Morgan Housel published this masterpiece in 2020 and the book’s premise is; doing well with money has a little to do with how smart you are and a lot to do with how you behave.
The following are 100 best quotes I collected from this book:
1. Financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know.
2. History never repeats itself; man always does.
3. Every financial decision a person makes, makes sense to them in that moment and checks the boxes they need to check. They tell themselves a story about what they’re doing and why they’re doing it.
4. Luck and risk are siblings. They are both the reality that every outcome in life is guided by forces other than individual effort.
5. It is so important to remember when judging success — both your own and others’: “Nothing is as good or as bad as it seems.”
6. The accidental impact of actions outside of your control can be more consequential than the ones you consciously take.
7. 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.
8. Studying a specific person can be dangerous because we tend to study extreme examples — the billionaires, the CEOs, or the massive failures that dominate the news — and extreme examples are often the least applicable to other situations, given their complexity.
9. You’ll get closer to actionable takeaways by looking for broad patterns of success and failure. The more common the pattern, the more applicable it might be to your life.
10. Bill Gates once said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”
11. The trick when dealing with failure is arranging your financial life in a way that a bad investment here and a missed financial goal there won’t wipe you out so you can keep playing until the odds fall in your favor.
12. As much 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.
13. The hardest financial skill is getting the goalpost to stop moving.
14. Modern capitalism is a pro at two things: generating wealth and generating envy. Perhaps they go hand in hand; wanting to surpass your peers can be the fuel of hard work. But life isn’t any fun without a sense of enough.
15. Happiness, as it’s said, is just results minus expectations.
16. The point is that the ceiling of social comparison is so high that virtually no one will ever hit it. Which means it’s a battle that can never be won.
17. “Enough” is realizing that the opposite — an insatiable appetite for more — will push you to the point of regret.
18. Reputation is invaluable. Freedom and independence are invaluable. Family and friends are invaluable. Being loved by those who you want to love you 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.
19. You don’t need tremendous force to create tremendous results.
20. If something compounds — if a little growth serves as the fuel for future growth — a small starting base can lead to results so extraordinary they seem to defy logic.
21. Buffett’s fortune isn’t due to just being a good investor, but being a good investor since he was literally a child.
22. The point is that what seem like small changes in growth assumptions can lead to ridiculous, impractical numbers.
23. It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time. That’s when compounding runs wild.
24. There are a million ways to get wealthy, and plenty of books on how to do so. But there’s only one way to stay wealthy: some combination of frugality and paranoia.
25. Getting money is one thing. Keeping it is another.
26. Keeping money requires the opposite of taking risk. It requires humility, and fear that what you’ve made can be taken away from you just as fast
27. Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.
28. A plan is only useful if it can survive reality. And a future filled with unknowns is everyone’s reality.
29. The more you need specific elements of a plan to be true, the more fragile your financial life becomes.
30. Room for error — often called margin of safety — is one of the most underappreciated forces in finance. It comes in many forms: A frugal budget, flexible thinking, and a loose timeline.
31. Conservative is avoiding a certain level of risk. Margin of safety is raising the odds of success at a given level of risk by increasing your chances of survival.
32. Most of our attention goes to things that are huge, profitable, famous, or influential. When most of what we pay attention to is the result of a tail, it’s easy to underestimate how rare and powerful they are.
33. The idea that a few things account for most results is not just true for companies in your investment portfolio. It’s also an important part of your own behavior as an investor.
34. Your success as an investor will be determined by how you respond to punctuated moments of terror, not the years spent on cruise control.
35. A good definition of an investing genius is the man or woman who can do the average thing when all those around them are going crazy.
36. When you accept that tails drive everything in business, investing, and finance you realize that it’s normal for lots of things to go wrong, break, fail, and fall.
37. Peter Lynch is one of the best investors of our time. “If you’re terrific in this business, you’re right six times out of 10,” he once said.
38. Something I’ve learned from both investors and entrepreneurs is that no one makes good decisions all the time. The most impressive people are packed full of horrendous ideas that are often acted upon.
39. The good jokes I see on Netflix are the tails that stuck out of a universe of hundreds of attempts.
40. When we pay special attention to a role model’s successes we overlook that their gains came from a small percent of their actions.
41. “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.”
42. The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want today.”
43. 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 pays.
44. Doing something you love on a schedule you can’t control can feel the same as doing something you hate.
45. People like to feel like they’re in control — in the drivers’ seat. When we try to get them to do something, they feel disempowered.
46. Take it from those who have lived through everything: Controlling your time is the highest dividend money pays.
47. When you see someone driving a nice car, you rarely think, “Wow, the guy driving that car is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.”
48. 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.
49. If respect and admiration are your goal, be careful how you seek it. Humility, kindness, and empathy will bring you more respect than horsepower ever will.
50. Wealth is what you don’t see.
51. We can’t see people’s bank accounts or brokerage statements. So we rely on outward appearances to gauge financial success.
52. It’s not hard to spot rich people. They often go out of their way to make themselves known.
53. Exercise is like being rich. You think, “I did the work and I now deserve to treat myself to a big meal.” Wealth is turning down that treat meal and actually burning net calories. It’s hard, and requires self-control.
