How To Create & Manage Your Personal Wealth - Morgan Housel - #142

**Chris Williamson** (0:00)
Oh yes, hello friends. Welcome back to Modern Wisdom. Strap yourself in for today. I'm sitting down with none other than Morgan Housel, ex-writer for The Motley Fool, Wall Street Journal. He's spent more than a decade thinking, reading, writing and interviewing about how to manage your money. And I've strapped him to a chair, put a microphone in front of him and asked him, how do I create wealth in my life? The basics of money management is something that none of us are taught, but all of us need. And today is, it's just crazy. I'm so impressed with Morgan. I knew that he was gonna be great, but this just blew my head off. It's one of those episodes that I've already gone back and listened to a number of times. And I'm confident that you will as well. You will have a friend who you know is absolutely awful with managing their money. And I implore you, I am on my knees begging you to send them this podcast so that it stops them from spending their money on useless crap that they no longer require. In other news, this episode is brought to you by 6 Month Sober. One of the easiest ways that you can save money is by no longer wasting it on alcohol. And taking a break for 28 days, 90 days or 6 months is the single most powerful lifestyle change that I believe you can make. Head to the link in the show notes below or go to 6monthsober.com/podcast. That's the number 6monthsober.com/podcast. And you can check out how you can upgrade your life by taking a break from alcohol. Finally, there will be a lot of new listeners tuning in today. Maybe one of your friends has sent it to you. Don't take it as offense. They don't mean that you're bad with money. They just mean that you could be better. And if you are new here, hit the subscribe button. You get one episode every Monday and every Thursday with the most fascinating humans on the planet delivered directly to your mobile device. But for now, please welcome the wise and wonderful Morgan Housel. Oh yeah, PS, there's a couple of connection dropouts in this episode. I've worked my absolute hardest to try and clean them up for you, but you may notice a little bit of signal change here and there. Apologies in advance.
Mr. Morgan Housel in the building, how are you, man?

**Morgan Housel** (2:27)
I'm good, thanks for having me. I'm excited to be here, thanks, Chris.

**Chris Williamson** (2:29)
Yeah, me too, me too. We're talking wealth today, right? Everyone wants it, but I don't know how to get it.

**Morgan Housel** (2:38)
It's very elusive. And it's not even that people don't know how to get it. I think it's a lot of people don't even think about defining what it is or what it's gonna mean to them or what it could do for them or why they want it. I think there's just a natural urge to want more of it, but answering the question why, it seems like a funny question to a lot of people. Like, of course I want to be wealthy. Why would you even ask? But you start getting these more philosophical questions of why do you want to be wealthy? Is it a status thing? Is it because you want more stuff? Is it because you want more control over your time? Is it because you think it's gonna erase problems that you currently have in your life? If you had more money, those problems would go away. And I think there's a lot of different elements to that. And I think at the highest level, what I've thought about in terms of wealth and that I really believe in terms of wealth and studying this stuff for so many years and studying other wealthy people and thinking about money myself, is I think what wealth can really do for you that will legitimately make most people happy is to the extent that you can use wealth to control your time, to give yourself options, to let you do what you want, when you want, with who you want for as long as you want to. That is wealth's great power that it can do for us. But that's usually not what people think about wealth wanting to do for them. Usually, what they think about it is more stuff, bigger house, nicer car, better clothes, maybe some travel, what not. And there's nothing wrong with that. I like fancy cars, I like big homes, I like it all. But we just have so much evidence.
It's almost cliche at this point to say, buying the bigger house and the fancier car won't make people happy. We have a lot of evidence on that, that there's this hedonic treadmill that people, when they're anticipating getting the Ferrari, that's really exciting. But then they actually get it and they say, it's just a car, it's just got a steering wheel and whatnot. There's a lot of different elements to that. I think what's really, this is something I learned when I used to be a valet at a fancy hotel in Los Angeles when I was in college. These people would come in driving their Ferraris and I would look at the car and be like, wow, wouldn't it be cool if I had that car? Wouldn't it be cool if I was driving that Ferrari? It took me a while to realize the irony of that thought, which was that those people drove in and I never said, wow, that driver, the guy driving the Ferrari, he is really cool. He must be impressive. As an observer, I just said, I want to be in that car. I didn't care about the driver. All I did is I imagined myself driving his car. But the guy driving in, when he's driving the Ferrari, he's probably thinking, everyone thinks I'm cool. And they did it. The valley on the curb was thinking, I don't care about you, I just want to imagine myself sitting in that seat. And it was just like this irony of like, no one cares about the guy in the car, but everyone wants to be the guy in the car. And to the extent that you want to buy a Ferrari, and a Ferrari is like, of course, the extreme example, doesn't need to be that luxurious, but the extent that you want wealth to buy you stuff because you think it's going to bring you respect and admiration and prestige, I think there's probably some of that that has a good signaling effect. But a lot of that is just a misconception about, you think people are thinking X, but they're actually thinking Y. I think that's a big reason why the perception of being wealthier seems like, oh, I'm going to be so much happier when I'm wealthy. But if you look at the statistics about how happy, wealthy people are, they're just, they're not that much, they're not that much happier than the rest of us. Of course, there's like a minimum level of meeting your daily needs and comfort and whatnot. But after that, a lot of like the status wealth, it's propensity to make people happy is really not there. But I bring that up because what we know does make people happier or has like a legitimate lasting long term impact on their happiness is when they can control their schedule, when they own their time, when they can do what they want, when they want, when they can wake up every single morning, seven days a week and say to themselves, I can do whatever the hell I want today. That makes people happy. So if you can use wealth to generate that, to own your schedule and for ordinary people, maybe that's taking a job that doesn't have a long commute or you're working in a job that pays less, but it's doing something that you love before and something like that. Or if it's at a higher level, retiring early, just retiring when you want to or retiring when you're 32, which is like a big movement these days. Stuff like that does make people happy. When you can control your time, that's a lasting impact. So when I think about wealth at the highest, the fundamental level, the first question is, what do you want it to do for me? And for me personally, it's just a level of independence. It's a level of waking up every day and saying, I can do what I want now. That's the goal of wealth for me.