In this podcast, Morgan Housel, author of 'The Psychology of Money' and 'Same As Ever', shares timeless lessons for crypto investors. He discusses the psychology of investing, the value of hard things, attaching identity to ideas, and the power of incentives. The podcast also explores the relationship between wealth and freedom, navigating changing options and incentives in the crypto market, and the power of compounding.
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Quick takeaways
Experiencing losses and hardships in bear markets is a necessary part of the journey to financial success.
Envy arises from comparing oneself to others in bull markets, fostering destructive behavior.
Happiness should be detached from external circumstances and focused on personal contentment.
Focusing on personal growth and self-improvement is more fulfilling than competing for financial gains.
Deep dives
The Cost of Admission for Wealth: Hardships and Scars
During the bear market, people often experience pain, losses, and hardships. However, it is important to understand that these challenges are part of the cost of admission for achieving financial success. Just as gaining wealth is accompanied by hard work and perseverance, experiencing losses and market declines is an inherent part of the journey. It is crucial to remember that every generation and individual will undergo their unique hardships and carry scars that shape their perspective on finance. By acknowledging and accepting that challenges are an integral part of the process, individuals can develop a more resilient mindset and better navigate future bear markets.
The Dangers of Envy in Bull Markets
In bull markets, the temptation to compare oneself to others and experience envy can be overwhelming. Particularly in the current era of social media, where people only showcase their successes and glorify their gains, envy can lead to destructive behavior. Envy arises when individuals believe that they deserve the same financial success as others and feel dissatisfied with their own achievements. This can drive individuals to take excessive risks or make impulsive investment decisions to catch up with perceived winners. It is essential to cultivate contentment and recognize that comparing oneself to others is counterproductive. Focusing on personal goals and achievements, rooted in individual circumstances, can lead to a more positive and fulfilling investment experience.
The Impact of Personal Expectations on Happiness
Human nature is to constantly raise expectations in tandem with circumstances. Even as wealth and material conditions improve, individuals often find it difficult to experience lasting happiness. This phenomenon occurs because people tend to measure their happiness relative to others and constantly compare their own circumstances. Whether it is in financial markets or in various aspects of life, this tendency often leads to dissatisfaction and unfulfillment. Recognizing this inherent human trait can help individuals detach their happiness from external circumstances and focus on personal contentment, rather than continually striving for more wealth or success. Understanding that happiness lies within one's mindset and perspective can foster long-term satisfaction and well-being.
Avoiding Comparison and Prioritizing Personal Growth
Rather than fixating on others' achievements or material wealth, it is crucial to establish personal goals, grounded in individual expectations and circumstances. By focusing on personal growth, knowledge, and building a solid foundation for financial decision-making, individuals can develop a healthier mindset towards wealth. Instead of seeking to outperform others or compete for financial gains, they can strive for continuous learning, prudent risk management, and the pursuit of long-term financial well-being. Emphasizing personal progress and self-improvement can lead to a more fulfilling and sustainable journey in the world of investment and finance.
The value of room for error and imperfection
In a world of uncertainty, it is important to acknowledge the value of room for error and imperfection. Trying to be perfectly efficient leaves little room for unpredictable events and setbacks. Having some slack and flexibility can help navigate unexpected challenges and take advantage of opportunities that arise.
The importance of optimism and pessimism
Both optimism and pessimism have their place in investing and life. It is important to balance both perspectives. Being optimistic allows for long-term growth and the ability to endure challenging periods. Pessimism keeps expectations in check and helps prepare for setbacks. Both perspectives provide valuable insights and help in making better decisions.
The slow and fast nature of good and bad events
Good things generally happen slowly over time, with compounding playing a major role. Meanwhile, bad things tend to happen suddenly and can appear catastrophic. This pattern can be observed in various aspects of life, where good outcomes require consistent effort and patience, while bad outcomes often result from single points of failure. Recognizing this pattern helps maintain a balanced perspective and avoid being swayed by short-term events.
Gratitude and managing expectations
Maintaining gratitude and managing expectations are key to finding happiness and contentment with one's financial situation. Instead of comparing oneself to others, it is important to compare personal progress to one's own past and be grateful for the improvements made over time. Keeping expectations in check and appreciating one's current position can lead to greater satisfaction with financial circumstances.
Welcome back to Bankless, Morgan Housel. Morgan has written "The Psychology of Money", and most recently "Same As Ever" which discuss the dynamics and psychology around money and markets.
In this episode Morgan drops lesson after lesson that you can apply to your own investing strategies and life broadly. It's a masterclass that is sure to have you reflecting on the decisions you make as we enter what may possibly be the next bull market.
0:00 Intro 6:49 History Always Repeats 11:44 Can We Break The Cycle? 16:49 THE BEAR MARKET 21:20 Psychology Of Investing 26:45 The Value Of Hard Things 29:26 Attaching Identity To Ideas 36:52 Markets Have Memory 42:23 The Key To Being Happy 47:27 Competing Against Yourself 55:32 Our Relationship With Money 58:51 The Power Of Incentives 1:04:48 Don't Try Too Hard 1:11:19 Investing Strategies 1:15:09 The Value of Imperfection 1:20:43 Optimism and Pessimism 1:24:41 Crypto's Barbell Thesis 1:27:53 Good Things Happen Slow, Bad Things Happen Fast 1:33:27 Final Bit Of Advice
