you got me on the therapist's couch and dug a couple layers deep, the answer would be something happened earlier in my life that left me in some aspects with low self-esteem, low self-confidence, and I had this mentality of I need to save everything because this is all going to come crashing down. I bet I bet that's what it was. Like it's hard for me to like actually zero in that specifically, but it's something like that. And so it was very common. This is not a criticism because you and I had fun conversations about this. They were always respectful, but I think it is common to be like, Morgan, why are you so frugal? Live a little. Live. And the truth was, even for me at that time, all behavior made sense with enough information. That was a product of who I was. One of the things I find really fascinating when you're talking about that is this lack of specific knowledge of why for you in your past you feel like I think I saved it because something happened where >> you know I I just felt like I had to keep all that money for my safety. >> I know you've explored that and I'm I'm kind of curious why do you think that exists if you can't even put your finger on what it is? I heard this from Peter Kaufman. He said, 'There's evidence in neurology that only 10% of your brain function is is conscious. The other 90% is processing emotions and feelings that you can't actually think about. They're there, but you don't know them. And so, a lot of people if if you think like, oh, am I scarred from my past now? Yeah, it's a bad experience as a kid, but I'm not scarred from my past. But the truth is, oh, you absolutely are. Things have happened and shaped you in ways that you can't even imagine. and everybody and that's 90% of what's going on in your brain are feelings and emotions that you can't put your finger on. And so I I always found that to be really fascinating as well. So if you ask why do I live this way and why do you live that way? Neither of us actually know. And a lot of people if you spent time with a therapist, a good therapist who can start pulling threads out of your brain, you're like, "Oh, I didn't even know this was there. I didn't even I didn't even understand this until we start talking about it, but of course it's been there influencing who I've been." So everyone can have that experience. So I think even the idea that 90% of it is not even conscious means that we can think about this all day but not really understand it. So a big part of this is yes I think you can there are parts that there are puzzle pieces you can put together but at the end of the day you kind of have to just say this is who I am for what for whatever reason this is who I am. Part of that too actually a huge part of it is the my growing belief that a lot of our personalities maybe the majority of our personalities are forged at conception and there's nothing we can do about it. It's just on the nature nurture spectrum. There's a lot of nature going on here and people are people are wired differently. I'm one of three kids to I have two two older siblings. We're all so incredibly different. My two kids are so incredibly different. Same parents, same values, same house. Couldn't end up more different. And so, of course, that's just a part of our experiences, but they we've just wired differently. Buffett talked about this quite a bit of with with finance. He's like, "Some people have the money mind where you you don't the first time they learn about compound interest when they're 8 years old, they just get it instantly. The first time they hear the principles of value investing, they're like, "Yeah, done. Got it. DCF, understood." And Mer put it more starkly. He was like, "When you teach financial matters to young people, they either understand it instantly or never. You either get it or you don't. You're wired you're wired for it or you're not." And I think there's a lot of areas in life in life that are like that. Music is one of those. Most people if you're if you're a musician you either understood it instantly when you're 60 years old or never. You're never going to be a musician. Dance is like we want to think that because we're intelligent and educated we could just go learn a new topic. And to some extent it's true. To a big extent it's not. >> One of the concepts you talk a lot about in the book is the pursuit of freedom. Money as a path to freedom. Would love to get your thoughts on what you mean by that. >> It's different for everybody. Some people like houses, some people like cars, some people like travel, but everyone's different. Virtually everybody, I would actually say everybody likes freedom, likes independence, doing whatever you want to do on your own terms, whatever that might be. And what you want to do might be different from what I do, but we're doing it on our own terms, being our own individual. That is universal. And so my definition of freedom is is different for everybody. And also independence exists on a spectrum. When I say independent, I don't necessarily mean you don't need to work anymore. Like pure financial independence. independence is always a spectrum and every dollar of wealth that you have is one more claim check of your own future that you own versus somebody else owns and so it's always on a spectrum of that and you know very few people will get to a point outside of retirement where they don't need to work anymore. They're completely free to do what they want when they want with whom they want. But the idea of you know for average ordinary people if you can you know have the independence to choose where you live and have a shorter commute that's enormous independence. If you can be laid off without frantically having to look for a new job the next morning, that's independence. If you or your family can get sick without it massively devouring your your your network, that's that's a level of independence. It's just the ability to withstand all the normal natural inevitable ups and downs in life. And some people will get to a point where they can withstand virtually any economic disaster when they they can they can live off interest and dividends and they're they're all set. There's there's that level. But I always view this is how I view debt, too. I view it as the more debt you have, the narrower the range of outcomes you can endure in life. Very simple, very elementary in that sense. But that's how I think about about wealth. Like the more wealth you have, the higher the channel, the wider the channel becomes of the range of outcomes that you can endure, good, bad, ups and downs, all of it. I never viewed it as saving money or building wealth. I viewed it as purchasing independence. Every from when I was a teenager, every dollar that I saved felt like a little bit more independence that I had. And a lot of that back too was low self-esteem. this is all going to come crashing down. I don't know if anyone's going to hire me ever again. I need to save for the