No. of Recommendations: 5
This is worth 53 minutes of your time while walking, running, biking, or whatever.
80 Years of Financial Knowledge in 53 Minutes | #422 (Bill Bernstein)
In this episode, we welcome back William Bernstein to discuss the final book of his longtime friend Jonathan Clements, Money and Me. Bill reflects on Jonathan’s ideas about spending, happiness, retirement, investing, inheritance, and the psychology of financial decision-making, while sharing personal stories that bring those ideas to life.
We explore why material purchases often lose their appeal quickly, why autonomy can be one of the best things money can buy, and how worrying about money can be a greater problem than spending it. Bill also discusses the four horsemen of financial disaster—inflation, deflation, confiscation, and destruction—why diversification matters, and why investors should be skeptical of assumptions about future returns and market forecasts.
The conversation also examines what it means to “win the game” financially, why retirement should be thought of as a verb rather than a destination, and the three foundations of well-being: connection, competence, and autonomy. Bill shares Jonathan’s approach to teaching children about money, the concept of “Omega” as a way to think about spending versus saving, and why the people around us can have an enormous influence on our expectations and consumption.
Bernstein:
Well, it's the essential equation of happiness or the equation of happiness, which is happiness equals reality minus expectations. That was probably an invention, I think, of the Magliozzi brothers on Car Talk, although it was written about before that. What affects our expectations?
Well, our expectations are driven by our current consumption. If you get used to flying first class, you're not going to be happy in cattle class. But also, it's affected by the people around us.
The example I like to give is, for example, the person who's an internist or a practicing physician in a poor rural community is a person who's going to be a lot happier than the person who's practicing internal medicine on the Upper East Side of Manhattan. Because in the poor rural community, that doctor is a respected member of the community, he's making a lot more money than the people around him, and he's not constantly looking over his shoulder trying to keep up with the Joneses. On the other hand, if you are practicing internal medicine in the Upper East Side of Manhattan, you are a half step above being an Uber driver.
You are not treated with respect by your neighbors. Basically, we are affected by the people around us. I'm trying to remember where I came across this.
