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S4.E1 - The Psychology of Money - Intro-Ch.2
71 Plays6 months ago
Welcome back to season 4! This week, Garrett leads our discussion of the Introduction - Chapter 2 from The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel.
- Introduction: “The Greatest Show on Earth” - (0:49 - 12:36) Share a story about how a particular experience impacted your financial decisions or beliefs about money?
- Chapter 1: “No One’s Crazy” - (12:37 - 28:05) How do you think recognizing different types of experiences people go through could change the way you judge others’ financial decisions?
- Chapter 2: “Luck & Risk” - (28:06 - 39:12) How do you all assess the role of luck in your own financial successes and failures, and do you think society generally underestimated the role of luck in financial success?
Resources referenced or discussed in today’s episode:
- Compounding investment growth over time comparison - click here
Next week we’ll discuss chapters 3 - 6 (pages 35 - 80).
You can buy the book on Amazon by clicking here.
You can also borrow it at your local library. Don’t have a library card, or unsure where your local library is? Search on Google Maps, or find your local library by clicking here.
Follow us on Instagram @booksbrotherspodcast
Connect with us at [email protected]
Please subscribe and give us a review! We would really appreciate it.
See you next week! Until then - read, reflect, and connect.
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Transcript
Introduction to Books Brothers Podcast
00:00:05
Speaker
Welcome to season four of the Books Brothers podcast, a group of friends from college who have stayed in touch through this book club. We read books together and each week discuss various chapters, reflect on them as they relate to our life and connect with each other by sharing our experiences. I'm Garrett. I'm Staley. I'm Flez. I'm Thomas. And I'm
Season Book Introduction: 'The Psychology of Money'
00:00:25
Speaker
Rob.
00:00:25
Speaker
Our new book this season is The Psychology of Money, Timeless Lessons on Wealth, Greed, and Happiness by Morgan Houssel. The last couple of books we've read and discussed focus primarily on physical and emotional well-being to promote happier, longer lives. For this book, we'll dive into another integral aspect that affects each person's life, health, and happiness, money.
Money as a Lens for Behavior
00:00:48
Speaker
In today's episode, we will explore the initial chapters of the book, The Introduction, The Greatest Show on Earth, Chapter 1, No One's Crazy, and Chapter 2, Luck and Risk. So in the introduction, The Greatest Show on Earth, Hassel sets the stage by describing money as not just a medium of economic exchange, but as a lens through which to view our behaviors, hopes, and fears.
00:01:13
Speaker
Money influences not only financial decisions, but also personal and emotional ones, making it a central theme in our lives and a spectacle as diverse and unpredictable as humanity itself. So let's dive right in.
Personal Finance Influences from Upbringing
00:01:27
Speaker
Can one or two of you share a personal story about how a particular experience influenced your financial decisions or beliefs about money?
00:01:36
Speaker
Yeah, I thought this chapter was interesting. I had written down a couple of things, but obviously the behavior component was a big part of this chapter. I think a personal story, it's really more or less just like my upbringing, I would say. So my parents raised me really like we were middle class.
00:02:00
Speaker
We weren't rich by any means, but we weren't living paycheck to paycheck. We had food on the table, but they really showed me the value of money at a young age, whether that's.
00:02:11
Speaker
mowing lawns. I think I had like seven, eight lawns that I mowed throughout the year. And then I went to work at Hy-Vee pushing carts and slinging milk jugs in the dairy and frozen department. And I think my parents really, because they didn't pay for everything, I think my beliefs around money just at an early age were just that really just entering into that like saving mentality.
00:02:40
Speaker
and almost a level of frugality. So I think there's kind of like a running joke maybe amongst some of us. But yeah, I mean, I'm always trying to look for the best deal so that my money can go the furthest. And so I'm somewhat economical, even frugal, like right now as I'm recording this, I'm in our perch.