apocalypse. That was probably my mentality. Maybe still is my mentality. But viewing it as not saving money, as idle money, as not delayed gratification, but viewing it as purchasing independence that I gain pleasure from today. Like it's not delayed gratification. If I save money, I benefit from that right now because I have a higher sense in my in my body of being more independent than I was before. That's always how I viewed it. You touched earlier on the concept of contentment as it relates to spending. I'd love to come back to you the research around happiness that how you spend your time, who you spend it with, the depth of relationships driving happiness more than financial means. How did you think about writing about how people spend their money as it relates to contentment and happiness? One of the biggest things is that I think a lot of the problem people get into trouble with, if only I had more money, then I'd be happy, is they're chasing the wrong emotion. Happiness is always a five-minute emotion. Happiness never hits you for more than a couple minutes at a time. I think it's very similar to humor. If I told you the funniest joke in the world, you laugh for five minutes, maybe. You don't laugh for 10 years. And if I told you that joke every day, you're like, "Stop. Stop. It's not funny anymore. Stop." Happiness is very similar. And so when like people have brief moments of like ah this is so great but not for 10 years. It's fleeting. And so when people daydream about having the nice house, the plane, the car, whatever it might be, and realizing how great that would be, by and large, what you're doing is you're imagining yourself in that house being content with it. Not being happy with it. You imagine yourself in that house being like, I'm good. I don't need anything else. I don't care that my neighbor's house is bigger. This is great. I'm totally content with this. Contentment can be a lasting enduring emotion. happiness never is. And so I think that's where people get into trouble. I think what you want to chase in life is contentment. You want to get to a level where like I I want to live a good life. I want to be able to enjoy the material abundance of this world, but I also want to get to a point where I'm like, I'm good. That's all I need. And so I I talked about my late grandmother-in-law in the book. She lived for 30 years on nothing but 1,800 bucks a month in social security. No assets, no pension, nothing. 1,800 bucks a month, nothing else. Happiest woman you'll ever meet. happier than any of the billionaires I've ever met. One of the few people who like probably did wake up smiling every morning. Found all of her joy working in her garden, going for walks, bird watching with her friends, totally content. She had no financial wealth and she had like unlimited psychological wealth. She had nothing and she wanted nothing more. And you and I know some very wealthy people, billionaires, who want the world and wake up every morning saying this ain't enough. And by the way, like I want to live in a world where most people wake up and say this isn't enough because that's where progress comes from. That's the seed of all innovation is people waking up and saying not enough. We need we need bigger, better, more like that's great. But at the individual level, it puts you on a hamster wheel forever. And so I think if you do want to chase that, unless you are so type A that you know you want to work 100 hours a week till the day you die, what you want to seek is contentment. And look, when I say contentment, I want to be content with my house. I don't want to be content with how good I am as a writer or a father or a husband. I never want to drop my standards for that. I always want to do better. I'm never going to be satisfied with how well I'm doing there. But I I absolutely want to be content with the physical life that I live because if you're not, you're always going to drive yourself crazy. So most people fall or certainly most people like maybe listening fall in between really like not having enough money for their basics and oh there's so much money on the side that you can just you know clip a coupon from US Treasury and and have everything you want >> for that group of people in the middle. How do you think about the tradeoff of achieving contentment or autonomy or freedom with incremental income that might get you that in the future? I >> mean, so much of this is I think be careful who you socialize with because they will absolutely indisputably set your expectations. I grew up in the woods outside of Lake Tahoe and this was before San Francisco tech money invaded. So, when I grew up in Tahoe, it was a it was a poor little mountain town. And by my childhood expectations, normal people drove old pickup trucks and rich people drove new pickup trucks. That was the stratification of wealth. Like, if you had a new F-150, you're like, "That guy's rich." And then I went to college in Los Angeles. In Los Angeles is the opposite. Wealth, like the definition of wealth is sky's the limit. And there are people in LA who like were like, "Oh, my my Bentley's 2 years old, so I'm poor." kind of thing. Like that that felt like the mentality in LA. And I think honestly if I if I think about it, people were way more content in Tahoe because they were socializing with people where the stratification of wealth was so much narrower that if you were, you know, a middle manager in Tahoe, you're like, great, you're doing awesome and you're raising your kid, like everything's great. Whereas in LA, it was like, oh, you're not a billionaire. Like why? What happened to you? So I always say like be careful who you socialize with. Be careful where you live because that is absolutely going to set your expectations. One example of this, the minimum wage in professional baseball by any definition on the national stage and definitely the world stage that's rich. 7 750 a year, you're in the tippity top, particularly on global standards. Nobody in the MLB earning the minimum wage feels rich. They all feel like they're scraping by because there are people on their team in the locker right next to them making 15 million a year, 25 million a year. And so 750 is absolutely a joke. There's a great Buffett quote, too. He says, "Success in life is when the people who you want to love you do love you." And everyone's different. In my own life, I'm like, I want my wife, kids, parents, and two or three of my friends to love me. And I desperately want them to love me and pretty much nobody else. And so, I want to use my wealth and my time and my energy to help my life within the context of those six or seven people. So, being careful who you socialize with and being careful whose attention and admiration you desire is really important. So if someone's in a certain situation, it's not easy overnight to I'm going to move to a new neighborhood. I'm going to make new friends. How have you thought about the incremental changes