Morgan Housel: Get Rich, Stay Rich

The Knowledge Project with Shane Parrish

Farnam Street

Business, Investing, Entrepreneurship

4.7 • 2.9K Ratings

🗓️ 28 May 2024

⏱️ 100 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

The skills it takes to get rich are drastically different from the skills it takes to stay rich.

Few understand this phenomenon more than Morgan Housel. He's identified unique lessons about wealth, happiness, and money by studying the world's richest families and learning what they did to build their wealth and just how quickly they squandered it all.
In this conversation, Shane and Housel discuss various aspects of risk-taking, wealth accumulation, and financial independence.

Morgan explains the importance of understanding personal financial goals and the dangers of social comparison, lets everyone in on his personal financial “mistake” that instantly made him sleep better at night, and why the poorest people in the world disproportionately play the lottery—and why it makes sense that they do. They also touch on the influence of upbringing on financial behaviors, the difference between being rich and wealthy, and the critical role of compounding in financial success. Of course, we can’t have a writer as good as Morgan Housel on the podcast and not ask him about his process, so Housel concludes with insights into storytelling, his writing processes, and the importance of leading by example in teaching financial values to children.

Morgan Housel is a partner at Collaborative Fund. Previously, he was an analyst at The Motley Fool. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers and was selected by the Columbia Journalism Review for the Best Business Writing anthology. He's the author of two books: The Psychology of Money and Same as Ever.

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Timestamps:

(00:00) Intro

(04:46) Risk and income

(07:40) On luck and skill

(10:10) Buffett's secret strategy

(12:28) The one trait you need to build wealth

(16:20) Housel's capital allocation strategy

(16:48) Index funds, explained

(20:59) Expectations and moving goalposts

(22:17) Your house: asset or liability?

(27:39) Money lies we believe

(32:12) How to avoid status games

(35:04) Money rules from parents

(40:15) Rich vs. wealthy

(41:46) Housel's influential role models

(42:48) Why are rich people miserable?

(45:59) How success sows the seeds of average performance

(49:50) On risk

(50:59) Making money, spending money, saving money

(52:50) How the Vanderbilt's squandered their wealth

(1:04:11) How to manage your expectations

(01:06:26) How to talk to kids about money

(01:09:52) The biggest risk to capitalism

(01:13:56) The magic of compounding

(01:16:18) How Morgan reads

(01:22:42) How to tell the best story

(01:24:42) How Morgan writes

(01:35:42) Parting wisdom and thoughts on success

Transcript

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0:00.0	Not having FOMO is the single most important financial skill.
0:04.0	I think it's so important that you cannot ever imagine accumulating significant wealth over your lifetime if you are susceptible to FOMO.
0:10.0	Like if there's literally one thing, like one trait that you want that's going to allow you to accumulate wealth, it's the lack of FOMO.
0:17.0	Why do index funds work so well?
0:19.0	Two reasons. One is it's always going to be the case that a very small number of stocks account for the majority of returns.
0:24.6	The other is, I think, the...
0:26.6	Whether it's like an investing debate or a saving or spending debate, they're not actually debating.
0:31.6	It's people with different personalities talking over each other.
0:33.6	And once you come to terms with that, there's not one right answer for any of this.
0:37.6	What's the difference to being rich and being wealthy? Rich is when you have enough money to make
0:42.4	your mortgage payment, make your car payment, you can pay off your credit card bill every month.
0:46.3	Wealthy, I think, is when you have a degree of independence and autonomy. The weird thing here
0:51.2	is that wealth is the money that you don't spend. Let's switch Garrison talk about reading and writing.
0:56.0	How do you select what you read?
0:58.0	I heard this idea, I think it was from Patrick O'Shaughnessy many years ago, who said,
1:01.2	you want a wide funnel and a tight filter.
1:04.1	You're one of the best storytellers of our generation.
1:07.0	Teach me how to tell a story like Morgan Housel.
1:10.7	I think it's two things.
1:12.2	One is...
1:13.6	Welcome to the Knowledge Project, the biweekly podcast exploring the powerful ideas, practical
1:35.0	methods, and mental models of others. In a world where knowledge is power, this podcast is your
	...

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