00:03:04
Speaker
and I'm sweating bullets right now because it's like 80 degrees in here and I'm too stubborn to turn the AC on because it's like, is it spring? Is it summer yet? In your slow internet? Yeah, are you sure that's not just your Wi-Fi router struggling to keep up with this stream? Producing a bunch of heat?
00:03:27
Speaker
Yeah, so I don't know. I think because of my upbringing, my parents taught me really to save. And so when I spend money, I think it's typically something that's more thought out rather than just whimsical, I'm going to buy this, I'm going to buy that.
00:03:45
Speaker
I look at the reviews on things if i'm gonna purchase a product or if we're planning a vacation i'm gonna try and look for the best airbnb or the best itinerary literally hour by hour type type of thing just so that we can maximize how we spend our money.
00:04:03
Speaker
Nice pain. That's great.
Financial Peace Class Experience
00:04:06
Speaker
Yeah, but I can definitely relate to and resonate with what you're saying about the family upbringing and stuff. I know one thing that Ruth and I found to be really helpful is really early on in our marriage, we went to a financial peace class. That's the Dave Ramsey class. And then obviously, I think he's a pretty like controversial guy. And there's a lot of people that have really strong opinions both ways with him. But at the time, we've been married about a year and a half and
00:04:32
Speaker
I had just got my first job, my first career job, and Ruth had been maybe working for a year. And that was really foundational for us because it was a place we could sit and talk about these conversations and do so in a room with other people, and particularly other older people who had been through some financial stress or such. And I think we often, we've been married almost nine years now.
00:05:00
Speaker
And we go back to how helpful that was for us. And it's not just that it was that class per se, but just that we had an opportunity to share and talk through how we were going to go about financial decisions. And I think having that was really an impetus for us. Going to that class was an impetus to like help us make decisions. I got out of college and bought a bed.
00:05:22
Speaker
and how did that particular experience influence your financial decisions or beliefs?
Learning from Impulse Purchases
00:05:30
Speaker
Oh yeah, thanks.
00:05:34
Speaker
When you get out of college, I feel like a lot of people make real money for the first time. And by real money, I mean like 40 grand a year. And so I got out and bought a bed thinking like, oh man, I don't even have to think about this. I can just buy a $1,500 bed and it'll be like the best bed I've ever slept in. All I've ever slept in is a twin bed that's a hand me down.
00:05:58
Speaker
And I'm going to get a queen. It's going to be amazing. I'm going to invest in something important, which is my sleep. And it was like the worst bet I had ever bought. It was so bad. Within like six months, there was a big divot where I slept that no matter what I fell back into, it was really uncomfortable and it ended up giving it away like a year later. And I guess the moral of that story was like, just because you have money,
00:06:27
Speaker
Number one, doesn't mean you should spend it. And especially not on something like just because you're spending a lot of money doesn't mean you're getting something out of it, too. But you felt like king in the castle, though, with that. Oh, man, I felt like king. Yeah, I did for a minute until like my sleep suffered. And then I was like, man, this was a big mistake. So.
00:06:49
Speaker
I think like Rob was saying in terms of analyzing your choices with money and not just making, I mean, that was kind of an emotional decision. I was really tired of a twin bed. I just wanted to get out of that thing and into a better situation. And I didn't really care about the quality or the financial consequences or whatever. And given, I mean, a bed's a hard thing to choose the right one before you've ever used one.
00:07:17
Speaker
I just kind of remember that being one of the only real impulse buys I think I made and it turned out poorly. But yeah, I would have to say that COVID changed a lot of my beliefs about finances and shutting down a business during that time. I was a lot more risk, bigger risk taker, which I guess that's going to be chapter two talking about luck and risk more. But having failed in trying to start my own business,
00:07:45
Speaker
has probably made me more risk averse after the fact. So being more weary, I guess, of how I'm delegating where my money goes and kind of having help and making sure I make better decisions with all of that. So that experience definitely changed that.
