The Art of Spending Money: How to Get Rich and STAY Rich | Morgan Housel

Morgan:
[0:00] Dopamine doesn't care how much you have. All it wants is more,

Morgan:
[0:02] more, more. What would feel better? Your net worth is $100,000 during a bull market or your net worth is a million dollars, but it's going to be a million dollars for the next decade.

Morgan:
[0:13] What feels better? The bull market feels so much better. The growth is what feels good. And so because of that, no matter what your net worth is, the right amount that you think is going to satiate you is always 2X.

Ryan:
[0:28] A lot of people think getting rich is the key to solving their problems are they right i

Morgan:
[0:34] Think they can be right they can be right so the answer is not no but it's not a resounding yes either i think it is very easy for everybody to assume that if you wake up in the morning and you're like oh i'm not i'm not satisfied with my life i have this hole that needs to be filled it's very easy to assume that

Morgan:
[0:52] that hole needs to be filled with more money.

Ryan:
[0:54] Why? Why is that the assumption?

Morgan:
[0:56] I think one of the big reasons why that is so easy to make that assumption is this. Money is so quantifiable. And so you can measure your progress and I can measure myself relative to you very easily. Very, very easily. I give the example of this. If I said I wanted to be a better husband, I'd like to be a 10% better husband. Great goal. Very noble goal. I would love to be a 10% better. What the hell does that even mean? How do I measure that? How do I try There's no husband points. There's no husband points. If I were to say like, who is a better father? Me or you or somebody else? Who knows?

Ryan:
[1:28] But if I said,

Morgan:
[1:29] I want to increase my net worth by 10%, I can track that. If I said, I want to have a higher net worth than you, I can track that. Down to the penny, purely objective. So I think because it is so easy to quantify, it's easy to overestimate the importance. And again, if you wake up with a hole in your life, the knee-jerk assumption is very commonly that a hole needs to be filled with money. Now, again, I think that can be true sometimes. I think everybody can use money to live a better, happier, more fulfilling life. But I think we overestimate the extent of what it can do. And so there is a long list of things that money can do to give yourself a better life. There is an even longer list of things that it cannot do for you. And so many times in life, that hole that you have in the morning might be what needs to be filled in there is, a different career, better relationships, better health, those kinds of things. And by the way, you can use money to help those things, but it's not a direct one for one. You know, if only I had more money, that hole would be filled and everything

Morgan:
[2:26] would be, would be great. That's rarely the case.

Ryan:
[2:28] Got it. So you're saying basically money should not be the default. I want to get into the case that you're making. So the book is called The Art of Spending Money. And this is after Morgan, you've written books on investing, basically the psychology of money, same as ever. These were books on how to earn, how to save, how to invest, particularly how to work your mental and your brain software to be oriented towards those things. You call spending money an art. So it's not a science, right? There's no universal formula is what you're saying. It's just like investing from that perspective. I think a lot of people though think they won't need to read this book and pay this book any attention until after they've made like a lot of money, many millions of dollars because they'll say, come on, Morgan, you know, the easy part is spending it. Okay.

Ryan:
[3:17] The hard part is actually making the money. Should people be thinking about spending money now? Or is that a problem that rich people have that they can delay until they're rich?

Morgan:
[3:29] I think it's a very good point. It's a fair point. I thought about that a lot with the book when I was writing the book of, is this only a topic for people who have tons of excess money lying around and they don't know what to do with it? I think the answer, it could have been written in that way. But I actually think for some of the people who have lower incomes, average incomes or lower incomes, this can impact you just as much. Those tend to be a lot of the people who are really struggling with things like if only, like the if only questions. If only I had.

Morgan:
[4:00] Like that's when the hamster wheel begins in your life is when you are, you at least feel like you're at a lower level and the aspiration of your, like the gaze that you have of where you want to be is really starting to form. And some of the most powerful, I think, misconceptions and issues that people have spending money tend to be when they are younger and don't have very much of it. I use this example that like my desire for a Ferrari and a Rolex and a mansion and a private jet, that desire that I had really peaked when I was like in my early 20s. Before you could afford any of these things. Before I could afford any of it whatsoever. And it's not that I don't like those things anymore, but when I didn't know this at the time, but when I try to like pick apart my life now, I think a lot of why I wanted those things so badly is because when I was 19 or 20 years old, I had nothing else to offer the world. I had no, I had no intelligence. I had no humor. I didn't know how to be a good spouse or good. I had nothing to offer. And so by default, I think in my little teenage brain, I was like, oh, if only I had a Ferrari, then people would value me because there was nothing else that they could, there was nothing else I had to offer. And so I think something like that of, if you don't, if you feel like you don't have a lot to offer the world, it is very common that people will default to, well, maybe people will respect me for my.

Morgan:
[5:19] Car, house, clothes, jewelry, whatever it might be. That's a very common thing. And that really inflicts, tends to inflict people who are younger and poor.

Morgan:
[5:28] So that's one example of like, no, I think this can really impact everybody. And I think I had the biggest issues with spending, whether it was spending too much or not spending enough or having kind of a flawed social aspiration of like, where do I want to sit on the hierarchy? I struggled with those the most when I was younger and had less money.

Ryan:
[5:48] Yeah, I think that's a great point. I mean, I think in order to understand where you're going to invest your life, you have to understand the things that money can do for you and the things that it can't do for you.

Ryan:
[6:00] And that's why this book was incredibly powerful for me. You also called it an art. So let's get back to this. Why is there no universal formula that we just plug in that tells us exactly how to spend our money and to optimize happiness? Yes.

Morgan:
[6:15] I think there's two parts to this, why I call it the art of spending money and not the science. One is the very simple, you and I are completely different. We have different backgrounds. We have different experiences. Maybe we're a slightly different age. We have different family dynamics. I'm socially scarred from my past in a different way than you are. We're both socially scarred from our past, but it's always going to be a little bit different. No two people are alike. If I were to talk about this in terms of our taste in food or our taste in music, people would totally understand it. If you said you like Italian food and I say I don't, it's fine. Nobody has any issue with that. And they understand like it's subjective. There's no right answer. There's no formula for what food tastes good. And so people assume, like people understand it with those topics and they assume that money should be the same. And I think most financial debates are, How much should you, like, how should you earn your money? How should you invest it? How should you save it? How should you spend it? Most of the time people are debating with each other. They're actually just people with very different preferences talking over each other. For sure. In a way that they would never do with food or music. And so, you know, people have very different views on this. Ramit Sethi is a great financial author, financial writer.

Morgan:
[7:22] And he talks about this a lot where his personal situation is he loves clothes. He loves fancy, expensive clothes. He dresses very well, always looks super sharp. and he couldn't care less about his car. That's like, that's his rough spending outline. So he spends a fortune on his clothes and not that much on his car.

Morgan:
[7:39] Now, somebody might be listening to this and be the exact opposite. They might be like, I'm fine wearing Levi's and a Target t-shirt, but I want to do it while driving in my super expensive car. Neither one of those people are right or wrong. It's just whatever fits you. And the idea that a lot of what we want in life is a product of our past and that the experiences that I've had, the experiences that you've had have led us to the desires that we have, whatever those desires are. I found this, what I thought was a very fascinating headline from the Washington Post in 1929. So this is the peak of the roaring 20s just before the Great Depression. And the headline in the Washington Post was, the more you are snubbed while poor, the more you enjoy displaying being rich. I thought that was so insightful that if you were somebody who used to be poor and you were snubbed for being poor, people made fun of you, people discriminated against you, whatever it would be. I think it's true that there is a much higher tendency that if you become rich someday, however you want to define that, those are the people that want to have the fancy car, the fancy house, the fancy clothes, almost as a trophy for what they've overcome.

Morgan:
[8:47] And I think it's so insightful. And I think everybody is snubbed in whatever unique way there. Some people who grew up rich were snubbed and made fun of and bullied because they were rich, like this can manifest so many different ways. But the idea that this is not a spreadsheet endeavor, this is not just, oh, the bigger house is better than the smaller house. The faster car is better than the slower car. It's not analytical like that.

