Transcript: Morgan Housel



The transcript from this week’s, MiB: Morgan Housel, is below.

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VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have an old friend who is also an extra special guest. His name is Morgan Housel and he could be the most popular writer in finance today.

He’s a partner at the Collaborative Fund but we really know him for his weekly missives on investing and behavior and psychology. There are a lot of people on my must-read list. Morgan is certainly one of them. I think you’ll find this conversation absolutely fascinating.

So, with no further ado, my conversation with writer Morgan Housel

VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: I have an extra special guest today. His name is Morgan Housel and he is a partner at Collaborative Fund but he is also a financial writer who began at the Motley Fool and has published in such august institutions as the “Wall Street Journal,” “USA Today” and elsewhere. He is the two-time winner of the Best in Business Award from the Society of American Business Editors and Writers and a winner of the New York Times Sydney Award.

His new book, “The Psychology of Money: Timeless Lessons on Wealth, Greed and Happiness” came out September 8th. Morgan Housel, welcome to Bloomberg.

MORGAN HOUSEL, PARTNER, COLLABORATIVE FUND: Thank you for having me, Barry. It’s good to be here.

RITHOLTZ: I had been looking for an excuse to bring you on the show forever. Full disclosure, we know each other quite a while. But in preparing for this conversation, I discovered all sorts of funny little things about you that I never knew.

Starting with your undergraduate career. Tell us what you originally studied and what you thought you would be when you got out of college.

HOUSEL: So, I have an interesting education background. It might help to start a little bit before college. I grew up as a ski racer in Lake Tahoe and because ski racing was taking so much time myself and a lot of my peers, we’re doing it effectively bypassed high school. We’ve actually did not go to high school.

We did an independent study program where you — we did virtually nothing. I mean, I honestly don’t have many memories of doing anything for my high school education. We got a piece of paper that said diploma on it when we are 16 years old and that was it.

So, when I started college, I started when I was 20 years old, I had no high school education. I had an 8th grade education at that point. So, I had to start at the very bottom. I started at a local community college with the most remedial courses that they offered trying to catch up.

And I was always interested in finance even during this period. I had no education. I had no idea what I was doing or what I was looking at. But I was always interested in the stock market. I was interested in investing.

And it just kind of occurred to me, I don’t know where I learned this or how I figured it out. But I got this idea that investment bankers were the smartest, most richest, most powerful, glamorous people in the history of the universe.

So, I wanted to be an investment banker. This was the mid-2000s. Every slightly ambitious young man in finance and economics wanted to be an investment banker. That was what I wanted to do and I had no backup plan when I went to college.

I was going to be an investment banker. That was it. I was going to move to Manhattan. I was going to work in mergers and acquisitions. End of story. No plan B.

And then I got an investment banking internship in my junior year of college and I walked in on day one and literally, literally within minutes, I thought to myself, get me the hell out of here, this is the worst environment, the worst culture I’ve ever seen in my life. It was just such a hazing environment of it wasn’t about learning or doing good work. It was sit in your desk and shut up so we can yell at you and if you’re lucky, you’ll go home at 3 a.m. and you will enjoy it and you’ll have a smile on your face.

And like I’m all for hard work, I’m all for grinding but this was just such a hazing. It was not hard work for any sake other than — that the senior bankers had to do it themselves so they wanted to put a torture back on you.

So, I got out of that really quickly. I think I lasted maybe like a month or something like that. And then I needed to do something else. In finance, I didn’t know what it was going to be but that’s how I kind of serendipitously ended up as a financial writer. That was not part of the plan whatsoever.

But I had a friend who was a writer at the Motley Fool at that time and he said, hey, you’re interested in investing. They’re hiring writers. Why don’t you apply? And I did apply thinking, A, they’re not going to hire me but, B, if they do, maybe I’ll stay there for three months or six months before I find another real finance job.

And long story short, I ended up staying at Motley Fool for almost 10 years and fell in love with writing. I’d always been interested in investing and finance. I was then, I still am now. But falling in love with writing was something that I did not see coming. It was not part of the plan but it became what I do for a living now. So, that was 14 years ago and here we are.

RITHOLTZ: So, let me rollback pre-Motley Fool but post-investment banking, was there a stint doing some private equity somewhere in the middle?

HOUSEL: Yes. Yes. There was. So, this was kind of summer 2007 I guess and I interned at a private equity firm in Los Angeles. And I love private equity, it was great. It was a good mix between business and finance versus just one side of the other whereas investment banking is just finance. You’re not working with the companies that you’re investing in. You’re just doing deals.

So, private equity was great. And then summer of 2007, as you know all too well, everything started blowing up. Financial market started seizing up. Credit markets seized up.

So, if you are a private equity firm that was borrowing tons of money to do these deals, things got really dicey and that was not 2008 by then. It was still 2007 but it was already clear enough that things were breaking and our portfolio companies were struggling that I was told, hey, there’s not going to be a full-time position for you when you graduate. So, that was when I needed to do something else and found my way kind of by pure accident into writing.

RITHOLTZ: And the ironic thing that knowing your writing all these years, to me, it’s funny. Investment banking, private equity, venture capital, it’s so opposite the way you described how you invest and how you think the average investor should put their money at risk.

Sort of contradictory, you keep it simple and say, more or less, just be a passive long-term indexer or am I oversimplifying that?

HOUSEL: I think it’s a little oversimplified because the only edit I would make to that is, look, I am — I dollar-cost averaging the index funds. I plan on holding them for decades if I’m still lucky to be able to do that. But that’s what works for me and I’m not going to pretend like that’s the best advice for everyone.

So, I’m not a passive seller (ph) at all. I admire a lot of active managers. I’m not against the active management in the slightest. So, I’m not just saying that to cover my bases, I’m really not.

This works for me because I, in my life, value the simplicity and the hands-off approach of our finances. I love being able to wrap my head around our entire net worth in the simplest ways possible and I think that active management is something where it should be the case that no more than 10% of people who’s set out to do it will be successful.

Of course, like that should be the case. People always make the — what we’ll point out, 90 percent of active managers underperform the benchmarks. Well, they should. Of course, that’s the case. You should have a situation where everyone who tries to beat the market can and they’re rewarded with kingly sums when they do it. This should not be the case.

It should be the case where it’s like what percentage of college basketball players go to the NBA. A really small percentage but that’s how it should be. The NBA is the big leagues where the stakes are high and the pay is huge. That’s how it should be.

So, when I just think about that from an active management perspective, it’s not that I’m against it, it’s just a risk reward trade-off and I know with really high confidence that if I and my wife can dollar cost averaged in the index funds, do it consistently and hold them for 30 or 40 or maybe 50 years, we will achieve every financial goal that we possibly have and more.

So, when I look at that and then I look at the odds of outperforming actively, something like 10 percent, something like, I just kind of shrug my shoulders and say, why, why would I need to do that. If I can do this simple thing that’s going to achieve all of my goals and I put no effort into it, the odds of like catastrophic failure are very low, the odds of the fund losing 90 percent of its value or becoming a fraud whatever it is, the odds of the manager retiring or being accused of fraud whatever it is, that’s all out the window.

It’s just like all those other risks are done and — versus active investing where I would have a 90 percent chance of doing worse. Not because managers are bad of what they do or it’s hard to pick good managers but that’s just how the active management space should work.

When I look at that trade-off, it just doesn’t make a lot of sense for us. But I completely understand why it would for other people. I — there are a lot of people who are like they cannot wake up in the morning and look at the mirror — and look in the mirror if they were dollar cost averaging in the index funds.