00:08:06
Speaker
That's great. My mom was a financial advisor, so she and my dad too. I just feel like growing up, I was taught and habits were formed in me at a young age to save, to tithe.
00:08:27
Speaker
So I remember this little plastic box that had three columns in it, like three separate spots. And when I'd get my weekly allowance, say it was like $10, I'd put $1 in the tithe, $1 in savings, and then got to spend $8.
00:08:45
Speaker
And then when the financial advisor piece, I remember my mom showing me that compounding graph of if you start a Roth IRA at 16 and you invest two grand for 10 years and stop at 26. And then if you start at age 20, but if you started at age 27 and invested two grand until retirement,
00:09:10
Speaker
you would have more if you invested the 20 grand from age 16 to 26. That always stuck with me and she opened a Roth IRA for me. I didn't at that age and income and stuff. I did not put away 10, two grand per year. I think, I think I got to like, I invested 20 grand by the time I was like 28 or 29, but
00:09:41
Speaker
I do remember those things and those stuck out to me and now that I have kids and thinking about how to teach them about managing their finances someday, whether it's by little allowances in the near future or whatnot. I think those practices and parenting that I received were really impactful and had a big imprint on me.
00:10:06
Speaker
How are you going to, are you going to teach any different? Like are going to say, Hey, if you put this in a Roth IRA, it could grow to this, but if you put it on Bitcoin, it could go 2000 times that. Like, are you going to, I'm playing, I'm playing, but seriously, I mean, to what, to what extent do you feel like you would change maybe the way that you, cause I mean, it's hard to, as a kid, it's hard to see a graph and be like, Oh yeah. Oh yeah. Yeah. Okay. Whatever. I don't care about that.
00:10:36
Speaker
Yeah, I think my kids are so young. I mean, one is four and the other is two. So the four-year-old's more the one where we go to a store and I want this, I want that. And he's gotten some money for his birthday and things like that. It's like, hey, you don't actually have enough to buy that. And he's like, but I want it, but I want it. So I think even at a young age,
00:10:58
Speaker
You know, yeah, maybe I'll wait till he's a teenager to show him the compounding graph when he actually has an opportunity to mow lawn and stuff like that. But I think at a young age.
00:11:09
Speaker
It may not actually be physical, like actual giving him cash, but developing habits of expectations that, hey, you help around the house. Like he loves to clean. He loves to sweep. We just got sand delivered to our house to help level out the backyard because there's a bunch of divots and stuff and just the earth has settled and it's very uneven. Like we're going to have a broken ankle.
00:11:37
Speaker
And he
Chapter 1: Personal Experiences and Economic Contexts
00:11:38
Speaker
just wants to shovel that sand, put it in the wheelbarrow, help me out. So I think the expectation of like, hey, we help around the house. And then as he gets older, like developing some sort of allowance system for chores and things like that. So starting small with his age and competency levels and growing into something more. But I do feel like I will mimic.
00:12:03
Speaker
a lot of the behaviors that I was taught. I can't think of anything off the top of my head that would be dramatically different or altered at this point. I feel like my parents did really well. Probably no Bitcoin though at this point.
00:12:17
Speaker
It feels like financial education as a kid is more of, um, absorbed rather than taught by the things that they see or experience. Well, I mean, and I think that like segues super well to like this first chapter that we got into, which I think it was just, I mean, I love that he started here.
00:12:36
Speaker
Yeah, let's dive into it. Chapter one's titled, no one's crazy, which explains why personal finance seems simple in theory, yet is often difficult in practice. Household argues that money related decisions are deeply personal and driven by individual experiences and emotions rather than just logic.
00:12:55
Speaker
He emphasizes the importance of understanding that everyone's financial behavior is shaped by their unique personal history, which makes their choices rational in their own context. So an example that was very striking to me in the book was the two graphs on pages 15.
