The Savings Expert: Passive Income Is A Scam! Post-Traumatic Broke Syndrome Is Controlling Millions!

People talk a lot about passive income. This is not a thing. Look, there's two ways to get wealthier, and passive income is not part of that equation, but what's really important for people is how we should spend money. Because I've written about money and finance and investing for 20 years, and I can tell you the correlation between how much you spend and how happy you are. It can exist, but it is not as simple as you think.

If you're unhappy with your life, it is a very easy assumption to make that if you had more money, a bigger house, a better car, whatever it might be, things would be better. And it's a lie we tell ourselves, of course, because here's the truth. So much of spending is a psychological itch that you're trying to scratch. And that manifests in so many different ways. For example, life is a competition. It doesn't matter how well I'm doing, it matters how well I'm doing relative to you. And the most tangible way to do that is through material stuff. I was reading some funny stats. They say that if you win the lottery, the probability of your neighbor going bankrupt increases. It's an amazing statistic. So, be careful who you socialize with because you're going to anchor to them as a baseline level of success and happiness. So, is it wrong to buy a Rolex? Absolutely not. But when it's controlling your personality, it's no different than any other addiction where it's forcing you to do things that you otherwise don't want to do.

The first thing that I think that's most important is...

So I've written about money and finance and investing for 20 years and almost never had I myself said what is my spending philosophy? I could tell you how I invest. I can tell you how I save. I could tell you why I do those things. If five years ago if you said Morgan tell me your philosophy about spending in your own life I'd be like I don't really know. And as I looked into it, there are literally tens of thousands of books on how to invest, how to grow your money, how to get rich, how to help your career. That topic is endless. There is virtually no book out there written about spending money. And I think the reason why is because we don't, I think we intuitively think nothing needs to be said because the answer should be obvious. More is better, fancier is better. That's the end of the topic. But if you know particularly wealthier people, I mean it affects everybody but particularly wealthier people, you know it's not that simple that the correlation between how much you spend and how happy you are, it can exist, everyone can spend money in a way it's going to make them happier, but it is not as simple as you think. And as I started digging into it in my own life of when have I been envious of other people of their material possessions, why was I envious, why when have I been jealous, why was I jealous, what kind of spending made me happy. What left me completely flat? It's a much more complicated topic than it seems at the surface. You know, another title for the book could have been the psychology of spending money because that's what this is. So, it's a look at the psychology of greed and envy and social aspiration and like climbing the social ladder, who you're trying to impress, whether those people are paying any attention to you. That's what this book is.

I think it is a very easy assumption to make if you're unhappy with your life that if you had more money, those problems would go away. Sometimes it can be true. It's not automatically false. It's just easier to assume that that's true than it actually is. And so I guarantee you that every single person listening to this right now has some degree of that. If I had a little bit more money, my problems would go away, even if they don't necessarily know it or not. So much of spending is a psychological exercise. There's an itch that you're trying to scratch and that manifests in so many different ways. And so I've often thought of money, look, is money the root of society, the core of society? No. There's obviously a million things more important than money, but I do think it's the clearest window that we can look through to try to figure out what's going on in our own lives, in other people's lives, in society. It shows very starkly what people value, what they're scared of, what they're aspiring to become. There are many more elements to the puzzle. Your health, your friends, your family. We can go on that forever. But money is a very clear window that if you see how somebody engages with money, you're like, 'Oh, I understand your insecurities. I understand your aspirations. I understand your self-confidence. I understand what you think of other people.' You can learn a lot about that.

Yes. And it manifests in very different ways. There's a great financial writer named Tiffany Aliche and she grew up very, very poor and now she's extremely successful and she calls it post-traumatic broke syndrome where even though she has a lot of money right now, she, I don't want to put words in her mouth. My understanding is like she's afraid to spend it because the feeling in her head is I will never go back to that, I can't ever go back to that poor person, post-traumatic broke. And so it can manifest in very different sometimes opposite ways. And so the point is not like if you grew up poor, you're going to want to display it. But the point is that it's a psychological itch. It's not just I want the nice car because nice cars are better. There's a social signaling, you're signaling to others. You're signaling to yourself. It's a trophy for yourself of what you've overcome. The more I dug into it, the more it was so clear of like spending is not just on material stuff. It's not just I want to buy this car or this house or these clothes or this jewelry because it's nice. It's I'm trying to send a signal to others or to myself of what I've overcome. One of the ways I thought about this in my own life was if I was on a deserted island with maybe just me and my family, nobody could see how we were living. Nobody can see your house, nobody can see your car, nobody can see your clothes, nobody can see your jewelry. How would I live? For me, and I think most people in that exercise, you immediately gravitate away from status and towards utility like I would not want a Lamborghini. I probably want like a pickup truck, something that has like more utility if nobody could see it. I would just want utility. I would not want an enormous house. I would want a house with a nice view because I'm not trying to show off to other people. I just want something that is calming and serene to myself. And so once you start seeing the stark difference between utility and status, once you force yourself to see it, you're like, 'Oh, it's everywhere.' Is something inherently wrong with status? Is it wrong to buy a Rolex? Absolutely not. Particularly at certain points of your life. Okay. So, when is it good? When is it bad? When is it indifferent? I don't know. I don't know. It's hard to say what's good and bad in terms of a formula because everybody's different. But I would say this, my own personal desire to show off material things...

