The biggest takeaway I got from “Same as Ever” is this—and I think this alone is worth the price of the book itself:
Consider things that won’t change in years and decades, and these are the places you’ll want to invest heavily. These things should generate high returns, of course. Your return doesn’t have to be in dollars, but rather in any way that enriches your life.
These investments could be in relationships, skill sets, or assets. Investing in things that never change preserves the magic of compounding, since we want to avoid disrupting it.
Housel eloquently states, “Things that never change are important because you can put so much confidence into knowing how they’ll shape the future. Bezos said it’s impossible to imagine a future where Amazon customers don’t want low prices and fast shipping—so he can put enormous investment into those things. The same philosophy works in almost all areas of life.”
Risk is what’s left after you’ve thought of everything
In 2020, when I began sharing my thoughts about investing publicly, one statement raised the most eyebrows: “I have two years’ worth of expenses saved up.” Many perceived this as an excessively cautious move that wasn’t necessary, and that money could be put to better use by investing in the stock market.
We were in the midst of a raging bull market back then, when interest rates were close to zero percent. As humans, we are inclined to extrapolate whatever is going on right now way into the future, so when the stock market never had a severe bear market since 2008 with interest rates at rock bottom, many people, including famed investor Raymond Dalio, were screaming “cash is trash! ”
But when the market went into a 10-months prolonged drawdown in 2022, a number of investors I know were taken out of the game because they treated cash like trash. Some even took on leverage because it seemed “silly” not to take advantage of cheap money and invested all their money in the stock market.
The drawdown highlighted why optimizing for efficiency in money management is not always prudent.
“As financial advisor Carl Richards says, “Risk is what’s left over after you think you’ve thought of everything.” That’s the real definition of risk—what’s left over after you’ve prepared for the risks you can imagine. Risk is what you don’t see.”
“Cash is an inefficient drag during bull markets and as valuable as oxygen during bear markets. Leverage is the most efficient way to maximize your balance sheet and the easiest way to lose everything. Concentration is the best way to maximize returns, but diversification is the best way to increase the odds of owning a company capable of delivering returns. On and on.”
Happiness
I have read a lot of books on happiness, and I agree with the conclusion that most of them reach: happiness is the difference between expectations and reality.
It is possible to alter your reality to a certain extent, but happiness will elude you if you keep raising your expectations.
Most of these expectations stem from envy, from the people you surround yourself with and what they value.
One time I read that the poor of this century live a better life than the rich of centuries past. Today, sanitation is better, communications are better, and resources are more abundant because of technology. But we don’t feel that way because we compare ourselves with our neighbors, not across time.
Housel reflects, “Montesquieu wrote 275 years ago, ‘If you only wished to be happy, this could be easily accomplished; but we wish to be happier than other people, and this is always difficult, for we believe others to be happier than they are.’” He further notes, “People gauge their well-being relative to those around them, and luxuries become necessities in a remarkably short period of time when the people around you become better off.”
His book also examines the complicated relationship between money and happiness. He observes, “Money buys happiness in the same way drugs bring pleasure: incredible if done right, dangerous if used to mask a weakness, and disastrous when no amount is enough.”
Steady Compounding
The promise of high returns attracts most people like a moth to a flame. Throughout my investing journey, I have frequently been asked what my goals are. The answer I gave was to aim for a compound rate of 15% over a long period of time. This response is often met with puzzlement in 2020, when social media glorifies returns exceeding 100%. Yet, it’s the steady compounding that truly builds lasting wealth.
Their mistake was not understanding that crypto returns and the unprofitable hypergrowth companies bull run in 2020 were abnormalities that were unlikely to repeat.
But more importantly, they didn’t understand the power of Steady Compounding, $100,000 compounded at 15% per year over three decades would be $6,621,177. It’s not about the highest returns when it comes to investing. Building a portfolio that generates sustainable returns that beat the market is the goal.
This was what Morgan shared in his book, “Chamath Palihapitiya was once asked about earning the highest returns, and remarked: I would really love to just compound at fifteen percent per year. Because if I can do that for fifty years that’s just enormous. Just slow and steady against hard problems.”
Likewise, wealth that’s generated quickly disappears just as quickly. Housel uses the analogy of tree growth to illustrate this: “Most young tree saplings spend their early decades under the shade of their mother’s canopy. Limited sunlight means they grow slowly. Slow growth leads to dense, hard wood. But something interesting happens if you plant a tree in an open field: free from the shade of bigger trees, the sapling gorges on sunlight and grows fast. Fast growth leads to soft, airy wood that never had time to densify. And soft, airy wood is a breeding ground for fungus and disease. “A tree that grows quickly rots quickly and therefore never has a chance to grow old,” forester Peter Wohlleben wrote. Haste makes waste.”
I hope these reflections and excerpts from “Same as Ever” provide valuable insights. I encourage you to share your thoughts and experiences in the comments below.
Let’s engage in a meaningful conversation about investing strategies that withstand the test of time.
You can get a copy of Same as Ever here.