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Understand & Apply the Psychology of Money to Gain Greater Happiness | Morgan Housel

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  • Understanding Financial Decisions
    • People make financial decisions based on personal experiences, upbringing, and current circumstances.
    • Avoid judging others’ financial choices because their logic might make sense given their background. Transcript: Andrew Huberman Great, looking forward to it. Great. So your starts off with this notion that people are not crazy. It’s in fact the title of the chapter. Does that mean that people are rational about money? Morgan Housel Oh, I think it’s very different. What I meant by no one is crazy is that it is so easy for people to look around at society and how other people are spending their money and saving their money and investing their money and Say, why the hell would anybody do that? Why would you waste your money on this? Why would you hoard your money like that? And I actually think if you peel back the onion layer of what’s going on in those people’s lives, no one is really that crazy with how they spend their money or save their money. It makes sense to them in that moment. My brother-in is a social worker. He works with very disadvantaged kids, kids who are abused at home, who don’t have homes. And a lot of those kids, not surprisingly, do very poorly at school. They misbehave, they get in fights, they don’t go to school. And it is so common for those kids that the teacher will look at those kids and say, why are you acting like this? Why don’t you do the right thing? It’s so obvious. And he says, there’s a phrase in social work, all behavior makes sense with enough information. That if you look at what those kids are dealing with in life, it would all make sense to you. Why they are misbehaving at school. And I think that’s a powerful idea for a lot of things in life, that all behavior makes sense with enough information. And you can really apply it to money, too. That you could easily tie how I spend my money today and save my money today based off of the experience that I’ve had in life, how I was raised, where I was raised, how old I am, the generation I was born into, all things that are outside of my control. And it is very common to look at people who are spending a ton of money. Well, there’s a story behind that. They’re spending a ton of money because they want some, you know, for a lot of them, they want some sort of attention. They’re trying to get people’s attention. Maybe sometimes they’re trying to cover up a hole. Maybe they are actually are really enjoying it. People who are hoarding a lot of money, there’s a story there too. They experience something that’s causing them to do that. And I think that this is really important for two reasons. One, it forces you to realize that there is not one right way to manage money, to save it, to spend it. You got to figure out what works for you. And what works for me might not work for you. There’s not one answer. And it’s not like math, like in math, two plus two equals four for everybody. And in money, it’s like, you got to figure it out for yourself. It’s almost like your taste in food or your taste in music. Like, just find out what you like and do that. The other thing is, I think you become less cynical about other people’s decisions. And you don’t spend all your day saying, look at that idiot spending their money in a stupid way. No, it’s just, you got to figure it out for yourself. And I think you become happier when you’re a little less cynical about how other people are doing it. For (Time 0:06:10)
  • Minimizing Future Regret
    • Base financial decisions on minimizing future regret, considering how your values might change.
    • Avoid extreme financial strategies; the middle ground often leads to less regret. Transcript: Andrew Huberman I mean, when we talk about money and wealth, what should we really take into consideration? Is there some sort of checklist? I mean, it becomes a pretty vast space. I believe that you get the best work out of yourself in terms of going after things you’re really interested in. But, you know, there may not be money in things that are highly interesting to somebody. Morgan Housel I asked Daniel Kahneman a very similar question about 10 years ago. Kahneman is a world-renowned psychologist, won the Nobel Prize in economics, passed away a year or two ago. He said, the trait that you need to do well with money over time, no matter who you are, is a well-calibrated sense of your future regret. What are you going to end up regretting in the past? I think at the highest level, that’s how you should base all of your financial decisions, is will I regret spending this or not spending this? Will I regret making or not making this investment? Now, much easier said than done. I think most people do not fully understand their own sense of regret, what they’re likely to look back and say, I wish I had not have done this. The other thing is that it changes over the course of your life. I’ll give you a perfect example. I’m a big saver, have been for my entire adult life. Heaven forbid, if I were on my deathbed tomorrow, would I regret the vacations I didn’t take, the cars I didn’t buy? The answer right now is absolutely not. I would feel so good knowing that my wife and kids are going to be okay. So I would take so much pleasure in knowing that I did not spend that money. I saved it for their protection. Will I still feel that way if I’m 80 years old? Then maybe I will look back and say, I should have lived a little bit more. I should have given my money away while I could have seen it being given away. So it changes throughout the course of your life. But I think if you’re always thinking through the lens of what am I going to regret? It’s never about YOLO or about like, oh, save today so you can have it for tomorrow. I think that’s too simple to think about it. You have to know what you’re going to regret in the future and look back. And back to everyone’s different. What I will regret might be very different from what you will regret. Very interesting story from Jeff Bezos. He talked about when he started Amazon back and I think it was 1994. The reason he started it, and he knew that there was very little chance it was going to work when he first started it. But he said, if I do not try this, I will regret it. And if I try it and it fails, I won’t regret that. That’s an amazing story that talks about his entrepreneurial spirit. The other thing when I first heard that story is, bless him for thinking that, I do not have that personality. If I devoted my entire life and my family’s money and my parents’ money to a startup and it failed, I might regret that. I admire and I’m grateful for the people who do not have that vision as he does, made the world better. But everyone’s sense of regret is going to be a little bit different. And sometimes this sense of what one (Time 0:10:03)
  • The Illusion of Credit
    • Credit card debt allows people to continually chase material possessions.