...but the reason why is because I had nothing else to offer the world. I had no intelligence. I had no wisdom. I didn't know how to love anyone. I had nothing else to offer friends, family, spouses, whatever it would be. And so the last remaining lever, if you're trying to get attention and respect, is well, look, I have no intelligence to offer. I have no wisdom to offer. Maybe people will admire me for my car. That was why I wanted it. And now that I hope today, 20 years later, I have a little bit more to offer to my wife, to my friends, to my family, to employers and customers, whatnot, then my desire for those things has gone down. Not to zero, but it's gone down. There's a great Warren Buffett quote where he says, 'Success in life is when the people who you want to love you do love you.' And key to that is like you have to ask the question like who do you want to love you. And for a lot of people the quick knee-jerk reaction is everybody. And so you want to have a nice car, nice clothes, nice jewelry because you think everyone's going to stop and stare. When I drive this down the road, people are going to stop and say, 'Look at that guy. Look at her. That's amazing. I admire them. I respect them.' And by and large, that is almost never true because no one's thinking about you as much as you are. They're not paying attention to your car or your clothes or your house. They're busy worrying about themselves. Jimmy Carr, I think you've had on the show before. Is that right? Love Jimmy Carr. He said this a couple weeks ago, I heard it and it was one of those I had to stop and write it down because it was so profound. He said, 'In your 20s, people worry about what other people think of them. In your 30s, you say, I don't care what anybody thinks of me. And in your 40s, you finally realized a truth, which was nobody was thinking about you the whole time. They were busy worrying about themselves.' And look, that's not black and white. Of course, people think about you and look at you and sometimes judge you, but not nearly to the extent that we think. And that was why I get back to the exercise. If nobody was watching, how would I live? The truth is because virtually nobody is watching except the people who I really love and admire and they're gonna admire me for things that have nothing to do with the kind of car that I drive or the clothes that I wear.

Life's a competition. It doesn't matter how well I'm doing. It matters how well I'm doing relative to you. It doesn't matter how big my house is if I'm trying to signal. All that matters is my house is bigger than yours. That's true for all wealth. There's no such thing as you are wealthy once you have x number of dollars. That does not exist. Everything is relative to other people. And the truth is like we live in a world of such material abundance where the majority of people listening to this will have some sort of shelter and a car and can buy clothes and whatnot. And because relative to a lot of history, we live in material abundance. The competition, the arms race for bigger nicer things is extraordinary. And it's way more powerful and potent today than it's ever been for two reasons. One is social media. So I am now aware of the homes that other people live in, the cars that they drive, the clothes, the vacations that they take. I'm now aware of it in a way that we were not 15 years ago. The other thing is because the internet has democratized access to audience and attention. The ability to become extremely rich is much more powerful than it's ever been. It's still rare, of course, but it's easier today than it's ever been to become very, very wealthy, even if only a small number of people are doing it because your potential customer base is now the entire world. You know, 100 years ago, if I was a businessman, my customer base was whoever lived in my town. Now, if you're a businessman, your customer base can be the entire world. And so, it's easier to make a huge fortune. And because of social media, once you make that fortune, people are probably going to know about it because a lot of those people who become very rich are going to say, 'Look at how I'm living.' And so you have this like trickle down aspiration of everyone else being like my definition of wealthy. If you're a young person today, a young person's definition of wealthy might be a multi-billionaire with a private jet and a private island where I think 80 years ago people's definition of wealthy was a three-bedroom house and one car and a happy family. And so we live in a world where like aspirations have inflated by such a dramatic degree that the arms race of spending just gets that much higher.

So I make the point in the book that of the top 10 richest men in the world there are a cumulative 13 divorces among the top 10 richest people and it's a small sample size like you can't really say that much with that but this is a group that is almost universally admired particularly among young men you know Elon Musk Jeff Bezos Mark Zuckerberg how amazing would it be to have that much money but if you dig into their actual their whole life not just their net worth not just the house and the jet that they have but if you look at holistically their entire life you're like I don't know it's not that great. It's one thing to admire someone if you can pick bits and pieces. I want his house and her car and his career and his physique, but you can't pick bits and pieces. You have to take the whole thing. And once you take the whole thing, you realize that like a lot of the people who you may have been looking up to either did not have a better life than you did or it was just marginally better in a way that was easy to overlook.

So, think about everything as a trade-off. Think of a Zebek as a trade-off. There's a trade you're making somewhere. And even, you know, when you aspire, you admire people. If you admire what we've done here, for example, think about the trade-off. Like, even with this team, the team have been working here every single day, including the weekends from morning till night for the last 14 days here in New York. Every single day. Right. Do you want a podcast? Like, do you want the trade? And if you do, fine. But just be informed about, as you say, both sides of the trade.

One of the things I write in the book is what's called the reverse obituary, which is it's a very good helpful exercise to write down. It's kind of morbid, but what do you want your obituary to say? Kind of a weird thing, but for me, everyone's different, but for me, I would want it to say Morgan was a good father, a good husband, a good friend, helped his community, was a good worker. That's what I would want it to say. Never in a million years in that obituary would I want it to say what my income was, how big my house was, how many times I went on vacation, how many horsepower my car had. Like, it's ridiculous to think that that's what it would be. You instantly drift towards the things that you know you actually want in life. And of course, it's going to be different for everyone, but I found it a helpful thing because you realize that it would be completely absurd to put the things that I might be chasing in my life in my obituary. And so if in any given day, in any given year, you're like, I got to earn a higher income and I want to buy a bigger house and I need a new car and all you see, they came out with this watch. But at the end of your life, you know, that's not going to matter. What's going to matter is were you a good spouse, a good parent, a good worker, were you honest? Were you a good friend? Were you funny? That's what's going to matter because that's what you want in your obituary.

Yeah, I think it's equally bad because both of them are the exact same thing which is money's controlling you. Money should be a tool that you use to become a better version of yourself to become a happier, more content version of yourself. But when it's controlling your personality, it's no different than like any other addiction where it's forcing you to do things that you otherwise don't want to do. And that can manifest on either end of the side. Either people can't stop spending or they cannot spend enough. A lot of financial advisers will tell you one of the biggest problems that they have are clients who have saved enough money for retirement. Good job. You saved for 40 years. You maxed out your 401k, did everything you were supposed to and now you're 70 years old and you have enough money to travel and play golf and you won't do it. And I think it's because they become so accustomed to the identity of I'm a saver. Every month I save and every month my net worth goes up and they cannot bring themselves into switching gears and going in the other direction. And for a lot of those people, the money is in full control over their identity. It's telling them how to live, what to like, what to aspire to, what to enjoy. The money is totally in control of their personality and it's just as dangerous and just as detrimental as when you were a teenager of I can't stop spending. And both of those are, the money is like playing the marionette doll of your life. It's telling you exactly what to do and when to do it.

