Hello, and welcome to another episode of the Odd Locks Podcast.
I'm Joe Wisenthal and I'm Tracy Allaway.
Tracy, you know what topic we'd never really talk about or really do. It's like we never really do anything related like personal finance, person.
Like what to actually do with all the information that we talk about on a bi weekly basis. Yeah, what it means for making money.
It's like a huge part of like financial media. But it's like, you know, I like to usually like what's going to happen with the quantitative titaning.
It's a tough one because I feel like you can talk about it generally, but also there's the temptation a lot of people end up doing this to give specific recommendations.
Right like get this credit card, Tesla, or yeah, either buy this dock, get this credit card, don't buy avocado toast like all this stuff, or like you know, move your money. But like it's kind of like cliche topic.
But like, on the other hand, I do think it's interesting right now because we've just had this like a sort of extraordinary like three years of like inflation, which many people have never really experienced in their lives, And so to my mind, that raises some interesting questions like how is this going to like change people's behavior and what should what have people done in the past during
periods of inflation? Like there are really interesting sort of like personal finance, spending investing questions that like will come out of this era well.
Absolutely, and also the prospect of just finally actually earning some interest on a basic savings account. I know it's still below the level of inflation, but for people who've been earning zero percent for most of their professional lives, I think it's very.
I think now it's kind of positive, right because you could play five percent in the CD and maybe inflation we three gonna have, right, you know. I asked my dad recently about his memory of the nineteen seventies. I was like, what was that like? You know, the first thing he said was like I could really get a lot of money out of bank account day.
Oh, there we go.
Yeah.
So, you know, there's all kinds of interesting things about like how people actually deal.
With right and also what happens when we have a sort of regime change and how do people react to it and how much have things actually changed?
Well, you know, and we've been talking about some you know, some of the real estate episodes. Yeah, like how much people like anchored to the ZIP era. They're like, you know, as if like that was normal. Yeah, so it's like when have people adjusted? Is there still a big adjustment left to go? Like, there's just some really interesting questions. Absolutely, Okay, well I think we should talk about them. And we
really do have the perfect guest. We're going to be speaking with Morgan Household, longtime writer, the author of the best selling book The Psychology of Money is More books coming out hugely popular in this area. Morgan, thank you so much for coming on Outlass.
Well, Joe and Tracy happy to be here, Thanks for having me.
Can I just say, all right, I'm gonna just say something just to let's set this scene a little bit, like I said in the beginning of the conversation, like personal finances a genre. It's this little hackney, this kind.
Of cliche, but Morgan does it well.
Years ago, like twenty eleven, twenty twelve, I was a business insider Morgan was it the Motley Fool? And I said to my former colleague at BI Sam Row, Morgan is the first personal finance writer that I like. And now here's this huge.
That's high praise. High praise from that means I was.
I just want to say I was long Morgan Household very early on.
I was.
I was long Joe during that period as well as well. So this is this is open up to Since then, I've always I feel like I've always done the same thing since two thousand and eight when I started this, which was you know you mentioned most personal finance writing kind of falls into two buckets. It's either here's the credit card you should you should use, or here's the
hot stock you should buy. The credit card part, you know, I was never just I was never that interested in it, and the here's the stock you should buy always felt almost immoral to me because you don't know who's reading your stuff. Is this an eighteen year old day trader or a ninet year old widow? Like who are you recommending this to? So because of that, I always I just kind of naturally fell into this bucket of like what's going through people's heads. I don't want to give
anybody advice. I don't want to tell anybody what to do because I don't know you, but I'm really curious what's going on inside your head. Particularly I started as a writer in two thousand and eight, so the world was falling to pieces, and it was just this idea of like, well, what the heck just happened here? Yeah, And I think once I kind of realized that you could not explain two thousand and eight through the lens
of a finance or an economics textbook. It's just not in there to explain the bubble, the bus, the bailouts, not an economics textbook. But psychology had a lot to say about it. Sociology like keeping up the Joneses that perfectly explained the housing bubble. So there are all these other fields outside of finance that filled in the gaps.
So that to me was like, ah, I'm just really interested in how you can connect psychology and sociology and political science to try to explain what people are thinking rather than what they should do. Yeah.
Both Joe and I we sort of started our financial journalism careers around two thousand and eight, and it was a great time to do it because you're sort of on the same level as everyone else. No one knew really what was going on, but talk to us a little bit more than about your approach. How does taking that sociological or psychological angle actually inform the way you think about personal finance investing.
