Key insights from
The Psychology of Money
Audio available
16 minute read
Published Sep 8, 2020
What you'll learn
Morgan Housel is a partner at the venture capital firm Collaborative Fund and a former columnist for The Motley Fool and The Wall Street Journal; he has twice won the Best in Business Award from the Society of American Business Editors and Writers. In The Psychology of Money, Morgan Housel argues that doing well with money has less to do with intelligence or technical skill than with behavior, and behavior is notoriously hard to teach. Through a series of short, story-driven lessons about janitors and executives, lucky breaks and sudden ruin, he shows how ego, envy, fear, and personal history shape our financial choices, and why patience, humility, and a clear sense of “enough” matter more than any formula.
Key insights
- 1 Our money decisions are shaped by the slice of history we lived through, so choices that look foolish to others make sense to us.
- 2 Luck and risk are two sides of the same coin, so no financial outcome is ever as good or as bad as it first appears.
- 3 The hardest financial skill is knowing when you have enough, because a moving goalpost can lead people to risk everything they have.
- 4 Wealth is built mostly by time, so earning good returns steadily for a very long period beats chasing the highest possible returns.
- 5 Getting wealthy and staying wealthy require different skills, and staying wealthy depends above all on surviving long enough for compounding to work.
- 6 A small number of rare events drive most outcomes, so you can be wrong most of the time and still do extremely well.
- 7 The greatest value money can offer is control over your own time, which brings more lasting happiness than anything you can buy.
- 8 True wealth is the money you don’t spend, so the flashy possessions we notice reveal little about how rich someone actually is.
- 9 Saving is the part of building wealth we control most, and it pays off even without a specific goal or a high income.
- 10 Aim to be reasonable rather than perfectly rational, and leave room for error, because the future, and even your own goals, will surprise you.
- 11 Volatility is the price of long-term returns, so treat it as a fee rather than a fine, and play only your own game.
- 12 Pessimism sounds smarter and appealing stories feel truer than they are, but humble long-term optimism usually wins.
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