Well, those two points that you just brought up, I think are very related. The first on the point of can money make you happier? The answer is yes, but there's an asterisk next to it that we need to get to. For years, there was a big academic debate of does more money make you happy? A lot of some of the studies showed yes, clearly it does. Others showed studies showed no, it really doesn't. And the academics, the economists were like battling for decades. It's kind of been cleared up in the last just the last couple of years, this last couple of decades with some nuance, which is this. If you are already an unhappy person, if you're already anxious, if you're already depressed, by and large, having more money will not help you at least that much. It might help you a little bit around the margins. If you start as an unhappy, depressed, anxious person. If you are already a happy, content, joyful, laughing person, having more money will give you a better life. So in either direction, it's just leveraging who you already were. It's not going to change you that much. It's just going to leverage who you already were. Very similar to like they say this about power. Like once you gain power in politics or something, it just leverages the personality that you already had. Money is very much like that. And so it's not a panacea in the sense of like oh like if you're miserable like if you had more money it's going to clear up your problems. It can make some of your problems a little bit easier to deal with. But I mean think about it in these stark terms. Let's say you are overweight and unhappy. You hate your job and you're recently divorced and your kids won't talk to you but you live in a mansion that has a Ferrari in the driveway and you got all kinds of fancy stuff. Is that a good life? If everything else in your life sucked and you woke up every morning going, 'Ah, I got to go to work today. I hate my job. I can't stand my job. I'm lonely. I'm miserable. I'm overweight. I can't sleep. I'm addicted to alcohol.' Whatever it might be. Of course, it's a terrible life. The house and the car don't matter at all. But you can flip that around and say like, let's say you live in a very modest middle class house and you drive a 10-year-old Honda Civic, but you love your job. You love your co-workers. You have a great relationship with your spouse. Your kids admire you. You have your friends over for a barbecue every Friday night. Materially, it's very modest. You have what you need. You're not impoverished. You're not homeless. You have the food that you want and the shelter that you want. But you would be an absolute maniac to choose the miserable person in the mansion versus the content, happy person in the middle house. If your goal is to live a good life, it's psychotic to pick one over the other.

Right. I had a similar realization to you a couple years ago when I took my family and I went to Maui for a vacation and I love Maui. It's my favorite place in the world. And now I have kids. So I'm building sand castles with my kids on the beach in Maui. And I remember thinking like this is a 10 out of 10. This is like this is peak life for me. Building sand castles with my kids. Everyone's happy in the sun. But then I had this realization of like if that's a 10. Playing with Legos at home on the living room floor with my kids is like a nine. Like it's really close because the realization was what I enjoy is like quality time with my kids. And I think a lot of the reason that people like travel is not because they like getting on an airplane and flying around the world and being jet-lagged and cramped into a small hotel. What they like is uninterrupted time away from work, away from all the other stresses of everyday life. That's what they actually enjoy. That's what they like, travel. It's not necessarily the location. It's like what the location is doing for you. So the question of will a big house make you happier? It will to the extent that it makes it easier to have your friends and family over because your friends and family are the ones who are actually making you happy. And so the answer can be, will a nice house make you happy? The answer can be yes if you're using it for the right reasons. There was this article in the New York Times, this is probably 10 or 15 years ago and the article said two things happened to Julia Roberts this week. One, she won the Academy Award and two she found out her husband was cheating on her. And so the column said, 'Pop quiz, did Julia Roberts have a good week?' And it's like, you'd be a fool to say yes. It was probably the worst week of her life, I imagine. Yeah. But what we see from the outside was dolled up in a beautiful dress, accepting the highest honor of her career and saying like, 'Wow, that must be amazing.' But it gets back to once you see the full picture, you're like, 'Nah, it's not as easy as it seems.'

I think if there is a formula that I lay out in the book and I make the point that like there's no formula for how to spend money. But if I did try to make a formula for a pretty good life and this extends way outside of money. The formula for a pretty good life is independence plus purpose. If you want to say like how can I be a happy person? You need to be independent. You need to be able to do what you want to do when you want to do it with whom you want to do it with. And you need some kind of purpose that is higher than yourself. And that could be a million different things. It could be friends, it could be family, it could be career, it could be religion, whatever it might be. I think it is very difficult to imagine anyone having a good life without those two things. If your entire life and your schedule is dictated by somebody else of you have to go to this job that you don't like, you have to have a long commute that you don't like, you have to do this when you don't want to do it, it's hard to be happy. And if you don't have any kind of purpose that you're doing it for, it's difficult to be happy. And so the idea that to me, the best thing to spend money on is independence. And I view it as purchasing. I don't view it as saving money. I view it as purchasing independence. That's how I view it, like I'm buying independence when I save. And so to me, the biggest thing that I spend my money on, and this sounds weird, but is saving. And I view that as buying independence. I view that as every dollar that I save is a little bit more independent than I was before. It's a little bit of my future that I now own and control. And if you're listening to this and you're like, 'Look, I'm not financially independent. I have no possibility of being financially independent.' Independence exists on a spectrum. And literally every dollar that you save is a little bit more independent than you were before. If you have $100 in the bank in savings, that can make it so that if you were to lose your job, you have a little bit more flexibility for rent or groceries or whatever it might be that you didn't before. $1,000, $10,000, any amount that you have is a little bit more independent than you were before. And so when you view one of the cores of living a good life as independence and any amount of saving money will buy you independence, I think that's a powerful observation for people. And then the purpose part is going to be different for everyone. For me right now in my life, it's being a good father. That's what I want my identity to be. That's my overarching goal in life is to be a good dad. I think the vast majority of parents will tell you that there was no greater joy, purpose than watching their kids thrive. It can also bring a lot of sorrow and a lot of sleepless nights and a lot of anxiety and a lot of worry that comes along with it. But nothing that I've experienced or any of the other parents that I know would say that anything in their life has come before that, that it's been a great thing. So we got on this point because the formula is independence plus purpose. For me the purpose is being a parent. That's not going to be true for everyone. But you're trading independence for that. I'm trading internal independence that I'm giving up. I want to sacrifice for my kids. I want to, loyalty to people who deserve your loyalty is a wonderful thing. Loyalty to people who don't deserve your loyalty sucks. And so if you are working, if you're giving your loyalty to a company that doesn't respect you, that sucks. That's terrible. Loyalty to people who deserve it is a very fulfilling thing. So my kids deserve my loyalty. How did they earn that loyalty? Just by being my kids. And there's some days where I feel like they don't appreciate it, of course. But I think that tends to be true. People get into problems when they are loyal to people or organizations or political affiliations who don't deserve the loyalty. That's when it gets dangerous.

