In this episode, Preston and Stig review Rolf Dobelli’s new book, which was highly recommended by TIP friend, Guy Spier. The book promises to deliver 52 surprising shortcuts to happiness, wealth and success.

In this episode, you’ll learn:

  • Why a good life is all about interpreting facts constructively
  • Why rereading 10 books is a better use of your time than reading 100 books
  • How to balance what is enjoyable and meaningful in your life
  • Why the climate is negligible whether you’re living in Miami than Buffalo
  • Ask The Investors: Why happens to the price of Bitcoin if the stock market crashes?

Tweet your comments about this episode directly to Preston, Stig, and the rest of The Investor’s Podcast Community using #TIPMoney.

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Podcast Transcript and Summary (automated)

Preston: [00:01:18] All right. How’s everyone doing out there.  So Stig and I are really excited to talk to you about this book that we just finished up.  And the name of the book is, The Art of the good life. And this is by Rolf Robelli and the subtitle for this is 52 Surprising Shortcuts To Happiness, Wealth, and Success. So as soon as I read the subtitle it really peaked my interest.

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Stig: [00:02:06] So my initial perception was this is going to be good after reading it. I can honestly say this is a fabulous book and I liked how short the various chapters are like he doesn’t go on meandering on about each little point he kind of gets raked the chiefs like each little chapters probably what 4 pages to like six pages long and straight to the point really elegant the way that he writes. And overall I just really like that in the book has 52 chapters in it so they’re not long but they’re well constructed. I like that. Do you have anything else that you want to highlight stick. Before we plow into our top points for the book No let’s do it. OK so what we’re going to do is I got the top five points that I put out of the book. Stig has his top five points that he put out of the book. We don’t know each other’s points so we’re hoping that they’re not overlapping but they might be. So we’ll find out here so stick why don’t you start off with your point.
: [00:02:58] So the very first one they have that is the mental accounting and basically the concept of mental accounting means that we are treating money differently depending where we got it from. So if I found money on the street our probably would be more callous that if it was something that I would inherent I can document that if people inherit money effectively be used more for donations. You can also see that they would typically invest more in bonds than stocks. So it it’s actually very interesting that even though it might be a dollar it’s definitely not in the light of mental accounting and mental accounting is something we also talked about before in the past you on the show because it’s something that’s very relevant for stock investors. So in this example where you bought a stock at say ten dollars you are more likely to sell that if reached 15 than if he went down to five dollars regardless of intrinsic value because mental accounting says that you order for ten dollars. And that’s really what you remember even though that stock doesn’t care. So what he’s talking about when he is saying mental accounting how to use that to your advantage in your daily life. It’s about how living a good life is interpreting facts constructively. So he comes up with this example with a parking ticket. The way that I guess all of us look at Pagad say is this. It’s something that we don’t like. It’s something that frustrates us and it’s into something we like to be without.
: [00:04:32] So what he has done in terms of his mental accounting is that he has set aside a fixed amount of money every year or donations. So regardless of whatever that is he will give it away by the end of the year. And then if he had expenses like I’m going to take is he will take from that pool. So he’s already written it off like it’s mental accounting always says that you’re actually not paying this money. It’s not something that will touch anyway and you can actually use this pencil account trick many different ways and way that he’s using mental accounting to cut back his expenses is that he’s always adding his income tax to the price which is about 50 percent so he’s saying if something cost you know 20 dollars at a restaurant I always say to myself it’s 30 dollars because that’s how much money I would need to make to pay off a meal. So I just have one more example. This is actually very relevant to the episode with just the power moments well whenever you go on vacation you always remember the high point and the end of the vacation. And he knows that too when he says that too is basically what he’s doing is he always prepays Espace she can afford going on a vacation because he knows that he brains will trick him into saying well it’s probably been the best vacation because at the very end you won’t pay anything like that.
: [00:05:54] I don’t really have anything else to add on that one you hit pretty much everything that was covered in the book. So let me go on to my point. So this kind of came near the end of the book and the title of the chapter was read last but twice. And this one really surprised me because I’d never thought about reading this way. And so the way starts us off he says if you had a punch card he stole this idea from Warren Buffett because Warren Buffett talks about having a punch card when he invests but he says if you had a punch card that you could only punch 50 times. Which books would you pick and how would you pick them that you could only pick 50 books. And so I really like this idea because we read a lot on the show obviously.
: [00:06:36] And I think a lot of people out there that listen to the show or art or readers as well. And what he’s getting at is make sure that you optimize what it is that you’re reading and just don’t waste your time. And he talked about his own library having like you had like 3000 books in his library. And he said that he had only read about one third of them and of the one third that he’s actually read. He couldn’t really say that he remembers too much from a lot of the different books. And so this made me think about my library at the house and how much I’ve retained from the various books and I felt the exact same way that he felt where the one example that kind of came to mind when I was thinking about this was the book that stick and I read on Starbucks Howard Schultz his book and I couldn’t really remember like I’m curious. Let me ask you this How much do you really remember from that book stick. I mean we did an entire podcast about this book but it really wasn’t for me. It really wasn’t a great book but I’m curious how much of that do you really remember.
