Lessons from Morgan Housel

Morgan Housel, an acclaimed author and partner at The Collaborative Fund, is renowned for his insightful perspectives on personal finance, investing, and human behavior. His work, most notably the best-selling book "The Psychology of Money," offers timeless wisdom on how our cognitive biases and emotional states influence our financial decisions.

On Wealth and Happiness

"Money's greatest intrinsic value—and this can't be overstated—is its ability to give you control over your time." [1][2]
"The highest form of wealth is the ability to wake up every morning and say, 'I can do whatever I want today.'" [3]
"Controlling your time is the highest dividend money pays." [1][2]
"More than your salary. More than the size of your house. More than the prestige of your job. Control over doing what you want, when you want to, with the people you want to, is the broadest lifestyle variable that makes people happy." [4]
"Having a strong sense of controlling one's life is a more dependable predictor of positive feelings of wellbeing than any of the objective conditions of life we have considered." [5]
"Use money to gain control over your time, because not having control of your time is such a powerful and universal drag on happiness." [1][2]
"Independence, to me, doesn't mean you'll 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." [1][2]
"Doing something you love on a schedule you can't control can feel the same as doing something you hate." [1][2]

On Humility and Ego in Finance

"Spending money to show people how much money you have is the fastest way to have less money." [1][2]
"Saving is the gap between your ego and your income." [1][2]
"No one is impressed with your possessions as much as you are." [1][6]
"Be nicer and less flashy. No one is impressed with your possessions as much as you are. You might think you want a fancy car or a nice watch. But what you probably want is respect and admiration. And you're more likely to gain those things through kindness and humility than horsepower and chrome." [7]
"Less ego, more wealth. Saving money is the gap between your ego and your income, and wealth is what you don't see." [1]
"Savings can be created by spending less. You can spend less if you desire less. And you will desire less if you care less about what others think of you." [1][5]
"Today's economy is good at generating three things: wealth, the ability to show off wealth, and great envy for other people's wealth." [8]

On Behavior and Mindset

"Doing well with money has a little to do with how smart you are and a lot to do with how you behave." [4][6]
"Financial success is not a hard science. It's a soft skill, where how you behave is more important than what you know." [3][5]
"A genius who loses control of their emotions can be a financial disaster. The opposite is also true. Ordinary folks with no financial education can be wealthy if they have a handful of behavioural skills that have nothing to do with formal measures of intelligence." [6][7]
"Napoleon's definition of a military genius was, 'The man who can do the average thing when all those around him are going crazy.'" [1][2]
"Your personal experiences with money make up maybe 0.00000001% of what's happened in the world, but maybe 80% of how you think the world works." [6]
"We all do crazy stuff with money, because we're all relatively new to this game and what looks crazy to you might make sense to me. But 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." [9]

On Risk, Luck, and Uncertainty

"Risk is what's left over when you think you've thought of everything." [1][3]
"Things that have never happened before happen all the time." [1][2]
"The line between inspiringly bold and foolishly reckless can be thin. Risk and luck, in different circumstances, can tilt the balance." [3]
"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." [1][2]
"If you give luck and risk their proper respect, you realize that when judging people's financial success—both your own and others'—it's never as good or as bad as it seems." [9]
"Success is a lousy teacher. It seduces smart people into thinking they can't lose." [1][3]
"When things are going extremely well, realize it's not as good as you think. You are not invincible, and if you acknowledge that luck brought you success then you have to believe in luck's cousin, risk, which can turn your story around just as quickly." [6][7]

On Planning and Long-Term Thinking

"Planning is important, but the most important part of every plan is to plan on the plan not going according to plan." [1][2]
"A plan is only useful if it can survive reality." [4]
"Growth is driven by compounding, which always takes time. Destruction is driven by single points of failure, which can happen in seconds, and loss of confidence, which can happen in an instant." [1][2]
"Compounding only works if you can give an asset years of uninterrupted growth. It is crucial to avoid interrupting it unnecessarily." [3]
"Endurance is key. And when you consider our tendency to change who we are over time, balance at every point in your life becomes a strategy to avoid future regret and encourage endurance." [4]
"The best financial plan is to save like a pessimist and invest like an optimist." [8]
"Progress happens too slowly to notice, but setbacks happen too quickly to ignore." [1][2]

On Getting and Staying Wealthy

"Getting rich and staying rich are different things that require different skills." [6][7]
"Getting money requires taking risks, being optimistic, and putting yourself out there. But 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." [9]
"There is no reason to risk what you have and need for what you don't have and don't need. It's one of those things that's as obvious as it is overlooked." [5]
"Survival is the ultimate measure of success." [10]
"Building wealth has little to do with your income or investment returns, and lots to do with your savings rate." [9][11]

On History and Human Nature

"I love Voltaire's observation that 'History never repeats itself; man always does.'" [1][2]
"Greed and fear drive human behavior. Despite advances in technology and knowledge, people still react to financial gains and losses in the same way they did centuries ago." [10]
"Predicting what the world will look like fifty years from now is impossible. But predicting that people will still respond to greed, fear, opportunity, exploitation, risk, uncertainty, tribal affiliations, and social persuasion in the same way is a bet I'd take." [8][12]
"The wise in all ages have always said the same thing, and the fools, who at all times form the immense majority, have in their way, too, acted alike, and done just the opposite." (quoting Arthur Schopenhauer) [12]

Timeless Learnings

Embrace uncertainty as the only certainty. Housel emphasizes that preparing for the unknown by diversifying risks and maintaining flexibility is more crucial than attempting to predict the future. [10]
Wealth is a mindset, not just a number. True wealth is the freedom to make life choices without financial stress, which requires discipline and prioritizing freedom over luxury. [10]
The power of storytelling over statistics. People are more influenced by stories than by data. Understanding this helps in making more rational decisions by recognizing the narratives that shape our own and others' financial behaviors.
The long run is usually good, the short run is usually bad. This perspective encourages a balance of short-term paranoia to survive and long-term optimism to build wealth. [13]
People play different games. Investors have different goals and time horizons, which can make their actions seem irrational to others. Recognizing this can prevent you from being influenced by the financial decisions of those not playing the same game as you. [6]
The first rule of a happy life is low expectations. Managing expectations is key to contentment. Appreciating progress rather than chasing an elusive perfection leads to greater happiness. [13][14]

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