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Today, we'll discuss Morgan Housel’s new interview with our very own Clay Finck, and more, in just 4 minutes to read.

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Morgan Housel: What Never Changes in Markets

“The behaviors that never change are history’s most powerful lessons because they preview what to expect in the future.” — Morgan Housel

What never changes is the root of Housel’s new book, Same as Ever, and the bestselling author of The Psychology of Money joined Clay Finck to discuss the behaviors that never change. Housel’s books have sold over 4.5 million copies and have been translated into over 50 languages. He writes a popular blog for the Collaborative Fund and serves on the board of directors at Markel.

Here are some highlights of their conversation, edited lightly for clarity and brevity. Tune into the full interview here.

Clay Finck: In writing your book about things that don’t change, what key overarching themes did you find?

Morgan Housel: I’ve always just been an amateur student of history, as many people are. So many things have changed, and you see those when studying history. But to me, what’s always been more fascinating is when you come across something, and it’s about an event that took place 50 or 500 years ago, and you realize, Oh, that’s exactly what people do today. It hasn’t changed at all.

You asked what some of the common denominators were. I think many of them fall under this umbrella of risk, greed, fear, uncertainty, and opportunity. And this goes way beyond investing. 

The first chapter in your book really hit home for me titled, Hanging by a thread. You really opened my eyes to just how fragile life is.

We live in this version of the world, but there are many other ways the world could have turned out. And think about just the very big, broad events. What would the modern world look like in the year 2024 if there was no COVID? If 9/11 had not happened? If World War II had not happened? If the Great Depression had not happened? 

So much of the world hangs by a thread. That goes both ways. There are a lot of amazing things that happen in your individual life. And in the global economy, positive events happen because of a tiny random fluke. Maybe it’s two founders who meet each other in a very serendipitous way and go on to create a technology that changes everybody’s lives.

You state that the biggest risk and the most important news story of the next 10 years will be something nobody is talking about today.

I wrote my first book in late 2019, weeks or months before COVID completely threw everybody’s life upside down. I and everybody else had no clue about it. 

The biggest global news story of 2023? Most people would say Israel-Hamas. If you go to January 2023, nobody was talking about that. Even the day before it happened, virtually no one was talking about it, thinking about it, forecasting it. So it’s always been like that. You can say that for this year. The biggest news story of 2024 is something that you and I are not talking about today.

How can understanding the power of storytelling help us as investors?

You’ve got to understand how short people’s memories are and how people’s memories work. By and large, statistics and numbers do not change people’s minds. Stories do. And a lot of that’s just because stories are memorable. If you think back to when you were in math in grade school or college, you probably don’t remember much of anything. But if you hear a good story when you are a child, you can remember it for life.

Several years ago, somebody tweeted that the best product that Elon Musk has ever made is not a Tesla car. It’s not a Falcon rocket, it’s Tesla stock. The best product he’s ever made is a ticker TSLA, which is one of the most incredible and captivating stories anybody has ever told. 

You wrote that every few years, there seems to be a declaration that markets don’t work anymore, that they’re all speculation or detached from fundamentals, but it’s always been that way. People haven’t lost their minds. They’re just searching for the boundaries of what other investors are willing to believe.

I think about this a lot where, like, why do markets overshoot? Why do they have bubbles? Is it because people are stupid? Is it because they haven’t learned from the past? I think sometimes you can say that. I’m not going to say that’s not the answer, but I think there’s a bigger thing to think about here where a big part of what drives investing returns is this intangible story.

The only way to find where the boundary is to go a little bit beyond it. The only way to know what the top P/E ratio this company can trade for is to go to such an extreme that people are like, Oh no, that was too far.

Would you say today’s market seems to be overvalued, or how do you think about it? Or do you even think about it? 

I really don’t. I hope to be an investor for the next 50 years. And because of that, I have a hard time imagining that 50 years from now, I’m going to look back and say, man, in January of 2024, I wish I’d been paying more attention. 

If you started investing in September 1929, the peak of the 1920s boom just before the Great Depression. Your returns were completely fine if you started investing in September 1929 and held for 50 years. 

I invest and like my strategy to be average for an above-average period of time. And I think if I can do that, if I can earn a Vanguard return for 50 years, I’ll probably end up in the top, maybe 1% of all investors who’ve done it. It’s just trying to maximize for a different variable than other investors might be.

You share this daunting statistic that between 1980 and 2014, almost 40% of all public companies lost all their value. How might that relate to some of the giant companies we know today? 

What’s amazing to me about that statistic is those were the public companies. Those are the winners. These are not garage startups. Those are companies that became so successful at what they did that they went public, and 40% of them within one generation are gone. They’re out. They didn’t merge. They went out of business. It’s incredible.

I read an interview with Nvidia’s Jensen Huang that I thought was so interesting. He said the unofficial motto of Nvidia is that they are always 30 days from going out of business. And that’s why even though Nvidia is worth $1 trillion and utterly dominating their field, I think their management team wakes up terrified every morning, and that’s why they’re successful.

Talk to us about how inefficiencies can actually drastically improve our lives.

If you looked at some of the most successful people in history, not just in business and investing, but people like Mozart and Beethoven, like all the people who are just crazy successful in their field, and you compared how they structure their day to the hustle porn that you see on Instagram, it’s night and day.

Most people who are very successful at what they do, particularly if what they do is like an art or a thought job where you’re making decisions, leave huge parts of their day unstructured so that they can think and process information.

And if you are just completely scheduled from the moment you wake up to the moment you go to bed, you have no time to think, and you have no time to ponder, you have no time to let your mind wander around, which is so important. 

There are so many examples of this, people like Einstein and Beethoven and Bill Gates and Buffett that intentionally leave big chunks of their schedule wide open with nothing scheduled. And what they’re doing during those moments doesn’t look like work.

They might be sitting on the couch with their eyes closed. They might be going for a walk. They might be on a kayak in the middle of the lake. And it’s the most important work they do in their careers.

Dive deeper

For more insights, check out the complete interview with Housel right here or read Clay’s great thread about his favorite quotes from Housel’s new book.

See you next time!

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