00:13:15
Speaker
in 16. So one of the graphs shows performance of the stock market over the course of one's teenage years and 20s if you were born in the 1950 and 1950 compared if you were born in 1970. So it's dramatically different. So if you were born in 1950, when you were a teenager and in your 20s, you saw the stock market basically do nothing and not grow at all.
00:13:41
Speaker
If you were born in 1970, your experience as a teenager and in the 20s is the stock market grew tremendously. And then the second graph, which I thought was extremely humorous since we almost all of us were born in 1990. And when he wrote this at 2020, who would have thought where we'd be at in 2024? But the graph on page 16 shows what inflation did to prices.
00:14:09
Speaker
in your teens and 20s if you were born in 1960 compared to 1990. So inflation was extremely volatile and increased a lot. If you were born in 1960 and, you know, were a teenager, if you were born in 1990, up until a couple years ago, and I will speak from experience, I had never even thought of inflation. And at the time that this book was written,
00:14:34
Speaker
Inflation, you know for us as teens and in our 20s, you know, probably never even crossed our minds So he shows these graphs and it really does illustrate how
00:14:44
Speaker
These two groups of people, separated by only one, maybe two generations, will have dramatically different experiences and thus likely have different views of the stock market, inflation, etc., which will thus impact our own and others' financial decisions and worldview.
00:15:06
Speaker
So how do you think recognizing these types of different experiences could change the way you and really anyone discuss and judge financial decisions made by others? I thought the statistics just around the lottery tickets was pretty interesting.
00:15:25
Speaker
It said that 40% of Americans can't come up with $400, which is like super duper surprising statistic. I've heard more statistics around people living like paycheck to paycheck than I ever thought was actually realistic or not realistic, but than what it was. But there was a line, I think it was on page 19,
00:15:51
Speaker
that, you know, it might seem crazy for someone that only has or less than $400 to them to their account or to their name that they would spend their money on a lottery ticket. But there was the line was like they are paying for a chance of a dream that we already have. So just just the thought of being able to actually like
00:16:16
Speaker
take care of themselves better is worth spending money on because of the off-shot chance that they might actually hit the lottery. I just thought that that was pretty striking. I really hadn't thought of it down to that level of like, wow, I'm technically living a dream that a lot of Americans would prefer, but yet they're sinking their funds into just the chance to get maybe what we have.
00:16:45
Speaker
I think I alluded to it right before you went through the summary here, but I just really appreciate that in a book about finance that basically he's just talking about how some people are born with
00:17:00
Speaker
Better understanding because their family and their upbringing and i think it's just really good to know whenever you're doing others and. I think for you is that helpful reminder of like again the chapter title like nobody's nobody's crazy right like people do things because that's what they saw growing up and that's the word and.
00:17:18
Speaker
something that might look dumb to you or unintelligent like it's how you know maybe someone grew up whereas like something that I might do others on that side might think is dumb but it's I'm doing it because it's why I grew up. Rob the $400 thing um last year I volunteered as a they called a mentors in this financial literacy class the company I work for we partner with a non-profit organization and
00:17:47
Speaker
One of the lower economic areas of the city in Oklahoma City and one of the ways that they try to empower and build up the community there is offering financial literacy classes. It's not a Dave Ramsey class. It's a class that's tailored specifically for people in very low economic socioeconomic communities.
00:18:08
Speaker
And it was extremely humbling because I was in a class rubbing shoulders with people who the class that we discussed having an emergency savings fund, the amount that this class taught was, hey, you need to work towards having a $500 emergency fund.
00:18:30
Speaker
And the table that I sat with, the other guys I was with, couldn't fathom that. They're like, I can't do that. They just could not process in their mind, not just doing it, but the value of having it. They're like, I have money, I need to spend money. Why would I have an emergency fund?
