Introduction

Patrick: [00:00:46] My guest today is Morgan Housel, who just about all my listeners will already know. Morgan just left a long time post at The Motley Fool to join The Collaborative Fund, a venture capital firm here in New York City. Morgan is a good friend who will hopefully be a recurring guest on the show. In this episode, we discussed the differences between private and public markets investing, how to foster innovation and creativity, how businesses are structured and organized and how Morgan finds interesting books and information.

Career Change

Patrick: [00:01:28] Well thanks, Morgan, for being here with me today. I think this might be the first, hopefully, in a series of these conversations between you and I touching on all sorts of stuff. So, maybe, we can start with, given that you've recently made a change in your career, I think you're going to be doing some similar things that people know you for but in a new venue. Maybe you could talk a little bit about your decision to move from The Motley Fool to The Collaborative Fund.

Morgan: [00:01:50] Yeah, first I would say I really thought I would be a writer at The Motley Fool for my whole career. I worked there for 9 years. I started there when I was a junior in college. To me, it was a dream job because what I did 7 days a week was read stuff that I was interested in and then go and write about it. That was it. That was effectively my job description from A to Z, and I loved it. Even after 9 years, it was still, every morning, it was, I can't believe I get to do this. This is fantastic. I had to ask myself though, if I worked in the exact same job, same company for my whole career, would I, at the end of my career, look back and say, I regret not trying something new. It took me 2 years to answer that question, and I finally figured that the answer was yes. Even if I love this on a day-to-day, this is great, I love everything I'm doing. If I'm 70 years old, am I going to look back and be, "Man, I wish I had branched out a little bit." And, I was like, "Yeah."

So, 2 years ago I met a guy named Craig Shapiro who runs The Collaborative Fund. I think he had read some stuff that I wrote and he emailed me one day and he said, "Hey, if you're ever in New York, let's grab breakfast." As luck would have it, I was going to New York the next day. So, it was just like a blind date. We met 2 years ago and instantly within 10 minutes, I remember thinking to myself, "This is the guy I want to work for." I just felt like we see eye-to-eye on where the world's going and what matters in investing. It was just pretty clear that I really liked this guy's philosophy. Then, he reached out to me about a year ago and said, "Hey, let's do something together." It still took me 9 months before I could finally pull the trigger and said, "Okay, let's do it." So, I've worked there for 2 weeks now and it's great.

Patrick: [00:03:33] That's great. Already writing a lot of great stuff.

Morgan: [00:03:36] Yeah. My job isn't going to change that much, at least, at first. I'm going to get into doing a lot of different stuff, but right now I'm still writing and speaking and doing stuff like this like I've always done.

Public versus Private Markets

Patrick: [00:03:45] So, was any of these and we'll get into some of these topics today. You've obviously spent a lot of time writing about, public markets and investing, and are now in the venture world or moving into the venture world. Was any of this motivated by your curiosity or interest in that shift? Is that deliberate?

Morgan: [00:04:04] Well, I think I wanted to do something new, but I'm not going to go out and become a doctor or a lawyer. Not that new. I got to stay within my field, but do something new. Frankly, if you think if I've been writing about dollar-cost averaging into index funds, and now I'm getting into venture capital. That's about as removed as you can get within one's field. That, to me, was pretty exciting. Just in the last 2 weeks I've been at the fund, I've learned so much. I feel like I'm a freshmen in college, just learning something brand new. Even though it's within the field of finance, there's so much that not only that I didn't know but things that I thought I knew that I'm realizing now were wrong and I've enjoyed it so much. That's going to keep on going for years or decades, I hope, that I'm still learning something new. So, that's really exciting to take it from that approach. But still, it's also encouraging, too, that it's still within the field of finance that I've worked in for a decade. So, the example that I give is, my dad was an ER doctor for 25 years, burnt out of the ER. Night shifts. It's crazy, after 25 years, he said, I'm done with ER, but he didn't want to retire. So, he became a general practice family doctor. He was qualified to do that. That's within the field of medicine, but it was totally new to him. He had to learn the field of family medicine from the ground up. But it was still within his field. He was still a doctor then and he's a doctor now. I feel like it's something similar to what I'm doing. It's still within my field of competence, but it's brand new.

Patrick: [00:05:39] Do you think that the diligence process and the investing process seeking inefficiency, I guess, right? Something that you can get for less than it's worth in the venture world, is really distinct from public markets investing or do you think it follows a lot of the same rules and ideas?

Morgan: [00:05:55] There are so many philosophies that carry over no matter what investing you're doing. Whether you're an index investor, a stock picker, private equity, venture capital. So many of the theories around risk and around opportunity and in psychology all carry over no matter what you're doing. But there are so many differences too, between how due diligence works at one level compared to venture capital. I would say for stock pickers or asset allocators, a lot of the due diligence and the research is done in a spreadsheet. It's let's crunch these numbers. What was revenue? What's net income? What is EBITDA? Let's build a model and that's going to tell us where things are going next. In venture capital, often there's no revenue. Sometimes there's not even a product. You move away from the analytical side to the fuzzy world of, I really believe in this guy, this guy is pretty passionate. I think a lot of people look at that and say, that's bullshit. What is due diligence if your due diligence pitch is I met this guy and he seems really passionate. I understand that criticism. I would counter by saying, and I think this is something that you would follow on with.. I think there's so much bullshit in every side of finance, due diligence. That the investment bankers making the models of, here's why we think this deal is going to work. The people that are back-testing so many strategies. Stock pickers that are building discounted cashflow models. There's a lot of nonsense there as well. I think that's more dangerous because since you have data and you're building a model, if you're a stock picker. It's easy to say, well, I built this complicated model in Excel, therefore it has to be right. I spent 2 weeks building this really complicated discounted cash flow model. Therefore, I'm really going to believe my forecast down to the decimal point. Whereas, I think in venture capital, we know that the range of potential outcomes here is enormous.

I had dinner with a CEO of a startup last night. I don't know him well enough to say his name's. I don't know if I'm allowed to tell this story, but it was so refreshing to hear. He's undertaking this startup that is incredibly ambitious and he's well-funded, well-backed, he's a pretty well-known guy. One of his trusted advisors, confidants, mentors came to him and said, let's call him Jim, he said, "Jim, I don't think this idea is going to work." Jim said, "Yeah, that's a true statement. The odds are this won't work. The odds are severely stacked against us." Then, one of his other advisors came to him and said, "Look, I've looked at the data and I think there's maybe a 1 in 50 chance that your idea works." He's, "1 in 50, that's great. That's better than I thought, that's amazing." So, that mentality is just so different from the world of the other end of investing where, if you're a stock picker, an asset allocator where you're trying to get to precision. Where in venture capital, the range of outcomes are known to just be enormous. You could drive a truck through them. But, that's what the expectation is among the investors who are investing in the funds among the CEOs, the expectations are, this could be 100x or very likely a 0.

I think a lot of people look at that and say, that's bullshit. What is due diligence if your due diligence pitch is I met this guy and he seems really passionate. I understand that criticism. I would counter by saying, and I think this is something that you would follow on with.. I think there's so much bullshit in every side of finance, due diligence.