It’s just against their personality. They would feel bad about it. They want to do it. They would feel like they’re leaving opportunity on the table. And I just don’t have that in the slightest. I want to spend all my day reading and researching and thinking about writing and doing the writing. So, that’s where I leave it.

RITHOLTZ: So, active investing is not like lake will be gone where all of the children are above average sort of a mathematical quirk doesn’t work that way?

HOUSEL: I mean, you would — like for years, I was one of the people who is pointing at the statistics of 90 percent of mutual fund managers underperform the benchmarks. I’m saying this is ridiculous. They’re all — this is the indication of their failure.

And it took me a while to come around to the idea of like, no, that’s how it should be. That’s, of course, how it should be. If — back to like the college basketball analogy, no one looks at the fact that 90 percent or whatever it is of college basketball players don’t go to the NBA. No one looks at that and says, college basketball is a joke. They’re all failure. What are they doing? They have no idea what they’re doing. It’s a scam.

No one would say that. Everyone would just know like, hey, look, the jump from good to really good is going to have a big calling effect. So, there’s like — not everyone is going to make it. That’s how it should be.

So, it’s hard in the mutual fund space and the hedge fund space whatever it is to accept that that’s just the reality of it that maybe 10 percent of you will outperform over the long run. But when you accepted that that’s how it should be, it should not be any different than that. In a just world, that’s exactly what you would expect.

And then it just becomes less cynical when you’re looking at it. You look at it and say, yes, 90 percent underperformance last year but that’s how it should be. So, it doesn’t bother me anymore.

RITHOLTZ: Makes perfect sense to me. You have been writing about finance for the better part of a decade. At what point do you start to run out of topics? Do you ever begin to feel like you’re repeating yourself?

HOUSEL: Well, there’s two ways to look at this and first, I would say you’ve been writing about finance for the better part of two decades so you have insight on this as well, I know.

I think there’s two sides of this. One is my belief, and I’m pretty sure I stole this from Jason Zweig but there’s only like a dozen financial topics worth writing about. You can kind of guess what they are. Volatility is common. Compounding is amazing. Fees are — like there’s only so many topics that you can write about or like the core ideas.

So, yes, there’s a very limited number of things to write about but the number of ways that you can express those ideas, the number of examples, the number of different connections from other fields that you can tie back to investing, those, I think, are endless. They are bottomless. You could do this forever. You could be a writer for a thousand years and never run out of examples.

And for me, that really took off when I realized that investing is not the study of finance. It’s a study of how people behave with money. And since it’s a study of behavior, it has all of these other lessons from other fields, rules and laws from other fields, other industries, other practices that apply to investing.

So, when you think of investing, it’s just how people think about greed and fear and opportunity and scarcity, well, those things apply to a lot of the other fields. They apply to politics. They apply to military history. They apply to biology. They apply to all these — like all these other fields that are important.

Like if you can take the lessons from those fields and apply them to investing or write about how people dealt with those topics in different fields and what we can learn about that as investors, then I think the well of ideas is endless.

So, it’s especially definitely the case that every week, I’m sure you can relate to this as well, Barry, that every week, I kind of wake up and say, what am I going to write about this week and does feel like I’m running out of ideas. But you always figure it out. I mean that’s the case for you as well, right?

RITHOLTZ: Yes. I don’t — I used to — let me back up a little bit. So, when I started writing, I was putting stuff up every day just as a habit, just as a routine to become a better writer and I actually had a conversation with Jason Zweig who you referenced earlier about, hey, how do I transition to weekly columns that are a little more in depth and use a little more data and not just sort of, I don’t want to say superficial but just daily becomes a little more news driven and weekly allows you some time to step back and think.

That definitely was a transition. It wasn’t easy going from daily to weekly. I still post on the blog every day but those are quick hits, hey, take a look at this, take a look at this chart, see that. It’s not the same as a thousand-word column where you’re really going into depth.

So, that leads me to my next question which is tell us a little bit about your daily routine, how do you structure your day, when do you get to think, when do you get to write.

HOUSEL: It’s changed a lot over the years because when I was at the Motley Fool, particularly early on at the Motley Fool, I was on the volume game. I was writing three articles per day which gives you literally minutes, maybe an hour, to think of an idea, do a little bit of research on it, write it and get it out.

So, that was tough but that was also a great way to learn how to write. I had no writing experience or background when I joined. So, that was a good just kind of starting thrown in at the deep end and figure it out.

So, my routine back then was very much just like almost like a daily panic. Think of three things to write, get them out there. And also, the articles weren’t very good because I wasn’t thinking about — I didn’t have time to think them through.

RITHOLTZ: You really picked up a following at the Motley Fool pretty early in your career there. Where was the transition from just cranking out a lot of volume to I’m going to do something more thoughtful and in-depth?

HOUSEL: It was — actually, I was speaking with him the other day, my old boss at the Motley Fool, he’s Brian Richards, he’s still one of my great friends. He — I came to him one day and I said, hey, rather than writing three articles a day, what if I were to slow down and write like three per week and they would be much more thoughtful and in-depth and better researched.

But the thing is the reason I’m not doing that is because I’m getting paid per article. So, if I reduce my volume by 70 percent, I can’t feed my family anymore. So, I came to him and said, what if I cut down to three a week but you pay me the same. And he said, great, yes, absolutely, let’s do it.

And the pitch to him was like, hey, my articles are going to be better. They’re going to be much more in-depth and thoughtful. So, we did that and it works. I feel like that was the turning point for me is when I — the economics let me slow down and think things through and you will be a little more in depth and thoughtful and that was when I really started going from just sitting in my deck and just — my desk and cranking out whatever I could as fast as I could to, hey, let’s read a book about this topic and then I’m going to go for a walk and think about it and think about how it applies to these other things that I read about and call some of my friends and bounce the idea off of them and then do some other research just a much more calmer, thoughtful process.

So, that was when I started spending most of my day reading and going for walks just what I do now but that’s when it started. So, the actual writing that I do now and now is slowed down to one article per week, something like that.

So, 90 percent of my week is reading and going for walks, which is where I do most of my, quote-unquote, “writing.” It’s where all I’m like just thinking like piecing ideas together happens and and speaking with friends on the phone who are in kind of similar fields, have expertise about these things that I don’t.

So, that’s a huge majority of the day. There’s not a lot of structure because I don’t think there’s — there can be because good ideas, creativity can’t be forced. They can’t be scheduled.

Like there’s no — you can’t just have like a calendar entry and say, OK, at 9 o’clock, I’m going to do creative thinking and come up with an idea. It doesn’t work that way. It’s always just this kind of random things. Sometimes the idea is really easy and Monday morning and just like pop in your head and you got it, you’re set for the week.

Other times, it’s really just this like you spent several days just kind of grinding through a bunch of ideas, a lot of which don’t work, a lot of which are very well thought out or you try to start writing an article quickly realize it’s not going to work.

So, there’s really not much structure other than just kind of unstructured rambling thinking and that’s — it’s not an easy thing to do because most of the time, it feels like you’re not working. And then so I feel like a lot of my time, even after doing this for 14 years, I’m constantly hit with this idea of like what I did I get done today, I didn’t do anything today, I’ve just been sitting — I’ve been sitting on the couch reading some books, listening to podcast, I didn’t do anything productive today.

