#707 - Morgan Housel - 9 Timeless Lessons About Human Psychology
Nov 16, 2023
01:51:45
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Morgan Housel, partner at The Collaborative Fund and author, discusses timeless lessons about human psychology. They cover topics such as the problem with prediction, responsible optimists, the unpredictability of major events, rising expectations, hidden metrics, the seduction of certainty, the limitations of a small sample size in understanding recessions, the power of storytelling, and the paradox of calmness and volatility.
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Quick takeaways
Predictions often fail to account for significant surprises like major historical events.
Fame changes how others behave towards you and managing expectations is crucial for happiness.
Observable metrics like wealth often take precedence over hidden ones like relationships, resulting in imbalance.
People tend to overestimate the importance others place on their possessions and circumstances.
Successful individuals often have personal struggles alongside their accomplishments.
Managing expectations is crucial for happiness.
Deep dives
The Problem with Predictions and Surprises
The podcast episode explores why people are so bad at making predictions, particularly in finance and economics. It highlights the idea that we are actually very good at predicting, except for the surprises that tend to be the most significant events over time. Historical events like the Great Depression and major world crises are examples of surprises that could not be foreseen. The episode suggests that instead of solely focusing on predictions, it is more valuable to recognize the facets of human behavior that never change and to manage our expectations accordingly.
The Burden of Fame and Expectations
The podcast delves into the challenges of fame and the importance of managing expectations. It discusses how fame can change the perception of oneself and the expectations others have of you. The episode highlights the idea that fame doesn't change you, but it changes how everyone else around you behaves. It emphasizes that expectations are easy to ignore because they aren't quantifiable like material possessions, but they have a significant impact on happiness. The episode suggests that recognizing the game of societal expectations and focusing on personal contentment can lead to a more fulfilling life.
The Tradeoff between Hidden and Observable Metrics
The podcast introduces the concept of hidden and observable metrics in life. It explores how people often prioritize observable metrics, such as wealth and status, but neglect hidden metrics, such as quality of relationships, peace of mind, and health. The episode discusses how people trade hidden metrics for observable ones, often to their detriment. It raises the importance of recognizing the value of hidden metrics and consciously prioritizing them in order to achieve a more balanced and satisfying life.
Reducing Expectations by Focusing on Others
The podcast touches upon the idea of reducing expectations by shifting focus from oneself to others. It discusses how people tend to overestimate the importance others place on their possessions and circumstances, while in reality, people are primarily concerned with themselves. The episode suggests that recognizing this can help individuals keep their expectations in check and prioritize personal contentment over external validation. It highlights the importance of understanding that others' opinions and attention are often not as significant as one might think.
The Paradox of Admiration
The podcast episode explores the paradox of admiring successful individuals. It suggests that the people we idolize often have less admirable internal states and experiences. The reflection on various famous figures like Bill Gates, Mark Zuckerberg, and James Joyce reveals that they had personal struggles and imperfections alongside their accomplishments. The episode cautions against selectively choosing the desirable aspects of these individuals, emphasizing the importance of acknowledging the good and the bad that comes as a package deal.
The Illusion of Certainty and Binary Thinking
The podcast discusses the human tendency to crave certainty and the allure of individuals who present a sense of binary thinking. It highlights that people are drawn to those who confidently present black-and-white ideas and claims, even if they lack accuracy or consider probabilities. The episode touches on examples like Nate Silver's election predictions and the desire for definitive answers even in the face of complexity and uncertainty. It argues that people are more comfortable with absolutes, which can impair their ability to navigate nuanced concepts and make informed decisions.
The Role of Storytelling and the Power of Best Story Wins
The podcast emphasizes the significance of storytelling and narratives over statistics and data. It asserts the power of a good story in captivating and persuading audiences, highlighting the impact of influential storytellers like Ken Burns and Michael Lewis. The episode reflects on the prioritization of storytelling over statistics in the public's reception and preference for compelling narratives. It poses the idea that stories are inherently more powerful in shaping opinions and capturing attention, often surpassing the influence of factual data.
The Power of Stories
Stories have a unique ability to convey complex topics and maximize their value. By telling a compelling story, entrepreneurs can leverage pre-existing products instead of reinventing the wheel, while historians like Ken Burns can become famous storytellers by presenting well-known events in a captivating way. Stories help synthesize confusing information and make it more relatable and engaging.
The Limitations of Logic and Rationality
Logic and rationality have their limits, and humans often make decisions based on emotions, incentives, and irrational factors. The Germans' counterattack during World War II surprised the rational-minded Allied generals who underestimated Hitler's irrational thinking. Similarly, athletes' performance is influenced not only by their physical abilities but also by their mindset and emotions. Social media exacerbates this by creating curated highlight reels for comparison, leading to increased anxiety and impacting mental health. Understanding the influence of emotions and incentives is crucial when navigating complex systems like investing and personal growth.
Morgan Housel is a partner at The Collaborative Fund, an investor and an author.
The world continues to change, but the hairless apes that inhabit it stay the same. So there must be some laws of human psychology which remain true, no matter what time and place you're in, and today we get to go through some of the most fascinating ones.
Expect to learn the problem with the way most people make predictions, who exactly are the reasonable optimists, whether anyone was able to predict the great depression, just how different median income for families differs from the 1950s to today, why trajectory is much more important than position, why stories are more powerful than statistics and much more...
