By Andy Serwer

And now for something completely different, as that great observer of the human condition, John Cleese, likes to say.

Close your eyes. Take a deep breath. And think about who you really are and what you really want.

Sounds wiggy? In fact, this is exactly what we all should be doing when it comes to investing, instead of obsessing over the daily noise of Trump and tariffs -- or even the tanking markets.

Morgan Housel has been encouraging us to think along these lines for years in his blogs, podcasts, and best-selling books The Psychology of Money and Same as Ever: A Guide to What Never Changes. Housel's overarching point is that studying human behavior is much more helpful in understanding the markets than, say, what you learn in business school or, heaven forbid, what your broker preaches. With the markets currently in bonkers mode, the teachings of Housel -- eclectically enough aligned with the likes of Warren Buffett, Eddie Lampert, and Barry Ritholtz -- are actually most salient right now.

Chris Davis, chairman and portfolio manager of Davis Advisors and a director at Berkshire Hathaway, is so enamored of Housel and The Psychology of Money that he sent out copies to a dozen or so of his children, godchildren, nieces, nephews, and some of their significant others promising each $50 if they read the book and sent him a summary.

Davis wrote to them: "It may seem unusual for me to pay you to read a book; but I believe that if you understand the concepts and techniques in this book, your life will go better over the long term. I can't think of a better return on a $50 investment." How many took Davis up on his offer? "The response rate was roughly 50%," Davis tells me. "I wish I could go long the 50% that responded and short the ones that didn't!"

Housel's fundamental argument is that our understanding of how markets work is flawed. "Generally, finance tends to be taught like a math-based topic: 'Here's the data, put it into the formula and it tells you what to do,'" he says. "In the real world, it could not be further away from that. People's decision to invest is emotional. They make financial decisions at the dinner table when their family dynamics are coming into play. They make them in a corporate boardroom where there's power and personality struggles."

I was curious if Housel saw any value at all in quantitative analysis. "Not to pooh-pooh spreadsheets and data, but there's a layer of behavior that sits above that. If you understand all of the facts and the data, but you can't control your behavior, none of it matters," he says. "And there's a flip side to that, which is the person who has good control over their behavior but doesn't really know any of the facts. Take a country bumpkin who saves some money and invests. That person can do incredibly well.

"It's one of the very few fields where that exists," he continues. "There's no way an amateur can outperform a Harvard-trained cardiologist at open-heart surgery. But in investing, you have these situations where the country bumpkin does very well and the hedge fund manager blows up at the exact same time."

Speaking of Harvard, that's not where Housel went. He grew up in Truckee, Calif., near Lake Tahoe, the son of an ER doctor and nurse at Marshall Hospital in Placerville. Young Morgan was a ski racer, shredding his craft at what was then Squaw Valley (now Palisades Tahoe). "I definitely had an 'Oh shit' moment at age 18 or 19 when all my friends are going off to college and I can barely add double-digit numbers," he says.

Housel started at the local community college in Truckee. After studying at the University of Nevada, Reno, for a year, he transferred to the University of Southern California, where he received a degree in economics.

"My plan was to be either a hedge fund manager or an investment banker," he says. "I really didn't know what those phrases meant, but I knew that they made a lot of money." Graduating into the economic you-know-what storm of 2008, Housel was laid off from a private-equity firm and "out of desperation" took a job writing for the Motley Fool. (There's a fascinating back story here concerning involving Eddie Lampert's alma mater.)

While working for the Fool and writing some for The Wall Street Journal, Housel got cold-called by Craig Shapiro, founder and managing partner of Collaborative Fund, who convinced him to join the venture-capital firm -- just to write about the markets.

Housel gained other followers too. "I first became aware of Morgan through a blog post, " The Three Sides of Risk," says Tom Gayner, CEO of Markel Group, a diversified holding company that some say resembles a mini Berkshire Hathaway. "It's the one about Morgan's high school skiing" -- and a tragic accident in which two close friends died. "If you don't cry after reading that, you're missing some frontal lobe material. I said, 'This is a guy who understands what's important deeply.'"

Gayner flew to Seattle, where Housel lives, to recruit him to serve on Markel's board. "And at the end of that day we're sitting in a restaurant," Gayner recalls, "and Morgan asked me: 'Why do you want me as a director?' And I said to him, 'Because you are the oldest 38-year-old I've ever met in my life.'"

Housel cognoscenti will be delighted to hear their mentor has a new book coming out this fall, The Art of Spending Money. Says Housel: "My first book, The Psychology of Money, was about how to acquire wealth through investing and saving and compound interest. This book is about what to do with that wealth. It dives deep into envy, jealousy, keeping up with the Joneses."

"Let's be honest," says Barry Ritholtz, chairman and chief investment officer of Ritholtz Wealth Management. "Talking about stocks and data can make people's eyes glaze over. What I love about Morgan's work is that he tells wonderful stories about the world of finance that people can really understand."

I was struck by the same thought when I read what Housel wrote about independence. "To the extent that you can use wealth for independence is the highest ROI that any money pays over time," he says. "That's all I've ever wanted out of money. Every dollar of savings is a piece of my future I own and somebody else does not. Waking up every morning and saying, 'I can do whatever I want today' is a lifestyle boost that will always feel great.

"Sometimes you meet people who have a high net worth who think they're financially independent, but often they're not," he says. "They are completely beholden to their boss, or their shareholders."

Does Housel have a take on the market right now?

"I have lots of takes. I follow the stock market very closely. I check it all day, every day, but it never influences the decisions that I make as an investor. I dollar-cost average into index funds that I hope to own for the next 50 years. I don't think that's a contradiction, because markets are a window into human behavior that are so fascinating."

Housel is a prodigious reader of books, preferring them over articles. "My philosophy for reading is to start with a very wide funnel and then have a tight filter. I will start reading a book about science, history, or culture, but if it's not working for me, I'm gonna shut it very quickly and move on to the next one. I think when you cast that wide of a net, you start to connect the dots and realize how broad behavior is.

"Unquestionably, you learn more from books than articles. I could not tell you one single article I wrote or I read in 2015, but I can tell you details of books that I read 15 years ago," he says. "We have a family friend that has a house on Lopez Island, Wash., which is in the San Juan Islands, and I was sitting there on the back porch in 2007 reading The Black Swan. That was a transformational book."

Some of those who inspired Housel may surprise you. "There was Eddie Lampert, who we don't talk much about anymore because he kind of flamed out. Early on he was like an idol. He just seemed like he had the magic touch, and I read every word that I could about him. Also T. Boone Pickens, who was an oil trader. I loved his personality, pizazz, and complete indifference to traditional Wall Street. I interviewed him in his office in Dallas, and he was just such a cowboy, right out of central casting. But it was also clear that beneath that cowboy veneer, he understood the mechanics of the oil market better than probably anyone alive at the moment."

Not surprisingly, Housel is a huge Berkshire fan. "It's kind of a cliché, but I would never have gotten into investing without Buffett and [the late Charlie] Munger," he says. "What was so appealing about them, particularly when I was young and uneducated, is I could understand everything they were saying, or at least I thought I could, versus some esoteric derivative strategy. That the ability to communicate to laypeople in clear, understandable messages is very, very difficult. The highest sign of intelligence is the ability to explain something complex in simple terms."

Is Housel's commentary helping you with any buy, sell, or hold decisions right now? It should. If not, you might want to reconsider.

Write to Andy Serwer at andy.serwer@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 03, 2025 13:39 ET (17:39 GMT)

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