The book itself is a short read – 203 pages in total from cover to cover. This is not an attempt to summarise Housel’s writing, however a piece which fetches notes from the book that I found extremely useful and would want to revisit again. Also as Naval Ravikant says 😛

“Don’t give me the lecture, give me the book. Don’t give me the book, give me the blog post. Don’t give me the blog post, give me the tweet. Don’t give me the tweet, I already know!”

I’ll try to begin with summarising the essence of the book in 3 lines

• How well you keep money, and not how much you earn determines how financially independent you are in the long run.
• Financial independence/success has very little to do with hard science and investing. It is more to do with the soft skill of how you think about and behave with money.
• Everything has a cost. It is not possible to not pay a cost for tangible gains. Cost is something which is not visible when success is seen and hence often ignored/underestimated.

Themes to Explore

I found themes quite similar both in terms of money and life, so have tried to keep themes explored general. I find the term financial everywhere in the book and this post easily replaceable with life.

Everyone Is Smart

• Experiences shape humans. Everyone experiences only a fraction (0.0000000001%) of all things that can possibly be experienced. 70-80% of our understanding of how the world works, if however shaped by these tiny experiences. Hence we are unable to appreciate why someone else does something which seemingly looks outrageous/crazy.
• Some people make financial decisions at a dinner table. Some via spreadsheet. Some based on their older generation’s experience. Strategy’s make sense only to the person who follows that strategy.
• A lot of what is investment strategy/market movement is emotions. Emotions don’t have formulas. One should be vary of banking too much on emotion prediction. Richard Feynman said

“Imagine how much harder would physics be if electrons had emotions.”

Luck And Risk

• Other’s failures often can be attributed to bad decision making and poor foresight. Personal ones however seem to have happened because you were on the bad side of luck. And it should be that way, because while making the decision you always convince yourself why it makes sense and how it will give returns in the future.

“The line between ‘inspiringly bold’ and ‘foolishly reckless’ can be a millimetre thick and only visible with hindsight. Risk and luck are doppelgängers.”

• One should focus less on success of individuals but more on broad patterns. Chances are strokes of luck can make someone very admirable, however patterns can’t be false.
• Some things are not worth risking whatever may be the potential gain.

A Moving Goal Post

• Capitalism not only generates huge amounts of wealth but also generates ENVY is enormous amounts. A financial/life goal post that keeps moving further ahead into horizon as you keep getting closer might be a fuel for working hard but happiness only comes with the sense of ENOUGH.
• Enough is not too little however. Enough is realising when it gets stressful, when it is leading to unending misery. Those 3% extra returns, those if only scenarios. Most people stop only when they either break or are forced to. Learning when to stop is an art. Rajat Gupta is an example 😄
• A side read – Voluntary Simplicity: Toward a Way of Life that is Outwardly Simple, Inwardly Rich by Duane Elgin.
• Learning to be happy with less money creates a gap between what you have and what you want—similar to the gap you get from growing your paycheck, but easier and more in your control. 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.

“Wealth is just the accumulated leftovers after you spend what you take in. And since you can build wealth without a high income, but have no chance of building wealth without a high savings rate, it’s clear which one matters more.”

• The most powerful way of becoming rich is not by increasing your earnings but by increasing your humility.

TIME Is The Secret Sauce

• Warren buffet, (ah how many times will this be mentioned). His skill is investing however his weapon is time. $81.5 billion of Warren Buffett’s $84.5 billion net worth came after his 65th birthday.
• High outputs (again read financial, or life skill) come from average or above average returns given time to compound. Something you can stick with over a longer period of time generates much more than a quick hundred dollars here/there.
• Staying wealthy is tougher than getting wealthy. Rihanna sued her financial manager for losing a lot of money. Financial manager said they thought it wasn’t necessary to tell her that spending a lot of money on things would make her less on account balance more on things.
• To be financially unbreakable you need to save money, over time. Not saving for a goal as such. Just saving for the sake of it.

“There are a million ways to get wealthy … but there’s only one way to stay wealthy: some combination of frugality and paranoia.”

