45 lessons from 'The Psychology of Money'

LUCK and RISK:

1. People from different generations, raised by different parents who earned different values, in different parts of the world, born into different economies experiencing different job markets with different incentives and different degrees of luck learn very different lessons. No one is crazy. We all make decisions based on our own unique experiences that seem to make sense to us in a given moment.
2. The challenge for us is that no amount of studying or open-mindedness can genuinely recreate the power of fear and uncertainty.
3. Luck and Risk are siblings. They are both the reality that every outcome in life is guided by forces other than individual effort. 
4. The truth is the quality of your education and the doors that open for you are heavily linked to your parents’ socioeconomic status. 
5. It will get really complex if we try to pick apart how much of an outcome was a conscious decision versus a risk. 
6. The difficulty in identifying what is luck, what is a skill, and what is risk is one o the biggest problems we face when trying to learn about the best way to manage money.
7. As we recognize the role of luck in success, the role of risk means we should forgive ourselves and leave room for understanding when judging failures. 
8. Some people are born into families that encourage education, others are against it. Some are born into flourishing economies encouraging entrepreneurship, others are born into war and destitution. I want you to be successful and I want you to earn it. But realize that not all success is due to hard work and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.
9. Don’t risk what you have and what you need to make money you don’t have and you don’t need. 
10. There are many things never worth risking, no matter the potential gain.
11. Getting money requires taking risks, being optimistic, and putting yourself out there. But keeping things requires the opposite of taking risks. It requires humility, and fear that what you’ve made can be taken away from you just as fast. It requires frugality and an acceptance that at least some of what you have made is attributable to luck, so past success can’t be relied upon to repeat indefinitely. 

How much is ENOUGH?

1. The hardest financial skill is getting the goalpost to stop moving. 
2. Modern capitalism is a pro at two things; generating wealth and generating envy.
3. Life isn’t any fun without a sense of enough. Happiness, as it’s said, is just results minus expectations.
4. “Enough” is not too little. “Enough is realizing that an opposite- an insatiable appetite for more- will push you to the point of regret.
5. Social comparison is the problem here. 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. 
6. Reputation is invaluable, freedom and independence are invaluable, family and friends are invaluable, happiness 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.
7. Survival mindset- More than I want big returns, I want to be financially unbreakable. And if I am unbreakable I actually think I will get the biggest return because I will be able to stick around work wonders.
8. Compounding doesn’t rely on earning big returns. Merely good returns sustained uninterrupted for the longest period of time especially in times of chaos and havoc will always win.
9. Planning is important but the most important part of every plan is to plan on the plan not going according to plan.
10. The margin of safety is one of the most underappreciated forces in finance. The margin of safety is raising the odds of success at a given level of risk by increasing your chances of survival. 

Real OPTIMISM:

1. A barbell personality- Optimistic about what will prevent you from getting to the future is vital.
2. Optimism is usually defined as a belief that things will go well. But that’s incomplete. Sensible optimism is a belief that the odds are in your favor and over time things will balance out to a good outcome even between is filled with misery. 
3. The farthest ends of the distribution of outcomes have a tremendous influence on finances, where a small number of events can account for the majority of outcomes.
4. Real optimism doesn’t believe that everything will be great. That’s complacency. Optimism is a belief that the odds of a good outcome are in your favor over time, even when there will be setbacks along the way. 
5. Not the man who hopes when others despair but the man who despairs when other hope, is admired by a large class of person as a sage.

What is the Value of MONEY?

1. The highest form of wealth is the ability to wake up every morning and say “ I can do whatever I want to do.” The ability to do what you want, when you want, with who you want, for as long as you want is priceless. It is the highest dividend money pay.
2. Money’s greatest intrinsic value is the ability to give you control over your time. To obtain, bit by bit, a level of independence and autonomy that comes from unspent assets that give you greater control over what you can do and when you can do it.
3. Controlling your time is such a key happiness influencer we shouldn’t be surprised that people don’t feel much happier even though ar, on average, richer than ever.
4. Doing something you love on a schedule you can’t control can feel the same as doing something you hate.
5. Having a strong sense of controlling one’s life is a more dependable predictor of positive feelings of well-being than any of the objective conditions of life we have considered.
6. “You might think you want an expensive car, a fancy watch, and a huge house. But I’m telling you, you don’t. What you want is respect and admiration from other people and you think having expensive stuff will bring it. It almost never does especially from the people you want to respect and admire you”.
7. It’s a subtle recognition that people generally aspire to be respected and admired by others and using money to buy fancy things may bring less of it than you imagine.
8. If respect and administration are your goals, be careful how you seek it. “Humility, kindness, and empathy will bring you more respect than horsepower even more.”
9. Wealth is hidden. It’s income not spent. Wealth is an option not yet taken to buy something later.
10. The important thing is that finding more energy is largely out of our control and molded-in uncertainty because it relies on a slippery mix of having the right geology, geography weather, and geopolitics. But more efficient with the energy we use is largely in our control. 
11. Past a certain level of income, what you need is just what sits below your ego. When you define savings as the gap between your ego and your income you realize why many people with decent income save so little.
12. In a world where intelligence is hyper-competitive and many precious technical skills have become automated, competitive advantages tilt toward nuanced and soft skills like communication, empathy, and perhaps most of all flexibility. 
13. History is littered with good ideas taken too far, which are indistinguishable from bad ideas.

MONEY and ERROR:

1. The wisdom in having room for error is acknowledging that uncertainty, randomness, and chance “unknowns” are an ever-present part of life.
2. Two things cause us to avoid room for error.
3. One is the idea that somebody must know what the future holds, driven by the uncomfortable feeling that comes from admitting the opposite.
4. The second is that you’re there for doing yourself harm by not taking actions that fully exploit an accurate view of that future coming true.
5. Spreadsheets are good at telling you when the numbers do or don’t add up. They are not good at modeling how you’ll feel when you tuck your kids in at night wondering if the investment decision you’re made were a mistake that will hurt your child’s future.
6. Having a gap between what you can technically endure versus what’s emotionally possible is an overlooked version of room for error.
7. You can plan for every risk except the things that are too crazy to cross your mind. And those crazy things can do the most harm because they happen more often than you think and you have no plan for how to deal with them.
8. It is one thing to say “we don’t know what the future holds” It is another to admit that you, yourself don’t know today what you will even want in the future.”
9. The trick is to accept the reality of change and move on as soon as possible.
10. 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.
11. Independence doesn’t mean you will stop working. It means you only do the work you like with people you like at the times you want for as long as you want.