Alright, we're back.
I just take a couple weeks off.
Like many of you, I got sick from what my kids brought home from school and I lost my
voice.
Sounded like death for a couple weeks.
Sounded like I was trying to swallow a chainsaw, but we're back.
Thanks for being patient.
My wife recently bought this book from an old bookstore.
It's called The Mathematical Theory of Investment.
It was written in 1913, which is why she bought it.
It's this beautiful, old leather bound, weathered book.
And she thought I'd be interested in it.
And I love it.
It looks great on my bookshelf.
This old, ancient book sitting there.
It looks great.
But it's so funny to flip through it.
That this book, written in 1913, called The Mathematical Theory of Investment, is as
dry and boring as it sounds.
It's just a bunch of formulas about how compound interest works.
It written in the driest academic pros you could possibly imagine.
And look, when I think about things like that, like the analytical, mathematical, deep academic
side of finance, do I think it is wrong or unnecessary?
No.
I think we know a lot today that we did not even a hundred years ago when this book was
written that we are better off for.
But it's just so true that what actually matters in people's lives, in terms of using money
as a tool to live a better life and be happier, and what actually works, are things that are
not found at all in a book like this.
That's so much of what matters with money is not the formulas.
It's not the education.
It's not the academics.
It's just the behavior.
It's just the understanding in your own head about what your goals are, what your temperament
is, how risk work, that's what actually matters.
So I have been jotting these things down for a while.
I just wanted to share with you what I think are the 10 most important rules that exist
in money, that anyone should be able to understand and wrap their heads around, that are both
A, understandable, which everything in this book I'm holding is not.
And B, are not analytical at all. They are just behavioral in nature.
So look, this is just my list.
Your results may vary.
Your opinions on money may vary.
But if I had to make a list of the 10 most important financial traits for anyone to grasp
and think about in their own lives, here's what they would be.
Number one, realize that it can happen to you.
And to be able to realize that you can't be a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher,
a philosopher, a philosopher, a philosopher, a philosopher,
to make so much money from so many gullible people
is enormous.
All right, number seven, picking a career
that may not be your passion, but pays a decent wage.
Chris Rock, the comedian, has this advice that I love.
He says, stop telling kids that they can be anything
they want when they grow up.
He says, you could be anything you're good at,
as long as they're hiring.
I think that's, it's like a lot of comedy,
it's funny because it's true.
Scott Galloway, he has a related advice.
He says, people who tell you to follow your passion
are already rich.
They made their money in iron ore, smelting most likely.
That's also great advice.
This, of course, is unpopular to say,
but a career that isn't your passion
yet earns a good income can actually be preferable
to the alternative.
And this is less about money and it's more about freedom,
and independence.
A low income job that is your passion
may breed resentment as you age and have kids
and get a mortgage and have higher bills
that become burdens long enough
that suffocate the joy that you get
from working in a career that is your passion.
But a job that you merely like
that pays a decent income,
provided that you live below your means
and save a chunk of that income,
eventually offer a level of financial flexibility
that lets you pursue passions as hobbies,
purely for their pleasure.
Jeff Bezos has this other related advice
that I think is very strong.
He says, if you can get to a point in your career
where you enjoy half of it,
that's great.
That's like the picture of success
when you can enjoy half of your career,
which means the other half is going to feel like work.
And his point was, that's good.
That's about as best that you can get.
So pick something that you can enjoy
and earn a good living from.
Even if it's not the thing that is feeding your soul,
I think it can actually be preferable
to living a long-term healthy life
than just following the advice of follow your passion.
Number eight, the willingness to adapt to views
that you wish were permanent.
All economies grow because businesses
and consumers and technologies change and adapt.
In its ironic how many investors attempt to ride this wave
of change with rigid beliefs?
Now of course there are a set of truly timeless
investing ideas, timeless investing philosophies.
But most of what guides us are beliefs
that reflect what we've happened to experience
in the narrow view of our own lives.
Even when investors study history,
they put more weight on stories
that align with their own experiences.
Because those are stories that are easier to understand
and they confirm their own beliefs.
It's painful to contemplate,
but a lot of what all of us believe
about investing is either right but temporary
or wrong but convincing.
And if you are unwilling to update,
if you're unwilling to update your views
when the world changes
or be open-minded enough to realize that some of your views
were anecdotal to begin with,
that's going to be tough to succeed in this field.
Number nine, this actually might be one
of the most important on the list.
The ability to be comfortable being uncomfortable.
You cannot enjoy the benefits of exercise
without some sort of discomfort
because being out of breath and soar and tired
is the sign that you've put in enough effort
to deserve a reward.
It's the same in investing.
The financial rewards for being comfortable
as an investor are the same as a physical rewards
for somebody who sits on the couch.
Returns do not come for free.
They demand a price and they accept payment for that price,
not in dollars.
That's not how you pay it.
You pay for it with uncertainty and confusion
and short-term loss and surprise
and nonsense and stretches of boredom,
regret, anxiety, fear.
That's how you pay the bill.
Most markets are efficient enough
to not offer any coupons either.
You have to pay the bill in full.
There are four psychological states of investing,
an order of lucrativeness.
The first is miserable but confident in its eventual rewards.
The second is miserable and giving up.
The third is comfortable in accepting of its future downside.
And the worst is comfortable and oblivious of what is to come.
That's the complete list.
All right, last number 10.
The ability to distinguish when analytics versus psychology
is necessary.
If investing were only about numbers,
like the book that my wife got me recently is,
nobody would be any good at it
because every investor has different arbitrary goals
and markets would never coalesce around something objective.
Good investing is some part analytical
and is some part psychological.
It's an art and a science.
The trick is knowing which skill is necessary,
when it's necessary and how one affects the other.
The trick is to know what skills is necessary,
and how one affects the other.
That's all I got for this week.
By the way, if you want to hear another podcast
with my good friend Doug Bonaparte and I talking about
what we learned from Charlie Munger
after he passed away recently.
Go check out our podcast with public.com.
It's called Mind Your Money.
I'll leave a link in the show notes.
Thanks again.
We'll see you on next week.
