Podcast Summary
Understanding human psychology's consistency: Recognizing human tendencies towards fear and greed, the power of stories, and the importance of understanding behavior provides valuable insights despite the constantly changing world.
Despite the constant changes in the world, human psychology remains consistent. Morgan Housel, a partner at the Collaborative Fund, investor, and author, discusses this concept in his book "Same as Ever." He explains that while we are notoriously bad at making accurate predictions, focusing on the underlying principles that never change can provide valuable insights. These principles include the human tendency towards fear and greed, the power of stories over statistics, and the importance of understanding human behavior. By recognizing these constants, we can navigate the future with a clearer perspective. Additionally, Housel emphasizes the importance of recognizing the limitations of our predictive abilities and focusing on what we do know rather than what we cannot predict.
Minor events can have major impacts on history: History is unpredictable and even seemingly insignificant occurrences can have profound implications
History is fragile and unpredictable. As highlighted in the discussion, even minor events or circumstances can have significant, unforeseen consequences on the course of history. For instance, the winds blowing in the wrong direction during the Revolutionary War could have prevented the formation of the United States. Similarly, the Great Depression, one of the biggest economic events of the century, could not have been predicted by anyone despite widespread knowledge of economic instability. These examples underscore the importance of humility in understanding history and the future. We cannot predict with certainty what events will unfold, and even seemingly insignificant occurrences can have profound implications. As Neil Ferguson emphasized, history does not repeat itself, but it often rhymes, and we must remain open to the possibility of unexpected outcomes.
Unpredictable events shape history: Prepare for known risks, but be aware that the biggest challenges often come from the unexpected. Stay adaptable and resilient.
The most significant events in history, which have the power to drastically change the course of our lives and economies, are often unpredictable. As the speaker mentioned, nobody could have foreseen the collapse of the Austrian bank in 1931 leading to a man in Ohio losing his job, or the attacks on Pearl Harbor and September 11th, or the COVID-19 pandemic. These events, which have shaped history, came as surprises. Risk, as financial advisor Carl Richards puts it, is what's left over when we think we've thought of everything. Therefore, it's essential to prepare for known risks, but we must also be aware that the biggest risks and challenges often come from the unexpected. The story of NASA test pilot Victor Prather illustrates this point. Despite all the preparations and testing, an unforeseen issue with the suit's heat led to an unexpected landing in the ocean. Thus, it's crucial to be adaptable and resilient in the face of the unknown.
Unforeseen Risks: Acknowledge inherent risks, maintain balance between preparation and flexibility, unexpected events can't always be prevented but can be mitigated with adequate preparation and flexibility.
No matter how much planning and preparation we do, there will always be unforeseen risks. The story of NASA astronaut Victor Prather's accidental drowning serves as a reminder of this. Despite NASA's meticulous planning, they hadn't considered the risk of an astronaut wanting to get some fresh air and opening the faceplate of his helmet, leading to his death. Similarly, during the Battle of Stalingrad, the German tanks' failure to start was caused by field mice chewing through the wires, an unlikely risk that was not accounted for. Therefore, it's essential to acknowledge the inherent risks in life and maintain a balance between being prepared and being open to unexpected circumstances. In finance, having a significant cash reserve can help mitigate unexpected risks, but it should feel like an excess to ensure adequate preparation.
Preparing for the unexpected and maintaining a realistic perspective: Recognize the importance of a financial buffer and managing expectations to find joy and happiness, despite societal advancements and individual envy.
It's essential to prepare for the unexpected and maintain a realistic perspective on life. The world experiences significant changes approximately once per decade, and during those times, having a financial buffer can be invaluable. Additionally, our expectations often rise with advancements in technology and living standards, leading us to feel no happier despite these improvements. It's crucial to recognize this pattern and manage our expectations, focusing on the gap between our circumstances and expectations as the source of joy and happiness. At the societal level, this phenomenon is known as the Tocqueville paradox, and at the individual level, it's driven by envy and the constant readjustment of expectations. Ultimately, while striving for wealth and improvement is important, it's equally essential to be mindful of our expectations and maintain a realistic perspective.
