Young and Profiting with Hala Taha (Entrepreneurship, Sales, Marketing)
Morgan Housel on Investing, Wealth, and Financial Freedom for Entrepreneurs | Finance | YAPClassic
Fri, 14 Feb 2025
Morgan Housel made his first investment at 18, putting $1,000 into a certificate of deposit at his local bank. When he started earning interest on that saving, he was hooked. He dove into books on finance, investing, and wealth building, eventually becoming a financial columnist for The Motley Fool and The Wall Street Journal. In today’s episode, Morgan shares why he thinks personal finance is more like psychology than physics, some of the common emotional pitfalls that can derail your financial planning, and much more. In this episode, Hala and Morgan will discuss: (00:00) Introduction (05:49) Early Financial Experiences (09:05) The Life-Changing Ski Accident (16:17) Career at Motley Fool and Transition (18:07) Writing and Publishing Books (28:30) The Psychology of Money (32:09) Personal Financial Philosophy (36:53) The Purpose of Money (38:40) Emotional Pitfalls in Personal Finance and Investing (42:39) The Art of Keeping Wealth (44:40) Balancing Optimism and Pessimism in Business (51:21) The Long Tail Strategy in Investing (54:10) The Importance of Patience in Investing (01:00:10) Preparing for Unseen Risks (01:07:08) The Role of Stress and Incentives in Success (01:12:05) Permanent vs. Expiring Information Morgan Housel is a partner at The Collaborative Fund. He's the author of the bestselling book The Psychology of Money. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, and winner of the New York Times Sidney Award. In 2022, MarketWatch named him one of the 50 most influential people in markets. He serves on the board of directors at Markel. Resources Mentioned: Morgan’s Podcast: youngandprofiting.co/3ELHGYl Morgan’s Book, Same as Ever: youngandprofiting.co/4jZGalU Morgan’s Book, The Psychology of Money: youngandprofiting.co/4gIFP3U Episode Sponsors: Shopify - Sign up for a one-dollar-per-month trial period at youngandprofiting.co/shopify Airbnb - Your home might be worth more than you think. Find out how much at airbnb.com/host Rocket Money - Cancel your unwanted subscriptions and reach your financial goals faster with Rocket Money. Go to rocketmoney.com/profiting Indeed - Get a $75 job credit at indeed.com/profiting RobinHood - Receive your 3% boost on annual IRA contributions, sign up at robinhood.com/gold Factor - Get 50% off your first box plus free shipping when you use code FACTORPODCAST at factormeals.com/profiting50off Active Deals - youngandprofiting.com/deals Key YAP Links Reviews - ratethispodcast.com/yap Youtube - youtube.com/c/YoungandProfiting LinkedIn - linkedin.com/in/htaha/ Instagram - instagram.com/yapwithhala/ Social + Podcast Services - yapmedia.com Transcripts - youngandprofiting.com/episodes-new Entrepreneurship, Entrepreneurship Podcast, Business, Business podcast, Self Improvement, Self-Improvement, Personal development, Starting a Business, Strategy, Investing, Sales, Selling, Psychology, Productivity, Entrepreneurs, AI, Artificial Intelligence, Technology, Marketing, Negotiation, Money, Finance, Side hustle, Mental Health, Career, Leadership, Mindset, Health, Growth Mindset, Finance, Personal Finance, Scalability, Investment, Financial Freedom, Risk Management, Business Coaching, Finance Podcast, Finance, Financial, Personal Finance, Stock Market, Scalability, Investment, Risk Management, Financial Planning, Business Coaching, Finance podcast, Investing, Saving
Chapter 1: What sparked Morgan Housel's interest in finance?
It's such a good question. I would say I don't. I've never tried to put myself in a box. And I think I've moved around over the years. I think if you asked me that question 10 years ago, I would have said, I'm an investor who writes. And maybe if you asked me today, I would say I'm a writer who invests. I've just switched around what I enjoy doing.
And it used to be that all of my emphasis and research and enjoyment was investing. I want to scour the world and study investing history and whatnot. And I still love that. I'll always do that. But the art of storytelling really bit me 10 or 15 years ago. And that's what I really find joy in doing now. And that's the craft that I want to hone.