Morgan:
[9:09] There's like a psychological itch that all of us have in our own unique ways. And so one of the, one of the like, just anecdotes that I use to make that point in the book was we have a family friend who grew up extremely poor. They were a foster child. They were homeless. They grew up as, as virtually as poor as you can get in the United States. And then he became a very successful businessman later in his life. And when his daughter was going to college, he told his daughter, please go to the most expensive school that you get into. It was almost like he wanted, he was begging her, like the higher the tuition, the better. And the reason he did it is because he was like in his scarred mind, Paying the highest tuition possible was like a trophy for what he had overcome. It was like I made it. And it was almost like if you get a scholarship, please reject it. And you can look at that and be like, it's so irrational. It doesn't make any sense. But I think that's an extreme example of what you and I and everybody has some version of that story of like, this is not a spreadsheet. This is all psychological of who we're trying to impress, what we're trying to prove to ourselves, what we're trying to prove to others.

Morgan:
[10:14] What we find relaxing, what we find fulfilling is very different person to person.

Ryan:
[10:18] Yeah, what I appreciated about this book is you encourage people, you don't offer judgment on what people choose to spend their money with. And yet also you acknowledge the traps. There are some psychological traps that people might fall into where they're, let's call it investing money maybe in places that won't fulfill them and won't produce happiness. And that's why this is, I know you have two other books on investing. This to me, I know it's talking about spending, but it's also an investing book because this is about investing in all of the non-financial things that are worth investing in,

Morgan:
[10:52] Right?

Ryan:
[10:52] It's kind of the criteria. It's like, what are the things, assuming your goal, your life goal is peace and happiness, what are the things you can invest in to make those things happen?

Ryan:
[11:03] And what are the things that money just won't solve for? So let's come to some of these money traps maybe. So one of the first ones you mentioned in the initial chapters is,

Morgan:
[11:13] We think we want stuff.

Ryan:
[11:15] But what we actually want is admiration. So you say people think they want a nicer car and a bigger house, but what they really want is respect and admiration. Talk about that.

Morgan:
[11:28] I think that's by and large true. If someone told me that's not black and white, it's a shade of gray, I would accept that. But I think for the vast majority of people, if you actually dig into what your material desires are, they are a status. they are to get other people's attention. The way that I tried to think about this, it's a very imperfect exercise, but I always try to ask myself, if nobody could see how I was living, if nobody could see my house, my car, my clothes, nobody could look, how would I choose to live? Or if I was on a deserted island with just my family, just my wife and kids, nobody else could see anything. How would we choose to live? What kind of car would we drive? How would we dress? And I think in that exercise, you start realizing the difference between utility and status and how much of our desires, my desires, are based off of status. And that's not a bad thing. That's not an indictment because a lot of the world is signaling and storytelling.

Morgan:
[12:24] It's a competition between people and for different resources and whatnot. So this is not bad at all, but you start to see where these desires come from.

Morgan:
[12:34] There's a really interesting anecdote from Harvey Firestone, the late tire tycoon made Firestone Tires. He wrote a biography in 1926, I think it was. This was about 100 years ago. And he said, for reasons I don't understand, every single wealthy person I've ever met, including himself, the first thing they did when they got wealthy was they bought a gigantic house. And he said, every single one of them, including him, found it to be a gigantic burden, found it to be a giant pain in the ass. And he and his wife were reminiscing in this biography. They were like, we were happier in the small little cottage that we used to live. It was so simple. It was so quaint. It was so easy to maintain.

Morgan:
[13:13] But he said, there's no going back to the small cottage except as a broken man. As in, he was like, he was, it was this incredible set of admissions where he was like, as soon as you get rich, you have to buy a big house. You don't like the big house. It's a pain in the ass to maintain, but you can't go back to the small house because that's an admission that that's, that's who you used to be. It's not who you are now. So I think there are all these psychological trophies that we have. They're trophies for ourselves and they are signaling mechanisms to other people of where you sit on the pecking order. And it is extremely rare that you find someone who has made a decent amount of money that completely detaches themselves from that game.

Morgan:
[13:52] I've played this game, like virtually everyone I know to some extent in their own individual way has played the game of, I want to signal to other people. People signal in different ways. You're signaling to different kinds of people, but there's always some sort of like, I want to get respect and admiration for the things that I have. Now, again, that's not bad and it's not a criticism. I engage in this as well. But I think the question to ask is, who do you want to respect and admire you? And what do those people actually respect and admire you for? So Warren Buffett's definition of life success was, when the people who you want to love you, do love you. He said, that's what success is in life. And I think for a lot of people, if you take a step back, you're like, well, who do you want? Who do you actually want to love you? And different for everybody, of course. But for me, it was like, it's my wife, my kids, my parents, and maybe two of my friends. It's like a very small group of people. And what do those people admire before?

Morgan:
[14:45] Not my car, not my house, not my clothes, not virtually anything material. They will respect and admire me if I'm a good husband, if I'm a good dad, if I'm a helpful friend. And you can use money for those things, of course. This is not an anti-spending argument. But if you really dig down to like, look, I'm doing this for respect and attention. Okay, whose attention do I want? And what do they respect me for? You will probably get to like a different philosophy around spending than the knee-jerk one that you had, which was more stuff, bigger stuff,

Morgan:
[15:19] faster stuff, nicer stuff. I think that tends to be the case.

Ryan:
[15:21] I love that quote. I'll say it again, the Buffett quote. When you get to my age, you measure your success in life by how many of the people you want to have love you actually do love you. Right. Incredible.

Morgan:
[15:31] And you can think that, I'm not naming any names, but you can easily imagine someone who is 80 years old, multi-billionaire, deca-billionaire, and from the outside, from our perspective, you're like, what an amazing life, such a cool life. But imagine that fictitious person, they're either divorced or their spouse doesn't love them, their kids don't talk to them, their community despises them, they're in poor health, their friends don't talk to them anymore. Imagine a situation like that and you're like, by Buffett's definition, the people who you want to love you do love you. You can imagine someone having all the money you could ever want, but not having that thing that actually matters. And you can flip that around. You could say, imagine someone who is decidedly middle class. They are like the typical median $75,000 a year, $200,000 net worth person. They're in a fantastic marriage with their soulmate. Their kids adore them. They sleep eight hours a night. They're in great health. Their community values them and loves them. They enjoy their career. And if you said like, which of those two people would you rather be? And, you know, it's different for everybody. I wouldn't judge you even if you said, I would still rather be the billionaire. But I think when you take that step back, that's when you're like, yes, you can use money to live a better life. But there's a lot of boxes to check before to then, before it's going to make much of a difference at all.

Ryan:
[16:51] Morgan, in reading like quotes from billionaires in your book, like Firestone, for instance, why do you think so many of them just they almost act as if money has been a curse in their life?

Morgan:
[17:04] I think evolution is such a powerful force. And the idea that this is life in many ways is a competition with other people. And the pull, the appeal is so strong that if I have a bigger house or a faster car than you do, that I'm going to sit higher on the social pecking order. And I will get more attention from mates, from employers, from friends, like whatever it might be. And therefore I'm going to have a leg up in life. That is, by the way, like probably not a false assumption to make. I think by and large, that can be true. There's a lot of asterisks in there in terms of, again, who's paying attention and whatnot. But I think it tends to be true that we are wired to compete against one another.

Morgan:
[17:46] And gratefully, by and large, we don't compete with each other through war and violence anymore, as much as we used to, at least. Now we can compete with each other with a competition over whose house is bigger and whose marble floors cost more and so it's a look look it's a it's a much better battle to engage in than many of the battles have been historically but, It's very difficult in a world of limited resources to just say, I don't care what anybody thinks of me. This is all kind of a peacock feathers, just, you know, mating game, display game, whatever you want to call it. And so I think that's a very strong evolutionary force. And because of it, because that force is so strong, it makes us harder. It takes a little bit of effort to take a step back and be like, well, who's actually paying attention? Like the strangers out there aren't. And the people who I want to pay attention don't really care what kind of car I'm driving. Or at least less than the strangers might, it takes, because the knee-jerk reaction is so powerful, it takes us taking a step back and reflecting on what actually makes us happy in life to actually do it. I fall for this all the time. Never in a million years would I want to make the claim that because I wrote this book and whatnot, that I've mastered this topic. I catch myself all the time with the assumption of, ooh, look at that car. Wouldn't that, ooh, look at that house across the way. Isn't that great?

Morgan:
[19:01] And I have to remind myself like, yes, that house is great. That car is really cool. But don't pretend like it's going to make the difference in your life that the knee-jerk reaction tells you that it will. You know that it's not going to. But it takes effort to do that. You have to take a step back and really force yourself to think it. You have to take.