And it’s hard to accept that, no, that’s the work. I mean, obviously, that’s — it’s a great job. I’m fortunate to be able to do that. But that is the work. It’s just trying to piece together different ideas over time so that maybe once a week, one of them sticks enough that you can write a thousand words about it and publish it.

RITHOLTZ: I can relate to that sensation of what did I accomplish today and if you don’t have anything on the page to show for it or you’ve been in meetings and phone calls all day, it feels like, well, I failed to produce something, did I really get anything done.

HOUSEL: I think what’s so hard about that is that for most of modern history, work was visible and physical. So, your work was digging a ditch or pulling a lever at the factory or making goods in a factory or you work on a farm. That’s for most of our history work was very physical, it was doing stuff with your hands and it was visible.

You could see what other people are doing and you could see what you got done. And now, you were shift to the era where most jobs are thought jobs. They are creative jobs where you’re working with your head and what really matters is not what you’ve — it’s not your physical deliverables, it’s the ideas that you came up with.

Then work become something that just happens in your head and most people, myself, do their best work when they’re sitting on the couch or going for a walk or doing something that looks nothing like work. Like I really don’t do any good work and even thinking from sitting at my desk, and I think that’s true for most people. We’re definitely not sitting in a meeting. That’s true for most people, too.


HOUSEL: I get my best ideas when I’m doing things that look absolutely nothing like work, which is easier when you work from home because you don’t have a boss, you don’t have a coworker who’s watching you sitting on the couch and is judging you for it. But even still, even for yourself, it just doesn’t feel like you’re being productive even though that’s when you do your best work.

RITHOLTZ: So, last question about the business of writing so to speak. Who is your audience? Who you’re writing for?

HOUSEL: I’ve always — so, here’s — this is where I might differ for — from many writers is that most writers will know who their audience is and they will try to write for them and they’ll say, I’m writing towards — for investors or financial advisers and let’s write for them.

I’ve always been attracted to this idea of selfish writing where I’m writing for myself and what I mean by that is I only want to write things that I think are interesting that I would want to read myself and then I just have to take a leap of faith that there are other people out there who would want to read that, too.

And the reason I do that is because I think, obviously, people do their best work when they are most interested in it, when they themselves personally think something is interesting and they are learning about it as they go as they write. So, that’s all I ever try to think about for who my audience is.

And I haven’t done much research. I have a hard time answering your question because I don’t know who my audience is. I know — I mean, there — lots of them are financial advisers or fund managers but I know there’s a lot of nonfinance people that are in there.

And hopefully, if I find something personally interesting and it’s interesting enough for me that I want to go write about it, there will be other people who are interested in it as well. When I was working at the “Wall Street Journal,” the task that they gave me was right an investing column every week that is relevant to a hedge fund manager but is understandable and accessible to someone who has no financial background or training or even interest.

That was the challenge, the goal, which pushed me to writing about finance and economics in a way that is I think — that is hopefully totally jargon free and understandable without erasing the really important context and nuance of finance and investing.

So, I think when you do that, it opens up your financial writing, your thoughts and ideas to a much broader audience. Lots of finance writers are just writing for CFPs and anyone else who’s not a CFP is not going to understand a word of what they’re saying that kind of thing.

Whereas if I think if you’re writing through the lens of behavior and history and just how people think about money, the psychology of money, then it just opens up — the net that you’re casting out to your audience is much wider.

RITHOLTZ: I share your enthusiasm for writing for an audience of one. People asked me who’s podcast for and my answer is always just me, it’s people I want to sit down and have a conversation with. If anyone comes along, great. But these are folks that I’m interested in talking to. It’s a podcast audience of one and it sounds like you do the same thing with your writing.

I think you and I have swapped Daniel Boorstin’s quote. He’s the former librarian of Congress. I write to figure out what I think and besides, at that hour, all the bars are closed is his famous line, which I think is pretty telling.

The last question on this really is it sounds like your writing style and your voice have evolved over time. How long did it take for the voice that we know today as Morgan Housel to come about?

HOUSEL: I don’t think it ever end. I think it’s a constant evolution. I’m sure that what I write 10 years from now if I’m still doing this will sound very different from what I am today. I think everyone’s writing is kind of shaped by who they read last or what they read last.

So, of course, that’s the case like whenever I write something that maybe seems like it’s in a different voice, it’s probably because I just read a book that I like that was written in a way that was really inspiring to me and when I sit down and write, I kind of have that voice still in my head.

I think that the shift that I’ve had over time is just using smaller words, shorter sentences, shorter paragraphs because that’s just — that to me is the huge majority of what separates good writing from average writing is just who can say the most amount of stuff and the fewest words possible, that’s who wins.

And so, if you look at the stuff I wrote 10 years ago, it was just bigger words, longer paragraph and if you look it from when I first started, it was the classic like let’s use big word that people have to use a dictionary to look up to try to show people that I’m smart, which is like the worst absolute (ph) writing that exist.

So, I think that is just the — that’s been the only common denominator overtime is trying to simplify it. But I think the actual voice is always evolving and even if I go back and look at stuff I wrote three years ago, not that long ago, sometimes I read it and it seems like a different person. It’s just — so, that’s always changing over time.

RITHOLTZ: Interesting. Go pick up any Kurt Vonnegut novel which was written so long ago and he absolutely writes so much information, so much detail, such wonderful storytelling with very simple words and very simple sentences.

HOUSEL: That always the common denominator. If you look at like Ernest Hemingway or like any of the really famous historic authors and you just ask what makes that good writing, like you know that’s good writing but why is it good.

Most of the time, I think if you really think about it, you’ll come down to simplicity that they were just easy to read. And most readers are — have limited time. They don’t have endless amount of time to really struggle through paragraph and stop and think, wait, what do that sentence mean, what is he saying, I have to go back and read it again.

People don’t want that. They wanted to just glance their eyes over the page and quickly understand what you’re saying, what your point is so they can get back to their day and only way to do that is to use simplicity. Simple words, short sentences. They have to do it in a way that doesn’t remove any of the essence of what you’re talking about. That’s the challenge.

Like anyone can write with short sentences or what not but if you’re doing that, you strip away the most important salient point of what you’re talking about and then you failed. You have to say the most amount of stuff in the fewest words as possible. Both sides of that are important.

RITHOLTZ: Quite interesting. So, let’s talk a little bit about this book. I really enjoyed it. I read it on the beach. I plowed right through it. You used some wonderful stories to make really important points about finance and investing and just your relationship with money. How do you find some of these really wonderful stories you use as illustrative points?

HOUSEL: For me, it’s like, look, I’m a financial writer. I mean, I write about investing and the economy. But I never read finance books. I never read investing books. I rarely read anything online about investing. I just want to read from — like cast the widest net that I can and read about behavior and how people think and how people have dealt with greed and risk and scarcity and try to learn from that in a way that’s going to make me a better investor, make me a better investor writer.

So, all of the stories, it’s just — those that came from years and years of just casual unstructured reading and just poking around but always with this idea in my head and always with — it’s like this feed in my head of what I’m reading and trying to ask, how does this apply to investing.

I think if you’re always asking that question when you’re reading about a broad variety of topics, there’s stories in the book about meteorology and about medicine and about dentistry that all tie back to investing. So, if you just have the widest net possible that you can read and always asking yourself how does is apply to my field, then I think those stories are pretty easy to find.