And I think jumping around like that has been really important. If you just put yourself in a box and say, I am a blank. you're cutting off so much of the world that you might find enjoyment in and have some talent in doing.
Yeah. And when did you first get interested in finances as a young man?
I think I was 19 when I first stumbled across investing. I've told the story before, but it'll always stick with me. When I was 18, my grandparents gave me $1,000 and I put it in a CD at the bank, certificate of deposit, where it earned interest. And I think I intuitively knew what interest was, but I didn't really get it.
And I remember I logged into my account the next day and the balance had grown from $1,000 to $1,000 and 3 cents. I earned three cents of interest. And I remember jaw hitting the floor, being completely stunned that I just earned money for doing nothing. Just for waking up in the morning, somebody paid me. I knew at that moment, I was like, this is the thing. This is what I love doing.
And so all throughout college, I wanted to be a hedge fund manager or an investment banker. I think in that era, like the mid 2000s, that's what everybody wanted to do. in that field. And then I kind of stumbled haphazardly across writing. It was never part of the plan. I never wanted to become a writer.
And even when I started doing it, I was a senior in college when I got a job at The Motley Fool writing about stocks. And I didn't want to do it. I just needed a job, but I fell in love with it. So I think that in itself is a lesson, particularly for people in college. You might think you know what you want to do and you have a goal and you have a path in front of you, but so many people
including myself, probably you, stumble into what they actually love and want to do serendipitously. So I think it was great that I did not follow the path that I thought I had paved for myself and just stumbled into something else.
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Chapter 2: How did a ski accident shape Morgan Housel's perspective?
And if you do anything for that long, you'll gain some proficiency no matter what it is. Anybody in any field, if they do it every day for 20 years, will get good at it. And so I think that's been just like sticking with it has been what's helped me the most.
Yeah. And I think something that also changed the way that you think about the world is actually an accident that happened when you were younger on ski slopes. It severely impacted you. It's really, really traumatic and tragic what happened. Can you tell us about that and how it shaped the way that you view the world?
Yeah. So I grew up as a competitive ski racer in Lake Tahoe, California. I was on the Squaw Valley Ski Team, and that was my life from my childhood and my teenage years. Skied six days a week, 10 months a year, all over the world racing. It was great. It was such a cool experience. And there were about 12 of us on the Squaw Valley Ski Team, and we were all best friends.
We had been together since we were children, skiing six days a week all over the world. And so one day in February of 2001... I was 17 years old and I was skiing with my two best friends. We had grown up together. They were 17 as well. And we would ski down the backside of Squaw Valley, which is out of bounds, which you're not supposed to do. You duck under the ropes that say, do not cross.
But we did this because we were young and rebellious. And that's where the best skiing is. It's untracked. You have the place to yourself. Now, when you ski out of bounds like that, when you get to the bottom, there's no chairlift because you went out of bounds. So it would spit us out on this back country road and we would hitchhike back. We loved doing this. It was kind of a thrill.
We got to hitchhike. It was all very rebellious, something that 17-year-olds do. So the three of us ski this run. And as we're skiing down, I very vividly remember we triggered a small avalanche. And it's a feeling that you will never forget because rather than pushing on the ground with your skis to gain traction and control, all of a sudden the ground is pushing you. And avalanches are very...
powerful. You'll be skiing down and then all of a sudden you have no control and it'll push you 20 feet this way and then jolt you 30 feet that way. But it was pretty small and it ended pretty quickly. And the three of us skied down and we like high-fived about it at the bottom. We were like, whoa, did you see that avalanche? That was so cool. We hitchhiked back
And Brendan and Brian, my two friends who were with me, they said, hey, let's do it again. That was great. Let's go ski that run again. For whatever reason, I don't really know. I said, I don't want to do it again. But how about this? How about you guys go do it again?
And rather than hitchhiking back, I'll drive around to the side of the mountain and I'll pick you up in my truck so you don't have to hitchhike. They said, great, let's do it. We made that plan. We went our separate ways. They went skiing. I went back to get my truck to go get them.
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Chapter 3: Why did Morgan Housel transition from The Motley Fool to Collaborative Fund?
