The Exchanges

Q And it's insane, right? We're slowing things down. Anyway, we can get off this, but, um, I want to switch to How exactly do you invest your money? Walk me through step by step.

A Well, it's, it's not going to be a long conversation because it's easy. I dollar cost average into index funds. I hope to own them for 50 years, and that's it. My entire net worth is a house, cash, Vanguard index funds, and shares of Markel where I'm on the board of directors, and that's it. And I don't, I don't think it needs necessarily to be more complicated than that. I think it is very intuitive in finance to be like, I will do the best if it's, if my net worth looks like a Rube Goldberg machine, and it's just so complicated, and there's so many levers and strategies in this. And it's not, I don't discount that smart people can do well financially with complicated transactions. I just don't think it's necessary at all. And maybe there's an analogy to health in this. There are the well-known biohackers out there who are just trying, they view their body as a Rube Goldberg machine, and they're like, I gotta maximize this and do this and take these pills and this diet and whatnot. I don't think that's necessarily bad, but without being any, any bit of a health expert at all myself, I'm like, look, if you just eat a balanced diet and sleep eight hours and exercise a couple times a week, that's probably good enough. That's probably getting you 90 or 95% of the way, or maybe even a hundred percent of the way To the results that the biohacker is going to get. I think, I think tha…

AI assessment note: “My entire net worth is a house, cash, Vanguard index funds, and shares of Markel”

Q things that go into creating that outcome. So what stays the same between all these different decades where he's done this, right? So he's done it from buying net net Ben Graham stocks, all the way to buying great businesses, all the way to the patience to do nothing. And then once every 10 years, deploy a whole bunch of cash. What is consistent across that period in your mind?

A Two of the big ones, we could come up with dozens of things that are consistent with someone like Buffett, but the two big ones are endurance, and maybe tied to that, capping a downside risk that allows him to stick around for longer than anyone else. There's also a psychological trait of wanting to keep going longer than anyone else. Um, I, I use this stat in, in my book that 99% of Buffett's net worth was accumulated after his sixtieth birthday. Like, the vast majority of people, including me and maybe you, If we became a billionaire at age 60 would be done. She'd move to Florida and buy a private island and like live happily ever after. For him to be that successful and to keep going full blast for what's now another 33 years and still going stronger than ever is a very unique characteristic that plays a massive role in his success. If Buffett had retired at age 60 or 50, like a normal person would have in that situation, you would have never heard of him. The whole reason he's so successful is just the endurance. And there's a, again, there's a psychological and a financial component to that. Never getting wiped out financially, and the psychology that will allow him to keep going full blast for nearly a century on end now.

AI assessment note: “the two big ones are endurance, and maybe tied to that, capping a downside risk”

Q What is consistent across that period in your mind?

A Two of the big ones, we could come up with dozens of things that are consistent with someone like Buffett, but the two big ones are endurance, and maybe tied to that, capping a downside risk that allows him to stick around for longer than anyone else. There's also a psychological trait of wanting to keep going longer than anyone else. Um, I, I use a stat in, in my book that 99% of Buffett's net worth was accumulated after his sixtieth birthday. Like, the vast majority of people, including me and maybe you, If we became a billionaire at age 60 would be done. She'd move to Florida and buy a private island and like live happily ever after. For him to be that successful and to keep going full blast for what's now another 33 years and still going stronger than ever is a very unique characteristic that plays a massive role in his success. If Buffett had retired at age 60 or 50, like a normal person would have in that situation, you would have never heard of him. The whole reason he's so successful is just the endurance. And there's a, again, there's a psychological and a financial component to that. Never getting wiped out financially and the psychology that will allow him to keep going full blast for nearly a century on end now.

AI assessment note: “the two big ones are endurance, and maybe tied to that, capping a downside risk”

Q What's the difference between being rich and being wealthy?

