The Psychology of Money: 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. Money―investing, personal finance, and business decisions―is typically taught as a math-based field, where data and formulas 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 own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together.
In The Psychology of Money, award-winning author Morgan Housel 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 topics.
Table of contact:
Introduction: The Greatest Show On Earth
1. No One’s Crazy
2. Luck & Risk
3. Never Enough
4. Confounding Compounding
5. Getting Wealthy vs. Staying Wealthy
6. Tails, You Win
8. Man in the Car Paradox
9. Wealth is What You Don’t See
10. Save Money
11. Reasonable > Rational
13. Room for Error
14. You’ll Change
15. Nothing’s Free
16. You & Me
17. The Seduction of Pessimism
18. When You’ll Believe Anything
19. All Together Now
Postscript: A Brief History of Why the U.S. Consumer
Thinks the Way They Do
About the author:
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 Distinguished Business and Financial Journalism.
Reviews about the ebook:
- Karen Melk:
This book is perfect for someone who knows more than a little about the stock market, has made some individual stock market investing decisions they regret and want to do better going forward.
- Dr. Smoker:
There is just no end to books about money, finance, how rich famous people got rich and famous, and how you can become rich or at least wiser with money yourself. This is a saturated market for financial self-help-styled books. What makes this one different? In some ways, absolutely nothing, and in other ways it is unique.
The author does give cliche advice about being frugal and saving your money and not spending like a child on the latest and fanciest new toys. The author also gives no real insight into how any of the people he mentions in the book became rich. If you are looking for that kind of book, then do not buy this one. I also despised he only mentioned men in the book who were rich and well known and not a single woman. This is horrible for two reasons: A. Society has produced more wealthy women than ever before in the past; (2) Some of the men who got rich were able to use their gender privilege as leverage to get ahead in the corporate world. At least the author addressed some men of color and was not exclusive to white men bc, these days, there are more people of color with wealth than there were in the past. The author also does not do case studies of why some people hold on to their assets in their lifetime. He fails to even mention all families who pass on their assets for generations as well. He does not mention privilege or inherited wealth at all. The author has cliche commentary about people who had funds once and lost it all bc they spent childishly and did not prepare for an economic downturn.
The author also gives lackluster historical information about how economies change over time. I am a huge history buff and nothing he said was new to me or even particularly insightful.
I have long known that most people who drive luxury cars are not rich. Most of these people are wretched financial situations or they bought the car when the markets were good and had no foresight times would get rough one day soon and they would regret buying that car. However, the other does package and explain a trite concept in an interesting way. Also, there may be less sophisticated readers buying this book who never considered it before that the person they always envied with the expensive car was actually on the brink of bankruptcy. One of my favorite parts was the part about how when you see someone roll up in a fancy car, they had a mediocre success and spent half their paycheck on that car.
I give this book 4 stars and not less despite the annoyances in my cons section bc it is a good reminder that you can not be a fool with your gold. Esp. these days where there is no end to fools try to one-up each other with fancy cars and private schools they can not actually afford. The word for this on the street is “flossing”.
The book started off riveting at first and served as a cautionary tale but wow did it disappoint towards the end and wow was the sexism ever so apparent.
- Brian Portnoy:
The Psychology of Money is an important book. Housel’s easy writing style might give some the impression that this is a casual take on the intersection of psychology and finance, but what’s really going on here is a master class in storytelling. Through the lens of history and personal tales, the author teaches us the most profound insights on the psychology of money – what it means to us, how we spend and save and invest, how we connect who we are today to who we might be tomorrow. In the tradition of Charlie Munger, Howard Marks, and Richard Thaler, Housel forces us to think about the word “risk” from many perspectives, revealing that the tinny and narrow treatments of risk by traditional economists are insufficient to inform how we make decisions about the money. On top of it all, the book is short, in the best possible way. It’s a quick read with a big payoff.
- John J. Maxfield:
It’s no exaggeration to say that this is the most anticipated book in finance in 2020. People who’ve read Morgan Housel’s work through the years know that he is probably the most lucid and insightful writer in finance today. His writing has influenced anyone and everyone who’s paying attention in the world of finance.
This book shows why.
Each chapter is filled with stories about why we do silly things with money. They’re funny, thought-provoking, and told in the pure, minimalist style that Housel has helped to pioneer in financial literature. You learn a lot from this book AND enjoy reading it. Another reviewer called it an instant classic. I agree. It’s shelved in my library next to Peter Lynch’s books.