We let's say there's two elements to this. One is I'm a writer, and then the other is I'm interested in behavioral finance, and you really have to mix both of those because in writing, particularly as a finance writer, if you're just writing about data and charts, like a lot of people, even in the industry, it's like it's boring, You're not going to catch you. So you got to
tell a good story. And so I'm always trying to find examples from fields that have nothing to do with finance that explain how people think about greed and fear and risk, because not only do I think that gets you closer to the truth of what's happening in finance, if you can really get like, why are people thinking
the way they are? But from a writing standpoint, I think it's more interesting if you can be like, oh, here's a story from World War two that explains how people think about risk, and let me tell you how that bleeds into finance. I think it's more interesting as a writer to catch people's attention that way.
So we're recording this at an event in Huntington Beach at Future Proof isn't one of your most famous stories about parking cars in Los Angeles at one point being a valet.
So yes, it was a hotel here in Los Angeles that I was a valet at during college, and it was a high end, five star hotel, a lot of rich people coming through, and there was one member who was just an absolute animal with money. He was very, very wealthy. I think he was worth hundreds of millions of dollars and money has never burnt a hole in
someone's pocket so fast. He wandered around, he was he was always drunk, and he wandered around with a stack one hundred dollar bills I swear six inches thick, and he would just flash money like no other. And we did a lot of errands for this guy. As a vala tipped very well. And one day he came to one of my colleagues and he peeled off a thick stack of one hundred dollars bills and he said, go down to the jewelry store down the street and buy me some gold coins. I think there were a thousand
dollars gold coins. And he came back any gold courts and this guy with a group of friends sat there at the Pacific Ocean skipping a gold coins to see how far they could go. Oh my god, And I remember thinking I was twenty one at the time, and I remember watching this and thinking like, how long can this last? And it was probably ten years later that I said, what's this guy up to? And I googled his name and sure enough, he went bankrupt. He went,
his company went out of business. He went, And it was like, when I saw the headline, he was like, of course, of course this guy. So to me, it was always so interesting that he was so smart. He was an entrepreneur who made a lot of his companies built parts for satellites, and he had a patent that's in every Wi Fi device, Like he was such a genius technically, but his relationship with money was so broken
and so bad. So that was like, it doesn't matter how smart you are, it's not about like what your IQ is. If your behavior with money is wrong, you're done. It's out. And then there's a flip side of that. It's true too, which is that some people who are not that intelligent by their test scores or whatever, but they have a great behavior with money can do spectacular over time.
I'm probably taking the wrong lesson away from this anecdote, but did anyone go after the coins?
For all I know?
They're still there all right later today, Joe, this is this is this is good to know. So this is you know, obviously there are going to be individuals who maybe don't have high income but or do a good job of accumulating savings over years, or people of massive
incomes that blow it all kinds of things. You know, you always hear these other stories about the cohorts and people who went through something together, like people who came out of the Great Depression and then they like you know, were like hoarders or something like that, or people who
came out of whatever it is. Is that true? People say that all the time, or people experience like the inflation in Wymar Germany and support like when you in your research when you read take It, you read a ton of history, like does that seem to be a real thing?
Yeah, definitely. I think every generation experiences the economy in their own unique way, and those experiences, particularly what you experience in your teens and twenties, like your formative years where you're starting to pay it attention to the economy really sticks with you. Everyone is seen or probably heard of the studies about the generation that went through the Great Depression, and then right after that it was World
War Two. So that was fifteen years of hell, and those people coming out of it like that stayed with them forever, and there's been academics who have measured how that impacted them. They're very scared of debt, didn't want to invest in the stock market way more so even when you talk about people in warmer Germany, or that people went through World War Two in Germany or in France or in Russia, those people were completely scarred economically
for the rest of their lives. And more recently, all three of us became young adults in the early two thousands, So for me nine to eleven was the first like adult big event and then so that was massive, and I think for our parents' generation, who were adults in the nineteen nineties, when things were so at least in relative terms, calm, stable, prosperous, not just economically but politically and geopolitically, we're like so solid and there was a
recession or you know, there's a hiccup at ninety four and ninety eight, but for most people that was like unless you were a bond trader, didn't matter. The nineties were great. Nine to eleven was like, oh wow, like we really got knocked down here, but that was a one time event, like America is still as strong as it's ever been. And then in two thousand and eight, I was like, wow, we got knocked down again, like two times in the last eight years. That's pretty bad.
