Morgan Housel

Morgan Housel (@TMFHousel)  joined Aaron Watson (@AaronWatson59) on the Going Deep with Aaron podcast to talk about writing, forecasting, and how to get ahead in investing. Plus Housel predicts the perfect stock for 2016!

Wait a second, that last part isn’t true. There are no get rich quick tips for stocks – or anything, really.

Comedians are often interviewed because they need to promote something (or enjoy talking). They universally tell the story that great things are the formula of time and effort.*  Amy Schumer, Judd Apatow, and Phil Rosenthal all specifically mention long days and hard work as part of their careers.

Whether you want to pick winning stocks, write great jokes, or do anything in life, you have to do the work.

Housel’s interview with Watson was shorter than some other, but packed with a lot of good information. Ready?


Warning, your dreams warts.

Housel said that when he was in school at the University of Southern California he wanted to be an investment banker. That does sound good, except, investment banking stinks. “It was a crashing disappointment,” Housel says about his experience actually working at the bank. “It was the culture that turned me off.”

Housel isn’t the only one to experience this.

Austin Kleon  said “every job is still a job.” Jon Acuff said that even though he has his dream job, he does a lot of things that aren’t dreamy. Both Peter Thiel and Robert Kurson left their (well paying) careers in law.

This career analysis brings up the idea of inside/outside thinking. Some points on this blog get too esoteric (  like using Colonel Blotto game theory to explain the entertainment sector ) but this one you can immediately apply.

We make better decisions when we consider both the inside view (what we know) and the outside view (what others know). Bill Simmons is a superforecaster because he is both a “Boston sports homer” and “well connected analyst.” That’s inside and outside thinking.

Daniel Kahneman experienced it and experimented on it. In Thinking Fast and Slow he wrote that his research team failed to take both the inside and outside view.

We can apply inside/outside thinking to our careers. Rather than thinking if telecommuting or travel or a promotion really is better, we can talk to people who do it. We can combine our perception of the job (outside view of the job) to what someone else says about it (inside view of the job) and make a more complete decision.


You’ll be up all night and you won’t get lucky.

Butchering of Daft Punk lyrics aside, sometimes you won’t be lucky. Housel was unlucky. He says that he was looking for a banking job in 2007, and there weren’t that many. This happens. Neil Strauss released his book the same weekend that Hurrican Katrina landed. It crushed his promotion schedule.

When faced with a negative outcome, Michael Mauboussin suggests we figure out how much of the outcome was due to luck. He gave three criteria:

1- It could happen to you or your business.

2- It could be good or bad, but not necessarily equally.

3- Another thing could have happened.

When we look at luck that way we see that Housel and Strauss did indeed have bad luck. It’s easy to imagine the economy not tanking and Housel finding a job or Hurricane Katrina turning to see and Strauss promoting his book.

More often the case is that luck is harder to tease out.  Michael Lombardi said spoke to this difficulty in the NFL.

Tim Ferriss also had a nebulous luck/skill situation. When his fully filmed TV show failed to be aired it was a bit of bad luck, but also a bit of skill. Ferriss admits to the bureaucracy at the network as stopping his show, something that was expected.


Writing the same thing over and over.

A lot of what Housel writes is the same thing over and over again. “Most professions get easier with time,” Housel says, “writing might be the opposite because you start running out of things to say.” Jason Zweig said the same thing:

“My job is to write the exact same thing 50-100 times a year in such a way that my editors and my readers will never think I’m repeating myself.”

What Housel and Zweig have done is try to find new ways to say the same thing, and I think this same story, new characters approach is more valuable than Housel conveys in the interview.

When Derek Sivers spoke with Tim Ferriss he said that he doesn’t review books as “good” or “bad” anymore because it matters when you read it. Certain books will change your life if they catch you at the right moment.

For me, I failed to read Nassim Taleb’s Antifragile on three separate occasions. It wasn’t the book, it was me. Eventually I finished (and loved it) after hearing an interview with Taleb and reading Fooled by Randomness.


