Morgan Housel on Buffett's retirement, Greg Abel's succession, and the psychology of spending money

so funny but we're excited to have Morgan on the show he he was great last time and I'm sure we'll have a fantastic I'm excited to ask him about his new book Oh yeah Art of Spending Money Art of Spending Money Well welcome to the Morgan, how you doing? Hey guys, good to see you. Great to have you on. Welcome back.

It's been too long. Yeah. Uh, I mean, I want to start with the with the accusations that you claimed that America was in decline. There I saw a viral post. I didn't look at any of the replies, so I don't really know what uh uh what was the story there.

It's it's weird because everyone knows that things get exaggerated on the internet, if not just made up on the internet. When it happens to you, it's it's pretty strange. So, I went on the Diary of a CEO podcast.

It aired, I think, a week or two ago, and we talked about tariffs, and I I mentioned something about the the fall in manufacturing uh jobs over the last 80 years, something to that extent. And I I had so many different asterisks of like, oh, well, part is technology, some of it is offshore, etc. , etc.

And that got spun into Morgan Hel is predicting the collapse of America. And it's one of those just like, what? How does how does that even happen? And so, I I called the guy out. he deleted the post.

But it's it's it's amazing to see when it happens to you personally because then you start questioning every like how many times have I read a headline that said so and so predicts the collapse of America but and but they didn't or or or some some uh you know some version of that.

So I'm not predicting the collapse of America. I'm quite optimistic. Such a challenge right now. There's so much long form content that's created and we're also in this era of of like clipping, right?

The internet likes long form content, but it really likes, you know, these short segments and sort of pulling out interesting moments and and we've had some issues with that uh already where, you know, we we had the CE we had the CEO of Perplexity on and John asked him a hypothetical question about ads and Techrunch ran with this article saying that Perplexity planned to, you know, just jam a ads in their browser or something like that.

And anyways, context is is uh very important. Um were you at uh were you at at the Birkshshire uh annual meeting? Uh no, this is the first this is the first one in four years I didn't go to. Awesome one to miss, right? Yeah. Wow. Yeah. Um how was how was what what made you decide not to go this year?

Just just family stuff. Busy. I've got I've got lots of other stuff going on. What's interesting is that I think I've been seven times and um the last four times I went, I didn't even go inside to the meeting. It's turned out to just be a place where there's so many like-minded people who go there.

So several years ago, me and Brent Behore and Patrick Oanessy and Shane Parish all rented a house and hung out and it was an awesome weekend even though we didn't even go to the meeting. So it's just been a place where there's so many collective people who have the same same thoughts, same priorities to go and meet.

That's great. Um well, I wanted to I mean I reached out to have you on earlier this week because uh obviously the news of um of uh Buffett, you know, stepping back at the end of the year to kind of get your reaction to it.

uh I it's one of those things it's interesting dynamic where uh it feels like the most important sort of knowledge and wisdom in the world is sometimes becomes so widespread that people uh sometimes people don't even pay enough attention to it even even 0ero to1 is one of those things it has like it's it's it's one of the most popular uh business books in history yet um people kind underestimate the value of it because it's just become um you know the ideas and it have become shared so broadly.

So I wanted to have you on you know specifically to talk about kind of the ideas that that you've um you know uh most gravitated to from uh Buffett yourself. Some of the ones I'm sure are are um very widely you know understood and talked about and then I'm sure others that are a little bit more kind of under the radar.

There's just so there's so many good bits. So yeah, I mean the the first is that to put his his retirement into context, Buffett made his first investment before Pearl Harbor and he started professionally managing money as a professional hedge fund manager when Harry Truman was president.

So just to like the the context of how long he's been doing this is absurd. And then so there's two parts of that. One is like yes, let the guy retire. He's 94. He's been going non-stop since he was 11. Like come on. And then the other side of that is that's why he's successful. Yes, his annual returns are good.

They were very good back in the 50s, 60s, and 70s. He hasn't really outperformed in any meaningful sense in a quarter century. Not a criticism because he has almost a trillion dollars in assets now. It's almost imposs it's almost impossible to outperform when you're that big.