    • This pursuit provides false hope of fixing deeper life issues, hindering true happiness. Transcript: Andrew Huberman So it’s easy to point fingers at people in these different groups. But going back to this issue of credit, how has the ability to own and use things that we don’t really truly own basically to exceed our income level in terms of the number and type of luxuries That we can enjoy, change the way that people think about money and use money. Because today’s discussion in your book, we’re talking about money as if it’s something that we have, but credit basically is living outside your means. By definition. Yeah. Morgan Housel I think the knee-jerk response would be, oh, it helps you pull your consumption forward so you can have more toys that you would not have had in a different era. And I actually think for a lot of people, it’s the opposite, that there are a lot of people that have holes in their life, challenges in their life. And a very easy answer, if you’re not happy with your life, and you have a hole you’re trying to fill is, well, if I had more money, this problem would go away. And in previous generations, previous decades, you could not just go out and have a ton of more money. You earned your money from your paycheck. That was what you had. Today, it makes it easier to try to fill that hole in your life with money. And so you can keep on getting more and more and more. And for a lot of people, they will wake up and say, oh, if only I had that car, my life would be better. And they go buy that car and they still feel the same. So it’s like, ah, you know what? If I had that car and that watch, then I’d feel better. They get the watch, they feel the same. Ah, you know what’s missing? The house. I got to go get that fancy house. It’s this continuous spiral. And since you can finance all of that, it makes it easier and easier to go on that spiral. Will Smith made this incredible realization I loved from his biography. He said when he was poor and depressed, he had hope because he could tell himself one day I’m going to have money and all these problems will go away. And then when he was rich and depressed, he was still depressed and he lost all of his hope because he had more money than he could ever spend. So he could not tell himself if only I had more money, these problems would go away. And so for a lot of people, the availability of credit is giving them, I think, a false sense of hope that’s keeping them on this hamster wheel of, if only I had this bigger house, this nicer Car, all these problems that I wake up with every morning would go away. And it keeps you on that path, which I think if you actually don’t have access to that much money, you’re more likely to wake up and say, what is this hole? I need to fix it in a different way. It’s health, it’s relationships, it’s purpose, whatever it might be, rather than trying to put a bandaid of credit over it. (Time 0:21:01)
  • The Indirect Path to Happiness
    • Money buys happiness indirectly by facilitating experiences and relationships, not material goods.
