"Same as Ever: A Guide to What Never Changes" by Morgan Housel dives into the constants of human behavior and societal trends amidst the ever-changing backdrop of history and innovation. Through a series of essays, Housel explores the aspects of human nature, economics, and financial decision-making that remain unchanged despite technological and cultural evolution. The book emphasizes the importance of understanding these constants for better foresight and decision-making, advocating for a balanced perspective on past lessons and future uncertainties.
Key Ideas
Constancy of Human Nature:
Housel emphasizes that despite technological advances and cultural shifts, fundamental human emotions such as fear, greed, and the pursuit of happiness remain unchanged. By understanding these constants, one can better predict behaviors in economic and social contexts.
Stories Versus Statistics:
The book argues that narratives often trump statistics in influencing public opinion and decision-making. People tend to connect more with personal stories that evoke emotions rather than dry, numerical data, which can sometimes be misleading or difficult to interpret.
Risk Management:
Housel discusses the concept of "unknown unknowns" and advises preparing for risks that are not yet apparent. This preparation involves building safety nets and buffers to handle unforeseen circumstances, like saving more than necessary.
Economic Cycles:
The book highlights the cyclical nature of economies and the importance of recognizing that what seems like a permanent good time or a never-ending crisis is just part of a larger cycle. This perspective helps in making more informed economic and investment decisions.
Incentives and Motivations:
Understanding what motivates people—including oneself—is crucial for predicting their behavior in various situations. Housel points out that incentives can often lead to unexpected behaviors and that aligning incentives with desired outcomes is key to managing personal and professional relationships.
Flexibility in Planning:
Long-term success is not just about sticking to a plan but also about being adaptable. The book stresses the importance of flexibility, allowing individuals and organizations to pivot in response to environmental changes.
Simplicity in Complexity:
There is often a temptation to complicate things unnecessarily. Housel advocates for focusing on simplicity and understanding the foundational principles that govern complex systems, which can lead to clearer and more effective thinking.
Impact of Personal Experience:
Personal experiences significantly shape our beliefs. Housel encourages readers to consider their own experiences and empathize with others' perspectives shaped by different backgrounds and experiences.
Enduring Traits and Cycles:
The book discusses optimism and pessimism, which have always played roles in human progress and survival. Recognizing these traits in oneself and society can help manage personal expectations and societal interactions.
Historical and Economic Lessons:
By studying history, one can identify patterns and lessons that are likely to apply in the future. Housel uses historical anecdotes and data to illustrate how past events provide context for current events and future planning.
Broader Implications
Morgan Housel uses these themes to challenge readers to think critically about what they assume to be true and to question whether their beliefs are based on enduring principles or temporary trends. The book's approach helps cultivate a reflective and forward-thinking mindset, ideal for navigating complex personal and economic landscapes.
Key Quotes
"Risk is what's left over after you think you’ve thought of everything." - Carl Richards
"Invest in preparedness, not in prediction." - Nassim Taleb
"The best story wins. Not the best idea, or the right idea, or the most rational idea." - Morgan Housel
"If you only wished to be happy, this could be easily accomplished; but we wish to be happier than other people, and this is always difficult." - Montesquieu
"History never repeats itself; man always does." - Voltaire
"What’s not going to change in the next ten years?" - Jeff Bezos (as cited by Housel)
"The fundamental cause of trouble in the world today is that the stupid are cocksure while the intelligent are full of doubt." - Bertrand Russell
"The grass is always greener on the side that’s fertilized with bullshit."
"Human beings cannot comprehend very large or very small numbers." - Daniel Kahneman
"Everything worth pursuing comes with a little pain. The trick is not minding that it hurts."
Direct and Re-Phrased Quotes:
Epigraph
o “The wise in all ages have always said the same thing, and the fools, who at all times form the immense majority, have in their way, too, acted alike and done just the opposite.” - Arthur Schopenhauer
o “History never repeats itself; man always does.” - Voltaire
o “I've learned an important trick: to develop foresight, you need to practice hindsight.” - Jane McGonigal
o “The dead outnumber the living . . . fourteen to one, and we ignore the accumulated experience of such a huge majority of mankind at our peril.” - Niall Ferguson
Introduction
o Amazon founder Jeff Bezos once said that he’s often asked what’s going to change in the next ten years. “I almost never get the question: ‘What’s not going to change in the next ten years?’ ” he said. “And I submit to you that that second question is actually the more important of the two.” Bezos said it’s impossible to imagine a future where Amazon customers don’t want low prices and fast shipping—so he can put enormous investment into those things.