But the point that is so easy to overlook is that yes, he's been a good investor, but he's been a good investor for 80 years, and that is literally 99% of why he's been successful. So, I made this point in my book, The Psychology of Money, that if Buffett retired at age 60, you would have never heard of the guy.

He never would have been a household name. He would have retired with like a hundred million bucks. Awesome. He he buys a yacht and a house in Miami and lives happily ever after. But no one would have ever heard of him. The whole reason he's successful is because he's been going for so long.

And I forget who mentioned this. I forget where I read this, that Apple is Steve Jobs with a thousand lives. That's what Apple is. like Steve Jobs built the company and then and then died, but Apple can live on because he built what it is. And I think that's what Bergkshire's always been.

And Buffett has talked about this that he wanted to build a company that would way outlast him. And the irony is like he he's still last he still ran the company for half a century or more. And so he lasted a long time, but it's going to keep going so far after he's gone, which is rare and unique.

And I also think of all the lessons that people like us try to learn from him, the the wrong lessons that you can learn from Buffett is like is is how to pick stocks. I think that's probably the wrong lesson to learn because a lot of the what he did in his heyday in the 60s and 70s just would not work today.

It's a very different world, different markets, faster information. It's just not transferable. But the lesson of like he's successful because he stuck around for so long even when he was so preposterously financially independent by you know by hundreds of orders of magnitude.

U he he kept going and like that's something that ordinary people can stick around of like stick around long enough that you're going to let compounding actually work in your favor. Uh I I think that's probably the most pertinent takeaway for people.

There's also so many entrepreneurs too who when they talk about and I understand this it's not a criticism because being a founder of a startup is so ridiculously hard and stressful but for so many of them the goal is we're going to build this company we're going to scale this company and we're going to sell it and I I I get that I don't look down upon that but the the huge massive results are for are people who are like I'm going to do this and I'm going to do it as long as I as humanly possible that I can.

Yeah, I I have a bunch of follow-ups there. Uh, first up, uh, Greg Ael. Is he underrated? It's interesting because he's coming in in his 60s.

He looks like, you know, guy who could be retiring next year, but the culture of of Buffett, you have to imagine that he's thinking, "Yeah, I got at least three more decades in here. I'm just getting started. " So, what's your take on Greg Ael?

Uh I don't know if you've actually dug into his career at all, but I'd love to know kind of how you think the culture uh at that Buffett created kind of lives on. Yeah, he's 60 so he can run the company for 30 years and then run for president after that. That's how this works. That's a standard path.

I think um most people outside of Bergkshire don't know that much about Greg Ael. He hasn't he he's not like Buffett has very intentionally, I think, been on kind of a media tour for the last 25 years. Goes on CNBC all the time. of course the annual meetings and the letters like people know a lot about him.

Greg Ael people don't know that much about him other than that he's been at Berkshire for 25 years and Buffett picked him as the obvious successor.

What is known is that he's not a stock picker and there's going to be people who who get into a lot of trouble over the next 5 or 10 years who are like looking for Greg Ael stock picks and they're not going to find them anywhere. He's an operator. He's a damn good operator.

Um, and that's important because Bergkshire 30 or 40 years ago, its market cap was like half stocks. It like that's like its portfolio was just public stocks that own Coca-Cola and Proctor and Gamble and stuff. Today, it's like less than 20%.

So, the majority of Bergkshire are wholly owned operating businesses and that's Greg's bread and butter. It's just like operating those. I think it's it's probably a very similar transition from Steve Jobs to Tim Cook.

Steve Jobs was this like genius magician and Tim Cook was uh just a a stone cold operator and that's I think that's what we're going through with Bergkshire. You're going from like the the wizard stock picker magician to the stone cold operator and worked out great for Apple.

It's just you have to keep your expectations in check both because Bergkshire's size and because of what Greg Greg Abel's strengths are. It it's not going to be and Bergkshire hasn't been this in 20 or 30 years. the place that's going to have like massive outperformance year after year. Yeah.

I wonder about how much he needs to be a stock picker because I totally understand the operator lens, but when you're looking at that $300 billion cash pile, it's like what are you going to buy a big oil company or something like like you can do so much with that. So, I'm sure that will be will be a challenge.

Uh I wanted to talk about the legacy of Warren Buffett a little bit more. There was a retrospective in the Wall Street Journal that I kind of took issue with, but I wanted to get your take. Uh the author is talking about uh Buffett's remarkable recall.

