Name: Adwait Kulkarni's review of The Psychology of Money by Morgan Housel
Item: The Psychology of Money
Rating: 4
Author: Adwait Kulkarni

Morgan Housel

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.

Timeless lessons on wealth, greed, and happiness

The Psychology of Money

Selena Yang

The most important economic events of the future—things that will move the needle the most—are things that history gives us little to no guide about. They will be unprecedented events. Their unprecedented nature means we won’t be prepared for them, which is part of what makes them so impactful. This is true for both scary events like recessions and wars, and great events like innovation.

I’m confident in that prediction because surprises moving the needle the most is the one forecast that’s been accurate at virtually every point in history

The correct lesson to learn from surprises is that the world is surprising. Not that we should use past surprises as a guide to future boundaries; that we should use past surprises as an admission that we have no idea what might happen next

If you have flexibility you can wait for good opportunities, both in your career and for your investments. You’ll have a better chance of being able to learn a new skill when it’s necessary. You’ll feel less urgency to chase competitors who can do things you can’t, and have more leeway to find your passion and your niche at your own pace. You can find a new routine, a slower pace, and think about life with a different set of assumptions. The ability to do those things when most others can’t is one of the few things that will set you apart in a world where intelligence is no longer a sustainable advantage.

Having more control over your time and options is becoming one of the most valuable currencies in the world.

That’s why more people can, and more people should, save money.

In a world where intelligence is hyper-competitive and many previous technical skills have become automated, competitive advantages tilt toward nuanced and soft skills—like communication, empathy, and, perhaps most of all, flexibility.

A good definition of an investing genius is the man or woman who can do the average thing when all those around them are going crazy.

Over the course of your lifetime as an investor the decisions that you make today or tomorrow or next week will not matter nearly as much as what you do during the small number of days—likely 1% of the time or less—when everyone else around you is going crazy.

Anything that is huge, profitable, famous, or influential is the result of a tail event—an outlying one-in-thousands or millions event. And most of our attention goes to things that are huge, profitable, famous, or influential. When most of what we pay attention to is the result of a tail, it’s easy to underestimate how rare and powerful they are.

A lot of things in business and investing work this way. Long tails—the farthest ends of a distribution of outcomes—have tremendous influence in finance, where a small number of events can account for the majority of outcomes.

That can be hard to deal with, even if you understand the math. It is not intuitive that an investor can be wrong half the time and still make a fortune. It means we underestimate how normal it is for a lot of things to fail. Which causes us to overreact when they do.

Sensible optimism is a belief that the odds are in your favor, and over time things will balance out to a good outcome even if what happens in between is filled with misery.

“Many bets fail not because they were wrong, but because they were mostly right in a situation that required things to be exactly right. Room for error—often called margin of safety—is one of the most underappreciated forces in finance. It comes in many forms: A frugal budget, flexible thinking, and a loose timeline—anything that lets you live happily with a range of outcomes”

“A good plan doesn’t pretend this weren’t true; it embraces it and emphasizes room for error. The more you need specific elements of a plan to be true, the more fragile your financial life becomes. If there’s enough room for error in your savings rate that you can say, “It’d be great if the market returns 8% a year over the next 30 years, but if it only does 4% a year I’ll still be OK,” the more valuable your plan becomes.”

Damian Makki

Everyone has their own unique experience with how the world works. And what you’ve experienced is more compelling than what you learn second-hand. So all of us—you, me, everyone—go through life anchored to a set of views about how money works that vary wildly from person to person. What seems crazy to you might make sense to me.

“You think you may not be ready, that you’ll do it at a more convenient time. But you don’t choose the time. The time chooses you. Either you seize what may turn out to be the only chance you have, or you decide you’re willing to live with the knowledge that the chance has passed you by”

The hardest financial skill is getting the goalpost to stop moving

Things are not always as good or bad as they seem. The old man loses his horse.

When things are going extremely well, realize it’s not as good as you think. You are not invincible, and if you acknowledge that luck brought you success then you have to believe in luck’s cousin, risk, which can turn your story around just as quickly.

But the same is true in the other direction.

A core philosophy my ex taught me and I don’t know if he realizes it was. But this quote reminded me of his values and the things he’d used to say. 

John Bogle, the Vanguard founder who passed away in 2019, once told a story about money that highlights something we don’t think about enough:		 

At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, “Yes, but I have something he will never have … enough.”

Enough. I was stunned by the simple eloquence of that word—stunned for two reasons: first, because I have been given so much in my own life and, second, because Joseph Heller couldn’t have been more accurate.

