How Stoicism Makes Us Better at Money — ft. Ryan Holiday

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Welcome to Prof G Mark. It's Ed. Today, this is an exciting day. We're speaking with one of our favorite multi-appearance kind of soon getting a jacket like on SNL.

Ryan Holiday, one of the world's foremost philosophers of the modern era. We discussed how stoicism can improve our relationship with money and whether justice can exist in a capitalist society. Very deep, very deep. I'd rather go back to the dog, the dog jokes.

But here with the news is Prof G analyst, Ed Elson. Ed, what is the palabra buena? I don't know if you know, but that's Spanish for what is a good word, Ed?

For those of you who don't know, Southgate is the manager of England and everyone's furious because he had the gall to tie. British fans are literally the worst fans in the world.

Anyways, get to the news. Get to the news.

Sales of previously owned homes decreased 0.7% from last month due to both the rising prices and elevated mortgage rates.

The Wall Street Journal reported that Apple and Meta were discussing integrating Meta's generative AI into Apple intelligence.

That report was swiftly denied by Bloomberg sources, however, who were unequivocal that Apple had rejected Meta's outreach because, quote, it doesn't see that company's privacy practices as stringent enough.

However, Apple is believed to be in talks with other AI providers, including Google and Anthropic.

And finally, according to a Financial Times analysis, since the end of March, nearly all gains in the S&P 500 have come from AI stocks and AI adjacent stocks.

Since March, if you removed AI stocks from the S&P 500, the stock market would be down 2%.

Scott, your thoughts.

So insufficient supply and elevated mortgage rates, actually mortgage rates are turning to kind of historical averages, are having a real impact.

Nationwide housing inventory has decreased by more than 30%.

About 28% of existing homes sold in May were purchased in cash.

That's 3% higher than a year earlier.

And some of the only people buying houses are people who are making, you know, really good money or can can pay all cash, i.e. old people.

I think this is terrible. It's a perfect example of our rejectionist exclusionary culture where once you have a house, you put pressure on the local review board not to issue more housing permits, thereby artificially constraining supply, taking housing prices up, which is great for incumbents.

It's just it's literally pulling up the drawbridge behind you.

I think it's really the federal government needs to come in with some sort of program to build a massive amount of housing.

It is happening more on a state level.

But this is I think this is I think this is a big deal for a lot of reasons.

And I don't I think it's such a psychological tax on young people when they can't when they make good money, they're working hard and they're saving.

And housing is like a car they're trying to catch that keeps just slowly pulling away from them.

What are your thoughts as someone who is a budding homeowner?

Median home prices are now six times median income.

That's the highest ever.

50% of Americans are struggling to make their mortgage payments.

70% of low income families are spending more than half of their income on rent.

More than half of Americans ages 18 to 24 still live with their parents.

And this one really shocked me.

70% of Americans are saying that buying a home is just unrealistic.

Now I'm going to offer a cultural observation.

If you go on Netflix, you go on Max, you go on whatever your streaming platform is and you go to the reality TV section.

You'll find that basically every other show now is some series that follows the lives of luxury real estate brokers.

So whether it's there are a ton of them, there's a million dollar listing, there's buying Beverly Hills, selling Sunset, selling the Hamptons.

So we have millions of Americans who are, according to the data, giving up on their dreams of buying a home.

And at the same time, binge watching luxury real estate porn every week.

And all of this is to basically say this is where we're headed now.

It's like housing prices have gotten so bad.

We just hit another record.

Inequality is getting so bad that Americans are now simulating their dreams of buying a home.

The reality is just becoming borderline unlivable.

People cannot afford houses anymore.

So I just think this housing statistic combined with what I'm seeing in entertainment, I think this should really scare people, especially young people.

When young people can't form households and they're working hard, playing by the rules.

I remember the house, the first house I bought with my girlfriend.

It was really meaningful for us.

It was a commitment to each other.

It was starting to build something together.

It has non-economic importance, if you will, or it has psychic importance.

And when you're working this hard and saving money and trying to buy a home and it's just slipping away from you, I just think it's another example of why we have more rage and shame.

And then the wealth porn that's thrown up on everybody.

I think it's discouraging.

The good news is we know how to fix it.

We need more housing.

I think someone at strategy, whoever runs strategy at Apple, I think deserves a raise.

I guess they probably make a good living.

But he came back and said, all right, what strategy would drive the most shareholder value for us?

If we go into the AI business, it's going to cost us tens of billions of dollars to figure this shit out and compete.