And then COVID twenty twenty, it's like the world broke again, like three times in twenty years. The world has broken in the United States, and I think that is like, what's the quote, fool me wants shame on you for me twice. Now that people have been fooled, so to speak, three times in twenty years, I think we now our generation believes that the world breaks every five to ten years, and I think that's a good I think that's the truth.
I think the previous generation that was America strong and stable and nothing bad happens, that was the anomaly, and I think I think we're a more pessimistic generation because of it.
So I was kind of going to go into that, you know, the one thing that I've been really fastened by over the last few years is what sort of strikes me, and particularly in like market it's an investing is this sort of like I almost call it like a sort of like nihilistic bullishness, like you saw it like buying NFTs or duage coin or whatever, where it's like, on some level it looks like optimistic speculative activity like maybe we saw in the late nineties, but it also
has this sort of like edge of like none of this really means anything.
You're knowingly chasing a bubble or buying a lottery because there's no other way to make money for the.
Wall Street bets like bragging about going broken your robin hood thing. Like it seems like we're in this era of like speculation but not coming out of a place of optimism.
Yeah. I almost think like the yolo mentality of trading NFTs or whatever it may be, is actually like comes from a very pessimistic place. If you're optimistic, then you're like, I want to own the S and P five hundred for the next fifty years. That's optimism. Pessimism is it's all going to go to hell anyways, Let's just throw it all on an NFT yeah, so it looks from the outset like a very like bullish, Like I'm so bullish on crypto. I know. I think it comes from a
pessimistic place. You made this point years ago that stuck with me during the gold bubble, if we call it that around twenty eleven, that there's nothing more pessimistic than betting on a rock. It's like, if you're optimistic, you bet on people. And how pessimistic do you have to be to say a rock is going to outperform humans? It's like the most pessimistic thing. And I think there's a very like there's an analogy in there with NFTs.
Yeah.
Wait, I take the point about people being pessimistic about these big sort of sociological breaks breaks in society. But if you look at the legacy of the two thousand and eight financial crisis, it wasn't necessarily a terrible time to start accumulating wealth and money. You know, if you bought the S and P five hundred in two thousand and nine, right up until twenty twenty, you'd be doing
reasonably well. Like, what do you think the legacy is of that particular era where we're still sifting through the wreckage of two thousand and eight, we have ultra low interest rates. Everyone's worried about deflation and subpar growth.
I remember, I don't know if it was twenty eleven, So if I'm getting this date wrong, I'm sorry, but I remember I think it was twenty eleven and the market went up substantially. Does that sound right to you? Twenty eleven? I think twenty twenty five percent? It was. Maybe it was twenty ten.
Twenty even bought him in October.
Maybe I was twenty year year. Maybe it was twenty ten. Maybe it's twenty twelve. I forget the year, but the market went up twenty twelve. I think maybe it's twenty twelve. The market went up twenty or twenty five percent. And I think it was Gallup who pulled Americans and said, did the stock market go up or down this year? And it was like sixty percent of Americans thought the market went down during a year when it went up twenty five percent. I actually think this was two thousand
and nine, which makes sense. Okay, it makes more sense, right, And so that wasn't I think this explains the question of like, in hindsight, it was a great time to accumulate assets. But during the time, even a year when the market went up twenty five percent, people were so sure that the economy was bad that they assumed the market went down. And Joe, both of you will remember this, from basically twenty nine to twenty sixteen, if you were a bullish on the stock market, you looked kind of
like a fool and you got dragged on Twitter. This was like, oh, the cape ratio is too high, and there was all this. So in hindsight it was a generational buying opportunity, but it was that's all hindsight. It was very hard to be bullish during that era, and a lot of it was twenty eleven was double dip recession right around the corner, and the idea that the financial crisis of two thousand and eight was just to prelude to what was to the big crash that was coming.
That was a very popular view during those years, and I think it was it was really hard to be a long term goal.
So we talked about this in the intro. This phenomenon of like people started like anchoring to what they know, and I feel like for a lot of people like ZERP, really low nominal interest rates like, oh, that's normal, and what we have right now, where like the ten years yielding four percent and a mortgage is over seven percent, that feels like aberrationally high. Like again, going sort of back to the past, like does it take a while?
I mean it must you sort of as you describe it, like it seems to like take a while for like at this sink in that It's like, no, that was that was then, and it wasn't necessarily like normal or abnormal, but that was a different time.
