November 18, 2024 • 15 mins
Can you truly understand the magic of compounding and what it means for your financial future? This episode promises to unravel the intricate dance between money and psychology, inspired by the insights from the YouTube video "The Psychology of Money in 20 Minutes" by Escaping Ordinary. We dive into the idea of "financial DNA," exploring how our unique life experiences shape the way we handle money, often without us even realizing it. With a nod to Warren Buffett's legendary career, we emphasize the power of starting early with investments and the often underrated influence of patience and compounding over time.
Ever wondered why some investments hit the jackpot while others wither away? We tackle the concept of tail events, revealing their pivotal role in areas as diverse as art collecting and venture capitalism. Through captivating stories of figures like Heinz Berggruen and companies such as Amazon, we demonstrate the potential of diversification and the necessity of embracing risk. Richness and wealth are not the same, and understanding this difference requires a mindset shift, viewing market fluctuations as an inherent part of the investment landscape rather than a threat to be feared.
Is it possible to step off the never-ending treadmill of wanting more? As we share the cautionary tale of Bernie Madoff, we challenge the relentless pursuit of excess and invite you to redefine what "enough" means in your financial life. The discussion urges a focus on aligning money goals with personal values, stepping away from societal pressures, and making conscious financial decisions. Finally, we encourage reflection on your "financial DNA," advocating for continuous learning and self-awareness in crafting a financial journey that truly resonates with your desires and aspirations.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to another deep dive, this time into the
world of money.
Well, not really the numbersthemselves, but more the
psychology behind them.
Oh, interesting, we're taking alook at a YouTube video called
the Psychology of Money in 20Minutes, by Escaping Ordinary
yeah, it's by BC Marks and we'regoing to try to uncover how our
(00:20):
experiences and emotions kindof secretly control our
financial decisions.
Speaker 2 (00:27):
Yeah, I mean, it's really fascinating how we often
think we're being super rationalwith our money choices, but
there's this whole other layer,almost, like you know, like a
financial DNA that's shaped byall our experiences in life.
Speaker 1 (00:36):
Yeah, exactly Like.
Imagine if you grew up duringlike a period of crazy high
inflation.
Speaker 2 (00:41):
Oh yeah.
Speaker 1 (00:41):
Would that make you a little bit more hesitant to
spend money?
Speaker 2 (00:45):
Oh, absolutely Like even fearful maybe.
Yeah, you'd be way morecautious.
For sure, that'd be likeingrained in your financial DNA.
Now, on the flip side, imaginesomeone who, like, came of age
during a huge economic boom.
Speaker 1 (00:57):
Right.
Speaker 2 (00:57):
They might be way more comfortable with risk.
Speaker 1 (00:59):
Yeah.
Speaker 2 (01:00):
You know, seeing debt as like a tool, not a danger.
Speaker 1 (01:03):
Yeah.
Speaker 2 (01:03):
Their experiences tell a totally different story.
Speaker 1 (01:05):
Yeah, it's kind of like our past.
Is this invisible force that'skind of pushing us towards
certain financial choices in thepresent?
It is.
It's a little bit freaky whenyou think about it, it is yeah.
Speaker 2 (01:17):
It really shows how personal our relationship with
money is, and that actually tiesinto this other cool point that
the video makes about the powerof compounding, especially when
you look at the story of WarrenBuffett.
Speaker 1 (01:29):
Oh yeah, the Oracle of Omaha.
But it's not just about hislike stock picking genius Right.
Speaker 2 (01:34):
Right.
The video really highlightsthat time is Buffett's biggest
advantage.
Speaker 1 (01:39):
OK.
Speaker 2 (01:40):
He started investing super young, which let his
investments just snowball overdecades.
Yeah, thanks to the magic ofcompounding.
Speaker 1 (01:48):
Yeah.
Speaker 2 (01:49):
Think about it like starting early, even with small
amounts, can make a massivedifference in the long run.
Speaker 1 (01:54):
It's like a superpower almost.
Speaker 2 (01:55):
Yeah.
Speaker 1 (01:55):
Just letting time do the work for you.
They actually compared in thevideo what would have happened
if he started investing at 30instead of 10.
Speaker 2 (02:02):
Oh, wow, and the difference is crazy.
Speaker 1 (02:04):
Yeah, he would still be like super rich, obviously,
but instead of billions he'd beworth millions.
Wow.
Speaker 2 (02:09):
So it really drives home the point that time is your
best friend when it comes toinvesting.
Speaker 1 (02:15):
Absolutely.
Speaker 2 (02:16):
But you know, it's so easy to get caught up in the
day to day financial news.
Speaker 1 (02:20):
Oh yeah.
Speaker 2 (02:20):
You know all the little ups and downs, but that
can sometimes make us miss thebigger picture For sure.
Speaker 1 (02:27):
I think we tend to fixate way more on the negative
stuff, like the market crashes,the losses, but we kind of
overlook the slow and steadyprogress that's happening over
time.
It's like focusing on a tinydip in the stock market, while
ignoring the fact that it'sgenerally trending upwards over
the long term.
Speaker 2 (02:44):
Yeah, it's like paying attention to, like the
daily weather report andcompletely forgetting about the
changing seasons.