    • True happiness stems from purpose and independence, which money can support. Transcript: Andrew Huberman Health outcomes depend on this. I mean, and on and on. So money can’t buy happiness, but it certainly can buffer stress and it can drive outcomes. So how should we frame that, especially if we are on the, or in the pursuit of acquiring more money, more wealth, because a lot of people are. Morgan Housel Money absolutely can buy happiness. It’s often though an indirect path. And what I mean by that is, a big fancy house make you happier? And the answer is probably yes. But the reason it might is because it’ll make it easier to host friends and family. And that’s what’s actually making you happy. It’s those extra connections with those people. Does going on a nice vacation make you happy? An expensive vacation? Yes. Because you’re going to form memories with your kids, with your spouse, with your friends while you’re there. That’s what’s making you happy. So you can’t say that money doesn’t make people happy. It does. It obviously does. The other thing that’s important is what really makes people happy in their core is some sense of purpose. There’s a great quote from the movie Boiler Room where he says, people who say money doesn’t buy happiness don’t have any. And I think there’s a lot of truth to that. The people who become richer say, of course, I was happier now than I was when I was poor. Of course, I would never want to go back there. But often what’s happening is the reason that you are happier when you are rich is because the reason you got rich is because you found some sort of purpose. You built a business, you were successful in your career, and that gave you a good sense of purpose and identity. And where you see the opposite of that are lottery winners who become rich, but not because they made a good investment, not because they built a business, not because they’re successful And their peers like them and whatnot. They just got lucky. And those are the people, so many studies that winning the lottery will not make you happy. It might for a very short period of time, but over time it doesn’t because you didn’t get any added purpose. You can’t wake up in the morning and say, I built this business. I did it. I’m so successful. I got my PhD. There’s none of that. You just got lucky. And so that’s not going to bring you much happiness. So money does make you happier. I think it can for everybody if you learn how to spend it in your personality and whatnot. Spending a lot of it, spending a ton of money can make you happier. I think there’s almost no limit to it, but it’s different for everybody. And it’s often a roundabout way. I think a lot about this when if I go on an expensive vacation with my kids, let’s say that’s a 10. That’s a 10 out of 10 in terms of just happiness, memories and whatnot. But actually what was making me happy was spending uninterrupted time with my kids. So staying home and playing Legos on the living room floor with them, that might be like an eight and a half because that’s what’s making me happy. You just have to figure out like the actual purpose. I think a good formula for a pretty good life at the simplest level is independence plus purpose. You need to have a purpose that is bigger than yourself that you are chasing, family, religion, work, whatever it might be, different for everybody. And you need to have the independence to make sure you can do it on your own terms rather than chasing somebody else’s goal. That’s the highest level of psychological well-being, independence and purpose. And money is not one of those things. But you can easily see how money can help those things. Money brings you independence. It can allow you to find your purpose in a bigger way. You’re not chasing, you’re not at your boss’s whim. You can do whatever you want. You’re independent. So using money as a tool can make you happier. Spending money can make you happier, but it’s not the thing that is making you happier. It’s just a tool to do other things and acquire other things that are actually making you happy. I’d (Time 0:24:10)
  • Centenarian Wisdom
    • Centenarians consistently regret not spending more time with loved ones, not earning less.
    • Prioritize relationships and meaningful experiences over accumulating wealth. Transcript: Morgan Housel There’s a gerontologist named Carl Pillemer who wrote a great book called 30 Lessons for a Living. And what he did is he interviewed about 100 centenarians and he just said, tell me about your life. What advice do you have for the rest of us? And there’s a section of his book about money. And he says of the 1,000 people, it’s 1,000 people he interviewed, of the 1,000 centenarians he interviewed, not a single one of them looking back at their lives said, I wish I earned More money. Not one, but virtually every one of them said, I wish I spent more time with my kids. I wish I was nicer to people. I wish I spent more time with my friends, my family. That was universal, but earn more money was not in there whatsoever. That stuck with me. (Time 0:31:20)
  • Health and Wealth
    • The wealthy often prioritize purchasing health, but true longevity requires lifestyle changes.
