Morgan Housel on the art of spending: 'If nobody was watching, what would you spend your money on?'

one AI agent for customer service, number one in performance benchmarks, number one in competitive bake offs, number one ranking on G2. And we have Morgan Hzel in the reream waiting room. We're going to bring him into the TBPN Ultra Dome. We're very excited to catch up with you again.

One of our earliest and just most enjoyable guests. I I such a favorite conversations ever across a thousand plus interviews. Remarkable. So, thank you so much for taking the time to especially in a huge huge week. Congratulations on on the launch. Big shoes to fill. Thanks, guys. Nice to see you.

Uh yeah, give us the give us the updates. Set the table. What's going on this week? that gong ready. Get this gong. I uh Yeah. So, my my my third book, The Art of Spending Money, came out this week on Tuesday. You know, it's a tough thing with uh There it is. Thank you. Thank you.

It's a weird It's a weird thing with books. I think I feel like it's almost like a startup where I I've been a writer for 20 years, but you get like three shots on goal when when a book comes out. And when when when when you're writing a blog post, if it sucks, and at times they do, there's always next week.

It's not not that big of a deal. When when when when you write a book, you really got to be like, "This is this is it. " you really got to put your best foot forward. So, there's it's always a a stressful thing to go through. Was the process different for this book from the other ones?

Do you've heard from authors who like go lock themselves in a cabin? Uh like what what's your process like and has it changed? It's usually it's it's usually roughly this.

It's it's about a year of very uh informal noodling where it's like I'll be going for a walk and it'll be like, "Oh, that would be a cool chapter and I could use this story. " It's a year of that like like just just no effort and then three months of part-time writing and three months of full-time writing.

During the last two weeks of the full-time writing, the world does not exist outside of my keyboard. That's usually how it works. Yeah. And are you like uh combing like like front to back of the manuscript uh like every day? Are you focused on like a single chapter for a full day?

Like h how do you actually like chop through like what becomes a full book? It's it's usually it's usually the latter. There's not much going through everything end to end until the very very end of the process. So it's usually just focusing on one chapter and very roughly.

This is not a hard and fast rule, but when I was writing it, it was like I want to focus on one chapter per week.

And normally I I'd say if there's one thing that I've gotten a little bit better at over the years, just a little bit better at, not perfect by any means, is that I think my first draft is closer to my last draft than it used to be.

Not necessarily because I'm a better writer, but because I'm better at knowing what writing is not going to work and then stopping it very quickly. And so I think when I when I go through a chapter, by the end of it, I can go back and scan it and be like, "Oh, this is pretty good. I'm going to set that aside.

" And then when I do my little self-edit at the end, that's that's usually where where it where most of the work happens. So it's uh much easier to write a book now that that we have AI. Is it Yeah. What was your problem? I'm kidding. I'm kidding. No, here's here's the thing. Share the promp.

I've I've I've talked to Just share the prompt. Just give me the prompt. Yeah. Come on. What's share your prompt? Come on. just I was talking to a guy the other day who just finished his manuscript and he said without Chachi PT he would not have been able to write the book and I'm like I love hearing that.

I love that if we can have a tool now we're going to have more books being published cuz I think there are people who have very good ideas who have a story to tell but are too intimidating to write a $50,000 a 50,000word uh manuscript which is not an easy thing to do.

So if we can just get more people out there because they have chat GBT to get them through writer block awesome. I think it's wonderful. I'm still I'm still old school because I've been doing it for long enough that I want to write every single one of my words for better or worse.

Even if I could have done a better job with some LLM like getting me through those blocks, I'm still going to try to power it through myself. I'm sure you saw uh David Simon, the creator of The Wire. There was a screenshot from an interview.

Uh someone asked him, "Okay, you've spent your career creating te television without AI, and I could imagine today you thinking, boy, I wish I had that tool to solve those thorny problems. " David Simon says, "What? " And the interviewer says, "We're saying dot dot dot. " David Simon goes, "You imagine that?