And I think that applies to a lot of field. That’s not just investing. I think if you are a doctor or an engineer or a politician whatever it is, if you’re reading about a broad variety of fields and topics, you won’t — and you’re always asking, how does this apply to what I do. So, that’s, I think, is a great way to learn.

And if you are only learning about your fields through the narrow lands of your field and if you’re an engineer, you’re only reading about engineering, if you’re a historian and you’re only reading history, like that’s just a narrow lens to learn about any field, particularly field that has to do with just trying to answer the question, how do people think, how do people behave, what are people likely to do next. That’s all that investing is but that’s what a lot of fields are as well. So, that’s why I take that approach.

I also just think it’s more interesting. Most investing books and economic books are really boring and maybe people who work in the field will find them worthwhile to read but definitely not like the average layperson on the street, they’re not going to pick up most economic textbooks and say, this is really fascinating.

So, you have to be able to present it in a way that it’s both interesting and also much more intuitive to grasp. If you just lay out a bunch of formulas and charts, most people are just going to say, this is it for me, I don’t have enough mental bandwidth to get through this right now.

But if you can tell a story about something that happened in World War II, then a much — then a higher degree of people are going to say, this is interesting, I’m kind of fascinated in this now. It humanizes what is typically just an analytical field in investing in a way that I think makes it more accessible for people.

RITHOLTZ: This is a story that you come back to in your columns and in the book about the Wright brothers and how completely ground breaking, game changing Kitty Hawk was in the first powered human flight and you described how no one really had any clue what took place for years and years and years. Discuss that a little bit.

HOUSEL: To me, it’s always been fascinating because the airplane is — in my view, and I don’t think this is a bold statement, the airplane was the most important invention of the 20th century because it impacted everything. It impacted everything from retail transportation to business commerce delivery to military. It transformed geopolitics. It started world wars. It ended world wars. Every — like the airplane changed everything.

And when it came about, when the Wright brothers first flew in Kitty Hawk, virtually, no one paid any attention to it and not just in the first few days after their flying in which virtually no newspaper covered it but even after they went back to Dayton, Ohio where they’re from, they left Kitty Hawk, went bac to Dayton.

And in Dayton, they were flying all over people’s homes, people businesses, they were flying their airplane all throughout town and even then, people weren’t paying much attention to it. And even when people started paying attention to the fact that, hey, these kids made this thing, that’s pretty cool, maybe it’s not just a toy, maybe this is not just some like crazy wild science experience, maybe there’s usefulness to this.

What most people thought about the airplane even when they started paying attention to it was just for military purposes. They thought, can we strap a machine gun t onto this, can we drop bombs out of this. It wasn’t for years and if not decades that people really saw the usefulness of what the airplane would be which was transporting people around the world, transporting goods and packages and inventory around the world. That took a long time for people to figure out that would be the usefulness of the airplane.

So, when you think about that just — that just — that idea and then you say, how does that apply to today, like what inventions are out there today that we’re not paying any attention to or we are paying attention to but we just have no clue about what their ultimate usefulness will be, because you know that’s going to be the case.

It was especially true for the Wright brothers but it was also true when the car first came about, when computers first came about, when the Internet first came about, et cetera, et cetera, et cetera. I feel like it takes at least a decade for most big inventions to get noticed, to get recognized, which then makes you asking, what have we done in the last 10 years that no one is paying attention to.
RITHOLTZ: Quite interesting. Tell me a little bit about your writing process for putting this book together. What was routine like, how long did it take you and what did you learn in the process of writing a book?

HOUSEL: So, the genesis of the book where it came from a longform post that I wrote in 2018 called “The Psychology of Money” which I set out at that time. I kind of shamelessly ripped off the title from Charlie Munger’s speech, “The Psychology of Human Misjudgment” which I’d love. It’s a wonderful speech that I think he gave in, I think, 1995 and he lays out in that speech, I don’t know, 15 or so of these just ideas about how human thinking goes astray and it’s a really good speech. He uses examples from other fields.

So, I kind of looked at that and said, how can I do the same but for just within the confines of money. He’s talking about just how humans misbehave in general, how can I narrow that down to money. And then so for the post, I took the 20 or so biggest ideas that I thought I had come across in my decade of writing about this and I just tried to explain them as succinctly as I could in the post and it did really well.

Over a million people read the post. It’s the biggest article that I’ve ever published and it was also the case that when I was writing it, I was trying to keep it short because it’s a blog post. It still ended up at 9,000 words, which is a very long blog post.

But there’s still a lot more to say. There were more stories to tell. There were other different points that I wanted to talk about. So, I knew when I wrote it like this could be a book, which is always a challenge with a book is that there are a lot of good ideas out there and a lot of great points, a lot of great articles but turning something into — from a thousand-word blog post into 60,000-word book is a big jump.

And most books out there, the reason that people don’t finish them, most readers don’t finish the book they start, is because most topics do not take 60,000 words to explain. You can get your point across in 2,000 words, Chapter 1 and 2, you get the point and then you can move on.

So, I always struggled with what is my book — this first book going to be because I — it’s hard to find a topic in which you can really devote that much space to. But this I realized that I could most particularly because rather than one idea that I spend 250 pages rambling about, it’s 19 different ideas, completely separate ideas.

So, you can start the book if you wanted to on Chapter 17 and it would make sense to you. Like all the ideas have a common theme that are tied together but each one of these ideas lives independently, which is really important for me with writing the book because that was going to reduce the odds that I was just going to ramble on and on and on and on about one topic. So, that was important.

In terms of the actual writing and research, like most of these ideas that I read about in the book are things that I have come across and some of which I’ve written about during the year. So, it was not like I started with a blank slate with this book. I kind of have a lot of these ideas kind of sitting out there already.

And then I gave myself one year to write it and after nine months, I think I had written one chapter. It was just so easy to procrastinate and delay and delay and delay.


HOUSEL: And then my wife one day kind of gave me some crap about how little progress I was making. She kind of expressed that she was disappointed in how little progress I was making. So, then I cleared everything off my calendar and I wrote the majority of the book over about a four-week period last December.

RITHOLTZ: Wow. That’s amazing. Your comment about how everything is too long reminds me our mutual friend, Michael Batnick, is fond of saying most books should be magazine articles, most magazine articles should be blog posts and most blog posts should be tweets.

That philosophy imbues a lot of your columns because you often write stuff that I finish reading and I’m like, wow, that was like 400 words. He could have gone on for triple that length. You purposely choose to keep things short, don’t you?

HOUSEL: I mean, very few readers whether it’s a book or an article whatever it is, very few readers get to the bottom and say, I wish it was longer. I wish there were more words. I wish there were more supporting examples.

Most of the idea — most of the time, what people want out of an article or a book is just a single idea or maybe a handful of ideas. They don’t need to just grind through 400 pages of examples. If you can leave them when they finished the book, when the closed it whether they make it to the end or not, if they can close the book and put it back on the shelf with two or three ideas in their head, the ideas can be summarized in a sentence or two, that is, I think, most — that’s what — that’s a success in my view.

So, I try to keep it short for that reason. I’m just trying to — it’s just out of respect for the readers. There’s actually one chapter in the book that is 400 words long, which is one page. And when I turn it in, the publisher said, is this a mistake, are you — did you lose the rest of it, like what happened here, and I said, no, that’s all I wanted — that’s all I have to say on this topic.

And he said, OK, well, it’s a book, do you want to add some more to it, you want to add another — some more examples, and I said, no, that’s all I have to say on that topic and out of respect to the readers, I’m going to leave it at that. I’m not going to waste anyone else’s time and ramble on about this just because it’s a book and I want it — have to be thicker so it feels better, we can charge more for it.

