Money is the most confusing topic in the world.
For years I thought I needed a finance degree to understand it. I recently stumbled across a book about money. I asked my community about it and none of them had heard of it (which is why I say it’s unknown).
The author of the book, Morgan Housel, is a writer many people know because of his first book. But his second book “Same As Ever” is relatively unheard of. And it’s better than his most famous book.
What’s cool is Morgan started out as a blogger. So he knows how to consolidate complex ideas and make them simpler for normal people. I read his new book to save you the hassle and time.
Here are the actionable ideas you can use to reach financial freedom faster.
The timeless way to think about money that no one talks about
Most money advice focuses on what to do. Morgan’s big idea, which he’s famous for, is to focus on how to think about money instead.
Once your thinking is sharpened, making the right money decisions is 10x easier.
So I read his book to learn how to think. A big part of what he writes about has to do with history. The cliche advice is understanding history helps us know where we’re heading so we can invest wisely.
Morgan says the opposite.
The point of understanding history is it reminds you that we have no idea where we’re heading. The world is unpredictable, and anyone who tries to tell you isn’t is shilling get-rich-quick scams.
Events compound in unfathomable ways.
The better approach is to focus on human behavior — which never changes — instead of data, stats, and specific events.
What AI will do to the world in 20 years is impossible to know.
But learning about how humans get greedy, approach fear, see opportunities, steal from each other, think about risks, and are influenced by group think…makes money decisions easier to execute.
Takeaway: Stop using future predictions to invest your money.
“Risk is what you don’t see”
Morgan shares a short story about Harry Houdini’s death.
Houdini was a daredevil. He could do anything. He could be buried alive and survive. He loved to ask members of the audience to punch him in the stomach. To prevent damage he’d flex his solar plexus and hold his breath.
One night after a show a fan came out to him backstage and started punching him hard in the stomach, without warning, to recreate the famous trick.
Houdini wasn’t ready.
The punches hurt him but he put on a brave face. The next day felt like torture. The cause was likely a ruptured appendix.
A week later he died from the injury in front of his wife and children. Out of all the ways he could’ve died, this was the most unlikely.
A daredevil killed by a few stray punches.
The point of this story is the most unlikely outcome is often the biggest risk. And no one plans for these risks because they’re the one-percenters.
“Risk is what’s left over after you think you’ve thought of everything.”
— Carl Richards
A legend in one field is a fool in another
Investing money often has a lot to do with the human behind the opportunity.
People go wild for Elon Musk because he created a popular car and sent more rockets to space than anyone else. He can out-meme anyone. He’s a billionaire and bought Twitter/X.
On the one hand he’s unstoppable. On the other hand he’s a giant failure.
Every time he gets married it ends shortly after. He admits to being lonely. He even disowned his own child for being trans.
Often, success means you overcompensate in one field while simultaneously destroying another important area of your life.
It’s why extreme success has downsides. And it’s why you shouldn’t believe that just because someone made it rain money in one area of life, they’ll be able to do it with any opportunity.
Genius and extreme success live on a knife’s edge. The same factors that can make one person a billionaire can lead the same person with similar traits to step over the line of risk and lose everything.
Be careful who you worship. Be careful backing one-trick ponies.
Money can contribute to happiness
Money alone won’t make you happy.
It can help make parts of your life easier so you can concentrate on the people and opportunities that will bring happiness.
The biggest problem with money is it can mess with your expectations. When your expectations are out of line you start to want things you don’t deserve. Lower your financial expectations to increase happiness.
Social media is a performance that can ruin your money mindset
Surprisingly, a lot of people get their money advice from social media.
The problem, as Psychologist Jonathan Haidt puts it, is social media is more of a performance than a reality. When you follow actors pretending to know what they’re talking about their strategies can often undermine how you use your money. Be careful who you follow.
See social media for what it is. And always do your own DEEP research.
Hope for a tragedy to get wealthy
This is the most controversial idea I came up with after reading the book.
Some people use tragedy as a reason for not getting their money right. Others use tragedy as an opportunity.
When you suffer a tragedy — like the death of a loved one, divorce, theft, extortion, bankruptcy, or getting fired — it produces stress. To relieve the stress you begin to get real focused.
That focus is what is hard to get when times are good.
When you have focus you have access to newfound energy, opportunities, and ways of thinking. When I lived a comfortable and easy life working a 9–5 cubicle job, I lacked motivation.
I couldn’t work out why.