Book Sourcing

Patrick: [00:09:05] So, I want to come back to some of these broad points about venture and young businesses. The 1 in 50 chance being a good chance. It's a unique environment. It's the frontier. It's experimentation, tinkering, and then amplification when something works really well. But before we get back into that topic, I want to touch on your personal system for exploration, for reading, for writing, for deciding what gets your attention. Maybe, we'll start with reading. That's something that obviously we share in common. Where did that start for you? When did you get interested in reading? How do you find books and what sorts of things are you trying to accomplish as a reader?

Morgan: [00:09:48] I was a late bloomer with reading. If you go back, my high school experience, I more or less didn't have a high school education. I grew up ski racing in Lake Tahoe where it's viewed as school was getting in the way of sports, and I, as a lot of my peers at the time, did an independent store study program, That when I was 16, I got a piece of paper that said diploma at the top, but my high school education was almost non-existent. So, I was definitely a late-bloomer in exercising my brain until probably my early 20s when I got it together and went to college. So, I didn't start reading consistently until I was probably 22, 23. But once I got into it, it just took off. Since then, I read quite a bit mainly because, not mainly but one of the main reasons, if you're a writer, the only way you're going to improve your writing and where you're going to get your ideas is from reading. I think that's a common question that a lot of writers get from other people is to say, where do you come up with these ideas? The answer is that you just read all day and they come to you. So reading is part of the job. Sitting at your desk and reading a book might look like you're slacking off, but that's part of the job.

There's a great article by Derek Thompson of The Atlantic recently, who he was talking about in a lot of jobs the difference between work and pleasure, they seep into each other. And they don't have much distinction anymore. That's especially true with writing and reading because I could ask on a Saturday if I'm reading a book, is that pleasure or is that work? It's both. If I was retired, I would still be reading this book. But also by reading this book, I got an idea that I can go out and do some research on and then write an article about it. So they go hand-in-hand. I think this was probably true for yourself as well. If and when you retire, you're going to read as much if not more. But at the same time, your reading influences your work today. So, they go hand-in-hand. Where I find books, the majority of is people I read who write blogs. I'm not just saying this because I'm on your podcast, but I get a lot of an idea of my reading ideas from you and your booklets that you send out. It's the same way that I go about reading blogs, is that there's so much material out there that you need a filter and some curation, and you need a trusted list of people who are going to point to other sources. People like Tadas Viskontas and his website, Abnormal Returns. I trust that everything he links to in that blog post is going to be worth my time to read. He's my trusted filter. I think you need that for reading books as well because millions of books out there, how do you sort through the good ones? I rely on recommendations from people who are smarter than me to go through that. There are so many blogs that do that now that there's an endless supply of book recommendations.

Patrick: [00:12:37] Yeah. Bill Gates has become famous for this. It's a really popular thing to do.

Morgan: [00:12:42] Yeah, not only does he recommend books, but he writes a little review. Here's what I learned from it, here's why you should read it. He's such a voracious reader that there are dozens, maybe hundreds on his site.

Walking & Thinking

Patrick: [00:12:53] For those listening, there's some very famous people that do this. But one that you may or may not have heard of, probably haven't heard of, is a guy named Kevin Simler. So, Kevin, he'll be a guest on the podcast at some point here, an engineer, an early employee at Peter Thiel's company, Palantir, and one of the best essay writers out there. He runs a website called Melting Asphalt, which is amazing. To an essay, mind-blowing. There's a section of the site that's like a reading pipeline with many reviews. So, definitely recommend checking that out if you're searching for good books. When it comes to writing, and, I guess, reading is the way of collecting the raw material. Then, writing is maybe the craft of trying to understand that and communicate it. How do you decide, for example, you've written 3 or 4 things since starting a new job already in just a couple of weeks. How do you decide what to write? Is it just a bubble to the top organic process or is there something more deliberate behind it?

Morgan: [00:13:52] I don't think there's anything deliberate at all. I almost never sit down at the desk and say, okay, let's think of something to write. I think if you try to do that, you're just forcing creativity, which just leads to poor ideas at best. C- ideas at best. This is true for most fields like painting or music or poetry. I think the best ideas come to you when you're in the shower or in the grocery store, or just walking down the street. I think there's a science behind this, that you're just going for a walk down the street is going to spur more creativity than sitting at your desk trying to force it. It's still hard, it's not an easy thing. But, I would say most of my ideas just come randomly during the day. Going for a walk or just sitting in the kitchen making some food or in the shower, and then all of a sudden you're, "Oh, I got it, there it is." And, you just piece it together. It's usually just a compilation of, what have I read in the last week and what stat did I get from this book? And how can I weave that into the story that I read online? And just weave something together and piece it together.

Patrick: [00:14:54] I think, fundamentally innovation is old pieces and new patterns. Those new patterns being able to recognize them, I feel, is never intentional, it's always subconscious. It's just, pack raw pieces of data into your subconscious, let it bubble around like a barbecue or something. You can get all the same ingredients for barbecued ribs and throw them in a quick fryer, and it's not going to taste the same as if you let them simmer. I've always found the same thing. That it's all about just being curious and collecting stuff, and then relying on whatever subconscious process, who knows what's going on to let it find new patterns.

You mentioned something earlier about if you retired you'd still be doing this. One of the questions we ask at our firm is, and this is about the age of automation that we live in, if you had whatever it is, $100 million tomorrow, would you still work here? Obviously, you want to hear the answer to be yes. But, oftentimes what we'll hear is, "Yes, but I would never do tasks, X, Y, and Z again." I'd come in and tell my boss, "Look, I want to be here. This is great. But there's no way I'm ever running a performance report again," or something like that. I think that's a neat way question to ask yourself to identify aspects of what you do, which are probably easy to automate. Because more often than not if you're a creative-leaning person, repetitive stuff is the worst. That's also the easiest thing to get rid of. We're in an interesting frontier and I'm a bit jealous of your new foothold in the venture world where it's going to be all about that moment of creation. New patterns. So to the extent that people can start collecting information in whatever field they're interested in, I think that's probably the first step. Beyond reading, what else do you do every day? Maybe, it doesn't have anything to do with reading, writing, or your job. Just things as a human that you find valuable to do all the time.

Morgan: [00:16:49] Something that I've done since I was a teenager and this too, was never deliberate. There's no story behind this, but I walk a lot. Just by myself, no headphones, nothing, just go for a 40-minute walk. That is when I think the best and figure things out. Not only at work, but just trying to figure out what am I doing in life. Trying to figure out a big decision. When I sit down, it's like my brain shuts off. I feel like I only think when I walk. I try to make a pretty big effort of doing that. It gets a lot harder in the winter. Which I'd like to see. Does my article quality go down in the winter as I walk less? I should look into that. But yeah, that's one of the big things. I have a 1 year old son, so my day-to-day in the last year has been significantly different in the day-to-day in the year. That's been disrupted quite a bit. But to be honest, most of it is reading and writing. Not necessarily sitting down with a book. But scanning Twitter, scanning blogs, which might look pretty inefficient, but I think that's where a lot of the best ideas come from. Just scrolling up and down Twitter, what catches your eye? And you find something that catches your eye and you just keep pulling that thread and go deeper and deeper and try to find something interesting.