54. The world is filled with people who look modest but are actually wealthy and people who look rich who live at the razor’s edge of insolvency.
55. Building wealth has little to do with your income or investment returns, and lots to do with your savings rate.
56. Wealth is just the accumulated leftovers after you spend what you take in.
57. A high savings rate means having lower expenses than you otherwise could, and having lower expenses means your savings go farther than they would if you spent more.
58. Spending beyond a pretty low level of materialism is mostly a reflection of ego approaching income, a way to spend money to show people that you have (or had) money.
59. When you define savings as the gap between your ego and your income you realize why many people with decent incomes save so little.
60. People with enduring personal finance success — not necessarily those with high incomes — tend to have a propensity to not give a damn what others think about them.
61. Savings can be created by spending less. You can spend less if you desire less.
62. You will desire less if you care less about what others think of you.
63. Saving does not require a goal of purchasing something specific. You can save just for saving’s sake. And indeed you should.
64. Saving is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment.
65. Savings without a spending goal gives you options and flexibility, the ability to wait and the opportunity to pounce. It gives you time to think. It lets you change course on your own terms.
66. When you don’t have control over your time, you’re forced to accept whatever bad luck is thrown your way. This is a hidden return on your savings.
67. A question you should ask as the range of your competition expands is, “How do I stand out?”
68. Intelligence is not a reliable advantage in a world that’s become as connected as ours has. But flexibility is.
69. Having more control over your time and options is becoming one of the most valuable currencies in the world.
70. Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable.
71. Acting on investment forecasts is dangerous. But I get why people try to predict what will happen next year. It’s human nature. It’s reasonable.
72. Things that have never happened before happen all the time.
73. History helps us calibrate our expectations, study where people tend to go wrong, and offers a rough guide of what tends to work. But it is not, in any way, a map of the future.
74. Realizing the future might not look anything like the past is a special kind of skill that is not generally looked highly upon by the financial forecasting community
75. The Intelligent Investor is one of the greatest investing books of all time. But I don’t know a single investor who has done well implementing Graham’s published formulas.
76. Recent history is often the best guide to the future, because it’s more likely to include important conditions that are relevant to the future.
77. General things like people’s relationship to greed and fear, how they behave under stress, and how they respond to incentives tend to be stable in time. The history of money is useful for that kind of stuff.
78. Specific trends, specific trades, specific sectors, specific causal relationships about markets, and what people should do with their money are always an example of evolution in progress. Historians are not prophets.
79. You have to give yourself room for error. You have to plan on your plan not going according to plan.
80. The wisdom in having room for error is acknowledging that uncertainty, randomness, and chance — “unknowns” — are an ever-present part of life.
81. “The best way to achieve felicity is to aim low,” says Charlie Munger.
82. The idea is that you have to take risk to get ahead, but no risk that can wipe you out is ever worth taking.
83. A good rule of thumb for a lot of things in life is that everything that can break will eventually break.
84. The biggest single point of failure with money is a sole reliance on a pay check to fund short-term spending needs, with no savings to create a gap between what you think your expenses are and what they might be in the future.
85. The most important part of every plan is planning on your plan not going according to plan.
86. We should avoid the extreme ends of financial planning. Assuming you’ll be happy with a very low income, or choosing to work endless hours in pursuit of a high one, increases the odds that you’ll one day find yourself at a point of regret
87. Some of the most miserable workers I’ve met are people who stay loyal to a career only because it’s the field they picked when deciding on a college major at age 18.
88. The trick is to accept the reality of change and move on as soon as possible.
89. Everything has a price, and the key to a lot of things with money is just figuring out what that price is and being willing to pay it
90. Like everything else worthwhile, successful investing demands a price. But its currency is not dollars and cents. It’s volatility, fear, doubt, uncertainty, and regret — all of which are easy to overlook until you’re dealing with them in real time
91. The question is: Why do so many people who are willing to pay the price of cars, houses, food, and vacations try so hard to avoid paying the price of good investment returns?
92. I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage
93. There is an iron law in economics: extremely good and extremely bad circumstances rarely stay that way for long because supply and demand adapt in hard-to-predict ways
94. We need to believe we live in a predictable, controllable world, so we turn to authoritative-sounding people who promise to satisfy that need.
95. 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.
96. It can’t be overstated: there is no greater force in finance than room for error, and the higher the stakes, the wider it should be.
97. I don’t know what I don’t know. So I am just as susceptible to explaining the world through the limited set of mental models I have at my disposal.
98. Hindsight, the ability to explain the past, gives us the illusion that the world is understandable. It gives us the illusion that the world makes sense, even when it doesn’t make sense
99. Risk is what’s left over when you think you’ve thought of everything.
100. Expecting things to be bad is the best way to be pleasantly surprised when they’re not.
“My investing strategy doesn’t rely on picking the right sector, or timing the next recession. It relies on a high savings rate, patience, and optimism that the global economy will create value over the next several decades” — Morgan Housel