Ryan:
[19:17] A step back. I also feel like you have to take a step off. And by off, I mean off this treadmill. We're on this hedonic treadmill of sorts where you talk about this well-known trend where people always say that they'll be happier if they had 2X more earnings. Yeah, it's always 2X. It's always 2X, right? So if you have 50,000, it's 100,000. If you have 100,000, it's 200,000. If you have a million in income, it's 2 million. And so you get this effect of millionaires are chasing decamillionaires or chasing centimillionaires, and they're just not happy. And then you go and you look at the billionaires And what did you say? Out of the 10 largest billionaires in the US, there's 13 divorces, right? And you wonder, I mean, is that the marker of happiness and success? What were the costs of achieving that status? Can you talk a little bit about this dopamine addiction that we have, this hedonic treadmill? Like, why is it always 2x more? Why do we actually have to take a step off the treadmill to realize that the thing we're on is not making us happy?

Morgan:
[20:19] There's this great quote from Will Smith where he said, getting famous is amazing. Being famous is okay. And losing fame is the most miserable feeling that you could ever have. And I think it's a great philosophy. He would know. Exactly.

Ryan:
[20:34] He has experience with all three. Chris Rock slap

Morgan:
[20:37] In the face. Exactly. He's speaking from experience. But I think it's a great observation. And I think it applies to money as well. That getting rich is awesome. It's so much fun. Being rich is merely okay. And losing wealth is mortifying.

Morgan:
[20:55] But inherent in that is the process of getting richer is what's fun. It's less about having a net worth that's going to let you live a certain lifestyle.

Morgan:
[21:05] It's the upward slope that actually feels good. That is just the classic dopamine process. Dopamine doesn't care how much you have. All it wants is more, more, more. And so I think that's a big part of this. And that's why bull markets feel so fun. Like what would feel better? Your net worth is $100,000 during a bull market or your net worth is a million dollars, but it's going to be a million dollars for the next decade. What feels better? The bull market feels so much better. The growth is what feels good. And so because of that, no matter what your net worth is, the right amount that you think is going to satiate you is always 2X. That's what it tends to be across incomes groups. I remember this for myself. I think I remember telling myself, if my net worth can be $1,000 I'm going to Like I like that's all that's all I would ever need. I remember telling myself that when I was 17 or whatever it was. And of course, that's silly to think about now. But I really had that feeling that that would be enough. And I can remember many variations of that. If only it was X, if only it was 2X, if only it was 4X, then I'd be all good. And of course, it's never the case because what you like is progress. What you like is going up.

Morgan:
[22:16] This can really afflict people when they are in retirement. Because if, let's say you are someone who's had really good savings habits for your entire life, maxed out your 401k, saved every month, invested.

Morgan:
[22:28] Low cost, did everything you were supposed to. And now at 70 years old, let's say you have $5 million. Awesome. You won.

Morgan:
[22:35] Now you can go live a great retirement. So many of those people can't do it. They cannot bring themselves to spend because their entire life, they've been conditioned to, the number goes up every month. My net worth goes up every year. Last year, it was this. Now it's 1x, now it's 2x. And the idea of they're going to start spending down their money feels so wrong. And this is the Will Smith thing, like gaining wealth is great. Being wealthy is okay. Losing wealth is miserable. And so at that point, the money is not a tool anymore. The money is in full control of your personality. If you're unable to bring yourself to spend it in a way that would make you happy. And that happens for a lot of people. If you get too addicted to the idea of it's only fun to go up and I'm never going to use this as a tool, then that's a crazy thing. I remember reading, I forget which culture this was. I read this probably 20 years ago.

Morgan:
[23:26] But there's, there are some other culture in, in, in somewhere in the world. I forget which culture that this is, that the idea of having a house with more bedrooms than you could sleep in is just so completely, it's like indistinguishable from mental illness to them. And in this culture, I forget what it was, even the very wealthiest people would be like, well, it's my wife and my kids. So our house has two bedrooms. And like, why would we, and the idea of like, there's three of us who live in this house. So we need nine bedrooms is like, again, they would consider it like mental illness. And so that idea of you only want more, you only have to have more. And the idea of only having what you need and just exploiting it for that tends to be for most people like a really hard thing to wrap your head around.

Ryan:
[24:10] Yeah, I think this is also true in the crypto community. So we've been very much conditioned to like hold. And so you just hold your assets because numbers go up and it's a virtuous thing to hold. And why are you holding? because you're holding for generations in the future for some lineage down the road. And so you never sell, you never do anything with your life, you just hold, right? It's the complete opposite of the fiat mindset, which is like spend, spend, spend. It was very interesting to your point in the book that you said many financial planners, the hardest thing they have to do is actually convince some of their retirees to spend their money. Because I guess you get into this habit set After a certain age where you're just, I mean, you turn almost miserly, where you're like, why spend?

Ryan:
[24:57] I'm used to saving. I will always save. And so the harder thing is to actually get them to spend, which is a fascinating thing in itself.

Morgan:
[25:05] Yeah. And again, at that point, the money controls you. It's a financial asset, but a psychological liability. Because you might want, in that situation, you might want to travel more, buy a bigger house, give some money to your kids, whatever it might be. And you can't because it controls your identity. And that's a tough thing to do. I think this is true very often with inheritance that I think if you're a wealthier parent, you might know that, the best time to give money to your kids when inheritance is actually going to have a positive impact on their life is probably when they're between age 20 and 40.

Morgan:
[25:40] When they're just starting out in their career, they might need to buy a house, get married, have kids to put through childcare. That's when they need your money. But for a lot of parents, the idea of letting go of some of their wealth while they're still alive is like they can't do it. They don't want to see their net worth go down, their own net worth go down. And so the standard thing, of course, is like, I will hold this money until I die. And then you can have it. And I think part of that is a safety mechanism of like, we don't know how long we're going to live. And so don't give all your money away because you might live until you're 97. But I think a lot of that is too, is just like, I can't see my net worth goes down because I think for a lot of people, this also isn't a criticism because I think I've fallen for this fairly often as well. The idea that your net worth equals your self-worth is very common. That when I look in the mirror, I say, I am a dad and a husband and an author and a citizen and my net worth is X. It's like it becomes part of my identity. And I think particularly for people who have somewhat of a higher net worth, like a medium to higher net worth, it can become a thing that your net worth becomes part of your identity and watching it go down, is very tough. This is also why the psychology of bear markets is so brutal for people. Because last year, you could say my net worth was X. And next year, you have to say my net worth is half of X. And that is brutal.

Morgan:
[27:00] It's not just numbers. It's not just money. It's who you were when you looked in the mirror. And I think this is true for a lot of people whose identities are really wrapped up in how they invest. Crypto is, of course, one of those. But there's many different flavors of that. The value investing community, the tech growth, the SPAC community. There's All these different tribes that exist in investing that become part of your identity. And if that identity breaks, it can almost be like in the same idea of like,

Morgan:
[27:27] if you could say like, I used to be a husband, but then I got divorced. It's not part of your identity anymore. And that could be really tough for people to deal with.

Ryan:
[27:34] Yeah. I wonder how much of the challenge with, you know, billionaires being unhappy is kind of a result of this is just like, I'm a good businessman, businesswoman. Therefore, I can show that in my net worth. It's all on paper. And you can see, everyone can see how good I am at this, right? It's the same with, I mean, I think I've adopted an identity as an investor, for instance, a crypto investor. It's very easy to see how well I'm doing on that score. It's just, you know, what's my ROI for the year or for the three-year period or for the five-year period of time, right? The numbers are on the screen. They tell me exactly. It is probably similar for you. I mean, Morgan, you've written books on investing, right? The idea that you wouldn't be good at this thing. That's got to be affronting to your sense of identity. If once again, you tie your identity to being a good investor, how do we get out of that trap?

Morgan:
[28:31] I think it's different for everyone. So this also falls in the category of there's no science to what I'm about to say. But for me, it's I think there's two things. The very classic Paul Graham quote of keep your identity small is very important. Anytime in life where you say I am a X, whatever X might be, I am a Democrat, I am a Republican, I'm a libertarian, I'm a crypto investor, I'm a value investor, doesn't matter what it is. Anytime you make that statement, you've attached yourself to a tribe, whether you know it or not. And once you fall into the idea of tribal thinking, it's very hard to think rationally because you don't want to be rejected by the tribe. It's very easy to outsource your critical thinking to other people within the tribe. That's true for everybody, no matter what the tribe is. And there are tribes everywhere. Politics has tribes. Education has tribes. Industries have tribes. Investing strategies have tribes all over the place. And so keeping your identity small, I think, is very big. But the other thing is, of course, you're going to have an identity.

