Review of Morgan Housel’s The Psychology of Money

  1. Luck & Risk
  2. Never Enough
  3. Confounding Compounding
  4. Getting Wealth vs Staying wealthy
  5. Tails you win
  6. Freedom
  7. Man in the car Paradox
  8. Wealth is what you don’t see
  9. Save money
  10. Reasonable > Rational
  11. Surprise!
  12. Room for error
  13. You’ll change
  14. Nothings free
  15. You & me
  16. The Seduction of Pessimism
  17. When you’ll believe anything
  18. All Together Now
  19. Confessions

2. Luck & Risk

The involvement of luck and risk in given successes is often overlooked.



There was a 3rd friend of Bill and Paul’s at school; Kent Evans. Kent was as smart as Bill and they would talk about who would be CEO of their imaginary company. The year before graduation Kent died in a mountaineering accident. Every year there are around 36 mountaineering deaths. One in a million.

4. Confounding Compounding

Growth is driven by compounding, which always takes time. Warren Buffett has made 99.7% of his money after the age of 52.

6. Tails you win

This chapter summarises the idea, if you make enough bets eventually you will win (assuming you’re not betting everything on it.)

8. Man in the car paradox

This chapter is the stoplight effect + money. The man sitting at the traffic light in the sports car thinks everyone is looking at him and how successful he is. In reality people are looking at the car and thinking how good they would look in it or how much fun it would be to drive.

10. Save money

16. You & me

This chapter talks about bubbles and how bubbles form in a way I had never thought about before.

17. The Seduction of Pessimism

What Housel does with his money.

At the end of the book Morgan explains what he does with his money. There is nothing new here. Hold a small emergency fund, save as much of your income as possible to invest in multi asset passive funds such as Vanguard and build multiple sources of income.



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