that move someone towards what would be contentment as they're sacrificing, let's say, incremental wealth. >> If I go back to when I was uh in my early 20s, my material desires were off the charts. every I I wanted to be the guy in the yellow Ferrari with the the Gucci that like I it was my material aspirations were so high and and they're really not that much anymore. And I think the reason why is because when I was 21, I had nothing to offer the world. I had no intelligence. I had no job skills. I didn't know how to love. I didn't know how to be a good friend. I had I had nothing to offer. And so I think intuitively a lot of people including me in that situation are like no one's going to admire me for any of those skills. Maybe they'll admire me for my car. that I think that was the easy and then I think a lot of people go through this as I'm like oh now I want to gain my admiration from my family and my ability as as an author and so my desire to show off my car drops because I want people to admire me for other things than that and so I think that can that can be really true so part of the part of the equation as you're thinking about incremental wealth is again whose love respect and admiration do you want who do you want it from and if you want it from strangers then you can try to get it through your material wealth And that's not even a criticism. I think I think it's a natural thing in the world. Like status is a is not always a bad thing. Stat you're trying to fit into other groups and cooperate with other groups. Status is not always a terrible thing. But if you want to use that money in what I think is a more durable manner, then you have to answer the question, who are the five or so people whose love and attention I really admire and how can I use this this money to leverage that? And so I use the example in the book of like will a big house make you happy? It might. If having that big house makes it easier to host your friends, but the realization is the friends are making you happy. The house doesn't make any difference. But if it's a conduit to having more meaningful relationships, awesome, fantastic. And an enormous house, a super expensive house might mean that everyone wants to come over and hang out with you. Awesome. Your social life is great now. But it's not the house. It's the the lubricant into better relationships. And so I think it's answering that that very simple question. Whose attention and admiration and company do I want and how can I use my money to get me there? >> Yeah. What are some of the things you found that people misunderstand about the right way to go about spending money and how they actually do it? >> Let me give you an example of a guy who I profiled a little bit in the book, Chuck Feny, who is a a multi-billionaire, started duty-free stores where you can buy like a gallon of vodka in every international airport, made a fortune, made $10 billion from the business. The very well-known part of Chuck Feny's story is that he lived like a miser. He lived I think the the statistic was literally he took out $2 million with an M from his $10 billion fortune to live on. He lived in a tiny little apartment flew coach and that's the well-known part of his story. He gave everything away. The less well-known part of his story is that when he became wealthy in the 1980s, when he first became a billionaire, he lived like a billionaire. He had multiple mansions. He had a private jet. He had a yacht. He lived like quintessential billionaire. And he didn't like it. He it just wasn't for him. Here's a quote that I love. He said, "I realized one day that I was happy when I was giving money away and I was not happy when I wasn't giving him money away." And so he chose to live like a completely normal ordinary middle- class person and gave everything away. What I love about that is not that he lived so frugally like but that's that was his choice. Great. What I love about it is that he chose it. He did not say because I'm a billionaire I have to live this lifestyle. He was like I don't care what anyone tells me what I should live. That's not what I want to do. I want to live like this. It's my choice. And so I love that he just made the decision for himself. He was not influenced by anyone else's expectations, any societal influences. A lot of people thought he was completely crazy that this guy's worth $10 billion flying coach in a in a one-bedroom apartment. But it was his decision. It's very rare in life that you see true independence. Someone who's whose truly their aspirations do not leave the roof of their house and and they're not influenced by anyone else's desires. It's very rare that you come across it. He was he was one of them. And it's a beautiful thing. >> And are those folks who do that, are they just wired differently? >> Of course they're wired differently. And the and the wiring that is different for most people is completely and utterly they are an internal benchmark thinker. And the external benchmark of comparing themselves to others doesn't measure whatsoever. I think it's more often that you see the opposite of somebody who is entirely external benchmark focused and probably doesn't have a lot a very a very stable internal scorecard of of how of how they're doing. Their measure of success is net worth, social media followers, attention and going to bed at night asking the question, am I doing the right thing? Am I doing the moral thing? Am I doing something that makes me happy? Would never cross their mind. I think that's actually way more common. >> How does somebody calibrate that that external piece? cuz it's it's true in almost everybody. Like there's some external validation of why are you doing what you're doing and kind of calibrating it. Is it because that's what your friends are doing? Is it because you think you're supposed to keep up? >> I'll tell you what, one of the things that that got me going on this topic of the psychology of spending was I used to live in Washington DC and I used to go down to the Library of Congress where they have this really cool section where they have every newspaper going back to sometimes the late 1700s. So you can go read like the Washington Post from 1871. And I used to love just going through and reading these things. And one day I was reading the Washington Post from 1929, obviously the peak of the Roaring 20s before the Great Depression. And I stumbled across this headline that I thought was so profound. The headline was, "The more you are snubbed while poor, the more you will enjoy displaying being rich." Yes. So many people if they have a very high propensity to show off their wealth. A lot of times it's because they are trying to fill an emotional wound that they had from earlier in their life of some time in their life when they were snubbed in some way and either for other people or even internally for themselves they want to show people or show themselves that they overcame that scar. I