I think that that does make sense. But the counter to that would be in the other direction. You know, in the late nineties, a mortgage was seven percent run by two thousand and three it was three or four percent, And I think people got used to that really quickly. That was kind of the basis of the housing bubble that peaked in two thousand and six, is that by two thousand and six people were already completely used to low interest rates that didn't exist four years prior.
That's wild.
So I do think people get accustomed to it fairly quickly. And a lot of that, I mean, at the corporate level, a lot of that debt rolls over every five years, so there's gonna be like that, the credit cycle is going to wash out in a fairly quick period of time.
But interest rate cycles are also pretty long. Like interest rates bottomed after World War Two in the early fifties and then peaked in the late or the early eighties, Like it was a really long cycle for them to go from three percent to fifteen percent.
What sort of different behavioral patterns do you observe between eras of low interest rates versus eras of high interest rates.
I think because the interest rate cycles are so long, and there's only been a couple cycles in the post World War two era, it was like they went, what.
Were people in the nineteen sixties doing? Tell us?
So much of that debt, though, didn't really exist, like at the end of World War two and forty five, consumer credit barely existed at all. In fact, a lot of the GI Bill was introducing new forms of consumer credit to make sure the economy didn't collapse after World War Two. It was like, we want you to be spenders, so like credit cards and installment loans. A lot of
that just exploded after World War Two. But then the rates were so high during that period that it really wasn't until the nineties that consumer credit just like exploded, So we don't have that much history about what it is, and so I don't think there's a ton of precedent for what we're dealing with in terms of like the consumer credit. But there's also a thing where you've seen
I know, Joe, you've seen this chart. I think you've tweeted this chart of as a percentage of income, household debt payments right now are actually very low, like historically near the bottom that they've been in the last forty years. So if you just look at the nominal amount of household debt, it looks scary, but actually, as like a percentage of income, it's actually very low right now.
You know, Obviously, economists, like macroeconomists, the last real inflationary period that anyone remembers was the seventies. And interestingly, like I sort of the grandees of economics, many of them
came during the seventies, So like looms very large. But setting aside like how academic economists think from the from your perspective, we're looking at sociology and history, etcetera, Like, does this remind you of the seventies or is that just sort of like a fake analogy because inflation was high then too.
I think the seventies were really unique too, because because in addition to inflation that was so crippling, there was so much social unrest between Vietnam. All of that blended together to just an era of pessimism. So a lot of the pessimism wasn't just because of inflation or just because of FED policy, Like there's all these other things boiling up that made people just really upset about the state of America that all falls in it. And I think that was true in the nineties as well. It
wasn't just economic prosperity. It was economic prosperity mixed with political stability, mixed with Soviet Union was gone, so America is untouchable. It was just like all these things mixed together. And I think if you view optimism solely through an economic lens, like ninety percent of households don't read the Wall Street Journal, don't know what the Dow did yesterday. They're putting all of these things together. It's not just is the economy strong, it's is Washington in good shape?
Are their political fights? Or is my kids school in good shape? It's like all these things mixed in one, and I think a lot of financial economists and journalists only view it through one narrow lens. But that's not how most households think.
All right, So just on this point, I mean, one of the oddities of our current economic environment is that the hard data says we're doing relatively well, but if you look at the survey based data, if you just look at what people are talking about on a daily basis, it's like we're already in a depression. Basically, how do you explain that discrepancy?
I remember years ago someone saying that consumer confidence, like the statistic that's released, is fueled by three things the stock market, gas prices, and politics. And to the extent that that's true, then I think it's it's politics is probably what's why that's being partisan in the way it is partisanship. Yeah, and I almost think it's it's so extreme that no matter, the Dow could double and the
unemployment right could collapse to one percent. I mean, someone brought up recently, I think it was Josh Brown, who was like, you, guys, the stock market's near an all time high, unemployments three and a half percent. You can earn five percent on your cash. Why are you not why are you not happy here? And I think for a lot of people, the answer is politics.
Hopefully inflation is soon going to be back at target or you know, defence target. But we don't know for sure. But we obviously, you know, we had the highest recently had the highest inflation in forty years, something we haven't seen.
We talked a little bit about like some of the sort of like nihilistic speculation, what do you see as some other knock on effects from the last few years, whether it's the inflation or just the COVID disruption or anything else that we've experienced since March twenty twenty.