Managing Expenses

Patrick: [00:18:02] One of the things we've talked about a bunch offline is the other side of the world of investing that gets far too little attention, which is saving. The expense side of the equation. With most systems, there's an inflow and outflow, and we talk a lot about the growth of our wealth of our portfolios, the best investing strategies. Obviously, you've written a lot about that. Maybe you could talk a little bit about your personal views on the other side of the equation. Of saving, managing expenses, living more simply because I've been very impressed with, not just your thoughts on it, but how you actually live your life.

Morgan: [00:18:38] Yeah, it's clear as day and inarguable, that the only way you can grow wealth over time is to spend less than you make. It doesn't matter if you're making minimum wage or you're Bill Gates. You have to have a difference between your spending and your income. I think that is so simple that people don't think about it very much in finance. It's just not something that we talk about very much. We talk about asset allocation and interest rates and valuations without thinking. The base of the pyramid is, if we're trying to grow wealthier over time, yes investing is a big portion of that. But, the single most important portion is, how much are you saving?

It's crazy. I'm sure you see this as well, a lot of people in our field who make a tremendous amount of money, don't save that much money. Therefore, the investing aspect is not that important to them because they don't have that much money to save. On the flip side of that I know so many people with modest incomes, $50,000, $60,000 a year, who are swimming in money and they're not investing geniuses. They've just created a lifestyle around it that doesn't promote frivolous spending. They live simple lives with simple tastes and simple pleasures. I think the important thing about that, when people talk about frugality, it's instantly thought of, "Oh, you're a miser. You're living an uncomfortable life, your house is freezing cold in the winter and scorching hot in the summer." I think that's not necessarily the case. A lot of the people who I know who are very good with money live pretty good lives. There's so much excess that you can take out on the spending side without digging into your quality of life. I think it comes down to a handful of things. School, house, and car. For most people, those are the 3 big things. Where are your expenses going? For most people, it's your housing payment, your student loan payment, and your car payment. If you can tackle those 3 things all the other things that we talk, that personal finance experts talked a lot about, cut out the latte, bring your lunch to work, doesn't matter at all. If you're cutting out the latte, that doesn't make a big difference if you have an $1,800 a month student payment.

If you can tackle those 3 things all the other things that we talk, that personal finance experts talked a lot about, cut out the latte, bring your lunch to work, doesn't matter at all. If you're cutting out the latte, that doesn't make a big difference if you have an $1,800 a month student payment.

Patrick: [00:20:46] So, forget the car for a minute because that seems just like another version of a pissing contest. A status and a signaling tool. Talk about school. What do you think about college? Do you think it's worth it? That you used to be a universal answer, of course it's worth it. What do you think? Do you think that it's too expensive? What it will look like in 20, 30 years?

Morgan: [00:21:06] I think it absolutely is still worth it for virtually almost everyone. I'm making this up, I'm going to say 90% of people in their late teens, early 20s, college is the right thing that they should do. Where I disagree with a lot of people is, it's often framed as there are two options. If you don't have family support to help pay tuition, there's only two options. There's, don't go to college and there's $100,000 in debt and nothing in between. That's what I fundamentally disagree with. My own college experience, I started at a local community college. A lot of that was because, as I explained, my high school background was less than honorable. So, I had to start at the community college level. But there were so many benefits of that. I went to community college for 2 years which is so cheap, it rounds to free. At the time, maybe the price has gone up. At the time now I was paying, I don't know, $300 a semester or something. It's virtually free in the realm of tuition. I was taking all the same GE courses at anyone else at a public or even a prestigious private school would have. Introduction to Biology and History 101. After 2 years of that, I transferred to a private university. I went to USC and all of that transferred. All of those credits transferred right in. I ended up going to community college for 2 years and USC for 2 years. I got my degree from USC. That's all anyone knows. That's what's on my resume. I went to USC, I got a bachelor's from USC, but I paid a fraction of the price of anyone else because I took my first 2 years at community college. You could take that a step further. I think, my advice for people who don't have the resources to go to more expensive schools is to go 2 years at a community college and then 2 years at a state school. You can do that in almost any state. You still might need loans to do that, but maybe it's $20,000 instead of $200,000.

Patrick: [00:23:02] You raise an important point which is, your resume says USC. So, let's reframe the question a bit. So, I'm a little bit more of a skeptic on the value of college.

Morgan: [00:23:11] You're a skeptic of the value of USC because you went to Notre Dame.

Patrick: [00:23:15] Clearly an inferior school. But, I think the career stamp that the first job that it helps you get is a big part of getting a bachelor's degree. Which, if you think about what a bachelor's degree signals, it signals that you've learned some things, maybe. I was a philosophy major and you didn't really have to do a whole lot to get a philosophy degree. You could read a little bit and write a little bit and pontificate, and there's your BA. And for me, personally, if it wasn't for the signaling value that comes with a college degree, certainly a prestigious one, I would have far preferred to spend those 4 years doing something more hands-on. It seems like colleges value is mostly about... Because you can learn anything you want on your own. With, some exceptions, maybe if you want to be an architect or an engineer, you want some more formal training. Doctor. But, a lot of what you need, you can learn on your own. Certainly, almost everything I learned in college, you could just go read and do it for 10 cents at the library.

Morgan: [00:24:19] Absolutely. And learn it better, you're doing it right.

Patrick: [00:24:22] So, it seems like what you're paying for is, one, the signaling tool, the status of the school, and two, the network. That you meet people and you probably still stay in touch with a lot of them. That can be extremely valuable and maybe worth the price alone. But that's where my skepticism comes from. That a lot of people I know, spent college not really learning. I've always learned much more in the working world where there's consequences. You really have to be accountable and learn very quickly. So, it's an open question, for sure.

Morgan: [00:24:54] Yeah, definitely. The signaling aspect, you're right, that even for most fields, with the exception of hard sciences, engineering, math, a lot of things you're going to learn in college are not going to be applicable to whatever job you're going out to get. But as a 22-year old, you're showing your employer, "Look, I did this for 4 years. I followed the rules, I checked the boxes. When someone told me to do X, I went out and did X." That's the only thing you have on your resume. So when you say it's just the signaling, that's important. That's extremely important. Both for employers and for you as a student to make your way in the world, to show someone, "Look, I'm only 23 years old, I haven't accomplished much in life, but I did this. I followed the rules for 4 years."

Patrick: [00:25:36] Since you've started going down this path of, you said to me one time, it's almost like a game to see how little you need to spend and not have any sacrifice in happiness. Is it possible that even goes the other way, that you get more happiness or joy when there's less stuff?

Morgan: [00:25:52] It's different for everyone, so I don't want to say this is how you should do it. But for my wife and I, we get more pleasure getting rid of stuff than we do buying stuff. If we take a big load to Goodwill, that makes us way happier than going out and buying something. I would say, our buyer's remorse for stuff is pretty high. Our degree of buyer's remorse. I just bought last week, two nice, top of the line, monitors, new computer. I got a new job, let's upgrade the system. I got two really nice ones. I got them and I set it up and I went, "Uh, the old ones were fine."

Patrick: [00:26:29] It's amazing how our wiring is all anticipatory. So, the surge of pleasure happens a lot more when you're expecting something, but then they don't pay off.