There's always going to be someups and downs, but the overall
trend is what really matters.
Speaker 1 (02:54):
Totally.
The video uses a great examplewith healthcare.
Like healthcare, advancementshave saved so many lives over
time but, it happened gradually.
Right, we don't see headlinesevery day about every tiny
improvement that's made, but thelong-term impact is huge.
It's a good reminder to keepthings in perspective.
Like a lot of times, progresshappens very quietly and it's
(03:15):
happening underneath all thisnoise of all the daily events.
Now the video also talks aboutsomething that can really throw
a wrench in things luck and risk.
They talk about the story ofBill Gates.
Speaker 2 (03:26):
Oh, yeah, yeah.
Speaker 1 (03:27):
The classic story of you know the brilliant kid who
builds this massive tech empire.
But the video kind of digs alittle deeper and highlights how
much luck played a role.
Speaker 2 (03:37):
Right.
Speaker 1 (03:38):
It's pretty wild to think about it Like back in the
late 1960s, gates High Schoolactually had a computer, a
Teletype Model 30.
Wow, that was like a one in amillion chance back then.
Speaker 2 (03:50):
Talk about being in the right place at the right
time.
Yeah, it gave him and PaulAllen this huge head start.
Speaker 1 (03:55):
Absolutely.
Speaker 2 (03:55):
They had access to technology that most people
couldn't even dream of.
Speaker 1 (03:58):
Yeah, gates himself has even said that having that
early exposure was crucial toMicrosoft's success.
But then the video contraststhat with this other story of
Kent Evans, who was Gates'sbrilliant friend, who died young
in a mountaineering accident.
Oh wow, yeah, that's a prettystark reminder that luck can be
a double-edged sword.
Speaker 2 (04:17):
It really is, and it highlights how unpredictable
life can be.
You know, both Gates and Evanswere incredibly smart, but their
paths went in completelydifferent directions because of
things that were totally out oftheir control.
Speaker 1 (04:30):
It really makes you think about how much control we
actually have over our ownsuccess.
Speaker 2 (04:36):
It does.
Speaker 1 (04:36):
So if luck plays such a big role, does that mean we
should just kind of throw ourhands up and let fate decide our
financial future?
No, not at all.
Yeah.
Speaker 2 (04:44):
I think, while we can't completely eliminate luck
or risk, understanding how muchinfluence they have can help us
make smarter decisions.
Speaker 1 (04:52):
Okay.
Speaker 2 (04:52):
It encourages us to be a little bit more humble
about our successes and realizethat sometimes things are just
out of our hands.
And that leads perfectly intoanother really important point
the video makes about the realkey to happiness.
Speaker 1 (05:05):
Okay, Now this is where it gets interesting.
We all know, but is it reallythe key to happiness?
Speaker 2 (05:12):
Well, that's the question, isn't it?
The video makes the case thattrue happiness doesn't come from
just accumulating a ton ofwealth.
It's more about having controlover your time and having the
freedom to do what you love.
Right, it's like money isbuying you the opportunity to
choose how you spend your days.
Speaker 1 (05:28):
Yeah, that makes a lot of sense.
It's not about the money itself, but what it allows you to do
with your life.
Speaker 2 (05:32):
Exactly a lot of sense.
It's not about the money itself, but what it allows you to do
with your life, exactly Like.
Imagine a job that pays superwell but it's high stress and
leaves you exhausted with notime for anything else.
Now compare that to a job thatpays less but gives you more
flexibility to spend time withyour family, pursue hobbies,
travel or whatever brings youjoy.
Which one sounds morefulfilling?
Speaker 1 (05:52):
It's a tough choice, but for me it would be the
freedom and the flexibility.
It goes back to that idea thattime is more valuable than money
.
Speaker 2 (06:00):
It is.
Speaker 1 (06:00):
Or at least that money can be a way to buy back
some of your time.
Speaker 2 (06:03):
Right.
It's about finding that balancebetween financial security and
living a life that you actuallyenjoy.
Using money as a tool to reachyour goals, not making it the
goal itself.
Speaker 1 (06:13):
You know, this is making me think about how we all
define enough when it comes tomoney.
What might be enough for oneperson could feel like scarcity
to someone else.
Speaker 2 (06:23):
Yeah, that's a great point.
And speaking of, like,unexpected outcomes and stuff,
the video talks about thisconcept called tail events.
Speaker 1 (06:30):
OK, have you ever heard of that?
I've heard the term, but I'mnot really sure what it means.
Speaker 2 (06:34):
OK, so basically there are these like rare,
unpredictable events that have amassive impact on the outcome,
way bigger than anyone expects,kind of like.
Speaker 1 (06:45):
Hold on.
Let's unpack these tail eventsand how they fit into this whole
money psychology thing.
After a quick break, Don't goanywhere.
Okay, so before the break wewere talking about these tail
events.
You're saying they're likethese rare, unpredictable things
that can have a huge impact.
Speaker 2 (06:59):
Yeah, exactly these events that have a way bigger
impact than anyone could predictit.
The video actually used theexample of this art dealer,
heinz Berggruen.
Okay, he collected all this artby, like Picasso and Matisse.