Morgan:
[29:29] Make sure you keep it very, that you're thinking long and hard about what that identity is.

Ryan:
[29:34] It's like tied to your core values.

Morgan:
[29:35] Tied to your core values. So for me, what I want my identity to be is husband, father, maybe author, friend, that kind of thing. I don't want to attach myself too much to anything. I want to have a mental liquidity to change my mind about these things, about how I invest and whatnot. I've often thought, if you start a hedge fund, I'm making this up, called Tech Momentum LLC, whatever, you have to do that. You can't stop doing that thing. You just boxed yourself in. And I want to have, again, the mental liquidity to be like, look, this is what I believe right now, but that's all subject to change. I'm in my early 40s. Right. A lot of things that I believe about life in general today is different than what I believed 10 years ago. And I hope that 10 years from now, when I'm in my early 50s, I'll have a whole new set of beliefs. I hope that's the case. And you can only have that mental liquidity if you kind of reject the tribal thinking of I am a blank, whatever that might be. And so that's a big part. But like the uncompromising, I always want to say I'm a good dad. I always want to say I'm a good husband. I cannot fathom a life where I don't want to be those things. So I want to make those my tribe. So I think it's just keeping your identity small and picking your tribes very intentionally.

Ryan:
[30:55] That's a great take. And I love that idea of mental liquidity. Getting back to the 2X more thing and the treadmill that we all feel like we're on, how do you just, is it possible to, I mean, there are people, you mentioned people like this that you've known in the book who've done this well. And we all in our lives know someone who just just seems to be happy with what they have. They just seem to be content. They just seem to not be on that treadmill that everyone else is on where they're always wanting and expecting and hoping for 2X more. They're kind of like fine with what they have.

Ryan:
[31:29] What is the secret to that life, to contentment?

Morgan:
[31:32] I think if we could, if there was a, not even a formula, but just a strategy on how to get there, nobody would struggle with this. The fact that people struggle with it is because it's so difficult for most people. But I think the insight for the people who are content, who are just like took themselves out of the rat race and they're like, I'm good. Like I was in this little house with this dirty car. I'm totally happy. I don't want anything else. I think a lot of those people who did it have a recognition of a couple of things. One, that the amount of recognition that you get from strangers for nicer things is much smaller than you think it would be. I think people who are content, just to use the example, with their 10-year-old car know that if they got a brand new car, most people wouldn't care. And that we overestimate. We tell ourselves, if I got this new car, everyone's going to stop and stare and say, look at that guy. He's so cool. But the truth is they won't.

Morgan:
[32:27] Nobody's thinking about you as much as you are. That's a big part of it. And, you know, and so I think the idea of just like they took themselves out of the game and they seek their dopamine. They get their pleasure from things that are not status games, are not rat races with other people. So I talked in the book about my grandmother-in-law, who was one of those people, who was just totally content. She found her pleasure just doing things that was not a competition with other people. Gardening, going for walks, talking with her friends. It had nothing to do with placing yourself on any kind of ladder. The other thing that's like the insight that I think is important here is a lot of people, and I probably catch myself a couple of times in the book doing this.

Morgan:
[33:10] A lot of times what people will say is spending money to make you happier. They use the word happier. And I think that's almost always the wrong target. That happiness is always a five-minute emotion at best. That if you're doing something that you really enjoy, it will create the emotion that you think is happiness. It's a fleeting thing. It's almost like humor. Humor is always a 30-second thing. If you hear the funniest joke in the world, you laugh for 30 seconds. You don't laugh for seven days. It doesn't work like that. It doesn't work like that. And if somebody repeats the joke 47 times, you're like, stop. It's not funny anymore. I think happiness is like that. It's a fleeting emotion. But the emotion that

Morgan:
[33:52] you want most likely is contentment. So if you are daydreaming about the bigger house, the bigger car, the plane, whatever it might be, by and large, when you are daydreaming and imagining yourself having a great life in that bigger house, what you are doing, whether you know it or not, is you're imagining yourself in that house, being content with it, saying, this is all I need. I don't want anything else. The more realistic thing that happens, though, is that if you are fortunate enough to get in that house, it's great for a little bit, but then you're on the back patio and you're like, whoa, look at the neighbor's house. They have a better view, right? It's the lack of contentment that's going to keep you going. So if you are chasing contentment instead of happiness, I think that's actually a pretty important mental shift of what you're actually trying to achieve.

Ryan:
[34:35] That's a great take. Another, I think, shift that you talk about was unlocked for me in the book is there are two benchmarks to measure how you're doing in life. One that's internal and the other that's external. The first, which is the internal one, is how happy you are with yourself. And the second, the other, is what other people think of you.

Morgan:
[34:55] Yeah.

Ryan:
[34:56] Talk about that.

Morgan:
[34:57] Well, I think there's probably a large group of people who their external benchmark is extremely high. Billionaires whose net worth is known and who show up on the Forbes list. And the Wall Street Journal profiles their house that they just purchased. And their external benchmark is enormous. And maybe it's not even just material. Taylor Swift has enormous external benchmark because of her talent, et cetera, et cetera. Athletes as well. And so that's one. And that's important. and that's not a nothing. But then there's the internal benchmark. Like what does nobody know about you, but you're so proud of yourself? What have you overcome? How are you as a spouse, a partner, a parent, a friend, a child? Like how are, like those things that, nobody else gets to see, but are very important to yourself. I think there's a lot of people whose external benchmark is very high and their

Morgan:
[35:49] internal benchmark is okay at best, if not low. And there's also the opposite group of people, people who are very happy with their life, very content with their life. They sleep eight hours and wake up feeling great, feeling great about what they've accomplished, their legacy, what they've done in the world, the mark that they've left on the world, but their external benchmark is not that high. They're middle-class people, average people. You would not think anything of them, of the house they live in, of the car that you drive, or their job title, or their income. You would not think that much of them. But mentally, they're in a better state than some of the people who have higher benchmarks.

Morgan:
[36:26] And so Elon Musk mentioned this. This is probably a year or two ago. I think he was on the Lex Friedman podcast. And he was like, you might think you want to be me, as in the richest man in the world. But he pointed to his temple and he was like, it's a storm up here. It's a mess up here. And so he's probably, I imagine, I don't want to put words in his mouth or pass too much judgment, but I imagine his external benchmark is among the highest in the world. His internal benchmark, I bet, is mediocre at best. And part of that is a great thing. I think people like Musk and many other entrepreneurs, what makes them great is that they wake up every morning telling themselves, this is not enough. You have not achieved enough. The products are not good enough. You're not going fast enough. You need to build more. That's why they're great. And we as society benefit from that. Like I want to live in a world where most people wake up in the morning feeling inadequate. That's where progress comes from. But at the individual level, you realize like, how hard that can be to grapple with. It's probably the opposite of what you are chasing in many ways. People want to have progress in what they're pursuing, but the idea of waking up and saying like, God, it's not enough. I'm falling behind. I'm not doing enough might be the opposite of the feeling that they're actually chasing during the day.

Ryan:
[37:42] I think that some of this though, maybe some of the pushback here is like, if you don't, if you're not entering the ring, if you're not competing with others, if you don't have these external benchmarks, then you're just not going to have an impact on the world. Like you're not going to do anything with like, what's, what's your issue? Like, is that akin to giving up?

Morgan:
[38:01] No. So I, so for me personally, and you can take this or leave it for however it would impact your life because everybody's different, but all I want out of money is independence. I just want to be independent. Now being independent means I can totally control my schedule. I wake up Monday, I wake up Wednesday, I wake up Sunday. I can do whatever the hell I want that day.