    • Immortality becomes a focus when material possessions are readily available. Transcript: Andrew Huberman Now they’re doing more physical labor to try and live longer. So what are your thoughts on the relationship between physical health and money? I mean, obviously, there’s a sweet spot there, but there’s no pill that people can purchase to live longer. Right. Morgan Housel I view it in the negative sense of the people who work to get money so hard that it takes a physical toll on their body. And that is so incredibly common. And that’s another form of debt that you can very easy, you can easily measure your net worth and your income. You could put a number on it very clean to measure. How do you, it’s much harder to measure your health. And it’s, I think it’s easier for people to say, yes, I’m only sleeping five hours a night and I’m on my third divorce and I’m overweight, but I’m making a lot of money this year. Because one is very easy to measure and the others are much harder. Your happiness, your health, whatnot, it’s harder to measure that. And I do think too that if you are very wealthy, particularly the very, very wealthy, you get so accustomed towards, I can snap my fingers and literally get anything, a Gulfstream jet, A mansion, whatever, I can get it right now. But health is like this last elusive thing that by and large you cannot purchase. And I think that drives a lot of people crazy. And that’s why if you can have anything in the world by snapping your fingers and getting it, then you eventually move towards what’s the thing that you don’t have, and that’s immortality. And I think there’s a long history of that going back to the robber barons. John D. Rockefeller was obsessed with it. Andrew Carnegie was obsessed with it. If you can have everything material in the world, you’re still going to have desire. And ordinary people can sit around and dream and say, one day I’m going to have the mansion. We’re not even a mansion. One day I’m going to have a house of my own. I’m going to have a car. I’m going to send my kids to college. Everybody wants to dream. So if all that is a given, you have all the money you could ever spend, you still want to dream. So what do you dream about? You dream about immortality. And so I think that’s been the case for a very long period of time. What’s interesting too is that there was a historian who looked back at the British peerage. He got a lot of data on how long people lived in various points of the UK economy. And what he found was until about, I think it was 1750, the richest members of the UK had among the shortest lives. The poorest people were some of them who were living the longest. And he dug into it. So how could this be? The richest people die the fastest. And what we found is the richest people were the only ones who could afford all the quack medicines and the sham doctors who were just poisoning them. They were poisoning them back in the day when we knew nothing about medicine. So I think the idea of, I want a better life and I should be able to buy that. There’s a long history of that backfiring on people as well. Yeah. (Time 0:41:18)
  • Stem Cell Clinic Failure
    • Wealthy individuals sometimes invest in unproven or risky health treatments.
    • A stem cell clinic in Florida blinded wealthy patients, highlighting the dangers of such pursuits. Transcript: Andrew Huberman Some of them probably never will have FDA approval. We’ll probably talk about stem cells another time. Morgan Housel Do you think you see this, though, where the wealthiest people are spending money on treatments that you either know are not going to work or are a very questionable work. All the time. And then it might backfire on you. That might make you less healthy. Oh, absolutely. Andrew Huberman I mean, I’ll just point out, I don’t have anything against stem cell therapies. I think they hold great potential. But there is a true story about a stem cell clinic down in Florida prior to the FDA, you know the gavel down on them of injecting stem cells into the eyes of wealthy people who could afford The treatment. These people had certain markers for macular degeneration and other things that can cause blindness. And guess what happened to these people? They all went blind. So that brought the gavel down on stem cell therapy generally in this country. A lot of people are getting infusions of stem cells and related things out of country. They’re coming back and they’re walking and talking. And they’re calling me and they’re asking what my thoughts are. And I have a lot of thoughts. I mean, I think that the basics of longevity are clear, right? I mean, you want to avoid, you know, head trauma and environmental toxins. Those things are real. And, and if you have certain mutations like BRCA mutations, you know, you need to be more careful about cancer and avoid smoking, all this stuff, right? Alcohol turns out to be pro pro cancerous and things of that sort. But then it’s, you know, it’s physical activity, it’s nutrition, it’s social connection, it’s sleep, it’s sunlight is, you know, it’s all the things that I’ve talked about on this Podcast and that other people talk about as well. But yes, very wealthy people are looking for that edge to live longer. And it is true that when you start to layer in all the basics of do’s and don’ts, all the behaviors, and then you start to augment that with a few extra things, you get the sense of more vigor That sort of suggests they may live longer. But we still don’t know. We still don’t know. With the exception of exercise that we absolutely know can enrich mitochondrial density, give people more energy and vigor, et cetera. You know, most of this is still a big question mark. See, I can (Time 0:44:02)
  • Social Media’s Influence
    • Social media warps perceptions of attainable wealth by showcasing extreme success stories.
    • This fuels unrealistic aspirations, particularly among young people. Transcript: Morgan Housel But maybe with social media, it makes it seem so that there are virtually anything is within your reach. Because it used to be before social media that your view of the world was mostly your neighbors and your coworkers and your siblings. And now everybody’s view of the world is a curated highlight reel of the most extreme events in the world. So if you are a 15-year scrolling through Instagram, then what is within your reach, what looks within your reach is a Ferrari and a private jet and a mansion in a way that didn’t exist When you and I were kids. I think it makes the aspiration level that much harder. And real examples of people who went from (Time 0:47:54)
  • Social Media’s Design
    • Social media’s design intentionally promotes social comparison and FOMO.
