The Psychology of Money: Introduction
Hello people! How are you? I hope everyone had a great start to March. I was slightly distracted last week. Regardless, I am back on track. The coming weeks, if not months, will be jam-packed for me. So, instead of sharing the book's summary (where I read the entire book in 3-4 days, create and edit the blog and post it on Mondays), this time, I will go on reading one chapter a week and of course, sharing the summary and lessons here. You would have read by the title, the book is "The Psychology of Money: Timeless Lessons on Wealth Greed and Happiness" written by Morgan Housel. It's a 238-page-long book separated into 20 chapters which can be read independently.
The author starts off by giving the example of two men— one without a college degree, no prior experience, no wealthy family and no connections and the other with everything the first lacked. Despite this, the former had a net worth of over $8 million, while the latter went bankrupt. The first was patient, while the second was greedy. That's all the difference. The author says,
"Financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know. I call this soft skill, the psychology of money." In any other industry, we learn through collective trial and error to become better farmers, skilled engineers, competent managers, advanced surgeons and so on. There is no way that a normal person can outperform a heart transplant better than a Harvard-trained surgeon. If the same trial and error method was applied to money, then why aren't we all wealthy?
Why is money such a taboo topic?
Why aren't we prepared for a rainy day?
Why do most of us lack a realistic view of what money does and doesn't do for our happiness in the short term as well as in long term? Because the way we are taught about money is more like a math-based field, where you have a formula and use it and not enough like history and psychology with behaviours, emotions, ego and pride. The author says 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 behaviour is hard to teach, even to really smart people.
Knowing what to do tells you nothing about what happens in your head when you try to do it.
Links:
I like to find out a bit about the authors of the books I read. This YouTube video of Ankur Warikoo with Morgan Housel serves the purpose: https://www.youtube.com/watch?v=0MJWmHWcMgk
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