Morgan:
[38:20] Nine days out of 10, what I want to do is work and be productive. And for me, write and try to be creative. That's what I want to do, but I'm doing it on my terms. I'm doing it independently. So you're right that if being independent means you become a monk and live out in the woods and don't talk to anybody, then yeah, for the vast majority of people, that's going to be a low quality life. But doing it on your own terms, even if what you want to do is be productive, I think is a wonderful thing. That's my personal goal. And that's how I've tried to mix these of like, yes, I think taking yourself out of the game is tough. Remember 10 or 15 years ago, there was a big surge in the FIRE movement, financial independence, retire early. It kind of petered out, but like 2012, 2015, it was like the biggest thing in the world. So many of those people, who saved a ton of money and retired when they were 27, six months later were clinically depressed because they took themselves out of the game. Their whole goal was like, I'm going to retire and then life will be great. And then they did it. And then you're waking up on a Wednesday morning and you're like, what am I doing? What am I doing with my life? Everyone out there is being productive and building and being productive members of society. And I'm just sitting here in bed in my sweatpants. And so, yes, there is a distinguishing characteristic between being independent and still being productive in the world.

Ryan:
[39:37] Yeah, that is interesting. There are a lot of things that we've talked about so far that money can't buy, right? And people think that it can, but it can't. But there is one thing that you say money can buy, or one of the things money can buy is actually independence, financial independence and freedom. I want to pause that and come back to that because there's still some other things that I feel like are money traps that I want to cover that are in your

Ryan:
[40:00] book. What is this concept of social debt, a type of social liability? And this is when the way you spend money influences how other people think of you. Maybe they have a bit more envy or jealousy. Maybe they're asking for favors. This was a powerful concept for me because it's one of those hidden costs of having wealth, I suppose, in particular, in spending wealth and show in ostentatious ways or earning it in public. Can you talk about the concept of social debt?

Morgan:
[40:33] I first started thinking about this probably about five years ago. I did a consulting session with a group of NBA rookies. And the idea was, everybody knows so many professional athletes make millions of dollars in their 20s and they're bankrupt by 30. It's the most common path. So this consulting thing was like, hey, for these NBA rookies who just signed their contract, Let's talk about money and good financial behavior. And one of the rookies said this thing I thought was so insightful. He was like, the reason that athletes go bankrupt, it's usually not because they bought themselves a mansion and a private jet. It's because they bought their fifth cousin who they don't even know a modest house. And he was like, there is so much social pressure when you make that money. He's like, particularly if you come from inner city poverty, as a lot of them did. He was like, you can't go from that and then sign a $10 million contract and tell everybody back at home, like, screw you guys, I got mine. Best of luck to you. He was like, when you sign that contract, that's not your money. That is mom's money, dad's money, cousin's money, grandma's money, grandma's cousin's money. He was like, you have to share it with everybody. And so he was like, yes, you signed a $10 million contract, but you probably have this phantom social debt overhanging it that is more than $10 million.

Morgan:
[41:49] Shaq once told this story too. He was like, when he signed his first contract, what was it with the Magic back in the 90s? He was like, his signing bonus was a million dollars. And taxes took half of that. So he has 500 grand. And he says, the first thing he did is he went to the Mercedes dealership and bought Mercedes S600, drives it home. As soon as he gets home, he pulls in the driveway and his dad walks out and says, where's mine? So he drives back to the dealership, buys his dad an S600. He pulls back and they all drive home together. And whether this is apocryphal or he's exaggerating, they pull back into the driveway and his mom comes out and says.

Ryan:
[42:24] Where's mine?

Morgan:
[42:24] And so he goes back and they buy her like a Mercedes convertible. And I think that's what social debt is. And it is not just for athletes or billionaires. The idea that your expectations and other people's expectations are a debt that has to be repaid, just like any other debt, but it's hidden. It's not on any balance sheet. You can't even measure it, but it's there. And whether that's like, if you make some money, your spouse wants you to spend differently. Your friends expect you to pay for dinner. Your own expectations are that you should be living in this neighborhood, driving this car. you have to dress a certain way if you have a certain job title. There's an endless list of those. And because it's not actual debt,

Morgan:
[43:03] it's a phantom psychological debt, it's very easy to ignore, but it's very real. And to use an extreme example on this too, I did another one of these consulting sessions for a family that were multi-multi-billionaires. And if you search their name on Google, nothing came up, nothing.

Morgan:
[43:24] They're not on any list. There's no, they're like, they give all their money away anonymously. There is literally nothing about them that you can look up. And that was very intentional. They did this very intentionally because they didn't call it this, but they are very aware of the concept of social debt. That as soon as your net worth is public and people know you have money, nobody treats you the same ever again and not in a good way. Everybody wants to be your friend. Everybody's asking for money and it's not a very fun life to live. So on like the extreme examples of the NBA athlete who's like, I have to spend all my money on my friends and this multi-billionaire family who was like, nobody knows about us.

Morgan:
[44:03] They, the billionaire family had a way, way better life, not because they had more money, but because they could just be themselves. People treated them normally. And they themselves and other people were not overhanging them with this social debt that can creep up on so many people.

Ryan:
[44:20] Do you believe, I think Naval has this line where it's, you know, best to be wealthy and anonymous. Do you believe that? Yeah, rich and anonymous.

Morgan:
[44:27] And he said the opposite of that is poor and famous, which the only example I could come up with is like Monica Lewinsky or something. Like poor and famous.

Ryan:
[44:36] Yeah, that's absolutely worse.

Morgan:
[44:37] Like everybody knows you, but you didn't even make any money from it. That's the worst position to be in. But rich and anonymous is great. I think Jim Carrey had a similar saying. He was like, if you think you want to be rich and famous, just try rich.

Morgan:
[44:49] Just try just rich because fame actually kind of sucks. So yeah, there's a lot of that. If you can be rich and anonymous, that's the best spot.

Ryan:
[44:56] To be in. You've got another chapter on this, which is just sort of a way to follow that path a little bit. You know, it doesn't need to be multi-billionaire status, but the idea of quiet compounding. Can you talk about that? What is the case for quiet compounding your wealth?

Morgan:
[45:12] I think a lot of it is just this idea that it's a good goal to live in a humble bubble. Yeah, I made up that term, but like I want to live in a bubble where all of

Morgan:
[45:21] my goals and my aspirations don't leave the roof of my house. I have goals for myself and my kids and my wife of the life that I want us to live, whether it's material or values, whatever it might be. But I don't want to have a lot of influence outside of my roof, because as soon as I do that, especially in the world of social media, it's just a nonstop torrent of like, well, they want us to believe this. And if I anchor my expectations to that person and their house and their lifestyle and their beauty, it just spins out of control. There's no end to that game. I want it to be a humble bubble because I don't want to be ignorant to the rest of the world. I want to be aware of what else is happening in the world and grateful for what we have relative to other people, other cultures, whatever it might be. And so I think that's the best you can do is the opposite of quiet compounding is when you are very loud and vocal, either online or with your material possessions.

Morgan:
[46:20] Displaying what you've achieved in life. I think it's a really tough thing. It inflates your own expectations and inflates other people's expectations of you. It makes it so that you can't handle loss very well. And so the idea of, I wanna be an empathetic person. I wanna be aware of the world, but for my financial goals, I wanna live in a bubble. I just wanna have, and I think in that situation, if you're not constantly comparing yourself to other people. You can be pretty content and live a great life at a much lower level than you otherwise could. If nobody's watching, which by the way, most people are not paying attention to you or me or anybody else. And if you come to terms with that, by and large, it makes it so much easier, To find your joy in life for things that are not a competition with other people. Being a good parent, being a good spouse, being a good friend, learning, being funny, being helpful. And so that's, I think that's what, it's one of the things that I've tried to do in my own life for the past five years. It's like, how can I live in a humble bubble and make sure that my expectations and my desires don't leave the roof of my house where the only people who I truly love and care about reside.

Ryan:
[47:26] The idea of quiet compounding as well is you can do it slowly, right? It doesn't have to be overnight. It can be gradual over time and you can use the power of compounding. I mean, this gets back to some of your other books on investing itself.

Morgan:
[47:38] Yeah. If I'm comparing myself to you and you outperformed me last quarter, then I'm going to try to chase you and do a bunch of crazy things and maybe lever up so I can catch you again. And like, it's not an easy way to invest for the long term if you are constantly comparing yourself to other people. I think one of the very underappreciated aspects of Warren Buffett's career and why he's been so successful. Number one, it's because he's been doing it for 85 years or whatever it is now. And so the compounding just gets absurd at that point. But I think very intentionally, since he's been about 20 years old, he set himself up to have a permanent source of capital, where if he had a bad quarter or a bad year, which of course he does from time to time, it wasn't going to matter. The capital was not going to flee.

