Weekly Workshop: Longevity and the Search for Equilibrium
"The three big ones in life are wealth, health, and happiness. We pursue them in that order, but their importance is reverse." Naval
What defines a great investor? If you ask Morgan Housel, it’s longevity or “the best returns you could earn for the longest period of time, which usually aren’t the highest returns that are out there.” In The Psychology of Money, he noted Buffett’s astonishing endurance:
"Effectively, Buffett’s success can be tied to the financial base he built in his pubescent years and the longevity he maintained. His skill is investing, but his secret is time. That’s how compounding works."
He elaborated during his recent podcast with Tim Ferriss:
"If Buffett had retired at age 60, no one would’ve ever heard of him. He never would’ve been a household name. He would’ve been a great investor, of course, but there’s a lot of great investors out there. The only reason he became a household name is just his endurance and his longevity."
Great investors show an intense competitive passion for their game. Unfortunately, their obsession often takes over their lives and their relationships and health start to suffer. This can significantly shorten their careers and there are many examples of burnout, Peter Lynch chief among them.
“I felt the Fund was an organism, a parasite, sucking my blood and draining my energy. I asked myself, who is more important, the Fund or me? Is the Fund a vehicle for my success, or am I the slave of my Fund?” George Soros
Even for Buffett, who consciously removed himself from Wall Street’s grinding performance culture, this single-minded focus took its toll. Ferriss recalled an anecdote in which Buffett stepped past his hurting son to get upstairs and read (talk about a reading obsession!).
In contrast, my conversation with Dan McMurtrie explored ways to balance competitive intensity with periods of recovery, something Dan calls the “tactical laziness” of large predators. He aims to find an equilibrium that allows him to achieve longevity in compounding:
“You're always trying to improve the equilibrium. That's the process of being an investor or running an investment firm, trying to improve that equilibrium. If you can build equilibrium where it's very hard to blow up or fail, your long-term expectancy goes through the roof.” Dan McMurtrie
This search is not limited to investing and reminded me of a quote I tweeted last week (from The Almanack of Naval Ravikant):
"There are basically three really big decisions you make in your early life: where you live, who you’re with, and what you do."
These big three shape your life in that they determine how and with who you spend most of your time. They are also intertwined and can mutually reinforce or diminish each other. For example, you might put up with a mediocre job to be with someone special. But if you find yourself in a place which doesn’t suit you, where you feel isolated and don’t find activities you enjoy, the burden on your partner as the remaining source of happiness increases unsustainably.
In my own life, I accepted jobs that weren’t a great fit when it was important that I earned money to support my ex-wife and myself. When the marriage soured, a key force behind this compromise disappeared and I ultimately ended up on a new path.
I’ve long struggled with these big three decisions for two reasons. As long as things are out of balance, I find that they affect each other that it becomes difficult to figure out what one truly wants. And in this confusion it is easy to revert to the autopilot of social programming and pursue external goals, placeholders that change shape as soon as we get too close.
For example, last weekend I went on a date with a woman I had first dated briefly in 2020 during the first COVID lockdown (shoutout to my followers for helping me out with a ton of fantastic recommendations for romantic restaurants). I saw her again a couple of times last year (long-time readers may remember my highly emotional posts about heartbreak). I felt that she wasn’t available, or playing games, so I broke off any contact in December. This was followed by nearly three months during which I thought about nothing but her and the feelings I had failed to communicate openly. This phase didn’t seem to pass, so I tentatively reached back out.
While the date started off well (how much I love listening to this woman), it ended in a lot of drama. It was the same old and afterwards I struggled to understand my own behavior. Why did I keep pursuing this miserable experience?
One of my friends offered up a great piece of advice: he told me to clearly, and on paper, separate what I was seeing in her and what I was merely missing in my own life. What part of my foundation was out of balance, where was I trying to compensate with this relationship?
I realized that I’d gone through a similar exercise already last summer. Long story short, my friend was right. Both this woman and my ex-wife share some characteristics: they are creative and artsy spirits, extroverts who easily and quickly connect with strangers, who like to host, travel, and go on adventures. These are qualities missing from my life and the urge to fill the void clouded my vision. Of course there’s a Naval quote for that as well:
"Today, I believe happiness is ... when you remove the sense of something missing in your life. When nothing is missing, your mind shuts down and stops running into the past or future ... In that absence, you have internal silence."
Naval called looking for an extrinsic source of peace and happiness "life’s “fundamental delusion.” Similarly, Housel pointed out that external goals, say wealth, status, validation, are the “most important topic in money, in finance” and “the hardest thing to actually make work” because the goal posts never stop moving. They lead us up a never-ending stairwell of desire.
That’s not to say that we shouldn’t pursue external goals. But we have to remind ourselves of their nature: a means to an end, not the source of meaning. We have to dig deeper for a more solid foundation:
"What people really want in life is independence and autonomy. People want to wake up every morning and do what they want to do on their own terms. To the extent that we can use money to gain independence and autonomy, that is, I think, as close as it comes to a universal want." Morgan Housel
Life presents us with a combination of meditation and negotiation. What can we find deep within ourselves and how does it relate to what the world needs and offers? It is easy to say that I desire a life not rich in money but in love and connection, in experience, learning, and creative expression. But that statement is tested anew every day; in every interaction with the world and in every relationship which offers the temptation of comparison. The quest for equilibrium never ends.