To me, it’s just — it’s like the golden rule, I’m a big reader and I don’t like when other writers waste my time with words that don’t need to be there. So, that’s what I tried to do for the book is just I wanted to go deeper than a normal blog post because that’s what you can do in a book. You can tell longer stories.

But I also just wanted to respect people’s time and make my point as quickly as I can and then get out of their way so they can move on to the next chapter or go about the rest of their day.

RITHOLTZ: All right. Last two questions about the book. The first one, what did you learn about the process of writing a book, would you do it the same way back and loaded the way you did in the last four weeks or would you go about differently? If you’re advising a new writer who wants to put out a book, what would you tell them is a productive approach to cranking out 250 or so pages?

HOUSEL: I would never recommend that anyone try to write like three quarters of a book in four weeks like I did. It was miserable. It was terrible. But I’m — I needed that deadline.

When I gave myself a year to write it, it was so easy to procrastinate and put it off and put it off. We — my wife gave birth to a daughter right out — in the middle of that period which made it easier for me to say, I’m going to take month off, one month turned to two months, two months turned to three months.

So, for me, like I needed that pressure to just sit down and crank it out. I would definitely not recommend it but I have a feeling that when I write book number two, something similar is going to happen. That’s always the case.

But it actually worked out fairly well, too, because during those four weeks when I was doing absolutely nothing but writing this book barely even talking to my family. I was just writing like five in the morning until when I went to bed. It was — since it was constantly on my mind and it was so fresh in my head and there was nothing else in my head but book, it made it easier for me to focus on it.

And since everything was still fresh in my mind like when I was working on Chapter 17, there were things that popped in my head about Chapter 3 that I could go back and change because Chapter 3 was still fresh in my mind versus if you’re writing something over the course of a year, by the time you’re writing the last chapter, the things that you wrote in Chapter 2 that was a year ago, you forgot about it. So, just having that much focus on the book at one point actually worked out well for me.

RITHOLTZ: And you hinted at what’s going to be my next question which is when are we going to see the next book from you?

HOUSEL: The book number two is definitely happening. We have a deal with a publisher. I haven’t made any public announcement yet. The turnaround time on books is pretty long. It’s about a year and a half or two years from the time you start writing it to the time you put on the shelf. So, that will come out.

It’s broader than investing. It’s not a finance book. It’s not economics book. But it’s a book that I’m really excited about. I’ve kind of written a little bit about it in blog post in the past and this is going to be — this is another topic that even I’ve written blog post on, I finally realized that I can write about — that I can write 250 pages on this topic.

So, I’m still playing with the final idea but I have a broad idea in mind but we’re not talking about it publicly. But let’s say two years from now, you and I will be on the podcast again talking about it.

RITHOLTZ: All right. Looking forward to it. So, let’s jump right into the big question, what are the big lessons that investors should have learned from 2020?

HOUSEL: I think there’s two or three that come to mind and all of these were things that we’ve known before 2020 but 2020 just like it slammed them into our faces in a blunt force way and made them obvious. One is that the biggest risk that is out there is always what nobody is talking about because what makes it risky is the fact that nobody is talking about it.

So, all those things that people tend to worry about over the last 10 years, is the fed going to raise interest rates, is Congress can raise the debt ceiling, are we going to have new stimulus packages, trade wars, et cetera, et cetera.

It’s not that those things are not risky. It’s just that they are well known, they’re well publicized, we’re talking about them all the time so we can prepare for a range of different outcomes. What really moves the needle over time are the things that just come out of the blue overnight and no one is talking about it and since they’re not talking about it, they’re not prepared for it either in actual terms in terms of their finances, their cash obligations, their ability to service the debt and they’re not prepared for it in psychological terms.

It’s such a shock and people get stuck in shell shock attitude of sitting (ph) there with their jobs on the floor when it happened. So, that was definitely the case with 2020 when pandemics could have been seen coming. Bill Gates gave a TED Talk in 2015 I think it was where he describes the risk of like exactly what we’re dealing with in 2020.

So, it’s not that we could not see this coming. It’s just that the exact timing was completely unknown and for the majority of people other than epidemiologist and people like Bill Gates, I think we just assumed that these kind of things like global pandemics were something that happened 100 years ago but that we have moved on from in humanity and they were not going to be part of our lives, which makes it that much more scary when we’re dealing with it.

So, the general idea that the biggest risk is what no one is talking about really put — drives on the idea of taking forecast and economic projections with a grain of salt because it’s not that those things are going to be wrong or that they are not risk. It’s that in any given year, I think this is true every single year, and definitely over any given decade, the biggest news story is something that was completely unforeseeable before it happened whether it is COVID-19 or September 11th or clash in Soviet Union, JFK being assassinated, the Great Depression, whatever it is, the biggest news story is always something that was unforeseeable. That’s one of the big ones.

Something else that’s true in 2020 is just the value of room for error in your finances, room for error in your budgets, room for error in your valuation analysis. The number of companies that went from record sales — record health in February to bankrupt in March or April is astounding and just like — something like 2020 just kind of put a spotlight into how fragile so many businesses are and how fragile so many investors are, how quickly things can change and when things go in a different direction, it only takes a couple of weeks or couple of days, maybe a couple of months before things are broken and there’s going to be permanent damage.

So, having room for error in your finance like just that personal finance level, I think in general, not everyone, but in general, most investors don’t have enough cash and bond. And that seems like a controversial statement when everything is going well and then March 2020 rolls around and people realized exactly why they have that.

Cash and bonds often associated with conservatism, not wanting to take a lot of risk, not wanting to be subject to a lot of risk, and I just don’t think that’s the case. What they do, what cash and bonds do is they allow the stocks that you do own to be left untouched, uninterrupted so they can compound over time.

The great quote from Charlie Munger is, “the first rule of compounding is to never interrupt it unnecessarily” and when you think about it in those terms and you realize that the cash and bonds that you do own, who cares that you’re earning no return or a negative return during these dirty times, if once per decade that cash and bonds can prevent you from being forced to sell stocks at an inopportune time, they’re going to earn all of their return and then some. Those to me are the biggest takeaways from 2020.

RITHOLTZ: So, that raises two questions I have to ask you about your answer. I’ll come back to the question of how you invest but I want to stick with the idea of completely unforeseen black swan events or unanticipated events. Here it is, it’s the end of the summer of 2020, the headlines are talking about overvalued stock, about a tech bubble, about day traders, are any of those things as important as the headlines make, are those things we should be worried about or the mere fact that it’s headline news suggests that it’s less likely to be what causes the next disruption?

HOUSEL: It’s not that those things are not risky. Like if — like could Tesla stock moves 50 percent of its value in the next month. Of course. Of course, it could. We’ve seen that happened with other companies in the past. Of course, it’s possible.

But if it were to happen, it would not be that surprising particularly for people who don’t own the stock. But even for those who do, everyone has to know that that is a possibility.

But when it happened, it’s not that it’s not a risk. It’s just that it would be easy, particularly after it happened, we would say, of course, that happened, that was foreseeable but this has been happening for decades. So, it’s not that it’s not a risk. It’s just that it’s somewhat foreseeable.

And so, that’s what — that’s really what risk is. Like the idea that you and I can sit here right now and say, Tesla might fall 50 percent in the next month, that is very different from the conversation if you and I were having in January or December and we were looking ahead saying, what are the biggest risk for the next year.

