The Psychology of Money by Morgan Housel
⭐️⭐️⭐️
A better name for this book might be something like: “Collecting wealth and keeping it too: Surviving financially in a world of ups and downs”
Decent book without novel insight. Can be summarized with a few points, some picked from other reviews:
- Index fund investing and compounding over time often outperform professional traders, who often do just about as well as random.
- Conflicting business advice exists due to survivorship bias, emphasizing the need to be cautious of anecdotal evidence. (Ex: “The customer doesn’t know what they want” and “The customer is always right”)
- Luck plays a significant role in success stories, and emulating their strategies likely won’t guarantee similar results and in fact taking the same bets as successful people like Bill Gates did might be bad on average.
- Spending money to signal wealth for respect and admiration is futile and can lead to financial strain. Don’t evaluate your lifestyle by those around you, doing so keeps moving the goal post.
- Financial independence and flexibility should be the ultimate goal, as it leads to greater happiness. Become financially invulnerable.
- Preparing for the worst is crucial, as unexpected events, crashes, and other emergencies can happen at any time. “Things that have never happened before happen all the time.” Really successful people prepare for the worst (Ex: Bill Gates saying he wanted to still be able to pay all employees for at least a year in case things went to shit)
- Investment strategies should align with personal goals and risk tolerance.
- Getting money and keeping money require different and often conflicting skillsets and mindsets. (Ie: action, taking risks, being positive vs inaction, playing it safe, being fearful)
- Pessimism can be convincing but not always accurate.
The book’s title may be slightly misleading, as it focuses more on the lessons learned from those who have gained and lost money. Additionally, the content is primarily U.S.-centric, which may limit its relevance to a global audience.
Note: Listened to this as an audiobook. Likely missed some points but nothing crucial.