A The definitions are, are my own, so I'm just making this up, but I think rich is when you have enough money to make your mortgage payment, make your car payment. You can pay off your credit card bill every month. Like, you can afford the things that you're buying, technically. Wealthy, I think, is when you have a degree of independence and autonomy. The weird thing here is that wealth is the money that you don't spend. That's what wealth is, like the homes you didn't buy and the car you didn't buy. It's money that you saved and invested. That is going to give you independence, and that's a hard thing for people, I think, to wrap their head around that wealth is what you don't see, because I can see your house, I can see your car, I can see your clothes, but I have no idea what your net worth is. I can't see your bank, your brokerage account, I can't see your bank account, so wealth is always hidden, and it throws a lot of people for a loop, because if, if I was looking for a role model of physical fitness, Well, I can see your fitness. I can see your weight and your muscle tone and whatnot. It's all visible. But when you're looking for a financial role model, who do you look up to? And a lot of people, particularly young people, will look up to the guy in the mansion with the Ferrari. But that guy, for all you know, is living paycheck to paycheck. A lot of, a lot of those peopl…

AI assessment note: “rich is when you have enough money... Wealthy, I think, is when you have... independence”

Q How does our social group impact our desires, and how should we think about our social group in relation to spending money?

A I always say, like, be very careful who you socialize with, because it will, full stop will set your expectations of what you want. And, um, I use the example that I, I grew up out in the, out in the mountain sticks outside of Lake Tahoe, and it was very much a mountain town, not poor, but not rich by any standards. And, uh, and then I went to college in Los Angeles, Los Angeles during the housing bubble in the mid 2000, when there was just overflowing with literally trillions of dollars of fake money. And, and some people were just such a, such a material culture then and now that like when that fake money flew around, it was just, everyone was just spending it on lifestyle, just inflating everything. And I realized, like, who's happier? It's not even close that it was the people in the middle class mountain town were happier, because it was so much easier to keep your expectations in check. You're like, it was so easy to be like, look, I drive, uh, A three-year-old Ford pickup, and the rich guy drives a two-year-old Ford pickup, and that's, that's the stratification. The stratification was this big, and then in LA, the stratification was 10 miles long, and so even if you are a dentist doing well in LA, you're a dentist making 300 grand a year, driving a Mercedes, you're absolutely amazing, crushing it, but no dentist in LA making 300 grand a year feels like they're crushing i…

AI assessment note: “be very careful who you socialize with, because it will, full stop will set your expectations”

Q But if you look back 30 years ago, and you could see what you've accomplished today, the financial success, the status success that you've had, you, you've blown away any goal that you would have had. Why keep going?

A I think in a healthy way, I can have a very split personality of, on one hand, I can say, man, I'm really good at what I do, and I'm, I'm achieving a lot, and this is amazing, and then I can very quickly flip a switch and say, I'm a nobody, and I've done some really bad work lately, and I think on balance, that's a, that's a pretty healthy personality, because if you only have the ego side, you're going to run yourself off a cliff, and if you only have the humble slash depressed side, you're never going to get anywhere, and so I've been pretty good at being able to toggle back and forth, sometimes, you know, within the same hour, certainly within the same day, And so what keeps you going? Hey, I really enjoy what I do. Writing has never felt like work to me. And I think it's, I think it's the same for you. It's just an extension of kind of who you are. It's never felt like work. And so I enjoy doing it. But also what keeps me going is like the healthy side of me. Part of me says like, I can keep doing this and do good work. And then a minute later, the other bird on the shoulder being like, you suck, you suck at this. And again, on net, I think it's a very healthy personality, even if it's just the two extreme sides.

AI assessment note: “I really enjoy what I do. Writing has never felt like work to me.”

Q What percentage of your net worth is in cash?

A It's probably 20 to 30%. Maybe it's high teens in that in that zone. And it's been like that over the, over the course of, of, of, of big changes in my net worth. I've always added about like that. Now, any financial advisor would look at that and say, Morgan, given your age and income, that's way too much. You don't need that. And I don't even disagree with that. I mean, it is, it is, it is ridiculous, but I value sleeping at night. And as I said before, maybe there's a nugget of my past that's left me with a lower sense of self-confidence of being able to, you know, the idea that this is all going to come crashing down. And the idea that what I value more than anything is not outperforming the market or outperforming my peers, it's independence. And so there are quirks of my personality and my wife's personality that lead me to that. Never in a million years would I recommend that To everyone or even many people. And I think it's, I think it is unique to my personality, but that's the point. How you allocate your money is unique to your, your personality. And I hope you don't judge me and I wouldn't judge you if you do it very differently. I think that's, I think that's the most important part. It's less about what do I do and more the idea that I do it because I'm me and I'm not you.

AI assessment note: “It's probably 20 to 30%. Maybe it's high teens in that in that zone.”