COVID was so interesting because it was so binary in terms of if you were a tech worker in twenty twenty, it had never been better, Whereas if you owned a laundromat, it's worse than the Great Depression, and the actual Great Depression, in facted virtually everyone at the same worst. COVID was so different, and so you have probably half of America for whom twenty twenty was a great year financially, and half it was the worst it's ever been by an
order of magnitude. And because of that, I think when you have half the country that doesn't understand what the other half went through, that also leads to an era of like, I don't trust this the numbers, trust the statistics, I don't trust the politicians because what this guy is saying is so counter to what I experienced in either direction.
And I think that also just leads to an era of hyperpartisanship of like, if you're saying that about the economy, how disconnected are you in a way that we really haven't dealt with. And a lot of the reason that a lot of the policies during the Great Depression, the New Deal got through in a semi biparson ways because
it's a great depression impacted everybody. Two thousand and eight was I think similar to that as well, like everyone was going to be screwed if the banks went down, so it makes it easier to push through policy.
This is also my theory of why people care more about inflation than the unemployment rate, because if you personally haven't lost your job, it's hard for you to sort of envision, oh, unemployment is at you know, a multi decade low, but you can definitely see egg prices at your local grocery. Everyone can see those, and so it seems like it becomes a much bigger talking point. But okay, let's talk about a bright spot, which is I guess we can now earn four or five percent on a
bank account or a certificate of pose. It that seems great, Yeah, and.
It's it's weird. There's almost a point when if you're buying a one year CD right now you get five and a half percent, it almost feels like you're robbing the bank. You're like, You're like, really, you're gonna fig me that when you when you've had fifteen or ten years whatever, observe. It's it's a wild thing to deal with. But you both of you know this historically weird. This is normal. Yeah. I think that's what's hard to wrap your head around, is that historically this is what we're
dealing with. Is not the anomaly. This is the completely normal part. And I think it would I think everything would be better if we live in an era if we never go back to deserve. Everything would be better if we have an era where there is some sort of anchor on speculation and people can earn a decent return on their cash with some level of risk. I think that's so much healthier in every aspect.
So one of the weird things though, just on that point, was, you know, earlier this year, when interest rates on bank accounts were starting to creep up, we actually didn't see that many people who seem to actually be moving their money into higher yielding accounts or money market funds. It didn't really happen, I guess until March when we had the SVB drama. But what do you think accounts for that? Is it just it takes people a while to realize this is something available to them.
Well, I mean, I think there has been quite a bit that have moved into money market accounts. I mean, what are money market accounts now five trillion dollars or something, So there has been money that's that's moved over. I think the average American just doesn't think about it that much. And maybe if you don't have a very high level of savings, there's kind of a wide bother mentality. Yeah, whereas most I imagine most of the high dollar amount
accounts have moved pretty quickly. And it's a wild thing if you think about, you know, anyone's guess of future stock market returns is as good as anyone else's. But if you think, like at valuations stocks return like maybe six to seven percent something like that, that, my guess is as good as anyone else is. So let's say stocks return six and you can earn five and a
half percent in a money market account. All of a sudden, you're like, for the first time in twenty years, it's a really it's not an easy decision to make.
Yeah, I have to say so, I think, like, you know, this has come up a few times, you know, on show, and the first couple of times we discussed that, I'm like five percent, Like, that's not that.
Have you finally been rate pill Jack?
Yeah, it's it's like it's like it's it doesn't really seem worth it to like move it over. But now like after like a few months, it's like, actually, yeah, it is, like it is like meaningful. And as you say, like if historical returns on the stock market are like maybe six and a half percent or something like that, and now you can get five percent like truly.
On a money market account.
Yeah, it's like that's like pretty good, isn't it.
But that's I think that's the world you should live. There should be some anchor against speculation. There should be some temptation for your money that is not just a yolo mentality.
Do you think like it doesn't feel right now in September twenty twenty three, that the speculative fervor that we saw that really peaked in twenty twenty one, Like it still feels like there's still like some embers of that right, Like you still see meme stocks, like it's not much, but like it's still exists.
