EP 59: How to Get Rich the American Way (with Joseph S. Moore)

Welcome to the Library of Mistakes, changing the world one mistake at a time. This podcast is presented by Professor Russell Napier, keeper of the Library of Mistakes. To find out more about the library, our events, our course, and much more, simply visit Library of Mistakes.com. Well, welcome everybody, a treat. Today, broader financial history, financial history beyond financial markets, beyond money, into trade, wealth, marriage, personality, you name it. It's all in Joseph Smith's new book, How To Get Rich, The American Way, classic financial advice that worked and didn't throw out time. And it isn't a treat to read it, because so many of the books I read are quite narrow on this subject, but you've broadened that I to just about everything. We have a podcast where we tell people about the wonders of understanding history and history advice. You are the first person we've spoken to on this. Who used to be a professor of history or associate professor of history? Who isn't anymore? So how did you go from being a associate professor of history to doing what you do not? Well, it's a treat to be here. I'm a fan of the podcast, so I've listened to many of those histories that you discussed. So I, while I was getting my PhD, there's a backstory to why I left the university world. When I was getting my PhD in history is 2005. I was studying something very not financial, radical Scots Presbyterians in the American South, which is not a way to make money. And I, back then, everyone told you the lesson of history was very clear. Ritting was throwing your money away. So the best thing you could do is buy a house, whether or not you were a graduate student and broke. And so my wife and I nodded our heads at this and did that. And then in 2008, a friend at our church offered a personal finance class for families. We went. They made us do a budget, and I did not sleep the entire night thinking who gave us a mortgage? Who in their right mind signed this paperwork? Oh, that's right. I signed this paperwork. And we sold our house in 2008, put, sold on a Saturday, our neighborhood house on the market the following Saturday, and it never sold. We were the last people off the financial Titanic in 2008. And that left me completely humbled that I thought I knew so much history that had helped so very little with my money. And so although I was getting a PhD in history studying other things and I wrote a book and articles on other things, I would come home at the end of the day. And I just wanted to understand how everyday Americans had encountered financial advice for 300 years. What were they told to do with their money? Did it work? What failed? What are the craziest things that they tried? And the more I studied, the more obsessed I became. One thing led to another, I began to, this is in the era, if you were AJ Jacobs wrote a book called The Year of Living Biblically, where he just kind of like spent a year experimenting with all the things in the Bible. And I thought, well, I'm going to experiment with all the crazy things Americans did. No matter how, the only line to demarcate that was when my wife said under no circumstances. Other than that, I would try anything I found in the past. And there's all these financial strategies that people tried, many of which were of course crazy, like buying land on the moon to be the first one to claim lunar land ownership. But some like for immigrant Americans, the most common way they paid off their mortgage, which by the way, they were in a housing crisis too. There were enough houses. They monetized their space. They would run out the rooms in their house. And so believe it or not, I rented out all the rooms in my house on Airbnb to like experiment. What is it like to live with all these roommates when you're middle age to try to get ahead? One thing led to another, and I began to get very serious about my investments to treat them like running a business. I had no business training whatsoever. But I learned how to run a business the way most Americans and immigrants had. And that one thing led to another, a series of investment decisions paid off well. And I was able to step away. Because believe it or not, especially in the American University, most of our time as professors is not spent thinking and writing. It's mostly spent in administrative meetings. And it was much more freeing to say I'm going to sit at my desk and write and be the academic. I always wanted to be rather than to show up at the curriculum committee meeting and debate whether or not this was the right line item to take out from the old policy. Well, it reminds me a lot. I've got a friend you may have heard of him. He's a former secretary of the treasury, Nicholas Brady. He's a venerable man, though, but he's a self-published, self-published, a little autobiography. He's got a whole chapter called Go See. Go See, go and do it, go and talk to people, go and kick the tires. Don't sit at a room analyzing the data. So it sounds like you basically did some Go See. I want to start a 1900, and I wanted to read a passage from the book. What we know are, take a certain these three history are often different. And as you point out, we mentioned the immigrants there. There are options. We're very different as well. Yes. I think it's one of the crucial things about your book as you talk about the options for people who don't have any money. And most of the books are high to get richer by people who have money and what they should do with it. Anyway, let me read about 1900 about the five ways to get rich in 1900. By about 1900, Americans finally understood which steps of