Author Kevin Kelly Shares Some "Excellent Advice for Living"

Kevin Kelly is the founding executive editor of Wired magazine and the author of Excellent Advice for Living: Wisdom I Wish I'd Known Earlier.

Motley Fool co-founder and Chief Rule Breaker David Gardner caught up with Kelly to discuss:

• The power of compounding in your finances and personal relationships. 
• ChatGPT and the origins of hacking. 
• Why investors should be unafraid of losing. 

Today's conversation comes from a recent episode of David's weekly podcast, Rule Breaker Investing.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on May 07, 2023.

Kevin Kelly: Imagine things getting worse. It's easy. It's cheap. It's very cheap to imagine how things go wrong because that is the probable destination. That's the s-entropy. Entropy is most things are going to fail. Most things are going to break. It's easy to imagine them breaking. It's much harder to imagine how things work well when we have this problem right now with AI. It's far easier to imagine all the ways that it doesn't work and harder to imagine how it works. 

Mary Long: I'm Mary Long, and that's Kevin Kelly, founding editor of Wired Magazine and author of the new book, Excellent Advice for Living. Motley Fool Co-Founder David Gardner caught up with Kelly to discuss a key financial concept that applies to all aspects of life, the imagination required of optimists and how Amazon won through optionality. This is an excerpt from a full interview which you can listen to on the Rule Breaker Investing podcast. We'll put a link at the show notes for you. 

David Gardner: I asked you ahead of time if you would consent to me randomizing different pages of your book and then just picking my favorite quote off that page and doing the interview that way, and you said you would allow us to go where our whimsy or, in this case, my dice take us, and so that's where we're going to start. Kevin, I've lined up about eight quotes here, and this was randomly chosen. In fact, the order we'll be talking through these was itself randomly chosen. I guess a less lazy interviewer would have actually sculpted everything. But this is how I roll, and I think you're really good with that too. So let's start with the first quote For each of these, I'm just going to spot you up, and there might be a story or an anecdote that you have in mind or simply additional thoughts you have for each. I love that the first one I randomized was from page 85, and this is what you write on page 85. All the greatest prizes in life, in wealth, relationships, or knowledge, come from the magic of compounding interest by amplifying small, steady gains. All you need for abundance is to keep adding 1% more than you subtract on a regular basis. Now I literally randomized that first [laughs] but that couldn't be a better Motley Fool setup, I don't think. 

Kevin Kelly: Are you sure that you weren't cheating there, because that seems all so familiar to me. Yes, it's true. My point is that it's not only true for money, for those little magic coins. But that it's actually true for relationships. It's actually true for skills. It's true for civilization as a whole. If we as a civilized society can create 1% more than we destroy, then we can make civilization that way. In fact, that's all civilization is. There's just plenty of destruction and problems, but we create a few percent more than we destroy, and that compounded over time. It gives us our society today. So it is absolutely true for finance, but it's also true for other things like relationships. If you can love [laughs] a few percent more than when you're being nasty or mean, you can actually compound that over time and accumulate something good. So there is, as Einstein says, this marvelous force in the universe, but it does apply even beyond the little stacks of bills.

David Gardner: Of course, we do spend a fair amount of time at The Motley Fool thinking about the compounding effect of money and interest, as you say, and certainly that is, in some ways, an easy read because it's numbers. It's numerical. You can actually play it out forward in a spreadsheet. You can quantify it, enumerate it. Whereas, when you start saying relationships, that takes us off into a right-brain qualitative assessment. I really appreciate that, in your mind and I think mine too, I find this persuasive. Everything's compounding. Everything is compounded up to this moment, for better and for ill, that you and I could share in this discussion, so everything is compounding. What we do as parents compounds. I love that you described earlier your approach to parenting, where it sounds like you really didn't offer much guidance. You just tried to do it through action. Sometimes it compounds in ways we don't appreciate or know for better or for ill. I also have adult children who sometimes say, dad, you said this when I was this age. I was, like, I did? l have no recollection.

Kevin Kelly: [laughs]

David Gardner: Again, for better or for worse.

Kevin Kelly: Listening? 

