I read a great article recently by best-selling author, Morgan Housel.
It explained the value of having low expectations...
98-year-old Charlie Munger was asked the question,
"You seem extremely happy and content. What's your secret to living a happy life?"
Munger replied,
"The first rule of a happy life is low expectations. If you have unrealistic expectations you're going to be miserable your whole life. You want to have reasonable expectations and take life's results good and bad as they happen with a certain amount of stoicism."
In 2009, Munger had lunch with Elon Musk and allegedly told the whole table all the ways Tesla would fail.
Musk tweeted,
"I told him I agreed with all those reasons and that we would probably die, but it's worth trying anyway."
Housel believes both Munger and Musk were making the same, very important point.
"Musk is right that some things that will probably fail are worth trying anyway. That’s true for everyone in almost all areas of life, because we live in a tail-driven world where a few events drive the majority of outcomes. It’s a world that demands you become comfortable with a lot of things not working, lots of things failing, and constant disappointment, because “success” means you tried ten things and eight of them fail miserably but two change your life."
"Munger is right that unrealistic expectations assure misery, for two reasons. One is that the world is a fragile and volatile and complicated place, and the only way to avoid disappointment is to expect it. Second is that progress tends to move the goal post. So the only way to enjoy the modern world is if your expectations rise slower than its progress."
The similarity is they both have low expectations.
Housel, however, believes having low expectations is a "superpower".
Musk purposely had low expectations for some of the most iconic endeavours in history.
One example is Starship, which has been modified in such a way that the cost of each launch becomes low enough to launch the things all day.
Step one - remove some weight, starting with the landing gear.
When talking about it, Musk laughed and said,
"This probably wont work the first time."
But also,
"Success is one of the possible outcomes."
Housel suggested that Musk wasn't "cocky risk-taking", but instead purposely had low expectations as it's the only way to "survive in a world that's not kind enough to reward every ambitious person with success".
Housel compared this to "higher risk equals higher return" and corrected the phrase to "higher risk means I'll probably earn lower returns most of the time but there's a small chance I'll earn good returns that make up for it."
How to stop the goalpost from moving
Charlie Munger was born in 1924. John D. Rockefeller was the richest man in the world in that year, with a net worth equal to roughly 3% of GDP.
Approximately $700 billion in today's world.
In those days, things like antibiotics, TVs, microwaves, computers, iPhones, or Google Maps, did not exist.
Would you trade Rockefeller's $700 billion in the early 1900s, for an average life in 2022?
Housel doesn't think so.
"But that’s hard to admit because all the insane luxuries Rockefeller didn’t have are now considered basic necessities. Everything works like that. All luxuries become necessities in due time."
The only way to go through life, is therefore to have low expectations.
- Not expecting a lot of economic growth.
- Not expecting great investment returns.
- Not expecting lots of innovation.
- Not expecting politics to improve.
- And to expect occasional catastrophes.
Be satisfied with your current circumstances.
Cherish any little improvements that happen along the way.
Marginal gains (I'm a keen cyclist).
Appreciate them.
Having low expectations doesn't make you sad.
Instead, they do the opposite - making little gains feel incredible, while bad news feels normal.
If you go through life expecting everything, you'll never enjoy the process.
I challenge you to continue your life from now expecting nothing in return - you might surprise yourself.
Further reading
How should affluent investors understand and deal with risk?
How to safeguard your family’s financial future
Goals vs. capital: Are yours aligned?