: [00:07:36] I remember him talking a lot of melted cheese. I had the exact same thought. That’s like the only thing I really remember from the book.
: [00:07:44] Went through a lot of things and he talked about how much he was revamping things and how the focus was on the coffee in general. I really didn’t take away too much more from that book other than those themes that he just blurted out. And so his point here about reading last but twice and being more thorough and focusing on the books that are really good. I completely agree with. Whenever I look back at some of the books that we’ve read and how much I’ve actually retained and to give you an example he said if I read a book one time I’ll retain three percent. This was his own said I retain 3 percent of what I read if I read the book twice I’ll retain 30 percent of what was read. So he’s estimate is that he’s understanding ten times more by reading the book a second time. And so what his technique is is he picks up a book. He kind of skims through it for about five minutes. He said I don’t give any book more than five minutes and if it doesn’t seem like something that he would want to punch his card for. Of the 50 books then he puts it down and he doesn’t read it. But if it is something that he feels like is going to be completely worth his time not only is he going to read it but he’s going to read it twice or maybe even three times. And I found this really an interesting way to look at reading because it’s very different than anything that I’ve ever done. Now he had four points that he talks about with this. He said if the book leaves no trace on the mind then it was a total waste of your time. So that goes back to his point. The second point that he has this is obviously not for a crime novels because once you read a crime novel you know who the suspect is. It’s totally worthless when you’re dealing with fiction. This is really only for nonfiction.
: [00:09:19] He said that his expectation and I know he used the example with a 50 book launch card but he said that his objective for the next 10 years is that he’s going to read 100 books which means he’s only read 10 books a year. That’s it. So like less than one book a month which isn’t a lot but he’s going to read those books two or three times. What he’s really getting out here is immersion. He wants to immerse himself in the book so that it really becomes a part of him and not something that he’s just kind of quickly going through and then forgetting everything that was talked about. One other final point that I think is really really important especially if you’re a young listener and you haven’t read a lot of books or you’re under the age of 30 or 40 years old. He talks about the secretary problem.
: [00:10:04] Let’s say that you were going to hire a secretary and you knew that you were going to have 100 people come for the interview. How do you know when to just stop because the time that you spend interviewing 100 is different than if you interviewed 30 people when you just made a selection. You’re wasting your time by interviewing another 70 people. So what is the best point to cut off the interview and just make a selection. If you had 100 and there was a mathematical solution to this and the answer is 37 and so you know if you’re going interview 10 then you should you know interview about three or four people to then make your selection as you’ve seen enough that you now understand what the population looks like to make an informed decision.
: [00:10:49] There’s a whole lot more written about this. You know there’s a really good book called algorithms to live by. By Brian Christiansen and Tom Griffiths. That gets into this extensively this idea of the secretary problem but to just make it short here and apply to what we’re talking about what he recommends is you should read as much as possible. Up until the age of 30 35 years old something like that depending on how early you started obviously but assuming you’ve been reading your whole life you should stop reading barrage of books by about 30 or 35 years old. And at that point you should become very focused and read only things that you think are going to be highly influential and read them twice or three times. And I found that to be a really profound thought and something that I really valued in this book because it was something I’d never heard. So that was my point. I’m curious was that one of your points there.
: [00:11:39] No it was actually not. It was shortlisted but it didn’t make the cut. No I really liked his point about by you should be read the book like exponential learning. You will also make it out of your principles. You know it’s so easy to read a book and say oh that’s a great book or yeah it was a somewhat good book but it did tug a lot about Mel the Chiefs are what are you. You’ve got out of it. But if you can find principles that you can adapt soar into your daily life. I mean isn’t that really one of the reasons why you read in the first place especially books like be reading here on the show. You want to get smarter. All right well let’s hear your your next wants to. So my next line is the negative side of the good life. And he says the best way to look at this would be to lose something like tennis and what she says is that whatever you are playing tennis with an amateur. It’s all about avoiding mistakes because amateurs tend to aim too long too high and short. So that is the way to win. Now if you’re playing in the pros you have to take on a bit more risk and you have to hit winners if you don’t hit when they’re against approach you’re probably going to lose eventually.
: [00:12:56] And he says that looking at the good life. It’s actually very similar because it’s not so much about or it guarantees but more about what prevents it from happening. So yes there’s less about what would make you unhappy you know you have a party drug addiction loan and that’s a long commute like a victim. A lot of great points. And it’s actually very interesting that he reached this conclusion that if you involved all of these things that will make you miserable the psychotic carousels. And I can’t help but relate this again to stock investing and to Benjamín Graham to Warren Buffett when they’re talking about if you only care about the margin of safety. All the risk you can incur. The upside really tends to take care of itself. And I never really thought about that in terms of how I am living my life. I always thought about what can I do to make me happy. And I guess not a snots trying to mitigate what makes me unhappy and get the indirect effect. So that was definitely life that I think most of us can take away from this chapter.