Here's an idea.

Let's sequester the billion most desirable consumers, i.e., iOS consumers, users, from all of these LLMs and give them a taste of the crack cocaine.

Let them offer applications on their LLM, which ChatGPT or LLAMA, I'm sure they'll do some sort of pilot project with Anthropic.

And then slowly but surely, as the competition heats up between these players and the ones that pull away get trillion-dollar valuations and the ones that are left by the side of the road get sold for scrap,

they're positioning themselves similar to how they position themselves getting in front of them and search and saying, hey, Google, we could develop our own search engine.

No, that would take us tens of billions of dollars to do something not as good as Google.

So we'll just bid it out.

And Google gives us $20 billion.

$19 billion hits the bottom line.

P of 30, OK, $570 billion or 15%, 20% of our market cap is this search deal.

I think they are trying to position themselves to be in a similar position to at some point turn to all of these AI companies and go, fellas, who wants to be the AI company, the LLM, that becomes the default for the billion wealthiest consumers in the world?

OK, it's going to cost you.

And when they announced Apple Intelligence, what was interesting is since then the stock's up 10%.

And if you look at these features, none of them are really groundbreaking or that exciting.

But I think analysts sense the same champagne and cocaine coming their way in terms of their ability to mature and close a search-like licensing agreement with one of these deals.

And right now they're giving them all a taste of those billion iOS crack cocaine.

Oh, my God, I love this analogy.

Not for these hot takes from the young British Ed Elson.

No, no, no.

It's for these drug analogies about AI.

What do you think?

As it accords to the LLM versus GPT, I think the most interesting thing about LLM is that it's one of the very, very few large models that is completely free and completely open source, which was a very interesting decision by Zuckerberg.

Clearly, his view was that the best method for AI was to take the Facebook method, and that is we're going to open it up to everyone.

We're going to make it free to use.

We're going to make it open source.

And then hopefully with scale and with mass adoption, we'll become the best product and we'll figure out monetization later.

Very different from GPT-4, which is closed source, meaning the model is proprietary.

No one actually knows how it works unless you work at the company.

So I like this story because it sets up GPT versus LLM in a head-to-head.

And yes, this is a story about meta versus open AI, but on a larger level, it's an economic story about closed versus open source.

Which one is going to win?

I think it'll be interesting to see if this does play out.

Hopefully, it plays out that they're competing on the same device.

But I would like to see which will end up winning as the stronger business model for AI, which is the most important technology in the world right now.

Excluding big tech and chip companies, the S&P 500 has declined 2% since March.

The three largest companies in the S&P 500 make up a record 21% of the index.

In 1999, the three largest made up 12%.

Excluding AI, nine of the S&P's 11 sectors are down since March.

I mean, last week, there was another great stat.

NVIDIA was down, I don't know, 3%, 5%.

It had a down day, not a terrible day, but it was down.

And it lost more market cap in that day than like 420 of the S&P 500.

Yeah.

This is, I don't think this is healthy.

This isn't a robust market.

And what it's becoming is that, one, it's an ad for index funds

because to try and pick stocks is impossible when it's three or five companies.

It's just in the largest economy, in the largest stock market,

the largest asset class, there's a handful.

Maybe you can count on one finger at the companies that are moving

and supporting the markets in the world's largest economy.

That's just not a good thing.

This feels very fragile because, I mean, if NVIDIA goes down

and this could happen, 80%, right?

Keep in mind, Amazon down 90% from 99 to 2001.

You got to think the S&P is going to go down.

What would that mean?

12%, 15%, 20% if some of the other ones follow them?

Nassim Taleb has this thing called fragility,

and he talks about the importance of anti-fragility.

And essentially what it says is a robust market is no one company

can have too great an impact on an industry.

So I would argue the banking sector is somewhat battle-tested

and somewhat stress-tested.

But I think the reality is if Jamie Dimon called President Biden

and said, oh, God, I'm really embarrassed,

but there was some 26-year-old who compliance missed in Singapore

and he went long credit default swaps

and figured out a way to leverage them up 40-fold,

and we're going to have to be out of business

at the open market tomorrow, and I need a massive federal bailout.

Otherwise, JPMorgan going under could start a global panic

and we could all be collecting guns and butter.

I think the government would bail them out.

If McDonald's calls and goes, oh, no, someone fucked up

and bought beef futures and we're out of business tomorrow,

they're like, fine, go out of business.

McDonald's can't take the global economy down,

so it can't even threaten fast food.