Then when I got fired in 2019 everything changed. I had to run fast. I had to back myself. I had to ask for help and expand my network. I had free motivation every damn day. My progress fast-tracked.
I realized I never wanted to work a f*cking job ever again.
That was the breakthrough I had been waiting for my entire life. And I got it from a tragedy that threatened my view of the world.
Poet Varlam Shalamov explains why:
Under high stress, a man becomes a beast in three weeks.
The huge danger of tragedy is it can negatively affect your mindset. It can turn your thoughts dark. Then you live life on dark mode.
The hardest thing to repair in the world is your mindset. If it’s broken then no financial opportunity will ever be accessible. Instead of reading more money books, upgrade your mindset.
Takeaway: tragedy is an opportunity. Use it.
The hidden financial leverage in stories
Leverage is a popular framework.
Leverage is getting out more than you put in. Morgan says to think of it as “squeezing the full potential out of something with less effort.”
You can get leverage through hiring other people, taking on debt, or building software. These forms of leverage are common.
Morgan introduced me to a new type of leverage known as story leverage. He says:
Stories leverage ideas in the same way that debt leverages assets.
Telling stories is a timeless skill that’ll never go out of fashion. Often the best financial opportunities aren’t the logical ones — they’re the ones with the best stories behind them.
- An underdog.
- A strange character.
- A controversial idea.
- A cult-like community.
Ken Burns says the good stories that have leverage are “about one plus one equals three.”
Every investment price, every market valuation, is just a number from today multiplied by a story about tomorrow — Morgan Housel
Many of us rely upon data and experts to make money decisions. But because the world is illogical and operates on entropy, nothing will make sense if you discount human stories.
Takeaway: pay attention to good stories that defy the odds.
Stability creates recessions and even depressions
This is another one of those contrarian ideas that made me go WTF! Morgan describes the formula of the global economy like this:
- Stable economies force people to get optimistic
- Optimistic people go into debt
- People with huge debt cause the economy to become unstable
We simultaneously need stability and instability for the world of money to work. That’s why when governments try to make markets more stable during a crisis, they secretly trigger a future recession as a result.
Good, stable times cause us to be blind to danger. When we’re making a sh*t-tonne of cash we lower our skepticism and become complacent. These are the ingredients of financial ruin if left unchecked.
Identify the peak of any market
Financial markets have good times and bad times. These are known as bull and bear markets.
Gurus will try to predict when we are going to transition from one to the other — because that’s when huge money is made. Morgan points out the only way to burst a bubble in anything is to push reality beyond what makes sense.
- Stories have to get crazy.
- Valuations have to make no sense.
- Stock prices have to defy logic.
Only once we push the limits do we uncover the risks and burst the bubble.
When nothing makes sense and everyone is optimistic, that’s often the time to be the most fearful with your money. We saw it in 2000, 2008, and 2021.
As a rule of thumb it makes sense that the world will break at least every 10 years. So plan for it. Expect a 2020 bat virus or banking crisis to happen.
If you follow the rule that the crazier the boom, the harder the bust, the Great Depression must have been obvious — Morgan Housel
A job misses one hidden ingredient of financial freedom
I’m not here to bash 9–5 cubicle jobs. You’ve heard it enough.
But one gem I got from Morgan is that we live in the knowledge worker economy. The problem is these thought jobs give us zero time to think.
If you can’t think you can’t be imaginative or creative. And these are the skills that lead to real wealth. Attending zero meetings every day has become a popular meme — for good reason.
Meetings take up our work time that we could be using to think. When thinking time increases new insights emerge.
More free time allows us to read and write. This is how we amplify, expand, and challenge our thinking.
If you want to predict who will never get wealthy, just look at all the people who don’t have time to think, and never read or write.
Why the money world looks unfair
“Financial success is unfair.”
I hear this a lot. It causes people to seek out the best money advice. But advice isn’t the driver of human behavior. We’re more driven by incentives than we are by advice.
The cliche “show me the incentive and I’ll show you the outcome” is more true than any of us would like to admit. The best ideas never make money unless they tap into the right incentives.
Create incentives before you create anything (especially a business).
Morgan Housel’s “Same As Ever” book is worth a read if you want to go deeper on some of these ideas.
He taught me to focus on what never changes, to forget about predicting uncertain events, and to spend more time studying human behavior.
This article is for informational purposes only, it should not be considered financial, tax or legal advice. Consult a financial professional before making any major financial decisions.