Context: As with the other articles in the ‘Notes from the book’ series, the primary reader I had in mind when writing this is me. I use these notes as an online Journal, with the act of writing a way to learn better, and the act of publishing, a driver to be very clearer in my views and to create an easy to access reference source from wherever I am. You may find some of the quotations longer than a typical book review, and this is by design. The notes are those I highlighted when reading the book using my Amazon Kindle – I outline how I sync these to my publishing workflow in this article.
Introduction
This is the second of Morgan Housel’s books I’ve read – my notes from the excellent “The Psychology of Money” are here.
‘Same as Ever’ is also excellent and recommended reading for anyone.
The essence of the book is that’s it’s impossible to predict the future due to the infinite way things can play out – so you are better off figuring out what never changes and focussing on that.
“I’m 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? And I submit to you that that second question is actually the more important of the two.”
Jeff Bezos
Bezos’ answer was 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.
Inevitably many of the things that don’t charge are the results of human psychology – which links closely Charlie Munger’s thinking (see this article).
The book has 22 chapters. I set out below the ‘same as ever’ concept in each chapter and key third party quotes or directly extracted commentary from Morgan Housel.
1. Hanging by a Thread
Same as ever: If you know where we’ve been, you realize we have no idea where we’re going.
I try to keep two things in mind in a world that’s this vulnerable to chance and accident. One is highlighting this book’s premise—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.
2. Risk Is What You Don’t See
Same as ever: The biggest risk is always what no one sees coming, because if no one sees it coming, no one’s prepared for it; and if no one’s prepared for it, its damage will be amplified when it arrives.
“Invest in preparedness, not in prediction.”
Nassim Taleb
3. Expectations and Reality
Same as ever: The first rule of happiness is low expectations.
Your happiness depends on your expectations more than anything else. So in a world that tends to get better for most people most of the time, an important life skill is getting the goalpost to stop moving. It’s also one of the hardest.
4. Wild Minds
Same as ever: People who think about the world in unique ways you like also think about the world in unique ways you won’t like.
“One day, I realized with all these people I was jealous of, I couldn’t just choose little aspects of their life. I couldn’t say I want his body, I want her money, I want his personality. You have to be that person. Do you want to actually be that person with all of their reactions, their desires, their family, their happiness level, their outlook on life, their self-image? If you’re not willing to do a wholesale, 24/7, 100 percent swap with who that person is, then there is no point in being jealous. Either you want someone else’s life or you don’t. Either is equally powerful. Just know which is which when finding role models.”
Naval Ravikant
5. Wild Numbers
Same as ever: People don’t want accuracy. They want certainty.
Most people get that certainty is rare, and the best you can do is make decisions in which the odds are in your favor. They understand you can be smart and end up wrong, or dumb and end up right, because that’s how luck and risk work. But few people actually use probability in the real world, especially when judging others’ success. Most of what people care about is, “Were you right or wrong?” “Was that a yes or a no?” Probability is about nuance and gradation. But in the real world people pay attention to black-and-white results. If you said something will happen and it happens, you were right. If you said it will happen and it doesn’t, you were wrong. That’s how people think, because it requires the least amount of effort. It’s hard to convince others—or yourself—that there could have been an alternative outcome when there’s a real-world outcome sitting in front of you.
A one-hundred-year event doesn’t mean it happens every one hundred years. It means there’s about a 1 percent chance of it occurring in any given year. That seems low. But when there are hundreds of different independent one-hundred-year events, what are the odds that one of them will occur in a given year? Pretty good.
6. Best Story Wins
Same as ever: Stories are always more powerful than statistics.
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.
Charles Darwin was not the first to discover evolution; he just wrote the first and most compelling book about it.
The most persuasive stories are about what you want to believe is true, or are an extension of what you’ve experienced firsthand.
Some of the most important questions to ask yourself are: Who has the right answer, but I ignore because they’re inarticulate? And what do I believe is true but is actually just good marketing?
7. Does Not Compute
Same as ever: The world is driven by forces that cannot be measured.
Most decisions aren’t made on a spreadsheet, where you just add up the numbers and a clear answer pops out. There’s a human element that’s hard to quantify and explain, and that can seem totally detached from the original goal, yet it carries more influence than anything else.
“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.”
Jeff Bezos
Every investment price, every market valuation, is just a number from today multiplied by a story about tomorrow. The numbers are easy to measure, easy to track, easy to formulate. It’s getting easier as almost everyone has cheap access to information. But 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.
8. Calm Plants the Seeds of Crazy
Same as ever: There is a very common life cycle of greed and fear.
It goes like this:
- First you assume good news is permanent.
- Then you become oblivious to bad news.
- Then you ignore bad news.
- Then you deny bad news.
- Then you panic at bad news.
- Then you accept bad news.
- Then you assume bad news is permanent.
- Then you become oblivious to good news.
- Then you ignore good news.
- Then you deny good news.
- Then you accept good news.