This book isn’t only written for investors; it’s also written for readers. It will entertain and, over time, enrich you.
- Drew Dickson:
Morgan has crafted an incredibly relevant, enjoyable, and helpful book about the interplay between money and emotion, and how we all are affected by both. He tells an important story about the stories we tell; offering Kipling-esque advice about imposters like luck and skill, winning and losing, and of course, triumph and disaster.
There is just no way you can finish this quick read and not be a better spouse, parent, or provider for it.
If you are 20, read this and embrace every bit of it. When you are over 50, you will be so glad you did.
If you are 30, read this and markedly improve your perspective on the what and why of success and failure, and how you can minimize regret.
If you are 40, read this and make the tweaks that you can, there is still plenty of time.
Even if you are over 50 (which I now am) read this, learn what you could have done better, what you still can do better, and then buy a copy for your 20-year-old (as I am doing right now).
- Gavin Mathews:
I’m in my mid-50s and just retired. While I have been a very successful investor over my 35 years of savings, I probably pushed a little too hard for gains I didn’t need, with the money that I did need. Reading this book will help me change a few of my overly aggressive investment strategies. It helped me recognize the most important lesson during your accumulation years. Knowing when you have “enough”.
- Jonathan Jackson:
The expectations from this book were sky-high. And, does it deliver. The key lessons on optimism and pessimism and long term aside – the two things that state with me:
1. Expectations change even slower than reality. Everyone sees the world they have seen before.
2. Everyone plays the game of investment differently. You need to define your game.
This is a fantastic book. It’s not a book about investments. It is a book about your mind, and mine and how it thinks about money, savings, expenditure, and investments. And, it is brilliant. Pick it up now.
- MCube Slade:
See guys this book is for those who have had a lot of Their skin in the game of the stock market and thought of creating wealth from it.
The first level of investor is the one who knows money can be made in the market but doesn’t know how and starts to trade without any knowledge.
The second level investor has made profit or loss on his capital and starts to find out where did he has gone wrong and starts learning about some basic concepts such as PE ratio.
The third level of an investor starts finding value in whatever the scrip he has been following and starts finding justification that it is costly or cheap and buy or sell them.
A fourth-level investor follows and checks if the price has gone up or not very often and loses faith if it doesn’t go up after he bought it, and if the price doesn’t go up he sells it and looks for another one. in a short span of months. Again goes back to the drawing board and finds what went wrong.
Then comes the whole talk of buffetology and starts to find companies like that and invest in them if he felt that it was cheap.
But everyone forgets that buffet is buffet because of his principles and patience which helped him in compounding for a very long time such as 70-80 years which very few do it. That’s when actually psychology matters and that’s what Morgan tries to tell us in this book that more than analysis of the scrip, the conviction that you calculated and the patience to hold it at least for several decades remains intact only then the wealth would be created or else you would be just a person among a crowd doing nothing but ordinary things in life. And explains that the world is actually big and we are just a blip in it. It gives us all great humility and convinces us to be humble and show gratitude to others.
- Joe Hamilton:
In less than 200 pages Morgan Housel succeeded through several short stories about money and business management to provide learned lessons.
The book uses plain English, easy to read and to understand.
He exposed many myths and fake assumptions in the business world, especially the dilemma of luck vs. talent.
It is fascinating to know for example that Bill Gates studied in the only high school in the US that by luck had a computer in 1968, one in a million chance.
Chapter 19 is like a summary of major ideas but there are some interesting ideas to think about and we may agree or disagree with it:
1. “You are one person in a game with 7 billion other people and infinite moving part”, so we underestimate significantly 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,s 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.”
- Sandeep Bhasin:
This is a must-read for the youngsters of today… or anyone who has still not started saving for the future. Morgan Housel beautifully communicates the idea of saving money and how! Me, at 48, get inspired to the core to save more and spend less. He has the knack for explaining difficult stuff in such a simple language. 5 stars from me. Take my word for it: you’ll love it!
- Angel Rosete:
I thoroughly enjoyed reading this book. If you’ve been in or around finance, the wisdom contained in this book may not exactly be new to you but it’s still great to re-learn some of these things or at least to hear it from someone else. I’ll definitely read the book again.
I’ve rated the book 4* and not 5* because I found a lot of the examples to be US/American focused. The world has changed. Morgan has not written with a global audience in mind or even a global perspective. This is not necessarily a bad thing if that’s the intended audience, however, I am not American and have only visited the country once, so I found that examples or cases from other countries might have helped a bit. Either way, a great read written in straightforward language.