: [00:14:06] Ok so the next one that I had Stig was a chapter. This is chapter 25 and it was called hedonism and eudaimonia. And this is all about how meaning can compensate for enjoyment. And I loved this chapter. This is something I’d never thought about. I kind of felt kind of strange reading this and thinking to myself wow how have I never thought about this. Let me just give the people that are listening here the scenario so he starts off this chapter and he asked yourself how enjoyable and the keyword is enjoyable are the following activities for you and you’ve got to put them on a scale from zero to 10 zero being not enjoyable at all and then being extremely enjoyable. And so these are some of the things on his list he says. Eating chocolate fighting for your country in a war spending time on your hobby raising children. Funding hospitals in Africa preventing global warming. Watching the World Cup he gives a bunch of examples like this. And so then I’ll just pause and you think about you know if something’s really enjoyable make it and if it’s not enjoyable at all make it a zero and think about what your results are. OK. So now you’ve kind of thought through that. Now here’s another question. How meaningful are the same activities when you think about them.
: [00:15:26] And so what he talks about is that people when they look at it from an enjoyment standpoint versus a meaningful standpoint the list actually changes the numbers on the list change and what he’s getting at is really kind of like when you’re talking about enjoyment you’re talking about something that’s short term like something that doesn’t require a lot of effort. You get a lot of enjoyment out of it whereas the other is something that’s more involved and requires a sense of pride because you put a lot of hard work into it and then it has meaning to it. And I like this because it made me think Wow. So you know like whenever I think about this show like it’s very meaningful to me it’s a lot of hard work. I mean sitting down and reading and recording and programming and working with the team is a lot of hard work. But it’s to us it’s very meaningful work whether people want to believe that or not but for us it’s very meaningful work. But I wouldn’t say that it’s just enjoyable. Like for me going out with my kids and go into like an amusement park that’s really enjoyable. Like I have fun when I do that.
: [00:16:29] And so he talks about this difference between is something enjoyable is something meaningful and then he talks about. So which one is it that you should be trying to acquire in your life. And I think intuitively whenever I started reading this I started thinking to myself like the answer is you want to do meaning work. Because that’s going to be lasting and everything else. And that wasn’t what he actually concluded in the chapter. And I like that what he concluded in the chapter is that you have to have balance between these two things. The person who goes out and is just trying to do things that are meaningful all the time they’re going to burn themselves out. They’re not going to have any type of enjoyment in their life or a sense of fun or anything like that. But the person who’s just on the opposite spectrum that’s just trying to go out and have fun all the time and they never do anything meaningful. They’re going to be incomplete as well. And so he said you got to strike a balance between these two things. And he says avoid the extremes.
: [00:17:25] And he said the reason why is because let’s say you enjoy watching TV but if you watch TV for 12 or 14 hours straight you kind of have this feeling the marginal utility he explains isn’t there it decreases the further that you wander away from the fringes. So you got to keep this balance in check. And I completely agree with this. This was a fantastic chapter it was something that I’d never really thought about my life and I was really happy to kind of stumble upon that in this book.
: [00:17:54] I don’t have anything to point press. I’m actually pretty surprised that you haven’t had any duplicates yet. But let’s see here for the next one to the next one is called The Sturgell of dignity circle or imagineer so we have around you. That includes all your non-negotiable principles and preferences that need no justification. For him it would be never post pictures of his cats on social media. Or it could be he would never do anything for money that he wouldn’t do for a tenth of that sum regardless or not. If you agree with him the strings from heaven this circle of decency really comes from he doesn’t care. It’s okay if you want to post all the pictures of your kids that you want on social media it’s okay if you want to do whatever for whatever kind of money it’s your principles it’s your circle of dignity. And what he says is that the smallest circle of the Ts the better because if you put more things into that circle the more that they can conflict. So regardless if you think that this is a silly example if you think that that his principles are good to live by I think it’s a very good way of living because at the end of the day it will offend disappointing people no matter what you do with your non-negotiable. But if you really think about it it’s a very superfluous question because things that are invaluable by definition have no price and the circle of degrees really do. And you have no price. Another this coming session might be a bit abstract but I think it’s important that you don’t have to rethink every time you find a tempting offer. Because at the end of the day it will erode your self-respect and reputation which will make you even more vulnerable. The future offers and that’s probably a vicious circle for you to answer.