Q Well, it comes down to perspective, right? So, like, if I could see what you see and feel what you feel, that decision would be rational.

A Yeah. There's so many things in life where you can look at other people and the decisions they make, not just in money, but for politics, their health decisions, whatever it might be, and fiercely disagree with it. But what's easy to overlook is that if I were in your shoes and had experienced what you had, had the same family dynamic that you do, the same DNA that you do, I would do the exact same thing. And I think that is a more important question to ask yourself. Like, what financial decisions would I make differently if I were born in a different era, born to different parents, born in a different country? And I think you can't answer that question, honestly, because you don't know, but you know there would be a lot of things different that are completely outside of your control. Where and when you were born would have a massive impact. You and I should not pretend that if we were born in the 19 sixties in Nigeria, that we would have the same views about Investing in the stock market over time that you and I do today. This kind of gets to the topic of luck. And a lot of people, when you bring up luck, they will say something that sounds smart that I've, I fiercely disagree with. They say like, oh, you should increase the surface area of your luck. You should like, oh, the harder I work, the luckier I get. It was like some variation of that. And I'm like, no, if you can do …

AI assessment note: “if I were in your shoes and had experienced what you had... I would do the exact same thing”

Q Do you believe that money should be able to pass between parents and kids?

A Well, able, sure, it's your decision, but there are obviously downsides. And I'm sure, I hope it's a long time for now that I'll leave my kids some money, not a lot. I love the Buffett quote where he says, leave your kids enough money so that they can do anything, but not so much money that they can do nothing. And that I think is really important. I want to use whatever money I've saved to give my kids the best opportunity of building the life that they, that they want. But not so much money that they are forced to live the life that I want for them. I've met some families who are, who are very wealthy, and wealth becomes like a personality burden of, because I inherited this much money, My job is to just be an heir of my grandfather, an heir of my, of, of, of my parents, rather than finding out who I am and discovering who I am for myself. That's true at like the very high levels, but you, you don't want the wealth that you pass your kids to burden them into a lifestyle that they don't want for themselves. You just want to be like, here's enough money so that you can have the leverage and the tools to find out who you want to be and live the life that you want, but not so much that it's going to burden you into like forcing you into a direction that you don't want to be.

AI assessment note: “Well, able, sure, it's your decision, but there are obviously downsides.”

Q Why do you think the best story wins? What, what's behind that?

A What we're trying to do when we read a lot of times is just contextualize whatever fact or story that was within our own lives. And it's much easier to contextualize a story than a statistic because there's a human element to a good story. And I also, it's just so much easier to remember and stick with you. I don't remember any of the formulas that I was forced to memorize in school, forced to memorize the night before the test. I remember a single one, but every good story that I was told, some of them when I was six years old, I still remember. So because it's just so much easier to remember a story than a statistic, and it's easier to contextualize it within your own life, and because there's so much emotion embedded in it, stories are like leverage for good statistics. If you decide, like there's some statistics, like I just said, if, if, if I said, Uh, first platoon of Company E all died on D-Day. That's a statistic. But if you phrase that, if you put a name or a face to it, it becomes a completely different thing. I always use the example of Ken Burns, who makes the best documentaries about U.S. history. And the vast majority of what is in his documentaries are already known. A documentary about the Civil War or World War II. You know how it ends. You know what happened. There's not that much new in there. But he is a better storyteller. Than I think any historian has eve…

AI assessment note: “it's much easier to contextualize a story than a statistic because there's a human element”

Q I want to come to writing later on. Uh, I got a lot of questions about your process around that, but before we get there, what is risk?

A You can have a million different definitions of risk. I think broadly it's anything that's going to prevent you from achieving the goals that you want. That's a very basic answer, but I think that's what it is. And the reason that's important is because take volatility in the stock market. Is that risk? Well, it could be. If you're a day trader, Then yes, if the market goes down tomorrow, that's a risk for you. If you're in, if you're going to retire in 50 years, it's not whatsoever. So just defining it in personal terms. Is I think the most important, but a lot of finance is not that. They define risk as volatility, whatever it might be, recessions, all these different things, but it's a very personal answer. What is risky for me might not be for you and vice versa. And this is what gets back to most financial debates are people with different time horizons talking over each other. There's a quote that I love that is personal finance is more personal than it is finance. That is really important for everyone. You and I should not pretend that risk for Renaissance technologies is going to be the same for you and I within our personal households, like completely, completely and utterly different. So anything that pulls you away from whatever goals you personally have is what, what I would define as risk.

