Confidence, which comes from success often, really does create blind spots.
And that's something I think about so much.
Like, how do I stay aware of those blind spots in my life that, you know, the success I've had in various areas has undeniably created?
And honestly, a lot of I just go just save loads of money, Steve.
Because the day you're wrong, you don't want to go broke.
I often think about that, like whenever the curtain comes down in my career, I want to make sure that I can say like, hey, thank you for letting me have this.
I'm so grateful for it, but I've saved enough that like I'm ready to pass a baton to someone else.
And that's a form of humility, too.
There's a quote from Denzel Washington where he's talking to Will Smith after Will Smith slapped Chris Rock, remember that whole debacle?
After that show, Denzel Washington comes up to Will Smith and he says, Will, when you're at your highest moment in your career, that's when the devil is going to get you.
And it's like when your career is so high and you're so famous, you think so highly of yourself that you can do anything.
That's when you're going to get yourself into trouble.
What a powerful quote.
And I think just paying attention to that, that's the natural humility that goes into it.
And it's not false humility.
It's not like, oh, I you know, false humility is like, I didn't do any of this.
I just got lucky. That's all false humility.
I think real humility is like I built this through hard work and I made some good decisions, but I'm just I'm just a guy.
I'm as fallible as anybody else.
I think that's it's it's not just important.
I think that's critical to any amount of sustainable success.
You taught me that the price you pay to be wealthy is the volatility you have to incur along the way.
It's kind of how I think about it in my head.
That's the cost of admission to being to being wealthy and to be to any level of success is putting up with an enduring unknowns and volatility and booms and busts.
And then other bullshit that you put up with in the investing market and in your career and in your relationships, there's always a cost for anything good in life.
There's a cost that you have to pay.
Like, of course, nothing's free like that.
But most of the costs that you pay are not they don't have a price tag that you can just measure very cleanly.
Like the cost of doing well in investing is putting up with volatility.
The cost of a successful career might be long hours where you were pulled away from your family.
The cost of a relationship is like always needing to sacrifice and compromise for the other person.
Nothing is ever free and so much of the success in life is just identifying what the cost is and being willing to pay it because for all of those things I just laid out, investing, career, relationships, the cost of admission is worth it.
Putting up with the volatility is worth it over time because if you can put up with the stock market falling 30 percent, if you can just say, ah, it's not that big a deal.
I'm just going to hold tight 10 years from now, the cost is well worth doing that if you can put up with the compromise that takes to have a successful relationship, by and large it's going to be a cost it's worth paying because you know, like so much of what matters in life is just the relationships
that you have. And once you identify the cost of that relationship, you're like, oh, I'll pay that cost all day long.
So worth it. This requires you to be cognizant of time horizons and your own time horizons, which is something you talk a lot about in Chapter 16 of The Psychology of Money.
Why is it important for us to know our time horizons and what you mean by time horizon?
It's the amount of time between now and whatever your goal is, which is very different for everybody, not just by your age, but like if you want to retire early or whatever, it'd be like, everyone's going to have a slightly different time horizon.
What's yours? Mine, I mean, you would break it up into different chunks.
Like, I want to get to a point or maybe I'm nearing a point in my career where I'm just doing things because I enjoy them.
There's really no financial incentive to what I'm doing.
That's one time horizon.
Another is like, OK, once my kids start getting older, I want to make sure that I'm always there for them.
When they need me, teenage years are so difficult for people.
Like, 24 -7, I'll be there for you, which means I'm going to have to pull back.
There's going to be a point where I just say, look, I've accomplished what I want to with writing and I want to be able to move on to something else.
And there's going to be a point where I say I really don't want to work that much anymore.
I just want to move on.
I mean, I need to take care of my parents.
So there's multiple different time horizons at different goals of your life.
Is buying a house a good or bad financial decision?
I'll tell you my own experience, which was in my 20s and early 30s.
My wife and I lived in like seven different cities and there was nothing better for us.
Some of those were just like, let's try this new city for fun.
Some of it was moving for work.
We moved for her school and our ability to just get up and go hand the keys back to the landlord.
Nothing was more valuable than that.
Once we had our son, our first kid, then very quickly, nothing became more valuable to me than having an established, secure home base that nobody could take away from me.
That was the cure. And also like kids are loud and they scream.
I didn't want neighbors in an apartment building that I was going to have to like try to keep my kid quiet for themselves.