But back to the formula, independence plus purpose. Most people have no purpose. Oh yes. So I think it's, I think yes, everyone is going to be, I'm dependent on my wife, my kids. You know, there is dependency there, but I'm choosing, I chose her as a spouse. I chose to have kids and so I still did it on my terms. And so, you're never going to be or I think you don't want to be 100% independent in the sense that you don't rely on anyone and no one relies on you because then you have no purpose. It's choosing who you want. I think it's, I think you're not independent if you have to be loyal to a job that you hate, but you have to have it because it's the only job you got and you have to do it and you have to pay this exorbitant rent on an apartment that you don't even enjoy that much. Like those are dependence on things that you don't want, but like I want to be dependent on my family because that gives me purpose.

If you try to get technical about it, I would say what are the odds that at some point in your life, you're going to lose your job and not be able to find another job for six months. The odds are not bad that that will happen to you at some point. Not very comfortable to think about. Maybe it's already happened to you already, but the odds that at some point that will happen are pretty good. And therefore, if you were to say like, look, a good measure of some level of higher-end independence, not a low level of independence, but like a medium level of independence is six months, is I could keep myself going for six months. Now, for a lot of people, that's a daunting task. And it's okay. You're probably not going to achieve that when you're 18. It's going to take some savings to get there, but that is a level at which you can exhale to a degree that most people have never been able to do before of like there's going to be some bad stuff happening in your life. It's going to be uncomfortable, but it's going to be okay. And for most people, for most of history, it was there's bad things going to happen to you and you're not going to be okay. It's going to be very traumatic. And one of the important things there is when you lose that job, the ability to go find a good job, even a better job where you want doing what you want with the people who you like working with is very important. If you don't have any savings, you're going to have to by default pick the very first job that you can come across, even if it's a terrible job in a location that you hate, doing something you hate, working with people you don't like. And so the flexibility to give yourself time to find a job that is a little bit easier and better for you, that is the purpose of savings.

Well, you're looking at your neighbor who won the lottery and your neighbor's probably bought a vacation house, bought a new car, sending their kids to private school, whatever it might be. And you watching that are like, I need that for myself. It's unfair that they have it and I don't and I'm gonna go do any reckless financial decision to get that. So much of what we think is normal. Our definition of success is what other people around us have. And so if you are watching your neighbor live a better life than you, then all of a sudden your definition of a good life is what they're doing. And you will do some reckless things to get it. I think that's what happens. And so one of the takeaways there is like be careful who you socialize with because you're going to anchor to them as a baseline level of success and happiness. Be very careful with what you do and who you look up to and who you aspire to. I grew up in Lake Tahoe, California, and this was before tech money when it was not a wealthy area. It is now because all the tech money from San Francisco came up. But Tahoe in the 90s and early 2000s was just out in the woods and you know you could buy a house for nothing and most people in town didn't have any money. And then I went to college in Los Angeles where there is a lot of wealth, there are high expectations and there are Lamborghinis and Rolls-Royces and whatnot. And one of my observations was people were happier in Tahoe. And I think the reason why is because the definition of success in Tahoe back then was a two-bedroom house and a pickup truck. That was success. In Los Angeles, the definition of success was a mansion and a Bentley. And so it was just easier for people in Tahoe to be like, I'm good. I check the boxes. Like look, I'm successful. Look at my tiny little house and my beat up pickup truck. That's success, right? And so that was like be careful who you socialize with because you're going to anchor to their level of success.

I think it's, I had this friend 10 or 20 years ago and he said, 'I don't save any money because I don't see the purpose. All I'd be able to save is a hundred bucks a month and what's that going to do for me?' And since I don't think it's going to do anything for me, I might as well just go spend it. And I remember thinking, no, no, that's like $100 in savings or if you do it for a year, $1,200 in savings is $1,200 more independence than you had before. And again, not if, but when you lose your job or your car breaks down, you're going to realize how unbelievably valuable that money is. And it's not savings, it's independence that it's giving you. So the idea that independence is on a spectrum. It is not you either don't have to work or you have to work. It's not that stark, but most people think of it in those terms. Why would I try to become independent if I have no chance of not working? And the simple way to view it is every dollar that you save is a piece of your future that you own, that you control, that is yours. The flip side of that is like every dollar of debt that you have is a piece of your future that somebody else controls. It's a moment in time in the future that is not yours. It belongs to somebody else. And so I've always viewed it on a spectrum. When I was younger and much poorer, I was a big saver. Even though like was I independent? Like no. Of course I had to work. I had to work to pay my rent and pay my groceries. Of course. But I viewed it as like every $20 that I saved, every $50 that I saved put me in a better position than I was before. And looking back on it, I don't think I could have articulated that 20 years ago, but it's what I felt. A lot of that for me back then was coming from a place of fear. I didn't have a lot of self-confidence in myself, in my career. So, I was like, I need to save to prepare for when this all comes crashing down. And even though it didn't come crashing down, I'm so glad that I did it because I've had a sense of financial security and I've had a sense of independence financially since I was in my early 20s. Not because I had saved a ton, I hadn't, but any amount that I saved, I viewed as like the cushion that gave me a much higher sense of confidence that if or when things go wrong, I'm not going to be flailing. I'm going to have some cushion to fall back on.