Morgan: [00:26:387 Oh, totally. When I ordered these monitors, I was, "Oh, I can't wait to get them. This is going to be so great. I can't wait." Then they came and I went, got the boxes, and it's like a kid on Christmas. I opened them up and they're beautiful and I'm holding them, it's like, "Oh, this is great." Then, I set them up and I start using them and it's nothing. But that happens so often, But there's going to be something next week that it's, "Oh, I got to go out and do this."

Patrick: [00:27:03] It's amazing how it's the hardest lesson to learn. That happens to me all the time too. It's like in investing, there's these, I think Danny Kennan was the guy, who said that these behavioral biases are like mirages. You can see them or think you know them, but then you're still going to suffer the consequences and maybe never learned the lessons.

Morgan: [00:27:23] Because so much of this is, we're not dealing with rational thoughts that you can really move around in your head and have control over. A lot of it is just dopamine and serotonin that you have not a lot of control over that you're going to be at the influence of.

Diffusion of Innovation

Patrick: [00:27:38] Let's shift and talk now about creativity and innovation, given the venture skew to your career now, and maybe start by talking about the piece you wrote recently about the Wright brothers and the general gist of your message there.

Morgan: [00:27:53] So, the Wright brothers is a fascinating story because we know, in hindsight, that when the Wright brothers conquered flight in 1903 that was one of the most monumental moments in human history. Not only in American history or modern history but in human history. We had tackled a new form of mobility and transportation that, in hindsight, is one of the most important methods of transportation given its influence in wars and agriculture, and e-commerce. But what's interesting, if you look back at the Wright brothers, when they did their first flight in 1903 almost nobody noticed. Not just that day or the next day. But for years. Not a lot of people paid attention to the Wright brothers. There are a lot of interesting historical accounts that a lot of people didn't believe that they could fly or when they actually saw them flying, thought it was a trick. Thought, oh, there's a wire in there somewhere, this is just some sort of illusion, I don't buy it. Even the people who really saw it and understood what they're doing thought, that's amazing. That's a cool toy you boys built. They just didn't really grasp it.

The first flight was 1903 and the first big mainstream reports of what the Wright brothers were doing came in 1908. I wrote in this article, I even found in 1904, a year after their first flight, an interview the New York times did with a hot air balloon tycoon racer at the time, and they asked him... Because there's a lot of talk about airplanes back there. Back at the time, they asked him in 1904, what are the odds that humans will be able to fly someday? He said "maybe someday, but not now, not now." That was a year after the Wright's first flight. The point I wanted to make in the article is, I think, if you look at a lot of inventions, you see that same trend occurring. There's a big gap between inventing something that, in hindsight, we know is transformational and convincing the world that you did something transformational. That can often take 10 or 20 years. We see that with the telephone and the light bulb. Penicillin is one of my favorite ones. It was discovered in 1929. And between 1929 and 1942, it was basically a laboratory toy. We knew we had this thing that could kill bacteria. And we knew it worked in living beings and we didn't really know what to do with it for 15 years. It took until World War 2 until we had legions of ill soldiers. If someone said, "Hey, we have a lot of infected soldiers in Europe right now, we should try to use this stuff." So it was 13 or 14 years from discovery until using it. But you would think in hindsight, as soon as we discovered penicillin, "oh my gosh, we solved one of the most fundamental problems of human history," which is infection, but we didn't really figure that out at the time.

Patrick: [00:30:45] There's an amazingly similar example from a book called Diffusion of Innovations, which is an amazing book for anyone that's interested in this topic about scurvy. So scurvy used to kill more people than ward did in early seagoing days. In 1601, a captain named James Lancaster, I think was his name, did a control study. A modern scientific study where he had 2 control ships and 1 test ship. And on the test ship, he gave people citrus or lemon juice and no one had scurvy, everyone was fine. On the other ship, half the people died. So he basically figured this out in 1601. It was totally ignored, he couldn't get anyone to do it in the British Navy or Admiralty. It wasn't until 150 years later that another doctor re-did the same study, same results. Then it was another 48 years after that until the Navy finally adopted it. So almost 200 years. It was 1795 by the time that was standard practice.

Morgan: [00:31:40] How many died within those 200 years?

Patrick: [00:31:41] Yeah, oftentimes, it would be half the ship.

Morgan: [00:31:42] Half the ship, right.

Patrick: [00:31:44] For me, that's the classic question of innovation. Is not just the idea, but the timing and the field. The group of people, the influencers, the tastemakers, who affect whether or not something gets adopted. Any thoughts on that dynamic in the venture world or the business world as you're thinking about new products or new services or new business of how to balance, not just finding the great idea, but one whose time has come?

Morgan: [00:32:14] I think, in venture capital as I was saying earlier, it is a completely, well-known expected normal part of the process that a large portion of the investments you make will fail. I think that the important thing to add on to what you just said, is that if a business fails, it doesn't mean that the idea that it was pursuing was wrong and shouldn't be taken up again. It may have just been early. One of the fundamental things that we ridicule from the dot com boom, and we should ridicule it, was pets.com. This was like the poster boy of the ridiculousness of the dot com era. And it was in terms of its valuation and whatnot, it was ridiculous. But pets.com was ordering your pet food online, which you can do on Amazon today. And Amazon made a successful business out of it. There are so many examples of businesses that at one point in time didn't work and were ridiculed and people would say, "Look, that doesn't work." Then, 20 years later, it works. I think a lot of innovation that fails doesn't fail because it's wrong, it just fails because the world isn't ready for it. There are so many pieces in between invention and sustainable consumer adoption that needed to take place. With pets.com, Amazon needed to build. They needed more people on the internet, you needed more customers. They had to build those customers up from selling books and then selling other stuff, and then Amazon took 20 years to build up a huge base of customers. They had to have their relationship with the shipping networks and they had to achieve scale doing other things so they can get huge discounts from the shipping networks. Now, they're at a place where Amazon has built up such an amazing business, that they can ship a 20-pound bag of dog food to your door. They could probably do it same day now with Amazon Prime, I think it's called. The things that we ridiculed 20 years ago, we're doing today profitably. I think the question that is almost impossible to answer, I won't even try to undertake it is, what are we ridiculing today? What am I ridiculing today? What are you, Patrick, ridiculing today that we'll look at back at 20 years and say, how could we have not seen that coming? Why were we so stupid to do that? I think the odds that you and I and everyone else listening are doing that, and will shake their heads in 10 or 20 years, is 100%, everybody does that.

There are so many examples of businesses that at one point in time didn't work and were ridiculed and people would say, "Look, that doesn't work." Then, 20 years later, it works. I think a lot of innovation that fails doesn't fail because it's wrong, it just fails because the world isn't ready for it.

Business Structures

Patrick: [00:34:26] What about the potential advantage of the way that people structure businesses? So again, this is like one of those accepted truths that may be in 50 years will seem like an absurdity where most businesses are still in that hierarchical, command and control, reporting line departments, marketing department here and the sales department here, etc. Have you done any interesting reading or research into other kinds of organizational structure? Whether it be startups or more established businesses. My guess is, it's more in startups that you find interesting or that people might want to think about?