AI assessment note: “broadly it's anything that's going to prevent you from achieving the goals that you want.”

Q you distinguish? Like, how do you get the feedback that the reader has a different framework for thinking now? Like, how do you know that somebody has thought about it? Is it like, it's not something as simple as the number of shares? Is it the number of people who email you afterwards and say something? Or is it just a gut feeling that you get or comment based or?

A First thing I say is there's no good answer for that because it's extremely difficult. I do, of course, I get feedback From readers, uh, through emails and comments, but you have to be careful with that because this is true for any like product reviews. You get huge skews between people who really like the article or people who really hate the article. Not a lot in between. I think feedback is only relevant if like a reader is forced to give it. So you get the biggest, The widest swath of opinions, but most feedback is going to be from the tiny skews on either end. People saying, I love this article. It's great. Or you're an idiot. You have no idea what you're talking about. So the emails, the comments you get from readers can be valuable, but I think, uh, you have to take all of them inevitably with some grain of salt. And then we, we have lots of, of, uh, meetings, conferences by the Motley Fool. So I meet a lot of our members and our readers face to face. And what's good, too, I like about it is that I really enjoy when people are brutally honest, and people come up to you and say, hey, I really disagreed with this last article. I really didn't like when you said this. I really didn't like when, you know, I think you're missing this point. I really like that, because I think there's a sense, in person especially, people will say anything online, but in person, there's a tend…

AI assessment note: “there's no good answer for that because it's extremely difficult. I do, of course, I get feedback”

Q Do you think that the writing about the finance gives you a bit of an outsider's perspective, which gives you an advantage?

A I think there are two sides of it. One is, without a doubt, there are parts of the investing field that I don't understand because I'm not a practitioner. That someone who is a financial advisor or a mutual fund manager or a hedge fund manager Could very rightly look at me and say, you don't understand X, Y, and Z. And they're right about that because I'm sitting at the comfort of my desk from an outsider sort of Monday morning quarterbacking. That's absolutely true. There is another side that I think that, uh, this I think is true for every field too, that it is impossible to think objectively about a field that you reap, that you get your paycheck from.

AI assessment note: “impossible to think objectively about a field that you reap, that you get your paycheck from”

Q How does wealth affect your relationship with your spouse?

A Oh, I think not at all. I don't, I mean, I haven't, it's a great question because I don't think I've thought about that whatsoever, but. You know, when my wife and I met when we were young, we were 1920 years old when we met and had, had nothing. And then no money. We're college students. And of course, nothing. And are we happier today? We have a different sense of life because now we've been together for 20 years and we, uh, we have two, two lovely kids together and whatnot. So there's a very different view on life and a sense of accomplishment for that. But are we happier? And I think that's no, but that's not uncommon. Not everybody, but a lot of people, if you ask them, when was the happiest time in your life when you had the most laughs, the greatest times, a lot of people, not everybody will tell you high school, college, high school, college, there's a man hanging out with my buddies and parties. And we did this crazy thing. We did that crazy thing. And one of the common denominators of that era of that age is you have no money, you know, but you're still very capable of having a great time with your friends and laughing and going out and going to parties and going on road trips, whatever it might be. And so the things that make my wife and I happy, we like walking our dog, and we like that 10 years ago as much as we do today. And even before we had a dog, we like going…

AI assessment note: “Oh, I think not at all.”

Q Has becoming a father changed how you live when you're not with your son?

A Well, we don't sleep very much anymore. So I guess that, and And the truth is, too, I don't, I read probably half as much as I did before he came along. And of course, I, I wouldn't trade him for anything, but I, I miss the amount of reading that I could do. There's no such thing as a Saturday sitting on the couch with a book anymore. It's, I have other duties now. So I, I, I, I definitely miss that. But, um, I, I think it's, it's probably, this is, I think almost every parent would say this too. I think it's just made me more focused on priorities now. Right. Because as soon as you become a parent, it's not about you anymore. Everything's about the other person. So it's made me much more focused on what, what are our goals as a family? And okay, No BS. Cut the crap. We just gotta go out and do that right now. Whatever it takes, we gotta go do it. I think that's something that almost every parent would say.

AI assessment note: “I think it's just made me more focused on priorities now.”