Morgan:
[48:22] People were not just going to liquidate their... Berkshire being public meant so that even if you didn't like it, You can sell the stock, but you can't pull your capital from the company. It's not how it works. And so the idea that he could just pursue his own thing with a time horizon that he wanted to do was important. I think there is a graveyard of investors who, in their souls,

Morgan:
[48:43] wanted to be long-term investors. They knew it's the right thing to do. They knew it's the right thing you just focus on the next 10 years. Don't worry about having a bad quarter. They knew that, but realistically, they couldn't. They had to pander to the short-term investors who were like, if you don't perform this quarter, We're going to pull our money and it's all over for you. That is such a common story. And that's why successful investing is not that difficult. This is not rocket science. It's just like diversification, patience, long-term, low-cost. Like it's not that hard, but it's so much harder to implement than it should be because we get wrapped up in all these external pressures. Morgan, up to this point.

Ryan:
[49:16] I feel like we've emphasized all of the money traps and maybe the curse of money. And so somebody might come to this point in the conversation and be like, what the hell? I don't even want to make money. It's just such a hassle. It's full of all these traps. I give up. I'm done. But there are some things, back to kind of the first question I asked you, that you believe that money actually can buy. Everything we just talked about are things that people think it can buy and it really can't. But there are truly some things that it can buy. And you talked about financial independence as being one of those for you. Let's kind of sharpen that argument a bit because I do think that is maybe the main thing that money can actually buy that yields benefits and true ROI for people. You talk about this idea that every $1 that you put in investment or savings is buying you $1 worth of financial independence, $1 worth of freedom. You talk about it being a spectrum of freedom rather than a binary. Spell out a little bit more your mental model here for financial independence and how is that something that money can truly buy?

Morgan:
[50:25] I guess one of the ways I think about it is I've been a big saver for my entire life and I never really viewed it as saving money as much as I viewed it as buying independence. I feel like I purchased independence with every dollar that I saved. And I think that mental shift is important for a lot of people because if you think about the process of saving money, it is inherently like I'm saving today so that I can spend it tomorrow. Which of course, for a lot of things, that is the case. If you're saving up for a house or a car, but if you view it as I'm purchasing independence, I might not ever spend this money. But the fact that I have it there, maybe throwing off dividends or just there if I were to need it, means that I can live a life that is much closer to my true self. I can live where I want, in the job that I want, pursuing the activities that I want. I can say what I want. I can do all these things. I can be independent. I can truly be myself. And it's true, again, as we talked about earlier, this is an art because everybody's different. But it is a very common denominator that almost everybody across generations, across cultures wants to be independent. It is such an innate human desire to want to be ourselves and not be pushed around, dictated by the whims and the pleasures and the ideas and the goals of other people. And so if you can use money to do that, I think that to me and for most people is the highest purpose of money is buying yourself independence so.

Ryan:
[51:42] You can be who you are. You define it as the ability to do what you want, when you want, with who you want for as long as you want, which I think is as good a definition as any. And getting back to the ideas, a lot of people think that, again, they fall into maybe this trap of thinking that's a binary of, okay, if I just have X millions of dollars, then I'm financially independent.

Ryan:
[52:04] Then I've kind of made it. And so, you know, they won't feel financially independent until they reach a certain level of net worth, let's say. And then they often fall into the trap of like, well, are we sure X amount of millions is enough? Maybe I actually need more or something like this. you actually go through 15 different stages of financial independence in your book. And just, I think the emphasis here is that, look, it's a spectrum, right? Like you can be more financially independent next year than you were this year. And in five years from now, than you were five years previous. Talk about that, if you will.

Morgan:
[52:41] Yeah. So like, let's start with somebody who has zero net worth or negative net worth. Relative to that person, somebody who has $1,000 net worth. Does having $1,000 in the bank make you financially independent? Of course not. Does it make you more independent than you were at $0? Of course, if you were to have a medical emergency, if you were to lose your job, if your car broke down, this is all a spectrum. I had a friend in college who was like, I mean, he said to me one day, he was like, I don't save any money. I live paycheck to paycheck because what's the purpose of saving 50 bucks a month? It does nothing for me. And I kind of get that logic, but I also feel like every dollar you save is a dollar of your future that you own and somebody else does not own. And viewing that as $1,000 is more independent than zero, $10,000 is more independent than a thousand. There is no limit to where you are on that spectrum. And I think once you have that mindset, I'm purchasing independence and independence exists on a spectrum. it is so much easier to build wealth. It is so much easier to be like, do I want a new car or do I want to be more independent? Do I want a bigger house or do I want to be more independent? It makes answering that question so much easier than it used to be.

Ryan:
[53:47] Yeah, I agree. There's also, I think, the concept of, I think there's diminishing returns with respect to financial independence. So there's some number that you kind of maximize the utility for financial independence. Like, give an example. How much more financially independent is a billionaire? Say someone like Peter Thiel versus somebody who has, I don't know, $10 million. Right. Maybe a bit more. But like Peter Thiel, I guess he's got an underground bunker in New Zealand. But like if shit hits the fan and the world goes under, I mean,

Ryan:
[54:17] we're all kind of in this together. So is he really more independent than someone with $10 million? It's just like, it's not that much more, right?

Morgan:
[54:25] And so- Yeah, it definitely diminishes. I mean, for most people, different for everybody, your results may vary, of course. But for most people, if you have a net worth of $10 or $20 million, you can be, if you choose to be, independent for the rest of your life.

Ryan:
[54:37] That's like max level, 15, right?

Morgan:
[54:40] You can live off of that. But if you talk to someone like Peter Thiel and you said $10 million, you might be like, that's his property tax bill per quarter. So this all exists on a spectrum. But for a lot of people, the idea of some level of financial independence is probably within reach, within a reasonable amount of time for a lot of people. I think what has infected a lot of people is this idea that financial independence means billionaire or something close to that. And so this gets back to the humble bubble. If you're living within a humble bubble, you can live for the rest of your life on $10 million without any issue or less than that. For the rest of your life, no matter what age you are. Like these are big numbers we're talking about. But I think there's also a lot of people in society for whom it's like that level of net worth, particularly probably in the crypto community, would feel like I've barely scratched the surface.

Ryan:
[55:31] There's a whole debate about this, Morgan. I saw a Twitter thread and that was just basically like, can you retire off of 10 million? And a whole bunch of people were saying, no, you can't possibly. And a whole bunch of people were of course saying, that's silly, of course you can, right? But the fact that there's debate about this means it's an unsettled issue, I think.

Morgan:
[55:47] Like most comedians who actually get to the truth, Chris Rock said, if Bill Gates woke up with Oprah's money, he'd jump out the window. And that's true. Like there's, I think, I think you, of course you can build a lifestyle for which 10 billion is not enough. Of course you could, you could build that. And for which 10 billion would not cover your basics. Of course that exists. But I think you can also live in most parts of the country, a very wonderful life. And probably very close to maximizing your happiness and contentment for levels at which particularly people in the crypto community would not bat an eye at. Yeah, I completely agree.

Ryan:
[56:23] And if I were to summarize, like the main thing that you can buy, if there's all these things you can buy with money, the main thing you can buy, and therefore it can be a focus for your net worth, you know, creation purposes is financial independence, right? That's the thing that everyone is actually able to buy with additional wealth. There's another piece though, for me, that's kind of tied to this. And maybe it is for you too, Morgan, which is the ability not just to be financially independent yourself, but the ability to also take care of your family, let's say, right? Whether, you know, if you have a family, maybe it's friends, if you don't have a family, but having a safety net for your kids. And you don't know what your kids might need in life, but the ability to be able to provide for them, to help them through different stages of life, at least for me, and I think for you probably, and a lot of people listening,

Ryan:
[57:13] is another thing that money can actually pay for. But there's a curse that comes with this too, right? And this is maybe an age-old question, which is the question of how do you use your money to help your kids without spoiling them? Can you talk about that?

Morgan:
[57:32] Yeah. I mean, I'll start with this little story from someone who, as a very wealthy person, came to Charlie Munger. And he said, Charlie, if I leave tons of money to my kids, is that going to ruin their ambition? And Charlie said, of course it will, but you still have to do it anyways. And the friend was like, why? Why do I have to do it? And Charlie said, because if you don't give them your billions, they will hate you. And he was like, so there's part of this. I think in general, he's right. So there's part of this that's like ultimate first world problem. If you're a wealthy person trying to figure out how to give it to your kids without ruining their ambition, it's a huge problem. And there's no easy answers to this. Full stop, period. I do think there is something to be said, though, that, a lot of where spoiled kids come from is not necessarily because the parents were spending a lot of money. It's because the parents probably unintentionally sent a signal to their kids that the value of other people is their net worth and their material possessions, that that was the value of it. And I think there's actually quite a few very wealthy people who live very wealthy lives and have all the material trappings, whose parents probably intentionally sent a message to their kids that you value people based off of their intelligence, their integrity.