    • These platforms use sophisticated algorithms to maximize engagement. Transcript: Andrew Huberman Mean, much of social media is just by definition in terms of the number of followers being displayed, et cetera, number of likes and comments being displayed is designed to set up these Metrics of comparison. Morgan Housel Yeah, the smartest minds of the generation work at Facebook and Instagram and Twitter to figure out how to give you FOMO, how to generate a little bit more dopamine. And they’re very good at it. I’d like to take a quick break and thank one of our sponsors, Function. (Time 0:53:15)
  • Financial Freedom
    • Financial freedom lets you pursue activities on your own terms, increasing happiness.
    • View savings as purchasing independence and autonomy. Transcript: Morgan Housel Yeah. Andrew Huberman It means different things to different people, but certainly one does not want to be enslaved by anything, including their own pursuit of work. So there, I think, at least two forms of anti-freedom. One would be the type that exists within our head. We have to continue on this track because I’m afraid of failure or I’m in pursuit of something and we are actually enslaved in a way that we sort of create for ourselves in the act of The Other is the job where, you know, it’s providing resources, but we really don’t need to be there. And yet people don’t hop off the train. You know, they could. They could escape the dreaded boss or the dreaded circumstance. You know, I remember a time when all I wanted was a window at work that opened for fresh air. That’s all I wanted. And like all these other things, I just a window that opened. I even tried to find one of these little saws to saw, but then the maintenance people or whatever, the facilities people told me I’d get in trouble. We yearn for freedom. We hate enslavement for all the obvious reasons. In your observation, what is the best way to frame this need for freedom? And I have to imagine that people listening are at various points along their careers. What have you observed here in yourself and with other people you talk to, wealthy, not wealthy? What is freedom? How do we get real freedom? Morgan Housel I think there’s an anecdote that I love, which was from Franklin Roosevelt when he was a kid. I think he was like five years old. He complained to his mother one day. He said, my entire life is rules and schedules and I hate it. So his mom said, okay, Frankie, tomorrow you can do whatever you want. The day is yours, anything you want. And his mom, Sarah Roosevelt, wrote in her diary that night, he said that day that he could do anything, he went back to his normal schedule. He did everything on schedule like he was supposed to do, but he was much happier because nobody was telling him to do it. And I think that’s what’s true for a lot of people. Freedom does not mean you do nothing. It doesn’t necessarily mean you retire. It doesn’t mean you quit working. I want to be free and independent, which means I want to wake up every morning and say, I can do whatever the hell I want today. Even if most mornings what I want to do is work and be productive and put myself to use. So I think a lot of people misconstrue freedom as I’m going to ride off into the sunset and do nothing now. It’s like, no, I think people have an inherent drive to want to be productive and social and do things. But there’s a big difference between your boss telling you to do it and doing it on your own terms. When I was a junior in college, like a lot of young men, I wanted to be an investment banker. That’s what looked like power and prestige. So, I got this investment banking internship, and it was absolutely miserable. They had this saying that is so funny in hindsight. They said, if you don’t come to work on Saturday, don’t bother coming back on Sunday. Like, just the culture of it was work 100 hours a week. Just go nuts with it. And I hated it. I hated every single second, and I had to leave. But it wasn’t because I was not into hard work. I think I was absolutely willing to work hard. I just didn’t want anyone to tell me to do it. And so, when I became not necessarily financially independent, but I could have a job, it was more entrepreneurial. It was like, oh, I will work very hard. And sometimes I might work as hard as an investment banker. I might work 80 hours a week, but it’s on my terms. And I think everyone is way more willing to do that than they are to be told what to do. I think that is an inherent human driver. And if you can use your money for independence to where you can wake up and say, I have the financial flexibility to work where I want, live where I want, retire what I want, take a different Job, move to a different department, even if it’s going to pay less. That giving yourself independence and autonomy, I think for most people is what’s going to drive. That’s the highest tool that you can use with money. And what’s important about that is where do you get independence with money? It’s the things you don’t spend money on. It’s the car you didn’t buy. It’s the house you didn’t buy. And most people will view that as like idle money. You’re saving up money. It’s just sitting in the bank doing nothing. No, no, no. It’s giving you independence. And once you view as like every dollar that you don’t spend is money that you are actually spending on independence. It’s not idle. It’s giving you marginal more independence than you had the day before. Then I think that’s, to me, that’s why I save money. I’m not saving money because I’m a pessimist. I think it’s all gonna come collapsing down. I’m saving money because I wanna be independent because that’s what I think is gonna give me the most fulfillment, the most happiness. And that’s where the savings comes from. (Time 1:14:42)
  • The Tangibility of Money
    • The pursuit of money often overshadows other important aspects of life.