No one would have said a global pandemic that goes shut the global economy down and caused the worst economic crisis since the Great Depression. And by the way, during that period, Tesla stock is going to be up 800 percent. No one would have seen that. No one would have said that. So, the fact that it was unforeseeable is what it made it risky.

Quite interesting. And then the second question is it’s funny, given your background, investment banking to private equity, I find the way you personally invest, which you described in the chapter of the book, surprisingly conservative, surprisingly risk averse. Your career seems like you embrace risk but what you actually do with your money is pretty middle of the road. Tell us about how you invest personally and how you budget and plan for your personal finances.

HOUSEL: So, it’s interesting that you bring that up because I don’t feel like that’s the case. I feel like I’m definitely an optimist. I feel like there’s going to be a tremendous amount of economic growth throughout the rest of my life that I want to take advantage of and invest in and compound and benefit from.

It’s maybe just a difference in how people get there. So, on our personal finances, I write about this in the book, the last chapter is called “Confessions” and I kind of just opened up the kimono on my wife’s personal finances. There’s no numbers in there but just here’s everything that we do with our money.

And how we invest is we’re quite frugal. We save a high portion of our income. We don’t prevent ourselves from buying anything that we want. It’s just that most of our needs or wants or desires haven’t shifted that much over time.

So, as our incomes have grown, our spending haven’t and therefore, we saved a high percentage of our income. And then we dollar cost average into Vanguard index funds and that’s it. Like our entire net worth is a house, a checking account, and some Vanguard funds and some shares of Berkshire Hathaway that I have for like sentimental reasons.

But that’s it. That’s all of our finances. And back to what we’re talking about earlier, I — our allocation might look for someone our age and our income, our net worth might look conservative. It’s — there’s various ways to measure this but cash is a percentage of our stocks let’s say. It’s something like 20 percent, something like that, which few financial advisers would say that’s necessary.

But for me, it’s important because I just want to make sure like my goal as an investor is to make sure that the stocks that I do own can remain untouched for 30 or 40 or 50 years. That’s my goal. And I’m going to achieve that goal if I can make damn sure that I can be hit with a category five financial storm and maintain it without having to sell my stocks for whatever reason whether that is a job loss or I have a change in expectations that I want to go out and buy a boat or a bigger house or send my kids to private school.

I want to be able to handle all of that without ever having to touch my stocks because if I can do that, if I can leave my stocks untouched for the next 20 or 30 or 40 years, that’s when the big games are going to happen, that’s when there’s going to be extraordinary return.

So, it looks like I’m not taking a lot of risk in the short run but the reason I’m doing that is specifically so I can take the most amount of risk and gave the most amount of leverage in the long run. To me, it’s this idea of saving like a pessimist and investing like an optimist. I want to be really pessimistic about the short run so that I have the opportunity to take advantage of the optimist long run.

RITHOLTZ: Save like a pessimist, invest like an optimist. I love that. So, in the book, you discussed the tendency of people to engage in confirmation bias to go out and seek information that confirms their prior belief. How do you avoid that? We all have biases. We’re all subject to the same wetware foibles. How do you prevent yourself from falling into the usual behavioral problems?

HOUSEL: I don’t want to pretend like I can. I don’t think anyone can. Daniel Kahneman, who’s, of course, like the godfather of this topic — of all these topics of behavior, has been asked several times if he himself has become less biased doing this research and he says, no.

So, like if someone like Kahneman cannot change who they are, how can someone like myself or you or anyone else do it. We can’t. I think the best that you can do it just be introspective about yourself and your own flaws and embrace them. Rather than thinking you can change them or avoid them, just embrace them with both hands and then try to structure your life around your known flaws.

So, for me, this gets back into like, maybe I do have a lower risk tolerance in the short run than other people my age. But that’s fine. Rather to be trying to change that or be trying to alter my mindset, alter my feelings, I would just rather embrace it with both hands and say, this is who I am so I’m going to accept that and I’m going to have a financial life and asset allocation that just accepts that and embraces it.

That is, I think, the best you can do behavioral biases. You can’t change who you are but you can embrace who you are and try to try to situate your life in a way that accepts it rather than trying to avoid it.

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RITHOLTZ: So, one of the lessons we’ve seen from 2020 is there is some number of people moving out of big urban centers to a little bit more suburban or even rural locations to kind of get away from crowds and COVID. When you and I were talking a year ago long before COVID popped up, you were discussing leaving D.C. to relocate to the suburbs of Seattle.

HOUSEL: That’s right.

RITHOLTZ: Tell us a little bit about what you ended up doing and what it was like doing it in the midst of a pandemic.

HOUSEL: So, my wife grew up in Seattle and she and I lived here for several years after college. We then moved to D.C. She went to grad school. We end up staying there for a while.

Our plan has always been to come back to Seattle. That’s been our plan for years and we just happen to pick May of 2020 to move. We planned that well before COVID but ended being, obviously, the worst time possible that you can move yourself and two small kids. We have a four-year-old son and an infant daughter, moved them across the country.

We got it done. It worked. We flew out here. We are on our plane, our 737 from D.C. to Seattle was I think us and six other people on the flight on the entire flight. We had a private 737 that would bring us out here. But it worked out, it all worked out. It was scary, it was hard but it all worked out.

RITHOLTZ: To clarify, you weren’t flying private. It was you flew commercials, there was just nobody else on the plane.

HOUSEL: There’s no one else on the plane. I think literally everyone on the plane had three rows of themselves. It was a 737 and the entire flight of passengers I think was 10 people on the whole flight.

RITHOLTZ: Amazing.

HOUSEL: And we were four of them and we used airline miles to fly across. So, they didn’t even get any revenue out of us. So, I feel sort of bad about it. But, Barry, the point that you bring up about like people moving out of city, who knows how severe that’s going to be or maybe there’s a vaccine in three months and everyone pours back in Manhattan, who knows.

The danger in that kind of stuff that we’ve seen in the past though is how quickly that snowballs. When people move out and then tax revenue declines and then police services decline and then there’s snowballs there. It happened to New York in the 1970s and ’80s. It happened to Detroit over the last 50 years.

So, that’s the danger about it. It’s not just like a trend that’s going to happen this year but how quickly those things snowball and become really hard to reverse over time.

RITHOLTZ: To be fair, we heard the same thing post 9/11 and that ended up New York came back bigger and stronger. Not a coincidence that cities have been creative centers of human capital for the past, I don’t know, 20 centuries. I imagine they’re going to be okay once there’s a vaccine and treatment, right?

HOUSEL: I mean, we certainly hope so. But, of course, getting back in 2020, it’s a surprise that no one sees coming. Who knows what’s going to happen? If 2020 has not diminished your willingness to forecast what’s going to happen in the next six months, I don’t think anything else will.

So, I agree with that. It seems like the base case scenario would be that we’ll get a vaccine and life will roughly go back to normal. But who the hell knows at this point?

RITHOLTZ: So, I want to come back to the concept of you being a risk-averse investor but not being risk averse in the rest of your life. And let me just take through a few things because you and I have discussed this and you always push back.

So, in high school, you’re a downhill ski racer. That’s an easy gentle risk-free gig. Investment banking, private equity, you’re now a partner in Collaborative Fund, which is a venture-capital firm. Your writing is something that not only did you not go to school for but your first job was, yes, what the hell, let me jump and see if I could do that with absolutely no basis for expecting to achieve any level of success.

