Podcast Notes Psychology of Money
I never wanted to become rich. I just wanted to become independent. -Charlie Munger
One of the things that makes people really happy in life is having control over what they’re doing.
Autonomy and control. And I came up with that because I read studies were people who worked jobs where they had low autonomy and control had psychological consequences. They were more likely to get disease, they experience stress significantly more, more likely to have cardiovascular problems, and heart disease, which is the single biggest killer of people generally. Makes your body shut down. You can feel your heart pounding. The psychological response to stress is huge. It’s massive.
There is a great quote from John D Rockefeller. He was the single richest man in the world. And he lived until, I think he was 99, something like that. He was 97. And his doctor talked about why his key to longevity was. And the doctor said “ he never lets anything bother him. He spends plenty of time outside and he leaves the table when he’s still a little bit hungry. “
That was his key to longevity. And when you read his biography, you realize how true that was. No matter what was going on in his life and the most stressful business conditions you can imagine, none of it ever bothered him. He just had ice in his veins and he could just keep going. So I think that’s definitely one of the keys to physical health.
You are wealthy when the money that you deny tastes better than the money you accept. -Nassim Taleb
The hardest financial skill is getting the goal posts to stop moving. It’s the hardest thing in the world. It’s hard for everybody because virtually everybody thinks if my net worth or my income was at this level, I’ll be fine. I’ll feel great. No more problems. I’ll wake up every morning with a smile on my face. And then if you’re lucky enough, where you work hard enough to get there, you guys, it’s not the case at all. You’re just going to keep pushing it, keep pushing it forever.
The first rule of happiness is low expectations. That’s exactly what you’re talking about. The comparison is the thief of joy. And it seems counterintuitive to people that if you want to be happy for most people, it’s if you need to be ambitious, need to make more money, work harder, whatever it may be. And that’s true, but that’s half of the equation. The other half of the equation is to keep your expectations low, so the gap between those two. It’s the gap between those two that actually a cruise to happiness overtime.
Managing your own expectations is more in your control than managing your circumstances in terms of raising your income, raising your investment returns.
The most valuable financial skill that anybody can have is not needing to impress other people.
The definition of success is when the people you want to love you, do love you. -Warren Buffett
Sometimes in life, like hitting rock, bottom bottom is the greatest incentive to change our lives.
Risk is what’s left over when you think you’ve thought of everything. -Carl Richards
Invest in preparedness, not in prediction. -Naseem Talib
The variable that I want to maximize for in my investments is endurance. If I can just earn average returns for an above average period of time, it’s going to lead to an amount of success that will literally put you in the top 5% of investors.
We have to be the best place in the world to fail. We swing for the fences 10 times and for every 10 swings, nine of them are in the Amazon graveyard. He’s talking about A9.com which nobody knows, because it failed the fire phone, which nobody knows. But the one in 10 pay for the entirety of the graveyard, the one in 10 is going to be AWS, which makes 70 billion. -Jeff Bezos
Learn to fail. Failure rate, take risks.
What’s the biggest threat, complacency. When people get successful, they play defense to their detriment, they don’t play offense as much as they need to keep up with the rate of change in in the world.
Competitive advantages tend to be short-lived, often because their success plants the seeds for their own decline. It’s easy to overlook how many forces pull you away from your competitive advantage. Once you have one, specifically because you have one. Success has its own gravity. That’s right. And the biggest source of the gravity there is laziness.
The reason you were successful, was because you were hungry. You need to realize that you’re no longer hungry for the same reasons. And what he told me to do was the hardest fucking thing I’ve ever done in my life, which was nothing. He said, spend a year, don’t rush back into starting the same business again. Because he said the reason why you were so unbelievably disciplined and would go to the office seven days a week was because you were like an insecure kid that was like fighting to survive. That’s gone now. So sit on your hands for a year, to absolutely nothing and get inspired again. Get hungry again about something new .
Even when you’re taking information that people already know, if you can spend a good story about it, you get people lining up and they will knock your door down to listen to you.
I think I spent my time now thinking about how getting things to calm down in my favor will change my life, but I don’t spend a huge amount of time thinking about how things are compounding against me right now.
All the headlines are bad news because bad news happens fast. So once you realize that, then it’s like the most of the news it’s gonna skew negative. Not because there are some producers trying to toy with your brain. It’s just because what is obviously happening today tends to be the bad news where the good news is just very slowly compounding overtime.
The rice board experiment.
If I ask you, what is 8+8+8, you can do that in your head. It’s not that hard. But if I say what is 8×8×8×8. Like forget about it. Even if you are really mathematically, inclined, there’s no way you can like, very few people could figure that out in their head. So our minds are just not good at exponential thinking. Like 8+8+8 it’s like so simple. Linear thinking, so simple. Exponential thinking, not intuitive in the slightest. And because it’s not intuitive, it’s so common to underestimate what compounds overtime.
Two of the chapters in the book, same as ever, speak to the importance of discomfort. One of the chapters is called when the magic happens, and you say that chapter, stress, pain, discomfort, shock, and discussed for all its tragic downsides. It’s also when the magic happens. And then the other chapter, called. It’s supposed to be hard. Most things worth pursuing charged their fee in the form of stress, uncertainty, dealing with quirky people, bureaucracy, other people’s conflicting incentives, hassle, nonsense, long hours, and constant doubt. That’s the overhead cost of getting ahead.