: [00:19:54] You know I think one of the important things that he talked about in the book was you’ve got to at least have the list of what your non-negotiable are and I think for most people out there myself included. I don’t know that I could show anyone what that list is and I think that’s a really important point. Maybe that’s not a bad exercise or a piece of paper and say What are my non-negotiable like. What is it that I hold very close and dear to myself that I’m not going to negotiate on or waver on. And let me put those down in writing and then start acting on that so that that’s something that I will never cross that line you know. Maybe it’s time you spend with your family or whatever that is. I think it’s important for people just to recognize the importance of writing down the list let alone going any further than that. So the next one that I had was the dog trap and I really like this one because it gets to a kind of a theme that’s again I hope we hit on when we’re talking about investing and he starts off this chapter with a really intriguing question. He says if I asked you how a zipper works what would you say your understanding is on a scale from 1 to 10 10 being you really understand how a zipper works and one being you don’t understand it at all.
: [00:21:07] And how would you respond. And so you kind of probably have a number in your head of how well you understand what it is. And then he said Now if I was going to give you a piece of paper and then really explain to me how does this zipper work. Explain. Like the engineering behind it all the mechanical pieces and everything. How much could you actually describe on how that actually works how it clasped together how it’s pulled apart all that stuff and what I think a lot of people recognize is that they actually understand very little as to how a zipper actually works. And maybe that’s just me and maybe my lack of understanding of the engineer. I guess that most people really couldn’t give too much of an explanation other than it zips up my clothes you know. And so his point on this and what he calls this is the knowledge illusion in that most people think that they understand things at a much more granular level than they actually do.
: [00:22:07] So then the next thing he steps to is so think about how profound and complicated a problem is when you ask something like this how much immigration is good for a country in the long term. And when you think about the complexity of that question it is extremely profound has so many different variables so many different variables that we think we understand but we actually know nothing about and what he’s really getting at here is sometimes you just shouldn’t have an opinion and that you should maybe throttle back how quickly you’ll provide an opinion. It wasn’t in this chapter but in another spot in the book he talks about this idea where your mind is constantly pumping out an opinion about everything and anything and basically turning that down turning the knob down on how you should be basically providing an opinion on things and sometimes it’s very liberating just to say you know I just don’t know or I don’t have an opinion on that. Like how many people do you go up through and say Hey what’s your opinion on X Y and Z. And the person actually responds back and says You know I just don’t have an opinion on that.
: [00:23:15] That is so rare that is so insanely rare that you just don’t ever see it.
: [00:23:20] And what he talked about in that chapter which wasn’t even the chapter I’m referring to here he said that’s a form of intelligence when a person says that when a person just spouts out anything that’s a lower form of intelligence. So I completely agree with that. Now when he goes with the rest of this chapter is he starts talking about ideology and he starts talking about don’t fall into the trap of just following any kind of ideology. And he says this is how you can tell if you’re falling into the trap of an ideology he says ideologies explain everything. They are irrefutable and are obscure. That’s the three pronged test of whether you’re falling into an ideology or not. And he says be especially wary when speaking in public about an ideology which is something they’re going I do every week because you will likely be prone to beat it deeper and deeper into your mind. And I can tell you that is a true statement. So what he says is imagine you’re on a talk show any time that you’re spouting something off and that when you’re on this talk show that you’re publicly proclaiming something that you need to be wary of the way that you come across. Whether it’s a really strong opinion anytime you have a strong opinion you need to be very careful what he’s saying here is if you can’t argue the opposite side of the opinion as well as your own opinion then you really haven’t earned your opinion yet. And he’s obviously pulling that from Charlie Munger. I’m assuming because I think Charlie is the one who has come out and said that. So that was my third point I really liked his discussion on this it was quite fascinating.
: [00:24:57] It was very very profound and very very liberating if you can just say I don’t know when it really creates this bond of trust that person even though you might think it probably shouldn’t because you just said you didn’t know anything. I mean think about how much you respect respected politician who were running for you know whatever kind of office journalist would ask him or her a tough question and that person would be I don’t know. And you could go back and started this more I’m really sorry I will send you an e-mail with my response. I’m just not knowledgeable enough. I mean I probably will for a position that I’ve never seen it so far but hopefully one day will happen. So my fourth point is if you run your own race you can’t lose. And it has the attack line by general knowledge is only useful as a hobby at this point partly because I don’t necessarily agree with it but also because I still find it very very profound. The way he starts out this chapter is he’s talking about how back in the stone age hunters and gatherers more or less did the same. There were definitely tasks that meant that and types of women that or some good reasons. But aside from that there were more or less all generalists because they had to be partly because often people died and you really need someone who could step in.
: [00:26:18] But the way that they live you have to be a generalist. That was the most efficient way of living. And he says that it’s very different today. You basically nolle more and more about less and less. And the reason is that when basically takes all. In a globalized and real world we have so many uses today so you shouldn’t be intimidated by this. Why this is suddenly a global competition. Because it also means that you can specialized in more fields and as long as you can win in your own field you don’t try to win another race. This is actually a very good thing for most people. And the way to think about this is something like the Kentucky Darby or any other kind of sports. I mean the winning horse is not twice as fast. Number two but he might be making five X prize money and sponsorships afterwards like that specialization is just so important. Same with entertainers. And the way that he conveys that into useful advice with the reader is that if you are applying for a job or you’re trying to pull this off resume don’t see how many different credentials you can take. See what is necessary and then do that very very well.
