People tend to have surprisingly short memories. Most of the time, they forget their bad experiences and don't try to learn from them.
says Morgan, author of the new books Same as Ever: A Guide to What Never Changes and The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness, which have sold more than 4 million copies since their publication. Mr. Housel. Published in 2020.
“The great lesson from history is to realize that much of the world hangs by a thread,” Hausl wrote. “Some of the biggest and most profound changes in history have occurred through chance, unexpected, and thoughtless encounters and decisions that have sparked magic and mayhem.”
You can plan for everything before the unexpected happens. According to Housel, this situation has been going on for a long time.
The following has been edited for length and clarity, as Housel recently told Yahoo Finance about his belief that many of the most important things in life never change.
Morgan, how does “Same as Ever” expand on your ideas about the psychology of money?
In the financial industry, most people don't make decisions on spreadsheets. They make it at the dinner table. They make it in a conference room with their colleagues. It's not just numbers and graphs. It's emotions, psychology, hormones, and your past experiences all colliding with each other.
What if you're worried about a recession or market crash, making bad investment choices, or simply having sleepless nights?
Rather than relying solely on predictions, it is better to have a prediction that you do not know when or where a risk will occur, but that the predictions are mostly nonsense or are about things that are well known. Expectations and predictions are two different things, and in a world where risk is invisible, the former is more valuable than the latter.
You write that there is a misconception that many people have that money can buy happiness. Could you rephrase that for a second?
I don't necessarily think money can't buy happiness, but it's true that new amounts of money tend to increase expectations. And when expectations rise, happiness at every level of life can be virtually destroyed.
Imagine a world where our grandchildren have a much better life than you and I. they are making more money. They have better medical technology. Maybe they live in a more peaceful world, but they're not happy about it either, because they just expect it to be.
An important life skill is to stop the goalposts from moving. It's also one of the most difficult things.
Why do you think lowering your expectations is a good idea?
Charles Munger, vice chairman of Berkshire Hathaway, once said that the first law of a happy life is to have low expectations. And I think he was encapsulating the idea that if your expectations are constantly rising, you'll never feel like it's enough and you'll never be happy.
What actually happens when that doesn't feel like enough is people keep taking more risks, more risks, more risks. They work longer hours, more hours, more hours, more hours in their careers. And it eventually explodes in their faces.
How does it affect how we manage our money?
Investing mistakes don't happen because people don't have the right information or the right details or the right formula. That's because people are trying to get the average return that the market is willing to give them, and they're saying, “What if I want a little more? What if I squeeze a little more out of it?”
That's the majority of investing mistakes. When you have no idea what's good enough, many people will naturally gravitate toward taking risks they can't really afford to take.
Based on your approach when looking in the rearview mirror, what is the right amount to save?
People are systematically underprepared for the risks they face in their personal lives. So if you're saving for retirement, save more. If you think you have saved enough, just keep saving. That's what history shows us.
If someone were to ask me, “Morgan, what are you saving money for? Are you saving money to buy a new house? Are you saving money to buy a new car?'' I would say, “No. “I'm saving for a world where unpredictable things happen all the time.” I think if you have to tie your savings to a specific event, you're doing it wrong.
Stressful and difficult times actually prove to be good in retrospect, right?
The greatest breakthroughs in society, the greatest technologies, the greatest social breakthroughs occur when the world is doing well, when everyone has an income and everyone has a full stomach, and everyone feels like the future is bright. It won't happen.
The biggest innovations happen when the world is on fire, so to speak. In the Civil War, it was railroad and telegraph technology. During World War I, it was wireless technology. In World War II, nuclear energy, rockets, jet planes, penicillin, all of these things. We would have figured them out anyway. But we probably figured them out about 30 years earlier than we imagined.
Can you bring it down to a personal level? Why shouldn't I be surprised when something goes wrong in my life?
When you find yourself in a difficult situation, the limits of what you think you can do are stretched further than you ever thought possible. Everyone has an idea in their mind about their limitations and their abilities. I have the ability to work hard like this. I have this skill, I have this intelligence. When things get a little more difficult, you'll realize that the boundaries are actually even further away. It's much wider than I expected.
This is a rather optimistic recognition that there is an incentive to try harder and be more creative when the going gets tough, and that's actually a great thing.
In your opinion, people should plan like pessimists, but dream like optimists. Could you tell me more?
There's a great story about Admiral Jim Stockdale, who was the highest-ranking POW in Vietnam. And he told this story about how the POWs who did the worst in Vietnam were optimists. That's because when optimists say, “Let's be home by Christmas,'' Christmas comes and goes and they get depressed. They will be disappointed.
And the ones who did it best were the ones who said, “We're going to go home eventually. This war is going to end. We're going to see our wives someday, but we won't be home before Christmas.'' he said. . This is going to be a very long war. ” Those who did the best were very optimistic about the future, but very realistic about how difficult the time between now and then would be.
I think that applies to business, investing, career, relationships, almost everything. You need to be very optimistic about where you are going, but very realistic about the challenges to get there.
From your perspective, people do some of their best and most important work outside of the office or at work. I think so too, and I think you too. Why should we pay attention to this?
Historically, most jobs were manual labor. Therefore, you can only be productive if you are swinging an ax and digging a hole with a shovel. I had to do something that actually looked like work.
As many of us have moved to thinking jobs where we make decisions with our heads, we no longer work with our backs and arms.
The most productive thing you and I can do might be to sit on the couch and think. Maybe I'll go for a walk. It could be talking to a friend. That's when you get the best thinking.
But for many employers, it's difficult to get you to do that. Because they're still glued to a world where work only happens when you sit at a desk and move your fingers on a keyboard.
By and large, we don't give people time to think, but when you piece everything together, this is the craziest thing. I think most people understand that good ideas don't come from meetings. It doesn't come when I'm sitting at my desk. They come in the shower. They come to the gym. They come when I'm walking my dog. They come when you're washing the dishes. That's when you think, “Oh, I understand the problem.” I understand now.
It's very important to give people time to do it, give yourself time to do it, give your employees time to do it.
Kelly Hannon is a senior columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 of her books, including “The World's Best.''Taking Control Even Over 50: How to Succeed in the New World of Work.” and “You’re never too old to get rich.” Follow her on X @Kellyhannon.
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