Speaker 1 (07:11):
Okay, but how does art collecting tie into this
whole tail events idea?
Speaker 2 (07:15):
So, berggruen, he knew that not every single piece
he bought would end up beingsuper valuable.
Right, he was betting on just afew of those pieces becoming
like masterpieces, like thoserare tail events that appreciate
like crazy and basically drivemost of his returns.
Speaker 1 (07:32):
So it's like venture capitalists.
Speaker 2 (07:34):
Yeah.
Speaker 1 (07:34):
They invest in a bunch of startups, knowing that
most of them will fail Exactly,but hoping that one or two
become like the next big thing.
Speaker 2 (07:41):
Exactly, it's that understanding that a tiny number
of events can have this massiveimpact overall.
And think about Amazon.
Ok, their success wasn't justabout selling books online Right
, it was about those tail eventslike Amazon Prime and AWS.
Speaker 1 (07:57):
Yeah, those were game changers, for sure.
Speaker 2 (07:59):
Exactly those are the things that are huge now.
Speaker 1 (08:01):
Yeah.
Speaker 2 (08:01):
They even dwarf all their other ventures.
Speaker 1 (08:03):
Even with flops like the Fire Phone along the way.
Speaker 2 (08:06):
Exactly.
The video actually quotes JeffBezos talking about this.
After the Fire Phone failed,Bezos said that Amazon was
working on much bigger failures.
Wow.
So he was basically saying thatyou can't really innovate
without taking some risks.
Speaker 1 (08:21):
Right.
Speaker 2 (08:22):
And knowing that some things just won't work out.
Speaker 1 (08:24):
Yeah, you got to be OK with some experiments failing
.
Speaker 2 (08:26):
You can't make a breakthrough without a few
stumbles along the way.
Exactly, and this whole tailevents way of thinking, it's not
just for like big companies,it's actually relevant to like
your own personal finances too.
Speaker 1 (08:37):
OK, how?
So I'm trying to picture howthis applies to me.
Speaker 2 (08:41):
It's about recognizing that you can't
predict everything.
You might make a ton ofinvestments, but maybe only a
few will really take off.
Speaker 1 (08:50):
OK.
Speaker 2 (08:50):
Diversifying and being patient are key, and being
open to those unexpected wins.
Speaker 1 (08:56):
So basically, don't put all your eggs in one basket
and be prepared for somesurprises.
Speaker 2 (09:01):
Exactly Even Warren Buffett's success.
It came from just a handful ofextremely successful investments
.
Speaker 1 (09:07):
Really.
Speaker 2 (09:08):
Most of his picks were just average.
Speaker 1 (09:10):
Hmm, Interesting, you know.
This reminds me of somethingelse.
The video talked about thedifference between being rich
and being wealthy People seem touse those terms interchangeably
.
Speaker 2 (09:18):
Yeah, it's a really important distinction, though
being rich is all about likeoutward appearances, you know,
fancy cars, lavish vacations,all that stuff.
True wealth is about havingassets that haven't been spent
yet.
Ok, it's about long termfinancial security.
Speaker 1 (09:32):
So it's like someone could look rich but actually be
drowning in debt.
Speaker 2 (09:36):
Exactly.
Speaker 1 (09:36):
While someone living a more modest life could have a
huge investment portfolio that'sjust quietly growing.
Speaker 2 (09:41):
Exactly True.
Wealth is often invisible.
Speaker 1 (09:45):
Right.
Speaker 2 (09:45):
And it takes patience and delayed gratification.
It's about thinking generationsahead, not just about your next
purchase.
Speaker 1 (09:52):
So it's not about keeping up with the Joneses,
it's about building a solidfinancial foundation.
Speaker 2 (09:57):
Exactly, and the video makes a really good point
about how our culture kind ofglorifies the trappings of
wealth, not the habits thatactually create it.
Right, we see celebritiesshowing off their fancy
lifestyles, but we don't see allthe discipline and smart
financial decisions that gotthem there.
Speaker 1 (10:14):
Yeah, it's like we see the tip of the iceberg.
All the flashy stuff, right,but all the hard work and
sacrifices hidden underneath.
Speaker 2 (10:21):
Exactly.
And that actually brings us toanother interesting concept from
the video the real price ofinvesting.
Speaker 1 (10:27):
Okay, I'm intrigued.
What's the real price besides,like the actual money you put in
?
Speaker 2 (10:32):
So the video uses this analogy of climbing a
mountain.
When you climb a mountain, youknow there are going to be
challenges along the way.
Speaker 1 (10:39):
Right.
Speaker 2 (10:40):
You know storms, difficult terrain, you might
even have to change your route,but you accept those risks as
part of the journey to get tothe summit.
Speaker 1 (10:49):
So you're saying investing is kind of similar.
Speaker 2 (10:51):
Yeah.
Speaker 1 (10:52):
There will be ups and downs, moments of doubt, but
you have to accept that as partof the process.
Speaker 2 (10:57):
Exactly, but a lot of investors try to avoid those
inherent risks.
They try to time the marketperfectly, jumping in and out,
trying to get something fornothing.
Speaker 1 (11:06):
Right.
Speaker 2 (11:06):
The video actually compares this to stealing a car
instead of buying it.
