I s pent my college years working as a valet at a nice hotel in Los Angeles. (Page 6)
He also had a relationship with money I’d describe as a mix of insecurity and childish stupidity. (Page 6)
Note: Heerlijk eufemisme
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. (Page 7)
Note: Gewoon de premisse expliciet vermelden
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. (Page 10)
Two topics impact everyone, whether you are interested in them or not: health and money. (Page 11)
Most of the reason why, I believe, is that we think about and are taught about money in ways that are too much like physics (with rules and laws) and not enough like psychology (with emotions and nuance). And that, to me, is as fascinating as it is important. (Page 12)
Money is everywhere, it affects all of us, and confuses most of us. Everyone thinks about it a little differently. It offers lessons on things that apply to many areas of life, like risk, confidence, and happiness. Few topics offer a more powerful magnifying glass that helps explain why people behave the way they do than money. It is one of the greatest shows on Earth. (Page 12)
The more I studied and wrote about the financial crisis, the more I realized that you could understand it better through the lenses of psychology and history, not finance. (Page 13)
What you’re holding is 20 chapters, each describing what I consider to be the most important and often counterintuitive features of the psychology of money. The chapters revolve around a common theme, but exist on their own and can be read independently. (Page 14)
Note: Heerlijk en inspirerend
It’s not a long book. You’re welcome. Most readers don’t finish the books they begin because most single topics don’t require 300 pages of explanation. I’d rather make 20 short points you finish than one long one you give up on. On we go. (Page 14)
We all think we know how the world works. But we’ve all only experienced a tiny sliver of it. (Page 18)
In theory people should make investment decisions based on their goals and the characteristics of the investment options available to them at the time. But that’s not what people do. (Page 19)
I don’t know what to make of this. Part of me wants to argue, fiercely. Part of me wants to understand. But mostly it’s an example of how different experiences can lead to vastly different views within topics that one side intuitively thinks should be black and white. (Page 23)
You don’t have to agree with this reasoning. Buying lotto tickets when you’re broke is still a bad idea. But I can kind of understand why lotto ticket sales persist. And that idea—“ What you’re doing seems crazy but I kind of understand why you’re doing it.”—uncovers the root of many of our financial decisions. (Page 25)
Few people make financial decisions purely with a spreadsheet. They make them at the dinner table, or in a company meeting. Places where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together into a narrative that works for you. (Page 26)
It was not until the 1980s that the idea that everyone deserves, and should have, a dignified retirement took hold. And the way to get that dignified retirement ever since has been an expectation that everyone will save and invest their own money. Let me reiterate how new this idea is: The 401( k)—the backbone savings vehicle of American retirement—did not exist until 1978. The Roth IRA was not born until 1998. If it were a person it would be barely old enough to drink. It should surprise no one that many of us are bad at saving and investing for retirement. We’re not crazy. We’re all just newbies. (Page 28)
Dogs were domesticated 10,000 years ago and still retain some behaviors of their wild ancestors. Yet here we are, with between 20 and 50 years of experience in the modern financial system, hoping to be perfectly acclimated. For a topic that is so influenced by emotion versus fact, this is a problem. And it helps explain why we don’t always do what we’re supposed to with money. (Page 29)
Note: Fijne overgang
Now let me tell you a story about how Bill Gates got rich. (Page 29)
Luck and risk are siblings. They are both the reality that every outcome in life is guided by forces other than individual effort. (Page 31)
For every Bill Gates there is a Kent Evans who was just as skilled and driven but ended up on the other side of life roulette. (Page 35)
Did failed businesses not try hard enough? Were bad investments not thought through well enough? Are wayward careers due to laziness? Sometimes, yes. Of course. But how much? It’s so hard to know. Everything worth pursuing has less than 100% odds of succeeding, and risk is just what happens when you end up on the unfortunate side of that equation. (Page 36)
After spending years around investors and business leaders I’ve come to realize that someone else’s failure is usually attributed to bad decisions, while your own failures are usually chalked up to the dark side of risk. (Page 37)
Be careful who you praise and admire. Be careful who you look down upon and wish to avoid becoming. (Page 41)
The more extreme the outcome, the less likely you can apply its lessons to your own life, because the more likely the outcome was influenced by extreme ends of luck or risk. You’ll get closer to actionable takeaways by looking for broad patterns of success and failure. The more common the pattern, the more applicable it might be to your life. (Page 42)
Bill Gates once said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.” (Page 42)
When things are going extremely well, realize it’s not as good as you think. You are not invincible, and if you acknowledge that luck brought you success then you have to believe in luck’s cousin, risk, which can turn your story around just as quickly. (Page 42)
Failure can be a lousy teacher, because it seduces smart people into thinking their decisions were terrible when sometimes they just reflect the unforgiving realities of risk. (Page 43)
Note: Weer een fijne overgang
The trick when dealing with failure is arranging your financial life in a way that a bad investment here and a missed financial goal there won’t wipe you out so you can keep playing until the odds fall in your favor. (Page 43)
Now let’s look at the stories of two men who pushed their luck. (Page 43)
There is no reason to risk what you have and need for what you don’t have and don’t need. (Page 49)
The hardest financial skill is getting the goalpost to stop moving. (Page 50)
Modern capitalism is a pro at two things: generating wealth and generating envy. (Page 50)
The point is that the ceiling of social comparison is so high that virtually no one will ever hit it. Which means it’s a battle that can never be won, or that the only way to win is to not fight to begin with—to accept that you might have enough, even if it’s less than those around you. (Page 51)
“Enough” is realizing that the opposite—an insatiable appetite for more—will push you to the point of regret. (Page 52)
The only way to know how much food you can eat is to eat until you’re sick. (Page 52)
Reputation is invaluable. Freedom and independence are invaluable. Family and friends are invaluable. Being loved by those who you want to love you is invaluable. Happiness is invaluable. And your best shot at keeping these things is knowing when it’s time to stop taking risks that might harm them. Knowing when you have enough. (Page 53)
Effectively all of Warren Buffett’s financial success can be tied to the financial base he built in his pubescent years and the longevity he maintained in his geriatric years. His skill is investing, but his secret is time. (Page 59)
The point is that what seem like small changes in growth assumptions can lead to ridiculous, impractical numbers. And so when we are studying why something got to become as powerful as it has—why an ice age formed, or why Warren Buffett is so rich—we often overlook the key drivers of success. (Page 60)
Linear thinking is so much more intuitive than exponential thinking. (Page 60)
You can’t blame people for devoting all their effort—effort in what they learn and what they do—to trying to earn the highest investment returns. It intuitively seems like the best way to get rich. But good investing isn’t necessarily about earning the highest returns, because the highest returns tend to be one-off hits that can’t be repeated. (Page 62)