Well, yeah, when you're that young, it's inevitable. A lot of people at like 18, 19, 20, that's when you're doing the most drugs and like all this kind of stuff because you just think you're invincible. So I have a feeling you probably didn't really do much of that at all.
I think even before that happened, I was always kind of, I had friends who were doing it more than I. I'm not going to sit here and say I did none of it. Yeah. Okay, I'll give you a specific example. I was telling my wife the other day, I remember when I was 18, one of my friends had cocaine.
And I was like, absolutely not, like not even in the slightest in a million years would I touch that stuff, never. But all my other friends are like, yeah, let's give it a whirl. Let's see how this works. So even at that age, I think just naturally, I had a risk assessment that was different from my friends. Yeah.
So you worked at Motley Fool, like you were saying. You got a job right out of college at Motley Fool. And you actually thought you were going to stay there and work there forever. You bought a house near the headquarters and you thought you'd never leave. So what actually changed your mind to pivot your career a bit?
Yeah, it was one of the hardest decisions of my career because I was really happy and comfortable at The Motley Fool. It's a great place to work, still is, filled with great people. I was happy there. Got in Craig Shapiro, who runs a private equity firm called The Collaborative Fund, reached out to me in 2015. And he just said, hey, I like your work.
Why don't you come to Collaborative Fund and just keep doing it? Keep doing exactly what you're doing, but just do it here. And I said, hey, I'm flattered, but I'm really happy here. No, thanks. My wife and I had just had our first kid who was two months old at the time. I was not prepared to just throw my career upside down. But he kept pushing and kept pushing and kept pushing.
And I think what the decision for me eventually became was, if I stay at The Motley Fool forever, from the time I was in college until I retire in my 60s, will I regret never trying something different? And I think after a while, I realized that the answer was, yeah, I think I might wonder what else was out there. So I finally joined Collaborative Fund in 2016. And it's been amazing.
That was before I had written books or done anything like that. And Craig was one of the only people, I think, in the world who would say, Morgan, just go do your thing. I'm not going to tell you what to write or when to write. And I don't write about what Collaborative Fund does. I feel like it's just my own canvas to write about anything that I'm interested in.
And so that was a really rare opportunity. Almost every professional writer at an organization, if you write for the Wall Street Journal or Reuters or CNN or something, you have an editor telling you what to write, how to write it, when to turn it in. And I think that just strips away the art of writing. It just turns it into a job instead of an art. So I really enjoyed the artistic side of it.
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Chapter 4: What led Morgan Housel to write 'The Psychology of Money'?
It's actually interesting. In the summer of 2018, I was in Omaha, Nebraska for the Berkshire Hathaway shareholder meeting. And we rented a house with like 10 friends. And this random guy came over to have dinner. I don't know who invited him. No idea who he was. And he introduced himself. He said, hi, I'm James Clear. I'm writing a book called Atomic Habits.
It's going to come out in a couple months. And so we had no idea, but like in hindsight, looking back, it's so funny to piece all that together.
Yeah, that book is huge. I think to this day, it's still like on all the bestseller lists. So like you were saying, you wanted to become an author because you saw the opportunity and you were like, I want what James Clear has. How has being an author actually transformed your career? Like what opportunities have come about? I'm sure you like weren't doing podcasts before you had a book.
Is that right?
I'd say in some ways nothing has changed and in some ways everything has changed. Nothing has changed because I still write about the same topics. I still read the same topics. I still sit in the same chair and think the same way. My wife and kids don't treat me any differently. In most ways, nothing has changed. What the book did to me
And it's a very real thing is it gave me independence, which is a big topic in psychology of money. What you want to use money and wealth for is to gain control over your time. And if I'm being honest with you, I feel like I'm really opening myself up in this podcast here. Before the book, I was always filled with career anxiety. What happens if I get laid off? What happens if this doesn't work?
And it really scared me, particularly as I became a father. I got mouths to feed. What happens if this doesn't work? That's the one thing that's changed post-books, a greater sense of financial independence. That means the world to me. And I also, my wife has pointed this out too. I think I've been in a better mental state post books that I have in my life.
It didn't make me happier, but I think it removed anxiety from my life. It's interesting that in a way that was what the book was about. But then because of writing the book, I got to experience it myself, which has been the cool thing.