Morgan: [00:35:02] The really interesting ones, I don't know if I'd recommend this because it's so extreme. But both at Zappos and another company called Valve, which makes video games, effectively have no hierarchy in the company. I might be misstating this but I'm pretty sure no one at Zappos reports to anybody. It's just, everyone's on a team and they're working and they collaborate and do stuff and get it done. They do have a CEO. But there's no formal hierarchy of, you report to me and I'm telling you to do this. I think for both of those companies, it has worked. I know, at Zappos, it caused a lot of consternation and they lost a lot of employees when they went that route. But I think there's something to be said, that if you want to unleash as much creativity in people, you need to give them as much freedom as possible. You can't do that at a lot of companies because there are a lot of workers, a lot of people who can't be trusted with that much freedom. The only way that it can work at Zappos or Valve or any other company, is if you just get completely compulsive and obsessive with hiring the right people. Which is itself, an incredibly hard thing to do. But if you hire the right people that you can trust, which I think you can only do at relatively small companies. But hire people that you can trust to say, "Patrick, I'm going to give you the freedom to work on whatever project you want. No, one's going to be breathing down your back. There's not going to be monthly reviews and targets you have to hit. I'm just hiring you because I know you're going to go do a good job. Now, go do it." If you can hire people who you can trust to do that, the outcome is incredible. I just don't think that it is that expandable to a lot of businesses.

Patrick: [00:36:41] I don't know much about Zappos, but I know a lot about Valve and Valve is, it's literally no hierarchy. There's a joke that the founder often can't get the game... It's a software company, video game company... Can't get the games he wants done because no one will do it with them. It's self-organizing. Meaning, the stuff organically creeps up and they might have an idea for a game and if one person can convince others to work on it with them, that a team forms. There might be a leader, but that leader won't, by de facto, be the leader in the next project, because he's probably not the appropriate person. He or she is probably not the appropriate person to do it. What I find incredibly appealing about it, at least philosophically, who knows in practice? Like you said, really hard in practice. Is that it eliminates, what is this pervasive rent-seeking within established institutions. That, why in the world would someone at the top of a hierarchy, want to mix things up and make it flat when they are capturing rent, so to speak, on the revenues of the business. And, I think, again, this is a private company. These are all hearsay. But there's a lot of people that say that Valve is the or one of the most profitable companies per employee in the world.

Morgan: [00:37:56] They mint money.

Patrick: [00:37:57] Meaning, multiples of earnings per employee of a company like a Facebook or a Google. Surely it's all about the people. But, one of the interesting backstories about Valve was they realized when looking at some analytics about what programs were on the most computers in the mid-'90s, they expected it to be Windows. It turns out windows was number two. The first was a video game called Doom, which I don't know if you play it, but I certainly played it as a kid. Doom was created by this 10 person hacking team in Texas or something like that. The light bulb went off that all that matters is this creative frontier aspect of business and innovation and you don't need a lot of people to do that. I think you've read about this and I'd be curious to know your thoughts, we see a declining lifespan for, say, S&P 500 stocks. The era of conglomerates has gone, now it's more of the pure-play era where there's spinoffs and carve-outs and more efficiency with less scale. Which is like the opposite of what it used to be under the command and control and reformed hierarchical world of business. Do you think that's going to continue? That there will be fewer and fewer, which there have been and smaller, more decentralized corporations in general?

Morgan: [00:39:17] I hope it because I don't think the history of the centralized business is something to be that excited about. I think what's obviously true and is always going to be true, is that the larger a business is the more controls you need to put into place. I think that's true for Valve and Zappos too. I have no idea how big Valve is, but I imagine if it gets to several thousand employees, if it's not already, it's going to be a lot more difficult to run that structure. All these companies like Walmart and Exxon Mobile and Microsoft will need to put in more restraints and more controls on their employees. That's always going to come at the cost of creativity, I think.

Patrick: [00:39:53] What advice would you have for younger people out there, maybe not just starting their careers but early in their careers, in terms of skills or skill sets that you think are either overvalued or undervalued in that paradigm? Assuming that there's more interesting organizational structures in the future and we already know that there's going to be far fewer careers, where it's, you join a company and you're there for the rest of your life, that just doesn't really happen anymore. What skill sets are either over or undervalued in your view?

Morgan: [00:40:22] I've seen so many people who are, on paper, brilliant. Their test scores, their grades are off the charts, but I think the main skill that these people lack and is one of the most important and not discussed enough skill, is empathy. That in the workplace, and this is growing in importance, is so vital and important. Your ability to interact with coworkers and clients who see the world different from you and say, "I never thought of that. It's not how I view the world, but I understand where you're coming from." Your ability to do that is so incredibly important. You see all these people who are brilliant, they're textbook brilliant. Their PhDs from MITs, but they can't interact with other people and they ultimately fail in life. So many of them.

Fails, that's a tough word. But on the other hand, there are so many people that don't have a lot of the formal technical skills that other people do, but their personal skills, their emotional intelligence, is off the chart. Those are the people that succeed the most. The people of the intersection of the two, of technical skills and personal skills are really the people that take off. But we don't stress the personal skills very much in school. Especially when you're young, it's technical skills, technical skills, technical skills. What coding language can I learn, what math can I learn. That's really important and I don't want to discount that.

If I could rearrange the education systems, but particularly in college, the one thing I would do is put more emphasis on the personal skills that you need to succeed in the modern workplace. You see it all the time with young workers that come in and they're hungry and they're smart. They don't know how to get along with people, particularly people who disagree with them. That is the most important skill, is your ability to understand where people who disagree with you are coming from and try to see the world through their eyes. This one investing statistic, I use this a lot because I think it shows the point. If you were born in 1970 and during your teens and 20s, your young formative years, the S&P 500 went up tenfold, in your teens and 20s. If you were born in 1950, then during your teens and 20s, the S&P 500 was effectively flat after inflation. So you have two different generations, the same period of their life and the stock market did something totally different. Went up tenfold for one group, went flat for the other. Those two groups are going to grow up throughout their lives, viewing the stock market different than one another. Because they came of age seeing a totally different world. You can use those examples for so many things in life that, this generation, this group of people, this race, this religion, this industry sees the world different from you do. You're going to disagree with a lot of the things that they say and it's so important that you try to put yourself in their shoes and try to see where they're coming from.

Patrick: [00:43:22] Do you think there are ways... So, I don't know about you, but if you think about introversion, extroversion as a sliding scale. The best litmus test I ever heard for introversion versus extroversion is when you go into a crowd, do you lose energy or do you gain energy? So there's some nuance there. I would say I'm in the middle but definitely leaning introvert which makes some of these empathy skills or networking skills difficult to execute on. Is there anything that you suggest for people on the more introverted side where some of these soft skills are less of a natural asset to develop them?