David Gardner: Everything is compounding, but certainly from a Motley Fool standpoint, I just love that I hit this one first, and this won't be the only one because, Kevin, there are other aspects of thinking about finances in life which is not the focus of this interview, but it's clearly part of your focus in life and part of your knowledge base and your interests. Presumably, you've been a saver through your life. I hope you own some stock, or you own some shares of the things that you created.

Kevin Kelly: Absolutely. Another piece of advice. I don't know if you get too, but again, l was very practical. Actually, l don't even know if it was in the book. I have a granddaughter. It was a funny joke, but as I was saying, forget crypto, kiddo. You invest in index stocks and mutual funds.

David Gardner: [laughs]

Kevin Kelly: I have been, and I've been a buy-and-hold guy through everything thick and thin, and I remember back in the '80s, I guess it was, it must have been in the '80s, there was a curmudgeonly guy at [inaudible] catalog, and there was the first time in my recollection where the stocks are going down. I'm not sure what the event was.

David Gardner: Maybe it was Black Monday, 1987, who knows?

Kevin Kelly: Maybe was '87, and he was saying, oh yeah, sell whatever it was. I say no, bye-bye. If I had cash, l'd be buying right now.

David Gardner: [laughs]

Kevin Kelly: But I have been and we have been very fortunate in that way too. Again, in index funds, it's primarily what I do. I don't have time to do the research that you need to be good at this. I'm a lazy investor, and I've been served well by hanging in. It worked.

David Gardner: Compounding works, and certainly I prefer investing directly in individual stocks as I'm sure you know we love here at the Fool, but right there with our first book, The Motley Fool Investment Guide, we started by saying everybody could or should just index, and for most people, that's what makes the most sense. At that time anyway, there is so much marketing of managed mutual funds that index funds looked even better because they were just so much cheaper, and the way to really compound was to not be paying so much in fees. Excellent Advice for Living, page 54, and I quote, "Over the long term, the future is decided by optimists. To be an optimist, you don't have to ignore the multitude of problems we create, you just have to imagine how much our ability to solve problems improves."

Kevin Kelly: Yes. I have become deliberately more optimistic as I got older. I think the optimism I'm talking about is a choice and less of a sunny disposition. It's more of a choice, where it's an active imagination primarily to imagine things working out good and well, things improving over time, because to imagine things getting worse is easy. It's cheap. It's very cheap to imagine how things go wrong because that is the probable destination. That's the s-entropy. Entropy is most things are going to fail. Most things are going to break. It's easy to imagine them breaking. It's much harder to imagine how things work well, and we have this problem right now with AI. It's far easier to imagine all the ways that it doesn't work and harder to imagine how it works. But if we can, then we're rewarded by becoming more likely that it will happen, and so more likely that the good version will happen. Overall, it isn't that we are ignoring the problems. It's just that we're imagining and seeing how, in fact, our ability to get better and how future generations can improve things so that we are actually more successful at solving problems. We will no doubt make new problems beyond what we have right now, and the only reason why we don't despair is because we will also continue to make solutions and the ability to solve those problems even faster. That's that 1% difference. That difference may only be 1%, by the way. Remember what I'm saying is that there may only be a 1% difference in our ability to solve the problem versus having the problem, but that 1% is all we need. That's my protopian vision.

David Gardner: I was going to rock that because I remember you and I talked about that, and certainly you wrote about it in The Inevitable. We're not living in a utopia. I think we can all agree on that.

Kevin Kelly: [laughs]

David Gardner: I'm pretty sure we're not living in a dystopia. I think things would be a lot worse. But what you have said for many years now, and you just alluded to it again, is we're living in what you call a protopia, which by my layman's definition is basically things are getting infinitesimally better each day. Maybe less than 1%, but every day. Maybe some days, they get a little bit worse that day, but invisibly so.