Am I making too much of this or does your actual behavior, maybe the — maybe I’m reversing the way I should look at this, because you’re such a conservative investor, does that allow you to engage in riskier behavior as a professional to take chances to roll the dice to try things that you put into if you didn’t feel like you had a comfortable financial cushion to leap off of?

HOUSEL: I think there’s probably some truth to that but there’s also another side of it which was ski racing in my teenage and early 20 years, I didn’t realize how much risk I was taking. I didn’t think it was that risky until two things happened. I wrote about this recently, two of my good friends who I grew up with ski racing were killed in avalanche and then three months later, I broke my back. There isn’t any nerve damage but broke my back, which is a very serious thing to happen.

Both of those things kind of opened my eyes to what risk is and they changed how I think about risk probably through today. Those have stuck with me.

The other thing like my very short stint in investment banking or getting a writing job when I had not been a writer, i didn’t feel like I was taking any risk because there wasn’t a lot of downside. If it didn’t work out, I could have just walked away.

It may be felt different with investment banking because I had no Plan B. So, when I realized that Plan A wasn’t going to work, there was this moment of like what now, like I don’t know what I’m going to do for my career now. That felt risky but I was also — I was 21 years old or whatever. So, my concept of risk was very different than it is now, now that I have two young kids that I support.

It’s very different when you’re doing things — when your downside feels that much limited. So, it’s a combination of learning about what risk really is over time and also taking risk that didn’t have a lot of downside. But there is a sense I think that my — our main — our north star for how we manage our personal finances is, again, being very pessimistic in the short run and having a ton of cash like preparing for the apocalypse in the short run while still maintaining a lot of long-term optimism both with our heads and with our investments and just in terms of how we invest.

It’s hard to wrap your head around that kind of dual personality, the barbell personality, but that — it is I think like what is necessary for getting rich and staying rich, which are the two conflicting separate skills but you need to marry both of those to be well over time. You have to have optimism and pessimism at the same time and just know where each one of them belongs in your life.

And if you don’t — if you only have one or the other, we all know permabears who have been waiting for the stock market to decline since 1977 and we all know permabulls who kind of run themselves off the ledge either fraudulently or innocently. They just takeway too much risk, bite off more than they can chew and it’s backfiring.

So, I think you have to manage both of those at the same time. That’s what we try to do with our personal finances and for us, how we manage optimism and pessimism is just about time horizon. Optimism over the next 30 years and a lot of pessimism over the next 12 to 24 months.

RITHOLTZ: So, you start the book out with something that I have to ask two questions about and you just hinted at it. There is an enormous difference between getting rich, which we see lots of folks are capable of doing, and staying rich, which seems to be a very different skillset. Tell us about people who have a hard time despite being wealthy either starting wealthy or achieving it staying wealthy.

HOUSEL: I mean, the kind of person that can invest in your seed stage startup and then watch it increase 5,000 fold and make a ton of money do really well in the stock market, those tend not to be the kind of people who can eventually say, OK, that’s enough, I’m going to put my money in muni bonds so I can stay rich and protect my downside.

You cannot have those kind of personalities in the same people. But you need something along those lines in order to stay wealthy over time. I think getting rich and staying rich are completely separate skills. We want to think they are the same that people who are able to get rich this year are going to be the same kind of people who are still wealthy 10 or 20 years from now.

But it turns out that is the case. There’s a tremendous amount of turnover in Forbes list of billionaires or if you’re to look at the turnover of mutual fund managers. The ability to do well in the short run and long run are very, very different and that it is not intuitive but it’s really necessary to wrap your head around because everyone wants to do well not just this year, they want to do well for the long run.

No one wants to get rich and then lose everything. Like that’s some of the — like most people would rather not get rich than it would be to get rich and then lose it two years later. So, you really have to marry those two skills and since they are separate conflicting skills, it’s a hard thing to do.

I think about Bill Gates a lot who took probably the biggest business risk swinging for the fences, the biggest flyer that’s ever been taken which was in 1980s. He said, every human on the planet should have a computer on their desktop in their homes, which is the most absurd thing in the world at the time. He was like the most optimistic risk-taking swing for the fences.

But during that very same moment, he made a vow that Microsoft would always have enough cash in the bank so that they can pay everyone’s payroll for 12 months with no revenue. So, there he was marrying optimism and pessimism.

He had this ridiculous optimistic view about where computers were going but at the same time, he was an incredible pessimist in the short run so much so that he wanted to make sure that Microsoft can survive with no revenue if no one was willing to pay for its product.

I think that is a rare skill to have in the same person. I don’t think Elon Musk has that skill and who knows where that’s going to lead to but Elon Musk is obviously willing to swing for the fences. But is he good at managing the short run? I mean, I don’t think he is.

So, it’s a very different personalities that for someone like Bill Gates who has long-term enduring success across many different environments, recessions, booms, bust, Microsoft has thrived because of that, both when he was managing the company but also just the kind of mentality that he left the company with.

So, you always need those two sides and if you don’t realize that they are separate skills the need to be nurtured separately and independently, you’re probably going to run into a point eventually when you realize that you didn’t have one of those skills and it leads to something regrettable.

RITHOLTZ: The morning we’re recording this, the Bloomberg Billionaires Index shows I think one, two and three is Jeff Bezos, Bill Gates and Elon Musk in that order. If you read about Musk, it’s fascinating. He took a PayPal windfall, didn’t even plan with it, he just kind of rolled it all over into Tesla.

And at several points in Tesla’s history, it was on the verge of not making it. He really doubled down and doubled down again and it worked out at least so far, it’s worked out for him and the same with SpaceX has worked out for him. The question is as you point out, can he keep doing it.

So, you mentioned Bill Gates who there’s a wonderful story in one of the biographies about him, they used to have bets, him and Ballmer and others in the early days of Microsoft how late they could leave for the Seattle airport and not miss a flight and my favorite story is he once left so late that he pulls up in his then old Porsche 911, leaves it running with the keys in it and just runs into the airport, just leaves it in front of the arrival gate.

I don’t know what made me think of that other than you brought him up and we’ll edit this out because it’s ridiculous. But …

HOUSEL: No. It’s such a good story and it makes me wonder like what happened to that car, did he come back and get it, did someone just take it and drive off. I imagine he left the keys there.

RITHOLTZ: I’m sure he got towed and he picked it up and I doubt he cared about it. But the reason I brought that up is you mentioned earlier, you were a valet for many years at a couple different places.


RITHOLTZ: For those of us who valet cars and occasionally a nice car here and there, what happens when you give a high-end sports car to a valet at a restaurant or a hotel?

HOUSEL: What do you think happens when you give a 19-year-old a Ferrari and then he gets to drive it around the corner where no one is watching, what do you think happens, Barry?

RITHOLTZ: That scene from “Ferris Bueller’s Day Off” where they take this 275 Spider out for a joyride and all but destroy it. That’s the worst nightmare, I think. I also think that’s why a lot of these car companies have come up now with valet keys so that you could give a card to a valet and it’s rev limited and speed limited. It ain’t going over 30 miles an hour so there’s no reason to take it anywhere.

HOUSEL: I don’t know of any stories — I’m sure it has but in my experience, I didn’t know of any times when a valet left the lot with someone else’s car when they shouldn’t have. Like they’re taking on the street now. That’s not something I saw.

