“The psychology of money” by Morgan Housel

The author 🖋

Morgan Housel is a highly respected, award-winning financial journalist and bestselling author with over 4 million copies sold worldwide.

A former columnist at The Motley Fool and The Wall Street Journal and current partner at a VC firm called The Collaborative Fund, Morgan has recently been named one of the 50 most influential people in markets by MarketWatch.

Key takeaways 🎓

1. Behavior > knowledge

Behavior trumps intelligence when it comes to investing.

Many smart people make poor financial decisions due to overconfidence, fear or greed.

But good decisions can be made with very little knowledge and the key to financial success is to just continue making them repeatedly over time.

2. Luck and risk

Sometimes, even if we make good decisions, we might not get the results we want.

This is because *in the short term* luck and risk play a big role when it comes to financial outcomes.

They’re like two sides of the same coin.

Sometimes we're lucky, sometimes we're not - that’s why Housel emphasizes taking only thoughtfully calculated risks in order to be prepared for all outcomes.

3. Compounding is the 8th Wonder of the World

Morgan argues that the single most powerful thing we can do to be better investors is to simply increase our time horizon.

Even small but consistent investments over a long period of time can grow into a small fortune due to compound interest.

And, like with most things in life - the best time to start was 10 years ago, the second best time is today.

Closing thoughts 🧠

The book (as well as Morgan’s podcast) aims to demonstrate that success with money often comes from good habits and controlling our emotions, not complex strategies, math skills or high IQ.

It reminds me of the famous quote by Warren Buffett when Jeff Bezos asked him how come more people don’t follow his strategy, to which Buffett answered:

"Because no one wants to get rich slowly”