He estimates that Buffett read more than a 100,000 financial statements. He famously reads books and seven newspapers and just reads constantly.

Uh and the right and the author says his unparalleled exposure to financial information combined with his prodigious memory made Buffett into a human form of artificial intelligence.

He could answer almost any query out of his own internal database that has given him an unparalleled ability to identify the kernel of significance in any new bit of information and a durable advantage over other investors.

Now, and this is the controversial part in my mind, says now that AI is universally available, a person with Buffett's massive command of data won't even have an advantage in the future.

And I just don't know if that's true, but I want to know, do you think AI changes the landscape in a way that the Buffett strategy just doesn't work anymore?

I think part of the the the problem with Buffett in the last 20 or 30 years is that his folksy grandpa demeanor hid the fact that he is off thecharts intelligent and most of the time when you think of like an Einstein kind of genius like they have a certain look and they talk a certain way that and Buffett was not that's what made him so popular is you felt like you could relate to him but anyone who spent a lot of time with him when he's not talking for the camera or writing in his folksy way will tell you he is he is in in a different universe of intelligence particularly for money.

And the reason he's successful is that since he's been 11 years old, he has spent 24 hours a day, 7 days a week thinking about stocks and nothing else.

And so it's less about the data that he knows, even though people will tell you those stories that uh he can recall specific figures from a balance sheet from an annual report he read 20 years ago. So there is like a just an insane memory recall, but it's the pattern matching recognition in there.

And then this other element that's way more important, which is his reputation. That's something that AI can't do.

And so a lot of Buffett's biggest investments, certainly the most important ones, came from the fact that he was had such a good reputation that he could walk into a boardroom and just say, "Hey, I'd like to buy 10% of your company. " And they were like, "Yes, name us your terms.

Like, we'd love to partner with Warren Buffett. " And so that's less about intelligence or data and more about the reputation that he had. And I think if you I think if Buffett were a jerk or a raider uh and had had a reputation of stripping companies, he would not have been 5% as successful as he was.

All the big deals came from people wanting to partner with him. Particular like think about 2008, the financial crisis. Every bank called him up and they were like, "Warren, name your terms. " Like just just tell your terms.

And he did it with Goldman Sachs and GE and Bank of America where he got these crazy deals that nobody else could have because of his reputation. And so I I wasn't just that it wasn't just that he had the liquidity. You're saying it was just like Yeah. There's there's there's a lot of liquidity in the world.

There's a lot of people who can write who can write a big check, not who can do it with that kind of that kind of reputation.

So I think there there is a little bit of truth to that idea that the skill that he had of reading annual reports was so much more valuable in the 1970s than it is today because everyone's reading the same reports. There's bots that can scam them just instantly.

But there's like that's not to say that anyone can be a Warren Buffett now. I think that's certainly a stretch. What do you think of the uh this narrative that the past decade of Bergkshire is really just the story of Apple and their and this again like kind of a stock pick there? Uh they're at such a huge scale.

Um do you think there's like a cultural shift towards technology? Of course when Apple was already the most it was the most valuable company in the world and it still outperformed the market and drove fantastic returns. Um it seemed like a big shift at the time.

Uh at the same time it p it p p p p p p p p p p p p p p p p p p p panned out very well. Um do you think that that represents like a significant change in the culture? I think what's interesting is that for having a reputation for decades of I don't do tech. I don't do tech. I'm a grandpa dinosaur. I I don't do tech.

Literally in dollar terms, Warren Buffett is the most successful tech investor ever. He made he made a hundred billion dollar profit on on Apple. No one's even come close to that. And so is that like a change or an evolution?

It is an evolution, but it's easy it's easy to assume and it's wrong to assume that Buffett's been the same investor for 80 years.

I think part of why he's been so successful is that every five or 10 years he completely updated his operating system to to have a different style, a different influence, and to to really adapt what was going on.

And I think that there there's only a handful of investors who are like that, who have made money in different eras. Uh there's a lot of investors who were very well suited for one era.

they could make a lot of money for 10 years, but they couldn't keep it going because nine times out of 10, it's because they didn't update their their thinking. They were stuck on this world that didn't exist anymore.

