The Psychology of Money

tl;dr: We all deal with it. We all deal with it differently. Lessons on how to become wealthy.

My friend, Tom, generously sent me a copy of?The Psychology of Money: Timeless lessons on wealth, greed, and happiness . My brother had been talking it up as well, so I was excited to dive in.

Part?“Millionaire Next Door” , it’s full of solid advice for becoming wealthy (as opposed to rich).

I told my kids that it’s required reading for all of them before they leave the house.

Why was it so good and what did it say?

Aside from the common sense (at least to me) suggestions for things like “live below your means” and “don’t get caught up in the rat race of consumption,” I really appreciated the idea of “you don’t need a reason to save.”

As the author says, “life throws you more curveballs than you expect,” which is something I’ve always tried to teach my kids.

Shit is going to happen and things will be a LOT better if you have backups than if you don’t and backups (as well as wealth) amass over time.

I’ve seen this up close and personal in the crypto space. It’s VERY tempting to go after the big 10x or 50x or even the 100x returns and, yes, they do happen and, of course, I played that game back in the day. Sometimes you get lucky, but sometimes you get rekt (as we like to say in crypto).

The other side is HODL– Hold on for Deal Life and find the few that you think are going to be of value over the long run and just hang on, recognizing that the ups and downs will inevitably be there, resist trying to time the market, and allow time and, in some cases, the power of compounding interest to do its thing.

I was pleasantly surprised the other day when I went to?Uniswap ?with an account that I hadn’t touched in a while. Apparently, I had added some liquidity to a trading pair waaaay back and, wouldn’t you know it, I had a nice amount of earnings there. It was a solid reminder that sometimes the best strategy is do nothing.

As an aside (and more on this in a future blog post), I was going to migrate my liquidity to Uniswap v3, but even though I have read about how to do ranges of trading pair liquidity, I found it extremely confusing and was concerned that I was going to miss something and end up losing. This was covered nicely in a?Epicenter ?podcast I was listening to on?Curve .

Anyway, the point is that trying to outsmart the market is, in the long run, a very dangerous game. In fact, this philosophy stands behind the?Crypto Futura Fund , where our strategy is buy-and-hold. We rebalance on occasion, but not too frequently. We have a thesis and an algorithm and we stick to it.

One other point that came home for me, and this is a tough one to get your head around, because I’ve always heard the saying “you can never be too thin or have too much money.” The reality is that you can be too thin…which means that having too much money may be a thing.

There’s a part of the Old Testament where Jacob is having a moment of reckoning and he is able to say with full confidence, “I have enough.” It’s a powerful moment of self-actualization because once you achieve that point, you are able to mentally free yourself from the game that others are playing….acquisition.

Housel, the author, does a great job throughout of reminding us that, on the surface, it looks like we are all playing the same game, but in reality, we all have different hopes/dreams/aspirations so we’re not. As long as you look externally for some type of validation, you’re going to end up unhappy.

Saying “I have enough” is a moment of liberation.

I also thought Housel did a great job of putting the concept of acquisition (and debt) into a larger historical context. It was a national policy following World War II to get the country out of a war footing and away from a recession. Eighty years later, we have climate change and landfills.

In his epilogue, Housel talks about what has happened as the promise of “a car in every driveway and a?chicken in ev ery pot” becomes increasingly out of reach for some, while a few continue to benefit greatly. It’s led to things like Trump, Brexit, Occupy Wall Street, and…. Bitcoin.

As he writes poignantly at the end…

“But a central theme of this story is that expectations move slower than reality on the ground. That was true when people clung to 1950s expectations as the economy changed over the next 35 years. And even if a middle-class boom began today, expectations that the odds are stacked against everyone but those at the top may stick around.

So the era of ‘This isn’t working” may stick around.

And the era of “We need something radically new, right now, whatever it is” may stick around.

Which, in a way, is part of what starts events that led to things like World War II, where this story began.

History is just one damned thing after another.”

Things are going to change, faster, and in unexpected ways. Putting yourself and your family in a position to weather the storms is not only responsible, it’s smart.

This book gives you the recipe.