You could still get really high-calorie, low-cost food

that if you eat it long enough will give you colorectal cancer.

So what we have now is an economy that's becoming less robust,

and while business start-ups, business permits,

new business permits are up, a lot of that is pent-up demand.

It just worries me to have companies that as they go,

so goes the market. What do you think, Ed?

to employees in video was to sell,

but I just want to point out that that week Jensen sold.

That's why the stock came down.

I mean, I'm sure you followed it earlier,

but I just love the timing on that.

I think that came out on Thursday.

I'm pretty sure that the filing was revealed on Friday,

or at the end of the day on Thursday, Jensen sold some of his stock.

I think it was $90 million, and that's why the stock came down.

That's probably about, what, 1% of his holding?

I like Jensen. We should roll with that guy.

Let's have him on the pod.

Just one personal final headline from me.

Our listeners might remember.

We had my uncle, the professor of corporate governance,

on Charles Elson a few months ago,

and he's been critical of Elon's compensation package.

We had a whole discussion about it.

You can hear that on our episode.

But here's the headline.

I was scrolling on Twitter yesterday.

Elon called him out on Twitter this week,

and he called him, quote, such a creep.

Are you sure he didn't think it was Ed Elson?

And he'd heard from some ladies at some tacky Brooklyn bar

where they play shuffleboard and have two-for-one Pabst or something.

That is my impression of every millennial.

Isn't that what you do?

To be called a creep by Elon Musk is a badge of honor.

He can retire now.

He's such a fucking idiot.

He wrote, he retweeted my TED Talk, and he wrote,

he wrote, I'm a fan of Scott Galloway, but he may have a point.

What he meant to say was, I am not a fan of Scott Galloway.

So he wrote, I am a fan of Scott Galloway, but he may have a point,

and he retweeted my TED Talk.

We'll be right back after the break with our conversation with Ryan Holiday.

I'm Megan Rapinoe.

Women's sports are reaching new heights these days,

and there's so much to talk about.

So Megan and I are launching a podcast where we're going to deep dive

into all things sports, and then some.

We're calling it A Touch More.

Because women's sports is everything.

Pop culture, economics, politics, you name it.

And there's no better folks than us to talk about what happens on the court

or on the field, and everywhere else, too.

And we'll have a whole bunch of friends on the show to help us break things down.

We're talking athletes, actors, comedians, maybe even our moms.

That'll be a fun episode.

Whether it's breaking down the biggest games or discussing the latest headlines,

we'll be bringing a touch more insight into the world of sports and beyond.

Follow A Touch More wherever you get your podcasts.

New episodes drop every Wednesday.

It's officially mid-August, which, in my mind, is peak summer.

But for college students across the country,

it's time to start thinking about returning to campus.

And for college professors, it's high time to figure out where you stand

lack of clarity in some classes, both mine and others,

about what the official university policy is, what a department policy is,

what an individual classroom policy is around the use of chat GPT to do student academic work.

Sounds kind of stressful, to be honest.

Does not feel very summery.

And so going into this summer, teaching my own class,

I decided to write my own AI policy prohibiting AI in my classroom.

How professors are readying themselves for the robots this semester

philosopher and New York Times bestselling author.

Ryan, thank you for joining us.

For those who don't know about this philosophy,

could you just give us a brief summary?

What is stoicism and where did it come from?

It's a philosophy. I sort of say it's based around this idea.

We don't control what happens. We control how we respond to what happens.

And then it's built around these sort of four key virtues, courage,

self-discipline, justice and wisdom.

And the idea for the Stoics is that, you know, every situation demands

or presents the opportunity to act with those four virtues.

So this little philosophy that originates from a shipwreck in Athens in,

you know, the fourth century, you know,

it ends up having an immense amount of resonance, you know,

23, 2400 years later with people all over the world.

It's pretty incredible.

He was a dealer in what was called Tyrian purple.

It's the dye that would make the cloaks of the fanciest Greeks.

So he suffers this shipwreck and he ends up penniless in Athens in a bookstore.

And he hears the bookseller reading some of the dialogues of Socrates

and this turns him into philosophy.

And he would joke later that he makes a great fortune when he suffers a shipwreck

because although he loses all his money,

it turns him on to an entirely different way of thinking and living.

And, I mean, he ends up changing the trajectory of Western civilization

as a result of how he responds to this thing that if you had asked him,

do you want to suffer a shipwreck and lose everything that you have,

he, of course, would have said no.

But, you know, what he makes of it is to me what stoicism is about.

people often think about it as applying to mental health.