: [00:27:37] I had a point that piggybacks off of what you’re saying there is you the thing that you’re really good at. I don’t remember where this was at in the book but he made the quote.
: [00:27:45] He said if you’re going to give to a charity you said if money don’t give anything else other than your money. And when read this was like that sounds like really bad advice.
: [00:27:59] And then he goes a little further and he says and I know this is more from a utility standpoint that he’s saying it’s I think that there’s a lot to be said of giving to a charity with your time and there’s a lot of other values to be had. But he’s looking at it purely from a utility standpoint. He said the most you can give to a charity is through your money because think about it if you’re really good at carpentry you need to be building things in that case like if you’re doing Habitat for Humanity maybe giving your time would be the best thing you could get for most people. They’re not a carpenter maybe they’re a computer programmer or they’re this or that if they focus on that thing that they’re really good at and they make money giving that money to the charity is going to provide the most utility to the charity than anything else. Because if you continue to work at your job you’re able to Bruce more and whatnot. But it kind of gets its XPoint focus on the things that you’re really good at and just knock them out of the ballpark.
: [00:28:54] So I guess where I might disagree with this is that I think general knowledge is really healthy you not only to grow as a human being but I actually think general knowledge can also help you specialize. And I think you’re just talking about merging two different fields. Someone like Hanumaan who we’ve talked about multiple times in the show he comes from a background in psychology and I think the reason why it’s been so useful not just for people into call you but also in finance is because he took baths from both those worlds. He used to talk about reading Dahlia’s book principles. And there’s a very interesting chapter where he talks about how nature can really explain a lot of things in investing into actual people and how just looking outside the window can really help you understand the world. It’s a very indirect way of having success not just financial success but also personal success. If you understand the world and I think general knowledge is what you need. So I think that’s probably where I disagree with him but I can definitely see that it might just be me twisting him because his advice about how to specialize and doing what you do best is definitely valid.
: [00:30:11] Ok so the fourth point that I have is called The focusing illusion. We talked about this a little bit when we had Robert Cialdini on the show and this idea was brought up by Daniel Kahneman and to just kind of paraphrase Daniel Kahneman he says nothing is more important than what you’re thinking about right now. So let me provide an example of what he’s talking about and why this is a profound idea. If I was to ask you whether you wanted to live in Miami or live in Buffalo how would you respond to that or what would you enjoy living more in one of those two locations. And most people immediately come back and say well I would be much happier if I lived in Miami and what people almost immediately are doing is they’re comparing the weather when they’re making that decision. They’re focusing on one aspect of the question which is the weather. And they know that if they’re down in Miami it’s hot murram and they don’t have to go through the winter where if they’re up in Buffalo they will. And so what he talks about here is the focusing illusion is providing this perception that you’re going to live a happier life in a different location and this could be applied to anything this is just one example. And what he says that when you think about what’s actually happening when you go down to Miami you have a job. You live in a certain area Miami which might be good or bad.
: [00:31:35] You have a long commute that might be really short or might be really long. You have all these factors that are also at play and so what you might find is that you’d be exponentially happier in Buffalo than you would be in Miami depending on all those other circumstances. Maybe you’re not making any money down in Miami and you’re working paycheck to paycheck and you don’t have any excess money to go out and enjoy yourself like there’s all these other factors that people just lose sight of because maybe they’re so fixated and so focused on that one thing. And so I guess what he’s trying to get out here is a person needs to take a step back and they need to understand this bias this focusing bias this focusing illusion that exists in almost any single person because the more that you think about that one thing that just keeps driving your thought process the more that you’re ignoring all those other things that are out there that might actually create a lot of value or a lot of happiness for you. And they’re nowhere in sight because you’re so focused on the one thing which might be his demise. I mean I don’t like this weather. I’ve got to move to Miami. So the recommendation that he provides is you know get out a piece of paper write down all the different factors that are at play with a decision to broaden your scope and broaden your perspective so that you don’t get sucked into this illusion.
: [00:32:57] And I found that to be very profound. I see this all the time. You know my daughter is little she’s 3 years old and I see this focusing illusion at play all the time even my son. You know they get this idea in their head. I want this toy and until they get that toy or they get that thing they just cannot get it out of their head they’re totally fixated on it and it drives their entire emotions. It drives everything because they can’t take a step back and say oh well you know there’s there’s five other toys sitting over here. I guess I could go play with one of those or whatever it might be and you see this in adults you see this and kids you see it and everybody. And I think it’s a much more profound idea than people really realize. And it’s funny when we were talking with Robert Cialdini he brought up the story where Daniel Kahneman was asked what’s the most important thing that you think is out there that a lot of people don’t understand. Daniel Kahneman actually said the focusing illusion even though this wasn’t what he had won his Nobel Prize for anything it was a completely different idea that something that didn’t even make him that famous that he brought up as the most important thing.
