17 Big Ideas from the Psychology of Money

Book by Morgan Housel —

1. Luck & Risk
   Big idea: Nothing is as good or as bad as it seems.
2. Never Enough
   Big idea: Rich people do crazy things.
3. Confounding Compounding
   Big Idea: Our minds are not built to handle the reality that compounding leads to logic-defying results.
4. Getting Wealthy vs. Staying Wealthy
   Big idea: Good investing is not about making good decisions. It’s about consistently not screwing up.
5. Tails, You Win
   Big idea: You can be wrong half the time and still make a fortune.
6. Freedom
   Big idea: Controlling your time is the highest dividend money pays.
7. Man in the Car Paradox
   Big idea: No one is impressed with your possessions as much as you are.
8. Wealth is What You Don’t See
   Big idea: Spending money to show people how much money you have is the fastest way to have less money.
9. Save Money
   Big idea: The only factor you can control generates one of the only things that matters.
10. Reasonable > Rational
    Big idea: Aiming to be mostly reasonable works better than trying to be coldly rational.
11. Surprise!
    Big idea: History is an unassailable guide to the future.
12. Room for Error
    Big idea: The most important part of every plan is planning on your plan not going according to plan.
13. You’ll Change
    Big idea: Long-term planning is harder than it seems because people’s goals and desires change over time.
14. Nothing’s Free
    Big idea: Everything has a price, but not all prices appear on labels.
15. You & Me
    Big idea: Avoid taking financial cues from people playing at a different game than you are.
16. The Seduction of Pessimism
    Big idea: Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you.
17. When You’ll Believe Anything
    Big idea: Stories trump statistics.

Quotes I liked from the book —

• “Go out of your way to find humility when things are going right and forgiveness/compassion when they go wrong.”
• “Wealth is created by suppressing what you could buy today in order to have more options in the future.”
• “Manage your money in a way that helps you sleep at night.”
• “If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon.”
• “Become okay with a lot of things going wrong. You can be wrong half the time and still make a fortune.”
• “Use money to gain control over your time.”
• “No one is impressed with your possessions as much as you are.”
• “You don’t need a specific reason to save.”
• “Uncertainty, about, and regret are invisible costs worth paying.”
• “Your goals and desires will change over time.”
• “Learn to love risk, but be paranoid of ruinous risk. The former pays off over time. The latter prevents you from taking future risks that pay off over time.”
• “Avoid being influenced by people playing a different game to you.”
• “There is no single right answer in finance, just the answer that works for you.”