Arrangement Compilation: Shenchao TechFlow

Morgan Housel is a partner at Collaborative Fund and a former columnist for the Wall Street Journal. He has twice won the Best Business Award from the American Society of Business Editors and Reporters, was twice shortlisted for the Robb Award for Outstanding Business and Financial Journalism, and is the author of the global best-selling book The Psychology of Money.

In this interview, Morgan offers ten key tips for cryptocurrency investors. The advice covers specific investment strategies, and Morgans insights apply not just to the cryptocurrency market but to investing more broadly, making it a valuable resource for investors of all levels.

Hosts: David Ryan, Bankless Podcast

Speaker: Morgan Housel, author

Original title: 10 Lessons for Crypto Investors With Morgan Housel

History repeats itself, inevitable

• Morgan Housel firmly believes that whether it is 100 years from now or 200 years from now, market bubbles will still exist, just like the technology bubble and the real estate bubble in 1999. He pointed out that bubble events in history, whether 100 years ago or 200 years ago, have striking similarities.

• Morgan explains that the reason history repeats itself is because of the consistent way humans respond to greed, fear, risk and uncertainty. Whether in fields such as finance, medicine, the military, or physics, peoples responses to these topics are surprisingly consistent.

• Morgan pointed to economist Hyman Minskys financial instability hypothesis, which suggests that if markets never experience a recession, people will become overly optimistic and accumulate large amounts of debt, ultimately leading to a recession. He emphasized that stability itself can lead to instability, and excessive stability can push the system toward instability.

• Morgan points out that after every market crash or recession, people are always looking for someone to blame, but in fact, these are all part of the normal functioning of capitalist society. He believes that trying to eliminate market cycles will only make the situation worse.

• While Morgan believes it will be nearly impossible to break this cycle as a society or industry as a whole, he noted that there is still hope on an individual level. Individuals can escape this cycle to some extent by recognizing these repeating patterns and avoiding them in their own investments and decisions.

• Morgan emphasized that if an investment can increase in value five times in one year, it is also likely to lose 80% of its value in one year. This is especially obvious in the field of encryption. Sometimes the value increases tenfold in a year, but it may also fall by 80% to 90% in a year under the influence of sporadic news. Some junk coins may even return to zero completely.

• Morgan mentioned that many people first entered the crypto market in the middle of the bull market and mistakenly believed that the bull market would last for a long time. However, they soon found themselves on the other side of the market cycle, entering a bear market and experiencing it in its entirety. In this process, more than half of the people will leave.

• Morgan notes that in financial matters, if you can complete the sentence I am an XX investor, you have pretty much tied your identity to how you invest. In a bull market, people may think of themselves as smart or rich, but in a bear market, this identification may shift to I am a loser or I am a poor person, an identity that is closely tied to market fluctuations. Contact can be personally harmful.

• Morgan quoted Harry Truman, stating that the next generation learns very little from the previous generation unless experienced firsthand. In financial matters, if you have never experienced a 50% decline, you may not truly understand the experience. Every bear market is unique, and even if youve been through multiple bear markets, the next one may be completely different.

The psychological impact of overstating earnings

• Morgan mentioned that the market has a collective memory and the market is composed of the collective consciousness of the participants. Different market participants, depending on their age and experience, will react differently to the same events, and each generation will understand risk in its own unique way. For example, young adults who lived through the Great Recession may remain wary of financial markets throughout their lives, while those who were children during the Great Recession may have only heard the stories from their parents.

• Morgan emphasizes that what people experience between the ages of 15 and 30 has a profound impact on them throughout their lives. During this stage, peoples brains are still malleable and they begin to assume social responsibilities, so experiences during this period will profoundly affect their worldview. There are also differences in the understanding of financial perspectives between different generations.

• Morgan pointed out that in bull markets, people are often dissatisfied with their own gains because they are envious of others. He believes that this kind of envy is one of the main reasons for the bull market to get out of control. In addition, on some social media, people tend to exaggerate or even fabricate their own successes, which may lead to unrealistic expectations and envy in others.

• Morgan believes market cycles have become more rapid due to the influence of social media. This phenomenon is particularly evident in the crypto space, where market ups and downs can occur in a very short period of time.

Money, happiness and personal values

• Morgan mentioned that in a bull market, especially in the cryptocurrency market, people often display their wealth, which is especially obvious on social media. He pointed out that this kind of behavior can easily lead people to envy others instead of focusing on their own progress and achievements.

• Morgan believes that while money can bring a certain level of happiness, it can only solve money-related problems. True happiness also includes healthy relationships, a good mental state, and a satisfying lifestyle.

• Morgan also notes that the schedules of successful people often include a lot of unstructured free time. This seemingly inefficient arrangement actually provides room for creative thinking and problem solving. In contrast, people who cram every minute into their schedules often don’t have time for creative thinking.

• Morgan quoted music producer Rick Rubin, stating that its only after achieving your dreams that people realize they dont feel any different than they did before, which can lead to despair. He emphasized that money cannot completely change a persons life experience. What many people actually desire is a simple, independent life, but they mistakenly pursue high status. Status is a game that can never be won because there is always someone richer, prettier, or happier than you.