the improvement that are went up. There was no financial advice industry as we have it today, just clearly labeled steps. Everyone knew to take. The first was a small saving and a charity bank or insurance company. Rarely more than $100. Step two was insurance. Even poor families carried life accident and fire policies. Step three was buying a home. Step four was using side hustles like raising chickens or renting rooms to pay the house off early. Step five varied, but was usually lending mortgages to neighbors, buying rental property, investing in local loan companies, or buying better tools for your trade. So a very different set of options and a very different way to go about it. But what lessons do you take from that for today? From the 1900 and I've obviously a lot of these things you can do really if you don't even have any money. Right. Well, that's where most Americans found themselves. This is what I started looking into this history. I fully expected to find a lot of what we talk about today tracing all the way back to the past. And when I got to the early 19 teens, the trail went cold. Like there just wasn't a series of well published articles and books telling people to do then what we tell people to do today. And I was quite vexed by this. I probably spent over a year trying to find in historical records what I considered to be financial advice. And I couldn't find it. And it was at a conference and somebody told me, you know, it's an off-handed comment. You know, the kind of comment that can only come when a bunch of scholars were sitting around shooting the breeze said, you know, you should look at is housewife manuals. And I immediately rushed to the first housewife manual I can get my hands on from the early 18 teens. And there it was. There was what people were being told to do with their money every day people, you know, not not the already wealthy, but the people who were trying to start from behind and catch up or get ahead. And women's manuals were where we were finding financial advice. I later realized they were also in young tradesmen's manuals when you're kind of training young men for trade. There was some financial advice there and then insurance pamphlets. That's where financial advice was before the financial advice industry. And really it's the 19 teens that creates what we think of as modern financial advice. Before that, most of what people were trying to do was secure where they had gotten and put themselves in a position to build equity in something, usually not the stock market. And I think this is a really important point. You know, what I tell people a lot, what always worked was always changing. And so for the Americans before the 19 teens, what worked was absolutely not the stock market. One, you couldn't buy a stock, right? Like really, you know, I often poke fun at people who taught, who show me a chart, I just call it the chart of the stock market going up. And they'll tell me if you'd bought the index in 1929, even with a great crash, it would have been $10 million today. And I say, you couldn't buy an index in 1912, in 1890, in 1870, there's that to stop thing because you would have had to buy 100 shares of every single stock in that index, would have cost you $1 million then. You couldn't have bought odd lots for all of those. And so Americans were not in the stock market. Like that just wasn't the way they conceived of their lives going ahead. They conceived of the stock market as an incredibly risky place to gamble with money for the rich. I think it's really interesting today. One of the odd parallels is that if you went to everyday middle class Americans and probably most middle class Brits today, and you asked them what's the safest, surest way to invest your money over the long haul, they would say the opposite of what someone would have told you in 1912, they'll say the stock market. And so in some ways, the way we see the stock market today is the way they saw real estate and annuities and insurance and bonds then as a safe, steady place to put your money. We've inverted their paradigm. Well, you make a comment in this, but first time I read it, I thought, wow, that's a hell of a comment, but let me read it. The more I read it, the more I think, well, actually, this, this might be true because something changes and you have a catalyst for that change here. The financial advice genre was midwife by a generation groping to be inflation. Every type of financial advice alive today arrived in that moment. There has been nothing new since. So there's a change. Justify it. Why was that change? in one American's, wanted to invest in anyway, there were other things going on, was inflation really that pivotal in changing the way we think about money, the way we invest money, even what we do? Yes, it was, and let me clarify that by saying, especially for the mass of Americans in the middle and lower classes. So I can find predecessors and I think Crossweith and them who did that great study of financial literature, piece together that there's plenty of literature predating the 19 teens on stock market investing in many things today. But what I would point out is like the average person would never have encountered that literature. If they did, they would have been warned off of it as gambling literature. They would certainly never have adopted it, and they didn't have the means or the capacity or the technology to integrate it into their lives. It would have been seen as wildly risky to have embraced a belief in compound interest as the way you get ahead for an average American whose life expectancy is 46. So they don't have the time, or the risk of temperament. So what I'm talking