That's still twenty five, and I think it's I think it's wrong to just associate speculative frenzies with interest rates. You gotta remember the nineteen ninety nine, like the peak of the dot com bubble, interest rates were higher than they are today. So you can have a crazy bubble with interest rates. I'm sure it plays a role, but I think just explaining it as like every ten to twenty years, people collectively lose their minds financially, like irrespective
interest rates make what easier to do it. But you could have a giant speculatve bubble with interest rates where they are today. So it wouldn't surprise me, even with the hikes that we've had, if there's a new crypto bubble, a new meme bubble, like whatever it would be. I think all that is detached from interest rates.
It feels to me like social media is also I don't want to say new, because we had message boards in nineteen ninety nine and two thousand where people were talking up stocks. But it feels like that sort of added fuel to that dynamic where people are chasing bubbles rather than running away from them.
Yeah, and it turns into like a tribal mentality, particularly in the crypto space, where you're willingness and your ability to buy certain kinds of crypto is your identity. And I think that also existed in the nineteen nineties, like I'm a tech stock trainer, that's your identity. And I think anytime in finance where you say I'm a blank whatever it is, even I'm a value investor, anytime you get that kind of tribal identity, you're like outsourcing your
thinking to the madness of crowds. And I think it's a really dangerous way to invest.
Is there a way like to deprogram that for from you know, deprogrammed someone or deprogram yourself, because like that lock in effect where like right, some way that you invest you know, and I think even like professional like professionals have this all the time, Like it seems really hard. Just changing your mind is really tough. Is there all, like have you in your research? Are there tools or like ideas that actually work to like get better at changing your minds.
I don't know if there's tools or ideas, but I think some people are just much better at being independent thinkers than others. Even like I said, if you said I'm a value investor, it seems so conservative and so so benign. But Josh Brown has made this joke that a lot of value investors just end up owning like typewriter companies for twenty years. And it's like even if you lock yourself into that tribe, it's not safe.
But even like you know, I was thinking too, like you know, in the beginning, like and you still have this fight. It's like setting aside eve an investment to like team Transitory or like team persons when you're debating inflation. It's hard to change your mind really, even with new data.
And I think social media makes that really hard too, because now there's like a timestamp on every call that you made in a way that there wasn't before, and people would much rather be consistent than be right. And the reason that is is because I think when most people are looking at a pundit online, they want their pundit to be consistent. And most people like, if you tell people what they want to hear, you can be
wrong forever without penalty. So if you want to be pessimistic and you listen to Peter Schiff for ten years saying the dollar is going to collapse next month, even if it doesn't, he told you what you want to hear, and you're gonna buy his newsletters and keep on going. So in the punditry business, that's the way to do it, even if it's like from an economic point of view, it's terrible.
Well, we're very good at avoiding consistency on this podcast. Yet we don't have that problem. We change our minds all the time. No wait, you mentioned value investing, and it does feel like, at least up until twenty twenty and maybe even beyond it, the big money was in chasing momentum. What does that mean because we're talking about
the fallacy of group thing. But on the other hand, if you have a really good handle on a certain narrative or what's going to attract people to a particular investment. It feels like an advantage.
Yeah, there's a great George Soros quote quote where he says, whenever I see a bubble, I rush into buy it. And it seems so counterintuitive, like why would you want to buy a bubble? I think his I don't want to put words his mouth. I think his thinking is he understands that a bubble is very likely to grow bigger than you think, just because everyone else is going to watch their neighbor to get rich and they're going to come in, which is exactly what happens every single bubble.
So I think that like the chasing of momentum, Yeah, it has a huge behavioral component behind it. Now the hard thing is like getting out before everyone else is someone like George Sorels can do, but virtually no one else can. So it's like that has no appeal to me whatsoever, because the idea that you're going to get out before everyone else when you're chasing their behavior to begin with, is betting wrong thing.
So we talked about it in the beginning like this sort of like you know, talk about how personal finance, personal money is like there's like two kinds and they're both kind of I'm not that great where it's one is like giving people stock picks and you know, let's be honest, and the other one is this sort of like okay, here's like what credit card to get to like maximize miles sitting aside like the speculative frenzy or
investing or mem stock. Do you think what we've experienced over the last three years will like meaningfully change how people consume going forward in some ways, like just general consumption patterns.
I think it's not necessarily the last three years in terms of COVID being the last three years. I think it's the last ten years of social media that just massively changes it. It's always been historically that there's no objective level of wealth. Everything is just relative to the people around you, your neighbors, your coworkers, and you're like, relative to that person, here's how much money I have.
I always hear people say things like, oh, like compared to like a king in the eighteen hundreds, you're so rich. It's like, yeah, great, but my neighbors, Like.
