Psychology of Money - takeaways

The way we are taught about money is more like physics (with rules and laws) and not enough like psychology (with emotions and nuance) 

1. Everyone understands and treats money differently basis their education, experience, environment etc. They take the information they have and plug it into the unique mental model they have of how the world works 

2. Chance (luck and risk) are both the reality that every outcome in life is also guided by forces other than individual effort. You are one person in a game of 7B people and infinite moving parts. 

3. There is no reason to risk what you have and need for what you don't have and don't need. The ceiling of social comparison is so high that virtually no one will ever hit it. 

4. The magic of compounding is this: shut up and wait. Compounding, like careers and relationships, work best when they have decades to grow. Endurance is key. 

5. Getting wealthy and staying wealthy are two separate skills. The latter requires a good mix of humility and frugality. More than the biggest returns, work towards becoming financially unbreakable and over time, let compounding run wild. 

6. A few long tail events will have the maximum impact on outcomes. 

7. Highest utility of money is independence of doing what you want, whenever. Emergency funds, retirement funds, all create options and independence. 

8. You don't want the watch, you want the respect and admiration of people. Ask yourself if it would actually make you happy if nobody ever got to see it? 

9. Spending money to show people how much money you have is the fastest way to have less money. Fastest way to reduce wealth is to spend money that you don't have. 

10. Want to build more wealth? One way is earning more, an easier way is to increase your savings rate. Your spending should reflect your needs and happiness and not your ego. 

Saving is a hedge against life's inevitable ability to surprise the hell out of you at the worst possible moment. 

11. History is a study of change, Ironically used as a map of the future. Things that have never happened before, happen all the time. 

12. All investors have different goals and time horizons even within the same asset class. Everyone's playing a different game, don't ape what works for someone else. 

13. We are always more likely to believe a story to be true, if we want it to be true. In markets and in life. 

Everyone has an incomplete view of the world, but we form a complete narrative to fill in the gaps. 

14. Planning is important. But what's more important is planning for the plan not going as per plan. 

15. Define the cost of success and be ready to pay it. Nothing comes free.