00:18:52
Speaker
And it was just a very humbling experience to what Staelyn just said. I had no control over where I was born, the family I was born into, and my experience is vastly different. Where I grew up being taught to tithe and save,
00:19:11
Speaker
every single time I received an allowance or income of any kind. And this is not in like a bragging way, it's just a fact like coming up with $500 for an emergency fund would not be any problem nor a concern for me. And then the fact that these guys, not right down the street, but just 10 miles away from me, couldn't even fathom A, doing that logistically or B, the value of that.
00:19:39
Speaker
Yeah, we're definitely in our own bubbles financially, I think, based on where we come from, where we live, who we hang out with, who we hang out with now, who we're married to. The first couple chapters of this book, it is refreshing that there's so much nuance and so many caveats in terms of what the right decision is because we treat finance like just a math or science-based
00:20:04
Speaker
Study but it really is like half humanities half Math and then you know, there's the macro versus the micro perspective on both of those ends of the spectrum There's like personal finance and how that works versus the way federal governments print money out of thin air and you know, there's just a lot of things that like
00:20:25
Speaker
that you just really need to study for a long time and actually understand history as well in order to get a broad enough understanding to where you can be confident that you're actually making the right decisions for you in the current time period, in the current situation that you might be in. And that's really daunting.
History of Retirement and Economic Theories
00:20:45
Speaker
I appreciate the fact that this is so philosophical here at the beginning. If you look at that graph, people born in the 50s, it's like, why would you invest in stocks? Put it on bonds and CDs and get interest. And then the people in the 70s, if they did that, they would be the dumbest investors of their whole generation.
00:21:04
Speaker
And it's 20 years apart. It's crazy that only that much time creates such a big gap in, what is it, 10 times more for the people in the 70s who would have invested in stocks versus the people in the 50s. That's amazing.
00:21:21
Speaker
It was a lot, yeah. That just was going to deviate because I thought pages 20 and 21 were really interesting, talking about the labor force participation rate for men over the age of 65. Oh yeah, that was interesting. Yeah, so back in 1880, almost 80% of men over the age of 65 were still working, and then fast forward to 2010, only 22%.
00:21:48
Speaker
So the idea of retirement for everybody is almost brand new. I mean, all the Roth IRA wasn't even a thing until 1998. That's crazy to think about. So in reality, we're all just guinea pigs with all this stuff, you know? Like, shoot, I mean, 50 years from now, what's, there might be something else, you know? Yeah. This is crazy to think about. Right. Yeah. Who knows?
00:22:13
Speaker
I think that chart you mentioned, Adam, about how the percentage is the retirement age and such. That reminded me a lot of the Blue Zones, where people were working basically up until they passed, essentially, or until they no longer could do their job. But I think that we view our work now as just different, right? Because they're doing just these lifestyle things that feel very natural.
00:22:42
Speaker
In a lot of those blue zones, there are being very manual labor things, farming and that where I feel like a lot of our work, it's good things, but a lot of it might feel more unnatural. We haven't been doing these kinds of vocations. Similarly, you said, talking about how the Roth area hasn't been around that long, we haven't been doing these kinds of jobs that long. You look at all of our different job categories, how long has that job category been around for? I mean, Thomas, I guess yours has probably been around
00:23:11
Speaker
The longest, you're kind of more in... Geology's been around a while. Yeah, rocks. Pangea. Thomas, what do you do again? Yeah, I gotta say, I actually was thinking that, so Thomas, go ahead. Tell us what you do. Samsonite. I knew it started with an S. What do you mean, what do I do?
00:23:40
Speaker
And they're great words of Robert. Don't ask me what I do. Tell me, let me tell you who I am. I'm here to, I'm here to make fun of Rob and his internet. Aren't you a project manager?
00:24:02
Speaker
Yeah, but I don't work in geology anymore. I used to do construction, but now you don't as much. It's different, not me. I work with the construction industry, but I'm not actually doing the construction. Okay. If you look at all of our vocations, all of our jobs, that's probably the closest to something that's been around for a long time. Yeah, I go out in the field. I turn a wrench every once in a while.