Everyone just looks at the people around you, But now it's the people around you is Instagram, and it's a curiated highlight reel like everyone around the world. Someone said recently, I went from keeping up with the Joneses to keeping up with the Kardashians, Like that's what social media did. It went from now you're comparing yourself to the highlight reel of everyone's life. So I think expectations of what people's definition is of a good life just exploded over
the last ten years. I can see it with my seven year old son who spends time on YouTube and what his definition is all at age seven, of what success looks like. If you watch Mister Beast all day, success is like driving a Lamborghini and throwing ten thousand dollars at strangers. And I think there's an element of that in social media.
It's just.
It turns into that. But it used to be when you compare yourself to your neighbors, there's much more mundane than comparing yourself to Instagram. So I think that's that's the biggest change in consumption. It's just an inflated expectation, and it's the Luis k joke of everything's amazing and
nobody's happy. If your expectations grow, that much. Then, even when there is great economic growth and the stock market is doing well, it never feels like it's enough because you're comparing yourself to something crazy.
I mean, listening to that, it sounds kind of dire in the sense that I don't think social media is going away anytime soon. What does that mean for the long term? Is there a way for people to break out of that mindset?
I don't think there is, And of course social media is not going away, so it would not surprise I'm not a forecast kind of guy, but it would not surprise me. In the next generation, we have very good economic growth, very good stock market growth, and no one is even a morsel happier for it. I think that that it's already happened over the last generation. I mean, that's almost the whole history of economic growth, like great growth, but everyone just gets accustomed to it. And there's parts
of that that's great. That's what keeps people wanting to push harder and innovate more is because it never feels like it's enough. So a lot of that is a great thing. But if you're looking at it's easy today to think, oh, our grandkids, their real income is going to be double or triple of ours, and that means their life is going to be so great. It's like the second part of that is where people make mistake.
There's a good chance that our grandkids, their real income will be double or triple of ours, and I would bet heavily that they will not be any happier for it.
Right, They'll be like that guy over there has a bigger spaceship than.
As exactly what it's going to be.
Yes, well, what do you do like in your in your personal life or with your family, or how you like think about these things to like escape Some of these traps are very hard to fall into.
It's not easy to do. I think my wife and I, who's in the room right now, are pretty good at just being like, this is what makes us happy, and we're gonna we're not gonna let a lot of external influences let us in. But it's hard for everybody. No one can escape the comparison game. I think it's just a natural part of how humans behave is just compare yourself to your peers. So it's not an easy thing
to do. I think there is something to say for the idea that nobody is thinking about you as much as you are, so everyone is like, I got to get the nicer clothes so that people will be impressed with me. They're not impressed with you, and they're not thinking. They're thinking about themselves. No one's thinking about your car, nobody's thinking about the size of your house. They're all
busy thinking about themselves. Once you understand that, then I think your aspiration for showing off like plunges, and that's what you need to be. Like, I'm just happy with this, hanging out in my family, going for a walk with my kids. I don't need to show off to people who aren't paying any attention to me. But some people can do that better than others.
We've been talking a lot about how human beings respond to change and the idea that maybe we're going from an environment of low interest rates to one of high interest rates. You have a new book coming out. My understanding is it's all about change. Is that right?
It's about things that never change over time, which I think is the more important. I got the idea many years ago. There's a Jeff Bezos quote that I'll paraphrase. He said, people always ask me what's going to change in technology? And a better question is what is never going to change? And he said, you can never imagine a future at Amazon where customers don't want low prices
and big selection. So because you can't imagine that future, you can invest all of your money into that knowing it's going to be just as important fifty years from now as it is today, which you can't say about most other technologies. Most other technologies have a shelf life of a year or two and then they're absollete. So it was the idea that part of the started for me with just the observation that both of you know, most economic predictions and stock market predictions are very bad.
Our ability to predict what the stock it's not very good, so and I think part of that reason is because we focus, we try to pay attention on what's going to change, and if we instead pay attention on what we know is not going to change, how people pay attention and respond to risk and greed and fear. Let's just focus on that, knowing for certain that's going to be part of our future, rather than pretending like we can predict what might change in the future.
Well, it's funny like even on the stock market, like our friend Sam Row, like who has a great newslettercare dot com. His whole thing is like stocks usually go up, yes, and you know, we could talk all about, oh, what's going to happen with like you know, the if the FED doesn't hike it, you know, the FED hikes in November and the FED hikes twice, et cetera. But like history seems pretty clear, like in the long term, they just the line basically goes up.