think everyone has some version of that my view of the world my spending desires and yours and everyone are a product of the experiences that we've had in life. Some of which were good, some of which were bad. some of which left some emotional scars on all of us. I have a a family member who grew up extremely poor. He was he was homeless for much of his childhood in and out of the foster system, then became a very successful businessman later in his life. And when his daughter was going to college, he told her, "Please pick the most expensive school that you get into." And it was almost like the higher the tuition, the better. And the reason was the idea that he was sending his daughter to an expensive school meant so much to him within the context of what he overcame. And I think that's an extreme example, but I think so many of us have some kind of emotional wound like that. And wound might be the wrong word because sometimes they're positive experiences. You grew up a super popular kid, loved by your family. You might not have very much desire to go out and prove yourself. You're just you have an innate amount of self-confidence from that from that experience. So I think the idea to answer your question, the idea that we are products of our own experiences, most of which are out of our control, I think is a good realization because it means my desires, your desires, our own view of the entire world, how we view the economy and politics are completely different from person to person. What you've experienced, Ted, is different from what I've experienced. And people in different generations, different countries, everyone's a little bit different. So part of that for me was a giving myself a little bit of grace of saying look if I do have quirky money habits and of course I do. It's not because I'm not thinking this through necessarily even though sometimes that might be the case. Something happened in my past that makes me believe this. And that's true for not just money. That can be true for political beliefs all kinds of social beliefs. Rather than looking at other people and saying why do you believe that? Why are you doing that? A way better question is what have you experienced in life that makes you believe that? An even better question is if I experience that same thing, would I believe what you do? And a lot of times the answer is yes. And so to the calibration question, I think it's less about like, oh, do I have flawed thinking and I need to push myself in this direction versus kind of embracing who you are and embracing that there is no right answer to this question. There's no right way to spend money. There's no right way to save and invest money. I dollar cost average into index funds. I know a lot of people watching this show don't do that or might even look down upon it. That's okay. The point is there is no run right way to do it and I think it bothers people in finance because finance particularly in the last century has been proposed as a math-based field like it's a cousin of physics and 2 plus 2 equals four for everybody for you and I there there is one right answer and we want to assume it's like that for money that for how we save invest and spend there should be a right way to do it and I think the reason that finance is so can be such a tense topic and subject of so much debate in a way that like meteorology is not. In finance, there's an infinite number of right answers for different people. And I think that bothers a lot of people. And so, I think the idea of embracing who you are and also being less uh judgmental of others because I I don't think it's it's it's ever appropriate to say, "I value spending my money on this and therefore other people should as well." Or, "I don't value this and therefore nobody else should as well." It's just not how the world works. What did you come to think is true about envy as it relates to people spending money? >> The author James Clear, he's unbelievably he he's the most successful non-fiction writer of the generation or maybe several generations. Book has sold over 25 million copies. Unbelievable. Dramatically more successful than I am as a non-fiction writer and we're about the same age. Somewhat similar topics. I do not have one single molecule of envy in my body for James because he is so likable. He is the nicest guy you will ever come across. You will never meet someone as successful and humble as he is. You will never meet someone who wants to help other people more than he he's just an awesome guy. And it's so it's impossible for me to envy him. He inspires me. I want to do more like he does, but I don't envy him. And I think it hit me that if occasionally, this is a character flaw of mine. If there are other authors who I envy, it's because I don't like them personally. They have they have a quirk of their personality that rubs me the wrong way. So I think so much of en there's a difference between being inspired by someone's success and being envied about what they have. And usually if you are struck with a bout of envy as all of us will be from time to time. It's usually because you say that person has something that I don't and they didn't deserve it. That's usually about where it comes from. And I bring that up because it's so common now in the age of social media. If you see someone with a nicer house, nicer car, a nicer plane, clothes, whatever it might be, than you have, you can either be inspired by their success if you admire them or if you think they didn't deserve it. It's very common to fall into the trap of envy. And so you were I think we're always making judgments about not only what people have, but whether they deserve that success to begin with. So back to the James Clear example, I am inspired by what he wants to do, by what he has accomplished. I want to be a better writer because of him and it makes me feel good about it. When you are caught in envy, then it's trying to chase what they have just because you feel like you're falling behind them and they didn't deserve it. You might be chasing something material that is not necessarily going to make you happy. Your neighbor who you don't like very much is a bigger house. So, you have to have a bigger house, not because it's going to make you happy, but just because you feel like they are in an unjustified manner above you on the social pecking order and that doesn't make you feel good. >> When does that translate from an emotion to spending? >> It's all over the place. Some people are obviously much better at this than others. This is not a black and white thing. But how much of the modern consumption economy is based off of some form on the spectrum of envy? Tremendous. Huge. Particularly for young people, particularly for young men, I would say, who are desperately trying to put themselves on the social pecking order. If they're young in their career, early in their career, trying to figure out where they sit in the order, trying to fork to to