"The Psychology of Money" by Morgan Housel - Book Review
Summary
"Doing well with money isn’t necessarily about what you know. It’s about how you behave. And behavior is hard to teach, even to really smart people.
Money - investing, personal finance, and business decisions - is typically taught as a math-based field, where data and formulas tell us exactly what to do. But in the real world 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.
In The Psychology of Money, award-winning author Morgan Housel shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life’s most important topics."
Review
As someone interested in finance and economics, and also studying psychology, this New York Times Best Seller has a direct allure because of its title. The author has good credentials in the field, and the book is widely renowned, which prompted me to pick it up. However, I must admit that I expected it to offer more depth than it actually does. While it is a fun and easy read, it primarily consists of random anecdotes about people's behaviour and wealth creation. There are occasional sparks of wisdom scattered throughout, but overall, the content feels disjointed and may not engage readers who already have some background knowledge on the subjects. I was hoping for a thorough exploration of how brain functions and psychology influence human perceptions of scarcity and abundance in decision-making, but I was ultimately disappointed, despite the book providing some practical advice, such as trusting in the power of compounding and the passage of time.
Key Takeaways
- Being well-off is more related to behaviour than being smart
- There is no one-size-fits-all formula for making financial decisions; each person is unique and must make choices based on their individual needs
- One of the most powerful tools you can rely on is the impact of compounding
Who Should Read This
Individuals seeking an easy read with practical advice about the psychology behind our financial decisions, along with fun anecdotes regarding economics and societal changes.
Favourite Quotes
"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."
"“It’s not whether you’re right or wrong that’s important,” George Soros once said, “but how much money you make when you’re right and how much you lose when you’re wrong.” You can be wrong half the time and still make a fortune."
"The hardest thing about this was that I loved the work. And I wanted to work hard. But doing something you love on a schedule you can’t control can feel the same as doing something you hate."
Rating
⭐⭐⭐ (3/5 stars)