My view on reading books
I want to start this post with a confession — I'm not a big fan of reading books, I never was, and I'm not sure I'll ever become one. In school, I preferred playing video games over reading books. In university, I watched many movies and TV shows, but I couldn't name more than 5-10 works I have read a year.
At the same time, it is hard to overestimate the importance of reading books and how great I feel whenever I finish one. The endless source of wisdom, great stories, and histories are hidden in the bookshelves.
At the end of 2022, I decided to make reading books my habit. I composed a list of books I want to read in 2023, thought about how I will review them, and watched inspirational videos to remind myself about the benefits of reading books. This list for 2023 consists of classics, biographies, software engineering, and management books. I'll prepare a separate post where I share more details about the list. #blog-promises
How to read books?
Reading is actually only one part of the book universe. Apart from it, I would also love to remember what the book is about and what new I have learned from it. Writing a review for a book or outlining core ideas from it would help me to quickly refresh it in my memory.
And let's make it even more fun — apart from reading and making notes, I would also share it on my web page. So here we are, with the first short form of a book.
The Psychology of Money: Timeless lessons on wealth, greed, and happiness
This book is not part of the list I've created, but it caught my attention when browsing through the library I have in the office at work.
The section after the three lines below contains my notes from book chapters.
Facts
- Full name: The Psychology of Money: Timeless lessons on wealth, greed, and happiness
- Author: Morgan Housel
- Published: Harriman House (September 8, 2020)
- ISBN-13: 978-0857197689
In The Psychology of Money, Morgan Housel shares stories exploring how people think about money and teaches you how to make better sense of it.
No one’s crazy
Ideas
Luck and Risk
Nothing is as good or as bad as it seems
Ideas
Never enough
When rich people do crazy things
Ideas
Never risk what you have and need for what we don’t have and don’t need.
– Warren Buffet
Few things to remember
- The hardest financial skill is getting the goalpost to stop moving
- Social comparison is the problem here
- “Enough” is not too little
- There are many things never worth risking, no matter the potential gain
Confounding compounding
Ideas
$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.
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. It's about making pretty good returns that you can stick with and which can be repeated for the longest period of time. That's when compounding runs wild.
Getting Wealthy vs. Staying Wealthy
Good investing is not necessarily about making good decisions. It's about consistently not screwing up.
Ideas
A mindset that can be paranoid and optimistic at the same time is hard to maintain because seeing things as black or white takes less effort than accepting nuance. But you need short-term paranoia to keep you alive long enough to exploit long-term optimism.
– Morgan Housel
Tails, you win
You can be wrong half the time and still make a fortune
Ideas
I’ve been banging away at this thing for 30 years. I think the simple math is, some projects work and some don’t. There’s no reason to belabor either one. Just get on to the next and keep telling stories.
– Brad Pitt
Become ok with a lot of things going wrong. You can be wrong half the time and still make a fortune. you should be ok with a lot of stuff not working . That is just how the world is.
Freedom
Controlling your time is the highest dividend money pays
Ideas
Being able to do what you want, when you want, where you want and with whom you want is priceless. Use your money to get control over your time.
Man in the car paradox
No one is impressed with you possessions as much as you are
Ideas
The paradox of the man in the car is that you believe that if you were the man in the car people would notice and admire you, but you believe this while ignoring the man in the car.
Admiration and respect are not owned with the possessions I have, but they should be owned through kindness and humanity.
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
Ideas
We assume that a person with an expensive car, house, and clothes is wealthy. Still, it only means that the person spent all this money on these things or maybe even has a loan to purchase them.
Side note: it is hard to learn how to build wealth because "Wealth is what you don't see," and it is hard to learn from what you don't see.
Save money
The only factor you can control generates one of the only things that matters. How wonderful.
Ideas
The first idea — simple but easy to overlook — is that building wealth has little to do with your income or investment returns and lots to do with your savings rate.
More importantly, the value of wealth is relative to what you need.
– Morgan Housel
Savings can be defined as a gap between my ego and my income. People need a pretty low amount of money to cover their basic needs. Everything else is ego approaching the income, spending money to show other people that you have money.
You don’t need a specific reason to save.
Reasonable > Rational
Aiming to be mostly reasonable works better than trying to be coldly rational
Ideas
Do not aim to be coldly rational when managing money, aim to just be pretty reasonable. We can’t always do rational things, it is not in the people nature. It is enough to be just reasonable when doing decisions.
Surprise
Ideas
“historians as prophets” fallacy: an overreliance on past data as a signal to future conditions in a field where innovation and change are the lifeblood of progress.
– Morgan Housel
We can’t rely purely on the history when thinking about future investments, because history is mostly study of the surprising events.
Room for error
The most important part of every plan is planning on your plan not going according to the plan
Ideas
Margin of safety - introduced by Benjamin Graham - is the only effective way to safely navigate a world governed by odds, not by certainties.
Instead of taking the world as black or white, we should take it as a range of possible outcomes.
You’ll change
Long-term planning is harder that it seems because people change and their goals and desires also change
Ideas
We should avoid the extreme ends of financial planning.
– Morgan Housel
When we avoid it, we will have less regret in the future. For example, we should not plan for working hard all life, because in the end we might end up regretting spending our whole life on work. At the same time, we can't live our entire life for a minimal salary because we could end up regretting not having money for retirement.
Nothing is free
Everything has a price, but not all prices appear on labels
Ideas
Every job looks easy when you are not the one doing it because you don’t see the challenges of this job. In investments, it seems easy to just invest in a good index fund and wait for returns, but most of the time, the price - is accepting volatility (holding without selling in hard times). Market returns are never free and never will be. The volatility/uncertainty fee - the price of returns - …
You and me
Beware of taking financial cues from people playing a different game than you
Ideas
It is important to understand what game you are playing because everyone has different goals, timelines, paths, and styles.
When investing/spending money, you should not be influenced by other people, your heroes, or people you admire.
When you understand the game you play, events occurring worldwide will not affect you in the same way as when you are unclear about your game.
The Seduction of Pessimism
Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you.
Ideas
Expecting things to be great means a best-case scenario that feels flat. Pessimism reduces expectations, narrowing the gap between possible outcomes and outcomes you feel great about.
My expectations were reduced to zero when I was 21. Everything since then has been a bonus.
– Stephen Hawking
When you’ll believe anything
Appealing fictions and why stories are more powerful than statistics
Ideas
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.