In a recent interview, The Psychology of Money author Morgan Housel gave valuable insights on AI, innovation, and the neglected role of normal people in achieving actual progress. His presentation, which was peppered with stories and wisdom, presented a new angle on investing, the nature of luck, and the necessity of perseverance for financial success.
The Accidental Writer: Morgan Housel’s Journey
Morgan Housel never had ambitions to become a writer. Like most people, he dreamed of being an investment banker or hedge fund manager. The 2008 financial crisis, though, threw a wrench into his plans, which sent him into a finance writing position at The Motley Fool. What was initially a move out of desperation to earn some bills turned out to be a prolific career. Housel’s experience is one of the chance nature of careers and the importance of luck in defining our directions.
The Role of Luck in Success
Housel pointed out that hard work and ability are essential, but luck also has a major role in achieving success. He used examples such as Bill Gross, the “Bond King,” and Warren Buffett, whose mythical careers were partly defined by the economic times they lived in. Housel’s message was clear: to recognize the influence of luck doesn’t take away from one’s accomplishments but offers a more accurate perspective on success.
Investing in Index Funds: Simplicity and Endurance
When it comes to investing, Housel does things the simple way. He mostly invests in index funds, not because he thinks active investing is defective, but because he values longevity. His approach is to maximize long-term longevity in the market instead of pursuing short-term returns. This method, he contends, is more within one’s control and more likely to result in great wealth over the long haul.
The Power of Narratives in Investing
Housel underscored the power of stories to influence market trends. He explained that valuations are sometimes a result of narratives about the future and not just present figures. For example, Tesla’s valuation is way ahead of established auto manufacturers such as Volkswagen, not due to present production figures but due to the story about its future potential. Housel cautioned that although stories have the ability to move markets, they have the potential to cause irrational exuberance, so investors need to remain earthy.
AI and Innovation: The Double-Edged Sword
The discussion soon fell on the subject of AI, a preoccupation of everybody. Housel accepted that AI was set to change the world but warned that groundbreaking industries had, in the past, seen a great many investors lose huge sums of money. Referencing railroads and airlines as parallels, he suggested that these two revolutions transformed society, but not much made it through in the end. The important takeaway? Even if you catch the trend correctly, investing in the correct companies is hugely tricky.
The Importance of Behavior in Investing
In an era of information availability, Housel is convinced that temperament and behavior are the greatest separators in investing. With the leveler of the playing field through AI, being able to remain calm during periods of market chaos and resisting the fear of missing out (FOMO) is paramount. Housel emphasized that the best investors are those who understand their limitations and maintain their strengths.
Ordinary Heroes: The Unsung Drivers of Progress
Housel’s heroes are the people of history and not the giant figures. They are common folk who work to make their lives and the lives of their families better. He feels that these unknown heroes, through their community efforts, effect actual advancement. This is a viewpoint that strikes home in his writing, where he tends to focus on the regular people who make remarkable differences.
below is the link of the full video of the interview
Disclaimer:
The opinions presented here by Morgan Housel are from the interview on Money Control. The information is provided for informational use only and not for financial advice. Money Control does not make a guarantee about the completeness and accuracy of the information. Please consult a professional to make investment decisions.