The Pleasure of Anticipation vs. the Present Moment: According to Buddhism, life's unsatisfactoriness stems from our brains deriving more pleasure from anticipation than actual experiences, leading to a constant focus on what's next and dissatisfaction with the present.
Life is filled with unsatisfactoriness and our brains derive the most pleasure from anticipation rather than actual experiences. This concept, known as "dukkha" in Buddhism, is often mistranslated as suffering, but scholars argue that it is more accurately translated as unsatisfactoriness or unsatisfactoriness. This idea is explored in Robert Wright's book "Why Buddhism is True." The human condition is marked by a constant desire for more, leading us to focus on what's coming next rather than appreciating the present moment. Even on vacation, the most pleasure can come from anticipating future experiences rather than the actual moment itself. This is due to the release of dopamine, a neurotransmitter associated with pleasure, which is triggered by anticipation rather than the experience itself. Additionally, our perception of wealth and happiness is relative to those around us, meaning that even with all the advantages we have today, many people still feel less blessed than those who lived centuries ago due to comparisons to others.
Focus on relative progress, not absolute position: Relative progress is key to success, whether in investing, careers, or fame. Having something unique sets you apart and keeps the baseline constantly evolving.
Our focus should be on relative progress rather than absolute position, whether it's in terms of wealth, status, or skills. From an evolutionary perspective, we're wired to compete for resources and mates, which means that what matters is having more than others, not the absolute amount we have. This applies to various aspects of life, including investing, careers, and even fame. People often misunderstand the value of their skills or information, assuming they're rarer than they actually are. The key to success lies in having something that others don't, be it unique knowledge, a distinct skill set, or a rapidly changing trajectory. Rapid changes in status and wealth can be alluring, but they also come with the risk of resetting the baseline and requiring us to constantly strive for more. Instead, a slower, more sustainable approach to success can lead to greater satisfaction and happiness. As Will Smith once said, people respect you more when you're chasing something than when you have it. Ultimately, life is a competition, but it's essential to remember that the journey matters just as much as the destination.
Sudden wealth or success brings unexpected challenges: Success can bring unexpected challenges and psychological burdens, leading to financial mismanagement, scrutiny, and pressure to perform. Prepare for these potential downsides to maintain mental well-being.
Sudden wealth or success, whether it comes early or late in life, can bring unexpected challenges and psychological burdens. The lottery winner's sudden wealth, for instance, can lead to financial mismanagement and even misery. Similarly, academics who gain fame later in life may struggle to adapt to the sudden attention and scrutiny. The author of a successful book, for example, may feel the pressure to match or exceed the success of their first work. These examples illustrate the importance of being prepared for the potential downsides of success, and the potential for a sudden shift in circumstances to upend one's sense of self. The pressure to perform and meet high expectations can be overwhelming, and it's essential to recognize and address these challenges to maintain mental well-being.
The Challenges and Expectations of Fame: Fame brings pressure and constant change, high expectations can cause unhappiness, and intangible aspects of life like relationships and peace of mind are valuable measures of success and happiness.
Fame comes with its own set of challenges and expectations that can often outweigh the benefits. The man in the documentary, despite having the talent, couldn't handle the pressure and constant change that came with fame. He wisely acknowledged that fame doesn't change who we are, but rather alters the people around us. Moreover, high expectations, though intangible, can be a significant source of unhappiness. We can easily measure the cost of material possessions, but the cost of unmet expectations can be much more difficult to quantify. People often prioritize observable metrics, such as salary or job title, over hidden metrics, like relationship quality or peace of mind. It's crucial to remember that these hidden metrics can have a profound impact on our overall well-being and happiness. Furthermore, some individuals choose to leave the fame game, trading it for a simpler, more authentic life. Actress Cameron Diaz and the band Goit (Goite) are examples of those who have walked away from their successful careers to focus on other aspects of their lives. In essence, it's essential to remember that fame and material possessions are not the only measures of success and happiness. The intangible aspects of our lives, such as relationships, peace of mind, and personal satisfaction, are often more valuable and harder to quantify but can have a significant impact on our overall well-being.