: [00:34:04] What you’ve thought about nemá through this chapter about the focusing Lucian was really the feeling of gratitude and how we are typically not grateful enough. Let’s give you an example so a few weeks ago I had a cold. And I remember complaining a lot about having a cold like timing was bad like I was very busy with the company and tons of other things so I had no time to be sick. I don’t know when you ever have time to get sick. That was kind of like the narrative for me. Yeah I had a cough like 3 4 days or whatnot but when I think about me today I have not one second about how grateful I am that I’m not sick only days during the year when I think about that when I’m sick and I guess that’s probably the same thing for most people. So that was not necessarily what this frozen illusion was about but I kind of like to bring an example to the table as a related topic and it’s also my segue really to my fifth and final point which is the less you expect the happier you’ll be. And this is not the same thing as not setting goals. One of the things that we learned the book is also that is to set goals and if you achieve goals you’ve come a happier person. This is very different actually. This is in many ways also the same as not only into the focus fallacy the way he frames this is he is comparing utility the happiness of a silver medalist compared to a bronze medalist and you might be thinking if you come in as runner up you would be happier.
: [00:35:41] But you won’t because silver medalist can pass himself to gold. That was his benchmark. Typically when asked if you get a bronze you aren’t thinking well you know I’m up here on the podium at least to get a medal. There are so many other people and they feel that didn’t get won and goal was pretty far away. So it will make you happier. Expectations in many ways are good and they are helpful in your daily life. You would expect the sun to set and rice like it always does. You’re a sprinter. Time and for was enti on that. But it can also work against you. We were recording this one of the first days in 2018. New Year’s Eve is typically the most disappointing day or the year because that is the time where people have the highest expectations. It’s not to sell the words nice per se but it’s where people have the highest potations and when they realized what they were going to do it’s still not as good as they hoped. Similar narratives about strength Day holiday families in Los a lot of things but especially New Year’s Eve shoot us should be the top day here. And basically his advice is that we should draw a clear distinction between the sire’s necessities and patients and you should make your wants your necessities.
: [00:37:00] It’s very dangerous to say I have to be the CEO or I have to have cats. Basically you don’t. And the way he provokes the reader is by saying you know aside from breathing eating sleeping and drinking you don’t really have to do anything. Instead it’s a lot healthier in terms of sending potations to say. My goal is to become the CEO My goal is to have cats because these necessities will basically make you unhappy. And as he states it will make you act like an idiot around other people and the way that he wants you to test this is he’s saying how important is this for the cold shelf life and he says considering the lifespan and stock to rank the syrup being you consider this a disaster and 10 being. This is the lifestream and then you should probably duck this too. Whatever you decide you have to have thought the focus fallacy. And it takes ten seconds he even says he does this on a daily basis. In terms of putting things into perspective there is something that you just like to have and I think this was a very profound manyways because it’s not a question about not being ambitious it’s not a question about not pursuing the goals. It’s more a question of how do I limit my downside how do I make sure that if I’ve reached my goal if this will happen I’ll just be happy. And if it doesn’t I’ll still have a good life.
: [00:38:30] All right so the last one that I had was called in her success and you actually hear Warren Buffet talk about this one a lot which is the difference of your outer scorecard in your inner scorecard. And this was the last chapter in his book. I really like this idea. And he starts off by talking about Warren Buffett specifically saying that Buffett had won the ovarian lottery and what he means by that is that Buffett was born at a certain point in time in the United States. He was blessed with a strong mathematical mind into a family that gave him opportunities that he could leverage etc. etc. and what he’s really getting at is Buffett was lucky that he had all of these things that were completely outside of his control lined up that afforded him the opportunities that he was able to pick on. And when you look across the world and all these other people that aren’t given those same luxuries at birth they don’t have the same walk that Buffett had to start off. So comparing yourself to a guy like Buffett if you’re trying to compare him based off of net worth which is only one tiny little metric that you could compare them to. But if you’re using that is your outside scorecard to compare yourself to him you’re going to continue to be disappointed in yourself and that’s what he’s really getting at with this is don’t compare yourself on the outside to compare yourself on the inside with yourself getting better each day. And so he brings up this example with John Wooden who’s one of the most successful basketball coaches in American history and wouldn’t has a quote he said.