Kevin Kelly: That's on a global average because there's obviously parts of the world that are going backwards. But as a global average, on averages in [inaudible] amount with local disruptions and local setbacks, just as you might have your own, anybody would have an illness. There was a doctor that I worked with, an author. He said, if you do a really honest appraisal of your body everyday, everyday you're going to find some little injury, some little cut, some little boil, something. There's not a single day when your body is perfect, and that is just the cost of living, so to speak. It's the same thing with our global civilization, that there are going to be always illnesses and cuts and injuries but that we overcome them over time. That by the way is another bit of advice. I believe that optimism can be learned, and we know from studies that this is true. One of the main skills, if I would have to say, it's actually a skill. Optimism is a skill. One of the skills of optimism is that you understand that setbacks are temporary. They're not your identity. The pessimist believes that setbacks is their identity, that it's inevitable, that they're faded to it. We can't escape it. But an optimist views setback as temporary, something that can be overcome.

David Gardner: That's a great definition. You've already said optimism is a choice. That's what you said initially. Optimism is a skill. It can be learned. It reminds me of a friend of mine who's a world-class executive coach, Heath Dieckert. Heath often, with his clients, will say, hey, what's the best you can see for yourself?

Kevin Kelly: [laughs] Great question.

David Gardner: This summer or coming out of your book tour or the rest of your life and that knee-jerk question forces people to articulate in their minds what might be the best. Guess what, you're much more likely to get near there if you've thought about it than just locking your way into the business. I hear a very similar thought. There's one other friend of mine, I want to mention Madison Perry, who when ChatGPT started to make its big pop culture splash starting late last year, Madison who tweets out sometimes on Twitter, said something to the effect of, what does it say about us? This is my question for you. This is not merely rhetorical, Kevin. I'll ask you directly. What does it say about us, humans that so many people are just trying to break ChatGPT and mess with it and make it say stupid stuff or show its shortcomings? I don't think it's necessarily being cynical. This is a positive inquiry. What does that say about humans?

Kevin Kelly: Actually, I'm not bothered by that, because that to me is much more in suggestion of what the origins of the word hacking came from. This is what the hackers were doing.

David Gardner: Love it.

Kevin Kelly: Back in the old days, MIT, they were hacking a system. They were trying to jailbreak it. They were trying to see what would work and not work as a means of exploring. That's what a lot of people who are hacking the ChatGPT are going, trying to jailbreak it, is their probing the limits of it, which I think is a very natural fun thing to do. I don't think it's that malicious. There were some guy who was asking ChatGPT about how to eliminate humans on Earth. It wasn't a serious intention to try and do that. It was more saying, what would it say? So I think at this level that we're talking about right now, it's a form of hacking. It's an exploration. It's testing the limits. It's quality control in some senses that the consumers are doing the quality controls, like, where does this break, which is what software people do all the time. There are people who are hired and that's their job is to see if they can break it, and that's what was happening here.

David Gardner: Number 6 comes from Page 132. Number 6 in our interview, this is the sixth that Kevin and I are doing of his stuff. "We tend to overestimate what we can do in a day and underestimate what we can achieve in a decade. Miraculous things can be accomplished. If you'd give it 10 years, a long game will compound small gains that will be able to overcome even big mistakes." I'll put an end quote right there, but I want to add, first of all, this is the second one that speaks again to compounding and small things growing, and you know I'm a sucker for these themes. But what I like about this one is you're also pointing out one of the things I've tried to point out about stock market investing in my own experience, both acting on my own advice and what I've provided to others and that is, losers are overrated. We make fearful, too fearful, losing in life. The most you can ever lose, and I've done this only once or twice, is 100 %, unless you're doing some crazy silly thing.

Kevin Kelly: [laughs]

David Gardner: But the most you can make is infinite, and if you do the math, losing is so overrated and not worthy of the fear people accord it. To quote you again, "A long game will compound small gains that will be able to overcome even," and I would even say in quotes, "big," but you mean, seriously, mistakes or losses, exactly.

Kevin Kelly: Again, there's a direct obvious financial vector in this, but this also same advice applies to other things. Again, if you are, let's say, for instance, one of the values of doing art, say, on a regular basis is that you can make some bombs. You can make stuff that's no good. You could be in a streak where you're, just, nothing is very good. But if you do it everyday, you're compounding your skills and that will overcome even the most horrific mistake that you might make or failure, and so this idea of doing things on a regular basis, small things on a regular basis, is part of what the advice is about. That could apply to exercise. So if you're doing exercise everyday, and then you get hurt, it's much easier to overcome that because you have built in this compounding ability to return to the gym or whatever it is and go back.

