Same as Ever: A Guide to What Never Changes

by Morgan Housel

People like to say, “To know where we’re going, you have to know where we’ve been.” But more realistic is admitting that if you know where we’ve been, you realize we have no idea where we’re going. Events compound in unfathomable ways.

As financial advisor Carl Richards says, “Risk is what’s left over after you think you’ve thought of everything.” That’s the real definition of risk—what’s left over after you’ve prepared for the risks you can imagine. Risk is what you don’t see.

History knows three things: 1) what’s been photographed, 2) what someone wrote down or recorded, and 3) the words spoken by people whom historians and journalists wanted to interview and who agreed to be interviewed.

Psychologist Daniel Kahneman says, “The idea that what you don’t see might refute everything you believe just doesn’t occur to us.”

Nassim Taleb says, “Invest in preparedness, not in prediction.”

The first rule of happiness is low expectations.

Investor Charlie Munger once noted that the world isn’t driven by greed; it’s driven by envy.

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.

Actual circumstances don’t make much difference in all these cases. What generates the emotion is the big gap between expectations and reality.

When asked, “You seem extremely happy and content. What’s your secret to living a happy life?” ninety-eight-year-old 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.

“You gotta challenge all assumptions. If you don’t, what is doctrine on day one becomes dogma forever after,” John Boyd once said.

Even within a good story, a powerful phrase or sentence can do most of the work. There is a saying that people don’t remember books; they remember sentences.

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.” I love and hate that quote in equal parts, because I know it’s true but I don’t want it to be. You see its wisdom so often in history.

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.

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.

Author Robert Greene once wrote, “The need for certainty is the greatest disease the mind faces.”

The next is accepting that what’s rational to one person can be crazy to another.

Third is understanding the power of incentives.

Last is the power of stories over statistics.

Crazy doesn’t mean broken. Crazy is normal; beyond the point of crazy is normal.

Minsky’s big idea was that stability is destabilizing.

Stability is destabilizing. Or, put another way: Calm plants the seeds of crazy. Always has, always will.

The irony of good times is that they breed complacency and skepticism of warnings.

After slapping Chris Rock on stage at the Oscars, Will Smith turned to Denzel Washington for advice. Washington said, “At your highest moment, be careful. That’s when the devil comes for you.”

“For every type of animal there is a most convenient size, and a change in size inevitably carries with it a change of form,” Haldane wrote. A most convenient size. A proper state where things work well but break when you try to scale them to a different size or speed. It applies to so many things in life.

Entrepreneur Andrew Wilkinson echoed the same when he said, “Most successful people are just a walking anxiety disorder harnessed for productivity.”

It’s a natural part of how the world works, driven by the fact that 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 the blink of an eye.

On a similar note, author Yuval Noah Harari writes: “To enjoy peace, we need almost everyone to make good choices. By contrast, a poor choice by just one side can lead to war.”

Same thing with COVID-19. Its initial impact was catastrophic, seemingly out of the blue. But we didn’t get hit with a single, one-in-billions risk. What happened—and I can say this only with hindsight—was a bunch of small risks colliding and multiplying at once. A new virus transferred to humans (something that has happened forever), and those humans interacted with other people (of course). It was a mystery for a while (understandable), and then bad news was likely suppressed (bad, but common). Other countries thought it would be contained (standard denial) and didn’t act fast enough (bureaucracy). We weren’t prepared (overoptimism) and could respond only with blunt-force lockdowns (panic, do what you gotta do). None of those on their own are surprising. But combined they turned into a disaster.

There is a balance, he said, 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.

Psychologists Lauren Alloy and Lyn Yvonne Abramson have a theory I love called depressive realism. It’s the idea that depressed people have a more accurate view of the world because they’re more realistic about how risky and fragile life is. The opposite of depressive realism is “blissfully unaware.” It’s what many of us suffer from. But we don’t actually suffer from it, because it feels great. And the fact that it feels good is the fuel we need to wake up and keep working even when the world around us can be objectively awful, and pessimism abounds.

Plan like a pessimist and dream like an optimist.

Everything worth pursuing comes with a little pain. The trick is not minding that it hurts.

This is one of the most useful life skills—enduring the pain when necessary rather than assuming there’s a hack, or a shortcut, around it.

A simple rule that’s obvious but easy to ignore is that nothing worth pursuing is free. How could it be otherwise? Everything has a price, and the price is usually proportionate to the potential rewards. But there’s rarely a price tag. And you don’t pay the price with cash. 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. A lot of times that price is worth paying. But you have to realize that it’s a price that must be paid. There are few coupons, and sales are rare.

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.

A good rule of thumb for a lot of things is to identify the price and be willing to pay it. The price, for so many things, is putting up with an optimal amount of hassle.

“The grass is always greener on the side that’s fertilized with bullshit.”

You never know what struggles people are hiding.

When the incentives are crazy, the behavior is crazy.

People can be led to justify and defend nearly anything.

And as Daniel Kahneman once wrote, “It is easier to recognize other people’s mistakes than our own.”

Ben Franklin once wrote, “If you would persuade, appeal to interest and not to reason.”

To paraphrase Ben Franklin: Vice knows it’s ugly, so it hides behind a mask.

In all these situations you have good, honest, well-meaning people who end up supporting or partaking in bad behavior because the incentives to play along are so strong. And in each situation there are more than just financial incentives. Incentives can be cultural and tribal, where people support things because they don’t want to upset or become banished from their social group. A lot of people can resist financial incentives; cultural and tribal incentives are more seductive.

“Show me a man who thinks he’s objective and I’ll show you a man who’s deceiving himself,” Luce said.

A doctor once told me the biggest thing they don’t teach in medical school is the difference between medicine and being a doctor—medicine is a biological science, while being a doctor is often a social skill of managing expectations, understanding the insurance system, communicating effectively, and so on.

A good question to ask is, “Which of my current views would change if my incentives were different?” If you answer “none,” you are likely not only persuaded but blinded by your incentives.

Nothing is more persuasive than what you’ve experienced firsthand. You can read and study and have empathy. But you often have no clue what you’re willing to do, what you want, and how far you’re willing to go until you’ve seen something with your own eyes.

Jim Carrey once said, “I think everybody should get rich and famous and do everything they ever dreamed of so they can see that it’s not the answer.”