The Psychology of Money – by Morgan Housel
Recommendation: 8/10. Date read: 10/27/20.
Wonderful read from one of the best writers in personal finance and investing. Housel breaks the book up into 19 short stories on how we think about money and the role it plays in our lives. He hits on the usual themes of wealth, greed, and happiness. And he dives deeper into exploring the importance of perspective, the role of luck, how we define success, coming to terms with the fact that wealth is what’s hidden, and why it’s important to embrace the reality of change as we look ahead in our lives.
See my notes below or Amazon for details and reviews.
My Notes:
Perspective:
“We all think we know how the world works. But we’ve all only experienced a tiny sliver of it.” MH
Role of luck:
“But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.” MH
Success:
“Success is a lousy teacher. It seduces smart people into thinking they can’t lose.” Bill Gates
In victory learn when to stop: “The hardest financial skill is getting the goalpost to stop moving.” MH
Align yourself with situations which have high upside, limited downside and even if you’re wrong half the time, you can still make a fortune: “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” George Soros
“If respect and admiration are your goal, be careful how you seek it. Humility, kindness, and empathy will bring you far more respect than horsepower ever will.” MH
Wealth is hidden:
“Someone driving a $100,000 car might be wealthy. But the only data point you have about their wealth is that they have $100,00 less than they did before they bought the car.” MH
“The world is filled with people who look modest but are actually wealthy and people who look rich who live at the razor’s edge of insolvency.” MH
“Savings can be created by spending less. You can spend less if you desire less. And you will desire less if you care less about what others think of you.” MH
Accept the reality of change:
Humans change their minds. If you don’t allow yourself to grow, you’re attempting to stay frozen in time.
“Some of the most miserable workers I’ve met are people who stay loyal to a career only because it’s the field they picked when deciding on a college major at age 18. When you accept the End of History Illusion, you realize that the odds of picking a job when you’re not old enough to drink that you will still enjoy when you’re old enough to qualify for Social Security are low.” MH
The End of History Illusion: tendency for people to be aware of how much they’ve changed in past but underestimate how much they will change (personalities, desires, goals) in the future.
Goal is independence:
“I did not intend to get rich. I just wanted to get independent.” Charlie Munger