    • Quantifying financial goals is easier than measuring relationship or personal growth. Transcript: Andrew Huberman Think people like Elon Musk, people like Mark Zuckerberg, they represent these incredibly extreme examples that obviously most people can’t even, including me, can’t fathom what A day in their life must be like. I met Zuck. He was on this podcast and it seems that he really enjoys doing what he’s doing. But I think for me and for most people, it’s just like so far out of the stratosphere of understanding is similar to the amount of wealth that they’ve acquired. It’s just sort of like, what do you even do with all of that? And people go, well, I’d figure it out. Yeah, I’m sure you would. But it’s just, it’s so astronomically outside the scale of one’s normal kind of dopamine reward schedules that it’s hard to imagine. And what are you going to do, buy a plane as big as a state? But there’s a place in between struggling to quote unquote, make it and being at that X at that extreme where people hit that sweet spot. And I think a lot of your work is really aimed at at least shining light on the possibility of a sweet spot where you’re doing something that you find meaningful, making sufficient income That your anxiety is buffered. You have meaningful relationships in and out of work. And you’ve essentially built a quote-unquote good life, right? I mean, I think I heard Naval say something recently where he said, you know, you want resources along the dimensions I just mentioned, a healthy, fit body, a calm mind, and a home full Of love. I think it’s a pretty awesome list right there. And it’s a lot of work though, right? And just to, you know, check off even one of those four boxes, a lot of work. Right. Morgan Housel I think because money is so tangible, of counting it is so easy and so tangible, that even if people know that, they’re going to put an inordinate amount of effort towards making more Money at the expense of their relationships, their health, their children, their friends, their family. And it comes at the expense. Because if I were to say, you know, how do I increase my income by 10% It’s like, I can wrap my head around that. I can give you a number of what that would be and how I might be able to do it. But if I said, how do I get my kids to love me 10% more? Like, ah, I have no idea how to measure that or how to even pursue it. So even if I want that, because it’s hard, it’s not tangible. It’s much easier to ignore and just pursue the thing that you can count, which is money. Do (Time 1:31:00)
  • Teaching Kids About Money
    • Children observe and internalize your financial habits and values.
    • Lead by example rather than lecturing, and recognize their individual personalities. Transcript: Andrew Huberman What are you teaching your kids about money? And at what age should we start to do that? And for those listening who don’t have kids, I suppose it’s never too late to learn. Morgan Housel I think one of the points I always make that I’ve learned the hard way, parenting, is I don’t think you need to sit your kids down and teach them about money because they’re paying attention Whether you know it or not. Kids are so incredibly good at learning. They’re better at learning than adults are, particularly for things like language and whatnot. But you don’t need to say, sit your kids down and say, this is how much we spend, and this is what we value, and this is why. I say, they’re paying attention. They’re figuring it out. Every time they hear you say, I can’t afford this, every time we’re at the store and they say, oh, look, this is on sale. Let’s get two of these. They’re making a mental note of everything. Every time they hear you bicker about work, every time they hear you talk about a raise, even if it’s just in the next room, they’re piecing it all together. And I don’t think they even know it, but they’re so good at learning that they’re building a mental model. And so even if you never sit your kids down and teach them, by the time, certainly that they’re teenagers, they know a lot about money. And maybe some of those things are good, maybe some is bad, but they’re paying attention. And so I think the only thing you can do as a kid, or as a parent, I should say, is to lead by example. Because we talked about this earlier, the propensity to rebel as a kid, as a teenager. You talked about the smoking ads, where they just wanted to do the opposite of what everyone else is doing. I think particularly for teenagers, which I don’t have yet, but if you sit them down and say, this is what you should do, you should always do this, you should never do that, their propensity To rebel is enormous. So I actually think it can backfire if you try to teach them. I think the best you can do, the only thing you can do is lead by example with people. One thing that a lot of, not just very wealthy people, but moderately wealthy people will say or ask is, how do I teach my kids about money without spoiling them? How do I use my money to help my kids without spoiling them? That’s a big topic for a lot of people. Even if you’re like a middle-class family, how do I leave a small