show people and to broadcast their talents. tremendously common in that aspect. So, some people are are much more influenced by it than others. But there's two ways to use money. One is as a tool to give yourself a better life. The other is as a yard stick of status to insert yourself on the social pecking order. That's always been the case. That was true 100 years ago. It has gone supernova in the last 15 years with social media because no matter how well you're doing, no matter how much you make, no matter where you live or how successful you feel, there is somebody on Instagram who looks prettier, happier, smarter, more successful than you are. No matter what you're doing, the comparison group that everyone compares themselves to has grown from what used to be probably 10 or 15 people in your personal life to 10 billion people on social media, 7 billion people on social media. And so, and I think it's impacted everyone, particularly younger people for whom that's all they've ever known is a social comparison group is social media. And everyone knows what the mental health of Gen Z is. It's atrocious relative to previous generations. >> How have you thought about how people approach and think about spending money? way that I wanted to think about it in my own life, but I think it's a pretty good exercise for others was asking the question, if nobody could see how I lived, if nobody except my immediate family could see my house, my cars, my vacation pictures, nobody else was watching, how would I choose to live? And you immediately understand the difference between utility and status. If you completely remove status from this mental exercise because nobody's watching, how would you want to live? And you immediately be like, well, I would want things that actually make me happier. I would want a house with a nice view. That makes me happy. I wouldn't necessarily want a house in the most exclusive zip code. That does nothing for me. I probably wouldn't want a Ferrari. I probably want a pickup truck that has utility. And I would want comfortable clothes that have utility. I wouldn't care at all about what brand they were. And so you immediately flow to this area. And why it's an important exercise is because the truth is very people very few people are watching. There's a great quote from the comic Jimmy Carr. He said, "In their 20s, most people are worried about what other people think of them. In your 30s, you say, "I don't care what anybody thinks of me." And in your 40s, you finally realize the truth, which was, "Nobody was thinking about you to begin with." I think that is so true, and it is so common with spending, that nobody is thinking about you as much as you are. Nobody cares about your house or your car or your clothes as much as you do. They're busy thinking about themselves. And once you come to grips with that, then I think you can your desire for impressing strangers plunges. And then your desire for using money to help you and your immediate family, the people whose love and attention and admiration you actually want can increase. >> Alongside of understanding the why, what have you what did you see in terms of calibrating expectations sort of how spending flows through to what you think you want in your life. One thing is that it is extremely common and very easy that if you wake up every morning feeling a little bit unfulfilled in life. There's a hole in your soul and you're just a little bit anxious, a little bit depressed. Extremely easy to assume that the solution to that problem is more money. It's almost like a knee-jerk reaction for everyone that well I have these problems. I don't feel fulfilled. If I if only I earned more money and could live a little bit different, then I'd feel great. And I think sometimes that can be true. Everyone can spend money in a way that's going to give them a better life. This is not an anti-spending creed at all. But I think it is too easy to make that assumption. And part of the reason that it is so easy is because money is one of the only things in life that is so immediately tangible and quantifiable. And so I use the example like if I said if I woke up and said I want to be a 10% better father, great goal. I would love to do that. What does that mean? How how do you measure that? There's no way I can measure that. I don't know if I'm a better dad than you are. There's no way to quantify it. But if I wake up and say I want to increase my net worth by 10%. Measurable down to the penny. I can compare mine to yours and everybody else's. So, because it is such an easy yard stick of measurement, it becomes for many people the ultimate target of not only how well they're doing, but the quality of their own life. It's too easy of a target. And so, it becomes the knee-jerk reaction of the solution to all your problems. >> There's a lot of people, particularly in the finance world, where that measurement is some verdict of success in their eyes. and you see people who it's unclear if it's just the game or more is the goal and there's no end to more. What did you see of folks that achieved any sensible measure of success and yet that wasn't enough? >> The biggest that I've come across because they're such a famous example is the Vanderbilt family. Of all the Robert Baronss, the Rockefellers and the Carnegies did pretty well at managing expectations, keeping wealth across multiple generations. They did a pretty good job. The Vanderbilts did by far the worst. It it's just it's it's a very it's a tragic story. Not not a lot of sympathy for someone who was worth almost half a trillion dollars adjusted for inflation when he died. But effectively, when Cornelius Vanderbilt died in the late 1800s, adjusted for inflation, roughly half a trillion dollars. Within three or four generations, there was virtually nothing left. And in between there were three or four generations of Vanderbilts who'd like if you dig into their lives and their biographies almost every one of them to a tea was miserable. And part of the reason why like how how could you be miserable if you had more money you you could do anything in life. In theory that's true but the but the truth was they had virtually no independence at all. The money told them who they could be who they could socialize with where they could live uh who they could marry what what values they could have. the money controlled every aspect of their personality and they had no it was it was like they were imprisoned by it and that can be like a hard like how can that be true if it's like most people's dream is to kind of have that that much money I came up with this concept in the book called social debt which is like you have financial assets and sometimes you have financial liabilities but there's a social debt as well and social debt is a hidden liability you don't actually see it but it's very real it's when society and your own expectations tell you how to live and who to be and control your personality