00:24:29
Speaker
Get a little fuel on me every once in a while. Sweat on your brow. You know, good old fashioned benzene and some other people's probably my, why my grandpa's still around, man. He probably touched all sorts of weird chemicals back in the day. They used to wear watches with, uh,
00:24:50
Speaker
What, boron in them, so they lit up at night and stuff? Oh, yeah, radioactive chemicals. Oh, that was in Colorado, actually. I learned about that. I thought you were going to talk about a free gasoline fighting accident. Oh, yeah. Dude, I love that movie. Oh, dude. I watched Talladega Metz on a flight today. I always forget how funny that movie is. That movie is so funny.
00:25:21
Speaker
One of the kind of sneaky ones that always gets me is the campaign or literally any of the Austin Powers movies. You haven't seen them in five years, you forget how awesome they are.
00:25:36
Speaker
Anyways, who digress? Anyways, yes. Financial decisions. No, I think everyone shared. Yeah. Anybody else have any thoughts on chapter one? I mean, and I'm cool if we still kind of dive into the labor force participation rate that flies brought up. I thought that was great.
00:25:55
Speaker
Yeah, we treat retirement as if it's kind of like a right, but it's only been the last two or three generations where that's been the case. Almost all throughout history, you've just had to kind of pull your weight until the end, it kind of feels like. I brought this up to my dad and he's like, yeah, we thought that everybody was going to just have a pension.
00:26:16
Speaker
And then you look at the stats on here that he shows about a pension. It's like only a quarter of those age 65 or older had pension income in 1975. And among them, only 15% of household income came from a pension. I know, similarly, Social Security, when it was designed, way more people are collecting on it now than what it was designed for, is my understanding. I don't want to give numbers.
00:26:41
Speaker
The specifics but for my understanding that you know so security as we do it now wait when people are tapping into it.
00:26:48
Speaker
I was going to say, it says from the book, when Ida May Fuller cashed the first social security check in 1940, it was $22.54 or about $416 adjusted for inflation. Not until the 80s were checks an average of or exceeded $1,000 a month adjusted for inflation. So yeah, even social security was never really, I don't think meant to replace a pension or anything like that.
00:27:15
Speaker
And it still can't. I mean, you look at social security and then cost of living, it's not even close. Why we're all on our own now. Find some gold. You better hope your investments pay out. Better get lucky. Better hope the boomers don't knock it all up during their retirement and go on too many cruises. Leave us nothing.
00:27:40
Speaker
Let's take a quick break for a word from our sponsors. Ever feel like your life is a reality show without the commentary? How your very own reality TV life narrator, they'll follow you around and provide commentary on your most mundane tasks. Watch as Dave hesitates as the dairy aisle. Will he choose almond milk or dare to go full lactose? And now back to the show.
Chapter 2: Luck and Risk in Finance
00:28:06
Speaker
Speaking of luck, I think that's a good transition to chapter two, which is titled Luck and Risk. So in this chapter, it addresses the critical roles both luck and risk play in our financial lives. The author highlights how closely intertwined and often indistinguishable these factors are, pointing out that many financial outcomes attributed to skill are often influenced by luck and vice versa.
00:28:32
Speaker
Acknowledging the roles of luck and risk can lead to more humility, better decision-making, and a more realistic approach to personal finance. How do you all assess the role of luck in your own financial successes and failures? And do you think society generally underestimates the role of luck in financial success?
00:28:54
Speaker
I think that the Bill Gates example that he uses in here is really cool. How precise it almost had to be for that one computer to be at a school. Can you give a brief recap of the computer that you're talking about in case anyone listening in has not read the chapter yet?
00:29:13
Speaker
Yeah, a little quick math. In 1968, I'll just read it because there's so many crazy stats like the buildup to how perfect it had to be for him to get that thing. But in 1968, there were roughly 303 million high school age people in the world, according to UN. About 18 million of them lived in the US. About 270,000 of them lived in Washington state. A little over 100,000 of them lived in Seattle.
