← The Psychology of Money with Morgan Housel
The Psychology of Money with Morgan Housel
How We Used to Live (Levittown, Progress, and Expectations)
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One of my favorite quotes is from David Packard, who once said, more businesses die of indigestion than of starvation. I see this all the time. It is so common with money, whether it is for you individually or for your business, that people get so tangled up in the big, complex projects that they drop the ball on the small stuff. To do well over time, you have to get the simple stuff right first. And one of those fundamentals in business that often gets overlooked is expense management. And that is why 25,000 businesses use RAMP. Ramp is a corporate card that includes the best expense tracking and reporting software that I have ever seen. It makes expense management so simple by automatically capturing every transaction the moment a card is swiped. For listeners of the show, Ramp is offering metal cards for the next 30 days. Just go to ramp.commorgan. that's ramp.commorgan. cards are issued by Sutton bank member FDIC. Terms and conditions apply. Before I start today's episode, I want to share with you an article that I just stumbled across just before I hit record, just now, that I thought was so fascinating and got me thinking about a lot of different things. There's an article in Scientific American that talked about these eye doctors who recently, I have no idea who would sign up to do this experiment, but these eye doctors, they basically did a very extreme form of LASIK eye surgery on five patients to manipulate their retinas. And after the surgery, this was the idea, these patients, there are five of them, can now see a color that you and I and everybody else cannot. Now, by definition, it's impossible to explain what that color would be because, like, how do you explain the color red to someone who's never seen red before? It's impossible. It's just red. And so this color, they explain it as a version of teal with a level of saturation that my brain and your brain cannot even fathom. And that's amazing on its own, because the idea that you and I think that we can see the world, we have eyes, we can see everything. Everything that's in front of me. This plant, this desk, this computer, this microphone I'm speaking to, we can see it, and it's true. But there's a lot out there that we cannot see. In this case, literally, there are colors out there that our eyes and our brains cannot even percept. And once you do a surgery like this, all of a sudden there's a world out there that you didn't even know existed before. I think that is a good analogy for how a lot of things in the World works. When we're talking about politics, the economy, investing, science, whatever it might be, it is very common for everybody. The natural state of affairs is to assume that you can see all of the world that you understand, at least the world that you live in, without the knowledge that there is so much out there going on that you cannot even perceive, ideas that you're unaware of, science that you're unaware of, cultures, values, views of the world that are having a big impact on the world that you and I cannot even perceive. That happens all the time. And I think it explains a lot of what's going on in the world today. Most arguments in the world about the economy, about politics, about culture, are not really people arguing with each other, so to speak. They're not really disagreeing with each other. It's people who have seen a very different side of the world talking over each other. And I think when you view it through the lens, no pun intended, of there are literally colors in the world that our brains cannot conceive. So, of course, are there ideas and values that we are completely oblivious and unaware of? Of course. I love that idea. Just wanted to share it with you before we get into the bigger idea that I want to talk about today. And what I want to talk about today is a topic that I think has always been important, that I wrote a little bit about in my book. Same as ever. But I think it's probably more important today, over the last year and probably going forward for the next couple years than it's been in a long time. And that is understanding shifts in expectations in what the average ordinary American considers to be an average, ordinary life. It's very easy to. To look over the fact that what counts as a decent, dignified life today has shifted dramatically over the last 80 years. And why that's important today is because, of course, there is a lot of talk about going back to a world that we used to have. Tariffs are largely based around that idea. We've talked about this in previous episodes, that we used to have a very strong manufacturing base and good manufacturing jobs, and we don't anymore. Now there is truth to that. As I spoke about two episodes ago, a lot of that is simply automation. It's not necessarily shipping those jobs elsewhere, although that has been a factor, of course. But the general idea here is that we want to go back to a time that was better. We used to have a great economy. We don't anymore. Let's go back. This isn't working. Let's go back to that. I understand. And empathize with those feelings. And to some extent, a lot of that can be true. There are parts of the economy that used to be more prosperous than there are today. There are cities and towns and regions that used to be more prosperous