The Psychology of Money (1)

Timeless Lessons on Wealth, Greed, and Happiness

By Morgan Housel

Introduction

Two topics impact everyone, whether you are interested in them or not: health and money
We think about and are taught about money in ways that are too much like physics (with rules and laws) and not enough like psychology (with emotions and nuance)
“History never repeats itself; man always does.”

No One’s Crazy

Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works
The challenge for us is that no amount of studying or open-mindedness can genuinely recreate the power of fear and uncertainty
Few people make financial decisions purely with a spreadsheet. They make them at the dinner table, or in a company meeting. Places where personal history, your won unique view of the world, ego, pride, marketing, and odd incentives are scrambled together into a narrative that works for you.

Luck & Risk

Nothing is as good or bad as it seems
“The customer is always right” and “customers don’t know what they want” are both accepted business wisdom. The line between “inspiringly bold” and “foolishly reckless” can be a millimeter thick and only visible with hindsight. Risk and luck are doppelgängers.
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.
- Studying a specific person can be dangerous because we tend to study extreme examples - the billionaires, the CEOs, or the massive failures that dominate the news - and extreme examples are often the least applicable to other situations, given their complexity. The more extreme the outcome, the less likely you can apply its lessons to your own life, because the more likely the outcome was influenced by extreme ends of luck or risk. You’ll get closer to actionable takeaways by looking for broad patterns of success and failure.
“Success is a lousy teacher. It seduces smart people into thinking they can’t lose” - Bill Gates

Never Enough