And so there's a very long history of Buffett doing that and every 10 years doing things that he would not have 10 years before that. Yeah. Um, are you familiar with that uh famous napkin diagram that Walt Disney drew showing how the parks relate to the film production, relates to the merchandise.

Have you seen that chart before? No, but it sounds awesome.

Okay, so Walt Disney um drew this big chart mapping the entire uh ecosystem of Disney and how everything uh works together and it's cited as this example of like oh like you know build this business where everything feeds into the other piece and uh you know what is your Disney map?

Uh but I was digging into it and I realized that Disney made that chart 10 years before he died. like he had already been building just in film for a decade and then 20 years to build the parks. The Walt Disney born in 1903 I believe the park didn't open until 55 and he died like shortly after.

And so it was more like a reflection on what he had built as opposed to it was a map that was that was drawn after he had explored the territory.

And so I'm I'm wondering your take on this idea that like um the idea of focus and the idea of empire building being something that can be charted beforehand versus has to be kind of naturally discovered and then can be potentially mapped after the fact.

I think there there's several historical examples of business of like very successful business uh people who had were product geniuses and and terrible at b at business. Walt Disney was one of them. He was the product genius of of of all time. He was a terrible businessman.

Henry Ford was another Henry Ford is the most successful mechanical engineer in history and he was at best a mediocre businessman. There's so many of of those like that.

I even I would even say Steve Jobs might fall into that category of technological genius, design genius, very at at best mediocre business person, which is why you needed a someone like Tim Cook. And I think there's there's been quite a bit of that.

But when the product is so good, you can take it in so many different directions.

Disney is an interesting example of of so many of the of the of the film IP that they had that was sitting on the shelf for decades and when it was made it was like oh people will watch this in the movie theater that was the only medium that they could watch it on and then the video cassette tape came along and they're like oh we could sell all of this and the DVD came along they're like oh there's another avenue to sell it and then streaming came along and it was like sky's is the limit so it was like the I the IP was so good that you didn't need a genius me businessman to uh to to come up with a distribution strategy.

Like it was so good that it just kind of ran itself. Ford was was similar. Like the cars were so superior to anything else that even if Henry Ford was making blunder after blunder, the the company kept going just fine.

And so I think I think a lot of times when you have like a very longunning business, it's less because they made phenomenal business decisions and more just because the product that they made was so phenomenal that they could keep it going. If an idiot ran Apple, it would still sell a zillion iPhones every single year.

And there, but there's only a handful of companies that are like that. I want to talk about the book out October 7th. Uh do you have a log line or like what what is the oneline pitch and then uh how can you unpack the different The title is the title is a pitch.

I guess the title is the pitch, but uh can you can you break it down in a little bit more detail? A little bit detail. The book is not called the science of spending money because I don't think that exists.

There's no way of saying here's how you should do it that's going to work for me and work for you even if we're similar people. It's just like spending is very individualistic. So I call it the art of spending money because art is different from person. It's it's it's subjective. It's often contradictory.

And so rather than telling you what to do, I don't want to lecture anyone, but um the book is a look at at envy and social aspiration and keeping up with the Joneses and uh becoming fulfilled and getting attention and watching other people.

It's kind of like the psychology of spending money, which I I which has always been like so much of what I write is just trying to figure out my own life. Yeah.

So, I looked at instances where I was clearly, it's hard to admit, but like when I was clearly envious and when I was clearly trying to get people's attention and just when you dig a couple layers below that, like why attention am I trying to get? Is that person even paying attention to me? Do they even care?

Was giving that attention like ticking away from other parts of my life? There's so many different layers to dig through. And I think those things are universal. Even if what you're spending money on is not a science, the psychology of it tends to be pretty universal. So, it's just a a look at that.

That was more than one sentence. I have I have to hone that a little bit sharper. But that's it. That's great. I mean, is there a key anecdote or story or even just like uh case study that you think is the most uh tractable for people to grab on to?

I I think about uh you know, all the emotion that goes into the identity tied to the car that you drive or the house that you buy. But uh what what what what case studies are you pulling from to kind of ground the lessons in something that anyone can understand who's reading the book?