- Then you assume good news is permanent.
- And we’re back where we began. The cycle repeats.
9. Too Much, Too Soon, Too Fast
Same as ever: A good idea on steroids quickly becomes a terrible idea.
There was a most convenient size for Starbucks—there is for all businesses. Push past it and you realize that revenue might scale but disappointed customers scale faster.
10. When the Magic Happens
Same as ever: Stress focuses your attention in ways that good times can’t.
A constant truth you see throughout history is that the biggest changes and 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.
The 1930s were a disaster, one of the darkest periods in American history. Almost a quarter of Americans were out of work in 1932. The stock market fell 89 percent. Those two economic stories dominate the decade’s attention, and they should. But there’s another story about the 1930s that rarely gets mentioned: it was, by far, the most productive and technologically progressive decade in U.S. history. The number of problems people solved, and the ways they discovered how to build stuff more efficiently, is a forgotten story of the ’30s that helps explain a lot of why the rest of the twentieth century was so prosperous. Here are the numbers: total factor productivity—that’s economic output relative to the number of hours people worked and the amount of money invested in the economy—hit levels not seen before or since.
11. Overnight Tragedies and Long-Term Miracles
Same as ever: 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.
It takes twenty years to build a reputation and five minutes to destroy one.
Warren Buffet
A lot of pessimism is fueled by the fact that it often looks like we haven’t innovated in years—but that’s usually because it takes years to notice a new innovation.
12. Tiny and Magnificent
Same as ever: Little things compound into extraordinary things.
Big risks are easy to overlook because they’re just a chain reaction of small events, each of which is easy to shrug off. So people always underestimate the odds of big risks.
13. Elation and Despair
Same as ever: Progress requires optimism and pessimism to coexist.
Optimism and pessimism are so hard to deal with. Pessimism is more intellectually seductive than optimism and captures more of our attention. It’s vital for survival, helping us prepare for risks before they arrive. But optimism is equally essential. The belief that things can be, and will be, better even when the evidence is murky is one of the most essential parts of everything from maintaining a sound relationship to making a long-term investment.
The best financial plan is to save like a pessimist and invest like an optimist. That idea—the belief that things will get better mixed with the reality that the path between now and then will be a continuous chain of setback, disappointment, surprise, and shock—shows up all over history, in all areas of life.
14. Casualties of Perfection
Same as ever: There is a huge advantage to being a little imperfect.
Many people strive for efficient lives, where no hour is wasted. But an overlooked skill that doesn’t get enough attention is the idea that wasting time can be a great thing.
“the secret to doing good research is always to be a little underemployed. You waste years by not being able to waste hours.”
Amos Tversky
A successful person purposely leaving gaps of free time on their schedule to do nothing in particular can feel inefficient. And it is, so not many people do it. But Tversky’s point is that if your job is to be creative and think through tough problems, then time spent wandering around a park or aimlessly lounging on a couch might be your most valuable hours. A little inefficiency is wonderful.
The irony is that people can get some of their most important work done outside of work, when they’re free to think and ponder. The struggle is that we take time off maybe once a year, without realizing that time to think is a key element of many jobs, and one that a traditional work schedule doesn’t accommodate very well.
15. It’s Supposed to Be Hard
Same as ever: Everything worth pursuing comes with a little pain. The trick is not minding that it hurts.
“The safest way to try to get what you want is to try to deserve what you want. It’s such a simple idea. It’s the golden rule. You want to deliver to the world what you would buy if you were on the other end.”
Charlie Munger
16. Keep Running
Same as ever: Most competitive advantages eventually die.
Whenever a once powerful thing loses an advantage, it is tempting to ridicule the mistakes of its leaders. But it’s easy to overlook how many forces pull you away from a competitive advantage once you have one, specifically because you have one.
Five big things tend to eat away at competitive advantages.
- 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.
- 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.
- 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.
- A fourth is that a skill that’s valuable in one era may not extend to the next. You can work as hard and be as paranoid as you’ve always been, but if the world no longer values your skill, it’s a loss. Being a one-trick pony is common, because people and companies that are very good at one specific thing tend to be the highest paid during the boom.
- The last is that some success is owed to being in the right place at the right time. The reversion to reality that unmasks good luck is often only obvious with hindsight, and is both humbling and tempting not to believe.
17. Harder Than It Looks and Not as Fun as It Seems
Same as ever: The window dressed version of ourselves is by far the most common
“All businesses are loosely functioning disasters,”
Brent Beshore
Almost everything looks better from the outside. A business is like an iceberg; only a fraction is visible.
Investing gurus and business titans are easy to elevate to mythical status because you don’t know them well enough to witness times when their decision-making process was ordinary, if not awful. Of course there’s a spectrum. Some companies operate better than others, some people are more insightful than average. A few are extraordinary. But it’s always hard to know where anyone sits on that spectrum when they’ve carefully crafted an image of who they are.
