2022 Book Report #3 - The Psychology of Money (Morgan Housel)
3/12 — The Psychology of Money by Morgan Housel
"Timeless lessons on wealth, greed, and happiness"
Luck and Risk - Nothing is as good or as bad as it seems. Focus less on specific individuals and case studies and more on patterns.
Never Enough - Happiness is just results minus expectations. The ceiling of social comparison is so high that virtually no one will ever hit it.
Confounding Compounding - $81.5B of Warren Buffet’s $84.5B net worth came after his 65th birthday. Our minds are not built to handle such absurdities.
Getting Wealthy vs. Staying Wealthy - Good investing is not necessarily about making good decisions. It’s about consistently not screwing up. The ability to stick around for a long time, without wiping out or being forced to give up, is what makes the biggest difference
Tails, You Win You - can be wrong half the time and still make a fortune. The great art dealers operate like index funds. They bought everything they could. Perhaps 99% of work you buy has little value... But that doesn’t matter if the 1% is Picasso.
Freedom - Controlling your time is the highest dividend money pays. Having a strong sense of controlling one’s life is a more dependable predictor of positive feelings of wellbeing than any of the objective conditions of life we have considered.
If you work in marketing, your tool is your head - which never leaves you. You might be thinking about your project during your commute, as you’re making dinner, while you put your kids to sleep - and when you wake up stressed at three in the morning.
Wealth is What You Don’t See - Spending money to show people how much money you have is the fastest way to have less money. Rich is current income, wealth is hidden.
Save Money - The only factor you can control generates one of the only things that matters. How wonderful. Saving is a hedge against life’s inevitable ability to surprise the hell of you at the worst possible time.
Reasonable > Rational - Aiming to be mostly reasonable works better than trying to be coldly rational. A doctor’s goal is not just to cure disease; it’s to cure disease within the confines of what’s reasonable and tolerable to the patient.
Surprise - The world is difficult to anticipate; it’s surprising.
Room for Error - The most important part of every plan is planning on your plan not going according to plan. The ability do what you want, when you want, for as long as you want, has an infinite ROI. A good rule of thumb - everything that can break will eventually break.
When You’ll Believe Anything - In 2007, we told a story about the stability of housing prices and the ability of financial markets to accurately price risk. In 2009, we stopped believed that story. That’s the only thing that changed, but it made all the difference in world
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