• Morgan noted that many people may be billionaires in terms of assets, but they carry a social debt that exceeds those assets. This debt stems from the need to be impressed by others and the desire to demonstrate ones own identity and worth, a phenomenon that Morgan describes as a burden.

• Morgan pointed out that money can be used in two ways: as a tool to enhance personal happiness, and as a standard by which others evaluate themselves. Many people mistakenly use money as the latter, that is, as a measure for others to evaluate their success. Split cards. If people can reduce this need, they can better use their money to enhance their happiness.

• The host said that when people see money as a tool to enhance freedom, they have the healthiest relationship with money. Chasing status is a tiring game with no end, and treating money as a tool can help people live better.

• Morgan noted that the value of many consumer goods, such as cars and homes, is often misunderstood. For example, a high-end Toyota might actually be better than an entry-level BMW because it offers more driving comfort rather than just bragging rights. Even intrinsically good people can make poor decisions when faced with large financial incentives.

• Morgan emphasizes that financial incentives can not only lead to negative behavior but also drive positive change. For example, during wars and recessions, technological innovation tends to accelerate due to pressing needs.

Investment strategy: medium-balanced long-term vs short-term

• Morgan mentioned that his own investment strategy is long-term regular investing. Whether the market is up or down, he regularly invests the same amount into the same investments and plans to hold them for 50 years. He emphasized that this strategy can reduce the impact of emotions on investment behavior.

• Morgan believes that long-term investing does not mean ignoring the short-term dynamics of the market. Long-term is actually the accumulation of short-term, and investors need to experience and understand these short-term dynamics, even if their understanding is that some of the markets behaviors are absurd.

• In the field of encryption, the emergence of new phenomena such as NFTs and various emerging assets is a part that cannot be ignored for content producers and investors. The emergence and disappearance of these new phenomena are part of the story and evolution of the crypto space. Morgan believes investors can adopt different strategies. Some may choose to invest regularly in large blue chip stocks or crypto assets, while others may prefer trading and trying new investment opportunities. He believes both strategies can be healthy ways to invest.

• Morgan noted that many stock market investors will put a large portion of their money into long-term, stable investments while keeping a small portion for trading and trying new investment opportunities. This strategy satisfies their intellectual needs for investing while also being fun.

The key to happiness: Accept imperfection

• Morgan points out that in the world of investing, effort is not always directly proportional to results. He believes that many investors misunderstand the things they can control and ignore the importance of their actions. He mentioned that in a bull market, the best thing to do may be to do nothing, and the same is true in a bear market.

• Morgan believes that in investing, striving for perfection (such as perfectly predicting market tops and bottoms) is often unrealistic. The market itself is full of uncertainty and unpredictability, and if investors realize that their decisions may be imperfect, they are more likely to adopt conservative strategies, such as diversification, to reduce the potential negative impact of a single decision. If you always try to be perfectly efficient, you may suffer badly in times of crisis.

• Morgan believes that accepting imperfection means taking a long-term perspective. Over the long term, market fluctuations and imperfections in individual investment decisions will have less of an impact on overall investment performance. Accepting imperfection can also help investors avoid overreacting to short-term market swings. Accepting imperfection is also part of mental toughness. During the investment process, it is crucial to remain calm and objective, even in the face of losses or mistakes.

• Morgan mentioned that learning from mistakes is an important part of the investing process. Accepting imperfections and learning from them can help investors make better decisions in the future. Accepting imperfection also means being adaptable. Changes in market conditions and personal circumstances may require investors to adjust their strategies rather than sticking to a perfect plan that may be outdated or inapplicable.

compete with yourself

• Morgan emphasizes that allowing optimism and pessimism to coexist is the key to long-term success in areas such as business, investing and sports. He mentioned that for investors who are experiencing the entire crypto market cycle for the first time, they may be inclined to invest in cryptocurrencies with complete optimism, hoping to experience the cycle completely from beginning to end.

• Morgan mentioned that crypto investors may find their own “dumbbell strategies” that don’t just balance between traditional assets such as cash or Treasury bonds and crypto assets, but may also include investing in other hard assets such as real estate. Can provide some safety net when cryptocurrency markets decline.

• Morgan used Microsoft as an example to illustrate the characteristics of a successful entrepreneur: extremely optimistic in technology and extremely conservative in financial management. Bill Gates once said that from the day he founded Microsoft, he had always hoped to have enough cash in the bank to sustain a years salary expenses with zero income.

• Although there may be many challenges and difficulties in the short term, if you can persevere, you may make huge progress in the long term. Morgan mentioned that in his own investment experience, the market has achieved significant growth over the long term despite the problems he often faced.

• Morgan emphasized the importance of applying these lessons across market cycles. He believes these lessons are especially valuable for those experiencing a full market cycle for the first time. If peoples expectations increase as their income increases, they will never be satisfied with their financial situation. He emphasizes that even those who are lucky enough to have growing net worth and income will never be happy if they dont work to control their expectations.