Speaker 1 (11:11):
Wow Okay.
Speaker 2 (11:12):
You might get away with it for a while, but
eventually there will beconsequences.
Speaker 1 (11:15):
So the real price of investing isn't just the money.
Ok, you might get away with itfor a while, but eventually
there will be consequences.
So the real price of investingisn't just the money Right.
It's the emotional rollercoaster, exactly the uncertainty
, exactly that comes with it.
Speaker 2 (11:22):
And the key is to view that price as an admission
fee to something worthwhile.
Speaker 1 (11:27):
Yeah.
Speaker 2 (11:27):
Not as like a penalty or a punishment.
Speaker 1 (11:29):
OK.
Speaker 2 (11:30):
If you focus on the long term goal, the ups and
downs become way less scary.
Speaker 1 (11:34):
Yeah, so it's all about perspective.
Instead of being afraid ofmarket fluctuations, you view
them as a natural part of thejourney.
Speaker 2 (11:41):
Exactly, and that mindset shift is so important.
It helps you avoid makingimpulsive decisions based on
fear or greed.
Speaker 1 (11:49):
Speaking of which, the video also talked about this
concept called hedonictreadmills.
Speaker 2 (11:54):
Oh yeah.
Speaker 1 (11:55):
It sounds kind of complicated.
Speaker 2 (11:57):
It does, but I think the idea itself is pretty
relatable.
Yeah, I agree, it's basicallythat tendency we all have to
constantly want more, even whenwe've already got a pretty good
level of comfort and success.
Speaker 1 (12:08):
Right.
Speaker 2 (12:09):
We get a raise.
We want a bigger house, a nicercar.
We achieve one goal and weinstantly set our sights on the
next bigger one.
Speaker 1 (12:16):
It's like we're always running but never getting
anywhere.
Speaker 2 (12:18):
Exactly, it's this never-ending cycle of wanting
more, and it can actuallyprevent us from feeling happy
and financially secure.
The video used the example ofBernie Madoff, the Ponzi scheme
guy.
Speaker 1 (12:30):
Oh yeah, Didn't he already have like billions of
dollars he did?
Why would someone with thatmuch wealth even need to run a
scheme like that?
Speaker 2 (12:37):
That's the hedonic treadmill in action.
Even with all that wealth, hewas still driven by this
insatiable need for more.
Speaker 1 (12:44):
Wow.
Speaker 2 (12:45):
Which ultimately led to his downfall.
Speaker 1 (12:47):
That's a pretty powerful cautionary tale.
It reminds us that true wealthisn't just about how much money
you have.
Speaker 2 (12:54):
It's not.
Speaker 1 (12:54):
It's about finding contentment and knowing when you
have enough.
Speaker 2 (12:58):
Exactly.
It's about making sure yourfinancial goals actually align
with your values and figuringout what really matters to you.
Speaker 1 (13:06):
So, instead of chasing the next big thing, we
should be focusing on what trulybrings us satisfaction.
Right, figuring out what enoughmeans to us can be the key to
financial and personalwell-being.
Couldn't agree more OK.
So we're back and I'm stillthinking about that enough thing
.
It's so easy to get caught upin comparing yourself to
everyone else and feeling likeyou're always behind.
Speaker 2 (13:26):
Yeah, it's the classic keeping up with the
Joneses problem.
Speaker 1 (13:29):
Yeah.
Speaker 2 (13:30):
But this video really encourages us to just step off
that crazy treadmill you knowand figure out what enough means
for ourselves.
Speaker 1 (13:37):
Right, because what's enough for one person can be
totally different for someoneelse.
It's about matching your moneygoals with your own values and
what you want in life.
Speaker 2 (13:46):
Exactly Finding that balance where you feel
financially secure and you havethe freedom to do the things you
really care about.
It might not be a mansion or afancy car for everyone.
Speaker 1 (13:55):
Right.
It's about making choices thatline up with how you want to
live your life, and thatdefinition of enough probably
changes as you go through lifetoo.
Speaker 2 (14:04):
Right, absolutely.
It's a conversation you'realways having with yourself,
checking in and makingadjustments to make sure your
money decisions reflect what youreally want.
Speaker 1 (14:13):
Yeah, like checking your financial compass every now
and then.
Speaker 2 (14:16):
Exactly Making sure you're still on the right track.
Speaker 1 (14:18):
And, at the end of the day, money should be a tool
to help us live better lives.
Speaker 2 (14:22):
For sure it shouldn't be the other way around.
Speaker 1 (14:25):
Well, this has been a fascinating deep dive.
It's really made me thinkdifferently about my own
relationship with money andwhat's important to me.
Speaker 2 (14:32):
Yeah, it's so interesting to explore this
human side of finance, you know,going beyond the numbers and
into the psychology that shapesall our decisions about money.
Speaker 1 (14:42):
And I have to say, this video.
We talked about the psychologyof money in 20 minutes by
Escaping Ordinary.
It's a great starting point foranyone who wants to learn more
about this stuff.
Speaker 2 (14:50):
Oh yeah, definitely.
And, of course, the book thatinspired the video Psychology of
Money by Morgan Housel.