So let's start at the very bottom. You're homeless. You're panhandling. Reliant on the kindness of strangers. As you go up from there, you can be completely reliant on your boss in a job that you don't like. Now that's another low level. As you go up from there, you have, look, I'm relying on my job. I'm relying on my paycheck, but I probably have some opportunities. I could go work at another job. I could choose to work here. I could choose to work there. And then you go up from there. It's like, yo, I like my job and I have some savings. So, if I lost this job, I can fall back onto it from there. You can go up from there to have, you can live where you want. You can work where you want. You can change fields. You can go and you can do a completely different job. You can take two months off and travel if you wanted to. Like, you're working your way up all the way to the highest level of financial independence, which is I don't need to work anymore. I've saved enough and I can wake up every morning and do whatever I would like to do. That's obviously an aspiration that for most people will never be reached until they're maybe in their, you know, 70s and they're retiring and they have social security and some other savings from there. But for most people, like a good level of independence as a good goal is enough savings so that if you lost your job, if your car broke down, if you needed to replace the roof on your house, you would be able to do it without losing that much sleep. That is a realistic level that I think almost anyone can achieve.

The first thing that I think that's most important, this is the first and the last thing, this is the most important part, is that all wealth, your feeling of wealth is what you have minus what you want and it's so easy to ignore the latter matter. I talk about in the book my late grandmother-in-law, my wife's grandmother, passed away a couple years ago. For 30 years, she lived off of nothing but $1,700 or $1,800 a month in social security. Not a lot of money. By most accounts, very little money. But she didn't want anything more. She did. If she made $1,700 a month, she did not want $1,701. She was perfectly happy. She found all of her happiness working in her garden, going for walks, watching the birds, watching the sunrise, watching the sunset, talking to her friends, hanging out with her family. But if you asked her, you said, 'You only make $1,700 a month. You're broke. Doesn't that make you unhappy?' She'd be like, 'What? Do you think having more money makes the sunset more beautiful? Do you think having more money makes going for a walk more pleasant?' And I'm not saying you should live like, you should be content with that amount of money, but the point is like she was content. She was totally content. And it was her choice. And I think she was happier financially than some billionaires because there's a lot of billionaires who have a billion dollars but they want two. They have two billion but they want four.

It's huge and that's actually a good realization to be like a lot of this is not something you can solve on a spreadsheet. It's not something you can solve with a formula. It's chemicals in your brain. And obviously some people are going to be more susceptible to that than others. I think my grandmother-in-law just had, for whatever it was, was wired differently than most people. Part of that was like she was a product of the Great Depression. She grew up during the Great Depression which probably like lowered her expectations. She never had...

Social media and whatnot. But of course, I think some people are wired differently than others for a level of contentment. But I think just there's a big thing in psychiatry where diagnosing a mental illness is sometimes more important than the treatment. If you just get a diagnosis of like, oh, you're ADHD, whatever it is, just knowing just like the fact that you can stop questioning, why am I having these thoughts? You can understand why you have those thoughts is more important than the treatment sometimes. And I think that's true here. If it's easier said than done to completely control your desires, but just knowing why you're doing it and realizing that it's probably not going to give you the happiness that you want, that it's just like any addiction that the more you chase it, the further away it's going to get, can go a big ways. And so for me myself, there's all the time there are moments where I'm like, 'Oh, I should get that car. Maybe I should get a bigger house.' I have those feelings daily. So the feelings don't go away. But I think I'm better now than I've been in the past at reminding myself of like it's not going to make you happier. You know that. You've tried this before. You've tried it before and it didn't make you happy. What is going to make you happy is spending time with your kids, having a good relationship with your wife and your own physical health and laughing with your friends and having good times with people who you enjoy. You know that's going to make you happy and you know that's not. And I have to remind myself because it's not intuitive. And I have dopamine that tells me you should want more and more and more and more. So, you never get over it, but I think once you've diagnosed the problem, it becomes easier at just like spotting that emotion and realizing that it's telling you a story that's probably not true.

I think it's probably true that everybody without exception is addicted to something and it's just harnessing that process for whatever it might be. So some people are addicted to... my wife's addicted to gardening, let's say. She couldn't care less about investing or spending money on a nice... she could not care less about her car or my car or your car. But if you have a good garden, if you have a pretty garden, she's all over this. So everybody's got their thing and it's just like can you harness that for productivity? I think a lot of like extremely successful people are people who took their natural addiction and harnessed it for productivity into their business. And that's why they're so successful. This became obsessed with one thing and it's a good question of whether we can actually guide that addiction or if it's just kind of pre-wired in itself. I think it's true for myself, someone who's written books about money for 20 years, thought about money for 20 years. My mom tells a story that when I was three, I would sit there and count pennies. I don't want to count seashells. I don't want to count cards. I don't want to count rocks. I want to count money. And so I think I've always had this disposition towards being fascinated with money. Why? I don't know. Because I did it when I was three. I did it before I could even think through it. But I think everyone has their little thing. It's always been fascinating to me. I don't think I'm obsessed with money. I don't think it controls my life. But I've had to go out of my way to have a healthier relationship with it. But I think it's definitely been true that the reason that I've found myself in this career is that it's always been my thing. And I think everybody has that thing in their life. You know, people talk about addictive personalities and I was reflecting on one of my best friends who was an alcoholic, had a problem with gambling, then had a problem with eating, then got obsessed with marathons and he traded each one of those things for the next thing. So now he's like obsessed with health and fitness. And so when I was thinking about people that are struggling with money problems and even my own historical struggle with money, I think I probably just traded it for something. And actually, I'm kind of happy about that because I traded it for a better addiction, one that was productive.