Bringing Hidden Aspects into the Observable Realm: Focusing on intangible aspects of life and understanding that everyone has both positive and negative traits can lead to a more fulfilling life.
People tend to focus on observable aspects of life and overlook the hidden, intangible ones. George, for instance, tries to bring hidden aspects into the observable realm by tracking his daily habits. Another important point is that people are more concerned about themselves than others, so focusing too much on impressing others through material possessions may not be worth the effort. Lastly, every person with outsized success has traits that are not desirable, and it's impossible to separate the positive aspects from the negative ones. In essence, understanding these realities can help keep expectations in check and lead to a more fulfilling life.
The Complexity of Heroes: Strengths and Weaknesses: Remember that heroes have both admirable traits and flaws. Instead of idolizing the famous, find role models in everyday people.
We should be mindful of who we look up to and understand that great achievements often come with less desirable traits. Elon Musk, Bill Gates, and other influential figures have both remarkable strengths and weaknesses. It's essential to remember that we cannot pick and choose which parts of their lives we admire, as they come as a complete package. Many heroes, including Tiger Woods, Alan Watts, James Joyce, Ernest Hemingway, and others, have had personal lives filled with challenges and flaws. Instead of idolizing the famous and wealthy, consider finding role models in everyday people who live good, balanced lives. By focusing on these individuals, we can set achievable goals for ourselves and strive for a well-rounded, fulfilling life.
The Extreme Personality Traits of Successful Figures: Success often comes with extreme personality traits, but focusing on providing valuable insights is crucial.
The drive for success can come with extreme personality traits that make it difficult for others to work with. John Boyd, a renowned fighter pilot, is an example of such a figure. His exceptional talent and understanding of fighter plane mechanics were unmatched, but his aggressive and unconventional behavior made it hard for his peers to tolerate him. The world is governed by probabilities, but people often think in black and white, right or wrong terms. This flawed way of thinking can make it difficult to predict markets and politics accurately. Those who can speak in certainties, even if they're wrong, tend to garner more attention. However, it's essential to focus on providing valuable insights and expertise rather than adding unnecessary noise to the conversation.
The allure of certainty and fluency in speaking: People are naturally drawn to those who provide a sense of order and clarity, even if it's not based on factual knowledge. The seductive power of certainty and fluency can be observed in various domains, including politics, economics, and religion.
Certainty and fluency in speaking can be more seductive and appealing to people than accuracy or truth, even when the speaker is wrong. People have a natural aversion to uncertainty and will often gravitate towards those who provide a sense of order and clarity, even if it's not based on factual knowledge. This phenomenon can be observed in various domains, including politics, economics, and religion. For instance, individuals who make definitive statements about complex issues, such as geopolitics or economic forecasts, can gain a large following, even if their ideas are not well-researched or accurate. This is because people are often more interested in reducing the uncertainty in their lives than in seeking out the truth. Additionally, the sample size of historical data we have for certain phenomena, such as recessions, is relatively small, making it challenging to be truly expert in these areas. Therefore, it's essential to approach complex issues with a critical mindset and to be aware of the seductive power of certainty and fluency in speaking.
Learning from the past while recognizing its limitations: Historical data has value but is limited and subject to interpretation. Avoid creating universal laws based on personal experiences and learn from the past while recognizing its uncertainties.
Historical data, while valuable, is limited and subject to interpretation. The past cannot definitively predict the future, and there are always alternative histories that could have occurred. This is true not only for economic trends but also for individual decisions and success stories. Mark Zuckerberg's decision to turn down a billion-dollar offer for Facebook and Yahoo's decision to reject Microsoft's offer for $50 billion are examples of this uncertainty. The key is to learn from the past while recognizing its limitations and avoiding the temptation to create universal laws based on personal experiences. Additionally, the power of storytelling should not be underestimated. Even if someone has the right answer, the ability to tell a compelling story can be a significant factor in persuading others and achieving success.
