At the Money: What Never Changes with Money
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Same as I ever was, same as.

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Indexing, massive technology concentration, the rise of ai, it's a brave new world, or is IT as much as our era seems to be unprecedented, a lot more is the same as ever. Human behavior, risk, opportunity, even living the good life, all tends to be well, if not eternal, pretty close. We tend to focus on what's different while ignoring all the things that remain the same.

I'm barry. results. And on today's addition of at the money, we're going to discuss why you should pay attention to the unchanging nature of money and human behavior to help us and packed all of this and what that means for your assets.

Let's bring in Morgan housel. He is the author of same as ever, a guide to what never changes. The book has received widespread claim for its insightful approach to thinking about risk and human nature. So more than let's start with your central premise, how consistent is human behavior across the millennia?

This is a great quote from volt, who said, history never repeats itself, but man always does. I think that is such A A good way to summarize history that the events never repeat themselves, the recessions, the wars, they're different every single time. And that what makes me so difficult to predict.

But the behavior, how people respond, recessions or bear markets, whatever IT might be, is very stable throughout history. How people responded to the risk and the surprise of the great oppression in the one thousand nine and thirties is exactly how they responded to the financial crisis of two thousand eight or the panic of march twenty twenty. No different whatsoever.

And that is important because we cannot predict when the next recessions is going to occur, when the next bear market might OCR. Nobody can do IT, but if you understand that the behaviors are stable over time, then you can say, I have no idea when the next recession is going to come, but I know exactly how you respond to IT when IT does come. So it's putting your faith in forecasts in the future in something that is repeatable and predictable, fooling yourself into trying to predict something .

that you can't IT sounds like the focuses less on predicting events and more on understanding around behaviors.

That's right. That's exactly right. And you're doing that because one is stable and predictable over time and one is not.

So let's discuss the power of narratives. Why is IT that stories are so much more influential then data and reasoning when IT comes to us thinking about things like money.

I think it's always been the case that the best story wins, not the person who has the right answer or the best answer or the answer that makes a more sense. It's always the best story that wins. People see that very often in politics, when it's almost always the case for generations that the person who wins the presidency is not the most competent or has the best policies is a person who tells the best story.

That has always been the case, and I think always will be, people don't have enough ban with whether it's in investing or politics or anything else, to truly pass all the data and sift through all the data to find the best answer. They need a quick sound, but they need a quick story. They need the best story to make sense of what's going on in the world.

So if you're talk you about the economy or the stock market going through all that day, I mean, that's that's an incredibly difficult thing to do. If you can tell someone a quick story. Here's a story about NVIDIA.

Here's a story about the U. S. economy. They can wrap their head around that in three seconds. And it's much more compelling because IT takes less, less effort to do every stock valuation is a number from today multiplied by a story about tomorrow.

You take a number from today like earning export share and you multiply by a story about tomorrow. That's the the the multiple that are slapping to IT. What's so important there is that the stories of people tell about what tomorrow might be are so much more powerful and also fick changing then the number from today. And this is why there's so much madness and chaos in the history of markets. It's all just people cleaning to and adapting to and telling new stories about what the future might hold.

So a number from today multiplied by a story about tomorrow that could be growth way, that could be earnings, that could be market chair IT, could be any sort of story and but that's a total unknown ah is that the power of narrative?

Yeah mean, if if you were to say, uh you know just making this up, that netflix stock will be trading at x dollars per share in three years that that sounds a reasonable thing to try to predict. But what you are really saying is, you know what story investors are gona believe about netflix three years or o you know what kind of mood investors are gone to be in three years or now? And when you frame me like that, it's absurd.

How could anyone possibly know what people are going to believe about the future three years from now? Most people don't really understand what people believe about the future today to, let alone what they are going to think about three years or now. And so when you realize that it's all, all narrative driving, is whatever people want to believe, the mean stock revolution, if you want to call that over the last couple years, has been the perfect example of that, where the number from today was able was meaningless or there was no number from today.

But the story about what I could turn into tomorrow was extraordinary. And this is one of those things that has always been the case that was through one hundred years ago. IT is so much more powerful today when social media allows the number of stories and the power of those stories to deliberate, a way that we've never .

seen really fascinating. So let's talk about the nature of risk. Why is IT that we really don't understand IT? And why do we always see them to be so surprised when a low probability event occurs?

I think, look, if there is a one percent chance of a very bad recession in the next year, and a one percent chance of a very bad pandemic, and a one percent chance of a war and a one percent chance of a natural disaster going down the list, well, the odds at any one of those will occur are very low, but the odds that at least one of them will occur are pretty good.

And so if you have a once in a century event, but there are hundreds of possibilities, is a one in a century recession. Once in a century, the remark, whatever is the outset, one of them are gona occur this year or in the next five, ten are very good. So this is why we are constantly surprised when there are big rest.

So i've been invested for twenty years, even investing for longer than that. What's happened in the last twenty years? Well, IT was the aftermath of nine eleven and the war in iraq and leon brothers.

Now in twenty years you've had like five once in a century events. And I think that will be the case going forward as well over the next twenty years. I think we'll have five or ten or maybe more events that are easy to call once in a century events. But since there are so many different versions of IT, they tend to happen much more frequently than we like to believe.

Yeah, we we we need a new name for these once in a century events that we get every five to ten years to say, to say the least. So so i'm glad you're putting this into a historical context. How can we Better understand history to both what's going on today and to concept ze what might happen? Morrow.

this is a great quote that I love that says, everything feels unprecedented when you haven't engaged with history. So if you're not a student of history, then every morning you wake up and to read the news. And IT feels like this is the first time it's happening.

This is the first bar market. This is the first recession. This is the first presidential sason ation attempt.

