#377 - Morgan Housel - The Psychology of Money, Incentives, Investing, & Human Misjudgement

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Feb 11, 2025

Morgan Housel, a bestselling author and finance expert, dives into the psychology of money and investing. He reflects on a life-altering skiing tragedy that reshaped his understanding of risk. The conversation highlights the complexities of wealth, emphasizing that financial success often comes at personal costs. Housel explores the interplay of anger and humor in online discourse, along with the pivotal role behavior plays over mere knowledge in investing. He also discusses teaching kids about money, advocating for resilience over feelings of inadequacy.

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ANECDOTE

Skiing Tragedy

Morgan Housel recounts a ski trip with friends where he narrowly avoided an avalanche that killed them.
This experience drastically lowered his risk tolerance in all aspects of life.

INSIGHT

Experiences Shape Risk Tolerance

Personal experiences shape risk tolerance, often subconsciously.
Disagreements often stem from differing experiences and needs, not necessarily conflicting logic.

INSIGHT

Tribal Nature of Disagreements

Disagreements are often tribal, rooted in different experiences and perspectives.
America's diverse tribes make disagreements starker than in more homogenous countries.

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The Psychology of Money

Timeless Lessons on Wealth, Greed, and Happiness

Morgan Housel

In 'The Psychology of Money,' Morgan Housel delves into the psychological and emotional aspects of financial decisions. The book consists of 19 short stories that illustrate how personal history, worldview, emotions, and biases influence financial outcomes. Housel emphasizes the importance of behavior over knowledge in managing money, highlighting the power of compounding, the dangers of greed, and the pursuit of happiness beyond mere wealth accumulation. He advocates for a frugal lifestyle, long-term perspective, and a balanced approach to investing, stressing that financial success is more about mindset and discipline than about technical financial knowledge[2][3][4].

The snowball

Warren Buffett and the Business of Life

Alice Schroeder

This book provides an unprecedented look into the life and investment philosophy of Warren Buffett. Written by Alice Schroeder, who gained unparalleled access to Buffett and his inner circle, it delves into the complexities and paradoxes of Buffett's life. The book covers his work, opinions, struggles, and triumphs, and highlights key principles such as intrinsic value, margin of safety, and long-term perspective. Buffett’s legacy is not just his wealth, but the principles and ideas that have enriched people’s lives.

Same as Ever

A Guide to What Never Changes

Morgan Housel

In 'Same as Ever,' Morgan Housel presents a master class on optimizing risk, seizing opportunity, and living a fulfilling life by focusing on what remains constant in a changing world. Through engaging stories and examples, Housel shows how understanding permanent truths about human behavior can help readers make better decisions and navigate uncertainties. The book emphasizes the importance of recognizing and adapting to timeless principles in finance, business, and personal life, rather than trying to predict specific future events[2][4][5].

Founders

Jimmy Soni

In this book, Jimmy Soni delves into PayPal’s turbulent early days, drawing from hundreds of interviews and unprecedented access to internal material. He reveals how the collaboration among a rare assemblage of talent, including figures like Elon Musk, Peter Thiel, Max Levchin, and Reid Hoffman, changed the world. The narrative highlights the challenges faced by the company, such as bruising competition, internal strife, and the dot-com bust, and how these individuals went on to influence leading companies like Tesla, Facebook, YouTube, and LinkedIn.