My career and I guess doing this. I'm pretty addicted to doing this, right? And I think it makes me happier than the plasma screen.

I think what's true about a money addiction is that it tends to be the classic addiction of like you tell yourself if only I get one more hit, so to speak, then I'll be satiated. Then that'll be enough. And the answer is like no, it absolutely will not. I'll tell you like a personal thing. I don't think this is true, but it made me laugh. My wife and I bought a new house about a year ago. It's an awesome house. We love it. It's great. And my brother-in-law came over the other day and he goes, 'You know, you're only going to live here for 2 years before you want to buy a bigger house.' And I had to laugh because I'm like, 'God, I don't think that's true. I think we're going to live here for a while, but I know what you're saying is right. That's the natural guide towards it.' That when we bought the house, it was like, 'Oh, this is going to be so great. Can you imagine? We're going to get to do this and get to do that and we have these neighbors and whatnot.' And you become accustomed to that very quickly and then your gaze shifts a little bit higher. You're like, 'Yeah, but look at that house over there. That one's nicer, isn't it?' That's always the natural thing. And that's dopamine at work. That is dopamine purely at work. Because the truth is our previous house was great. And our previous house used to be our dream. And dopamine exists when there's a gap between where you are and where you want to be with something. And when that gap closes, they often refer to that as the arrival fallacy. Right. Which is really kind of what you're describing. You tell yourself once I get there, then I'll be good. Then that's enough. And it's a fallacy because you know that's not true. As soon as you get to whatever that mountaintop is, there's another mountain above it. It pushes you in a way that is not easy. Like nobody should pretend that you can just go do this today. But it pushes you into appreciating what you have now and finding your joy, finding your happiness through other things that don't have the arrival fallacy. Never have I as a parent said, 'Oh, if only I had one more kid, then that would be great.' There's really no arrival fallacy for kids. You just kind of be like this. Like I just appreciate being around you. I just appreciate all the... and if anything, it's the opposite. It's you look back and you're like, 'Oh, I miss when you were younger.' It's like, 'Oh, it's sad how fast you're growing up.' If anything, rather than looking ahead and being like, 'Oh, it's going to be better then,' you're looking back and you're like, 'Ah, I wish I had appreciated that phase a little bit more.'

That's your purpose. Yeah.

I think there's a difference. It's a subtle difference but between pursuing something that you genuinely enjoy doing which for you is this and your business and whatnot versus being addicted to something, chasing something that you don't have yet. And so I imagine, you can correct me if I'm wrong, but I imagine when you're doing this, you don't tell yourself, 'I need to work harder so that one day the podcast can be up here.' I imagine, tell me if I'm wrong, but I imagine you come to work every day and you're like, 'I like doing this today. I liked today. I liked yesterday. I'm going to like tomorrow.' And so you're not chasing a false goal. You just actually enjoy doing it.

But here's the truth. The reason that we live in a world with a ton of technology and a ton of great businesses and great medicine, whatnot, is because virtually everybody for all of human history has woken up every morning and said, 'It's not enough. I need more.' That's the fuel of progress. And I don't want to live in a world where everyone wakes up and says, 'I have all I need.' Because then progress would stop that day. We'd probably start declining that day. And so there is a paradox here of like as a whole society, I'm grateful and you should be grateful that people wake up unfulfilled because we live in a way better world today than existed 100 or 200 years ago because of that. And the richest people in the world who I think are by and large tortured psychologically have created amazing technology that you and I benefit from. And the reason we're doing this podcast is because people before us who were way wealthier than you and I woke up in the morning and said this is not enough. Bill Gates, Jeff Bezos, all those people, Elon Musk, Mark Zuckerberg, they woke up and said I don't care if I have a hundred billion dollars. It's not enough. I need to create better technology and that's great. We benefit from that. And so there is a paradox here that will never change. That will never change. So there's a paradox that like the better society becomes, I think it's always going to be the case that as a whole society we're going to have a level of angst and anxiety and not be satisfied and say it's not enough. At the individual level though I think you can recognize that game and contextualize it with your own life and say like look, I want more money. I want to sell more books and have a better career. I want to save more money. I also have to go so far out of my way to put it into context and say none of it's going to matter unless I have a higher purpose beyond that money. So I think you can aspire for more and still go out of your way to realize what the expectations game is. Even if you can't perfectly control it, it's similar to like I want to eat a good diet. Of course I want to eat healthy food. I'm not going to pretend for a second that I don't want Oreos and ice cream because they're great and they're always going to taste great. And so I'm never going to get to a point where I say, 'I don't want a nicer house.' I'm a human and so are you and so is everyone else. You're always going to have those feelings. But you can recognize the game. You can recognize the voice that's talking to you and realize when that voice lies to you and when it's telling you a story that is either false or just a little bit incomplete. I think if you had to say who is the happiest person in the world on average, not like naming a person, but if you had to describe the life of like who's the happiest person out there, my guess is it's probably something close to a middle-class family that lives in a three-bedroom house and has a 5-year-old car, but they have an amazing marriage, tons of friends, they're in good health, but they are by any other statistic ordinary. And at the end of their life more than the people who are very very successful, that ordinary family is going to look back when they're on their deathbed when they're 95 years old and be like that was good, that was a good time.

No, here's the truth. I think on the nature-nurture spectrum, most of what we believe and the feelings that we have is forged at conception and we're just wired that way. Okay. And there's not much we can do about it. Some people have different aspirations. Elon Musk was born wired very differently than you and I. And there's nothing we can do about that. So, we are who we are, but I think we can put those feelings into a better context. Even if we can't control having those feelings, we can choose, we can tell ourselves a more complete story about why we're having those feelings and what those aspirations will actually do to our happiness.