I want my own house that's mine and it's just a standalone house.
My kid can scream as loud as he wants not bothering anybody else.
That became important to me like instantly.
So it's I think people get caught up when they're like, well, the housing market returns four and a half percent per year.
It's like stop with the spreadsheets, like just do what's going to work for you.
I know I know Ramit Sethi has a lot of thoughts about this on renting versus buying.
And I think one of the differences between Ramit and myself is I have two young kids.
And so like that, if I didn't have kids, I think I would be like rent forever and try different cities.
Move all around. What can be better than that?
But when you have kids, what's more important to me is stability.
I want my kids to go to a stable school, know their neighbors, have friends that they can be friends with for years.
That's important. If we just think about investing then in terms of is buying a house a good financial investment?
My brother, who works in my company, he's the one that introduced me to your book many, many years ago, said to me something along the lines of Steve, don't buy houses to make money because you have the ability to play a different set of games that very few people can play.
Yeah. And what I mean by that is he kind of explained it to me because listen, everyone can buy a house so the returns there aren't going to be huge.
Go find a game like only you can play and you'll get bigger returns.
If you're buying a house because you think it's going to be a good financial investment, stop.
Even if it turns out in hindsight that it was, it doesn't matter.
I think these are just purely lifestyle decisions.
And I think so many people get screwed up when they're in a spot in their life where they should be renting because they need to be mobile.
They need to move around to a new job, new career, new school, whatever it is.
But they end up buying because they think they're going to make money doing it.
And that's exactly that's the problem.
So I own a house and if I ended up losing money on it, I don't think I'd care that that's not why I'm owning it.
I'm owning it just because I want the stability for my family.
I've just made an offer on my first ever house because I played other money games for the last decade of my life.
And now I have a partner and we've been together many years and we're both like 31 years old and we're getting into that position now, you know.
Yeah. And my brother explained to me, he goes, listen, this is a bad financial decision, but it's a good emotional social life decision and you need to know how to separate the two.
Don't mark this down as a way that you're trying to make money.
Like you might make money in 20 years time if you're still living there.
Look at it as you need someone to live.
And he must have got that from you.
When we bought our last house, which was after I wrote this book, this is a different experience, I thought at the time and still think today, I probably paid a little bit too much.
I mean, I paid the market rate, but if you said, like, oh, did you get a good deal?
I said, no, no, no, no, didn't bother me in the slightest.
That's not what I was doing it for.
It would be, I mean, it would be like if you ask, like if someone is deciding whether or not to have kids and they think about the cost of kids, like forget about, of course you're going to dump hundreds of thousands or millions of dollars into your kids.
And it's like if money is coming into the equation, like stop right there.
It should not do it.
You're doing it for very different reasons.
This is not an investment.
People buy houses because they think they're making loads of money.
Because there have been periods in time in which people have made loads of money.
Historically, like that's the anomaly.
Historically, in the US and the UK, housing prices adjusted for inflation go nowhere.
It's just been the last 20 or 30 years that there's this very brief window of time that owning a house was a great investment.
Robert Schiller won the Nobel Prize about a decade ago for his work in showing that over the last 150 years in the United States adjusted for inflation, most home prices have been flat as a pancake.
It's just the last 20 years that have inflated people's expectations of what a house can do.
Statistically, there's going to be at least one person listening to this that has made an offer as we speak for a house under the assumption that it's going to help them stack wealth.
If they were purely doing it for those reasons, what would you tell them to do instead?
If that's purely the reason, run for your life.
Don't do it. Particularly, I mean, it used to be, and maybe it still is like this in many cities in America and the UK, but it used to be that rentals were almost without exception, shitty houses.
There were no good rentals.
A big change, at least in America in the last 20 years, is that most big cities have tons and tons of luxury apartments to live in and there are great places to live and they're in the city centers and they've got beautiful granite countertops and they're great places to live.
Don't fall for the idea that you can't live well if you're renting.
I think that's the problem.
And realize that if you're doing it for financial reasons, you're probably about to borrow a shit load of money for an investment that historically has been a very bad investment.
Like if you put it in those terms, like what are we doing here, man?
You're going to borrow hundreds of thousands of dollars for an investment that historically has been a loss.
That's what you're doing here.
You feel good about that?
That's what I'd say to that person.
Godspeed.