David Gardner: Yeah, being fit, being stronger. Yes.

Kevin Kelly: Yeah.

David Gardner: Really appreciate that. Have you ever read or maybe met James Clear or his book, Atomic Habits?

Kevin Kelly: I am, of course, very aware of the book. I'm a big fan of it. I have not actually met James, but I applaud his basic thesis, as in ideas about making things as easy as possible, as habitual as possible, and I think that has been an influence on my own habit-making. Of course, there's good habits and bad habits too. But going back to the investment thing, yes, that's very much true, and I think that advice is really good for entrepreneurs and people who are trying to do something new and difficult. That is the same thing that if you can track your progress in a way that it's incrementally compounding where you do things, and you're not waiting for a big payoff. You're not hoping for the thing to come in all at once, kind of get rich fast, but you're getting rich slowly. Who wants to get rich slowly? Everybody should be because that's really the only way you're going to get there.

David Gardner: [laughs]

Kevin Kelly: If you do this compounding, then again, when you have the disaster strengths, when the lights go out, whatever it is, when you had your near-death experience, which we will have if you're an entrepreneur, then you can overcome it much easier because you have built in this compounding slogans you've been gaining all along. So you go back 10 feet, but you've been incrementally gaining a foot each day.

David Gardner: Resilience, obviously the word grit in recent years has been used to describe this, and the reason it's popular is because it's important in accounts. Two more. Number 7, page 202, this one you won't even find fast enough because it's so short I'll be done before you get there, Kevin.

Kevin Kelly: [laughs]

David Gardner: "Go with the option that opens up yet more options."

Kevin Kelly: Yes. This is, actually, maybe a more of a theme of the book, in general. There's a couple of themes in the book. One is about the generous nature of the universe, and the second one is this idea of opening up options, which is part of our optimism is about. But the idea is that, in my view, when I think about technology which we're taught here near about, again, I think most of the problems that we have today in our lives and in the world have been created by the technologies of the past, and most of the technologies of tomorrow will be caused by our technologies that we're making today. The most critics of technology would probably agree with it. But where I diverge from the critics is I believe that the solutions to those problems is not less technology, but more and better technology, and those new and better technologies themselves are not immune because they will produce new and better problems. You might wonder, what's gained by all this running around technology making new problem, solving new problems, making new problems. There's one fundamental thing, which is that we get options, we get choices, we get possibilities. That's the difference between living in a city and living in a beautiful village in the Himalayas, where they eat organic food and stuff. It's that you take the one-way bus into the grimy, greedy city, and you have choices about what you can do. You don't have to be a farmer. You don't have to be a farmer's wife. So that's what technology gives us, and what civilization's giving us is increased choices. So what we want in our individual lives, and society-wise, is that when we make choices, we want to favor those choices that will unleash more options. We don't want to close down options. We always want to make choices where we're increasing our options over time.

David Gardner: Love it.

Kevin Kelly: Each time we can make a choice, we are going to close off options. There is inherently a closing off of options, but we want to be opening up more than we close off. So when I look at decisions I have to make, I'm evaluating it on what does the option scape look like? Does it increase my choices and possibilities, even though that my close off others, or is it going in the direction where I'm restricting the number of options that I have? I think that thinking in terms of the option escape is a skill that we're going to increasingly come to rely on as we have more and more choices and possibilities before us.

David Gardner: I love your point about the problems of today are better problems in some ways. They're also more complex problems, and therefore we need better technology to solve them. Some of the undeniable human progress, yes, things really were worse back then, and yes, things really are better today, and only we can't see it day-to-day in a protopia. But when we look a century backward, we see that many of the top causes of death of our fellow humans a century ago are diseases that have been eradicated. It's truly remarkable. We take for granted too often, probably every day, how much has been gained, how much safer this world is, even though we're all aware of problems with guns and other threats in our society today. But wow. So some of the problems, they truly are better problems in the sense that they're not as sad and tragic, what we're actually having to encounter as something like smallpox.

