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The Psychology of Money Book: Key Takeaways from a CEO

Some books should be required reading, and The Psychology of Money book by Morgan Housel is one of them.

When I worked at, I was surprised how many people didn’t know how to manage money. It’s super common, and it’s super avoidable.

A lot of people think it takes TONS of mental effort and number crunching and math.

It doesn’t. Not always.

A lot of it comes down to psychology. And that’s what Morgan wrote this whole book about. Mastering the psychology of money, so you can master your money and what it can do for your life.

Whether you’re balancing the checkbook at home, the balance sheet at work, or investing and growing your wealth—everyone can take away something valuable from The Psychology of Money.

These are my key takeaways.

They may not make sense outside the context of the book, so I encourage you to pick it up for yourself and give it a read.

P.S. I interviewed Morgan Housel in this video—check it out if you want to get his take on current financial market trends.

The Psychology of Money Book Key Takeaways

  • Ronald Read was patient; Richard Fuscone was greedy. That’s all it took to eclipse the massive education and experience gap between the two
  • There will never be a story of a janitor outperforming the world’s top nuclear engineers
  • 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
  • Lottery tickets. Americans spend more on them than movies, video games, music, sporting events, and books combined
  • Someone else’s failure is usually attributed to bad decisions, while your own failures are usually chalked up to the dark side of risk
  • Bill Gates once said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”
  • There is no reason to risk what you have and need for what you don’t have and don’t need.
  • Know when you have enough
  • It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time
  • The ability to stick around for a long time, without wiping out or being forced to give up, is what makes the biggest difference. This should be the cornerstone of your strategy, whether it’s in investing or your career or a business you own
  • “I’ve been banging away at this thing for 30 years. I think the simple math is, some projects work and some don’t. There’s no reason to belabor either one. Just get on to the next.” —Brad Pitt accepting a Screen Actors Guild Award
  • In 2018, Amazon drove 6% of the S&P 500’s returns. And Amazon’s growth is almost entirely due to Prime and Amazon Web Services, which itself are tail events in a company that has experimented with hundreds of products, from the Fire Phone to travel agencies
  • “If you remove just a few of Berkshire’s top investments, its long-term track record is pretty average.”
  • 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
  • What they did value were things like quality friendships, being part of something bigger than themselves, and spending quality, unstructured time with their children
  • The historical odds of making money in U.S. markets are 50/50 over one-day periods, 68% in one-year periods, 88% in 10-year periods, and (so far) 100% in 20-year periods
  • “The four most dangerous words in investing are, ‘it’s different this time.’”
  • An underpinning of psychology is that people are poor forecasters of their future selves
  • “Every job looks easy when you’re not the one doing it.”
  • When a commentator on CNBC says, “You should buy this stock,” keep in mind that they do not know who you are. Are you a teenager trading for fun? An elderly widow on a limited budget?
  • It’s hard to grasp that other investors have different goals than we do, because an anchor of psychology is not realizing that rational people can see the world through a different lens
  • Few 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
  • Another is that pessimists often extrapolate present trends without accounting for how markets adapt
  • Even after people caught on to the plane’s wonder, they underestimated it for years. First it was seen mainly as a military weapon. Then a rich person’s toy. Then, perhaps, used to transport a few people
  • Manage your money in a way that helps you sleep at night
  • If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon
  • Every investor should pick a strategy that has the highest odds of successfully meeting their goals

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