inheritance or help my kids? Should I buy them a new car or should I help them through college? I think a big thing that is easy to overlook is two things. You might think as a parent that you are teaching your kid grit and independence by withholding resources from them. And you’re doing it very well-intentioned. You need to earn your iron, my money, and this is mine. You got to go figure out your own. I think it is very easy to overlook that you are not teaching your kid independence and grit. You’re teaching them to resent you. And I have a good friend, Chris Davis, who told the story. Now, he’s an extreme example. Chris Davis’s grandfather is Shelby Davis, who was a billionaire investor, one of the greatest investors of all time. And Chris tells a story that when he was a kid and his grandfather took him skiing, his grandfather would say, if you want me to buy you a lift ticket, you need to hike up the hill first and Ski down, hike to the top. And if you do that, then I’ll buy you a lift ticket. And Chris said the lesson that they learned from that was not grit and independence and hard work. The lesson they learned from it was grandpa’s kind of a jerk sometimes. And I think that’s an extreme example, but you see that a lot with kids. One like very practical takeaway from this is that I think as a parent, you have to live the same lifestyle as your kids. It’s very difficult to say mom and dad fly first class, but you’re back in coach. Andrew Huberman Does anyone actually do that? Oh, absolutely. Morgan Housel And maybe that’s still a very extreme example. But what you think as a parent that the kid is learning is, oh, if I work as hard as mom and dad one day, I’ll be sitting up there. And they don’t. The lesson they learn is mom and dad think they are superior to us or mom and dad are superior to me. I’m inferior to them. I think this is why you see a lot of very wealthy kids who are just psychologically broken. Because I think you have well-meaning parents who are like, look, we’re very wealthy, but you’re not. You got to earn your way. And all the kid hears throughout their life is, I’m inferior, I’m inferior, I’m inferior, I’m inferior. And by the time they become adults, it’s so ingrained into who they are that they can’t take a step forward. They can’t advocate for themselves. And so, look, that’s what the very wealthy deal with. But I think that’s, that’s what I think a lot about with kids. The other thing that every parent with more than one kid will understand and recognize this, my two kids are, could not be more different. Their personalities, their goals, even with the same parents living under the same roof, they are roof, they’re a million miles apart. And so how, if you say, like, what are you teaching your kids? I don’t know who they’re going to be when they grow up. I don’t know what their goals or their aspirations are going to be. So is it right for me to tell my daughter, oh, here’s how you can save and become super wealthy over time? What if she doesn’t want to live that life? What if she does have more of a YOLO personality of like, oh, I just want to go travel the world. I have no aspirations to become super wealthy and retire early. So you have to let them figure it out for themselves and realize that what might be right for you and what may have been right for the era in which you and I grew up in might not be right for Them and might not fit the era that they grew up in. (Time 2:01:27)
  • Money as a Tool
    • Use money as a tool for happiness and freedom, not as a social comparison metric.
    • Prioritize self-understanding and personal goals over external validation. Transcript: Andrew Huberman Wild concept, but it seems just spot on. So we need to think about money a little differently or a lot differently if we are to get the most satisfaction from our work and from resources. Morgan Housel It requires a lot of looking in the mirror and just saying like, who am I and what do I want? I think that’s the biggest thing, particularly when we started this conversation by saying, everybody’s different. What’s right for me is not right for you. Inherent in that is that you have to understand yourself. And a lot of people, a lot of financial damage is done when people have a financial plan that is right for another person, but it’s wrong for them. And that’s dangerous because it’s the right financial plan, maybe for a lot of other people. So it makes sense. It’s rational. It makes sense on paper, on the spreadsheet, it looks good, but it doesn’t fit your personality. That’s when a lot of damage is done. So I think to do better with money, you need to spend a lot of time thinking about who you are and your family and your goals and your aspirations, realizing that all those things will change And adapt over time. So what was right for you 10 years ago might not be right today. And in a way that might seem selfish, like tuning out the rest of the world and tuning out other people and coworkers and neighbors and whatnot, just saying, how can I use this as a tool To become happier, to live a little bit better life? What’s the purpose of money if it’s not that? I love (Time 2:10:46)