Kevin Kelly: To me, there's nothing that makes me more optimistic than reading history. During COVID, we read up and watched many lectures on what actually happened during the Black Death, during the plague. Oh my gosh. It was just horrific in so many ways. It was very rapid, with entire families being wiped out except for one person. It was really phenomenal. Of course, they didn't even have the highest level of living standards to begin with. But this was just really plunged them to the depths. If you read anything about how slavery was endemic for most cultures around the world, it was really bad. So I always liked the Obama challenge, which is, you're going to be born somewhere in the world with no control over what rank you are or what gender you are. It's like what year do you want to be born in.  It's like you do not want to be born in the past.

David Gardner: [laughs]

Kevin Kelly: We do not want to be born in the past where you're randomly going to be born somewhere in the world, and most people had it really tough, and particularly the women. So you can see progress in that way, more than just longevity, just control of your time, pain, all kinds of things.

David Gardner: Before we go to our final quote, I just want to underline one quick investment point about your go with the option that opens up yet more options. One of the words that I've used regularly over the years for my own signature style of investing is optionality. I know, you know what that means.

Kevin Kelly: [laughs]

David Gardner: I think a lot of people do too, but I don't think enough that the world understands the power of companies. Alphabet is a great example, and Amazon is a great example, and many. ironically perhaps, of the best stocks of our time, the stocks that you want to have had in your portfolio, are companies that exhibit extreme optionality. It does seem with as they go with their option, whatever their initial business model is, it opens up more options to your point, Kevin. So I want to make sure there's a real clear parallel in my fellow Fools' minds here that what Kevin is saying about go with the option, it opens up yet more options, is awesome advice for entrepreneurs and for investors buying into certain stocks over certain others. So I'm a huge optionality buff.

Kevin Kelly: I haven't heard your definition. Could you summarize that to me in just one sentence. You hinted at it, but optionality, meaning that companies that are increasing the options in which they can do business?

David Gardner: So companies who's very nature is such that they have increasing numbers of options with their widget or platform, or cultural or innovative idea. It was once pointed out to me by Andy Cross, our Chief Investment Officer here at the Fool. There are actually a lot of differences between [laughs] me and Buffett that don't actually make me look very good, but he said the difference between you is that you are looking for companies with infinite possible futures, and Buffett is looking for companies with one definite future. You think about say it's candies or Geico insurance. I loved AOL back in the day, my first 100-bagger stock because I saw it could be so much more or Amazon started. You remember this, Kevin, Earth's biggest bookseller. Of course, you do so.

Kevin Kelly: I was one of the very first customers because Jeff knew the [inaudible] catalog, and we were book reviewers, invited Stuart [inaudible], and I actually have a history of my first purchase in 1995. But I have to say, I did not see that optionality that Jeff saw because I was imagining it as bookselling and anybody who saw beyond that had a bigger vision than I had.

David Gardner: If I may say, I don't even think Jeff saw what Jeff would see because that's part of the nature of this, is that as you take more steps toward the lighthouse, you still don't exactly know where it is, but you know, that's a little brighter than where I just stepped from. As you get closer, these are the words of Shirzad Chamine, the author of Positive Intelligence. I've always loved this metaphor. He says, "You'll never actually get to the lighthouse, but there's more and more light." So I do think that Jeff Bezos did not know Amazon Web Services in 1995.

Kevin Kelly: No.

David Gardner: But who was positioned culturally with the ideas to actually take us there and get us there, and where will these entrepreneurs and these visionaries take us next? You're one of them, Kevin. So that's why I'm glad to be hanging out with you.

Kevin Kelly: I like that term, and I would expand it beyond even investment and even personal optionality and say that what we want to have as a civilization is optionality.

David Gardner: Love that.

Kevin Kelly: We want to increase the optionality so that we, as a civilization, are opening up options all the time, taking choices where we increase options rather than decrease them. That may be something to keep in mind, headed into the current situation with China and Russia, is to try and keep our options expanding.

Mary Long: As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy stocks based solely on what you hear. I'm Mary Long. Thanks for listening, and we'll see you tomorrow.