than they are. Of course that is true. But I want to use an example of what I think was the peak of Americana middle class prosperity that I think if you wanted to put an image on the nostalgia that we're trying to go back to, it would be this. I'm going to start the story at the end of World War II, 1945, when 16 million American soldiers came home. And of course, when they came home, they had just suffered and adored and took part in the ravages of World War II, the most horrific event of the 20th century. And before that, before that began. Most of the GIs grew up as children during the Great Depression and experienced the poverty, watched their parents endure the poverty of those eight years or so of the Great Depression. So when they came home in 1945, there was such an overwhelming desire to relax and enjoy the life that they had not been able to enjoy up until that point, at any point during their adult lives or even in any part of their life that they could remember. So much of what happened during the Great Depression was people moved inwards, physically inwards. You had, if you had a house or an apartment, your grandmother, your cousin, maybe even your neighbors moved in with you. That was what happened when you lost your house to foreclosure. You couldn't afford the rent anymore. People moved in. Housing got very, very dense. And as World War II ended and the people came home, what was so common among the soldiers who returned home was, I want space. I don't want to live in a tiny apartment in Brooklyn with my grandmother and my cousins and my aunt and my uncle. I want my own space. I deserved it. I've earned it. And that view was noted that very clearly by a guy named William Levitt. William Levitt worked in what was kind of like the Army Corps of Engineers in World War II. And we, when he came home from the war, he noticed there was going to be incredible demand to take farmland that was on the outskirts of big cities and turn them into what we know today as suburbs. That was kind of a new idea back in the 1940s and 1950s. Up until that point, you pretty much had two places to live, a farm in the middle of nowhere or a dense urban city. William Levitt really pioneered the idea of the suburb. A lot of these were on the Outskirts of cities not far from New York or Philadelphia, where you could live in a nice area where you had your own house in a backyard. It wasn't a cramped apartment, but you could still drive into the city to work. That was a new pioneering idea made part by and large by the automobile, which, that too was a fairly new idea, and the new interstate highway system and roads that were being built. And so Levitt and Sons, the home building company, started buying up hundreds of acres of farmland in New York and Pennsylvania and later in other areas around the United States to build what. What were known then and now as Levittown. The first was Levittown, New York, and then it moved into Pennsylvania. I think there's one in New Jersey. And Levittowns are kind of the peak ideal of what Americana was. It was these gigantic communities. They eventually built more than 50,000 homes in America. And this. There are so many documentaries that were made about Levittown because it is the ideal Leave it to Beaver neighborhood. That was the view then, and I think to a large extent the view now. The idea of a middle class family, a working husband, a stay at home mom, three kids, a dog named Spot, a white picket fence. The kids came home and they were well behaved and they played baseball in the front yard and everyone was happy and they had picnics and they took the canoe out on the lake on the weekend. Like the ideal, perfect Norman Rockwell American life. That was Levittown. I found this documentary about Levittown. It was made in the 1990s. And the name of the documentary, I think, sums up the feeling that people had for Levittown then and in modern times. The name of the documentary is Wonderland Land because that was what Levittown felt like. It was absolutely incredible that a middle class, working American family, the vast majority of whom were GIs, could come home and buy their own house. They weren't renting an apartment, they weren't even living in a cramped apartment. They had their own house in a. With a backyard and a driveway. That was absurd. That was amazing. It felt just wonderful, bonkers to people that you could do this. And when you contrasted that, that life when they were buying these homes in the 1950s to the war and the Great Depression and the cramped apartment in Brooklyn that they had experienced up until then, Levittown, the American suburb, felt like a dream. There's a quote in the documentary of a woman who had lived in Levittown for 40 years at that point, and she says, quote, when we moved to Levittown was like a Utopia. That was. That was the only way that you could describe it. A wonderland, a utopia. It was the ideal of America. Like this Leave it to Beaver land. One other guy who had lived there since he was a child, he'd been there for about 40 years. At this point. He said, quote, it was so perfect. It was like a sitcom. We were expecting there to be a laugh track in the background. Just these perfect, ideal family, suburb, everyone's happy. That's the view of it. But there's another part in the documentary that I think is the most important, and this was back in the 1990s. Levittown was just starting to lose its charm, lose the glamour, lose this Americana utopia