But it's interesting to hear that the origins of this philosophy,

it really has mostly to do with money, which is what we dedicate this podcast to.

So I'd love to get your take on how has stoicism helped you

when it comes to thinking about money and how could it help other people?

the two most well-known Stoics are Marcus Aurelius, the emperor of Rome,

and Epictetus, who was a slave about a generation before Marcus Aurelius.

So you have this, what I love about stoicism is here you have it encompassing

both extreme ends of the social spectrum and hierarchy.

And yet they're both talking about the same thing,

which is how does one find freedom and self-command inside either extreme powerlessness

or extreme power, you know, extreme adversity or extreme success.

And so the Stoics, I would say as a rule, Epictetus is the exception.

Most of the Stoics are quite successful and quite wealthy.

But they understand, as I'm sure many people listening do,

that just because you have money, you know, we say, you know, it'll set you free.

And it doesn't. Many of us are sort of slaves to ambition, slaves to status,

slaves to maintaining, protecting what we have or growing what we have.

And so stoicism is really about finding sort of freedom within whatever circumstance

one happens to find themselves in.

I think it's interesting how many people for whom wealth and power

actually decreases their autonomy rather than increases it.

And that's something stoicism is very helpful for me with.

It's like, if I'm getting more successful, why do I have less control of my schedule?

Why is the reward for my success less time to do the thing I actually want to do,

which is write or spend time with my family?

And so I think stoicism has a lot to teach us and talks a lot about that.

where we talk about the four virtues, courage, temperance, justice and wisdom.

Break down for us those virtues for our listeners and particularly how they relate

to our relationship with money.

each one of them, but we kind of know it when we see it.

You know, courage, I think we all understand is running into battle,

but it's also the moral courage to stand up, to speak truth,

to take risks as an entrepreneur or creative.

Self-discipline, you know, is sort of what you put in your body,

how you treat your body, the habits you practice.

Wisdom is, you know, the decision to become a lifelong student,

to always be learning, to sort of push ego away.

To me, the virtue that's most interesting that I think is kind of the North Star

for all the others is this virtue of justice,

because to what end are we pursuing the other virtues?

You know, if your courage is about taking risk after risk after risk

to just create a ginormous pile of money that came at the expense

or the cost of, you know, other people, the environment, you know, ethics, etc.,

I don't think the Stoics would consider that a virtue.

So what I think is interesting about these virtues is how interrelated they are

and how interconnected they are.

Again, with self-discipline, you know, I think some of us have a problem

we spend too much money.

Then there's other people, I'm sure you've met these people, Scott,

where they have more money they could possibly spend in a lifetime,

and they've become addicted to sort of frugality or growing the money.

They lack the Epicurean insight of, hey, you only live once.

How are you going to spend this time that you have on this planet?

Yeah, it's so funny.

less than you make when you're a young person

so you can establish an army of capital.

But then as you get older, if you're blessed enough to have, you know, economic security,

I don't understand why people don't spend it.

I don't understand why they don't enjoy themselves,

why they don't do amazing things with their family.

I think it's just hardwired into you, or they get so focused on having more,

not recognizing it's really not going to do much for you.

Let's focus on justice for a minute since that's the subject of your latest book.

It strikes us that in capitalism there's no such thing as fair.

I always say fair is a dangerous word.

Despite that, how do you think we can practice the virtue of justice within a capitalist society?

how you are legally able to run a business,

I think is different than the choices that you're going to decide to make as an individual.

So, yeah, look, life is not fair.

If you think things are going to be fair,

you're going to be rudely disappointed.

But I struggle to understand why one would not strive to treat people fairly.

So, to me, the essence of stoicism is like what's in your control.

How other people treat you is not in your control.

What other people do, how other countries operate,

whatever the standard business practices are, that's not in your control.

But how you decide to operate your business,

how you treat people inside it,

what you choose to do or not do,

to me, this is where this virtue of justice comes in.

So, I love that we live in a society that gives individuals an immense amount of freedom to do what they want.

But I think the expectation,

and the founders who were all steeped in stoicism, I think, would have agreed on this,

the expectation was that private virtue would govern the choices that we make as individuals.

And, in fact, the whole system doesn't work without that willingness to go,

hey, I don't care if I can do this.

I think it's wrong to do X, Y, or Z, so I'm not going to do it.

you describe in your new book, Right Thing Right Now,

you define justice as holding the line.

Can you explain a little bit more about that,

and perhaps how that might relate to spending and saving?

justice is like, what are those rules?