about there is, it's the 19 teens when middle class and working class Americans flip their understanding from seeing market behavior or market investment as wildly risky and at the fringe of financial life to at the center of financial life. Now, why is that? It is absolutely inflation and to a lesser extent, the income tax. Because in the 19 teens, suddenly Americans encounter the need to outrun prices at the grocer and from the government, right? That there's a new reality. In 1912, Babe Ruth placed for the Yankees. Now, that's an American. It supports analogy that not everyone might follow. But the price of a gallon of milk is 24 cents, a gallon. If I go back another 100 years to 1812 and Napoleon rules France, it's 24 cents a gallon. There's functionally no inflation in American history for over 100 years. Now, there was deflation and bounces back from that deflation, but there was no real inflation. And so suddenly it goes from 0% to 8%, 18, 17, 15, 15. Like, for point of reference, COVID was never hit 8% inflation in the United States, except one year. I think it touched it. Most of it was 3% and 4% inflation. No one knew what to do. And so what I'm interested in is historian is what every day Americans were trying to do with their money. And for every day Americans, there was not a grandmother, grandmother, great grandmother, a lot of who had seen prices double. Well, that's why your book is so interesting. Because it's from that standpoint. It's not from the standpoint of people who have capital and come to invest it. Interesting, you choose Bay of Ruth playing for the Yankees. It's also the foundation of the American Central Bank as well, I mean, just the year after. So it's basically the Federal Reserve. We owe this to all this financial advice exists today, didn't we? Yes. Yes. And there's this other phenomenon that occurs at the same moment, which is Americans were not really paper investors. If they were, it was in mortgages. Americans would have known how to lend mortgages. In fact, women lent more mortgages than pretty much any other demographic. People understood how to lend a mortgage. They understood that as a paper investment. But paper investing was really still at the fringes of American life. And then World War One happens. And the Liberty Bond movement to get Americans to basically lend the government the money to fight this war is wildly popular. I mean, just almost humorously so. Americans are flocking to these rallies to sign up young people, children, old people with their savings. And they put it in these 4% bond yields. Like in a world that every one of them has lived in with 0% inflation. So 4% bond yields in a 0% inflationary world with no income tax. It's a pretty good deal, like grandma can sit by the fire in peace, knowing she's getting a solid return. And then it is on the heels of that inflation to completely destroy the value of those bonds. So most Americans' first paper investment is a massive loss. Meanwhile, they look at the stock market. And it goes up 50% in a single year in the 19 teens. And it keeps going up. And so suddenly all those warnings for 100 years that the stock market was not to be trifled with for everyday people is turned on its head. And they think, well, if I'm falling behind by the steady steps of the latter of improvement, then it's time to take the escalator. Although, of course, there was no escalator at the time to take the elevator. And so that was a transformational pivot for everyday Americans' personal engagement with capitalism. So the really interesting thing is we're starting from a different standpoint. We're looking at different people. And as you pointed out right at the beginning of this book, that perhaps negates some of the research that academics do on this whole subject. Because not all of the things that are true-- I mean, in other words, they're excluding a lot of behavioral issues when they're coming up with financial advice. It's one of them being compounding. The important thing about compounding is not to interrupt it according to Charlie Munger. Yes. But in real life, particularly for people with more precarious lives, interruption of compounding is going to be a very common thing. So when we look back at the history of Americans, actually, many of them didn't get the benefit from compounding because of that precarious nature and because they often had to interrupt it. I think this is one of the important things for historians to reconsider-- financial historians to reconsider. It is one thing to find conversations happening in the investment literature of the 17th, 18th, 19th century. It is another thing to know if any one of any significance-- any number of people of any significance are actually doing any of that. Or if they even could do any of that. And for most Americans, for most working class people in all countries, doing or benefiting from compound interest was not an accessible phenomenon. For two reasons. One, you mentioned Charlie Munger. I think it's like 99% of Warren Buffett's wealth comes after his 60th birthday. Well, that's a year most Americans never live to see. So compounding takes time. Time is something most working people did not have. You were expecting to live into your late '40s to early '50s. The second thing compounding needs is something that you can reinvest the dividends from, which A, the stock market was not as easy to do that with in the 19th century. But even putting that aside, most Americans' wealth was in land. And land is not compound. So just the concept of compound interest, the math has always mesmerized people. And you could find many times people in the 17th, 18th, 19th century mesmerized. I