" And the interviewer goes, "Boy, if if that had existed, it would have uh screwed me over. " Simon says, "I don't think AI can remotely challenge what writers do at a fundamentally creative level. " And then he says, "I'd rather put a gun in my mouth. " There. There you go. Yeah. Just just get right to it.

Here's what I think. I've always thought that writer's block is actually a symptom of your idea sucks and it's not working. And the reason you can't find the words to get through is because you know in your soul that this idea is not working. Yeah. You fundamentally don't you don't care about what you're writing about.

Right. And I think as a like when I think about the points where I've been writing that I cannot get fig get myself moving. It's like writing that essay. I had to take a class in college about dinosaurs and I had to write a paper about dinosaurs. You studied dinosaurs.

It was an actual class that fulfilled some sort of like science some sort of requirement. how your son is obsessed with dinosaurs. Apple doesn't fall far from the tree. That's incredible. No, but you're writing you're writing about a topic that you don't care about. The words do not come easily.

You're not if you don't care. Of course. Jord is secretly a PhD paleontologist. I'm finding this out for the first time. Sorry. No, I would say the the flip side of that is when you know you have a good idea and it's a right idea, the words just tend to fall right out and and it's no problem to get them on the paper.

And so I bring that up because I think if you have writer's block and you're like, "Oh, let me use chat GPT to get me through it, it will find a road through and it will help you on the next paragraph, but then you're probably ignoring the signals of your idea not working and you're much more likely to get to the bottom and finish the essay or whatever it is, even if your idea sucks and it didn't work.

" Yeah. I've noticed writer's block is just this divine presence that's telling you, you don't need to make this. It's not it's not it's not needed. It's not needed by the world. and you can force through it. But what did you actually what did you actually do? I've been writing a I think there's a Oh, sorry. Oh, sorry.

I was going to say I think there's a similar analogy with music where I've heard from many musicians, I am not one of them, of course, that their best songs were the easiest to write and like the tune, the lyrics just flowed right out.

And if they are struggling to figure this out, figure out the tune, figure out the lyrics, it's probably because the song's not working. It's usually the same. Yeah.

I've been writing a daily newsletter for this and to prep the show about 500 words and uh I've noticed that I haven't been using AI for anything other than knowledge retrieval.

If I have to look up what what's the market cap of this company, of course I go to chatbt and then I also noticed that uh a lot of times I'm kind of just reiterating like a discussion that I had with Jordy earlier in the morning.

And so I'll use dictation sometimes to just get some of the words down and then I'll kind of write from there.

But I'm never crafting a prompt for what I'm writing, which I think is just interesting because the models have gotten so much better and yet there's still something about like I got to come up with the own idea or like the seed of the debate. Yeah. What do you think? Yeah.

It's also very difficult to really make it right in your voice. So you can prompt it and say write it like Jordy like do it exactly, but it's not it's just it's it hasn't hasn't gotten there yet.

I feel super grateful that it's still easy to clock uh AI generated text because if I'm scrolling on social media, maybe I see a post and then I'm in the comments like interested to see what other people think about it and I can just easily clock.

Okay, AI generated, I'm just going to skip it because it's probably just like summarizing it and asking a question, but uh I I worry we'll lose that ability to filter like in the next iteration of the models.

It's definitely made me a sloppier writer and I'm I'm I'm like deliberately not trying to craft the perfect sentence structure constantly because I feel like the like the rigidity is just an extra layer that I impose on myself and if I take that away it just kind of feels more stream of consciousness and is just actually a better product.

I don't know. Shifting gears. Yeah. Yeah. Sorry. Go ahead. I was going to say shifting gears to the book. Yeah. Yeah.

thesis and do you think uh well maybe a kickoff question do you think tech has figured out how to spend money because there was always this there's always this critique that uh tech people don't know how to spend money and I think part of that was the the tech uniform was not maybe like the east you know the west coast tech uniform jeans and a t-shirt and sneakers people sort of came you know participated in this industry in a very sort of plain way.

Pattygonia jacket's like 200 bucks. Okay, it's reasonable. Well, let's let's compare tech spenders to Wall Street spenders. The major difference is most tech wealth is not liquid and Wall Street was paid in cash every year.