Whatever I might be if if a stood of history, you know that there have been a million different flavors of virtually everything that's going on today. And it's the same movie over and over again. It's a different cast of characters.

It's a slightly different script, but it's the same movie again and again and again. That doesn't necessarily make things more comfortable because you deal with things that are painful in your own life, painful for other people, as IT is not represented in that this is the same thing. And that really pushes you to towards understanding the behaviors of help people responded these things versus trying to predict exactly what's gonna en next. If you understand how people respond to what's always occurred, then you have a good sense of how they can respond next time.

So one of things that has always occurred is that we tend to go through these cycles of calm and chaos. Oh, why is IT that during the good times, we seem to plant the seeds for the chaos that invariably seems to follow. You look.

when things are good in the economy or the stock market, people naturally, Normally rationally take more risk. If the economy is really strong, you feel Better going into dead in your business and building a new factory. Or if the stock market looks really strong, you feel Better allocating more assets to there is a very rational thing to do.

But when you do that, you as as one of, you know, hundreds of millions of actors in the U. S. Economy have planted the seeds for the next decline. The more risky taking in your business, more risk e, taking in your portfolio makes the market more, more fragile, more vulnerable.

And so the irony is that if we never had a recession, people would very rationally take a lot of risk in their business, go into debt if we're never gonna recessions. And the fact that they're going into dead is what makes the economy fragile. And the fact the economy becomes fragile is what causes the next recession.

So this is irony of if we never have recessions, you would guarantee that you're going to have a very bad recession in the future. And the similar stock market, the lack of volatility is what plans exceeded for future volatility because you get complacency and people take on more risk. And so when you view IT like that, you view volatility as completely unavoidable when the lack of recessions, plants proceeds from the next recession. It's guarantee that we're going to a have future recessions, future burry markets. You've view IT as much more inevitable rather than something that requires the economy to break or for policy makers to make .

a mistake forward to occur. So we've been talking about how history sets our expectations for what might occur in the future. Let's talk about the gap between expectations and reality. What happens when that gap gets to be too large?

It's always been the case in the U. S. Economy that if you look over a multi generation period, there is economic growth and usually substantial economic growth.

If you look at how we are living relative to our grandparents, and their grandparents would grow so much, IT has also always been the case. People look back and say, look, it's not as good as IT as as I used to be. There are things are different in the past.

And I think what so often happens is that people's incomes grow, but their expectations grow by even more. The average midd class american today is living a life that john d. Rocke eller could not fathom.

They have technologies and medicines at. Rocket fellow, the richest man in the world in this day, could not fail them. But you cannot say that the average american should feel richer, the rock fellow, because that's not how people's brains work at all.

Wealth is just relative to what other people have around you. So you you measure your life relative to your neighbors and your coworkers and everybody else. And in that situation, you can have a world where people's incomes grow, their assets grow and they live a longer life.

But if everyone else is doing the same, you don't feel any Better off. And you can also imagine a world which our branches are living away Better than us. They're Richard, they're healthier, but they're no happier for IT because everyone else is going to be living that too.

They're all gonna the same cancer medicines and they're all gonna the same high incomes. And so by comparison, they don't feel like going that much Better off when you realize that all wealth and happiness is just comparison to other people. You realized that the gap between your expectations and reality is really what you want to go for to gain some sort of happiness and contentment out of your money.

And perhaps that's why social media has become so toxic. All IT does is raise peoples expectations and their comparisons rather than appreciating what they have.

Yeah because I mean that I used to be that you compared yourself to your neighbors and your coworkers. Now you compare yourself to accurate, highlight real of a bunch of strangers fake performative lives. And so no matter how well you're doing, you can open up instagram and be bomb boarded with hundreds of people who appeared to be doing Better and look Better and or look happier than you are even if it's all bs. And so even though the comparison game has always been the case, IT is so much more pot today than it's ever been.

What we see on instagram is the car of the house, but we don't see the monthly payments and you don't see .

the person bigging with their spouse or dealing with their health problems or or not. It's all the highlight, real, and sometimes it's it's the fake highlight real and IT IT leads people to think that everyone else is, is, is happier than you are. There's a great quote from mota sq.

He said the three hundred years ago. He said, if you only wish to be happy, that is very simple to do, but people want to be happier than other people, and that is very difficult because we over estimate how happy those other people are. And he said that three hundred years ago, you help before social media. If you were around today, I think I think you would look at that statement and say that is ten times true today than it's ever been.

Our final question, how can we baLance optimism and pessimism in our own lives with money?

I've always praised that as you want to save like a pessimist and invest like an optimist, you want to be very confident in where we're going for your investments, but you won't be very realistic about how heart is can be to get there. I hope to be an investor for another thirty year, fifty years. And i'm very confident that fifty years on now, the markets going to be extraordinary ily higher than in yesterday. I'm equally confident that it's going to be a very painful slog to get there is going be a nonstop chain of surprises and setback, ks and recessions and pandemics on not. And so I think that's how you baLance to you, very optimistic and where you're going in the long run and very realistic about how difficult could be to get there.

So to wrap up, the world is changing faster than ever, and we tend to focus on each experimental, unprecedented action that takes place. We really should be focusing on all the things that are the same as they've ever been. I'm barry results. You're listening to bloomberg at the month.

Time is and holding up time and.

We're in the middle of a truly wild presidential race pitting a democrat who wasn't on the ballot until this summer against republican who is convicted on thirty four felony counts. But the wildest thing might be this guy.

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awesome. I max chef gin. This is citizen iron three part series from irani, where we investigate iron mosques. Unprecedented support for Donald trump, while you on ink, on apple podcast, or wherever you like to listen.