Lessons from ‘The Psychology of Money’
Book Review — The Psychology of Money by Morgan Housel
— From Dayo, as she experiences and learns. Welcome to The Mind Palace!
While the most valuable lesson I learnt from this book full of gold was that:
I can’t judge certain actions people make because I do not know their histories, I have not lived their experiences the way they have and I have not suffered or enjoyed the after effects of their experiences.
(Alas, objective knowledge is not objective.)
These highlights are worth mentioning because they are insightful. Alright.
1. Compounding makes the dream work
Compounding is simply not intuitive.
Want to know how Warren Buffet became a great investor? At the very base of skills and intellect, he started early and has been consistent for a long time- no matter the state of the market.
Time will always be your friend if you use it, and compounding makes the dream work.
2. Tails, you win
Most great accomplishments are the end results of multiple failures. Standard. Cliche. But it’s true.
Even though we take many Ls, we will make wins because we do the right things. And some times, we just act and we don’t know where the wins come from. We don’t know ‘how’.
Why? Because we severely underestimate the power of luck.
Failures are normal, more normal than we think but at the end of the day, serendipity will never fail you.
3. Wealth =/ Riches
You have the purchasing power to buy a Tesla, you buy it. I have the purchasing power to buy a Tesla but I buy a Tesla stock so I end up having the purchasing power to buy 5 Teslas. We’re not the same.
Must you be like me? No.
But I sure as hell get to live my life on more of my conditions because money affords financial freedom and flexibility.
4. Enough or Sink
‘If your desire to get more money is higher than you can be satisfied, you’ll land in trouble. It’s guaranteed, accept it.
Controversial as it may sound, you take risks to make money and you avoid risks to keep money.
In Morgan Housel’s words, ‘it I saw absolutely foolish to risk what you have and need for what you don’t have and don’t need’.
This reminds me of something just dad told me when I lost something important: ‘you don’t give out what you need’.