Well, one of the things, this is a little bit different than the question that you asked, but one of the things that's important is that a lot of the people who do retire early, who they tell themselves, 'I'm going to save so much money and I'm going to retire when I'm 32 and then life's going to be great.' What actually happens is they retire at 32 and six months later they're bored out of their mind and they realize that like what actually makes you happy is purpose and for a lot of people their purpose can be their career or they realize they had this idea that when they retired it was just going to be a great life but the truth is all of their friends are working and don't have time to go play golf with them on Tuesday afternoon and so a lot of people who retire early end up going back. They realized it was not what it was made out to be because if the formula is independence plus purpose, they gained independence but they kind of lost their purpose and so it was incomplete. They didn't get what they wanted.

And this term passive income has become like completely overused because for example a lot of people when they talk about passive income they're like, 'Oh, I'm going to own real estate. I'm going to have some rentals and that's passive income.' If you think owning a rental property is passive income you've never owned a rental property because there's nothing passive about it. It is a constant chain of broken toilets and leaky roofs and tenants who don't pay you on time and there's nothing passive. That's a full-time job doing that. And so I heard someone say this recently that there's two ways to get wealthier. You can sacrifice more or you can want less and that's it. And passive income is not part of that equation.

Sacrifice more.

Work in a job that has a lot of downsides that might stress you out and requires you to wake up early and go to work and do some things that you don't want to do and spend time away from your kids in a way that you don't want to do. Sacrifice more or want less. Those are your two choices. And I think that's important in the passive income debate because I don't think there's, but there by and large is not a thing of passive income. Even if you're just like, you know, you put your money in a savings account that pays 3% interest. Well, you had to sacrifice to earn that money and to save that money and to delay the gratification of that money. I really think it's an ironclad formula. Sacrifice more or want less. Those are your two options.

Of course, everyone's always going to want the easy answer. Just like for health, the answer is eat a better diet and exercise. Nobody wants that. They just say, 'What's the secret potion? What's the secret formula?' And maybe now we have Ozempic. So maybe now it's closer to a secret formula. But the truth is, what's the secret to better health? Sacrifice more because working out and lifting weights and running is a sacrifice. It's not fun. It hurts. That's why it's good. Or want less, be happier with your imperfect body.

I don't think it's necessary. And you could point to people I've written about in my books who had no financial education, no training, did not read the Wall Street Journal, could not tell you how the Federal Reserve works, but they had control of their psychology, control of their emotions, they worked hard, they saved their money, they invested it, and that's all you need. So the answer is you don't need to know how this works. Just in the same way that in order to be healthy, you don't need a PhD in biology. You don't need to understand how cell division works in order to be in good shape. And I think it's the same for the economy. And it can actually backfire for a lot of people that once they start reading the Wall Street Journal and learning a bit about finance, it increases their confidence more than their ability. So they're like, 'Oh, I read the Wall Street Journal. I should go day trade crypto now because I read a thing that teaches me how the Federal Reserve works.' So now like I'm going to... It increases your confidence more than your skill.

And so I think it's important to be an informed citizen and the Federal Reserve impacts your life and tariffs impact your life. So it's important to have some baseline understanding, but I think that's more about being an informed citizen and informed voter than it is having financial skill.

Well, what's the meme of like the tail spectrum of like the poor person drives a Toyota, the middle person has a Porsche, a BMW, a Mercedes, and the rich person goes back to Toyota of like it's like whether you are very uneducated or extremely wise, you tend to end up... And so I think it does tend to be the truth that the people who do the best financially either have like no financial education or extreme financial education. And it's a person in the middle that has their confidence increased much faster than their ability and they're like, 'Oh, no, no. I read this thing on Reddit that taught me about day trading. So now I'm going to go bet my entire net worth on this company I've never heard of.'

I think a lot of it is like the richer you become, you realize that the big house and the fancy car didn't do anything for you. It didn't give you what you thought it was going to give you. And then so you're like, look, I'm just going to go back to utility. Like status didn't do it for me, so I'm going to go back to utility. It can also be the case that if you're successful and rich, you can gain your admiration and your attention through the business that you built or the intelligence that you have or the friendship that you can offer others and therefore your desire to be like, 'Look at my car, look how cool my car is,' just goes down from there.

I think you'll see that in investing that like the absolute lay person will invest in index funds and the extremely experienced Wall Street veteran will invest in index funds as well. And it's a person in the middle that just has like a little bit of intelligence, a little bit of experience, a little bit of information that is trying as hard as they can to outperform the market.

Yeah, I think there's a truth too that like there's an optimal level of intelligence that you want for investing where you want to be smart enough to understand the basics but not so smart that the basics bore you. And a lot of people get so smart that they're like, look, index funds, compound interest, like I'm just putting... it's too boring. Like I need something really complex to satisfy the intelligence that I have. And there's a sweet spot where like for me I'm just like, 'Oh, index funds and compound interest.' Like that's kind of as high as my intelligence goes here. But I think the truth is that that is the best position to be in. Smart enough to understand the basics, but not so smart that they become boring to you. Because once they're boring to you, you're just like, 'Ah, sweep those away. Let's try to pull some more levers here.'

Yes, monthly wage growth.