That's a must read for anyonewho's serious about
understanding this topic.
Speaker 1 (14:59):
Before we go, I want to leave everyone with a
question to think about.
If you had to write down yourown financial DNA, what would be
the key events or lessons thatshaped it, and how is that
affecting your financialdecisions today?
Speaker 2 (15:12):
That's a really great question.
Taking the time to think aboutthose experiences, both the good
and the bad ones, it can helpus understand our own biases and
make better choices.
Speaker 1 (15:23):
So, yeah, think about that for a bit.
Examine your own financial DNAand use that knowledge to make
better decisions and create afinancial life that truly
reflects what you value.
Until next time, keep learning,keep exploring and remember the
best investment you can make isalways in yourself.
A
Welcome to another deep dive, this time into the
world of money.
Well, not really the numbersthemselves, but more the
psychology behind them.
Oh, interesting, we're taking alook at a YouTube video called
the Psychology of Money in 20Minutes, by Escaping Ordinary
yeah, it's by BC Marks and we'regoing to try to uncover how our
(00:20):
experiences and emotions kindof secretly control our
financial decisions.
Speaker 2 (00:27):
Yeah, I mean, it's really fascinating how we often
think we're being super rationalwith our money choices, but
there's this whole other layer,almost, like you know, like a
financial DNA that's shaped byall our experiences in life.
Speaker 1 (00:36):
Yeah, exactly Like.
Imagine if you grew up duringlike a period of crazy high
inflation.
Speaker 2 (00:41):
Oh yeah.
Speaker 1 (00:41):
Would that make you a little bit more hesitant to
spend money?
Speaker 2 (00:45):
Oh, absolutely Like even fearful maybe.
Yeah, you'd be way morecautious.
For sure, that'd be likeingrained in your financial DNA.
Now, on the flip side, imaginesomeone who, like, came of age
during a huge economic boom.
Speaker 1 (00:57):
Right.
Speaker 2 (00:57):
They might be way more comfortable with risk.
Speaker 1 (00:59):
Yeah.
Speaker 2 (01:00):
You know, seeing debt as like a tool, not a danger.
Speaker 1 (01:03):
Yeah.
Speaker 2 (01:03):
Their experiences tell a totally different story.
Speaker 1 (01:05):
Yeah, it's kind of like our past.
Is this invisible force that'skind of pushing us towards
certain financial choices in thepresent?
It is.
It's a little bit freaky whenyou think about it, it is yeah.
Speaker 2 (01:17):
It really shows how personal our relationship with
money is, and that actually tiesinto this other cool point that
the video makes about the powerof compounding, especially when
you look at the story of WarrenBuffett.
Speaker 1 (01:29):
Oh yeah, the Oracle of Omaha.
But it's not just about hislike stock picking genius Right.
Speaker 2 (01:34):
Right.
The video really highlightsthat time is Buffett's biggest
advantage.
Speaker 1 (01:39):
OK.
Speaker 2 (01:40):
He started investing super young, which let his
investments just snowball overdecades.
Yeah, thanks to the magic ofcompounding.
Speaker 1 (01:48):
Yeah.
Speaker 2 (01:49):
Think about it like starting early, even with small
amounts, can make a massivedifference in the long run.
Speaker 1 (01:54):
It's like a superpower almost.
Speaker 2 (01:55):
Yeah.
Speaker 1 (01:55):
Just letting time do the work for you.
They actually compared in thevideo what would have happened
if he started investing at 30instead of 10.
Speaker 2 (02:02):
Oh, wow, and the difference is crazy.
Speaker 1 (02:04):
Yeah, he would still be like super rich, obviously,
but instead of billions he'd beworth millions.
Wow.
Speaker 2 (02:09):
So it really drives home the point that time is your
best friend when it comes toinvesting.
Speaker 1 (02:15):
Absolutely.
Speaker 2 (02:16):
But you know, it's so easy to get caught up in the
day to day financial news.
Speaker 1 (02:20):
Oh yeah.
Speaker 2 (02:20):
You know all the little ups and downs, but that
can sometimes make us miss thebigger picture For sure.
Speaker 1 (02:27):
I think we tend to fixate way more on the negative
stuff, like the market crashes,the losses, but we kind of
overlook the slow and steadyprogress that's happening over
time.
It's like focusing on a tinydip in the stock market, while
ignoring the fact that it'sgenerally trending upwards over
the long term.
Speaker 2 (02:44):
Yeah, it's like paying attention to, like the
daily weather report andcompletely forgetting about the
changing seasons.
There's always going to be someups and downs, but the overall
trend is what really matters.
Speaker 1 (02:54):
Totally.
The video uses a great examplewith healthcare.
Like healthcare, advancementshave saved so many lives over
time but, it happened gradually.
Right, we don't see headlinesevery day about every tiny
improvement that's made, but thelong-term impact is huge.
It's a good reminder to keepthings in perspective.
Like a lot of times, progresshappens very quietly and it's
(03:15):
happening underneath all thisnoise of all the daily events.
Now the video also talks aboutsomething that can really throw
a wrench in things luck and risk.
They talk about the story ofBill Gates.
Speaker 2 (03:26):
Oh, yeah, yeah.
