Thread by @akhilsethi

Here’s a thread on one of the best books I’ve read till date: The Psychology of Money by @morganhousel. It covers 19 short stories on the ways how people think about money & teaches how to make better sense of one of the life’s most important matters.

Thread 🧵 is not about the review of the book rather I have picked up some of my favorite quotes / sayings that will definitely give a different perspective to see things. Here you go.👇

The premise of this book is that doing well with money has a little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach, even to really smart people. A genius who loses control of emotions can be fin disaster & vice versa.

Fin success is not a hard science. It’s a soft skill, where how you behave is more important than what you know. This soft skill is called as “The Psychology Of Money”

Two topics impact everyone, whether you’re interested in them or not: Health & Money. So I think the sooner we focus on them, the better it would be

Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works. What seems crazy to you might make sense to someone else.

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.

Nothing is as good OR as bad as it seems. Luck and Risk always play their game because the world is too complex to allow 100% of you actions to dictate 100% of your outcomes.

Everything worth pursuing has less than 100% of succeeding, and risk is just what happens when you end up on the unfortunate side of the equation.

The hardest financial skill is getting the goalpost to stop moving. If expectations rise with results there’s no logic in striving for more because it’ll never end. Happiness, as it is said, is just results minus expectations.

Social comparison is always a problem. It’s a battle that can never be won. There will always be someone who’ll be better hence ACCEPT that you have enough because “Enough” is not too little.

Power of Compounding & patience: $81.5 billion of Warren Buffett’s $84.5 billion net worth came after his 65th birthday. Our minds are not built to handle such absurdities.

Getting wealthy & staying wealthy are 2 completely different things. Good investing is not necessarily about making good decisions. It’s about consistently not screwing up. Best way to stay wealthy: combinations of FRUGALITY & PARANOIA.

Planning is important, but the most important part of every plan is to plan on the plan not going according to the plan. A pan is only useful if it can survive reality. And future is completely filled with unknowns / unpredictability.

You can be wrong half of the time and still make a fortune. Anything that’s huge, profitable, famous, or influential is the result of a tail event – an outlying one-in-thousands or millions event. Always remember, most of the times, tails drive everything.

Money can’t directly buy you happiness. Money can give you freedom to control your time which in turn leads to happiness. It’s highest dividend money pays.

Paradox: People tend to want health to signal that they should be liked/admired. But in reality, others often bypass admiring you, not because they don’t think wealth is admirable, but they use your wealth as a benchmark for their own desire to be liked/admired.

Important: What you want is respect and admiration from other people, and you think having expensive stuff will bring it. It almost never does-especially from the people you want respect/admiration.

Wealth is what you don’t see! Spending money to show people how much money you have is the fastest way to have less money. Wealth is nice cars not purchased, the clothes forgone & the first-class upgrade declined. It’s the fin. Assets not been converted into stuff you see.

Past a certain level of income, what you need is just what sits below your ego. People’s ability to save is more in their control than they might think.

Reasonable > Rational: People don’t want a mathematically optimal strategy rather the one that maximizes for how well they sleep at night.

History is the study of change, ironically used as a map of the future. It helps us calibrate our expectations and offers a rough guide what can work. But is is not, in any way, a map of the future. Things that have never happened before happen all the time.

Margin of safety: We don’t need to view the world in front of us as black or white. The GREY area – pursuing things where a range of potential outcomes are acceptable – is the smart way to proceed! Purpose of margin of safety is to render the forecast unnecessary.

Long term planning is harder than it seems because people’s goals and desires change over time. Compounding works best when you give something years to grow. True for not only money, but careers and relationships. ENDURANCE is the key!

Nothing’s free: Everything has a price, and a key to a lot of things with money is just figuring out what that price is and being willing to pay it. Problem is price in most of the things, is not obvious until you’ve experienced them firsthand.

Few things matter more with money than understanding your own time horizon and not being persuaded by the actions and behaviors of people playing different games than you are.

It’s easier to create a narrative around pessimism because the story pieces tend to be fresher and more recent. Optimistic narratives require looking at a long stretch of history and developments, which people tend to forget & take more effort to piece together.

Appealing fictions: The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true.

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