00:29:41
Speaker
Only about 300 of them attended Lakeside School.
00:29:45
Speaker
So start with three in the three million and end with 300 and that's, and then one, so one in a million high school age students attended the high school that had the combination of cash and foresight to buy a computer and Bill Gates happened to be one of them. Yeah. So he was the lucky one, right? But then there was a third, it was him and his buddy, but then there was a third guy and he died mountaineering, which is like a one in a million, right? So Bill Gates was the lucky one.
00:30:14
Speaker
His buddy was the risky one. Basically, they both could have been lucky, but one was lucky, one was risky. I think the book Outliers talks about this too with Knopf and Gladwell. Is that right?
00:30:29
Speaker
I feel like I have to fight the urge to try and assign ownership to a lot of success because once you assign ownership to success in this realm, you, I think, automatically sort of discount the level at which luck
00:30:50
Speaker
actually contributed to your success. And I feel like that creates a sense of false confidence. So maybe you get lucky for two or three years and you start doing things based on the belief that it was all you. It had nothing to do with the circumstances and then you become way too risky in your approach to everything. And maybe your ego gets in the way and starts making some decisions that
00:31:16
Speaker
you two years ago before all your success never would have made. So I think, for me, I think the conservative and probably the smarter way to be is to just try and attribute as much to luck as you can so that you don't stop analyzing everything for the potential pitfalls that it could present. But I think, I mean, you see it all over the place. You see people that obviously were incredibly lucky and they flaunt what they have as if they did it all themselves.
00:31:46
Speaker
Yeah. Yeah. I feel like we could all play this luck game. I mean, we were all born into the families that we have, you know, we were provided all the things we were provided to get, to get through the good schools and to go to college, get a better job. You know, we weren't born into.
00:32:04
Speaker
I don't think any of us were really born in situations that were not privileged. I'm pretty sure that's what it is. Yeah, it is exactly what it is. Yeah. I mean, just look at anybody born in the US versus the Congo. I don't know. Choose any country that's not the US really. Yeah, exactly. So really every decision that we make is lucky here because it's like the fact that you're even here is lucky.
00:32:28
Speaker
I definitely personally can be very prideful and there's definitely times where I would say I don't take for granted what my parents, what my mother-in-law have done to get me where I'm at today. No doubt about it. I'm not taking all of their generosity for granted now that I'm fully independent and
Role of Luck in Financial Success
00:32:54
Speaker
whatnot. There can be elements of
00:32:56
Speaker
I can just, I share this during the blue zones of the external or internal locus of control where I can just like, all right, it's on me now. Like I really have to, I need to make really good decisions because I need to like set ourselves up for the future and worrying about, I can worry more as income increases.
00:33:16
Speaker
And there's just an element of like, man, things have always been provided for me and it can easily go away if I make a couple really stupid decisions. But then at the same time, as we learn in this book, it's like if we just make the boring, mundane, patient decisions,
00:33:35
Speaker
You know, not move the goalposts of our standard of living, not bet on that huge potential ROI that's extremely risky where we could lose it all as Hausl gives several examples of that, but do like the really boring, you know, the Reagan read in the introduction, the janitor and gas station attendant who just saved and invested in stocks, blue chip stocks over and over and over. And when he died, he had a net worth of $8 million.
00:34:04
Speaker
No one knew. There's just this element of my parents, my family, my upbringing. It's very lucky that I was born into that situation and there's no way I could ever get a big head about that.
00:34:24
Speaker
And at the same time it can be lost very quickly if i make some very prideful and big headed i've come to this level of attainment like i'm invincible like some of these hedge fund managers and stock brokers felt that they were in lost at all.
00:34:41
Speaker
I mean, even if you do all the right things, it could also end up like that. That's the crazy part, you know, like Lehman Brothers just totally went bust, right? People lost millions. Is that why he called it the most exciting game or what did he call it? The greatest show on earth. The greatest show on earth. Is that why he called it that? I don't, I don't really know why he called it that.