For a critical element of our society, including many of the wealthiest and most powerful among us, there seems to be no limit today on what enough entails.

Not all success is due to hard work and not all poverty is due to laziness.

Focus less on specific individuals and case studies and more on broad patterns.

The book I read was Born Royal by Oneka McCllelan

Erin Preuninger

Sunk costs-anchoring decisions to past efforts that can't be refunded-are a devil in a world where people change over time. They make our future selves prisoners to our past, different, selves. It's the equivalent of a stranger making major life decisions for you.

Nkwachi Nwamaghinna

Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.

The author talks about the importance of resilience in life.

Simayon Thampi

Perhaps 99% of the works someone like Berggruen acquired his life turned out to be of little valid. But that doesn't particular particularly matter if the other one percent turned out to be the work of someone like Picasso. Berggruen could be wrong most of the time and still end up stupendously right. 

A lot of things in business and investing work this way. Long tails-the farthest ends of a distribution of outcomes-have tremendous influence in finance, where a small number of events can account for the majority of outcomes.

That can be hard to deal with, even if you understand the math full stop. It is not intuitive that an investor can be wrong half the time and still make a fortune. It means we under estimate how normal it is for a lot of things to fail. Which causes us to overreact when they do

Kyler Phillips

True success is exiting some rat race to modulate one’s activities for peace of mind.

Comfortably living below what you can afford, without much desire for more, removes a tremendous amount of social pressure that many people in the modern first world subject themselves to.

Philipp

This book is based on a blog which talks about 20 points based on psychology behind money. The book is basically a detailed explanation of these 20 points. It suffers through the same problem that many other self help books go through i.e. due to limited content, it gets a lot repetitive. But other than that, the book is well written and the author does well to convey the point that he wants to convey throughout the book i.e. save your money!

Adwait Kulkarni

Honestly not great it wasn’t what I was expecting. It was a lot of waffle and repeating of the same things over and over again. It had a bit of knowledge in there but not what I was expecting the book to be.

Nathan Rogers

Rare for a book to not sell something bombastic, especially a financial book at that. The age-old advice of saving, not wasting money, and uses it for something you value, somehow felt more revolutionary than any of the so called "reinventing the wheel" advice on many self-help books.

catto fishu

confirmed a lot of thoughts I’ve been having. 

liya n

Sanjay Krishna 

“The world is full of obvious things which nobody by any chance ever
observes.”
—Sherlock Holmes

Reiza H

A rather down to earth advices about finance, money and investment.

No one is crazy. Every decision is a rational one, at least from their perspectives at that time.

I like the book because it breaks down the financial world of data into something more recognizable: emotions, feelings, hope, fear and dream. Universal emotions we all had. 

More about this book later.

Lewis Ngugi

Worth the time to listen to 🙌🏽
A lot of the points shared in the book are actionable and I agree with the author, it's just a switch of one's attitude that makes them wealthy.

I thought the book was incredible. There was times where I could not put the book down. My biggest takeaway is that wealth is silent. Wealth is what you don’t spend not what you can see. However, we live in a society that constantly uses wealth signifiers to announce that they are rich. 

Felicia

I thought the book was incredible. There was times where I could not put the book down. My biggest takeaway is that wealth is silent. Wealth is what you don’t spend not what you can see. However, we live in a society that constantly uses wealth signifiers to announce that they are rich. 



ahmed

I've read/listened to this book in Jan 2023 , the perfect timing for such a book.

Aaron Chiandet

It’s nothing more than a collection of moderately interesting blog posts. A teenager or young adult would likely get value from it though.

Jaiden Ratti

I've read a lot of books on personal finance and this is one of the few I would recommend to people. Housel is a master of reaching out beyond numbers and spreadsheets and toward minds and behaviors. Definitely will be coming back to it.

Olga V

Omar

Very effective at telling you: 

Wealth is what others don't see, what you don't spend, what you save. 

Live below your means no matter what. It may suck now, but it's the only way to build wealth. 

Invest, but only in a way that helps you sleep at night well. Even if the perfect investment portfolio for you to maximize returns can be proven to be the best, if you can't sleep well at night,  you won't stick it out and it'll end up worse for you. 

Building wealth is all about freedom. Freedom to choose how you spend your time is true wealth. Money helps you buy that freedom. 

Very clear insight on how money works and how people react to wealth. This is a book that everyone should read!