Morgan:
[58:43] Those kind of softer values. And it doesn't matter what kind of car they drive or where they send. I think kids, if you teach those values early enough, kids can latch onto it. And this is why you can have parents whose net worth is a million dollars with the most spoiled brat piece of shit kids you've ever met. Or you can have the children of billionaires who are very, very good, down to earth, decent people. It's less about how much you're spending. It's more about the values that you teach those kids. Now, the higher your income is, the more important it is to like force those values down your kids' throats because it's gonna be so easy for them to say, we live in this house and our friends live in that smaller house and therefore we're better than them. That's a very easy knee-jerk reaction for the child to make unless you are going out of your way to figure out and teach them what you actually value in life. So never easy, not easy whatsoever. The other thing I would say about this is that it's very common for wealthier people to want to teach their kids financial values, not intentionally, but through humiliation. And so you tell your kid. Yeah, what's that? So I use a story from a wealthy friend of mine whose grandparents were billionaires.

Morgan:
[59:52] And he said when he was a child, his grandparents, when they took him skiing, his grandpa would say, if you want me to buy you a lift ticket, you first need to hike up the hill for one run and ski down. And if you do that, if you prove to me that you can hike up and ski down, then I'll buy you a lift ticket. And he said, the lesson that we learned was not integrity and hard work and grit. The lesson that we learned was grandpa is an asshole. That was the lesson he took away from it. But I think it was very well-intentioned. I think a lot of wealthy families are like, my kid needs to work hard just like I did. And that is very well-intentioned. That is not bad advice. But with the child, particularly when they're younger, the message that they hear is not, oh, I should work hard. The message that they hear is, I'm below mom and dad. They're better than me. And they're humiliated from it. And it's a very hard balance to get around.

Ryan:
[1:00:41] Well, you make a great point, which is like in order to teach your kids in kind of the it the right way. The parents have to live at the same lifestyle level as the kids. So here's the thing you shouldn't do. I mean, don't fly first class with the parents and then put your kids in coach, right? Just to kind of teach them the lessons because they haven't earned it, right?

Ryan:
[1:01:00] You don't want to live at a different lifestyle than your kids or they probably will resent you. And it's an act of hypocrisy. I mean, it's not kind of like walking the walk. So you can choose a certain lifestyle in which to raise your kids based on kind of like your wealth level. And you You can even undershoot it if you want, however you want. But it has to be the same for both the parents and the kids was one of your takeaways.

Morgan:
[1:01:23] I think there's even another lesson from this that my wife and I still talk about, even grapple with sometimes, which is we were car shopping a couple of years ago. And I had this thought of like, if we get a nice car, And we raise our kids in that nice car. That becomes their baseline expectation of what a family car is. And then I was like, what if my son or my daughter wants to be a kindergarten teacher and the appropriate car given their salary is going to be a Honda Accord?

Ryan:
[1:01:50] Sure.

Morgan:
[1:01:51] But we set their expectation that it was a higher car than that. Are we doing them a disservice? And therefore, should we buy the lower car? I don't know what the, I wish I could tell you my final thoughts on that. But I think about a lot of like, I don't want to inflate my kids' expectations of material life because that becomes their baseline. They don't know that it's a good life. That's their baseline. There's this great interview with Zach Dell, Michael Dell's son. This was probably 15 years. I guess this was a while ago. And the interview, I'm paraphrasing, but the question was along the lines of, what is it like to grow up as a son of one of the richest men in the world? And Zach Dell, who was like a young teenager at the time. He was not the adult he is now. His answer was, this is all I've ever known. The private jets in the mansions are all I've ever known, so it's completely normal to me. I think that's, of course, an extreme example, but so many people are like, you have to be careful with the lifestyle that you give your kids because that becomes normal. It does not become nice, it becomes normal. And so I think about that a lot. My wife and I talk about that a lot.

Ryan:
[1:02:50] You think about it, you talk about it. I don't know if you have any conclusions on that. It's really interesting. I mean, would you advocate for maybe living under the lifestyle that you can afford just for the sake of your kids?

Morgan:
[1:03:03] That's why I don't have any conclusions on this because I don't know the answer to that. I also don't want to, I want to use my money to give my children a great life. For them to live in an amazing house in a great neighborhood next to great friends and going to great schools and going on great trips. Of course, I want to do that. I also don't want to send the message that that is completely normal. That everybody does that. And that that is the baseline of what you should measure your adult life against 20 years from now. It's a very difficult thing to get around. And I don't have a lot of conclusions

Morgan:
[1:03:34] other than it's something I think about a lot. There are a lot of things with money in which you can't say, here's the answer. Here's the solution. There are a lot of things that just are. And I think that's one of them.

Ryan:
[1:03:45] It's family dependent. It's couple dependent. It's kid dependent. Everyone's going to have to make their own decisions on this. But of course, they should consider what the trade-offs are. I think that's what's important here. Speaking of that, I think you're talking to a lot of investors in the audience. And again, as I mentioned earlier in the episode, a lot of crypto investors, their disposition is hold. And certainly we all know as investors, the value of compound interest was the eighth wonder of the world. Is that a Charlie Munger thing? It's just once you see compound interest, and I discovered it, it's kind of a discovery, I guess, in my undergrad program, just like basic business school. I was like, oh, my God, compound interest. And then for me, spending money after that, Morgan, was never the same, right? Because you kind of like look at the math and you realize that, you know, a dollar that you spend today could turn into a thousand dollars, right? And so that thing that you're buying is quite expensive in today's value. So there's a balance for people who see compound interest, you know, they might not want to spend anything in life. And I guess this goes back to the retiree who's been saving their entire life, but there's kind of a balance here. And I'm wondering if you could talk about it a bit, which is the stoic type of philosophy, which is you compound interest, like discipline,

Ryan:
[1:05:05] Let's just do the investor thing, you know, saving for multiple generations later versus maybe this, you know, Epicureanism, which is, guys, like life is short, okay? We got to live for today and you're not getting any younger. And so do the math on your lifespan and realize that you're saving money to what end? You're not enjoying your life. How should people think about balancing that? I think probably disproportionately you find on an episode of listeners like this, they're probably more on the stoic camp of just like worshiping at the altar of compound interest. Maybe they need to be more Epicurean, but there's a balance here.

Morgan:
[1:05:44] I think the only way to settle that balance is with the idea of what you want to try to do. And to me, the definition of risk is what are you going to regret on your deathbed, whenever that might be. And that is different for everybody. And I don't think most people have a good sense of what they're likely to regret in the future.

Morgan:
[1:06:04] Mostly because we don't know exactly how our life is going to play out. I started thinking about this a long time ago, 20 years ago, when I had a coworker who I worked with. We worked at a ski resort in Lake Tahoe where I grew up.

Morgan:
[1:06:15] And he was buried in debt. He was probably mid-20s. I was like a late teenager. He was mid-20s. And at the time, he had $25,000 in credit card debt, which to me at the time was unbelievable. Insane, right? Somebody could have $25,000 in credit card debt. I could not even fathom when he told me that. Sure. And all the debt came from these ski trips that he had done all over the world. Sure. He skied in Europe. He skied in South America. He went to Antarctica one time. He had been everywhere, all financed on his credit card. And I thought it was absolutely crazy. And the punchline of the story was not too long after that, he died skiing. He died in a ski accident. And I remember thinking, I'm so glad he did those trips. I'm so glad he did. Those things that I used to make fun of him with all the time. I'm so glad he did it. Yeah. Because I think he was 30 when he died and he lived more than most, than almost, he had seen the world in a degree that most people would never even dream of. And so the idea of what are you going to regret on your deathbed is very, very important to think about. Now, I can take the other side of this. As I mentioned earlier, I've been a big saver for my entire life. And those savings, of course, equal the trips that I did not take, the cars I didn't buy, the houses I didn't buy. That's what my savings is. Now, if I were on my deathbed tomorrow, I would not regret any of that for one second because I would take so much pleasure knowing that my wife and kids are going to be.

