The Psychology of Money
@morganhousel has described the different perspectives on how we think about money with unmatched simplicity.
Timeless wisdom, great practical advice throughout and definitely, one of the most original finance books in years.
10 lessons from the book🧵
@morganhousel has described the different perspectives on how we think about money with unmatched simplicity.
Timeless wisdom, great practical advice throughout and definitely, one of the most original finance books in years.
10 lessons from the book🧵
1) Freedom:
The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want today.”
Controlling your time is the highest dividend money pays.
The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want today.”
Controlling your time is the highest dividend money pays.
2) Confounding Compounding:
Good investing is about earning pretty good returns that you can stick with, and which can be repeated for the longest period of time.
That’s when compounding runs wild.
Good investing is about earning pretty good returns that you can stick with, and which can be repeated for the longest period of time.
That’s when compounding runs wild.
3) Survival Mindset:
Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.
A plan is only useful if it can survive reality. And a future filled with unknowns is everyone’s reality.
Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.
A plan is only useful if it can survive reality. And a future filled with unknowns is everyone’s reality.
4) Tails, You win:
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 money you lose when you’re wrong.
You can be wrong half the time and 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 money you lose when you’re wrong.
You can be wrong half the time and still make a fortune.
5) Tails drive everything:
Your success as an investor will be determined by how you respond to punctuated moments of terror, not years spent on cruise control.
A good definition of an investing genius is who can do the average things when all those around them are going crazy.
Your success as an investor will be determined by how you respond to punctuated moments of terror, not years spent on cruise control.
A good definition of an investing genius is who can do the average things when all those around them are going crazy.
6) Save Money:
Most importantly, the value of wealth is relative to what you need.
Learning to be happy with less money creates a gap between what you have and what you want.
Most importantly, the value of wealth is relative to what you need.
Learning to be happy with less money creates a gap between what you have and what you want.
7) Reasonable >> Rational
Aiming to be mostly reasonable works better than trying to be coldly rational.
Aiming to be mostly reasonable works better than trying to be coldly rational.
8) Surprise:
You’ll likely miss the outlier events that move the needle the most.
History can be a misleading guide to the future of the economy and stock market because it doesn’t account for structural changes that are relevant to today’s world.
You’ll likely miss the outlier events that move the needle the most.
History can be a misleading guide to the future of the economy and stock market because it doesn’t account for structural changes that are relevant to today’s world.
9) You & Me:
Beware taking financial cues from people playing a different game than you are.
The main thing is going out of your way to identify what game you’re playing.
Beware taking financial cues from people playing a different game than you are.
The main thing is going out of your way to identify what game you’re playing.
10) Luck & Risk:
Be careful who you praise and admire. Be careful who you look down upon and wish to avoid becoming.
Therefore, focus less on specific individuals and case studies and more on broad patterns.
Be careful who you praise and admire. Be careful who you look down upon and wish to avoid becoming.
Therefore, focus less on specific individuals and case studies and more on broad patterns.
Thank you for going through the thread. Follow me at @readswithravi for more book learning, reviews, and lessons. Teach or share with others what you learn, that's how we grow.
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