Luca Moerenhoudt

There are a lot of actionable insights and learnings from this book as well as lots of historical anecdotes which explain why certain people behave the way they do towards money. 

Whilst some of Morgan's insights aren't particularly new or novel, I think that fundamentally underpins the message of the book which is that finance and money should be made simple. 

When we can remove ego we can create more wealth, he talks about your wealth being the gap between ego and income which resonates. Overall, lots of useful takeaways from this book to think about money in a more meaningful and profound way.

There are a lot of actionable insights and learnings from this book as well as lots of historical anecdotes which explain why certain people behave the way they do towards money. 

Whilst some of Morgan's insights aren't particularly new or novel, I think that fundamentally underpins the message of the book which is that finance and money should be made simple. 

When we can remove ego we can create more wealth, he talks about your wealth being the gap between ego and income which resonates. Overall, lots of useful takeaways from this book to think about money in a more meaningful and profound way.

Kehinde Adeleke

Amazing book that I feel everybody should read because of how important the advice are.

You just need to know the type of invest to are and acknowledge that some of your financial decisions won’t be rational to others. They just need to be able to make you sleep well at night. And I think that’s enough.

Sarah Schumacher

This book was incredible. Short chapters but each packed with concise well-written statements that distilled important concepts into something you can immediately grasp. I don’t love reading about finance, but I do love psychology, and the marriage of these two angles was done incredibly well.

It also helps that I have the exact same goals/expectations and financial strategy as the author, because I know we’re coming from the same place (an extremely important idea he covers in Chapter 16). It’s only the last chapter where he gives an overview of what he does personally; the rest of the book is a primer on larger principles.

Do NOT skip the Postscript on US history. In a few pages he summarizes why we ended up here in the most succinct way. That section alone should be required reading.

TLDR; don’t read this book for specific investment advice. Do read it to absorb core principles that will help you make better decisions about your finances, and potentially much more.

—

Gratuitous mashup example: this feels like taking Jon Kabat-Zinn’s Wherever You Go There You Are, Daniel Kahneman’s Thinking Fast & Slow, Ray Dalio’s Principles and some Seth Godin, then mashing them into a single book about financial decision making. A great book to read a chapter or two out of often. It feels like a series of blog posts that became a book, but in the best possible way.

Groundbreaking book simplifying personal finance for those who may not have had the opportunity to receive positive psychology teaching around money. This book is something I gift to people often. Practical, timeless, and important takeaways for thinking about your money.

Jacob Medure

I really enjoyed this book and loved the overall content. It’s not just a balanced view on personal finance, it focuses on the psychological patterns useful to have a balanced and successful financial life.

Jacopo Nardiello

Zia Nazaliah Ainisyifa

aku baca buku ini fisik, karena sengaja beli, tapi karena translate, jadi kata2 atau kalimatnya banyak yg ga aku pahami :") keknya lebih baik beli buku ini yg versi aslinya bahasa inggris.. 
Buku ini ngomongin terutama kek tentang saham, investasi, terus banyak nyeritain sejarah keuangan suatu negara juga, buku ini juga banyak nyeritain pengalaman dari suatu tokoh, banyak kutipannya juga, yaa memang ada beberapa poin yg bisa aku ambil tentang pelajaran keuangan sih👌

Tuago

Very quick read with some very useful advice on personal finance

Sumayya Tsabitah

i expected too much lol. it talks more about the rich and poor, wealth, and savings. kinda basic, i was wondering where is the psychology part? it was just mentioning quotes from some of psychologists but didn’t explain more why human did it. but yeah to be fair, it’s enjoyable reading

Julien Sobczak

If you want to earn more money or want to be happier, starting with this book is a good idea. As outlined by the author, "Two topics impact everyone, whether you are interested in them or not: health and money." This book will benefit everyone (as confirmed by its huge success).

"The Psychology of Money" challenges brilliantly the preconceived idea that finance is a science, like physics, with rules and laws. The author argues that money is a soft skill, where how you behave is more important than what you know, and where your emotions play a major role.

It's one of my favorite books. It's the kind of book where you end up with a lot more insights than you expected before opening it.

The 20 chapters revolve around the main topic, but exist on their own and could be read independently, even if it's probably simpler to just read it from cover to cover as it's a short book.

Róbert Istók

One of the best books I've read about finance!

It is short but packed with value. It gives you a great mental model of money and long term wealth generation. 

Make sure to read the postscript as well, there are valuable history lessons to learn about!

Philipp &
The Psychology of Money by Morgan Housel

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