Hanging by a Thread
o To base predictions on how people behave rather than on specific events. Predicting what the world will look like fifty years from now is impossible. But predicting that people will still respond to greed, fear, opportunity, exploitation, risk, uncertainty, tribal affiliations, and social persuasion in the same way is a bet I’d take.
o Forecasting events is hard because it’s easy to skip the question, “And then what?”
o Every event creates its offspring, which impact the world in their special ways. It makes prediction exceedingly hard.
Risk Is What You Don’t See
o As financial advisor Carl Richards says, “Risk is what’s left over after you think you’ve thought of everything.”
o History knows three things:
o 1) what’s been photographed,
o 2) what someone wrote down or recorded, and
o 3) the words spoken by people whom historians and journalists wanted to interview and who agreed to be interviewed.
o Psychologist Daniel Kahneman says, “The idea that what you don’t see might refute everything you believe just doesn’t occur to us.”
o Nassim Taleb says, “Invest in preparedness, not in prediction.” That gets to the heart of it.
o It’s better to expect risk to arrive, though you don’t know when or where, than to rely exclusively on forecasts—almost all of which are nonsense or about well-known things.
o If you’re only preparing for the risks you can envision, you’ll be unprepared for the risks you can’t see every single time. So, in personal finance, the right amount of savings is when it feels like it’s a little too much. It should feel excessive; it should make you wince a little.
Expectations and Reality
o Montesquieu wrote 275 years ago, “If you only wished to be happy, this could be easily accomplished; but we wish to be happier than other people, and this is always difficult, for we believe others to be happier than they are.”
o Money buys happiness in the same way drugs bring pleasure: incredible if done right, dangerous if used to mask a weakness, and disastrous when no amount is enough.
o Today’s economy is good at generating three things: wealth, the ability to show off wealth, and great envy for other people’s wealth.
We tend to take every precaution to safeguard our material possessions because we know what they cost. But at the same time, we neglect things that are much more precious because they don’t come with price tags attached: The real value of things like our eyesight, relationships, or freedom can be hidden from us because money is not changing hands.
o Charlie Munger replied: “The first rule of a happy life is low expectations. If you have unrealistic expectations you’re going to be miserable your whole life. You want to have reasonable expectations and take life’s results, good and bad, as they happen with a certain amount of stoicism.”
Wild Minds
o The same personality traits that push people to the top also increase the odds of pushing them over the edge.
o “You gotta challenge all assumptions. If you don’t, what is doctrine on day one becomes dogma forever after,” John Boyd once said.
Wild Numbers
o People don’t want accuracy. They want certainty.
o “The fundamental cause of the trouble is that in the modern world, the stupid are cocksure while the intelligent are full of doubt.” - BERTRAND RUSSELL
o To help his students think about this, Stanford professor Ronald Howard asked them to write a percentage representing the likelihood that they had responded correctly next to each answer on the tests he gave. If you said you were 100 percent confident that your answer was correct and it was wrong, you failed the entire test. You got no credit if you said you were zero percent confident and your answer was correct. Everything in between gave you a confidence-adjusted score.
o Daniel Kahneman once said, “Human beings cannot comprehend very large or very small numbers. It would be useful for us to acknowledge that fact.”
o ‘‘With a large enough sample, any outrageous thing is apt to happen,” Mosteller said.