18. Incentives: The Most Powerful Force in the World
Same as ever: When the incentives are crazy, the behavior is crazy. People can be led to justify and defend nearly anything.
“There are three ways to be a professional writer: Lie to people who want to be lied to, and you’ll get rich. Tell the truth to those who want the truth, and you’ll make a living. Tell the truth to those who want to be lied to, and you’ll go broke.”
Jason Zweig
“If you would persuade, appeal to interest and not to reason.”
Ben Franklin
“People follow incentives, not advice.”
James Clear
One of the strongest pulls of incentives is the desire for people to hear only what they want to hear and see only what they want to see.
19. Now You Get It
Same as ever: Nothing is more persuasive than what you’ve experienced firsthand.
A big theme throughout history is that preferences are fickle, and people have no idea how they’ll respond to an extreme shift in circumstances until they experience it for themeselves.
Downturns don’t happen in isolation. The reason stocks might fall 30 percent is because big groups of people, companies, and politicians screwed something up, and their screwups might sap my confidence in our ability to recover. So my investment priorities might shift from growth to preservation. It’s difficult to contextualize this mental shift when the economy is booming. And even though Warren Buffett says to be greedy when others are fearful, far more people agree with that quote than actually act on it.
20. Time Horizons
Same as ever: Long term thinking is easier to believe in then to accomplish.
Long term is harder than most people imagine, which is why it’s more lucrative than many people assume.
The world changes, which makes changing your mind not just helpful, but crucial. But changing your mind is hard because fooling yourself into believing a falsehood is so much easier than admitting a mistake. Long-term thinking can become a crutch for those who are wrong but don’t want to change their mind. They say, “I’m just early” or “Everyone else is crazy” when they can’t let go of something that used to be true but the world has moved on from.
Doing long-term thinking well requires identifying when you’re being patient versus just stubborn. Not an easy thing to do. The only solution is knowing the very few things in your industry that will never change and putting everything else in a bucket that’s in constant need of updating and adapting. The few (very few) things that never change are candidates for long-term thinking. Everything else has a shelf life.
Another point about long-term thinking is how it sways the information we consume. I try to ask when I’m reading: Will I care about this a year from now? Ten years from now? Eighty years from now? It’s fine if the answer is no, even a lot of the time. But if you’re honest with yourself you may begin to steer toward the more enduring bits of information.
There are two types of information: permanent and expiring.
- 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?”
- Expiring knowledge catches more attention than it should, for two reasons. One, there’s a lot of it, eager to keep our short attention spans occupied. Two, we chase it down, anxious to squeeze insight out of it before it loses relevance.
Permanent information is harder to notice because it’s buried in books rather than blasted in headlines. But its benefit is huge. It’s not just that permanent information never expires, letting you accumulate it. It also compounds over time, leveraging off what you’ve already learned. Expiring information tells you what happened; permanent information tells you why something happened and is likely to happen again. That “why” can translate and interact with stuff you know about other topics, which is where the compounding comes in.
21. Trying Too Hard
Same as ever: an enduring quirk of human behavior is 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.
“Simplicity is the hallmark of truth—we should know better, but complexity continues to have a morbid attraction. When you give an academic audience a lecture that is crystal clear from alpha to omega, your audience feels cheated. . . . The sore truth is that complexity sells better.”
Edsger Dijkstra “
In health it’s sleep eight hours, move a lot, eat real food, but not too much. But what’s popular? Supplements, hacks, and pills.
22. Wounds Heal, Scars Last
Same as ever: People tend to have short memories. Most of the time they can forget about bad experiences and fail to heed lessons previously learned. But hard-core stress leaves a scar.
An important component of human behavior is that people who’ve had different experiences than you will think differently than you do. They’ll have different goals, outlooks, wishes, and values. So most debates are not actual disagreements; they’re people with different experiences talking over each other.
The oldest story is that of two sides who don’t agree with each other. 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.
Questions
The book ends with a list of questions to the reader, which are set out below:
- Who has the right answers but I ignore because they’re not articulate?
- Which of my current views would I disagree with if I were born in a different country or generation?
- What do I desperately want to be true so much that I think it’s true when it’s clearly not?
- What is a problem that I think applies only to other countries/industries/careers that will eventually hit me?
- What do I think is true but is actually just good marketing?
- What haven’t I experienced firsthand that leaves me naive about how something works?
- What looks unsustainable but is actually a new trend we haven’t accepted yet?
- Who do I think is smart but is actually full of it?
- Am I prepared to handle risks I can’t even envision?
- 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?
- How much have things outside my control contributed to things I take credit for?
- How do I know if I’m being patient (a skill) or stubborn (a flaw)?
- Who do I look up to that is secretly miserable?
- What hassle am I trying to eliminate that’s actually an unavoidable cost of success?
- What crazy genius that I aspire to emulate is actually just crazy?
- What strong belief do I hold that’s most likely to change?
- What’s always been true? What’s the same as ever?