Well, but this is growth. So in any given year, even if the growth is 2%, that's 2% higher than the previous year. So this is not wages over time. Now, it is true that if you look over a 25-year period and you took the average American family, not everybody, but the median, that their wages adjusted for inflation have gone up. Not up as much as people would want over 25 years, but that they are better off than they were 25 years ago. What is also true is that the average median family would probably disagree with that statement even if it is true statistically for several reasons. One of which is their expectations have gone up over the last 25 years. The other is even if you're looking at average wages, average and when we talk about these statistics does not refer to any specific family. This is just a statistical number. Everyone spends their money differently. So, if I told you, hey, average family, you're richer than you were in the year 2000. And they're like, yeah, but I'm trying to put my kids through college and have you seen the price of college? And like, yeah, that might be true because the price of TVs has gone down, but have you seen the price of rent and housing? Like, at the individual level, these statistics don't really mean that much and never have. I think a lot of economists get into a problem with that when they're like, well, statistically X, Y, and Z has happened. But ignoring the psychology and the individuality of like what's happening actually on the ground in people's heads and how they spend their money, there's just an endless amount of nuance in here. And so I think it's always been true that we live in a world where over long periods of time there's good economic growth. We become wealthier. We have bigger better things. We have more income. We have better medicine. It's equally true too that like there is always something legitimate to complain about. And it's legitimate to complain about. It's not just like, 'Oh, you should be more grateful.' It's a real thing. And so when I look at a graph like this, actually, what like if I was thinking just like with my math head, I'd be like, 'Oh, there's been quite a bit of growth over the last 25 years.' Like the growth has gone up and down, but it's growth. You know, never in this chart is growth below zero.

It depends. I mean it's at the individual... Are the rich getting richer? Yes. Are the poor getting poorer? Statistically no. Even adjusted for inflation. I mean it depends what period we're talking about here. There was about a 20 or 30-year period where the answer was unequivocally yes. There was an interesting trend over the last 10 years where in percentage terms the group of wage earners who had the highest percentage growth were actually the low wage earners. That was true for two or three years after COVID where if you were a minimum wage worker those were in percentage terms great years for you for getting wages. It's tapered off. So the answer to your question is the rich are getting richer. The poor I think are treading water by and large. There's always people who are doing differently than that. But when one group of society is getting richer, treading water feels like you're falling. And the specifics of how people spend their money. So even if on average adjusted for inflation their wages are flat, but if your rent skyrocketed or you're trying to send your kids through college or you have a long commute and you got to put gas in your tank, at the individual level, things can feel very very different from what the statistics show.

I think as an amateur student of history across cultures all over the place all through history what you want to avoid more than anything in society is when probably a third of the population wakes up every morning and says this isn't working. That's the point at which it's going to collapse from there is when enough people wake up in the morning and just have this feeling of like whatever this is it's not working out for me. You want to avoid that part. And so like look I tend to be a free markets guy. I'm a capitalist. I think people should be able to become very wealthy, etc., etc. You also don't want to get to a point where people become so wealthy that a big chunk of society just wakes up every morning and says, 'Fuck this. This is not going to work out for me.' And I think we're either there or precariously close to there in a lot of areas in the world. Social media, that's always been the case. And social media makes it a hundred times worse than it's ever been. For example, you and I are recording this a day after Charlie Kirk was assassinated yesterday. And there were who knows what number percentage it was. But I think it was not hard on social media to find people who were celebrating it yesterday. Now when Martin Luther King was assassinated, did those people exist too who celebrated assassination? Of course. But because of social media, by and large, you did not hear from them unless you were part of that group. Whereas today, virtually everybody yesterday saw people celebrating Charlie Kirk's assassination. And so even if those feelings existed in the past, they're much more apparent today. You see them today in a way that you did not before. So because of that, it's easy to say we're more divided today. We're more extreme today. We're more pessimistic today. I think the nuance is that's not actually true. You're just more aware of it. Those feelings always existed. They existed in the 1990s. They existed in the 1950s. It was just much easier to contain those and for the average citizen who got their information from one newspaper, one evening news program to feel like things were much more stable and in control and that people were much more uniform in their opinions than they actually were.

Right. Because in that situation too, we talked about this earlier. I don't know that individual's name, doesn't matter, but no one refers to him by his name. It's them. It's they. And once you dehumanize any group of people like that, and this has been the case for all of human history, that 99.9% of people cannot kill another human, but they're perfectly fine killing them. That group, once you dehumanize, you can do anything. And at a much lower level, everyone realizes this with road rage. I've had road rage. The person cut me off. That son of a... honked my horn, flipped... I don't get too extreme with it. But in things I would never do eye to eye. But once I'm looking at a car, then there's no human there. And my ability to have a level of anger is so much higher than it would be if we were just looking eye to eye. I had this experience a couple years ago where I was pulling into a gas station and I inadvertently cut somebody off. It was an accident, but I totally cut them off and he honked and threw up his middle finger at me. And we since we pulled into the same gas station, we were now like eye to eye and I walked over to him and I think he thought I was like coming to confront him and I put up my hands and said, 'I just want to apologize. I didn't mean to cut you off. I'm so sorry. I did.' It was not on purpose. And he I think he was so surprised and he was like, 'Wow, thank you. Thanks for like...' and we had this moment of like almost hugging of just like 'I hope you have a great day.' It was one of those like once in the moment when you strip the humanity off it, when it was two cars each other, both of us were like 'fuck you.' Once we looked eye to eye it was like 'oh brother, like it's okay, it's okay.' And I think that was just like for me that was an individual example of what happens at society when you strip the humanity off it. We're capable of so much anger and hate. Eye to eye we're like 'oh that's all good.' And I think all of us know somebody who we disagree with politically regardless of what it might be and it's easy to be like 'oh that person's an idiot. They're stupid. They're ill-informed.' And actually, if you sit down and talk to them, you're like, 'Ah, look, we might have some disagreements here, but it's all good. Cheers. Let's have a good night.' Like, eye to eye, the vast majority of people get along and get together. But social media has turned all of life into road rage.

That was what he did by and large was going into schools and being like, 'I know you disagree with me. Let's talk.' And he turned it from road rage into a conversation between people. And even if you disagreed with him, I think he did it very right in that sense. And I think that's why people from all over the spectrum are devastated in the last 24 hours. It was like he was one of the people who was doing it right. Even when you disagreed with him, he was having a conversation face to face and bringing people together.