: [00:40:10] Success is peace of mind which is a direct result of self-satisfaction in knowing you made the effort to do your best to become the best that you are capable of becoming. Success in this sense isn’t winning titles or collecting medals. Instead it’s an attitude. And he goes on to say make each day your masterpiece. And so what this really is. What is it that’s important to you on the inside not what are people around you seeing on the outside what is important to you that you become a great parent that you’re there for your family those kind of things that are most important. And then what are you doing each day to get better at those things that you truly value from the inside and that you’ve got to keep trending in that direction. It’s something that I like that he talks about in the book he says there’s no way that anyone is going to read this and immediately say oh you know what I’m just going to focus on my inner scorecard and are going to completely ignore their outside school. But what he says is you should try to trend in that direction. It’s not that you’re making a complete flip and you got to kind of have both in your life. What he’s saying is if you can trend in that direction where you slowly start to focus more on your inner scorecard than your outer work or you’re going to be much happier you’re going to be much more successful in your own right. And that’s what he’s really trying to get out with the entire book. And that’s why he’s saying 52 surprising Shortcuts To Happiness wealth and success.
: [00:41:36] Great point Christine and I also think a very nice way to run the book. Do you have anything else here. No. OK. Let’s go into the next segment. All right.
: [00:41:45] So this is the point in the show where we take a question from the audience and this question comes from Tim Davidson money team and I’m from Australia visiting time with my wife who’s a dentist and we listen to a call Kutsal time and Nicholas mushy. Keep up the good work guys. You know before the bitcoin protocol it really has a major technological innovation. Bitcoin is essentially just a piece of software. It’s a technological innovation because it’s uncorrelated as a potential asset with in mind. Thus it doesn’t matter what the Fed Reserve is doing it doesn’t matter what’s going on politically price is set by the people in a free market but war happens if she is crushed globally like eating 2000 what do you think will happen to the price of bitcoin in the south. All the old coins. Does the average invest in Bitcoin. We think of the coins as a share or equity company because a lot of people do own stocks. So my question is in the event of a correction crash in global share markets the average investor follows suit. Well sassily cryptos. And finally I just want to say the road might be straight up and it might be the one at the end of the shakeout in the next five to two years. Ideally it will be accretive currency that will become mainstream. Learning about it now and making in some coins could be traded once a lifetime. With all this in mind the two asset classes discussed uncorrelated and the mindset of the average investor or are they directly connected and much.
: [00:43:19] So Tim that’s a cool question and Thailand is a beautiful country. I’ve been there one time and it was really neat. So I just wanted to throw that out there. I like this question. I think it’s an important discussion to talk about what happens during a large credit and tracting event first and then maybe we can talk about some of the hypotheticals of what could happen with bitcoin. So when we talk about a credit event what’s happening is all the credit in the system is drying up and then it’s contracting down to its monetary base line. And so let me explain this for anyone who doesn’t understand what I mean by that. You first have to understand how a fiat currency works so a fiat currency has what’s considered monetary base baseline component and that it has a credit component. The credit is made up of the fractional reserve banking that happens and if you don’t understand what fractional reserve banking is I’d tell you to google that. Learn a little bit about that. How when a central bank puts more monetary baseline into the system how the banks can then expand that and basically create credit around that. Once that credit expansion reaches a limitation it starts to basically get supersaturated as the way I like to call that it starts to contract and it has a tendency to accelerate as that contraction occurs and what it’s doing is it’s accelerating back down to its monetary base line. So just for simplicity let’s say that 20 dollars is the monetary baseline and then another 80 dollars is credit making up a total for the entire economy of one hundred dollars.
: [00:44:55] Once that gets to the 100 dollar limit and it gets supersaturated 100 then it starts to contract back down it goes to 80 it goes to 60 but that 20 dollar component of the monetary base line does not dry up. Only the credit part of that dries up. So when you think through this example if you’re valuing everything commodities you’re valuing stocks revaluing bonds with this money that’s in the system 100 dollars as that contracts the value of everything else is going to go down right with it. So the price of gold if you go back and you look at gold during the credit contraction of 2008 and this is really from the late summer period up until maybe Christmas of 2008 you actually saw the price of gold go down. I want to say by 20 or 30 percent during that period of time. And the reason you saw the value of gold go down is because all that credit all that the credit was drying up. And so since gold is somewhat fixed in the amount and the quantity that exists in the world if you’re using these dollars to value that and those dollars are contracting and disappearing you’re going to see the value of gold go down right with it. So with all of that said and let me just add to that as soon as that credit event tracks. OK and we saw this go for contraction back in the last credit cycle. I would say what would you say still February March somewhere in there if 2009 is when you probably saw it. I think that’s about when the timing was. Is that right.
: [00:46:26] Yes. Sounds about the bottom. And I think gold even like from the year end was like 24 percent. Just shut up.
: [00:46:32] Yeah yeah. And so you saw gold even front run that a little bit gold hit its complete contraction. I want to say around Christmas of 2008 and then it started going up but in general you’ll see everything contract even commodities that have like a fixed supply of those commodities they’ll contract up until that point where the central banks then do their expansion again and they start in the last cycle it was all this quantitative easing they started pumping more dollars into the system they started buying bonds off the market at any price and they started fueling the system with more fiat into it which expanded the monetary base line. And then the credit came after that. And I fully expect to see something like that play out again whenever the next credit event happens. I don’t necessarily expect that a credit event happening here. Christmas time of 2017 but you never know when these things could hit and what might trigger it. I mean you could have some type of global event. Call it a war something that could maybe cause a credit event to start trickling down and kind of compounding on itself. You don’t know when that’s going to happen. So when all of that happens and you look at Bitcoin specifically which is I know your question was at bitcoin in my personal opinion will be treated as a fixed supply just like gold. That’s my opinion. Other people might have an argument against that but my opinion is that it’ll be just like gold.
