The Psychology of Money - Morgan Housel
Notes:
Highlights
Page: 55
Having a strong sense of controlling oneās life is a more dependable predictor of positive feelings of wellbeing than any of the objective conditions of life we have considered.
Page: 59
If the operating equipment of the 21st century is a portable device, this means the modern factory is not a place at all. It is the day itself. The computer age has liberated the tools of productivity from the office. Most knowledge workers, whose laptops and smartphones are portable all-purpose media-making machines, can theoretically be as productive at 2 p.m. in the main office as at 2 a.m. in a Tokyo WeWork or at midnight on the couch.Ā²ā¹
Page: 60
What they did value were things like quality friendships, being part of something bigger than themselves, and spending quality, unstructured time with their children. āYour kids donāt want your money (or what your money buys) anywhere near as much as they
Page: 69
Savings without a spending goal gives you options and flexibility, the ability to wait and the opportunity to pounce. It gives you time to think. It lets you change course on your own terms.
Page: 82
Whenever we are surprised by something, even if we admit that we made a mistake, we say, āOh Iāll never make that mistake again.ā But, in fact, what you should learn when you make a mistake because you did not anticipate something is that the world is difficult to anticipate. Thatās the correct lesson to learn from surprises: that the world is surprising.
Page: 130
I have had several occasions to ask founders and participants in innovative start-ups a question: To what extent will the outcome of your effort depend on what you do in your firm? This is evidently an easy question; the answer comes quickly and it has never been less than 80%. Even when they are not sure they will succeed, these bold people think their fate is almost entirely in their own hands.
Page: 133
If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon. Time is the most powerful force in investing. It makes little things grow big and big mistakes fade away. It canāt neutralize luck and risk, but it pushes results closer towards what people deserve.
Page: 133
itās never as good or as bad as it looks. The world is big and complex. Luck and risk are both real and hard to identify. Do so when
Page: 133
Become OK with a lot of things going wrong. You can be wrong half the time and still make a fortune, because a small minority of things account for the majority of outcomes.
Page: 134
Use money to gain control over your time, because not having control of your time is such a powerful and universal drag on
Page: 134
happiness. The ability to do what you want, when you want, with who you want, for as long as you want to, pays the highest dividend that exists in finance.
Page: 134
Save. Just save. You donāt need a specific reason to save. Itās great to save for a car, or a downpayment, or a medical emergency. But saving for things that are impossible to predict or define is one of the best reasons to save. Everyoneās life is a continuous chain of surprises. Savings that arenāt earmarked for anything in particular is a hedge against lifeās inevitable ability to surprise the hell out of you at the worst possible moment.
Page: 135
Worship room for error. A gap between what could happen in the future and what you need to happen in the future in order to do well is what gives you endurance, and endurance is what makes compounding magic over time. Room for error often looks like a conservative hedge, but if it keeps you in the game it can pay for itself many times over.
Page: 135
You should like risk because it pays off over time. But you should be paranoid of ruinous risk because it prevents you from taking future risks that will pay off over time.
Page: 137
Being able to wake up one morning and change what youāre doing, on your own terms, whenever youāre ready, seems like the grandmother of all financial goals. Independence, to me, doesnāt mean youāll 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.
Page: 138
We own our house without a mortgage, which is the worst financial decision weāve ever made but the best money decision weāve ever made. Mortgage interest rates were absurdly low when we bought our house. Any rational advisor would recommend taking advantage of cheap money and investing extra savings in higher-return assets, like stocks. But our goal isnāt to be coldly rational; just psychologically reasonable.
Page: 140
I know people who think itās insane to try to beat the market but encourage their kids to reach for the stars and try to become professional athletes. To each their own. Life is about playing the odds, and we all think about odds a little differently.
Page: 141
One of my deeply held investing beliefs is that there is little correlation between investment effort and investment results. The reason is because the world is driven by tailsāa few variables account for the majority of returns. No matter how hard you try at investing you wonāt do well if you miss the two or three things that move the needle in your strategy.