Ryan:
[1:07:33] Okay because I saved for them.

Morgan:
[1:07:35] I would, that would be the, all that matters to me. So I would not regret it in the slightest. But now let's say I'm on my deathbed at age 97 and my kids hopefully are independent and on their own. If I had just saved my entire life, I probably would look back and say, I wish I had spent it and given it away while I could have seen the fruits of that. And so it's going to change throughout your entire life. Regardless of what it is, having a good sense of your future regret and taking a step back and saying, how good have you been up to this point in your life at knowing what you're going to regret? Everybody has some regrets. How good are you? How good were you at the time of taking an action and realizing

Morgan:
[1:08:18] that you might regret it in the future? It's not an easy thing to do. Different for people from person to person, but it's never so simple as YOLO or compound forever. It's never that black and white. It's always a degree of what are you going to regret in the future?

Ryan:
[1:08:33] I think that's great. And I think this comes back to your idea of mental liquidity, the ability to switch modes, right? So you could be a saver, a super saver, super investor for one portion of your life, one era. And then you could switch that and live for going on the trips all around the world, right? And you can switch that as long as you don't assume the identity of I am a super saver. This is what I do. I'm programmed in this way. And so that's another aspect of keeping your identity light.

Morgan:
[1:09:03] Can we talk.

Ryan:
[1:09:03] About the obsession over small purchases? Do you think that's a good thing or is it a trap?

Morgan:
[1:09:10] You can easily see how it could be one or the other because we've been talking about compound interest and the thing from compounding is how counterintuitive, how not intuitive the gains can be. So you and I could sit here and do the calculation of if we stopped going to Starbucks every day, what would that be and invested that $4 instead, maybe now it's like $8, all the prices have gone up. If we invested that money instead, what would that be worth in 50 years? We could do that calculation. It would blow our minds. Everyone knows how that works with compounding.

Morgan:
[1:09:42] This is another topic from Ramit Sethi though. He's like, people spend way too much time talking about $3 problems when they should be talking about $30,000 problems. And I think this is why stop buying your latte became such a big thing in like the personal finance community is because that is an easier topic to discuss than don't go to a private university where you're going to bury yourself in a quarter million dollars in debt, you moron. Don't buy a house you can't afford, you idiot. And so it's much easier to talk about $3 problems because it's so fun and it just doesn't mean anything. But you can easily imagine someone who is like, I stopped going to Starbucks and I'm going to invest that money. Meanwhile, they went to a school they can't afford. They live in a house they can't afford. They go to childcare that they can't afford. They have health insurance that they can't afford. And so, yes, small things matter. The drips matter. The drips add up.

Morgan:
[1:10:33] But don't let that overwhelm the idea of asking much bigger questions in your life. For most people, the only spending that makes any difference whatsoever is your house, your car, your education, your health care, your child care. That's it. Everything else is a rounding error relative to that.

Ryan:
[1:10:48] Another idea in your book is trying new things with your spending. So you talk about within the confines of your budget, you should experiment with many different types of spending you can. And I think this is the idea of finding that high utility type spending, that the products or the things or the experiences that are actually adding value to your life, not the status type spending, but the utility spending. And you only find that if you try a whole bunch of things.

Morgan:
[1:11:12] Yeah, it's not intuitive exactly what your thing is going to be. For some people, it's food. For some people, it's clothes. I'm not a wine guy. I like wine, but my wine taste caps out at like $16 a bottle. And I've had so many people who will hand me, they're like, oh, this is a $300 bottle. Take a sip of this, it'll change your life. And I drink it and I'm like, I don't taste anything. I feel nothing, yeah. It tastes like Trader Joe's two-buck truck to me. I feel nothing. But I like that it is their thing. They found their thing, even if it's not mine. And I spend my money on things that other people might not appreciate and value as much as I do. And it's never intuitive what your thing is gonna be. And the only way to find it is to try a million different things. So you have to have a bunch of small experiences in your life. Try eating at a fancier restaurant. Try staying at a nicer hotel. Try flying first class, whatever it might be, because it's not intuitive what that thing is going to be for you.

Ryan:
[1:12:05] Yeah, and do it independently. So you make the point that independent spending

Ryan:
[1:12:09] is kind of like independent thought, right? You could tell someone's taste by how they're not copycatting everyone else. They're establishing their own tastes and their own ways to spend their money.

Morgan:
[1:12:20] And that's what I love about someone like Ramit, who is like, he's going to buy super expensive clothes.

Ryan:
[1:12:26] And drive a Honda Accord or whatever he drives at the same time.

Morgan:
[1:12:29] Like that is someone who is obviously thinking independently.

Ryan:
[1:12:32] He's not doing just the cookie cutter rich person thing, right? Exactly.

Morgan:
[1:12:35] What society told.

Ryan:
[1:12:35] Him to do.

Morgan:
[1:12:36] There's a thing in politics where it's like, if I can guess your political beliefs on every topic, if you just tell me your beliefs on one topic, you're not thinking independently. So it's like, if you tell me your thoughts on abortion and after you give me that piece of information, I can guess your thoughts on gun control and everything else, you're not thinking independently. And I think it's true for money as well. If there's not something in your life that doesn't really match your income, your net worth, you're probably not doing it independently. Everyone should have a thing, particularly if you're a higher income person, you should have a thing that you spend way less than every other rich person would because it doesn't give you any value, whatnot. And if you don't have that thing, you're probably not thinking independently.

Ryan:
[1:13:16] Morgan, this has been great. I wonder as we kind of close this out, if you could, I know obviously a lot of these thoughts, people have to integrate into their own lives and customize for their own particular circumstances. But I want to ask maybe a more kind of personal question for you,

Morgan:
[1:13:31] Which is when.

Ryan:
[1:13:32] You put all of this together, just for your own life and how you think about the art of spending money, what sort of decisions have you made? What does it look like for you in your household?

Morgan:
[1:13:45] I think my wife and I have always lived a pretty simple life. We actually spend a lot more money now than we did five or 10 years ago, because I think we've experimented with things and like been like, oh, that was fun. Let's do more of that.

Morgan:
[1:13:56] So we do spend a lot more. We're still very big savers. But I often, I mentioned this earlier, the extent to which I catch myself in my own head saying, if only I had that, if only I had this, then things would be great. And I have to actively take a step back and say, you know, that's wrong. You know, it would not make you as happy as you think, as you're telling yourself it would. It might make this and that a little bit happier, But what's actually going to make you happier are your health, your friends, your family. So can we use money to help those things? Can we use money to spend more time with our family, to spend more time with our friends? And maybe that's buying a bigger house so that we can have our friends over for dinner more often, whatever it might be, that's going to make you happier.

Morgan:
[1:14:36] And so to me, the core has always been, there's two ways that you can spend money. One is as a tool to give yourself and your loved ones a better life. And the other is as a yardstick of status to measure yourself against strangers by. Thank you. And when you stated that starkly, it's obviously like, well, I want to use it as a tool. But so much of society and modern marketing and our knee-jerk reactions push us towards the signaling, gaining status against strangers side of the equation. And it takes so much active patience and thought in your own life, almost on a daily basis, to ask yourself, am I buying this thing? Do I want this thing because it's going to make my family happier? Or because I'm going to feel like it's going to give me the impression of having a leg up on the social status ladder against other people. So did you write.

Ryan:
[1:15:23] This book for yourself, Morgan?

Morgan:
[1:15:25] I write every book for myself. I'm a very selfish writer. I just want to try to figure out problems in my own life and tell stories that I think are interesting. And if other people can learn from them and relate to them, all the better.

Morgan:
[1:15:36] But I'm not trying to pander and I'm not trying to teach other people. I'm just trying to have a self-reflection about what I see in my own life and what I see in other people's lives and try to tell a story around it.

Ryan:
[1:15:46] Well, it's a fantastic reminder. The art of spending money, great book, great reminder on how to use money as a tool, what it can be used for,

Ryan:
[1:15:54] what it can't be used for. And when does it come out?

Morgan:
[1:15:57] October 7th.

Ryan:
[1:15:58] Fantastic. Thank you so much for joining us on Banklist and talking about this. It's been a pleasure. Thanks for having me. Guys, got to let you know, of course, none of this has been financial advice, maybe a little bit of spending advice. We'll say that. You could lose what you put in, but we're headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.