Writing is a form of thinking.

Housel joins the list of other writers ( Michael Mauboussin, Maria Popova, Charlie Munger ) who note that writing is a form of thinking.


Finance is more than numbers.

Both Housel and Watson mention that finance is more than numbers and Housel paraphrases Dean Williams, explaining that finance is like physics. On the one hand we can predict how land a rocket on the moon. On the other hand we can’t know what the weather will be in four days.

It’s why we advocate for Garrett Hardin’s 3 questions as a way to look at complex situations.

1- What are the words and what do they mean?

2- What are the numbers and do they compute?

3- And then what will happen?

Finance, Housel and Watson note, fits this framework. Other things do too:

– In the Malcolm Gladwell and Bill Simmons post we used the 3 questions to evaluate the value of professional sports stadiums.

– In the Tyler Cowen post we used the 3 questions as a model applied to Jared Diamonds work.

– In the Nick Murray post we used the 3 questions to explain Murray’s investment philosphy.


Forecasting non-weather events.

Housel tells the story of being ready to go on the radio when the producer pulls him aside to ask if he has his forecasts ready. “I don’t really do that,” Housel explains. “That’s okay,” the producer grunts, “you have 10 minutes.”

What a joke. It reminded me of the story Lewis Howes tells about being on reality TV and the producer asking him to play scenes a certain way. Financial forecasts, reality TV, and candy. The triad of “limited quantity consumables.”

It takes a lot of work to be a good forecaster, but Philip Tetlock has explained how.


When you know enough to be dangerous.

Financial education is generally good, Housel says, but sometimes it can be bad. We can get into the know enough to be dangerous territory.

Housel says that some people take an introductory finance class and suddenly think they are George Soros. That’s not good (you don’t have Soros’ back). Luckily that won’t happen to you and I because we have a model for novel.

In Gut Feelings, Gerd Gigerenzer outlines a system for dealing with new and normal situations.

-In new situations we should go with our gut and favor simple solutions.

-In normal situations we should go with our brain and can have more complex solutions.

Gigerenzer writes: “An intuitive ‘shortcut’ will typically get them where they would like to be, and with a smaller chance of making grave errors.”

For example, conventional wisdom says not to spend more than 25% of your paycheck on mortgage payments. That’s a simple rule that works for people that don’t want to learn the nuances of real estate prices, the rollercoaster ride of flipping houses, or time-value of money calculations. If you are more enterprising (read: risk-taking) then that 25% figure wouldn’t apply. What you don’t want is to be someone that acts like they know a lot, when they don’t. Except that happens.

Housel cites resarch by Lauren Willis at Loyola University who wrote:

“Objective observers generally admit that research to date does not demonstrate a causal chain from financial education to higher financial literacy, to better financial behavior, to improved financial outcomes.”

Rephrased, unless you dive deep into something, use simple models.


How to get ahead in finance (or in anything).

“To get ahead in investing you have to do something other people can’t do or won’t do.” – Morgan Housel

We’ve seen the “be different” mantra applied other areas too.

Ken Fisher applied this mantra to investing.

Judah Friedlander applied it to comedy.

Michael Mauboussin applied it to business.


Bust your biases with books.

Watson asks each guest what challenge they have for other people and Housel says, “read things you know you’re going to disagree with.” It’s advice we’ve seen before. Remember, you’re not right about everything.

“A reasonable person believes each of his beliefs is true, and that some of them are false.” W.V.O. Quine

Some of the best thinkers have warned us about our biases well before Housel.

“The first principle is that you must not fool yourself — and you are the easiest person to fool.” said Richard Feynman in Surely You’re Joking Mr. Feynman.

You can use Twitter for this. You can also read things, like this post. Thank you.

Thanks again for reading, I’m @mikedariano on Twitter.

* Time, effort, and luck.

Want to catch up on the posts, The Waiter’s Pad: Volume 6 is available here. You can also donate a few bucks here.

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