Morgan: [00:44:01] For me, I don't consider myself introverted. I don't have a problem talking to people but I prefer it to be no more than two people. That's really the case. A lot of times when I'm in meetings with 10 people, I don't say a word. Then the meeting gets out and I go back to my desk and I email people and say, "Hey, I wanted to bring up this, this and this," that I should have brought up in the meeting, but in a room of 10 people, I don't want to pipe up. If it was a meeting with two people, I would have no problem interjecting and saying, "Hey, this is what I think." But, with 10 people, I don't want to do it. So for me, I don't like big meetings so I try to avoid them. If I need to talk to people, I want it to be one-on-one. Rather than sitting at my desk and talking where other people can hear us, which makes me uncomfortable. I'll say, "Hey, let's go for a walk. Just the two of us to talk about this." That's how I've dealt with what might be my extroverted side. Is just trying to keep personal conversations, face-to-face conversations, as intimate as possible.

Old Newspapers

Patrick: [00:45:00] What are some resources that you haven't mentioned elsewhere, or don't mention often? These could be journals or books or individual authors, TV shows, anything, that you've learned a lot from, or gained a lot from that you could share with people?

Morgan: [00:45:17] I've talked about this and written about this before. I live in Washington DC, so I have the library of Congress nearby. At the library Congress, they have every edition of the New York Times, Washington Post, Wall Street Journal, going back to, some of them, in the 1850s. Every single edition on microfilm, so you can go in and find a newspaper from 1901 and throw it in the computer and read it. I absolutely love reading old newspapers. There's a tendency to think of old newspapers are junk. They're what your hamsters piss and that you throw them in the trash. Yesterday's newspaper is not worth looking at anymore. I've learned so much. I get so much pleasure from going back and reading really old newspapers, 1890, 1910, 1920. Just read, what were people talking about back then? What did advertisements look like? What were people buying back then? What were the important stories back then? I think that gets back to what I was talking about with empathy, of just trying to put yourself in their shoes. What did people think back then? The cool thing about newspapers is that there's no hindsight in there. It's, this is what people were thinking in 1901 or 1890. This isn't a historian looking back and trying to guess what people might've been, selectively. This is what they were talking about on this day in 1870. That, to me, has changed how I think about a lot of things. Mainly that the events that we think were obvious, in hindsight, at the time were not.

I did this a lot with investing where I went back to the day the stock market peaked in 1929. What was written about in the Wall Street Journal? The day before the Great Depression began and the market was on its track to fall 90%, what did the Wall Street Journal say? If you go back and read it, the answer is not much. We look at it, in hindsight, and say, in 1929, the stock bubble, so obvious. In a lot of ways, it was. People were talking about it in 1929, but not to the extent that you would think. You go back and read it, and a lot of the analysis at the time was, "stocks are overvalued, but business is still strong, we don't foresee anything crazy going on." If you really try to put yourself in their shoes at the time, you think, yeah, that makes sense. The biggest events, World Wars and Depressions and market crashes, I think, only happened because of a crazy confluence. I hate the phrase perfect storm, but a perfect storm of events that come together that caused the Great Depression. A lot of this stuff is just not foreseeable before it happens and when you read old newspapers, that becomes clear.

Patrick: [00:48:02] That's a really neat tactic. We don't want to have the proximity that you do to the records, but I'm sure you can probably look up a lot of the stuff too. It seems like that would apply to really old books as well. That a book that you can still get in print that's hundreds of years old, obviously it's lasted for some good reason. Maybe that's another tactic that people could take for finding some unique angle. I think you and I are both pretty active in the worlds of Twitter and just personal brand, you could call it. Where we're putting a lot of work out there and sharing it. I found that, maybe the best way of learning outside of books, is all of these unbelievable people that write essays or produce some interesting knowledge content that there's no way I would have ever known or discovered. I would never met you, probably, 15 years ago.

Morgan: [00:48:51] Yeah, I think you met me on Twitter.

Patrick: [00:48:52] Yeah, it would have never-

Morgan: [00:48:53] I remember tweeting you and saying, "Hey, are you Jim O'Shaughnessy's son?" I remember that.

Underrated Writers

Patrick: [00:48:57] Yeah, I remember it too. So, it's this interesting new world where you can connect and people are pretty friendly with really smart, interesting people. Thinking of people as a resource. Any people that you follow, whose work you read, whose businesses you appreciate? Let's caveat this by saying, let's avoid the usual suspects here. You and me having a conversation can turn into preaching to the choir pretty quick. Anyone under the radar that you recommend people check out or read?

Morgan: [00:49:32] If you asked me this two weeks ago, I would struggle answering that question because the people who I read are the same that a lot of the people listening to this podcast or that you read as well. I found a guy a couple of weeks ago, he's not totally under the radar, but pretty much. His name is Mike Dariano and he writes a blog called Waiter's Pad. Have you heard of him?

Patrick: [00:49:53] I have, yeah.

Morgan: [00:49:54] He also wrote a book called Lessons Learned from Failed Startups. That was really good. But, his blog, Waiter's Pad, I had never heard of it. I'd never heard of anyone linking to it. I don't know, I don't remember how I found it, but I started reading it and it just clicked instantly that, "Oh, this is good." Basically, what it is, is he listens to podcasts and then does summary write-ups on them. Bu adding in his own thoughts and weaving together old podcasts. So, "Hey, in this podcast, Jason Zweig said this, which reminds me, Barry Ritholtz once said this." He weaves it together really well. He's a great writer. It was a blog I'd never heard of, I don't know where I found it, but when I did found it, I'm spending hours on it. I thought it was fantastic.

Patrick: [00:50:39] Very cool. Two that I would throw on that pile, the first one is an anonymous doctor. I think he is a psychoanalyst or something like that, a psychiatrist. I don't know his name, but his website is called Slate Star Codex. This is one of these old school-

Morgan: [00:50:57] Terrible name for a website.

Patrick: [00:50:59] Well, terrible until you see how many comments he gets on some of these posts, which number in the thousands. This guy writes some incredibly complicated but accessible meditations, especially on things in the medical world. Like, for example, the EpiPen controversy that's been in the news. He wrote a really thoughtful piece on that. But this guy, I have no idea how he could possibly be a practicing MD and have time to do this, but it's really incredible. In the show notes I'll link to a couple of examples. Then, the other person I would put, even though now he is probably the philosopher king of your new world for more traditional public markets investors. Paul Graham, I think is the gold standard for thoughtful, interesting essays in the modern world. They're all free, they're on his website. I would argue that if you dedicated yourself to reading, in whatever order you want, all of his essays that you'd have a better education in business and in life than most college degrees.

Morgan: [00:52:03] He's a venture capitalist but most of his essays are not about venture capital. A lot of them aren't even about investing, it's just about life.

Contrarian Finance Views

Patrick: [00:52:12] There's one called, What You Can't Say. I think that's what it's called. About how to find contrarian ideas. It's a good segue into my next question. Which is, he picks points in time of fashion trends or trends in the world that, in hindsight, just seemed completely absurd. He uses that to say, that means that there's lots of absurd today too. So there'll be things in any era, and today's no exception, where something is widely accepted and it's utterly ridiculous and we'll look back on it as utterly ridiculous. So I'm curious in the world of investing, and we'll call it the financial advisory world, the asset management world, the venture world, if you like. What things, if any, do you think we'll look back on as aspects of this financial services space as just completely ridiculous or wrong in 10, 20, 30 years?