So, so I mean that's that that that's the that's one of the biggest like tech wealth is a lot of paper wealth relative to Wall Street wealth. That was so much more liquid. You can go buy the Rolex, you go buy the house in the Hamptons cash.

And so I think that that was that was that was probably that was probably part of it. But yeah, there's a culture of like buying the the the watch based on the, you know, a banker buying deciding what watch to buy based on the size of their Q4 bonus, right? Just like it's going to be some percentage of that.

So, the watch I get will, you know, maybe it'll be a Submariner, maybe it'll be the Daytona. I don't know yet. Yeah. I I do think there's something to be said that on Wall Street, your value and your success was was how much money you made.

And in tech, it is much closer to towards the product that you built and the intelligence that you have and whatnot. And and so there is less desire to show off wealth in tech because that's not what people get valued for.

And I I can't think of hardly anyone in Wall Street outside of maybe Warren Buffett who is very well respected and admired and wears a t-shirt and lives in a modest house. It doesn't happen.

But you can but but you can name a hundred of those people in tech who do that because they're valued for their ideas, not just their annual bonus.

On that illquidity question, uh Paul Graham had a take recently that a lot of uh a lot of tech people, they're locked up and then by the time they can afford art, they struggle to like get up to speed on the art world or something. Does that resonate with you at all?

Just the fact that if you come on Wall Street and you can afford like the the Rolex and then the AP and then the FPJO eventually, like it just ladders you up the luxury ladder easier than just having all this money and being like, well, do I really want to jump to the top of this luxury ladder that just put the hydonic treadmill on 15 miles an hour on the first run?

Yeah, I think it's very difficult for people to know what they want. They're very good at knowing what they need and they're very good at knowing what they don't want. Knowing what you want is actually very difficult. And and part of the reason is because what I want might be totally different from what you want.

People have completely different needs and whatnot. I think if you are thrust into wealth very quickly. Um there is a there is knee-jerk reactions of what you think you should want. I want a mansion. I want a fast car. I want art. I want the plane.

Whatever it might be, and sometimes it's true and sometimes it's it's very not. And I think if you I think if if I can predict all of your spending habits based off of your income, there's a very good chance that you're not doing it right.

Because there's a very good chance that you are just buying and spending your money in the way that that society told you to do. If you earn this much money and your net worth is this, you should have this house and this car and this art and travel this way and whatever it might be.

And and most of the time it just doesn't work that way. People have very unique spending preferences.

The people who I've seen, the wealthy people who I've seen who've done the best have a lot of really extreme quirks in their spending where they spend, they're very wealthy, but they spend no money on on cars or no money on travel, no money on food, whatever. it it's very unique to them, whatever it might be.

Uh you're I'm I'm not a wine person in in the slightest. I'm not I'm not even necessarily a travel person, but a lot of people would be the exact opposite, and that's fine.

So, I think it takes a lot of looking in the mirror, so to speak, to figure out who you are and to go down the path of trying to figure out what you want, which is not easy.

I I feel on a personal level that my relationship with money has been very distorted because the business that I started building in college ended up you know has cash flowed every month for my entire adult life which has been a tremendous benefit but it's also completely uh it's just distorted the way that while in tech the primary way you generate wealth is you get a measly salary for a long time and then you get a whole lot of money at once or maybe you sell some secondary along the way and get some liquidity.

But it's been this weird dynamic where it's like I remember well so so the first time I took a meaningful profit share from from my company.

I bought a 9 I took the entire amount and I bought a 911 because I was just like well I'm going to get the same amount next month and then I'm going to have this 911 for a long time.

And so I had to kind of like I it's taken it took me a few years to kind of like learn such a fascinating psychology learn that uh lesson whereas I I I wouldn't think like oh that's a lot of money. I would just think of money in increments of basically months of cash flow basically.

I think I think there's there's good mental accounting there of like rather than thinking about the 911 costing 120 grand you think of it as one month. It cost me one month or something like that. I think that's that's actually a smart way to do it. And and even even I I value a month even more now.