Speaker 1 (03:27):
The classic story of you know the brilliant kid who
builds this massive tech empire.
But the video kind of digs alittle deeper and highlights how
much luck played a role.
Speaker 2 (03:37):
Right.
Speaker 1 (03:38):
It's pretty wild to think about it Like back in the
late 1960s, gates High Schoolactually had a computer, a
Teletype Model 30.
Wow, that was like a one in amillion chance back then.
Speaker 2 (03:50):
Talk about being in the right place at the right
time.
Yeah, it gave him and PaulAllen this huge head start.
Speaker 1 (03:55):
Absolutely.
Speaker 2 (03:55):
They had access to technology that most people
couldn't even dream of.
Speaker 1 (03:58):
Yeah, gates himself has even said that having that
early exposure was crucial toMicrosoft's success.
But then the video contraststhat with this other story of
Kent Evans, who was Gates'sbrilliant friend, who died young
in a mountaineering accident.
Oh wow, yeah, that's a prettystark reminder that luck can be
a double-edged sword.
Speaker 2 (04:17):
It really is, and it highlights how unpredictable
life can be.
You know, both Gates and Evanswere incredibly smart, but their
paths went in completelydifferent directions because of
things that were totally out oftheir control.
Speaker 1 (04:30):
It really makes you think about how much control we
actually have over our ownsuccess.
Speaker 2 (04:36):
It does.
Speaker 1 (04:36):
So if luck plays such a big role, does that mean we
should just kind of throw ourhands up and let fate decide our
financial future?
No, not at all.
Yeah.
Speaker 2 (04:44):
I think, while we can't completely eliminate luck
or risk, understanding how muchinfluence they have can help us
make smarter decisions.
Speaker 1 (04:52):
Okay.
Speaker 2 (04:52):
It encourages us to be a little bit more humble
about our successes and realizethat sometimes things are just
out of our hands.
And that leads perfectly intoanother really important point
the video makes about the realkey to happiness.
Speaker 1 (05:05):
Okay, Now this is where it gets interesting.
We all know, but is it reallythe key to happiness?
Speaker 2 (05:12):
Well, that's the question, isn't it?
The video makes the case thattrue happiness doesn't come from
just accumulating a ton ofwealth.
It's more about having controlover your time and having the
freedom to do what you love.
Right, it's like money isbuying you the opportunity to
choose how you spend your days.
Speaker 1 (05:28):
Yeah, that makes a lot of sense.
It's not about the money itself, but what it allows you to do
with your life.
Speaker 2 (05:32):
Exactly a lot of sense.
It's not about the money itself, but what it allows you to do
with your life, exactly Like.
Imagine a job that pays superwell but it's high stress and
leaves you exhausted with notime for anything else.
Now compare that to a job thatpays less but gives you more
flexibility to spend time withyour family, pursue hobbies,
travel or whatever brings youjoy.
Which one sounds morefulfilling?
Speaker 1 (05:52):
It's a tough choice, but for me it would be the
freedom and the flexibility.
It goes back to that idea thattime is more valuable than money
.
Speaker 2 (06:00):
It is.
Speaker 1 (06:00):
Or at least that money can be a way to buy back
some of your time.
Speaker 2 (06:03):
Right.
It's about finding that balancebetween financial security and
living a life that you actuallyenjoy.
Using money as a tool to reachyour goals, not making it the
goal itself.
Speaker 1 (06:13):
You know, this is making me think about how we all
define enough when it comes tomoney.
What might be enough for oneperson could feel like scarcity
to someone else.
Speaker 2 (06:23):
Yeah, that's a great point.
And speaking of, like,unexpected outcomes and stuff,
the video talks about thisconcept called tail events.
Speaker 1 (06:30):
OK, have you ever heard of that?
I've heard the term, but I'mnot really sure what it means.
Speaker 2 (06:34):
OK, so basically there are these like rare,
unpredictable events that have amassive impact on the outcome,
way bigger than anyone expects,kind of like.
Speaker 1 (06:45):
Hold on.
Let's unpack these tail eventsand how they fit into this whole
money psychology thing.
After a quick break, Don't goanywhere.
Okay, so before the break wewere talking about these tail
events.
You're saying they're likethese rare, unpredictable things
that can have a huge impact.
Speaker 2 (06:59):
Yeah, exactly these events that have a way bigger
impact than anyone could predictit.
The video actually used theexample of this art dealer,
heinz Berggruen.
Okay, he collected all this artby, like Picasso and Matisse.
Speaker 1 (07:11):
Okay, but how does art collecting tie into this
whole tail events idea?
Speaker 2 (07:15):
So, berggruen, he knew that not every single piece
he bought would end up beingsuper valuable.
Right, he was betting on just afew of those pieces becoming
like masterpieces, like thoserare tail events that appreciate
like crazy and basically drivemost of his returns.
Speaker 1 (07:32):
So it's like venture capitalists.
Speaker 2 (07:34):
Yeah.
Speaker 1 (07:34):
They invest in a bunch of startups, knowing that
most of them will fail Exactly,but hoping that one or two
become like the next big thing.
Speaker 2 (07:41):
Exactly, it's that understanding that a tiny number
of events can have this massiveimpact overall.