But there was strip in our parking lot like behind where everyone was watching, no one can see, where we had like 200 feet of straightaway where you could put your foot at the gas. Of course, we did that. The other thing is in our valley garage, we were always driving way too fast for management to like (ph). So, they put in these huge speed bumps, not normal speed bumps but like really sharp brutal speedbumps and that didn’t slow us down in the slightest. We just started plowing over the speedbumps at full speed.

So, that’s — I mean, it’s obviously – it’s obvious what would happen if you give a 20-year-old or 21-year-old college boy the keys to a Lamborghini and say, go for it. It’s obvious what would happen.

We park on average about 10,000 cars per month at the hotel that I was working at.


HOUSEL: And in any given month, we would get in a handful of accidents, three or four accidents, and then it was always thought we were being so reckless and we also have to point like, no, if you drive — if you park 10,000 cars and bang up three of them, that’s actually a pretty good record. That’s actually a record that we feel pretty good about. But when there was a car — when we were smashing up a Bentley once a week, it’s hard to explain that to your manager.

RITHOLTZ: That’s a challenge and I bet your you’re banging up Hondas and Toyotas, not Ferraris.

HOUSEL: My roommate at that time who worked with me, we’re roommates but he was a valet as well, he was backing up a Ferrari right in front of its owner and he just smashed it right into a curb on accident. He wasn’t being reckless but he just smashed the bumper straight into a curb and it was painful to watch. It was painful to watch everyone’s reaction.

RITHOLTZ: Unbelievable. I know I only have you for a finite amount of time. So, let’s jump to our favorite questions. Our speed round we ask all our guests and let me start with what are you streaming these days, give us your favorite Netflix or Amazon Prime or any podcast you happen to be listening to.

HOUSEL: I just watched a documentary on Netflix “Sour Grapes” which is about the wine boom, the fine wine boom of the 2000s where the price of fine wine skyrocketed and what happened during that period is a lot of counterfeit wines.

A lot of people would just take any old wine, peel the label off, put on a label that says, this was from 1945, it came from this French vineyard and it was all BS, it was all made up. I think they sell those bottles for 20,000 bucks.

So, there was one guy, his name was — name is Rudy Kurniawan who made tens of thousands of fake wine bottles, all of the finest vintages you can imagine and sold them for tens of millions of dollars. He’s in jail now. So, the documentary is on his scheme and it was absolutely fascinating.

RITHOLTZ: Tell us about some of your early mentors who helped shape your career in both writing and finance.

HOUSEL: Carl Richards who is a financial adviser. He’s also a columnist of “The New York Times,” writes a blog called, “The Behavior Gap.” He was always who I really looked up to. I just thought he was such a good writer. He was who I wanted to be.

And I emailed him one day out of the blue just saying how much I like his writing and he said, let’s talk, and he called me up and we spoke and that was just so — I was an absolute nobody at that time. So, the fact that he took the time to do that really meant the world to me.

He was also big on the speaking circuit. He was speaking at financial conferences, which I always wanted to do and you did as well, Barry, I looked up to that as well, and Carl was one of the people who really helped me get started speaking.

And I’ll never forget the help that he gave me because I was no one. He owed me nothing. He was getting nothing out of helping me. He did that out of the goodness of his heart and I’ll never forget that.

RITHOLTZ: We talked about reading. We talked about books but we haven’t named any titles. Tell us some of your favorite books and tell us what you’re reading currently.

HOUSEL: I’m always a fan of any book that has to do with the period from 1918 to 1945, kind of the end of World War I through the end of World War II. So, the Great Depression and World War II, that period, is so fascinating to me for two reasons.

One is that the more technological change took place during those 20 or 30 years that have taken place during any other period in history. Like we started World War II on horseback and ended with nuclear fission. Just so much progress took place during that period.

That period is also the combination of Great Depression and World War II is when people dealt with the most uncertainty, the most trauma, the most tragedy, the most misery of any other period of modern history and it’s fascinating to learn about that just as a lens into behavior and what people do during risk and threat and uncertainty.

So, any peer — like any book around that topic I’m always interested in. I’m reading a book right now by historian Jon Meacham called “The Soul of America” which talks about periods in American’s past when we felt like the country was coming to an end whether it was the race riot, whether it’s the civil war or the race riots in 1960s or what we’re dealing with today.

It just kind of period that where America was tried with a concept of America look like it was breaking and how we overcame that. It’s a really good book.

RITHOLTZ: I know you have a couple of favorite books you’ve referenced about that period between the depression and World War II, a couple of history books you’ve mentioned and I can’t remember the name of them. There was an author who you read two or three of his books. You know what I’m referring to?

HOUSEL: Yes. There’s a historian named Frederick Lewis Allen who wrote three books.

RITHOLTZ: That’s it.

HOUSEL: It’s a trilogy. One is called, “Since Yesterday.” One is called, “Only Yesterday.” And the other is called, “The Big Change.” And they were about how America changed from 1900 to 1950 and it is so well written, the stories are so good, and he’s writing about the perspective of like the average American, not what is going on with the generals and the presidents.

But if you are just an average Joe living in Ohio, what would — how did your life change from 1900 to 1950. It’s so good. That trilogy was so well done. He wrote most of them in the 1940s and 1950s and it was — they’re just gems out there.

RITHOLTZ: What sort of advice would you give to a recent college grad who said to you they were interested in a career in financial writing?

HOUSEL: I would say find four or five people who you really look up to, people who — that you want to be five or 10 years from now and just call or email them and ask them out for coffee or maybe if it still COVID, ask them out for a quick Zoom call.

I think that’s the best way to get ahead to learn from other people and also just to network with people who might be able to open doors for you one day. And you will be surprised if you reach out to people even people who seem, I would say, out of your league. If you email them and say, hey, I really admire what you do, I’d like to take you out to coffee, how many of them will say yes.

The success rate for doing that will probably be much higher than you assumed and those few connections that you can make might have a bigger impact on your career than anything that you learn or read or taught in school. That will have a huge impact on what you can do.

RITHOLTZ: And our final question, what do you know about the world of finance, investing, writing today that you wish you knew 20 years ago or so when you were first getting started?

HOUSEL: One thing that sticks out is that good investing is not being good at something. You have to find something that other people are bad at. So, the fact that you are good at modeling, the fact that you are good at spreadsheet does not necessarily make a difference because a lot of people are good at that.

So, that’s where a lot of investors go astray is thinking I’m very smart, I’m very good at this, I have a lot of skill, I have a lot of intelligence and it doesn’t lead to any sort of investing result to speak of because so many other people are good at it.

You have to find something that other people are bad at. That is — and try to be a little good at that. If you are sort of good at something that other people are bad at, you’re going to have a lot more success than if you are very good at something that other people are also very good at.

RITHOLTZ: Quite fascinating. Thanks, Morgan, for being so generous with your time. We have been speaking with Morgan Housel. He is the author of the new book, “The Psychology of Money.”

If you enjoy this conversation, well, be sure and check any of our 300 and something previous discussions where we talk about all things, finance, investing, money related. You can find that at iTunes, Spotify, Overcast, Stitcher wherever you find our podcasts are found.

We love your comments, feedback and suggestions. Write to us at Check out my weekly column on Give us a review on Apple iTunes. Sign up for our daily reads Follow me on Twitter @ritholtz.

I would be remiss if I did not thank the crack staff that helps us put these conversations together every week, Tim Harrow (ph) is my audio engineer, Michael Batnick is my head of research, Atika Valbrun is our project manager, Michael Boyle is our producer/booker, I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.




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