Even though monthly income has like increased throughout my adult life because like I'm like a month as a kid you're like I got all the time in the world. Now I'm turning 30 at the end of this year. I'm like oh time is a real thing. It goes by. You don't it's not you don't have a infinite supply. Do people come?

How do you how do you think that makes me feel when you say time's time's like running out because you're turning 30? How how does it make everybody else feel? I would I would kill almost 30 years.

Well, are you are you uh are you are you spending a lot of money on your health because you looked younger than the last time you came on the show? May maybe I just hadn't showered last time I was on on on on the show. I don't know.

But um no, I I I I do think there's there there is a real thing where there it's a fine balance between spend for today, live for today, and save for tomorrow. Both of them are really great ideas, and it's never as simple as yolo or or you know, save and and and and save for the future.

It always just comes down to what are you going to regret? What are you most likely to regret at some point in your future? And and it it goes both ways for people. You could easily imagine looking at yourself 20 years from now and regretting the trips you didn't take, the 911 you didn't buy, the house you didn't buy.

You can so easily imagine too looking back at some point in your life when you're tired and your career is not working out, whatever it might be, and saying, "I am so grateful that I saved the way that I did. It gave me a sense of independence that I value more than anything right now.

" What are your take on the Oh, sorry. You you said you said a lot of a lot of uh successful people have, you know, quirks in their spending. Do you I imagine you understand your own at this point? Yeah. I mean, this is this is a trivial and small thing, but I love this heristic by Rob Henderson.

He's a great uh great academic. And he says uh rich people food looks better than it tastes and poor people food tastes better than it looks. And on that spectrum, I love I love cheap food. I love Taco Bell. I love I love Jimmy John's. I can't get enough of it. And I've had I've had some very expensive meals, whatnot.

And I I I have enjoyed them marginally at best. The best meals I've ever had tend to cost the cheapest.

And so that it's it's such a trivial thing, but never would I want to be like, "Oh, I can afford to eat this way, so let me abandon all the food that I love and go eat some food that is subpar because I'm supposed to like this stuff better when I don't. " Yeah.

Did you uh did you cover private aviation at all in the book? We had a funny conversation with a friend this morning. He basically said, "I'm my house is going to be paid off by the end of this year, and after that, I'm giving all my money to netjets. " He's not getting a second. I love it. Which is a quirk in itself.

He finds uh commercial aviation to be very dehumanizing. Yeah, man. I would I would if if you had a choice between two houses and commercial or one house and net jets a thousand times out of a thousand, I would do the latter. Yeah, absolutely. Totally agree. Two houses are a giant pain in the ass anyways.

But I I to answer your question, I do cover private aviation in that because I made this this observation that like having a a a a private plane is like the ultimate luxury. If you talk to wealthy people, they're like that's the only thing that you get pleasure out.

That the house, the yacht, the car doesn't do you much. the plane will change your life forever. And I think part of the reason we love it so much is because the vast majority of people in that situation remember what it was like to fly commercial.

Now, here's the the observation is nobody thinks it is an ultimate luxury to have a private car, but virtually all of us do. And the reason we don't think about it is because we've always had private cars. And so there's nothing to compare it against.

Now, you you could imagine that if you spent your entire life on a train, on a public train or a public bus, and then you got a quote unquote private car, it would feel like the ultimate luxury, but we have nothing to compare it to. Another example, so much of their lure. Yeah.

If you're if if if you uh if someone's lucky enough to be born into a family that uh only flies private, can you imagine their experience of flying? They're like, "Ah, I don't want to fly.

It's going to uh you you can imagine they don't even have a positive feeling associated with flying private because it's all they know cuz if you actually you know it's like okay I'm going to be up in the air and like the bathroom's small and I don't have that much access there's not that much there's some food but it's not my my favorite food.

I can't get Taco Bell delivered. Yeah. Exactly. Exactly right. Right. Uh, do you think people Oh, I I I want to hear your reaction to Jord's take that uh buying physical things is actually an experience dichotomy between I just want to spend money on experiences.

So, I uh growing up as a kid, I always I always loved brands and I would get obsessed with different things, whether it was mountain biking or snowboarding or surfing or anything. And I would get uh fixated and obsessed with like a certain kind of surfboard, right?