And think about Amazon.
Ok, their success wasn't justabout selling books online Right
, it was about those tail eventslike Amazon Prime and AWS.
Speaker 1 (07:57):
Yeah, those were game changers, for sure.
Speaker 2 (07:59):
Exactly those are the things that are huge now.
Speaker 1 (08:01):
Yeah.
Speaker 2 (08:01):
They even dwarf all their other ventures.
Speaker 1 (08:03):
Even with flops like the Fire Phone along the way.
Speaker 2 (08:06):
Exactly.
The video actually quotes JeffBezos talking about this.
After the Fire Phone failed,Bezos said that Amazon was
working on much bigger failures.
Wow.
So he was basically saying thatyou can't really innovate
without taking some risks.
Speaker 1 (08:21):
Right.
Speaker 2 (08:22):
And knowing that some things just won't work out.
Speaker 1 (08:24):
Yeah, you got to be OK with some experiments failing
.
Speaker 2 (08:26):
You can't make a breakthrough without a few
stumbles along the way.
Exactly, and this whole tailevents way of thinking, it's not
just for like big companies,it's actually relevant to like
your own personal finances too.
Speaker 1 (08:37):
OK, how?
So I'm trying to picture howthis applies to me.
Speaker 2 (08:41):
It's about recognizing that you can't
predict everything.
You might make a ton ofinvestments, but maybe only a
few will really take off.
Speaker 1 (08:50):
OK.
Speaker 2 (08:50):
Diversifying and being patient are key, and being
open to those unexpected wins.
Speaker 1 (08:56):
So basically, don't put all your eggs in one basket
and be prepared for somesurprises.
Speaker 2 (09:01):
Exactly Even Warren Buffett's success.
It came from just a handful ofextremely successful investments
.
Speaker 1 (09:07):
Really.
Speaker 2 (09:08):
Most of his picks were just average.
Speaker 1 (09:10):
Hmm, Interesting, you know.
This reminds me of somethingelse.
The video talked about thedifference between being rich
and being wealthy People seem touse those terms interchangeably
.
Speaker 2 (09:18):
Yeah, it's a really important distinction, though
being rich is all about likeoutward appearances, you know,
fancy cars, lavish vacations,all that stuff.
True wealth is about havingassets that haven't been spent
yet.
Ok, it's about long termfinancial security.
Speaker 1 (09:32):
So it's like someone could look rich but actually be
drowning in debt.
Speaker 2 (09:36):
Exactly.
Speaker 1 (09:36):
While someone living a more modest life could have a
huge investment portfolio that'sjust quietly growing.
Speaker 2 (09:41):
Exactly True.
Wealth is often invisible.
Speaker 1 (09:45):
Right.
Speaker 2 (09:45):
And it takes patience and delayed gratification.
It's about thinking generationsahead, not just about your next
purchase.
Speaker 1 (09:52):
So it's not about keeping up with the Joneses,
it's about building a solidfinancial foundation.
Speaker 2 (09:57):
Exactly, and the video makes a really good point
about how our culture kind ofglorifies the trappings of
wealth, not the habits thatactually create it.
Right, we see celebritiesshowing off their fancy
lifestyles, but we don't see allthe discipline and smart
financial decisions that gotthem there.
Speaker 1 (10:14):
Yeah, it's like we see the tip of the iceberg.
All the flashy stuff, right,but all the hard work and
sacrifices hidden underneath.
Speaker 2 (10:21):
Exactly.
And that actually brings us toanother interesting concept from
the video the real price ofinvesting.
Speaker 1 (10:27):
Okay, I'm intrigued.
What's the real price besides,like the actual money you put in
?
Speaker 2 (10:32):
So the video uses this analogy of climbing a
mountain.
When you climb a mountain, youknow there are going to be
challenges along the way.
Speaker 1 (10:39):
Right.
Speaker 2 (10:40):
You know storms, difficult terrain, you might
even have to change your route,but you accept those risks as
part of the journey to get tothe summit.
Speaker 1 (10:49):
So you're saying investing is kind of similar.
Speaker 2 (10:51):
Yeah.
Speaker 1 (10:52):
There will be ups and downs, moments of doubt, but
you have to accept that as partof the process.
Speaker 2 (10:57):
Exactly, but a lot of investors try to avoid those
inherent risks.
They try to time the marketperfectly, jumping in and out,
trying to get something fornothing.
Speaker 1 (11:06):
Right.
Speaker 2 (11:06):
The video actually compares this to stealing a car
instead of buying it.
Speaker 1 (11:11):
Wow Okay.
Speaker 2 (11:12):
You might get away with it for a while, but
eventually there will beconsequences.
Speaker 1 (11:15):
So the real price of investing isn't just the money.
Ok, you might get away with itfor a while, but eventually
there will be consequences.
So the real price of investingisn't just the money Right.
It's the emotional rollercoaster, exactly the uncertainty
, exactly that comes with it.
Speaker 2 (11:22):
And the key is to view that price as an admission
fee to something worthwhile.
Speaker 1 (11:27):
Yeah.
Speaker 2 (11:27):
Not as like a penalty or a punishment.
Speaker 1 (11:29):
OK.