I don't know if this is the best case study, but it was one that I I thought was so interesting. I read the biography of Harvey Firestone from Firestone Tire. He was the tire magnet like 120 years ago whenever he lived.

And he has this part in his biography where he says every single successful person that he knows, including himself, when they became rich, they bought a giant mansion. And every single one of them to a tea hated it. It was a pain in the ass to run.

It was it was you when when when when your house is 17 bedrooms, it's just more roof to leak, more radiators to break. And and he was like, "Everyone hates it, but all of them do it. Every single one of them does it. And even when they hate the house, they never sell it and get a small house.

" And he had this line that I loved. And he said, "There is no going back except as a broken man. " So like once you inflate your lifestyle, you cannot deflate. Even if you hate the inflated lifestyle, you cannot go backwards because it becomes so synonymous with your identity.

It's like the size of your house is who you are. I thought that was pretty interesting. And he was like the equivalent of a billionaire living in a mansion. It's not a very relatable example. But I think there's so much of that that if we spend money on something and it doesn't make us happy, it's very hard to rewind.

So be like be really careful when you're inflating your lifestyle because you it's very easy to go forward. It's extremely hard to go back. Yeah. How much time have you spent uh or or are you putting any attention in the book towards the way that um San Francisco and the tech industry spend money?

I' I've always been, you know, fascinated uh by it given how much uh just this dichotomy between extreme wealth and this uh in many ways desire to one glass box please. Yeah. Yeah. Or this desire to um you know be uh and it's it's good in many ways, right?

If tech if if imagine the the negative attention that the technology industry would have gotten if every uh you know series C founder in San Francisco was like driving a Lamborghini, right?

It would have just it would have been it would be fun, but it would have been um Well, I think I think I think there's part of that that they can't spend a lot of money because it's not liquid. Like they're rich on paper, but there's not a lot of liquid wealth in San Francisco.

I mean, there is, but it's all it's all relative. But I but even that is a sense of social signaling. Like if people know that you're rich and you are going out of your way to live an austere lifestyle that that might be because it'll make you happier.

It might also be because that's the signal that you're trying to send. That's like those are feathers. Buffett's the best example of this. I mean you you have to spend some time on on Buffett in the book of just intentionally. Yeah.

But then that got kind of twisted because Mark Zuckerberg was famously driving like a Corolla for a while. But then Sam Bankman Freed at FTX kind of used that as window dressing to be like, "Oh, I'm the altruistic billionaire. I I don't I just drive a beater car.

" Uh when of course he had like a mansion in the Bahamas and a bunch of other stuff that he like wasn't pointing the camera at and and Mark Zuckerberg's interesting because he famously drove the Acria for whatever for many years and now he just bought a half billion dollar yacht.

So it all it all it all comes around eventually. Yeah.

He's also evolved his taste in cars a lot where he could buy a supercar, but I believe the most recent car he bought was a Cadillac CTS-V Blackwing, which is like a $100,000 sports car, but it's not a half a million dollar sports car, but it's an American, you know, muscle car. It's like very fun and very different.

So, he's he's clearly finding his own path in expressing himself in a more unique way than just like one rich guy car, please. Uh, and so I I I think he's probably happier and like carved out a unique niche. And I feel like that that's often a better place to land is not just don't just buy the most expensive thing.

It's okay to buy the expensive thing if it's craft and and it's interesting to you and it has a story and it has relevancy or performance. Um, but it needs to like speak to you in some unique way that actually, you know, improves your life. I don't know. What's your most irrational uh purchase?

I know you've talked in psychology of money that you you paid cash for your house or you don't have a mortgage, I believe. But, uh, what else is is potentially irrational? I I don't know if this is irrational, but it's one I think about a lot. I grew up skiing uh as as a competitive ski racer.

And when I was, you know, 10, 12, 13 years old, I always felt like all my friends had better gear than I did. They had the nicer skis, the newer jacket and whatnot. And back then it bothered me. When I was 13, I was like, I was so envious of them.

And so now, and obviously I I got over that, but now that my son, he's nine now, we we ski a lot together. And I think because of the scars that I had for my friends having nicer stuff, I made this vow a couple years ago. I was like, I'm going to buy my son the best skier every year.