Best Story Wins
o Stories are always more powerful than statistics.
o The best story wins. Not the best idea, or the right idea, or the most rational idea. Just whoever tells a story that catches people’s attention and gets them to nod their heads is the one who tends to be rewarded.
o People don’t remember books; they remember sentences.
o The valuation of every company is simply a number from today multiplied by a story about tomorrow.
o If you’re trying to figure out where something is going next, you have to understand more than its technical possibilities. You have to understand the stories everyone tells themselves about those possibilities because it’s such a big part of the forecasting equation.
o Mark Twain said, “Humor is a way to show you’re smart without bragging.”
o When a topic is complex, stories are like leverage.
o The most persuasive stories are about what you want to believe is true, or are an extension of what you’ve experienced firsthand.
o Poet Ralph Hodgson said, “Some things have to be believed to be seen.”
o Guiding people’s attention to a single point is one of the most powerful life skills.
o Good stories create so much hidden opportunity among things you assume can’t be improved.
o Visa founder Dee Hock once said, “New ways of looking at things create much greater innovation than new ways of doing them.”
o Some of the most important questions to ask yourself are: Who has the right answer, but I ignore it because they’re inarticulate? And what do I believe is true, but is it just good marketing?
Does Not Compute
o The world is driven by forces that cannot be measured.
o Historian Will Durant once said, “Logic is an invention of man and may be ignored by the universe.”
o Some things are immeasurably important. They’re either impossible or too elusive to quantify. But they can make all the difference in the world, often because their lack of quantification causes people to discount their relevance or even deny their existence.
o Jeff Bezos once said, “The thing I have noticed is when the anecdotes and the data disagree, the anecdotes are usually right. There’s something wrong with the way you are measuring it.”
o Athletic performance isn’t just what you’re physically capable of. It’s what you’re capable of within the context of what your brain is willing to endure for the risk and reward in a given moment.
o Capabilities are a function of in-the-moment circumstances.
o Investor Jim Grant once said: “To suppose that the value of a common stock is determined purely by a corporation’s earnings discounted by the relevant interest rates and adjusted for the marginal tax rate is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin and believed Orson Welles when he told them over the radio that the Martians had landed.”
o The stories are often bizarre reflections of people’s hopes, dreams, fears, insecurities, and tribal affiliations. And they’re getting more bizarre as social media amplifies the most emotionally appealing views.
o Economist Per Bylund once noted: “The concept of economic value is easy: whatever someone wants has value, regardless of the reason (if any).”
o The ones who thrive long term are those who understand the real world is a never-ending chain of absurdity, confusion, messy relationships, and imperfect people.
o The first step toward accepting that some things don’t compute is realizing that the reason we have innovation and advancement is because we are fortunate to have people in this world whose minds work differently from ours.
o Author Robert Greene once wrote, “The need for certainty is the greatest disease the mind faces.”
o The next is accepting that what’s rational to one person can be crazy to another. Everything would compute if everyone had the same time horizon, goals, ambitions, and risk tolerances. But they don’t.
o Third is understanding the power of incentives.
o Last is the power of stories over statistics.
Calm Plants the Seeds of Crazy
o There is a very common life cycle of greed and fear. It goes like this:
o First, you assume good news is permanent.
o Then you become oblivious to bad news.
o Then you ignore bad news.
o Then you deny bad news.
o Then you panic at bad news.
o Then you accept bad news.
o Then you assume bad news is permanent.
o Then you become oblivious to good news.
o Then you ignore good news.
o Then you deny good news.
o Then you accept good news.
o Then you assume good news is permanent.
o And we’re back where we began.
o The cycle repeats.
o Surprise has six common characteristics:
o Incomplete information
o Uncertainty
o Randomness
o Chance
§ Unfortunate timing
o Poor incentives
o “Everything feels unprecedented when you haven’t engaged with history,” writer Kelly Hayes once wrote.
o Optimism and pessimism always have to overshoot what seems reasonable, because the only way to discover the limits of what’s possible is to venture a little way past those limits.
Too Much, Too Soon, Too Fast
o Schultz wrote in his 2011 book Onward: “Growth, we now know all too well, is not a strategy. It is a tactic. And when undisciplined growth became a strategy, we lost our way.”
o “A tree that grows quickly rots quickly and therefore never has a chance to grow old,” forester Peter Wohlleben wrote. Haste makes waste.
o Robert Greene writes: “The greatest impediment to creativity is your impatience, the almost inevitable desire to hurry up the process, express something, and make a splash.”