Speaker 2 (11:30):
If you focus on the long term goal, the ups and
downs become way less scary.
Speaker 1 (11:34):
Yeah, so it's all about perspective.
Instead of being afraid ofmarket fluctuations, you view
them as a natural part of thejourney.
Speaker 2 (11:41):
Exactly, and that mindset shift is so important.
It helps you avoid makingimpulsive decisions based on
fear or greed.
Speaker 1 (11:49):
Speaking of which, the video also talked about this
concept called hedonictreadmills.
Speaker 2 (11:54):
Oh yeah.
Speaker 1 (11:55):
It sounds kind of complicated.
Speaker 2 (11:57):
It does, but I think the idea itself is pretty
relatable.
Yeah, I agree, it's basicallythat tendency we all have to
constantly want more, even whenwe've already got a pretty good
level of comfort and success.
Speaker 1 (12:08):
Right.
Speaker 2 (12:09):
We get a raise.
We want a bigger house, a nicercar.
We achieve one goal and weinstantly set our sights on the
next bigger one.
Speaker 1 (12:16):
It's like we're always running but never getting
anywhere.
Speaker 2 (12:18):
Exactly, it's this never-ending cycle of wanting
more, and it can actuallyprevent us from feeling happy
and financially secure.
The video used the example ofBernie Madoff, the Ponzi scheme
guy.
Speaker 1 (12:30):
Oh yeah, Didn't he already have like billions of
dollars he did?
Why would someone with thatmuch wealth even need to run a
scheme like that?
Speaker 2 (12:37):
That's the hedonic treadmill in action.
Even with all that wealth, hewas still driven by this
insatiable need for more.
Speaker 1 (12:44):
Wow.
Speaker 2 (12:45):
Which ultimately led to his downfall.
Speaker 1 (12:47):
That's a pretty powerful cautionary tale.
It reminds us that true wealthisn't just about how much money
you have.
Speaker 2 (12:54):
It's not.
Speaker 1 (12:54):
It's about finding contentment and knowing when you
have enough.
Speaker 2 (12:58):
Exactly.
It's about making sure yourfinancial goals actually align
with your values and figuringout what really matters to you.
Speaker 1 (13:06):
So, instead of chasing the next big thing, we
should be focusing on what trulybrings us satisfaction.
Right, figuring out what enoughmeans to us can be the key to
financial and personalwell-being.
Couldn't agree more OK.
So we're back and I'm stillthinking about that enough thing
.
It's so easy to get caught upin comparing yourself to
everyone else and feeling likeyou're always behind.
Speaker 2 (13:26):
Yeah, it's the classic keeping up with the
Joneses problem.
Speaker 1 (13:29):
Yeah.
Speaker 2 (13:30):
But this video really encourages us to just step off
that crazy treadmill you knowand figure out what enough means
for ourselves.
Speaker 1 (13:37):
Right, because what's enough for one person can be
totally different for someoneelse.
It's about matching your moneygoals with your own values and
what you want in life.
Speaker 2 (13:46):
Exactly Finding that balance where you feel
financially secure and you havethe freedom to do the things you
really care about.
It might not be a mansion or afancy car for everyone.
Speaker 1 (13:55):
Right.
It's about making choices thatline up with how you want to
live your life, and thatdefinition of enough probably
changes as you go through lifetoo.
Speaker 2 (14:04):
Right, absolutely.
It's a conversation you'realways having with yourself,
checking in and makingadjustments to make sure your
money decisions reflect what youreally want.
Speaker 1 (14:13):
Yeah, like checking your financial compass every now
and then.
Speaker 2 (14:16):
Exactly Making sure you're still on the right track.
Speaker 1 (14:18):
And, at the end of the day, money should be a tool
to help us live better lives.
Speaker 2 (14:22):
For sure it shouldn't be the other way around.
Speaker 1 (14:25):
Well, this has been a fascinating deep dive.
It's really made me thinkdifferently about my own
relationship with money andwhat's important to me.
Speaker 2 (14:32):
Yeah, it's so interesting to explore this
human side of finance, you know,going beyond the numbers and
into the psychology that shapesall our decisions about money.
Speaker 1 (14:42):
And I have to say, this video.
We talked about the psychologyof money in 20 minutes by
Escaping Ordinary.
It's a great starting point foranyone who wants to learn more
about this stuff.
Speaker 2 (14:50):
Oh yeah, definitely.
And, of course, the book thatinspired the video Psychology of
Money by Morgan Housel.
That's a must read for anyonewho's serious about
understanding this topic.
Speaker 1 (14:59):
Before we go, I want to leave everyone with a
question to think about.
If you had to write down yourown financial DNA, what would be
the key events or lessons thatshaped it, and how is that
affecting your financialdecisions today?
Speaker 2 (15:12):
That's a really great question.
Taking the time to think aboutthose experiences, both the good
and the bad ones, it can helpus understand our own biases and
make better choices.
Speaker 1 (15:23):
So, yeah, think about that for a bit.
Examine your own financial DNAand use that knowledge to make
better decisions and create afinancial life that truly
reflects what you value.
Until next time, keep learning,keep exploring and remember the
best investment you can make isalways in yourself.
A
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