00:35:06
Speaker
Well, I think he called it that because and this was so fascinating. He goes in what other industry? All right, we're going we're going back a little bit, but I kind of want to read it word for word.
00:35:18
Speaker
In what other industry, this is page four, does someone with no college degree, no training, no background, no formal experience, and no connections massively outperform someone with the best education, the best training, and the best connections? I struggle to think of any. So he uses the example of like a surgeon. It's like none of us could walk in and perform open heart surgery like a trained surgeon.
00:35:44
Speaker
But in the example of Regan Reed, when he died, he ended his life with $8 million in wealth. And this Merrill Lynch executive, Harvard graduate, NBA had this $90 million house or something. It cost $90,000 a month to maintain this house, and he lost it all.
00:36:08
Speaker
And it's like, how can someone with no education compared to this guy perform better? Yeah. It's a good reminder to stay humble, I think. Exactly.
00:36:18
Speaker
Garrett, I'm glad you brought that up. It reminds me of like the passage or the, it's in the Bible, like, I don't know, hundreds of times I feel like fear of the Lord, right? So just having great respect and fear of the luck and the risk component, knowing that it's really not in your hands. It's in the higher powers hands, but I don't know. I was thinking about this.
00:36:44
Speaker
what role of luck in your own financial success. Just thinking back to college, I decided to go to Missouri State because it was like my cheapest option. And at the time, I didn't know that I wanted to pursue logistics and supply chain. But later on, I found out that I did. And Missouri State was one of 50 universities at the time that you could get that degree. So like right there, I felt lucky and fortunate.
00:37:14
Speaker
to find that career path. And then with internships, I feel like that really set the stage for my career. And then at that time, I felt very lucky that I got to work for a Fortune 50 company right out of college.
00:37:30
Speaker
Just so happens that they did really good that year and I got a bonus and then that allowed me to pay off my debt really, really fast and like kind of catapult you into your future and it all kind of comes back from like, I know we're going to get into some of the like compounding chapters, but it's like it feels like every thing kind of compounds of the degree or the major, the internships, the job, the bonus, the blah, blah, blah. And it's like, man, before you know it, it's it's like, wow.
00:38:00
Speaker
you look back and it feels like every little thing, which is all part of a grand plan, really kind of help set the stage or help you move forward. So I definitely think that there's that compounding aspect that I know we'll get into, I think in next week's episode. But yeah, just kind of fun to look back and reflect on.
00:38:21
Speaker
It's a good exercise.
Conclusion and Invitation for Reflection
00:38:23
Speaker
Yeah. To look back and reflect on all the things that were out of your control that helped you. It is very humbling for sure. I agree. Yeah. So maybe that's the takeaway for this episode is.
00:38:36
Speaker
Just some self-reflection for those listening is how has things outside, whether you want to call it luck, whether you want to call it Providence, God's plan, the reality that there are a lot of external forces at play and in the success or failure of not just our financial life, but life in general. So it's probably a good takeaway and a way to end the episode of
00:39:01
Speaker
doing some personal reflection of how external forces and luck have really impacted our trajectory in small ways over the course of time that have really compounded to get you where you are today. So with that, thank you for listening to this week's episode of the Books Brothers podcast. Join us next week as we discuss chapters three through six.
00:39:22
Speaker
from The Psychology of Money, Timeless Lessons on Wealth, Greed, and Happiness by Morgan Houssell. If you haven't yet, go out and get the book so you can better follow along with us. If you have enjoyed listening or benefited from our conversation, please subscribe, give us a review, and share with a friend that you want to connect deeper with.
00:39:43
Speaker
Lastly, we'd love to hear your thoughts. You can reach us by email at connect at booksbrotherspodcast.com or on Instagram at booksbrotherspodcast. Until next week, read, reflect, and connect.