that it used to be. And it interviewed someone who had been there since the original 1940s. Remember, this is in the 90s. So there were a couple residents who had been there since day one. And he's talking about how he. For his generation, the greatest generation, Levittown was as good as it got. Even when they had lived there for decades, it still felt like a utopia. But for his children and maybe his grandchildren, it wasn't. They wanted to get out. They hated it. They wanted it, like, as soon as they graduated high school or college, they couldn't wait to get out of there. And so this guy who had lived there for 50 years said, quote, the idea was probably great 40 years ago, but something happened along the way to take away the dream. He said, quote, this is my dream come true, because this is what I expected to have in my lifetime. I don't know what my children expect, but this is what I wanted. This is my dream come true. And what he was pointing to is that Levittown, for him was amazing. It exceeded his expectations by so much that even when he had lived there for almost half a century, it was still the utopia that it felt like when he moved in. But for his children's generation, it wasn't. They didn't like it, they hated it. They wanted to move. And so we could go down that idea for a long time. But I want to sum this up. I'm going to put a pin in this idea with one statistic. Of the 50,000 Levittown homes that were built, how many today have been altered? As in have a new addition put on them, a garage that was added on, a third or fourth bedroom that was added on, a new family room or dining room that was added onto them. And the answer is virtually every single one of them, except for one, apparently. The address is 52 Oak Tree Lane. That is effectively untouched in its original footprint. Virtually all of the other 50,000 plus Levittown homes have been added to because this is really important. The original Levitt town house, the original footprint, they were all virtually the same, was 750 square feet. It didn't have a garage, it didn't have a basement, it didn't have a deck, it didn't have a porch, didn't have air conditioning. It was two bedrooms, a living room and a kitchen and one bathroom and that was it. So imagine, by the way, the typical 1950s Leave it to Beaver family that had three and a half kids. They were living in a house with two bedrooms. Your three and a half kids shared a bedroom. Everybody shared one bathroom. Air conditioning, forget about it. Garage, forget about it. Porch, forget about it. The average lot size for the Levittown house was 6,000 square feet, which I had to look this up. So I can't really contextualize that is very small. The average new house today in the United States, the lot is almost 9,000 square feet. So almost 50% bigger than it was back then. The point I want to make is that what was considered to be a life that was so incredible you could only describe it as a utopia. Those Levittown houses back in the 1950s would be considered barely livable by today's standards. Again, let me explain that with some statistics. The median new house in the United States in 2024 was 2157 square feet. It was three times the size of the Levittown Utopia House. Three times the size. The average new house today is of course, two stories. It has a two car garage, it has air conditioning, it has a porch made from have a deck. The Levittown houses had none of those things. And I found this New York Times article from 2007 that was trying to find an original Levitt townhouse. And this journalist is on the hunt for an untouched Levitt townhouse. And he can't find one anywhere because as we now know, virtually none of them exist. Every one of them has had another bedroom attached, a garage attached, a huge new addition that has a new kitchen or a new living room. They've all been added to. Because nobody in the year 2024 or for a long time wants to live in a 700 square foot house with no garage and no air conditioning. And this article finds us this guy who buys an original Levittown house and he's very quickly about to add to it, going to add a garage and add a bedroom to it. And there was a museum back Then that wanted to buy the original Levittown house. And when they learned that this gentleman bought one, but he's about to alter it and turn it into a modern house, they're like, no, no, please don't do it. And this guy who buys a house, his name is Mr. Schrader, he says, quote, I hate to disappoint the historical society, but I need a home, not a museum. I mean, it's cool living in a bare bones Levitt townhouse. People do tell me, wow, it's an original Levitt. That must be very rare. But people don't want to raise a family in a house that size anymore. That's. That last line is so important. People don't want to raise a family in a house that size anymore. The world that we have so much nostalgia to for the 1950s would be considered a deep poverty today. I don't think that's an exaggeration whatsoever. In 2024America, if you're trying to raise four kids in a house that has two bedrooms, no air conditioning, no garage, 700 square feet, that would not be considered within 10 miles of middle class in the vast majority of America, I don't think that's an exaggeration whatsoever. Now, of course people do that. There are many people who do that in the United States in apartments and whatnot. But nobody in that situation, literally nobody would be using words like wonderland and utopia to describe