Same As Ever - Morgan Housel Flashcards
“The dead outnumber the living… fourteen to one, and we ignore the accumulated experience of such a huge majority of mankind at our peril.
—Niall Ferguson”
“History is filled with surprises no one could have seen coming. But it’s also filled with so much timeless wisdom.
If you traveled in time to five hundred years ago or five hundred years from now, you would be astounded at how much technology and medicine has changed. The geopolitical order would make no sense to you. The language and dialect might be completely foreign.
But you’d notice people falling for greed and fear just like they do in our current world.
You’d see people persuaded by risk, jealousy, and tribal affiliations in ways that are familiar to you.
You’d see overconfidence and shortsightedness that remind you of people’s behavior today.
You’d find people seeking the secret to a happy life and trying to find certainty when none exists in ways that are entirely relatable.
When transported to an unfamiliar world, you’d spend a few minutes watching people behave and say, “Ah. I’ve seen this before. Same as ever.”
Change captures our attention because it’s surprising and exciting. But the behaviors that never change are history’s most powerful lessons, because they preview what to expect in the future. Your future. Everyone’s future. No matter who you are, where you’re “from, how old you are, or how much money you make, there are timeless lessons from human behavior that are some of the most important things you can ever learn.”
Amazon founder Jeff Bezos once said that he’s often asked what’s going to change in the next ten years. “I almost never get the question: ‘What’s not going to change in the next ten years?’ ” he said. “And I submit to you that that second question is actually the more important of the two.”
“Things that never change are important because you can put so much confidence into knowing how they’ll shape the future. Bezos said it’s impossible to imagine a future where Amazon customers don’t want low prices and fast shipping—so he can put enormous investment into those things.
The same philosophy works in almost all areas of life.
I have no clue what the stock market will do next year (or any year). But I’m very confident about people’s penchant for greed and fear, which never changes. So that’s what I spend my time thinking about.
I have no idea who will win the next presidential election. But I’m confident about the ways people’s attachment to tribal identities influences their thinking, which is the same today as it was a thousand years ago and will be a thousand years from now.
I cannot tell you what businesses will dominate the next decade. But I can tell you how business leaders let success go to their heads, becoming lazy and entitled and eventually losing their edge. That story hasn’t changed in hundreds of years and never will.”
“Author Tim Urban once wrote, “If you went back in time before your birth you’d be terrified to do anything, because you’d know that even the smallest nudges to the present can have major impacts on the future.”
How hauntingly true.”
“People like to say, “To know where we’re going, you have to know where we’ve been.” But more realistic is admitting that if you know where we’ve been, you realize we have no idea where we’re going. Events compound in unfathomable ways.”
I try to keep two things in mind in a world that’s this vulnerable to chance and accident.
One is highlighting this book’s premise—to base predictions on how people behave rather than on specific events. Predicting what the world will look like fifty years from now is impossible. But predicting that people will still respond to greed, fear, opportunity, exploitation, risk, uncertainty, tribal affiliations, and social persuasion in the same way is a bet I’d take.
“Forecasting events is hard because it’s easy to skip the question “And then what?”
Saying “Higher gas prices will cause people to drive less” seems logical.
But then what?
Well, people have to drive, so maybe they’ll look for more fuel-efficient vehicles. They’ll complain to politicians, who will offer tax breaks to buy those vehicles. OPEC is asked to drill more; energy entrepreneurs innovate. And the oil industry knows two speeds: boom and bust. So they’ll probably pump too much. Then prices fall, all while people own more efficient vehicles. Then maybe the suburbs become more popular—and people end up driving even more than before.”
“Every event creates its own offspring, which impact the world in their own special ways. It makes prediction exceedingly hard. The absurdity of past connections should humble your confidence in predicting future ones.
The other thing to keep in mind is to have a wider imagination. No matter what the world looks like today, and what seems obvious today, everything can change tomorrow because of some tiny accident no one’s thinking about. Events, like money, compound. And the central feature of compounding is that it’s never intuitive how big something can grow from a small beginning.”
Excerpt From
Same as Ever
Morgan Housel
https://itunes.apple.com/WebObjects/MZStore.woa/wa/viewBook?id=0
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“As financial advisor Carl Richards says, “Risk is what’s left over after you think you’ve thought of everything.”
That’s the real definition of risk—what’s left over after you’ve prepared for the risks you can imagine.
Risk is what you don’t see.”
The Economist—a magazine I admire—publishes a forecast of the year ahead each January. Its January 2020 issue does not mention a single word about COVID-19. Its January 2022 issue does not mention a single word about Russia invading Ukraine.
That’s not a criticism—both events were impossible to know when the issues were planned in the months before publication.
There is so much we don’t know. And not just about the future, but the past.
History knows three things: 1) what’s been photographed, 2) what someone wrote down or recorded, and 3) the words spoken by people whom historians and journalists wanted to interview and who agreed to be interviewed.
What percentage of everything important that’s ever happened falls into one of those three categories? No one knows. But it’s tiny. And all three suffer from misinterpretation, incompleteness, embellishment, lying, and selective memory.
Think of a content child, blissfully playing with toys and smiling as the sun hits their face.
In their mind, everything is great. Their world begins and ends with their immediate surroundings—Mom is here, Dad is there, toys are nearby, food is in my stomach. As far as they’re concerned, life is perfect. They have all the information they need.
What they’re unaware of is so much greater. In the mind of a three-year-old, the concept of geopolitics is completely unimaginable. The idea of rising interest rates hurting the economy, or the reason someone needs a paycheck, or what a career even is, or the risk of cancer, is utterly out of sight, out of mind.
Psychologist Daniel Kahneman says, “The idea that what you don’t see might refute everything you believe just doesn’t occur to us.”
The wild thing is adults are just as blind to what’s going on in the world.
There’s a haunting video of a local New York City newscast from the morning of September 11, 2001, minutes before the terrorist attacks took place. It begins: “Good morning; sixty-four degrees at eight. It’s Tuesday, September eleventh…. It’s going to be a beautiful day today, sunshine throughout. Really a splendid September day. The afternoon temperature is about eighty degrees…”
Risk is what they couldn’t see coming.
think of risk the way the State of California thinks of earthquakes. It knows a major earthquake will happen. But it has no idea when, where, or of what magnitude. Emergency crews are prepared despite no specific forecast. Buildings are designed to withstand earthquakes that may not occur for a century or more. Nassim Taleb says, “Invest in preparedness, not in prediction.” That gets to the heart of it.
realize that if you’re only preparing for the risks you can envision, you’ll be unprepared for the risks you can’t see every single time. So, in personal finance, the right amount of savings is when it feels like it’s a little too much. It should feel excessive; it should make you wince a little.
The same goes for how much debt you think you should handle—whatever you think it is, the reality is probably a little less. Your preparation shouldn’t make sense in a world where the biggest historical events all would have sounded absurd before they happened.