As a kid, I wanted to surf Mayhems, but I couldn't really afford them. They were super expensive, and I worked at a surf shop. I could get these other boards for a lot cheaper, so I'd always get them. Now, as an adult, I only surf mayhem.

Um, and I always, we grew up in this era, our generation was told constantly, don't spend money on things, spend money on experiences. I never understood that because in my view, I was like, when I put on a jacket that I love and it's a thing and I wear it for the day, it's an incredible experience.

Or if I take this surfboard that's incredible and I go out surfing with it, that's an experience in itself. So, what do you what what what's the verdict on things? Can things make you happy? I've found that things have uh have and continue to make me happy in my life. Yeah, totally.

Because I think I think what you broke down there is if nobody were watching and nobody could see your surfboard, nobody could see your car, you would still buy them. And therefore, you're doing it for something that actually makes you happy rather than trying to signal for the attention of strangers.

If you use like a fancy sports car for example, there are some people who own Ferraris because they love the artistic engineering of it. They love the line. They love the beauty of it. They love the growl. They love the engine. They work on it themselves. They wax it themselves. They love the art of owning it.

They love the acceleration. They love driving it. That's one group. Another group just wants to get the attention of strangers and they just rip it down the road just trying to turn as many heads as they can.

Yeah, the former is going to get way more happiness out of it than anyone else because they would still do it if nobody was watching. I think that's the the framework is like if if nobody was watching how you lived, what would you spend your money on?

And as you just described it, I know you would still buy that surfboard. And so it's it's it's the right thing to do.

I think the uh stuff versus experience tends to go astray, too, because particularly in the social media world, a lot of experiences that we want to spend money on are literally just to impress other people. It's where should we go on summer vacation that's going to generate the best Instagram pick.

This is this is John's on Europe. He's like, I don't need to go to Europe. We have lakes here. We have oceans here. We have mountains here. Why why would I why would I leave the the great uh United States? You know what my example of this is? Bali. I don't know if you've ever been to Bali. It's a dump.

It is a Thank you. Thank you. I did my my my wife and I took our honeymoon to Bali and uh it's a dump. So, so I went there on a on a on on multiple surf trips and I I only cared about the waves, but the funny thing is people go out there on surf trips and like the actual best surfing in Indonesia is really not in Bali.

There's a handful of solid waves. The downside is there's actual trash in the water. You are just swimming in this like supposed like idllic reef break and you're just swimming through plastic bags. It's just absolutely disgusting on a half the island and the water's just like brown and dirty.

And people surf in America, too. Yeah. And it's like, you want Do you want to say that? You want to take the picture and say, "I'm I look Look at me. I'm in Bali in my trash. " I think that's it. I think that's No, I think I think Bali becomes a popular tourist destination because people love to say, "I went to Bali.

" And post that on social media. The whole time I was there, my wife and I kept saying we could have flown to Maui, which is a 5-h hour flight. Instead, we flew 20 hours to Bali. Yeah. And it's 97% worse. Yeah. And like, why would it?

But I I I think honestly, we were attracted to it back in the day before we knew better because it sounded like a cool thing to do. Like, oh, we get to tell our friends we're going to Bali.

We didn't know anything else other than it was a cool It sounded like I don't want to I don't want to I don't want to uh uh say too dump too hard on on Bali. Part of why it's not as great as the hype is that there's too many people there. I sort of like created the problem.

I think it is, you know, probably is as nice as Maui just just uh physically, but the challenge is again the infrastructure, the the traffic is uh number of times I've almost died on a scooter in Bali, too. I'm surp I'm surprised I'm here on this podcast. Safety is real, right?

And so then it's like if if nobody could if nobody got to hear where you're going on vacation, you can't post it and you can't tell anyone else. Never would I want to go to Ma to Maui. I'd be like, "Ah, let's just go to Santa Barbara or let's go to Maui or something like that. " It's so much better and easier.

Yeah, that's funny. Uh, I want to talk about like the the I mean, maybe the frame is like do people ask you more questions about or how do you see the job to be done by the book? Is it more about how to is it more about money or just happiness? It's definitely more about happiness.