raising four kids in a 700 square foot house. And so, look, the very simple but I think very important point that I want to make is that the definition of what a good life is has shifted. It's increased substantially in the last 80 years or so. By the way, what do you call that shift in expectations? Progress is what you call it. It's wonderful. It's not a bad thing that it used to be a 700 square foot house with no air conditioning was utopia. And now we have 2,200 square foot houses with three car garages and four bathrooms and air conditioning and go on down the list. And that's considered aver. That's what progress looks like. That's great. I want to live in a world in which our definition of a good life expands. But I think this is true too, for the jobs that we yearn for as we go through tariffs. We're trying to bring manufacturing back to the United States and yearning for a time when middle class people could work in manufacturing jobs that we now think have been disappeared to China and Mexico and Canada and other places. It's true. Look, to some extent that is true and this gets more touchy because you're talking about people's dignity of their work and their employment. But what's true is that a lot of the manufacturing jobs that existed 50 or 80 or 100 years ago would not be considered good jobs at all anymore. It would not be considered acceptable jobs in the slightest. Let me give you one statistic to put a point on this. Building the Hoover Dam, which was like incredible feat of engineering when it took place, just an amazing thing that happened. 96 workers died building the Hoover Dam. If something like that happened today, before we got even remotely close to that before, when 10 people died, we would have shut the whole project down. Workplace deaths in the 1950s, that's not when the Hoover Dam was built. But just using that as a reference point, were almost four times higher than than they are today. People just had much more tolerance for the indignity, the physical pain, the physical suffering and even the death that was required of the manufacturing jobs back then than they are today. And look, maybe this is the wrong way to phrase it, but to the extent that people are softer now than they used to be, that they will not put up with a job where 96 of your co workers are going to die around you building one project. The fact that we don't put up with that anymore, that too is progress. Isn't that great? Don't you want to live in a world where dying on the job is not acceptable anymore like it used to be? But that too is an example that our definition of a good job has shifted over time. I think it is largely true that a big chunk of America, particularly in urban and suburban America, the definition of a good life in the eyes of, let's say a 22 year old, is a bachelor's degree from a flagship university, a six figure job waiting for them when they're done, a 2,500 square foot house with a 30 year fixed rate mortgage to buy it with, that's like their baseline level of success. That's what they expect. Now that too. I'll say it for the 10th time on this podcast, that's progress. Compare that, compare Levittown and dying on the job to that today. That's progress, but is a massive shift in expectations. And I think when we fall for the siren song of nostalgia, of wanting to go back, we should always keep that in mind that the definition of a good life has changed substantially and that we might be surprised and shocked in a bad way if we are constantly yearning to go back and we actually take a step back. Because I think the fact is, if you and I had a time machine and we can go back to Levittown in 1958, let's say, and we stepped off that time machine, we would instantly see two things. One is, I think, yes, people were happy. They were pretty satisfied. They couldn't believe that they were living in this utopia. That would be our first realization. The second realization is I think we would look around and say, that's the house you live in. That's where you live. That tiny little thing. That's your house. That's your utopia. I think a lot of us would say that. Now, I know that could be a touchy point. It's different for everybody. Maybe it's actually good. This was unintentional that I started this podcast with the experimental surgery and these people who can see new colors because all of us, me included, everybody has that in their own world. When we're trying to make sense of the world and defining what a good life is and taking stock of how other people live, how we live, and our expectations, everybody is a little blind to what others are going through. But more importantly, I think it's easy to become blind to what we ourselves used to be in the past, the lives that we used to live, the definition of success that we used to have. That's true in your individual life and it's true for society as a whole. That's it for this episode. Thanks again for listening and we'll see you next time. Limu Gay Moo and Doug Limu and I always tell you to customize your car insurance and save hundreds with Liberty Mutual. But now we want you to feel it. Cue the emu music. Limu Save yourself money today. Increase your wealth. Customize and save. We see that may have been too much feeling. Only pay for what you need@libertymutual.com Liberty Liberty Liberty Liberty Savings Very underwritten by Liberty Mutual Insurance Company affiliates excludes Massachusetts.
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