What are the standards that you set for yourself about the things that you're willing to do and not willing to do,

what you think is okay and what you think is not okay?

You know, the decision, it's like keeping your word doesn't just demand the sort of ethical virtue from us,

but also requires the discipline virtue to do the thing that maybe you don't want to do anymore,

or to do the thing that's hard, or to do the thing that's uncomfortable,

or to do even the thing that is expensive.

And so, again, these virtues are all related,

but I think if you are not doing it towards what we would, I think, call the right thing,

if there isn't an ethical component, a moral compass to what you're doing,

then, yeah, you're just piling up, you know, dollar after dollar, success after success,

you know, follower after follower to what end.

it's just that one should exist and you should recognize that.

but it's saying that if you don't have, here's what I found, if you don't have a North Star,

like if you don't have, here's what I'm trying to do, here's what's important to me,

here's the positive difference that I'm trying to make, here are my values,

what often ends up happening is that you default to money.

So you do the thing that pays the most, you do the thing that is safest,

you do the thing that everyone else is doing,

instead of being able to evaluate each individual choice in accordance with these values.

And so you can end up one day very far from where you wanted to end up

or the kind of person that you want to be,

because you were making a series of rational decisions along the way.

Do I take this job, which pays this amount, or this job, which pays, you know, 10% more?

Or do I go into this industry versus that industry?

You kind of end up just getting guided around by these less than stellar values,

money just being a proxy for other things.

And I think you're going to end up in a place that isn't particularly fulfilling or meaningful.

I mean, it feels like sort of the direction where you're going,

and it's like, you know, money is great, but it's not everything,

and maybe it doesn't even matter, and this guy got shipwrecked,

he lost everything, and he was still okay.

Is part of the learning that we should learn to live without caring about money,

or is there a way to live a Stoic life while also wanting to get rich

and wanting to be financially successful?

and he was in this position of local leadership,

and there was this particularly obnoxious man that everyone hated,

who was obsessed with money.

And so ultimately, the story goes that he awards this guy a grant,

a large chunk of money, and people said,

why would you do this? This man's horrible.

And he said, I know he's horrible, money's exactly what he deserved.

And so the idea is, you know, is this money that you're after,

is this success that you're after, is it going to make you better or worse?

And I think for some people it makes us worse,

and for other people it makes us better.

And the idea for Stoicism was that, look, as long as it makes you better,

as long as you respond to it well, you know, it's neither good nor bad.

there is no good or bad without us, there is only perception.

There is the event itself and the story we tell ourselves about what it means.

Can you talk to some of the people who are earlier in their careers

about that way of thinking to remain balanced

as they start to experience real wins and real losses?

you have to be able to accept it without arrogance and let it go with indifference.

and you bear the adversity with sort of fortitude and perseverance,

and I think sometimes, especially early in your career, you're like,

is this a good job? Am I getting paid enough? Am I being respected?

You have all these like opinions about this situation that you're in

instead of thinking about how to get the most out of it, how to learn the most,

how to get closer to where you ultimately want to end up.

And these opinions, I think, kind of get in our way of us, you know,

we hate our boss and instead of thinking about what can we learn from this person,

good and bad, right? Or we think that we're in a position that isn't, you know,

up to our standards or isn't fully taking advantage of our skills.

And instead of, again, thinking that this is a temporary position

and what can I get out of it while I'm in it that can move me closer to what I want to get?

So again, this power of sort of indifference is the ability to be where you are

in a given moment and get the most out of it.

It's not this kind of passive resignation and you're just there forever,

but it's the ability not to be so emotional about something

and thus actually be able to take advantage of it.

throughout your life when it comes to money?

How do you think about, you know, what, in addition to being happier,

what habits have you adopted that you can relate back to the Stoics

that you have found have been really helped you professionally and economically?

And so discipline is important. You know, delayed gratification is important.

As you said, like the key to wealth is sort of early on to accumulate capital,

invest it, and then be able to spend it later.

So this is, you know, the marshmallow test 101.

But I think sometimes we think of discipline as this active thing

when really it's about making good decisions.

So like if saving is this daily active discipline for you,

you're not going to be that good at it.

But the more you automate things, you know, you're just making one discipline decision one time.

You know, the more automated your finances are,

the more it takes the day-to-day discipline out of it.

And you don't have to be that smart or that strong.

That's a really interesting insight that, you know, discipline is one thing,

but the easiest discipline is to make it easy, right?

To start from a position of victory.