• Most dangerous words in investing (and if I haven’t already mentioned enough, as is the case in life as well) are “This time it’s different”. Chances are, we will underestimate outlier events which move the needle the most. Hence to keep what you have and also growing on the side requires giving time for things to grow without getting too excited or too dejected.
• History can be a misleading guide to the future of the economy and stock market because it doesn’t account for structural changes that are relevant to today’s world. Hence understanding time and banking on it is always the best strategy.

ROI And Error

• The ability to do what you want, when you want and for as long as you want has infinite ROI. And you need to plan for this kind of independence.
• The most important part of every plan is planning on your plan not going according to plan.
• There will always be room for error in all your plans (financial or life). Being ready for contingencies is the only way to plan for those. We think black swan events happen once in a lifetime and we will be able to evade them. No. Things that never happened in the past happen all the time.
• Margin of safety is the most effective way of navigating through this world which is governed by odds, not certainties. And almost everything related to money exists in this kind of the world.
• Single points of failure need to be avoided in life. Based on the theory that, if anything there is in this world which can break-will break, it is intelligent to have multiple support blocks for the life/financial strategy you build as removing one block doesn’t raze the building to the ground.
• Having more control over our own time is becoming more and more costly in today’s world. We can achieve it only by having a financial strategy that doesn’t break easy and can take load when time comes. It helps in unwinding a bit and taking life at our own pace rather than running on a treadmill configured with a sprinter’s pace.

“Savings in the bank that earn 0% interest might actually generate an extraordinary return if they give you the flexibility to take a job with a lower salary but more purpose, or wait for investment opportunities that come when those without flexibility turn desperate.”

Paradox And Fees

• People watch other’s with expensive things and want to own those things. They do not want to become other people. However when people go out to buy the expensive things they assume that by owning the object they themselves become a pice of admiration.
• You never watch the man driving a ferrari but always desire that the car be yours. Using their wealth to satisfy your own hunger.

“No one is impressed with your possessions as much as you are.”

• No one tells you the things they had to pay as fee to own something that is desired by all. Rich is current income. It is what you see. Wealth is hidden. It’s income not spent. Wealth is an option not yet taken to buy something later. Its value lies in offering you options, flexibility, and growth to one day purchase more stuff than you could right now.
• All things have a price to be paid for them. Nothing comes for free. However, some prices do not appear on labels.
• Price to pay to for investment and related gains is not measured in dimes or rupees. Its fees is volatility, fear, doubt, uncertainty, and regret—all of which are easy to overlook until you’re dealing with them in real time.
• Most people think of wealth getting wiped out in some period of time as Fine. Humans don’t like paying fines. Hence they pull their capital out. Thinking of it like fee however can help you keep at it.
• It is important to define the cost of success and thinking of it as a fee for the gains instead of as a fine. Markets have as much authority to take things away from you as they have to make it double for you.

Believe Everything

• Stories make us believe everything. We tell us stories to convince ourselves that we are in control. We tell us stories to convince us that we have everything sorted and concocted a strategy that can never fail.
• As said earlier, we have an incomplete view of the world in terms of experiences and facts but we tend to fill the gaps with the help of narratives.
• Incentives are the most important motivators to tell a convincing story. Rather than accept that we don’t know stuff, we will help fuel our thought in a way to achieve the incentives. This brings in a lot of room for error and thus leads to some stark stories of misery, reckless decision making.
• Daniel Kahneman:

“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. That’s a big deal in producing mistakes in many fields.”

These are the themes that I just wanted to write about, so that it keeps helping me in the future. Re-reading books is tough but remembering what your read with keywords is easy.

This piece of text can in no way replace reading the complete book. There are some “GOOD STORIES” that Morgan has accumulated to drive home his incredible points.

Key Takeaway: Soft skills and values like low ego, humility, simplicity etc. are the most important ingredients for creating wealth and not exceptional investment strategies. Good investment strategies, with average or above average returns couples with loads of time can product results which are inexplicable. And there is no such happiness and calm like the freedom to do whatever you want, whenever you want and for a length of time you want which ultimately comes only from having a healthy savings balance to bank on.

For recommendation on books that you want me to write on please comment.

General investing life money psychology savings vision