control your desires in ways that might be opposite of your actual personality. And the Vanderbilts are a very interesting example because the first Vanderbilt heir who did not get a trust fund when virtually all the money was exhausted is Anderson Cooper of CNN. Not only is he the most successful Vanderbilt heir in probably 150 years, he's probably the happiest. And part of the reason was he was basically the first person in his family in a century and a half for whom money did not control his personality. He was like, "I need to go make a name for myself and do what I want to do. I'm not going to be a socialite and just go to parties and host, you know, you know, whiskey tastings with my friends. I'm going to go do this thing that I love, which is journalism and TV." And so it was almost like he was a first person who was like mercilessly like let go of money controlling their personality. Now, that's an extreme example. There are plenty of other very wealthy families who do a great job. The Rockefellers did a very good job of it. So, it's not cut and dry, but the Vanderbilts had an they had a half a trillion dollars of wealth and probably a trillion dollars of social debt hanging over them that they didn't even know. They couldn't count it, but it was a very real thing. >> And how about people currently making that money? Could be first generation wealth. Obviously, a lot of people in the money management industry that just generate a lot of wealth and then seem to have the motivation to keep going. And others generate the wealth and then they're done. The only formula that I kind of tried to put in the book is the the simple formula for a pretty nice life, which is independence plus purpose. It's it's a very basic formula, but it's hard to imagine anybody having a really nice life without those two things. Independence and purpose. There's financial independence, of course, but there's also like independence of thought, independence independence of philosophy, and purpose is is another enormous thing. My guess and this is probably not black and white but the vast majority of people who made some money and then quit and then walked away. What they were doing was not their purpose. They made a ton of money in a company but did they act was running that company owning that company actually what fed their soul? Probably not. And the people who do run the business until they die until the day they die that is their purpose. That is their soul. That's what they love to do. And so I think it by and large it's not about the money. I mean, anything over I would say in the tens of millions of dollars, it's not going to change your lifestyle that much. It's it's really not going to change that much. Maybe let's say a hundred million. Anything over a hundred, by and large, you're living in the same house, driving the same car. So, if you have financial ambitions more than that, I think it's either an addiction to money, which can which is a very common thing, or it's because what you're doing is actually your purpose and filling your soul and it's what you love to do. And so, take Mark Zuckerberg, Elon Musk, those guys. They if you told them they had to quit their business tomorrow, they they they would rather not live. They have to do it. It's just an extension of who they are. It's their purpose. >> What are some of your favorite stories and lessons from the book? >> This is one that has nothing to do with money, but when I heard it, I'm like, that's one of the best stories I've ever heard. Kevin Cosner, great actor. And when he, this is back in the uh late 18, late 1980s, probably. He had a friend who was homeless at the time. And because he was homeless, Kevin Cosner, who was still kind of a budding actor at the time, he and his wife invited them into his house. You're homeless. You can sleep in the basement. Come on in. And his friend is a writer. So when he was living with Kevin Cosner, he was constantly writing manuscripts all day long. And he would tell Kevin, "Please read this. Please read. This is the best thing I've ever written." Kevin's, "No, I don't want to read your manuscripts. Go away. You just you're just a smelly guy in my basement." Finally, he lived there so long that his wife said, "He's he's got to go. He's got to get out." And the guy left and continued to be homeless. He was back on the streets. As he's out on the streets, he's calling Kevin, "Please read my manuscript. It's so good. You're gonna love it." Out of desperation, Kevin was like, "Fine, I'll read the damn thing. Send it." He sends it over. And the manuscript is titled Dances with Wolves. And completely changed Kevin Cosner's life, of course, like one of the greatest novels that turned into the movie. And so Kevin Coffer kind of used as this example of like you never know where talent's going to come from. You never know where it's going to be. One of the takeaways that I had from that is like the luckier you are, the nicer you should be in life. If you are in a position to help other people and give them a chance and you never know where talent's going to come from like that, particularly for like an artistic talent like writing like that, you should give people chances when they when they have it. And just the general philosophy of the luckier you are, the nicer you should be as a base of the pyramid philosophy in life, I think it was really important. I'd love to dive into your path and your thoughts about spending where you just started because post psychology of money there's just a shift. Yeah. >> And and again we see this a lot in the investment world when someone has success all of a sudden they're in a different economic stratosphere than they thought they would be or maybe they they aspired to be there. walk me through kind of your thinking with you and Gretchen and your family going from that that scarcity mindset to what's changed over the last five or six years. >> I think people who have made an amount of money that they never anticipated can probably relate to to this to to to some degree. There is a list of things in which my image my life got better because we have more money. I could name a dozen things where like oh life's better now than it was 5 years ago. There's also a list of things that did not change whatsoever. And there's a list of things that probably got a little bit worse because of it. And I think that would be something that I would not have foreseen. There's no use being negative about it. Like we could talk about the list of things that got better, but a list of things that got a little bit worse in terms of my expectations, my my kids expectations, family expectations, the publishers expectations all shifted in a way that created a social debt, a social liability. And I think my wife and I have done a very good job at keeping those expectations in check. Even though we've loosened up at being like, "Yeah, but we just the only thing that's going to make us happy is our relationships