Morgan: [00:53:05] I'll answer that question by saying what I don't believe we'll look back on. I don't think active management will die like some people think it will. There's obviously a huge trend towards indexing and "passive investing." I think the itch to do better than average will always be there, no matter how much evidence is there that most people won't. That will never go away for the same reason that Vegas won't go away. There's something fundamental about the human condition that just wants to... We'll always believe that there's going to be more opportunity there. I think that's rooted in the fact that there is always an opportunity to do significantly better than average. There is always the next Tesla and the next Apple, and there always will be. And since they will always be there, I think active management will not go away. It is shrinking and it will continue to shrink. But I think that in 20 years, there's going to be a significantly large mutual fund industry of active fund managers. So that's what I think will not go away. I think this isn't that bold a statement because this is a trend well underway, but I think we'll look back at fees as ridiculous. And the fact that asset managers, again this is already declining, but that asset managers can make dynastic sums of money per year for mediocre results. People are waking up to that and they will continue to wake up to that. If I had to guess, I would say in 20 years, a good asset manager will make as much money as a good doctor, which is great. There's nothing wrong with that. Surgeons make good money and they drive Mercedes and they have nice homes, but they don't make $400 million a year. I think that is one of the things, and we're already seeing that particularly among institutional investors, who for years went along with the high fees and now we're saying, "Hey, what am I getting for this?"

I would say in 20 years, a good asset manager will make as much money as a good doctor, which is great. There's nothing wrong with that. Surgeons make good money and they drive Mercedes and they have nice homes, but they don't make $400 million a year. I think that is one of the things, and we're already seeing that particularly among institutional investors, who for years went along with the high fees and now we're saying, "Hey, what am I getting for this?"

Patrick: [00:54:56] What about in the financial advisory space? This is an area where you're going to know a lot more than me. I'm in the asset management business. What trends are good? What things are vestigial and dying? Maybe if you were a young person looking for a financial advisor or a service, Robo, could be your answer. What should people look for and what should people look to avoid?

Morgan: [00:55:18] I'll give one example. My wife's cell phone contract is up for renewal. She can get a new phone with AT&T. She's eligible for a phone upgrade. Her and I, went online the other day, att.com, logged into our account. We said, what are our options, let's figure it out? We just couldn't figure it out. There all these different packages, all these different options. I just couldn't really figure it out. So, we said, okay, let's go to the AT&T store this weekend, we'll talk to a guy. I thought that is a good example of where financial advising is going. In that, there is a great push of online, automated Betterment, Wealthfront. That's phenomenal. I have so much respect for those guys. I think the majority of millennials when they get into the span of their career, where they're accumulating assets, those are the companies that are really going to win big. And, Vanguard and Schwab too, that have their own online robo-advisors. To take this back to the AT&T example, there's always going to be a point where you're, "I don't get this, I want to go talk to a guy." The information that's online is great, but I want to look someone in the eye and say, what is this? Therefore the good financial advisor, the face-to-face advisor, is not going to die. I think the people who really will win in financial advisor over the next 20 years, the people that marry the two, that have an online automated platform for 99% of what you need. But "hey, you can still call me and talk to me." Someone who does that really well right now is Vanguard. If you have, I forget what the threshold is, it's high. I think it's either one or $5 million with Vanguard. You can call a Vanguard CPA and say, "Hey, I don't know how my social security options work. Can you explain it to me?" And, a human will talk to you about it. A qualified human will talk to you about it. That is he model that's really going to win in asset management. Is marrying technology with human interface. As it stands right now, it is by and large one or the other. It's either Edward Jones or Betterment. That's unfair, but that's kind of where things stand right now. The future is going to be marrying Edward Jones, so to speak, with Betterment.

Kindest Act

Patrick: [00:57:31] It sounds like you think the role of the advisor or the best outcome from hiring a financial advisor, is someone that can steer you through difficult to navigate waters, decisions, etc, keep your cool. In that spirit, I'm curious if you had to think about the person or individual act, the nicest thing that anyone has ever done for you in your career professionally, what would it be? Who would it be and what would it be?

Morgan: [00:57:59] The first I ever got into investing was reading Jason Zweig when I was a late teenager, or maybe I was 20 years old. It just clicked with me not only because it made sense, but I'm just thinking, this guy's such a good writer. It was a couple years ago. What was it? I met Jason Zweig randomly at an event one time and just shook his hand and I was star struck and it was two seconds, "Nice to meet you, bye." I emailed him and said, "Hey, I'd love to grab lunch with you sometime." He accepted and we ended up having a conversation for hours. I was legitimately star struck around Jason. He was just larger than life in the field of investing and writing, which is what I wanted my career to be at the time. He was so supportive with his time and supportive. So, he's someone that I look back at as that helped me so much. I think most people who are as busy as he was, if they get an email from a stranger that says, "Hey, I want to have a three-hour lunch with you," he would say, "No, I don't have time for that." So, that stood out to me as pretty big.

Patrick: [00:59:10] What about same question twisted? So, if you had to identify the nicest thing that you've done for somebody.

Morgan: [00:59:20] This is going to be more difficult. Because of that experience with Jason and a couple other people, on the rare occasion that someone emails me and says, "Hey, I'm in college and I'm thinking about getting into finance or writing." Even when I read those emails, I always grunt and say, "I don't have time for that. I don't know this person." The tendency is to just hit delete and pretend it didn't happen. I always try to make an effort to say, "Okay, here's what I think. You can always call me. I prefer you call me because it's easier than typing." I try to reciprocate what people like Jason did for me as well.

Patrick: [00:59:59] Yeah. This was like one of those classic dinner table family conversations that we had with these two questions. I find it always is an interesting answer. It's harder to answer the second one, right? The answer to the first one for me, wasn't professional. But, actually, sadly, I had a cousin who passed away recently. He was our age. A freak occurrence, really awful, but I would name him as the guy who did the kindest thing to me. It was a different version of what Jason did for you. Which is, when I went to Notre Dame, I transferred as well, just like you did to USC. I went to a smaller school in Minnesota, which is where my family's from. Again, just like you, because I was a complete waste of space in high school with a... I was thinking of the animal house. Who is it, Douglas Simpson Day that has the 0.0 GPA, or someone that doesn't have a GPA. Mine wasn't quite that bad, but it was close in high school. So, I transferred after getting my act together, into Notre Dame. This cousin is actually a second cousin. I didn't know him that well prior to this meetup, he was there as well. He spent months integrating me, completely selflessly with no expectation of anything in return. Even if he wasn't going out, he would call people and say, my cousin's coming out. It was unbelievable, at age 18 or 19. Because of him I met my wife, I met the guy who was my best man, most of my other groomsmen, good friends. It's amazing how big of an impact someone willing to take their time. Someone better established than you willing to take their time to integrate you. Hopefully, I can pay it forward thing. I haven't done anything that good yet, but hopefully I can.

Formative Books

Last couple of questions. If you had to identify... And, books has been a common theme, but I think it's a good one... If you had to identify, say two or three books that have literally changed your life... This is another question I've started to ask everyone. I asked myself this question and it was shockingly a very small number of books. If you had to identify a couple that were really life-changing for you, what would rise to the top of that list?