call it an almost pornographic obsession with compound interest. It's like, ooh, how big can this number get? And I don't even have to do anything, right? But the problem with that is that's not how most of the real money Americans made was made. They made it by finding a way to serve someone else's needs, to solve someone else's problems. And that's how they left ahead. And the idea that they would put it into compounding and never touch it would have been almost ridiculous. In fact, I can find people in the 19th century kind of laughing off the idea that you would put your money away and never touch it. Yeah, I can't find the quote in this book, but I thought it was really stunning. And you talk about the Irish people who came to America after the famine. And just what a high percentage of them own business businesses in that generation. My business can be richer, make our candlestick, make our barber, whatever, or something much, much bigger. You quote the billion makers here who got really rather large. But was it one in five of those immigrants owned a business? Yes, and that's really new research. By the way, that came out of a book and I'm going to kick myself after that it's not popping into my head immediately, the reference. But there's a fairly new book on the Irish in New York that really examined these families from their banking records. Because what they've done is they've gone back and found the savings bank records. These were really banks that working class people used were actually charity organizations. They were not banks in the sense that you think of today. They took deposits and put them in incredibly low return investments. And it was men as a charity organization. And the records from these banks have been discovered, those that survived. And they were able to piece together just how far ahead many of these famine Irish were able to go. Prior to that work, our understanding of the famine Irish was that they got to America and basically just clawed their way, held on. Maybe if you were really lucky, got a job for the New York City Police Department or something like that. But that many of them did not leap ahead. When, in fact, there was a shocking level of upward mobility amongst the famine Irish. And this is true everywhere you go, wherever they went. And especially small business ownership. So many move from their trade into owning a small business that puts them in a relatively financially stable place. Some of them become quite wealthy. The billiard family you mentioned, they, two Irishmen who were obsessed with the quality of bumper rails. Billiards was incredibly popular past time in the 19th century. And they just got a reputation for having better bumper rails that didn't wear out and that worked what better than other people. And they eventually sold out to the Brunswick Company and retired as millionaires back when a million dollars was a lot of money. Yeah, we have to talk about the sculpts as well, of course, because you mentioned two of them in this book, Smith and Carnegie. A really interesting quote from Smith, which suggests he may have been a value investor, suggesting that what you really need is attention. This is the story of-- of why the Great Wealth in America was not made by the diversification of equity risk, but the concentration of equity risk, it may have been secured and maintained through diversification, but not made that way. But let's quote from the other, Scott, 250 years ago, by the way, something really important happened. Adam Smith published The Wealth of Nations, and I believe something of a secondary importance happened on the other side of the Atlantic as well, but we have a little party. Yeah. Yeah, let's get back to you. Let's put our cups of tea down and get back to Andrew Carnegie. And this is Carnegie, concentrate your energy, thought and capital exclusively upon the business in which you are engaged. People who scatter their capital, which means they have scattered their brains, I've never heard that one from Carnegie before. They have investments in this or that or the other here or there and everywhere, don't put your eggs in one basket is all wrong. I tell you, put all your eggs in one basket and then watch that basket. I think we usually attribute that to a more modern speaker, such as Buffett, but that is Carnegie. So for the people we are talking about, the people who accumulated wealth from very little wealth, it was really about focus on an investment rather than a lot of investments. That's one of the conclusions from your book about the advice, the classical advice that worked for Americans. Yes, so one of the big transitions for the mass of the population of Americans, keep in mind Americans are coming from all these other countries. This is an era of extreme mobility from Britain and all over the British Isles, from Germany, from Italy, from China, from Japan. And as these immigrants are encountering American capitalism, they bring with them a whole lot of feudal assumptions. And most of those feudal assumptions are rooted in financial ideas of not falling behind, not failing, surviving, right? That's what people are trying to do. And very quickly you start to see conversations in which successful American businessmen try to convince their fellow citizens who come from all of these different backgrounds, but all of them are fairly rooted in futile mindsets. But they need to get away from this DIY sense that do everything yourself, spread yourself out, don't concentrate, don't take that risk, because actually here in this dynamic economy, concentration is where your rewards will come from. The president of Harvard in the 1820s or '30s, I