Same As Ever

Insights from Same as Ever by Morgan Housel
If there were 1000 versions of your life playing out right now, how would you guarantee financial success in 999 of them? The answer lies in
embracing timeless truths about human nature and financial markets. When you use timeless truths to guide your decisions, you needn’t
rely on luck. Here are three such truths illustrated by insightful stories:
The punch that killed Houdini

After a performance in 1926, Houdini invited a group backstage to meet him. As he started greeting the group,
a skinny Canadian student named Gordon Whitehead punched him in the stomach without warning. The kid
met no harm ‐ he was trying to reenact a stunt he'd seen on stage, in which Houdini gets punched in the
stomach by the largest man in the audience and doesn't flinch. But unlike that punch on stage, Houdini didn't
see this punch coming, and he winced in pain afterward. The next morning, Houdini felt a horrible pain in the
spot where Whitehead punched him. Hours later, Houdini died from a ruptured appendix. As a famous
illusionist, Houdini survived being thrown into a river chained up and being buried alive because he saw those
events coming. His biggest risk was the punch he couldn't see coming.
At least once a decade, the world breaks in unexpected ways. So instead of trying to predict every way the world could break, we should
create an investment portfolio that can withstand a variety of unexpected economic storms. Here are two ways you could do that:
 Invest in several uncorrelated assets (i.e., things that increase in value over time for diﬀerent reasons). Investor Ray Dalio
discovered that a portfolio of 15 uncorrelated assets can reduce one’s downside risk to an unexpected event by 80% while
generating average market returns.
 Have more of your portfolio in a safe money market fund than you believe is necessary, so when the world unexpectedly breaks
you can still sleep at night and don't feel the need to panic‐sell your stock holdings. Also, having more cash readily available
allows you to take advantage of a once‐in‐a‐decade opportunity.
The California superbloom

After six years of drought and fires, Californians got exactly what they were hoping for…and much more. In
2017, California experienced record rainfall and a superbloom that turned desert towns green. Times were
good, so what happened next was shocking. After the record rainfall stopped, the record vegetation died,
which became dry kindling and fueled some of the largest wildfires California had ever seen. Too much of a
good thing becomes a catalyst for a bad thing ‐ a timeless truth that takes many forms.
In financial markets, optimism leads to greed, greed leads to more debt, more debt causes instability, and
instability produces a recession. The stimulus everyone loved during the pandemic created the inflation
everyone hated. If you're not careful, your success can be a catalyst for failure and stress. Housel says,
“Paranoia leads to success because it keeps you on your toes. But paranoia is stressful, so you abandon it quickly once you achieve
success. Now you’ve abandoned what made you successful and you begin to decline—which is even more stressful.” There are two ways
to counteract this cycle and combat complacency without having to live in a perpetual state of paranoia:
 Adopt a Jeﬀ Bezos “Day One” approach ‐ regardless of your company's size or success, wake up each day with a startup
mentality.
 Pull a Jerry Seinfeld and see a new opportunity before you exhaust your current one. Housel writes, “Jerry Seinfeld had the
most popular show on TV. Then he quit. He later said the reason he killed his show while it was thriving was because the only
way to know where the top is, is to experience the decline, which he had no interest in doing.”
The world's largest man

Robert Wadlow was six feet tall at age seven. At age 11, he was seven feet tall. His record growth did not lead
to remarkable strength as you see in superhero comics. Wadlow was incredibly weak, so weak that he
required steel braces to stand. Just before he died at age 22, he stood nearly nine feet tall and getting blood to
his enormous body strained his heart, elevated his blood pressure, and formed a large ulcer on his leg. That
ulcer got infected and killed him. Fast growth leads to frailty and reduces one's lifespan ‐ this is true in many
facets of life. The opposite is true as well.
If you were patient enough to slowly grow your money in an S&P index fund over any 20‐year period in the
last 70 years, you would've been rewarded with a 700% return on average and had a 0% chance of losing your
money. But sadly, most people are too impatient to follow this massive‐upside, minimal‐downside strategy
because they try to compress that natural 20‐year investment window.
“No less than 90 percent of all investing blunders are caused by investors trying to compress this natural time horizon…A good
summary of investing history is that stocks pay a fortune in the long run, but seek punitive damages when you demand to be paid
sooner.”
Given all this, the question we should ask ourselves when investing is not, “What's the best return I can get this year?” But rather, “What's
the best return I can sustain for the longest period of time?”
www.ProductivityGame.com

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Insights from Same as Ever by Morgan Housel

The punch that killed Houdini

The California superbloom

The world's largest man

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