Morgan: [01:02:18] It wasn't that long ago that I read this, maybe, two years ago, three years ago. A guy named Benjamin Roth, he was a lawyer from Ohio and he was just an avid diary keeper. He kept an extremely extensive detailed diary during the Great Depression. Started in 1928 and finished it in 1942, which was maybe shortly before he passed away. But every day, would document, and he's an incredibly good writer, what was going on in the country. And what did he see around town and just random tidbits? How were his neighbors fighting more in 1933 when the economy was worse versus how they were before? How are people dealing with the rise in bankruptcies and bank runs, which was a huge deal in the early 1930s? So, it's an amazing diary and his son put it together and published it in, I think, 2010. So, not that long ago. That, to me, just stood out. I've read so many economic textbooks and things about the Great Depression that are all hindsight. It gets back to again what I was talking about with the old newspapers. They're all looking backward about what happened during the Great Depression. Looking backward, writing from today, looking back to them. He was writing this in 1930, 1933. "This is what I see in the world today." What's amazing about it, two things really stuck out to me, was the similarities between what he wrote back then and what people were saying in 2009, 2010, when we were just coming out of the Great Recession. The similarities were uncanny about how it changed politics. You saw a rise in 2010, what we call The Tea Party, something similar in 1932. You had a big revolt against bankers and central bankers. You had a huge fear of the hyperinflation that was always right around the corner. That was a huge fear in 1931, 32, which seems crazy now because now we know they had deflation back then. That was their biggest problem. But, they were scared shitless over hyperinflation back then because of the central bank actions. Which was the same thing in 2010, that in hindsight, we know we had very tame inflation, if not deflation, but the gold bugs were out in force in 2010. So, the similarities really struck me between the 1930s and the 2010s. I loved the book. I think I read it in one setting because it just grabbed ahold of me.

Then another set of books that caught my attention for the exact same reason, because they were firsthand accounts was, there's a historian named Frederick Lewis Allen who wrote a trilogy of books. They're called Since Yesterday, Only Yesterday, and The Big Change. Since Yesterday's on the history of America in 1920s, Only Yesterday was the 1930s, and The Big Change is how America changed from 1900 to 1950. They're just incredibly well-written and well done. This is not a shocking statement, but how America changed from 1900 to 1950 is orders of magnitude different from how it changed from 1950 to 2019. From 1900 to 1950, we went from horse and buggy to jet, and from 1950 to 2000, we went from jet to faster jet. The changes that took place during the first half of the 20th century were just off the charts. Interestingly, a lot of the biggest changes took place in 1930s when the economy was on its knees. In the 1940s, where because of World War 2, the amount of innovation that happened sometimes, literally, overnight was off the charts. So, during the 30s and early 40s, which we think about as a dark time in world history, you had the Great Depression and the World War, in hindsight, ended up being some of the most, if not, I would say the most innovative time, maybe in US history.

Patrick: [01:06:17] You've mentioned it to me once before, maybe a week or two ago and I haven't read it yet. But, it sounds like just an awesome, totally under the radar book.

Morgan: [01:06:26] Just so good. Because not only is it an amazing topic, but this is the most important thing for books. He's just an incredibly good writer. So, you don't have to reread paragraphs, like you do a lot of history books. It just comes to you and you can just sit down and read it. It's great.

Stories from Motley Fool

Patrick: [01:06:40] Last question is, as you close a great chapter with The Motley Fool and move on to new things, thinking back on your time there. If you had to think of one, maybe even two, really colorful, fun stories from your time with The Fool, what would they be? What stands out in your memory?

Morgan: [01:07:00] So actually, how I got started at The Motley Fool is a story in itself. It was 2007. I was a junior at USC and I was reading a guy's blog, just an individual blog, blogspot.com, I think, at the time. And I forget what it was, but this guy, he was an investing blog, but he wrote something that was wrong, just factually inaccurate. It wasn't big, but he just misstated something and I was a jerk about it. So, I emailed him and said, "Hey, you're wrong, here's what actually happened." He wrote back and said, "Oh, you're right. I'll update that. Hey, by the way, I see your email address is USC. I'm coming out to LA next week, we should meet up." I said, "Sure, you're an investor, I'm an investor, let's meet up." So, it was great. "Let's have coffee next week. Let's stay in touch." He emailed me the day before he was going to come in. The guy's name is Sham Gad, I should say. Sham emailed me and he said, "Hey, I'm flying to LAX, what's the best bus to take to downtown LA?" If you're familiar with LA, the answer is there's not much. So I said, "I'll pick you up at the airport." He said, "Really?" I said, "Yeah, I'll pick you up." I didn't live close to LAX at the time, but it was like, "Oh, I'll come get you. I'm not doing anything else." So, I went and picked him up at the airport. Never met the guy other than a couple of emails. Picked him up, started talking. As we're driving back to my house, he said, "Hey, is there a cheap hotel near your house?" I said, "No, but you can crash on my couch if you want." I met this guy, I've exchanged two emails with a complete and utter stranger, but we hit it off. He's an avid investor, I was an avid investor, so we just totally hit it off. Had dinner, had drinks, he crashed on my couch. Then a couple of months later, I figured out that he was writing for The Motley Fool. He said, "Yeah, you should apply." I never once in my life, up until that moment thought I want to write about investing. But interestingly, it was mid-2007 and I was working at a private equity firm at the time and credit markets started blowing up and I needed to find a new job. The private equity fund was not doing well, credit markets were freezing. We're getting lines of credit pulled from underneath us. So I needed to do something else. Sham said, "Oh, you should consider writing for The Motley fool." I said, "Okay, I'll maybe do this on the side until I find a job at a hedge fund." I ended up staying 9 years. It all started because I let a stranger sleep on my couch.

Patrick: [01:09:19] Serendipitous. That raises the last question, other advice for young people that are interested in investing specifically. Not just generic skillsets, but someone that is a junior in college like you were and into investing, maybe just picking stocks or whatever the dimension that they might like? Do you think it's a good time to go into this industry? If so, what should people consider and do?

Morgan: [01:09:46] I do think it's a good time to go into finance. I think there's a lot of opportunities because the whole industry from venture capital to something like Betterment, or just the average Joe investing, is being turned upside down right now. It's an exciting time to be in the industry. The advice I would have for young investors, not necessarily going into the industry, but young investors, is, I would recognize that almost every great investor gets more humble as time goes on. I think that's even true for the Warren Buffets of the world. I think Warren Buffet is more humble in his 80s and he wasn't in 60s. I think it's true for me, I think that's probably true for you. I would always try to keep that at the top of your mind when you're 22 years old and you really think I've got this figured out, you probably don't. That might sound discouraging, that might sound like I'm random. But I think that's true for so many investors, that the more experience you gain in this field, the more humbling it becomes. That's not to discourage you out of investing. I think investing is one of my great hobbies and my central focus. I'm so interested in it. So, it's not to say that you shouldn't try at investing, that's not the message at all. It's just to constantly be asking yourself, what am I missing?

Patrick: [01:11:04] It's always harder than you think. There's no doubt about that. Well, that's a great place to end. So for now, until next time, hopefully we'll be able to do this a few times in the future. We'll leave it there. Thanks so much for joining me.

Morgan: [01:11:16] Thanks, Patrick.

Created by @_Nick_Diller