Same As Ever
Morgan Housel is one of my favorite writers. He has a phenomenal ability for phrasing financial concepts the average person can understand. His latest book, Same As Ever, continues this skill.
Amazon.com: Same as Ever: A Guide to What Never Changes: 9780593332702: Housel, Morgan
If asked what the price of oil will be in a year, I have no credible idea. The same is true for stocks, interest rates or inflation. And that is what is truly confounding about financial markets. There are many things the news media obsesses over, but they are either meaningless or unknowable.
Conversely, Housel’s book highlights things that don’t change. Once you understand these concepts, you can better position your finances.
Here are a few favorite takeaways:
Have modest expectations. If you want to be happy, lower expectations. Happiness does not come from objective conditions. It is created by the gap between expectations and reality.
Good times don’t last forever. Instead, people become overly optimistic about their abilities, finances, or the general optimism of the future. This behavior encourages taking on more debt and risk. With increasingly reckless behavior, good times end, and consequences hurt. Calm and optimism devolve to stormy times with fear and doubt. This sentiment change fuels the next recession, default, or panic.
The world, with unlimited dynamics, swings from calm and crazy, fear and greed and optimism and pessimism. Understand the pendulum, knowing when you have had enough. Be able to walk away on your terms.
Stress and urgency create innovation. When everything is great, there is little incentive to push for innovation. This creates complacency, often leading to unexpected obstacles. Whether wars, floods, pandemics or financial calamities, this is always the case.
However, mankind rises to the challenge when times get tough. We innovate, create and solve problems. People band together in difficult times. Although hardship stinks, it propels us forward.
Progress is hard to see. Bad news is highly visible and happens quickly and violently. It may be a pandemic, a tornado or car accident. Our media pounces on every tidbit of depressing news. Conversely, good news is very subtle, often imperceptible. It is like compound interest. Small, but consistent, improvements lift entire civilizations. Steps back to enjoy the progress.
Embrace unscheduled time. My college students have no idea what “free time” is. They are glued to their phones or video games. Not to sound old, but in my time there was much “down time”. Unscheduled time led to creativity. Allocate time and space to pursue creative ideas and solutions. Turn off your electronic devices. Go for a walk. Write in your journal.
Everything has a price, but you don’t pay with cash. Things worth pursuing charge in the form of stress, lack of sleep, uncertainty, difficult people, bureaucracy, conflicting incentives and long hours.
Whether a great marriage, athletic performance or a stellar career, nothing exists without hardships and costs. Hurdles are part of the process, but they deliver great satisfaction in accomplishment.
A long-term focus is wise, but elusive. Long-term thinking is helpful for investing, careers, relationships, and anything that compounds. Although rewards accrue over long time frames, it requires suffering through recessions, bear markets, and personal struggles. Short-term events compromise you psychologically, but are unavoidable. If you remain calm during downturns, you must convince your team to remain engaged. The long-term path also requires recognizing when you’re blindly stubborn, instead of patient.
Expiring information is short and meaningless. However, permanent information, like understanding what never changes about markets, human nature, and the power of incentives, is useful. Unfortunately, permanent information is in shorter supply.
Expiring information dominates headlines whereas permanent information takes time and effort to find. Focus efforts on permanent sources that deliver resiliency for long-term thinking. This focus avoids daily noise that won’t matter in the future.
The big, painful events of your life, such as financial ruin, loss of loved ones and war stick with you and color how you see the world. These “scars” are different for everyone. They explain many variances in how people see the world.
When encountering someone who believes differently than you, it’s possible they were impacted by different scarring experiences. These produce fundamental differences in beliefs and behaviors. Scars help you better understand yourself and others in ways that improve communication, relationships, and decision-making.
Although these are a few favorite highlights, the book covers much more and is highly worthwhile.
Dave Sather is a Certified Financial Planner and the CEO of the Sather Financial Group, a fee-only strategic planning and investment management firm.