Effective storytelling connects audiences to familiar information: Ken Burns and Michael Lewis use unique storytelling abilities to engage audiences with well-known information through music, sentence structure, poetic writing, and format choices.
Effective storytelling, whether in documentaries, books, or newsletters, can captivate audiences despite the presence of well-known information. Ken Burns, a renowned documentary filmmaker, and Michael Lewis, a successful business storyteller, demonstrate this through their unique storytelling abilities. Burns's use of music and sentence structure in his documentaries creates an emotional connection, while Lewis's poetic writing engages readers. The structure of the content, such as short lines and easy-to-read formats, also contributes to the overall reading experience. These storytelling techniques, combined with the choice of location and guest selection in podcasts, can make it difficult for audiences to put down the content, regardless of the familiarity of the subject matter.
The Power of Stories to Make Complex Topics Engaging: Stories can humanize and make complex topics more memorable and enjoyable to learn. Good storytellers can transform dull subjects into engaging experiences.
Stories have the power to add value and make complex topics more engaging. Whether it's a beautiful warehouse with exposed wooden beams or a historical speech, stories can help humanize and make the substance more memorable. In the case of complex topics, stories can act as leverage, helping to synthesize and clarify confusing information. A good storyteller can transform a dull and dry subject into an entertaining and engaging experience. For instance, Ken Burns' documentaries, despite being on well-trodden historical ground, have become famous due to his storytelling abilities. Similarly, physicist Richard Feynman was able to make the complex subject of physics entertaining and accessible through his storytelling. Overall, stories can help increase tolerance for complexity and make learning and understanding more enjoyable.
Understanding human elements in communication: Effective communication requires acknowledging human behavior and motivation beyond facts and data. Use sticky messaging to capture attention and resonate with audiences.
Effective communication requires understanding the human elements that drive behavior and motivation, rather than relying solely on facts and data. Eric Weinstein's concept of a "stickiness arms race" highlights the importance of packaging information in a way that captures attention and resonates with audiences. Steve Jobs' marketing of the iPod as "1,000 songs in your pocket" is a famous example of this principle. Additionally, people and markets don't always behave rationally, and it's crucial to recognize this unpredictability in order to navigate life and business successfully. Archibald Hill, a physiologist from a century ago, provides an interesting analogy. He devoted his career to understanding the limits of human running speed, and his discoveries about oxygen processing and lactic acid buildup are still relevant today. However, the real lesson from Hill's story is the importance of understanding the human element in all aspects of life, whether it's running a race or building a business.
Emotions Influence Performance: Our abilities and talents are not just a sum of their parts, but are influenced by the context and emotions we experience.
Our physical abilities and capabilities are not just determined by our bodies and machines, but also by the context and emotions we experience in high-pressure situations. This was discovered by physiologist Dr. A.V. Hill in his studies on athletes' aerobic capacity. His tests were highly accurate on the test track, but unable to predict race winners in competitive events like the Olympics. The reason being, the presence of emotions like nervousness, excitement, and adrenaline significantly alters performance. This concept applies to various aspects of life, including sports, business, and personal relationships. For instance, ski racer Mikaela Shiffrin, the greatest skier in history, experiences extreme nervousness before major competitions, leading her to vomit before races, which affects her hydration and energy levels. Similarly, a DJ friend of mine, who idolized Eric Prydz and eventually performed with him, used to get so nervous before shows that he would throw up. These examples illustrate that our abilities and talents are not just a sum of their parts, but are influenced by the context and emotions we experience.
Calm periods can lead to extreme actions and events: Historically and economically, calm periods can result in risky behavior and instability, ultimately leading to significant events and crises.