When the Magic Happens
o Stress focuses your attention in ways that good times can’t.
o The most important innovations don’t happen when everyone is happy and things are going well. They tend to occur during, and after, a terrible event. When people are a little panicked, shocked, worried, and when the consequences of not acting quickly are too painful to bear.
o President Richard Nixon once observed: “The unhappiest people of the world are those in the international watering places like the South Coast of France, and Newport, and Palm Springs, and Palm Beach. Going to parties every night. Playing golf every afternoon. Drinking too much. Talking too much. Thinking too little. Retired. No purpose. So while there are those that would totally disagree with this and say “Gee, if I could just be a millionaire! That would be the most wonderful thing.” If I could just not have to work every day, if I could just be out fishing or hunting or playing golf or traveling, that would be the most wonderful life in the world—they don’t know life. Because what makes life mean something is purpose. A goal. The battle, the struggle—even if you don’t win it.”
Overnight Tragedies and Long-Term Miracles
o Good news comes from compounding, which always takes time, but bad news comes from a loss in confidence or a catastrophic error that can occur in a blink of an eye.
o The most important things come from compounding. But compounding takes a while, so it’s easy to ignore.
o Most deaths—trauma, heart disease, stroke, some cancers, infections, drug overdoses—are caused by blood and oxygen deficiencies.
o The disease might be complex, but the fatal strike is insufficient blood and oxygen getting to where it’s needed.
Tiny and Magnificent
o Biologist Leslie Orgel used to say, “Evolution is cleverer than you are,” because whenever a critic says, “Evolution could never do that,” they usually just lack imagination.
o Little changes compounded for a long time create extraordinary changes.
Elation and Despair
o Progress requires optimism and pessimism to coexist.
o The best financial plan is to save like a pessimist and invest like an optimist.
o There is a balance between needing unwavering faith that things will get better while accepting the reality of brutal facts, whatever they may be. Things will eventually get better.
o Rational optimists: those who acknowledge that history is a constant chain of problems, disappointments, and setbacks but remain optimistic because they know setbacks don’t prevent eventual progress. They sound like hypocrites and flip-floppers, but often, they’re just looking further ahead than other people.
Casualties of Perfection
o There is a huge advantage to being a little imperfect.
o Not maximizing your potential is the sweet spot in a world where perfecting one skill compromises another.
o “The secret to doing good research is always to be a little underemployed. You waste years by not being able to waste hours.”
It’s Supposed to Be Hard
o Everything worth pursuing comes with a little pain. The trick is not minding that it hurts.
o One of the most useful life skills is enduring pain when necessary rather than assuming there's a hack or shortcut around it.
o Most things worth pursuing charge their fee in the form of stress, uncertainty, dealing with quirky people, bureaucracy, other peoples' conflicting incentives, hassle, nonsense, long hours, and constant doubt. That’s the overhead cost of getting ahead.
o A unique skill, an underrated skill, is identifying the optimal amount of hassle and nonsense you should put up with to get ahead while getting along.
Keep Running
o Most competitive advantages eventually die.
o Cope’s Rule—not universal enough to call a law—tracked the lineages of thousands of species and showed a clear bias toward animals evolving to become larger over time. “The tendency for evolution to create larger species is counterbalanced by the tendency of extinction to kill off larger species.”
o The most dominant creatures tend to be huge, but the most enduring tend to be smaller. T-Rex < cockroach < bacteria.
o What’s incredible about this is that evolution encourages you to get bigger, then punishes you for being big.
o Five big things tend to eat away at competitive advantages.
o One is that being right instills confidence that you can’t be wrong, which is a devastating characteristic in a world where outlier success has a target on its back, with competitors in tow. Size is associated with success, success is associated with hubris, and hubris is the beginning of the end of success.
o Another is that success tends to lead to growth, usually by design, but a big organization is a different animal than a small one, and strategies that lead to success at one size can be impossible at another.
o A third is the irony that people often work hard to gain a competitive advantage for the intended purpose of not having to work so hard at some point in the future. Hard work is in pursuit of a goal, and once that goal is met the relaxation that feels so justified removes paranoia. This allows competitors and a changing world to creep in unnoticed.
o A fourth is that a skill that’s valuable in one era may not extend to the next.
o The last is that some success is owed to being in the right place at the right time.
o “A New Evolutionary Law,” Van Valen wrote, "the probability of extinction of a taxon is effectively independent of its age.”
o Competition never stops. A species that gains an advantage over a competitor instantly incentivizes the competitor to improve. It’s an arms race.
o Evolution is ruthless and unforgiving—it doesn’t teach by showing you what works but by destroying what doesn’t.