believe, gave a speech at a cattle farm convention, which apparently I guess the Harvard presidents are living a better life than they used to. But the point of his speech to these gathered farmers is run your business like a capitalist enterprise. You need to concentrate, because that's where your biggest rewards will come from. And this would have been a true paradigm shift in the mental landscape of everyday people. To wrap your mind around not trying to spread yourself out for protection, but to concentrate so that you could leap ahead, it really took some convincing. I think to this day it takes some convincing to get people to believe that that's the case. But we find over and over again the investors who distract themselves trying to dabble in various strategies, underperform largely. And my favorite PT Barnum said, whenever a dentist hears he can make some money doing literally anything other than drilling teeth, he'll lose all his money in that pursuit. That's kind of what Carnegie is getting at. Get after what you can make the most money and concentrate relentlessly on making money that way. And yet, I wonder when we look at the history of financial advice and you mentioned the book by CrossFit and March and Knight, was all of that advice written for dentists, doctors and lawyers, because they were the people who had the money anyway. And they were smart enough to be overconfident and actually were pretty gullible about all of this. And therefore we've missed the financial advice that was going out to the vast majority of the population, but by definition had to have a different skill. So I find that quote from Smith, by the way, so that'd be rate it. It's a great fortunes or the consequence of a long life of industry, frugality and attention. And it's the attention you put in italics there. And that is not, I think, index investing is attention. So. Yes. I mean, that does spoke Adam Smith, right, don't blame me index investor fans. And I think there is a movement of the 20th century obviously to try to quantify the benefits of diversification. And in part, that's for a very different financial reality in which more and more people are invested in the markets. But really it's goal is somewhat the same, right, to try to avoid the loss of capital. And for the vast majority of people, their way they're making their capital is not from the stock market. They're making it in their professions, they're making it in their business decisions. And to your point, the best thing for a dentist to do is to concentrate on being a dentist and then diversify that out so they don't lose what they've gained. But that's not the same thing as how you get ahead. And so a lot of that literature about getting ahead your right was kind of aimed at the gullible professional who thought, well, if I'm good at this thing, I'll also be good at everything else. And that then and now is rarely true. I mean, as you say, then and not it's still the same, I mean, I advise anybody to watch the movie Glenn, Gary Glenn, or else, which is about real estate and not equities. But that's how it works. That's how it goes. And when they have that list of marks there, I think doctors, dentists and lawyers are pretty high up, pretty high up the list. And some more financial history, Sheila Wilde, no, I had no one that Sheila Wilde had been a big thing in the 60s because the other Adam Smith, the Pentium Adam Smith, the George Goodman, the money game, focused on some of the more speculative stocks of the 60s and Sheila Wilde is in there. But let me read you, read for you a little bit of the history of Sheila Wilde and Gas and the lesson that comes from it. Sheila Wilde promised a bananza of American wealth, only it did so in 1859. The number of Sheila Gas companies in the United States went from three to 40 in two years. By 1861, nearly all were gone. This happened again in World War I when there was an oil shortage and again it busted because of cheaper competition from oil wells and again in the oil crisis of the 1970s. That went ended with $1 billion in losses, laid off thousands of workers and created ghost finds like something out of deadwood that are still running in the desert today. Let me skip to the conclusion and that is the future takes a lot longer to get here than you think. Nearly every huge American bust was an idea that eventually boomed over and over again and the next big thing gets here in laborious slow times. Now this runs through your book like a stick of rock, this difference between slow time and fast time and how you adjust your perceptions about this so they are more fantastic. Modern example is Amazon which managed to fall 90% share price, fell 90% from 2001 to 2003, barely visible on the screen or if you chart the share price of Amazon. You say it has been a feature of America throughout that just we all assume that things are going to happen quickly. It's a nature of writing history that we constroutine a time anyway and people come to assume that that is the way things actually work if you like in real time. Yes so there's so many, it's shooting fish in a barrel to go through financial history and find people thinking that the future will get here tomorrow and investing and losing their money doing that. One of my favorite examples of this, I mean there's this over and over, the canal booms to the 1800s, as soon as the eerie canal opened every city in America wanted to be the next big canal city, Boston, Baltimore, Charleston and they all had these massive dreams with prospectuses for investors about how it was going to connect to the interior. They all went bust, I mean 96% of the money is completely lost but who actually made