He's going to get the best skis, the best boots, the best jacket. And I'm doing that to kind of like fill this hole that I had when I was when I was a young kid. And the irony about it is he could care less. He does not care whatsoever what gear he has. And so that's interesting, too.

Like I think there's always a story behind spending. For me it's like he doesn't care because he has No, he doesn't care because he's so all he knows is the best, right? Is that isn't that I feel like I feel like I like if if I buy him a new pair of skis, I expect him to be like, "Oh, wow. Let me look at these.

They're so cool. " Cuz that's what I would have done. And I get him and he's like, "This doesn't doesn't matter whatsoever. " No, I totally resonate with that, though. I I remember growing up skiing snowboarding.

I would I would always have a snowboard that was like three seasons old, lightly used, and it was like the practical decision. It was $50. It got you down the mountain just pretty much as well as anything else.

But then I'd be watching the Burton, you know, videos, and it's like, you know, looking at these and and I'd be just running the numbers. I'm like, I would have to ref 400 soccer games to get, you know, that board with those bindings. It's like I'm going to ref like 10 games this weekend, but I'm not going to get there.

Yeah, I was skiing at some point. I got too tall for regular skis. And so they needed to They were like, you have to go to custom skis if you want to be really in this. And I was like, I'm switching to scuba diving. Like, you know, whales are big enough for the ocean. I'll be big enough for the ocean. It's fine.

Uh I do have one last question. Do you have one? I have one last but um you go.

Switching, I hate to switch uh back, but on the art of spending money, what is the uh what do the real uh Birkshshire enthusiasts think that uh or what has Birkshshire signaled around how they're going to spend $300 billion or whatever their their current cash pile is?

cuz I feel like the general market's sentiment is that, you know, Birkshshire is preparing for the next, you know, uh, next time great companies go on sale due to some crisis. Uh, but I'm curious if you have any, um, sort of insight there.

I think, you know, the the list of companies that you could acquire for hundred billion dollars is not a very long list, but there is a list. Like it's it's not inconceivable that Bergkshire could make a hundred billion dollar acquisition.

Um I I' I've often thought that Bloomberg the the media company like B that would be a perfect Bloomberg fit. It's probably worth about hundred billion or that that'd be perfect for Berkshire. And then Bergkshire is so big it's a trillion dollar market cap.

They could probably repurchase a hundred billion dollars of stock. It might take three or four years but they could do it. There's enough liquidity there. So you could spend 200 billion. Like that's that's pretty conceivable.

The big question for me is once Buffett is gone and passed away and his his stake in Bergkshire is more dispersed, then you could there's room for an activist investor to come in. Right now, you can't have an activist in at at Bergkshire because Buffett owns too much.

He would just tell him to go away and and then it's over. Once Buffett's majority voting stake or like big voting stake is gone, then it's interesting. Will Bill Aman or one of those guys come in and say, "We want you to do a $200 billion special dividend. We want you to spin off this and that and that.

" I hope that doesn't happen, but you can very easily see it happen, particularly if people aren't going to give uh Greg the, you know, a a five-year leash to prove his way. If if the results aren't there in two or three years, you'll probably have people knock at the door. Yeah.

And so having that pressure, I hope he doesn't have pressure to deploy that $300 billion of cash knowing that if he doesn't someone's going to come knock at the door and threaten his job or tell him to spend off this or that. So he's not you said he's not a stock picker either.

So he's not exactly just going to go out and be like, "Okay, I'm going to start deploying this and you know that way, right? It feels like it has to be more significant. " Yeah. Yeah. Uh I have another question, but we'll have to do it next time. Uh this was great joining leaving us all hanging.

I know it's just going to turn into a whole conversation and we can do a whole another 30 minutes. So why don't we just do another 30 minutes in a couple weeks. I'll see you then. Morgan, we love coming on. Have a great Friday. We'll talk to you soon. Bye. Here's the run of today's show.

We have Sonia from Sequoia coming in the studio next. Uh they Sequoia just hosted the AI Ascent Conference uh with an absolutely stacked roster. some of the greatest programmers, some of the greatest uh entrepreneurs in artificial intelligence or really just in history uh all coming together.

We saw a fantastic jacket swap between Alfred Lynn and Jensen Wong and I'm excited to talk to her about trends in artificial intelligence and what is happening in