Calm periods in history and economics can lead to extreme actions and events. This was exemplified by the actions of a quack physician, Theodore Morell, who may have contributed to Hitler's erratic behavior during a pivotal point in the war. In the military, even trained soldiers may not be able to act when faced with the realities of combat. Economically, periods of calm and optimism can lead to risky behavior and instability, ultimately resulting in market crashes and recessions. As the economist Hyman Minsky noted, the absence of recessions would actually guarantee the next one due to the human tendency to become overly optimistic and take on debt during periods of calm. Paranoia, while uncomfortable, can also serve as a competitive advantage and help individuals survive in chaotic situations.
The fear of failure drives success but can also lead to downfall: Success can breed complacency and make it hard to find contentment, as people's motivations often involve surpassing others.
The fear and anxiety that drive people to become successful can also lead to their downfall once they reach their goals. Companies, much like individuals, can become complacent and lose their edge when they no longer have to struggle to survive. However, it's important to note that people's motivations for success often go beyond personal satisfaction. The desire to surpass others and constantly strive for more can make it difficult to find contentment. The example of the Mexican fisherman, where one sacrifices success for happiness, doesn't always apply as people's goals are not just to be successful but to be more successful than others. The cases of companies like Sears, IBM, and General Motors serve as reminders of the importance of staying hungry and focused even after achieving great success.
Effects of Fame and Social Comparison on Mental Health: Fame and social comparison can negatively impact mental health, especially for younger generations. Social media exacerbates the issue by providing a curated comparison baseline, leading to feelings of inadequacy and mental health issues.
Fame and social comparison can have detrimental effects on mental health, especially for younger generations. The audience of a content creator, like Tim Ferriss, can shift from social media platforms to other areas, but the desire for recognition and validation remains. The downside of fame is significant, and the paranoia that comes with it can lead to success. Intergenerational competition theory suggests that comparing one's quality of life to previous generations can impact well-being, and social media exacerbates this by providing a curated, often unrealistic, comparison baseline. Social media is designed to make users compare themselves to others and feel worse, contributing to mental health issues. Additionally, factors like hormonal birth control and other societal influences can further impact mental health negatively. It's crucial to be aware of these issues and take steps to mitigate their impact on ourselves and future generations.
Impact of Information Consumption on Emotions and Well-being: Recognize potential negative effects of engaging with toxic content, resist forcing growth beyond natural limits, and understand the importance of a healthy emotional balance.
Our consumption of information, particularly in the digital age, can greatly impact our emotions and overall well-being. While there are valuable resources to be found online, it's essential to recognize the potential negative effects of engaging with toxic content. Modern politics, for instance, is designed to provoke anger and division. Similarly, pushing for growth or success at an unsustainable rate, whether in business, relationships, or personal finance, can lead to disappointment and failure. It's crucial to understand the natural pace at which things should develop and resist the temptation to force them beyond their limits. As Robert Wadlow's extraordinary size illustrates, trying to double the size of something doesn't necessarily result in double the output; instead, it can lead to breakdown and failure.
The dangers of forced growth and oversize: Understanding natural growth rates and sizes for businesses and individuals is crucial to avoid pitfalls of overgrowth and maintain identity and success.
Trying to force growth or size beyond what is natural can lead to negative consequences. This was illustrated in the tragic story of a man who grew to an extraordinary size, which put immense stress on his body and ultimately led to his untimely death. Similarly, companies like Starbucks and Uber have experienced the pitfalls of overgrowth, leading to cultural shifts and loss of identity. In personal lives, individuals may find that what works in one area of life may not scale to others, and it's essential to recognize and adapt accordingly. For instance, a person who excels in social situations at a young age may not possess the same qualities that serve them well in their later years. Morgan Housel, the author of the upcoming book "The Psychology of Money," emphasizes the importance of understanding normal growth rates and natural sizes for businesses and individuals to avoid the pitfalls of overgrowth. To learn more from Morgan, follow him on Twitter @MorganHousel or check out his podcast, "The Morgan Housel Podcast." His first book, "Psychology of Money," is also highly recommended.