money in that was the workers who were digging out those suddenly very in demand skills to dig out channels. I would just see it over and over, I talk about beet farm, sugar beet farming in the 1830s and Americans were just so obsessed with this idea that they were going to grow beet sugar and every single investor lost their money in that movement. But yet most American sugar today comes from beet sugar. So over and over the future does get here but the real rewards are for those who find a way to work in that industry, who find a way to monetize the demand for suddenly very in demand skills but as investments they rarely play out the way we think they do and this comes from, we talk about fast time slow time. If you know, Benoit Mandelbrows idea is like fractal time that time speeds up in financial markets, it speeds up and slows down. And I think that is very true in the financial lives of everyday people as well. But that is how we write time. We write almost exclusively fast time histories. Everything is 1929, everything is 2008. And so if you put those books down or you turn that movie off at the end of the film, you get this idea. The way a lot of people, the massive people get their financial history is fast time histories and you think the lesson is well, everything changes really fast and only the smart people see it coming and you don't want to be the dumb people. But that is not how financial life is lived. And so, you know, I often, the joke that I have with my first, it was students is you watch, you know, some of these films, if you think the takeaway is a financial, for takeaway for you as an investor, no, it's a murder mystery. Like, you're supposed to yell at the screen, run away. from the subprime mortgage lender, he's behind you, you know, like, that's not financial life. Financial life is lived in slow time. And by the way, slow time is very loud. I have a slide I show students sometimes of all of these quotes saying that the recession is here, everything's going to collapse, we're all going to lose our jobs. And then another column saying, this is one of the greatest opportunities in financial investments ever. And then you show the year and it's all the same year, and then it's some mundane year in the economy that no one remembers because nothing really happened. So slow time could be very loud. There's always someone telling you it's about to bust. There's always someone telling you it's about to explode up. But most of the volatility stays within a range. There's very little actual fast time in financial history. And so we need to start reorienting ourselves to what people did in slow time that worked so that when it was stress tested by fast time, they came out ahead. It's a really interesting point because, you know, we teach a course on the finance. If you say to people, "How do you lose money in equities?" They'll all tell you about 2000 to do it. Some of them have read a little bit of history, so they'll tell you about 1929. And it's these really quick ways that you lose money in equities. But there is another way to lose money in equities. That's slowly. Yes. I mentioned that in the book. And then when you look for histories of losing money in equities slowly, they haven't really been written. A little, let's cover the period, say, 1966 to 1982. I think you start the clock in '64 and you're in your book, same thing. There are books about bets of that along the way. Their period's been the money game itself is about the 1960s, there have been some of the 70s. But how you lost a hell of a lot of money over that long period is not really well written up. It's actually true, largely, if the period from 1900 to 1920, more so after the beginning of the First World War. And because we as historians, we want to tell a dramatic story, don't we? And I mean, look, I've written the book on four great bottoms, so I'm pretty guilty of this. I've written the book on the Asian financial crisis as well. Maybe we need to spend more looking at that slow time when or equities not a great holding for the long run. It's not often, but there are times when it's not, and we're not focusing on that because it's not dramatic enough to sell books. Well, and there you go, I mean, how much of the financial advice industry is rooted in those assumptions, and what's the old quote, I cannot remember who I'm sure it'll come to me later. But it's very difficult to convince a man of a thing if his salary depends on him not believing that thing. It's either Sinclair Lewis or Optin Sinclair, and I always get to take some. But that basic idea that, you know, how to convince people that there's all these long slow slugs of time that are probably more relevant financial history for you to know, but it's very difficult to sell that book or enroll that class because it is less dramatic. I will say on this idea of stocks being long-term investment superheroes, some of that history is starting to come under the strain of investigation, and it may not be true. Ed McQuerry, professor at the Levy School of Business at Santa Clara in California, has put together a rather robust, probably the most robust data set now that we have of all the American stocks for all of history in all the markets. And we forget this. Like, New York was not the only stock market. There were stock markets in Nancez, Mississippi. Actually, that was the most popular one in the South. And so, when we actually look at all the stocks people were investing in, they did not be bonds for the entirety of the 19th century. And that is not something that sells you a million copies of a book, but telling people that stocks will always win in the long run, that will move