• Morgan advocates learning to be grateful for what you have and advises people to compare themselves not to where others are now but to where they were in the past. For example, most people are probably much better off now than they were five years ago, even though they may feel inferior to others when browsing social media.

The power of motivation

• Morgan noted that incentives are an important driver of peoples behavior, whether in crypto or elsewhere, and understanding what motivates a person or organization is critical to predicting their behavior and decisions.

• Morgan noted that incentives may drive market behavior in the short term, but in the longer term, true values ​​and fundamentals will determine how the market performs. Market dynamics are often driven by the different incentives of participants, which may include pursuing quick profits, avoiding losses, or investing for the long term.

• Morgan noted that understanding incentives can help investors better assess risk. For example, if the market is dominated by investors pursuing short-term profits, the market may be more volatile and unstable.

• Morgan recommends investors reflect on their own motivations, such as financial goals, risk tolerance and investment horizon, to develop a more appropriate investment strategy. If a persons primary incentive is capital preservation, then they may choose a more conservative investment strategy.

• Morgan emphasizes that while markets may be affected by various incentives in the short term, sticking to an investment strategy based on solid principles and understanding will generally be more successful in the long term.

Manage risks well and don’t try too hard

• Morgan emphasized that investors often try to over-optimize their investment strategies, such as trying to accurately predict market tops and bottoms. However, this excessive effort is often unnecessary and may even be harmful. Accepting imperfection and having room for error is very important in investing. In a world full of uncertainty, the pursuit of perfection means there is no room for error, which can have serious consequences in times of crisis.

• Morgan believes that a long-term perspective is more important than trying to pinpoint market dynamics in the short term. He advocates long-term investing and holding strategies rather than frequent trading and trying to predict short-term market movements. Investors should avoid overreacting to short-term market fluctuations. Market fluctuations are normal and overreaction can lead to unnecessary transactions and additional costs.

• Morgan points out that streamlining the decision-making process in investing can reduce errors and stress. For example, investing a fixed amount at regular intervals (such as investing the same amount every month) can avoid the stress of trying to buy or sell at the perfect time. Investors should develop patience and resilience to cope with market unpredictability and volatility.

• Morgan emphasized that successful investing often takes time, and frequent trading often results in higher costs and lower overall returns. Investors maintain the consistency of their strategies and avoid frequent adjustments to their portfolios due to short-term market fluctuations.

• Understanding basic economic principles, market dynamics, and financial instruments can help investors make smarter decisions that focus on long-term goals and the big picture. As market conditions and personal circumstances change, appropriate adjustments to investment strategies are necessary. The market has its natural up and down cycles, and understanding these cycles can help investors better position their strategies.

optimism and pessimism

• Morgan believes that long-term success in investing requires a mix of optimism and pessimism. Optimists believe in good returns in the long term, while pessimists prepare for short-term difficulties. He advises to be frugal like a pessimist and invest like an optimist.

• Morgan mentioned that one asset allocation strategy he likes is the dumbbell strategy, which is to keep liquidity high and debt low at one end (a pessimistic short-term strategy) and invest in stocks for the long term at the other end (an optimistic long-term strategy) . He emphasized that there may be various challenges and surprises in the short term, but if you can persist, the rewards in the long term may be huge. Therefore, he advises caution in the short term and optimism in the long term.

• Morgan stresses that its important to have a balanced mix of optimism and pessimism. Excessive optimism may lead to overlooking risks, while excessive pessimism may lead to missed opportunities. Optimism is an important driver of investment and innovation. Optimists tend to see long-term growth potential and opportunities, which is a valuable perspective in investing.

• At the same time, Morgan also emphasized the value of pessimism. Pessimism can serve as a risk management tool, helping investors identify potential problems and challenges so they can make more prudent decisions. Many of the great advances in history have been driven by optimists, but they have also been accompanied by the caution and balance of pessimists.

• Morgan noted that market cycles influence investor optimism and pessimism. During rising markets, optimism may dominate, while during falling markets, pessimism may be more prevalent. He suggested that individual investors consider their own optimistic and pessimistic tendencies when formulating investment strategies. Understanding their own emotional tendencies can help develop an investment strategy that is more balanced and suitable for them.

Good things happen slowly, bad things happen quickly

• Morgan believes that good things often come from compound interest, which is inherently a slow process. In contrast, damage is often caused by a single point of failure, which often has an immediate and catastrophic impact.

• Good investment returns take time to build, and market declines or crises can occur in a very short period of time. Investors need to understand that building wealth is a long-term process and should not expect significant returns quickly.

• Morgan noted that because negative events can happen quickly, investors need strategies to mitigate those risks, such as by diversifying their investments or maintaining some cash reserves. The psychological factors of the market play an important role in this phenomenon. When markets panic, investors tend to react quickly, causing prices to drop sharply. Morgan reminds investors to learn from history and understand market cyclicality and volatility.

• Morgan stresses that no matter how experienced an investor is, they should remain humble and open to new information. The market is complex and unpredictable, and there is always something new to learn. Investment decisions are always made based on imperfect information, so understanding and accepting this uncertainty is a key part of successful investing.