And why do you think that freedom has come about? Is it because you're getting speaking engagements that you're like pulling in extra revenue streams? Obviously, book sales has some revenue streams, but book sales these days don't really move the needle, right? Maybe your books do. But what do you think changed in terms of you feeling like you have more freedom?
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Chapter 5: How is personal finance more like psychology than physics?
Yeah.
That's the perfect example. He does not have the pedigree. He does not have the degree from Harvard. He did not work at Goldman Sachs, but he was clearly patient, not greedy, et cetera, et cetera. And because of that, he became very wealthy. So there are very few fields in which that's the case. If you did not go to medical school, you do not know how to perform open heart surgery, full stop.
But it's not like that in finance. You don't need the education to do well as long as you have the behaviors. So because it's one of the few fields that's like that, it's easy to overlook what you need. And most people, if they're like, I want to become a good investor, they're like, great, I'm going to go get a degree in finance. I'm going to memorize all the formulas.
And by and large, that's not what you need. What you need is the behavior. Now, for a lot of people, that behavior is nature instead of nurture. They're born understanding. Their brain is wired in a way that lets them do it. And some people are the opposite of that. But just understanding what you need and what you don't is, I think, the most important thing of doing well with money.
And just to dig in on what you said, you also say in your book that we learn traditionally about finance like it's physics, right? It's rules. There's laws. But you say we should look at it more like psychology with emotion and nuance. Can you dig deeper on that?
In math? And in physics, there's one right answer for everybody. So if I say, what is two plus two? It's four, no matter who you are or where you're from or where you live or how old you are. But in finance, it's not like that. Because if I say, how should you invest your money? Well, what works for me might not work for you and vice versa.
Everyone listening, we're all gonna come to a different conclusion. Because our risk tolerance is different. Our social aspirations are different. Our time horizons are different. Everything is different. So it's much closer to like taste in music. And if I said, what's the best music? There's no one answer for that. It just depends who you are and what you like and how old you are.
Music that I liked when I was 15 would be atrocious to me now. So you're going to change throughout time. That's most of the nuance in finance is just realizing that there is not one right answer. And I think the majority of the time in finance, when people are arguing with each other about how should you spend your money, how should you invest your money, they're not actually arguing.
They're not actually debating. It's just people with different experiences and different risk tolerances talking over each other. And it's the equivalent. If I think X and X is good for me, you might think X is terrible because it would be bad for you. That's the biggest issue with financial debates.
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Chapter 6: What are the emotional pitfalls in personal finance?
In 2021, when there was like the Robinhood explosion in investing, it went supernova at that point because you had all these 19-year-old people who were like, I just made $20,000 on Robinhood and you should be able to double your money every week. A, most of that was bullshit. And B, the people who looked at that said, I need to go start trading options too. And you know how that ended.
For the vast majority of them, it ended in tears and losses. And so all of that is driven by FOMO, the idea that someone else is getting richer than you and you need to catch up. And so if you can break away from that and realize that there are always people who are either look like or actually are getting richer than you, and that's fine. That's totally fine. It's unavoidable.
You don't need to catch them. You just need to play your own game and do what works for you is really important.
Yeah, I feel like everything you're saying is reminding me of this bag story from yesterday. That's kind of why I brought it up is because at first I felt bad. I was like, man, she's got a $6,000 bag. I work so hard. I don't have a $6,000 bag. And then I realized, well, I could have a $6,000 bag. These are just not my priorities. So to your point, everybody has different goalposts.
And just because somebody looks like they have a lot of money doesn't mean like behind the curtain that they actually have much going on at all.
I would actually take it a step further with nothing to do with your sister-in-law. I'm sure she's wonderful.
Yeah, it's just the example. Yeah.
When you see somebody driving a $100,000 car, the only thing you know about their finances is that they have $100,000 less than they did before they bought the car. You have no idea how much money they have. And I learned about this when I was in college. I was a valet at a nice hotel in Los Angeles. And these people would come in driving Porsches and Ferraris and Lamborghinis.
And then if you get to know them and talk to them, you realize they're actually not that successful. They just spent half of their salary on a Lamborghini lease payment. The vision that they had, the identity of, oh, this guy's driving a Lambo. He's clearly super successful. No, you actually don't know that at all.
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