with each other and our health." And so if you asked a very fundamental question, my my kids are young. They're six and nine. And if I said, you know, does my six-year-old daughter love me more today versus a couple years ago when we left? Of course not. Of course. Does does my son like playing football in the driveway with me more that I make now that I make more money than he did three years ago? Of course not. So the things that actually move the needle don't change whatsoever. I would also say that relative to where I was 5 years ago. I don't have more better days, but I think I have fewer bad days, which is a lifestyle improvement. That that that is a better life. That is an upgrade. But let's not pretend that when people make some amount of money, they're just going to wake up grinning ear to ear. It's it's it's just not like that. It's not how it works. I probably wake up frowning less often. So great. That's cool. But it's not necessarily the happiness that a lot of people envisioned. And I think I intuitively knew that 5 years ago before this, but it's one of those things you have to experience to actually believe it. >> What are some of the things that you would say were smart spending for you and your family? Things that you do spend on now that you didn't before. >> One is uh our our house, which is a big purchase. I I I work from home. My my wife is home. This is where we're at 99% of the time. Might as well go big on a house that is great for us and gives our kids a good life in a neighborhood that we enjoy. Like that was huge. And that I would say is all internal benchmark. You know, I we we don't have a lot of people over. We're not showing this to to anybody. This is all just for us. But we drive normal cars. We wear modest clothes. Like that stuff. The stuff that is more external benchmark we really couldn't care less about. The internal stuff is good. The other, and this is I I think people I think a lot of people with money can relate to this. The joy and legitimate pleasure that you can get from helping others is hard to describe. It's very hard to describe. And it sounds kind of like self- congratulatory if you haven't been there yet, but it is so true that if you help somebody who's in deep need, who you're actually going to make a big difference in their life, it's enormous. Spending five grand on yourself will probably do nothing. spending five grand for someone who's in need can utterly change their life and you get an enormous boost from that. We've had several experiences with that too. >> As you've internalized all these lessons through writing the book, how have you thought about imparting lessons about spending to your kids? >> One of the biggest things is I don't I don't think about doing that because I don't think you need to. The analogy I always use is there's so much evidence in politics that what you believe is extremely correlated to what your father believed. Your father in particular, not not different for everybody, but very high correlation between those two beliefs. And what's also true is that most fathers do not sit their children down and say, "This is why I vote the way I do." The kids hear every little comment. They w they they watch what you're watching on TV. They understand what you're reading in the paper and they form mental model over time even without any explicit instruction. They have an extremely strong mental model by the time they're young adults of what politics should be from their parents. And I think money is the same where you don't need to sit down your kids and tell them about money. But every time you say we can't afford this, every time you make a snide comment about your neighbor's yard, every time you choose the hotel to go on vac, they're always paying they're always paying attention. And by the time you're young adults, they have a very crystal clear mental model of how money works. Usually, people will go in one or two directions. Uh either mimicking what their parents did or realizing that their parents made catastrophic errors and running as fast away as running away as fast as they can in the opposite direction. But you're very influenced one way or another. So I would say like you don't need to impart lessons on your children. You just need to lead by example. You just need to be very cognizant of the lifestyle that you live, how you talk about yourself, how you talk about other people at the dinner table. I I talked to uh this guy a couple years ago. He's he's about my age and his father is a a very well-known billionaire investor. And he this this friend of mine grew up as a as a child of a billionaire living like a billionaire. And he is the most rational, down-to-earth, humble, empathetic person you can meet. And I asked him one day, I said like, "How did you grow grow up like this but become so down to earth?" And he was like, "Look, my parents, we I I he was like,"I always knew we had a lot more money than other people and we lived a bigger life than other people, but my parents made so clear that that's not what you judge other people by." And at the dinner table, we did not sit around and talk about how filthy rich we were. We talked about values and helping other people and being good corporate citizens. And that's what rubbed off on the kids. And I think there is a truth that whenever you have spoiled children, it's usually not because the children had a big material life. It's because the parents maybe without even knowing it. Maybe like they they didn't even know they were doing this taught their kids that you should judge other people by how much money they have. Not how not how much wisdom they have or how helpful they can be or their morals or whatever. We have more money and therefore we're up here and they're down there. That's where the spoiled kids come from. So you got to be very careful about the lifestyle that you choose to live as well. One of the things I love about getting the chance to do this with you right before the book comes out is there's a level of expectation you may have that books have, especially yours, a very, very wide degree of potential outcome. How are you thinking right now about this book compared to your other books, compared to your own expectations of what happened? Now, we've we've made bets in the past. I've always won taking the over on your book. >> I owe you dinner. It's true. Um, yeah. So, we're recording this before the book comes out, so I have no idea what it's going to do. I also have a a theory like all books are basically a seedstage startup in the sense of even if you do everything right and it's run by talented people and wellunded, it's probably going to fail. That's that's most of the case. Books are a tail driven business. The first print print run of Psychology Money was 5,000 copies because all the evidence showed us like that would be a great outcome and we're at nearly 10 million now. Nobody could have foreseen that. And there's also plenty of books that are very well backed by bigname authors at Flop. That happens all the time. And so I think I I've always had this idea of what I call selfish writing. I write for an audience of one, which is me. I write things that I think are interesting. I tell stories that I think are are fun. I write it in a voice that I think is is is fun to read and easy to read. And if if other people like that, great. If they don't, there's nothing I can do about it. So, particularly if you're in a position to sell lots of books, if you sell a million copies of your book and if 1% of people hate it, that's 10,000 people who hate it, 9,000 of whom will email you and tell you about it. And so, you you always have to be in with a mentality of like, I did the best and I'm proud of it, but I can't please everybody. And that's just how it works. And it's a tail-driven business. 