“A calm mind, a fit body, and a house full of love. These things cannot be bought. They must be earned.” Naval
Those of us with a passion for their work must be mindful to not let it upend their lives. One can easily start to thrash and grind in frustration at a workload what will never ease up. Here is what Peter Lynch told Financial World shortly before deciding to retire at the age of 46:
“I've worked every Saturday for seven or eight years - I mean seven in the morning. In the last six months I've started working some Sunday mornings at home. … I haven’t gone to a Celtics game in five years. I don't even watch them on TV. … You think I enjoy coming in here on Saturday mornings? Don’t you think I’d rather be playing with my kids or doing something with my wife?
Unfortunately, Peter knew only two speeds: “overdrive and stop.” He chose to stop and I can’t blame him. I hope the rest of us can take Dan’s advice to heart and allow ourselves rest when we need it.
In the works.
I’ve decided to turn the lengthy and unwieldy Druckenmiller piece into shorter serialized posts. I hope this will ultimately lead to a more frequent and consistent publishing cadence. It should also allow me to offer more variety by mixing longer series with shorter pieces.
Good news if you enjoyed my piece on Sebastian Mallaby’s The Power Law: I will be recording another conversation with Sebastian. I will be emailing premium subscribers for a chance to submit questions.
That same email will also give you a chance to ask me questions. Doing an “ask me anything” feels a little self-important but why not run another experiment. I promise to only go through with it if enough questions accumulate and it feels like I have something interesting to say.😉
Podcast: Morgan Housel
Writing: Nick Maggiulli: Climbing the Wealth Ladder
Disclaimer: I write for entertainment purposes only. This is not investment advice. I am not your fiduciary or advisor. Do your own work and seek your own financial, tax, and legal advice before making any investment decisions.
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Podcast: Morgan Housel
I’ve talked about it at length and you can find my notes on Twitter. As Tom Morgan pointed out in this week’s excellent piece, Housel is a master of the metaphor who uses a wealth of stories to enrich the conversation around investing and personal finance:
“I'm a finance writer, but I never read finance books. I read history/biology/biography, and in that process, I'm constantly looking for things outside of finance that remind me of finance. I think it's hard to come up with stories if you're only reading/thinking about your own field. It's when you connect the dots from other fields that it gets exciting.”
I highly recommend the pod which mixes his perspective on investing with gems from his background and thoughts on his writing process.
Book: Almanack of Naval Ravikant
This book about wealth and practical philosophy is somewhat controversial among my friends, some of whom view Naval’s online persona as “fortune cookie wisdom.” I’ve met Naval once in a group setting and he exuded a tremendous inner calm and clarity. He struck me as the most interesting person in the room by a mile.
I regularly return to the book and often come away with an idea or quote that triggers new perspectives and leads me to new rabbit holes. It’s available for free online.
“I only really want to do things for their own sake. That is one definition of art. Whether it’s business, exercise, romance, friendship, whatever, I think the meaning of life is to do things for their own sake.”
"Desire is a contract you make with yourself to be unhappy until you get what you want. … I try not to have more than one big desire in my life at any given time.”
Nick Maggiulli: Climbing the Wealth Ladder
Climbing the Wealth Ladder is a thought-provoking piece that visualizes wealth as a step-function based on how expense categories become trivial relative to net worth. This is a choice: I’ve met very wealthy, self-made people who still cared a lot about insignificant expenses. Personally, I spent several minutes at Trader Joe’s weighing whether I should splurge on a $6 chocolate Babka or go for the cheaper $4 banana bread (the Babka was so worth it!).
“Wealth is, and always will be, a relative measure.”
“0.01% is a good proxy for what constitutes a trivial amount of money for any level of wealth. … For each category, the marginal spending decision represents about 0.01% of the net worth level shown. … When you view wealth in this way, it looks more like steps than a smooth, ever-increasing line. This is because most people in the same level of wealth consume in much the same way … It takes a giant step in wealth to fundamentally alter how we live our lives. And the steps only get larger as we go higher up the wealth scale. So think about whether that step is worth it.”
“We were all super small youtubers and we basically talked every day for a thousand days in a row and did nothing but hyper-study [YouTube]. What makes a good video, what makes a good thumbnail, what’s good pacing, how to go viral. We called it daily masterminds. Some days I’d get on Skype at 7 in the morning and I’d be on the call until 10pm.”
Bear market war story:
“I thought I’d relay my experience from 2001 – 2003. While I was on the sell side during this period, I watched the tape like everyone in this business and it was constantly depressing. … the analysts were constantly trying to make calls that we were at rock bottom valuations. They were using valuation measures that people used in the boom, but really weren’t relevant to normal markets. …”
Love this scene in Moneyball:
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