There's another version of that. Derek Thompson from The Atlantic I think he wrote this in like twenty fifteen, twenty sixteen. He said, you know, since two thousand and eight, there have been hundreds of thousands of articles written about the economy and what's going to happen. And you can summarize all of that period by just saying things got better slowly. That's all the economic news you needed to know during that ten year period. And so I think I think there's a lot.
Of true I love talking about all this stuff every once in a while, I'm like, it's just sort of fun.
But I don't know, no, I think that's an important topic. I've been open about how I invest I dollar cost average into index funds, but I pay attention to the stock market every day. I read all the economic news. I read the Wall Street Journal every day because I think it's interesting. I think markets are interesting, and you don't need to take that news and become a day
trader with that news. But I think markets are such a fascinating window into human behavior, and there's no other window that shows like how people think about greed and fear and risk, which are such important topics in all areas of life, but you see it in finance in a starker way than any other topic.
Morgan Housel, so great to finally have you on Outlaws. Thank you so much. This is a really fun company.
Yeah, the perfect person for our first personal finance episode.
I think this has been fun.
Thanks, this is great. Thank you so much.
Thanks guys.
I'm so glad we've finally had Morgan on.
That was great.
That was fantastic, and I'm looking forward to the new book for sure. I also thought the summary of Markets and Economics as like, it's not really about the line going up or down, but it's about the human beings involved in it, the emotions, the sort of like intellectual rigor around these ideas. That's the perfect way of summing it.
Up, Yeah, I totally agree because I basically am of this view. It's like the economy will probably overtime grow and the stock market over time will go up. And I don't want to just leave it at that because I do think.
All this, that's your job, this.
Is my job.
I want people to pay attention. But every once in a while, I'm like, Okay, why do we pay attention? And I think that Morgan captured it as you and as you said right there, it's like, it's interesting, we learned a lot about how people think and how people behave. It doesn't necessarily mean like it makes sense to like try to like trade to like Morgan Stanley or Goldman's like s and p Year in Target or something, right.
I also thought the point about like one of the things that happened in COVID was the fracturing of people's experiences. I thought that was really interesting because I think the knee jerk reaction to a global event like that is to think, oh, well, we all went through this big,
you know, history making thing. But actually, as Morgan said, individual experiences varied widely, and I think it makes sense that that might be one reason why people now are much more distrustful of what they're hearing on a sort of collective basis.
That was such a good point. That was like a light bulb because I guess on some level it's like maybe that seems obvious, but like that was really well put in. Like I remember July twenty twenty and I was like, things don't seem very good. But then I did, like you know, I would like follow like these tech people and they're like like close another deal today, yeah, like over zoom, and I was like wow, like this is.
A yeah, I'm working from home and like my personal wealth just went up by ten person, Like.
That's really that bifurcation is really striking. I was like this idea of like we had three in the span of less than twenty years, yeah, nine to eleven, two thousand and one, the Great Financial Layman two thousand and eight, and then COVID so less than twenty or three, like pretty like sort of earth shattering moments of one way or another, Like you see like how like cumulative we just begin to expect like oh this is the norm.
No totally, And I think people also react to those in different ways because some people might think, well, I need to save a ton of money. Yeah, because I never know when there's going to be a great recession coming up next and I'm going to lose my job, and other people might just think, you know, screw it, none of this matters. Even if I accumulate all this wealth put it in an index fund, Maybe another two
thousand and eight happens tomorrow and it doesn't matter. So I'm going to buy an NFT instead, right?
Or am I going to be happy with the five percent on the CD? Or you know, like I always think, you know about the Chinese economy, which is does seem to have this same phenomenon of high savings, right, Yeah, but as you've written a lot about, like some of the most intense speculative the worldlike people like day trading, like iron ore futures and stuff like that.
Yeah, exactly. All right, well shall we leave it there.
Let's leave it there.
Okay. This has been another episode of the ad Thoughts Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
And I'm Joe Wisenthal. You can follow me at the Stalwart. Follow our guest Morgan Housel at Morgan Housel. Follow our producers Kerman Rodriguez at Carman Arman and Dash Bennett at Dashbot. And check out all of our podcasts at Bloomberg under the handle at podcasts, and for more oddlogs content, go to Bloomberg dot com slash Odlogs. We have transcripts, a blog,
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