product. Yeah, well, as you point out, very different inflationary environment. So one more, to what extent, the cult of the equity is a product of that new inflationary environment here in the United Kingdom, famously, it was one investor who allegedly spotted that. A man called George Ross, Ruby, he was running the Imperial tobacco pension scheme and was able to get quite a lot of money into equities. After the war is our perception on equities, just fundamentally changed, given that bonds have really, for me, 1,800 to, let's go to 1939, had indeed beaten equities and something changed slowly after the war. But now, let's say that looks like it may be fully discounted, the belief that equities will beat bonds in the long run. Now, there's not some really interesting advice from this move more. I thought that was an interesting piece of advice, not one that you get when you read a book on traditional investment, I'll quote the statistic and your comment. I cannot emphasize this point enough. We aren't mobile anymore. In the late 1800s, one in three Americans changed addresses every year. In the 1960s, it was still one in five, that helps account for the upward mobility. Today, it is just one in 13. So how do you relate this mobility? This is American data, obviously, we can see if the Americans tended to move a bit more than other citizens of the world. What is it about moving more that has helped in the way Americans get rich? So, and obviously, for British audience, this won't play quite as precisely, but I think it is actually still true. I've spent a great deal of my life enjoying the archives of Britain and have many friends there. I think this is still moderately true, and maybe even more so true than you might think. But for Americans, it is especially true. Americans live in the largest free market zone, the largest most successful free market zone in the history of the world, and that means there is opportunity for you somewhere, and that's what most Americans of the 19th century understood, that they were in pursuit of the opportunity more than they were trying to root themselves in place and space for some long haul. They weren't trying to recreate, in some ways, the villages of Europe. They were trying to follow where the opportunity to grow was, and so they went where it was, wherever that was, highly mobile society, I mean, almost mind-blowing to us today. There's a famous, I can't remember, I think it's made the first, what used to be called "moving" or "boxing day" in New York City, and like the streets of New York City for the 19th century on that day, really the whole week, were so clogged, you couldn't, you just sit in traffic with horse-drawn carriages, everyone moved on the same day. My recollection is that it's still moving down Montreal, no, someone will not get in touch to tell me that isn't true anymore, but at least in the recently, it was also moving down Montreal. Yeah, so, and by the way, this is still true today in the United States, families who move from one state, from one U.S. state to another, not only will they make more money over the course of their lifetime. They have children who will, they've tracked, you know, the generational effectiveness. Their children will earn more money over the course of their lifetime, then their peers, which keep in mind, their peers are in the same place where they went for the opportunity. So you move to Cincinnati or out of Cincinnati, wherever, and your child and that other child in Cincinnati, your child is more likely to out earn the other child. Same place, same opportunity, but there's something about going and taking that risk and the long-term payout of that for families. Yeah, well, let's talk about risk because embrace failure is one of your lessons from American financial history, when we quite like, well, we run a mistakes podcast, so why can't we not like embrace failure? So let me read you this statistic you have here. You suggest open the hair salon, move to the booming city, buy the franchise, take the online certification course, if it doesn't work, move on. The chances of failure are overstated. In the 1880s, a widely publicized number said 95% of all businesses failed, it appeared in USP, it was nationwide, and it's perpetuated to this day, and it was wrong. The real numbers range from 30 to 50%, not far off today. So take more risk, actually, is one of the things you say, you're not necessarily even taking more risk with your money, but taking more risk with your time is one of the lessons from high Americans get rich, and one which may be, you overestimate the consequences. You point out you live in a civilized society, you live with certain safety nets anyway. The ability to take a risk without sort of falling into destitution, I think there are those risks, but they're not as big perhaps as we conceive them to be, that seems to be one of your lessons. It is one of the great oddities of our time that we are probably more risk averse than we've ever been, and it is probably the least risky age we've ever lived in, in terms of your personal financial decisions. For about half of American history, there was no bankruptcy. And the reason that's a really important insight is that there were two American experiments with bankruptcy in that time, and the most important one is the 1840s, 1840s, 43s somewhere in there, we have a brief two year period of time where we allowed bankruptcy, and we have the records. Historians have gone through those records, and what they have found is, these people who declared bankruptcy, they had taken a risk financially, and they have failed. Over 40% of them bounced back to be successful financially. So