The Wonders of the Future
o Fisher’s Fundamental Theorem of Natural Selection. It’s the idea that variance equals strength, because the more diverse a population is, the more chances it has to come up with new traits that can be selected for.
o Dee Hock says, “A book is far more than what the author wrote; it is everything you can imagine and read into it as well.”
Harder Than It Looks and Not as Fun as It Seems
o “The grass is always greener on the side that’s fertilized with bullshit.”
o An expert is always from out of town. It’s similar to the Bible verse that says no man is a prophet in his own country.
o Everything is sales also means that everyone is trying to craft an image of who they are. The image helps them sell themselves to others. Some are more aggressive than others, but everyone plays the image game, even if only subconsciously.
o Skills are advertised, flaws are hidden.
o “All businesses are loosely functioning disasters,” Brent Beshore
Incentives: The Most Powerful Force in the World
o When the incentives are crazy, the behavior is crazy. People can be led to justify and defend nearly anything.
o Incentives are the most powerful force in the world and can get people to justify or defend almost anything.
o Ben Franklin once wrote, “If you would persuade, appeal to interest and not to reason.”
o Ben Franklin: “Vice knows it’s ugly, so it hides behind a mask.”
o “Show me a man who thinks he’s objective and I’ll show you a man who’s deceiving himself,” Luce said.
o Most common in investing, law, and medicine, when “do nothing” is the best answer, but “do something” is the career incentive.
o When good and honest people can be incentivized into crazy behavior, it’s easy to underestimate the odds of the world going off the rails.
o Unsustainable things can last longer than you anticipate.
o A good question to ask is, “Which of my current views would change if my incentives were different?”
Now You Get It
o Nothing is more persuasive than what you’ve experienced firsthand.
o It’s not until your life is upended, your hopes dashed, your dreams uncertain that people say, “What was that wild idea we heard before? Maybe we should give it a shot. Nothing else is working, might as well try.”
o “If you find the right balance between desperation and fear, you can make people do anything.”
o Under high stress, “a man becomes a beast in three weeks,” Shalamov wrote.
o Chris Rock once joked about who actually teaches kids in school: “Teachers do one half, bullies do the other,” he said. “And learning how to deal with bullies is the half you’ll actually use as a grown-up.”
Time Horizons
o Everything worthwhile has a price, and the prices aren’t always obvious. The real price of long term—the skills required, the mentality needed—is easy to minimize and often summarized with simple phrases like “Be more patient,” as if that explains why so many people can’t.
o The long run is just a collection of short runs you have to put up with.
o “The future is much like the present, only longer.”
o Your belief in the long run isn’t enough. Your partners, coworkers, spouses, and friends have to sign up for the ride.
o Patience is often stubbornness in disguise.
o The few (very few) things that never change are candidates for long-term thinking. Everything else has a shelf life.
o Long-term is less about time horizon and more about flexibility.
o Time is compounding’s magic, and its importance can’t be minimized. But the odds of success fall deepest in your favor when you mix a long time horizon with a flexible end date—or an indefinite horizon.
o Benjamin Graham said, “The purpose of the margin of safety is to render the forecast unnecessary.” The more flexibility you have, the less you need to know what happens next.
o John Maynard Keynes: “In the long run we’re all dead.”
o Permanent information is: “How do people behave when they encounter a risk they hadn’t fathomed?” Expiring information is: “How much profit did Microsoft earn in the second quarter of 2005?”
o Expiring knowledge catches more attention than it should, for two reasons.
o One, there’s a lot of it, eager to keep our short attention spans occupied.
o Two, we chase it down, anxious to squeeze insight out of it before it loses relevance.
o Expiring information tells you what happened; permanent information tells you why something happened and is likely to happen again.
