Best review on THE PSYCHOLOGY OF MONEY Book 22

Morgan Housel is a partner at The Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal.

He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, winner of the New York Times Sidney Award, and a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism. He lives in Seattle with his wife and two kids

Timeless lessons on wealth, greed, and happiness doing well with money isn?t necessarily about what you know. It?s about how you behave. And behavior is hard to teach, even to really smart people. How to manage money, invest it, and make business decisions are typically considered to involve a lot of mathematical calculations, where data and formulae tell us exactly what to do. But in the real world, people don?t make financial decisions on a spreadsheet. They make them at the dinner table, or in a meeting room, where personal history, your unique view of the world, ego, pride, marketing, and odd incentives are scrambled together.

In the psychology of money, the author shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life?s most important matters.

Chapter 19 is the summary of the main ideas, but there are some exciting ideas to think about, and we may agree or disagree with them:

 1. “You are one person in a game with 7 billion other people and infinite moving parts”, so we significantly underestimate the role of luck and world complexity.

 2. “Saving is income minus ego,” so be careful with your ego spending!

 3 “Happiness results minus expectations,” so be careful with your expectations!

 3. “Individual wealth is what you don’t see, hidden,” so big houses, fancy cars, or Instagram photos are spends or debts of individuals, the visible part you see, not their wealth.

 4. “Customer is always right” and “customers don’t know what they want” both accepted business wisdom.

 5. Napoleon’s definition of a military genius was, “The man who can do the average thing when all those around him are going crazy.”

Main highlights of the Book

• Investment is not hard science. Any ordinary individual can be wealthy without financial education using behavioural skills.
• Both luck and risk is hard to measure. Financial success, to some extent, is motivated by fortune regardless of brilliance and endeavour.
• People with the best time management skills tend to be happier in life.
• The most important financial skill is stopping goal posts from moving ahead. It becomes dangerous if the ambitions of money, power, and prestige increase faster than satisfaction. One step moving forward makes the goal post push away the goalpost two steps ahead with the beginning of diabolical circles. A feeling of remaining behind is created despite significant achievements.
• The financial freedom plans should be clear. Never take the risk of compromise on Family, friends, character, and freedom for the greed of money.
• The wealth of Warren Buffet is not due to his being a great investor. His wealth is motivated by the many years of his investment. The secret of Warren Buffet is time and skill in investing. From his USD 84.5 billion net worth, 84.2 billion net worth was accumulated after investing for 49 years. Therefore we stand little chance to achieve that big unless investment starts early. 
• Earning money and retention capital are two different skills. To make good money, one needs to have the right actions, risks and be positive. Keeping the money is just the opposite skill. One has to play safe with fearfulness and not take unnecessary steps until Warren Buffet resides in the same old house he acquired right at his becoming stage of becoming a millionaire.
• Individuals make the right and wrong decisions. But how much money one makes when he is right and the money he losses, when he is wrong will decide his future wealth.
• The key to unhappy lives today is the loss of our personnel time controlled by the advancement of technology.
• Individual Possessing a big house, big car and vacations is not the wealth. The asset investment that has not been converted into homes, cars, and vacations is your real wealth.
• Social comparison is a problem. Comparison is the thief of all joy. Remember – there’s always a bigger fish.”
• Reduce your ego.
• Wait for the best opportunities.
• These can only happen if you save.
•  Compounding only works if you give it the time to grow
• Be reasonable rather than rational. Reasonable is more realistic.
• Having the ability to do what you want, when you want, is the ultimate form of wealth
• Don’t be tempted by those who flaunt wealth. Someone can seem prosperous, but it’s impossible to know at a glance.

• Every investment won’t be a winner. Learn to plan accordingly.
• Deal with market volatility. Accept and embrace it.
• Run your race.

Quotes from The Book (Best review on THE PSYCHOLOGY OF MONEY Book 22)

• “$81.5 Billion of Warren Buffet’s $84.5 billion net worth came after his 65th birthday. Our minds are not built to handle such absurdities.”
• “Getting rich is one thing. Staying rich is another”
• “We underestimate how normal it is for a lot of things to fail which causes us to overreact when they do.”
• “Controlling your time is the highest dividend money pays.”
• “No one is as impressed by your possessions as much as you are.”
• “Spending money to show people how much money you have is the fastest way to have less money.”
• “One of the most powerful ways to increase your wealth is not increasing your income. It is to increase your humility”
• “Commitment to your strategy during the lean years of the market is the financial variable that most correlates to your eventual outcome.”
• “History is the study of the change, ironically used as a map of the future.”
• “The most important part of a plan is to plan for the plan not going according to plan.”
• “We are bad forecasters of our future selves.”
• “Everything has a price, but not all prices appear on labels.”
• “Beware taking financial cues from people who are playing a different game than you are.”
• “Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you.”
• “The more you want something to be true, the more you’re likely to believe the story that overestimates the odds of it being true.”