And one of the big points in the book is there is no formula for how to do this. And so that's why when you have a formula like spend money on experiences, not stuff, it tends not to work because I'm different than you are.

And and people from different generations, different countries, different backgrounds, totally want different things. And I think it is immature to say that because I like spending my money on this, you should too. Or because I don't value this, you shouldn't either. It's not. But it's it's an innocent mistake to make.

And a lot of people make it in finance. the assumption that there is a right answer to earning, saving, spending, investing when like it's a very individualistic endeavor. And so a lot of this when the the the question you ask like do people ask me for advice on this?

The advice I have and people don't like to hear this is like you need to figure it out for yourself. And so the book is about the psychology of envy and contentment and social aspiration which tend to be universal. But there's nothing in this book that says you should spend your money like this.

And so it's not called the science of spending money because I don't think that exists at all. Yeah. Uh what about uh what do you what kind of uh things that you can spend money on have the worst value?

Because when I talk about uh when when you look at uh luxuries like maybe staying at an Aman property man is maybe 10 times as expensive as like the average four seasons, but I think it's it's probably like five times better in my opinion. Um Yeah.

So, so it's not it's not it's not per like a perfect trade, but but it it's at least if you only have a limited amount of vacation time a year and you want to have the best possible experience, I think it's a it's a trade worth take, you know, a trade worth making.

But where where do you think um maybe is on the opposite side of that? Things that are 10 times uh do you think it do you think it's you you mentioned food. Is there anything else? I I'll tell you one like little spending quirk that I have.

This is slightly off topic, but I think it's when when when I grew up, I I was a I was a a ski racer, and I always felt that everyone else on my team had better gear than I did. They had they had they had nicer skis, they had a nicer jacket, they had they had all of that. And it drove me crazy.

And so when my son, he's nine now, when he started skiing, to kind of make up for the the hole in my soul that I had when I was a kid, I was like, I'm going to buy you the best of everything. You're going to get you're going to get the nicest skis, the nicest everything. And the the quirk is he could care less.

He could not care less about any of that about having the nicest stuff. And so that too was like a realization of like that would have meant more to me than anything that I could have ever had. And he could not care less because everyone has their little spending quirks about them. Totally. Last question from me.

I obviously we're here. I want to celebrate the book.

I want to promote this book, but I'd love to know about another book that you think uh serves as uh just something you enjoy, something that you an author that you respect, maybe someone from the 20th century or 21st century author, uh someone who you've pulled influence from or just have respect or just a book that you keep coming back to.

Yeah. I mean, two non-fiction authors that I think are the greatest of modern times, they're both still living, still writing. One is Eric Larson and the other is is Robert Kersonen.

Uh they've they've both written some very famous books and some very successful books and I think their ability to craft a sentence and tell a story is unparalleled. And even if I were to compare them of all the writers of the last 200 years or so, I'd put them near the top there.

It's just so it's effortless to read their their work. Never do you have to reread a paragraph and say, "What are you trying to say here? " You can just kind of glaze your eyes over the page and completely understand what they're saying.

And what I love about what Eric Larson in particular does, so he's a non-fiction writer, writes books about like World War II and all these these these different events. Some of his chapters are half a page. And so some of his books can have 200 chapters.

They're each a page or two because he's so good at just being like, "Here's my point. I'm going to make the point, use an example, and boom, I'm done. I don't need to ramble for another 17 pages. I'm just going to move on. " And that to me is the key of good writing.

It's like the person who can say the most in the fewest words wins, and he's the best at that. Yeah. Yeah, I read Devil in the White City a while, maybe a decade ago. Uh, fantastic book. Loved it. And and perfect example of that. Thank you so much for coming on the show. So fun. Always a great time.

Let's do it again soon. We're going to this time we're just going to send a recurring slot the calendar. You can move it if you want. Uh, but uh we love we love talking. It's always fun. Hit the hit the gong again for being number one uh in the business uh section on Amazon. Uh business decisionmaking.

See you at number one. and I'm sure uh many other uh charts uh to come. Thanks. Congratulations. Fun as always.