Trying Too Hard
o There are no points awarded for difficulty.
o An enduring quirk of human behavior: the allure of complexity, intellectual stimulation, and discounting things that are simple but very effective, in preference to things that are complex but less effective.
o The sore truth is that complexity sells better.
o “The course of evolution has been to reduce the number of parts and to adapt those which remain more closely with their special uses, either by an increase in size or by modifying their shape and structure.”
o When you first start to study a field, it seems like you have to memorize a zillion things. You don’t. What you need is to identify the core principles—generally three to twelve of them—that govern the field. The million things you thought you had to memorize are simply various combinations of the core principles.
o Complexity gives a comforting impression of control, while simplicity is hard to distinguish from cluelessness.
o Things you don’t understand create a mystique around people who do.
o Length is often the only thing that can signal effort and thoughtfulness.
o Simplicity feels like an easy walk. Complexity feels like a mental marathon.
o Pain is the sign of progress that tells you you’re paying the unavoidable cost of admission.
o “The moral of this is not that ignorance is an advantage. But some of us are too much attracted by the thought of rare things and forget the law of averages in diagnosis.”
Wounds Heal, Scars Last
o What have you experienced that I haven’t that makes you believe what you do? And would I think about the world like you do if I experienced what you have?
o Wounds heal, but scars last.
o The same is true for recessions—things heal. And markets—things recover. And businesses—past mistakes are forgotten. But scars last.
o “A mind that is stretched by new experience can never go back to its old dimensions,” said Oliver Wendell Holmes.
o Two things tend to happen after you get hit with something big and unexpected:
o You assume what just happened will keep happening, but with greater force and consequence.
o You forecast with great conviction, despite the original event being improbable and something few, if anyone, predicted.
o The question “Why don’t you agree with me?” can have infinite answers. Sometimes one side is selfish, or stupid, or blind, or uninformed. But usually a better question is, “What have you experienced that I haven’t that makes you believe what you do? And would I think about the world like you do if I experienced what you have?” It’s the question that contains the most answers about why people don’t agree with one another. But it’s such a hard question to ask. It’s uncomfortable to think that what you haven’t experienced might change what you believe, because it’s admitting your own ignorance. It’s much easier to assume that those who disagree with you aren’t thinking as hard as you are.
o Benedict Evans says, “The more the Internet exposes people to new points of view, the angrier people get that different views exist.”
o Disagreement has less to do with what people know and more to do with what they’ve experienced.
Questions
o The idea that what lies in front of us is a dark hole of uncertainty can be so intimidating, it’s easier to believe the opposite—that we can see the future, and that its path is logical and predictable. No belief in history is as commonly held, and no belief is as consistently wrong.
o Look backward, and be broad. Rather than attempting to figure out little ways the future might change, study the big things the past has never avoided.
o Who has the right answers but I ignore because they’re not articulate?
o Which of my current views would I disagree with if I were born in a different country or generation?
o What do I desperately want to be true so much that I think it’s true when it’s clearly not?
o What is a problem that I think applies only to other countries/ industries/ careers that will eventually hit me?
o What do I think is true but is actually just good marketing?
o What haven’t I experienced firsthand that leaves me naive about how something works?
o What looks unsustainable but is actually a new trend we haven’t accepted yet?
o Who do I think is smart but is actually full of it?
o Am I prepared to handle risks I can’t even envision?
o Which of my current views would change if my incentives were different? What are we ignoring today that will seem shockingly obvious in the future? What events very nearly happened that would have fundamentally changed the world I know if they had occurred?
o How much have things outside my control contributed to things I take credit for?
o How do I know if I’m being patient (a skill) or stubborn (a flaw)?
o Who do I look up to that is secretly miserable?
o What hassle am I trying to eliminate that’s actually an unavoidable cost of success?
o What crazy genius that I aspire to emulate is actually just crazy?
o What strong belief do I hold that’s most likely to change?
o What’s always been true? What’s the same as ever?
Conclusion
In "Same as Ever," Morgan Housel masterfully articulates the unchanging elements of human behavior and societal dynamics that shape our world, underscoring the importance of learning from the past to navigate the future. By focusing on what remains constant, such as human motivations and economic cycles, readers can gain a more grounded understanding of how to approach personal and financial decisions. This guide serves as a reminder that while the surface may change, the underlying forces driving human actions and societal developments remain the same.