for half of American history, people could have bounced back if given the chance, but they weren't given the chance. If you take a risk, and what I really mean here is like professional risk, a career risk, do you take the thing you've gotten back to our point about Carnegie, the thing you have focused on becoming exceptionally good at and that you are monetizing, and take the risk that you can monetize at a higher rate, do you take that risk, and it doesn't pay out? You will be fine. Now I'm not suggesting that it's not horrible, and I talk in the book about my own financial foibles and how very close I got to declaring, having to, I spent a very long night staring at a lot of books at the table going, I think I may have to declare bankruptcy. It is not fun when you think you're about to fail. but you will be okay in a way that many of your ancestors would never have dreamed they could bounce back. You can bounce back. So we live in this risk-averse age that's not particularly risky as a historian. Good place to end is the last lesson. Reject pessimism. We have to put that in if we're going to talk about mistakes. The returns on despair are low. Tick. Big war was selling pessimism at scale but remember E or every episode of Winnie the Proves surprised at how good things turned out. Sure optimism needs its guardrails but do not confuse cynicism with wisdom. They are not the same. I'm thinking of the citizens of the United Kingdom today who seem to be surrounded by cynicism which perhaps isn't wisdom but certainly shows up as pessimism. To the optimist there's a famous book I was going to mention it earlier. Triumph of the optimist. That is one of the lessons of history is that optimists tend to do better. Yes and and yet for some reason especially as historians we have this we are quite enamored with pessimism because it sounds so wise to tell you that it doesn't always work out but the actual historical lesson of the last several hundred years is how how well things have worked out for so many people who in previous systems or generations would not have worked out for. Some of this pessimism that is growing like a cancer is rooted in this wildly political society. We've always been Brits and Americans. We're always known to sit around with a newspaper and which someone would read out loud and then debate politics but then mostly you would go back to your living and we live in this world where we are inundated with political messages. I often tell especially young people it's fine whatever your politics I don't I have friends on all sides of all spectrums but whatever your politics the question for you as an individual it's not what type of economy you would build but what are you going to go build in this economy for for young Brits today. I think I looked this up fairly recently. I want to say of Americans born in the bottom 20 percent all right the bottom the bottom 5th 6 and 10 get out 4 and 10 become middle class to well the 1 and 10 goes away the top for Brits 7 and 10 get out so actually upward mobility for Brits is a tad bit higher than it is for Americans. Now we can debate all around the issues of why and how much and what's the top end and who was you know I but I can't live in zone 1 in London or whatever but you can't actually get ahead and the statistics bear that out and it's going to take a drowning out some of the noise what I call big woe because big woe is rewarded for what they are saying I know I was part of it right it's it there's no clicks for journalists there's no votes for politicians there is no tenure for an academic like me telling you the things are getting better but I we can get all of those things if we tell you it's worse. I think it's a really really interesting place where you start this book saying that professors of finance are risk averse that's why they become professors and therefore by natural selection we're narrowing it down to people who want to write about being risk averse you stop doing that as you just point it out maybe is that because you think the reason when I asked you the initial question where we began did you have to leave being a professor of that of a social professor of history because you like risk too much. I will tell you that my my colleagues by beloved friends in academia are a risk averse people right we we want to write the biographies of risk takers we do not want to be risk takers and if you don't if you doubt that I invite you to sit into any faculty meeting but the the real lesson of history is that risk is rewarded not always that's why we call it risk but it is rewarded with outsized returns including for everyday people which has largely been forgotten and I hope I hope this is a book that kind of puts that optimism back front and center on the history of everyday people's lives because people really did get ahead and they actually believe it or not still are doing so it's it's a more optimistic story than we might think but it is true. Well the reason I like it is a much broader story it's much broader story than first half money that invested years was pretty good to get some money and that invested when that for most people that's kind of important and maybe not so well covered by by academia Joseph thanks very much really enjoyed it as I said it's a beautifully broad scope lots of runs for optimism as well so I recommend people read it how to get rich the American way classic financial advice that worked and didn't throw it time Joseph thanks for writing it thanks for joining us. Russell thanks so much I've truly enjoyed it thanks for all the all the great writings you've put in the world I've enjoyed reading them through the years thank you. you