: [00:47:51] And so my expectation for that first part of that credit event or that credit contraction whenever it happens is that the value of bitcoin will go down just like any other stock or bond or anything. Now once that kind of bottoms out and in the past the bottoming has happened pretty quickly because central banks had interest rates to play with they dropped interest rates they were able to expand the credit supply very quickly like within six months nine months and then you saw a very abrupt rebound in things like gold and commodities that had a fixed supply or a fixed supply to demand ratio there. And so I would expect to see that kind of a similar thing play out in Bitcoin this time around where that might be different is if somehow maybe Bitcoin as part of the reason for the meltdown which you know I think that might be the way far off reason. But I mean it’s definitely in the realm of possible that could maybe make my whole underlying assumption of all the stuff false. So at the end of the day I have no idea but I hope some of those ideas and kind of that thought process of how credit events kind of work help you think through what solution you think might occur. So I’m curious to hear what stic thinks on all this.
: [00:49:04] So what we know at least based on history is that if a crash should occur you would have the contraction of present type II before and then you’re just going to see the Fed start coming out a bunch of liquidity. One thing that you’ll see is likely that will lower the federal funds rate which is basically a rate that’s maintained by the Federal Reserve and that is the cash that flows in and out you can look at it in terms of deposits between the banks. And if that rate is high they will have more incentive to hold onto that cash. But if it’s low they will have more sense if to push it out into the market to get their production going so I’m pretty sure you will see something like that. The Fed has also recently hiked rates probably because they would like to have some ammunition. If we see a crash the other thing at least what we saw last time was this start on into easing at the start it up almost out of the gates buying of 600 billion in mortgage backed securities and agency. So who knows if we might see something similar to that. But when it comes to bitcoin I think this is very exciting because it just talks about how you will pull out what a credit depressant talked about a fixed monetary baseline. I’m not sure that is what investors will think if this should incur.
: [00:50:23] I think that investors would say I find gold to be safe.
: [00:50:29] I’m not sure they will make the analysis because it has a fixed monetary baseline. That’s not how people talk to each other up but it would seem like oh so if the state is pumping out of funds one way or the other and gold cannot like how that goes inflation I think it’s all about safety at that point in time more than anything else so the question is really will people perceive the kind to be safe whenever that happens. And I think that is really going to be the big question mark because we’ve never seen anything like that or bitcoin thing above came out 20 0 8 I think so and there was a very small you couldn’t really use that for anything. I think that the potential upside is huge. But again the downside. We don’t know about that.
: [00:51:14] One other thing that I want to piggyback on what you were saying there is we have seen it in Cyprus and we have seen it in a couple other locations where they have had basically a meltdown in the fiat of the domestic currency and bitcoin has done extraordinarily well in those locations for obvious reasons. But I’m not necessarily saying that’s what’s happening in the next credit event. I think it could. But I think it’s something that people need to be aware of. Instict lightly hit on this as well as like what does the Fed do if they don’t have much interest rate to play with and the market starts to contract in a major way. Well you know I’m of the opinion they’re going to definitely go to quantitative easing and they’re going to go to in a massive way and that’s going to be interesting to see how that all plays out and whether that’s going to be enough to stimulate the economy as fast as it did during the last credit event. But you know they’ve replaced a lot of credit with dollars. And I think they’re going to do that again. So we’ll see what happens. But those are some of our thoughts. We definitely do not know what the heck is going to happen as far as I’m concerned it’s 50/50 as far as it going up or going down. I have no idea but I think those are some of the important things to consider when you’re thinking through what might happen. All right. So Tim thank you so much for submitting your question for submitting your question we’re going to get you free access to our intrinsic value course which is a paid course on our IP Academy website and we just really thank you for doing that if anyone else listening to this wants to get your questions played on the show. Go to ask the investors dot com. You just click on a little button there or you can record your question. And if we played on the show you get a free course.
: [00:52:44] All right guys. That was all Empresa I had for this week’s episode to be invests podcasts we Sheetal again next week.
: [00:52:51] Thanks for listening to the IP to access the show. No courses for forums go to the investors podcast dot com. To get your questions played on the show. Go to Aspe dotcom and to win a free subscription to any of our courses on te IP Academy this show is for entertainment purposes only. Before making investment decisions consult a professional. The show is copyrighted by the IP network.
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Books and Resources Mentioned in this Podcast

Rolf Dobelli’s book, The Art of the Good Life – Read reviews of this book

Preston and Stig’s new Bitcoin Resource

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