SELF HELP 29

How To Invest After 50, When You're Only 20

This newsletter is my process of writing a self-help book, tentatively titled How To Make Money: Financial Advice For Poets.

I thought about sending out this letter early to paid subscribers then the next day to regular subscribers, but I didn’t want to. I do prefer paid subscriptions but in the end still believe the reader is always doing the writer a favor.

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A fundamental flaw of people, that explains most things (though not everything), is that we think we know more than we do. We confuse hindsight (which is 100%) with foresight (which is not). That’s a large part of what Daniel Kahneman is getting at in Thinking, Fast And Slow, and Nicholas Taleb in The Black Swan.

Kahneman won the nobel prize in economics and Taleb is an asshole who has fashioned a cult around a brutish, dismissive personality. They’re both geniuses, but perhaps the difference is reading Kahneman makes you smarter and following Taleb makes you think everyone is dumber than you.

The cult of Taleb, his conferences and the behavior of his followers who, unable to copy his mathematical prowess, copy his bad manners instead, would make a great article for someone. Maybe me, except I couldn’t stand to be around those people.

But I was thinking about this, because so much of the conversation about Covid is based on thinking we know more than we know. Allowing our intuition to guide our rationality (which Kahneman points out is inevitable). Everybody says follow the experts but also seems to know slightly more than their sources. Or maybe it’s just the politicized nature of media. Or a function of how twitter has turned articles into headlines and headlines are written to get clicks. A Washington Post headline can be incredibly misleading, and influential, even if the article is solid and well sourced. Who reads the articles anyway?

Yesterday I spoke with two investors. One of them, a younger investor in his mid-thirties, has multiple AirBnBs in New Orleans. The other owns a large portfolio of houses in New Mexico and Colorado that he started buying out of foreclosure and fixing following the mortgage crash of 2008.

The investor in New Orleans is worried because of the new outbreak. And to be fair he’s not really an investor, he owns a small company consisting of stand alone hotel rooms (I wrote about managing AirBnBs here). Last year he lost $45,000 in bookings in one week when Covid shut the city down. But he survived the crash. In fact, by the beginning of this year he was thriving, and he knew he owed at least part of it to Donald Trump who, on an intellectual and moral level, he despised.

But now Covid is back. He’s fairly certain they won’t be printing any more money. New Orleans has instituted a new mask mandate. And the cancellations have begun trickling in.

The investor from New Mexico is much more comfortable, financially. He told me that things don’t get better as you get older. He has a voice that is preternaturally optimistic, but nothing he said to me supported his optimistic tone. He’s 62 and he plays guitar and writes songs. He was calling because he’d seen a video I’d made about a man who drives a carshare and comes into possession of a gorgeous dog. One of the things he wanted to tell me was that dogs are important.

“Dogs will always listen to you. When I write my songs my dog wraps himself around my feet. They’re never bored.”

He owns 20 homes and doesn’t have any debt. He’s married and has some nieces and nephews but no children of his own. Sometimes he has to arrange for a new air-conditioning system or refrigerator. But for the most part his business runs itself.

“People with kids always have something to do,” he said. “But if you don’t have kids you have to work a little harder at filling the time.”

He said he wouldn’t buy another house, even at a fantastic price. He’s not outrageously wealthy but he has more than he knows what to do with. When he was in marketing he saw people continuing to drive new businesses into their 60s and 70s. “Why did they do it when they were already so rich?” He asked. “Because they didn’t have anything else to do.”

“When you’re younger,” I replied, and I wasn’t sure this was true but I was saying whatever popped into my head, which to be fair was no smarter or dumber than anything he was saying, “You can find things to do with money. Even if you’re not driven by money. Like, there’s a difference between ‘nice house money’ and ‘hookers and cocaine money.’ When you’re older all you need is nice house money, comfortable retirement money. Hookers and cocaine, in excess, loses its appeal.”

I told him I still needed money. But I’m younger than him, and I have less. I’m almost 50 and nowhere near as financially secure. I’m about the age he was when he left his consulting gig to focus on purchasing real estate. Also, he has a wife that he loves deeply. At a certain age that becomes cheaper than the alternative.

The key, it seemed, was to have children. After that, the next important thing was a good marriage. But even a good marriage might not be enough without kids. What do you do when you’re 62, financially successful, but don’t have any kids?

“I don’t know!” he said, in his happy, optimistic way. He said he was just writing songs and hoped one of them would be played on the radio. He was pretty certain it would.

The investor told me that no matter what, you can’t get complacent. You can’t just lose yourself in drinking and drugs while waiting for the days to pass. He seemed worried that I was headed in that direction because of the dog video, but I told him I had multiple sclerosis, and a degenerative thing with my spine, and the thing that seemed to help was working out every day. I keep the workouts moderate, I’m focused on not getting injured. I do primarily resistance training with low weights in depletion sets. But anyway, smoking pot and shooting heroin doesn’t work very well with daily exercise.

“That’s great,” he said. And told me a story about hurting his wrist (or his elbow?) that I won’t repeat here.

You need a business. Or a cause. You need to feel productive. You need to make progress, at something. You won’t enjoy getting old otherwise. If you’ve run out of things to do; find something to do.

This morning I woke still going over our conversation. We’d talked about so little but I was so inspired. We hadn’t said anything deeply insightful; we’d just talked. What an interesting person, I thought. I was glad he’d called. You have to do something. There was no way around it. Why did the partners in the firm keep working? Why not? Was Jack Warner happy after he sold Warner Bros.? At first maybe, when he was still on the board and doing independent production. But after 1973, until he died in 1978? I don’t think so.

Daniel Kahneman points out how often our intuition is right, and also how often it’s wrong. And why statistics are so difficult: because they rely on slow thinking, and fast thinking influences us more than we’d like to admit. Socrates said he was certain of nothing. Socrates was also referring to people thinking they know more than they do. The blacksmith might know everything about blacksmithing, but the expertise doesn’t transfer to anything else. People who are expert in one thing often overrate their abilities in other things, the way successful businessmen overrate their own insight and underestimate the importance of luck.

Anthony Bourdain got the quote from Socrates tattooed on his arm. “I am certain of nothing” spelled out in ancient Greek. When I heard Anthony Bourdain describing the tattoo and its meaning in an interview with Mark Maron I listened to after his death, I got the same tattoo.

Xoxo

Stephen

p.s. Maybe I’m being hard on Nassim Taleb and his followers, based on a few limited twitter interactions (I muted them). But I don’t actually think so. Nassim is obviously a genius who has made a ton of money, but he’s not so secure he doesn’t need a cult following him around like baby ducks.

Still, The Black Swan is a great book about other thinking.

p.s. 2 Don’t forget to like and leave comments. It keeps me going. And please share on the social media of your choice.