The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel. 

3/5 rating. 81 pages.

Book #2 of 2024. Read January 15, 2024.

This is a short book about why we make the decisions we do about money, and how we can make better ones.

I liked a lot of Morgan’s ideas in this book. One of the keystone points he continually comes back to is:

No one is crazy, money decisions make sense when they are made. It is only with all of the knowledge of today that we can look back and call them obviously bad.

The recommendations that Morgan makes for your future are:

– What decisions with your money will help you sleep at night?

– Save, for all eventualities.

– Build in room for error.

– The length of time you invest is the key contributor to wealth.

– Define the game you’re playing – you need to know your time horizon.

Below are some of the best quotes, and I think do a good job summing up the book as a whole. I thought it was really interesting and phenomenal advice, it just didn’t make me want to find out what was on the next page, so it only got a 3.

Quotes:

“The premise of this book is that doing well with money has a little to do with how smart you are and a lot to do with how you behave.”

“History never repeats itself; man always does.” – Voltaire

“But every financial decision a person makes, makes sense to them in that moment and checks the boxes they need to check. They tell themselves a story about what they’re doing and why they’re doing it, and that story has been shaped by their own unique experiences. Take a simple example: lottery tickets. Americans spend more on them than movies, video games, music, sporting events, and books combined.”

“The 401(k) – the backbone savings vehicle of American retirement – did not exist until 1978. The Roth IRA was not born until 1998.”

“After spending years around investors and business leaders I’ve come to realize that someone else’s failure is usually attributed to bad decisions, while your own failures are usually chalked up to the dark side of risk.”

“At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, ‘Yes, but I have something he will never have…enough.’”

“Good investing is not necessarily about making good decisions. It’s about consistently not screwing up.”

“A plan is only useful if it can survive reality. And a future filled with unknowns is everyone’s reality.”

“The most important driver of anything tied to money is the stories people tell themselves and the preferences they have for goods and services.”

“I just want to ensure I can remain standing long enough for my risks to pay off. You have to survive to succeed.”

“In fact, the most important part of every plan is planning on your plan not going according to plan.”

[F]ew things matter more with money than understanding your own time horizon and not being persuaded by the actions and behaviors of people playing different games than you are.”

“For reasons I have never understood, people like to hear that the world is going to hell.” – Historian Deirdre McCloskey

“Tell someone that everything will be great and they’re likely to either shrug you off or offer a skeptical eye. Tell someone they’re in danger and you have their undivided attention.”

“‘Every group of people I ask thinks the world is more frightening, more violent, and more hopeless – in short, more dramatic – than it really is,’ Hans Rosling wrote in his book, Factfulness.”

“There are many things in life that we think are true because we desperately want them to be true.”

“I did not intend to get rich. I just wanted to get independent.” – Charlie Munger

“Independence, to me, doesn’t mean you’ll stop working. It means you only do the work you like with people you like at the times you want for as long as you want.”

IG Link.