Last week, I was in Singapore for a short vacation. I read “Same as Ever” which is yet another insightful book by Morgan Housel as I rode on buses and MRTs. It consists of 23 short stories that offer lessons on risk and opportunities. Here, as a financial educator, I’ll list down 5 key insights that are relevant to us in the key areas of personal finance, investing and portfolio building. They are as follows: 


1. Snickers

The book starts off with a story between Warren Buffett and a friend of Housel, the author in late 2009, which was during the Global Financial Crisis. This friend asked Buffett on the state of the economy and if it’s recoverable. As a response, Buffett stated that Snickers was the best selling candybar in 1962 and continues to be the best selling candybar in 2009. 


The difference is: 

  • This friend focuses on future prediction. 
  • Buffett focuses on businesses, regardless of the state of the economy. 


The former believes in market prediction. The latter believes in solid businesses that are durable, resilient, and profitable regardless of market conditions – good or bad. This explains why Buffett could hold onto his stocks: Apple, AMEX … etc for decades despite short-term volatility in their stock prices. Such focus is what sets apart Buffett to be an investment legend from many others that are not. 


2. Does Not Compute

Housel shared a story on Robert McNamara. He had successfully turned around Ford through machine-like operation driven by numbers and statistics. Then, he was recruited as the US Secretary of Defense to combat the Vietnam War. Since then, he ran the Defense Department like Ford, demanding for everything to be quantified and numbered. But, he failed to consider the human element, which is important, but could not possibly be quantified and assessed with charts. 


Similarly, I would say it holds true when it comes to personal finance. 


For instance, at KCLau.com, we believe withdrawing money from the EPF to pay off mortgages is generally financially unwise. This is because the dividend yields offered by EPF are on average 6+% a year while mortgage rates cost 4+% a year. Why would you forgo 6+% a year in order to save 4+% a year in interests? To us, based on numbers alone, it’s a no brainer. 


However, we never consider one’s feelings and emotions towards “owing debt”. There are people who feel emotionally relieved to be totally debt-free. How are we going to measure the joy, the satisfaction and the peace that one would feel once they have all their debts settled? Could such be worth more than the 2+% a year earned from our EPF accounts?


As such, there are times when ‘numbers alone’ could not be the deciding factor of a financial decision. There is always a human element to it. 


3. Invest in Preparedness, not in Prediction

The above is a quote by Nassim Taleb, a U.S. mathematical statistician. 


Think of it as how California prepares for the next earthquake. According to this book, Housel wrote: “While there is a possibility of an impending earthquake in California, its state government would not know as to when, exact location, and its magnitude if it happens. As such, the state government prepares for it as if it would happen in the near future.” 


It is the same with investing. 


I do know that markets will crash in the future. I just don’t know when and how great its magnitude would be if it does. Regardless of it happening, I believe the stance to take is to prepare for it as if it could happen in the near future. Such is practical as we don’t want to be off guard when a market crash happens. These preparations would include: 

  • Have a cash buffer (even if we earn nothing in cash).
  • Enhance diversification into multiple stocks or asset classes. 
  • Have an action plan if prices of our stocks fall by 50% in the future. 
  • and so on and so forth. 


4. Too Much, Too Soon and Too Fast

Today, many people want to earn more money faster via stock trading. But such often backfires because it takes time to build sustainable wealth via stocks. This means years and decades, not months, weeks, days or even seconds. This is the same with many things in life. Take pregnancy as an example. It takes 9 months. There is no way we can “produce” a baby in a month regardless of how hard we try to do so or desire. Some things really take time. 


Hence, if you are new to investing, please understand that it takes time to learn and master the skills and the art of investing. The returns (big money) would be increasingly probable as you grow and mature as an investor. Often, the greater returns come more consistently in proportion to one’s investing skills which are honed over time. 


So, instead of quick profits, know that there is a process to becoming a smarter, savvier and sharper investor. And more importantly, such a process takes time. 


5. Optimism + Pessimism 

Housel writes that as polar opposites as they are, it’s vital that they co-exist. 

Many solid businesses, Berkshire Hathaway, Microsoft, Amazon … etc know this principle. They are forward-looking as they invest heavily in the future. That is a form of optimism. While they do so, it’s key to note that they too have set aside billions as reserves. They are meant to mitigate a business slowdown if they are hit by economic crises, market crashes, trade wars … etc. Such prudence can be seen as pessimistic. Such are examples of “optimism + pessimism” at work. This is important because optimism is about long-term growth while pessimism is to ensure one can “stay in the game” but surviving multiple short-term events. 


Hence, Housel advocates one to: 

  • Save like a pessimist and invest like an optimist. 
  • Plan like a pessimist and dream like an optimist. 


As an investor, I believe striking a balance between “optimism + pessimism” is a helpful approach to investing. This is because pessimism enables us to set aside some reserves while optimism allows us to achieve better returns. Therefore, in this case, we can avoid becoming overly aggressive or conservative in managing our finances or investment portfolios. 


Conclusion: 

Personally, I enjoyed reading Same as Ever and it had deepened my insights and knowledge in human psychology, particularly in the areas of personal finance. It allows me to understand that there is a human behind financial decisions and it
helps me to be more understanding of why or how people make decisions. 

Indeed, humans are more complex than a financial spreadsheet. 

I would highly recommend this book and you can grab a copy: 


Link: 
Same of Ever: Timeless Lessons on Risk, Opportunity and Living a Good Life


If you have read this book, let me know your thoughts on it below:


Ian Tai
Ian Tai

Financial Content Machine. Dividend Investor. Produced 500+ Financial Articles featured in KCLau.com in Malaysia and the Fifth Person, Value Invest Asia, and Small Cap Asia in Singapore. Regular Host and Presenter of a Weekly Financial Webinar with KCLau.com. Co-Founded DividendVault.com, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.

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