90% of virality of anything in life is luck. It hits the right people at the right time. Particularly with social media, it just takes off and has its own life after that. Before I wrote Psychology of Money, Jason Swag of the Wall Street Journal told me something that always stuck with me. He said, "Morgan, if the book is good, you don't need to market it. And if the book is bad, no amount of marketing will help. You do the best you can and then it's out in the world and there's nothing you can do about it." >> I'm going to ask you a couple of closing questions relating to spending. Before that though, what's your overunder on the number of sales this book's going to generate? I don't I try not I I try I've been a very poor judge of that as you know I don't try to think about it that much I mean know if you were back to it's a seedstage startup if you were a founder of a seedstage company that incorporated yesterday and you said how much is your company going to be worth in 10 years you're a fool to answer that question because the answer is probably zero but if it hits it could easily be a h 100red billion and so somewhere between uh between 1 and 10 million copies I think this is an important topic rather than like people don't like the word luck because it makes it feel like you're you're bitter of their success. So rather than luck, I think the phrase you should use is what is repeatable. And the truth is if you sell 10 million copies of a book, it's probably not repeatable unless you're like JK Rowling and like it's just not repeatable. >> What's next after this one? >> I don't know. I remember Michael Lewis saying this in an interview many years ago. He's like, it's so often for an author that when they finish one book, they're like, great, what's next? I got to start the next one tomorrow. And some people would do a very good job at that, but he was like, that's the worst mentality. You have to wait for the idea to hit you. And like I said at the start of this, like it's going to hit you in the shower. It's going to hit you when you're walking your dog. You can't just sit down and be like, what's the next idea? Psychology of money hit me on a on a walk. This hit me on the treadmill. So I I don't know. I just have to wait. And that might happen tomorrow. It might happen 10 years from now. >> All right, Morgan. Couple of questions to ask you. What is the best money you've ever spent? >> I don't think I've ever told this story. I my my wife and I met when we were young and she was 19. I was 21. Met in college and uh we started dating in May which was important because we started dating and she was like I'm moving to England this summer. We've been dating for two weeks like I get back in September. Let's just see how it goes then. And I was so in love with her already that I didn't like that answer and I was like I'll see you in London in two weeks. And I didn't have a lot of money back then but I was like I'm I'm getting on a plane. And London is where we like actually started dating. And I bet I almost guarantee if I didn't do that, if I said, "I'll see you in September," we would have gone our separate ways. And that was more than 20 years ago. We're still still going strong. >> That's awesome. What have you splurged on that you love and don't regret? >> The cheap cheating answer would be independence, but I know that's not what you're actually getting on. I travel well and I I like that. And a lot of people think that's a complete and utter waste of money and they won't do it. I'll tell you this is this is not the question you ask, but I think this is an important part. I grew up as a ski racer in Lake Tahoe and I always felt that my friends on the team had better gear than me. That like their skiers were not their their jackets were nicer and it drove me crazy. It was like it was like a hole in my soul when I was 12 years old. I hated it. And so now that my son who's nine, he's a big skier with me now. I think to make up for that wound that I had when I was a kid, I'm like, I'm going to buy him the best new skis, new jack, the best that exists. It's all his. The irony is he could care less. He does not care at all. He could be skiing on a cardboard box wearing a burlap sack. Wouldn't bother him in the slightest. And so it's been interesting for me of like what like hey I got you a new jacket. And he's like what? Like why? I don't care. I don't. And to me that's like that's the ultimate psychology of spending money. I had this hole that he doesn't and therefore we view it very differently. >> All right. One more. What's the worst financial advice that you see people keep repeating? >> One that seems very harmless and innocent is the spend money on experiences. It be and I think it's bad for two reasons. One, a lot of times the experience that you want is what will make a good Instagram picture. That's especially true for young people. And you're not doing it for the experience. You're doing it for the material good of social status. And that is that is just as much of a trap as buying expensive clothes to get people's attention. That's one. My wife and I also came to this conclusion like a month ago. This is a recent thing. We were like, can we acknowledge to ourselves that the last five vacations we've taken, the best part of the trip was coming home. The most enjoyable part of the trip was coming home being like, "Oh, back to the comfort of home." And we're like, "Maybe we should do this less." Like, society tells us travel, travel, travel, travel. But at this phase of our life with young kids who aren't the best travelers, we're like, "Maybe we shouldn't." Maybe two months ago we canceled a vacation and we were like, "Oh, so glad I don't we we could just stay home and sit on the couch." And so that advice of spend money on experiences. Maybe part of it is the experience that I want right now is like playing Legos with my kids on the living room floor. That's an experience. I don't need to fly across the world to do it. >> Morgan, wish you best of luck with the book. Thanks again for doing this with me. >> Thanks, Ted. [Music]