Low Expectations

Elon Musk said he had lunch with Charlie Munger in 2009. Munger allegedly told the whole table all the ways Tesla would fail.

It “made me quite sad,” Musk tweeted last week. “But I told him I agreed with all those reasons & that we would probably die, but it was worth trying anyway.”

It’s both sad and inspiring.

It’s also, I think, more complicated than it looks. Munger was recently asked an unrelated question that adds a layer to Musk’s point.

Asked, “You seem extremely happy and content. What’s your secret to living a happy life?” 98-year-old 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.

I think these guys are making the same point. And it’s an 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 common denominator between both guys is the superpower of having low expectations.

That’s not intuitive, because low expectations make you think of a mopey pessimist who’s accomplished nothing.

But I want to convince you: it’s the opposite.

1. Tails, you win

Late last year Musk was asked about one of the hardest problems on SpaceX’s plate. Its massive Starship has to cut weight everywhere it can so that the cost of each launch becomes low enough to launch the things all day.

Step one was cutting the landing gear.

Rather than the rocket returning to Earth and landing on its own, the new design means it’ll come down with its bottom exposed, aiming itself at a giant tower on the ground. Just before hitting the ground, two enormous rods shoot out of the tower and grab the rocket like a parent catching a falling child.

It’s wild. Musk explained:

We’re talking about catching the largest flying object ever made on a giant tower with chopstick arms. It’s like Karate Kid with the fly, but much bigger.

He then laughed, and added the most important line: “This probably won’t work the first time.”

He says that often about his endeavors.

When a rocket failed to land five years ago, he said, “Didn’t expect this one to work, but next flight has a good chance.”

Talking about Starship’s challenges last month, he said “success is one of the possible outcomes.”

He tweeted two years ago:

To be frank, in the early days, I thought there was >90% chance that both SpaceX & Tesla would be worth $0. The press & aerospace / automotive industry at the time (correctly) agreed with me.

I don’t think any of that is casual irreverence or cocky risk-taking. Purposely low expectations is the only way to survive in a world that’s not kind enough to reward every ambitious person with success.

When people say, “higher risk equals higher return” they should actually be saying, “higher risk means I’ll probably earn lower returns most of the time but there’s a small chance I’ll earn very good returns that make up for it.”

That’s the distinguishing feature of higher risk: The greater prevalence of failure, not the smaller chance of success that has the potential to offset it.

The key part is that low expectations and accepting frequent losses increase the odds of sticking around long enough to eventually be right enough to make up for it, and then some.

And that applies to ordinary people, not just maniacs like Musk.

In a boring index fund of 500 stocks, fewer than 20 companies make up most of the returns in any given year. Sometimes it’s fewer than five companies. The rest – literally 80%+ of companies – range from OK to disastrous returns. So if you track every individual company, bring your pitifully low expectations. That’s how the world works.

2. Getting the goalpost to stop moving

President James Garfield died in 1881 because the best doctor in the country did not believe in germs, and probed a bullet wound with an ungloved finger, likely contributing to his fatal infection.

There are so many examples of the primitive lives the most privileged people lived in different eras it’s astounding.

Charlie Munger was born in 1924. The richest man in the world that year was John D. Rockefeller, whose net worth equaled about 3% of GDP, which would be something like $700 billion in today’s world.

Seven hundred billion dollars.


But make a short list of things that did not exist in Rockefeller’s day:

To say nothing of computers, iPhones, or Google Maps.

If you’re honest with yourself I don’t think you would trade Rockefeller’s $700 billion in the early 1900s for an average life in 2022.

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. It’s why “everything’s amazing and no one’s happy,” as Louis C.K. says.

The only way to counter that truth is going through life with purposely low expectations.

Don’t expect a lot of economic growth.

Don’t expect great investment returns.

Don’t expect a ton of innovation.

Don’t expect politics to improve.

Expect occasional catastrophes.

Be OK with things staying roughly the way they are right now, or worse. Because for most people the way things are right now is indistinguishable from magic relative to how things used to be.

Then any little improvements that happen to come along feel incredible. You appreciate them more. Low expectations don’t make you depressed – they do the opposite, making little gains feel amazing while bad news feels normal.

It’s not easy, because the knee-jerk way to set expectations is to anchor to what everyone else has right now. But imagine the tragedy of unbelievable progress throughout your life and enjoying none of it because you expected all of it.

My friend Brent has a theory about marriage: It only works when both people want to help their spouse while expecting nothing in return. If you both do that, you’re both pleasantly surprised.

It’s a good model for a lot of things.