Finance
by Morgan Housel
Why do clever people go broke?
Morgan Housel's answer is that doing well with money has little to do with how smart you are and a lot to do with how you behave. Behaviour is hard to teach, even to very clever people. His book is a set of short chapters about that behaviour.
Hear a sample · read by Laura
Housel treats these as two different skills. Getting money takes risk and optimism. Keeping it takes humility, and a healthy fear that what you've made could be taken away. So he puts survival first, because you need to still be in the game when compounding pays out.
Warren Buffett is a brilliant investor, but Housel points out that most of his fortune arrived after he turned 65. He started investing as a boy and never stopped. His skill is investing. His secret is time.
Housel once worked as a hotel valet. He noticed that when people see a flash car, they barely think about the driver. They picture themselves in it. That's why spending to be admired rarely works, and why real wealth is the car you never bought.
At a billionaire's party, Kurt Vonnegut teased Joseph Heller that their host made more in a day than Catch-22 had ever earned. Heller replied that he had something the man would never have, which was enough. Housel says the hardest money skill is to stop the goalposts moving.
Behaviour
How you behave with money matters more than how much you know about it.
Enough
The hardest thing to learn about money is when to stop wanting more.
Time
Most of Warren Buffett's fortune came from starting as a boy and never stopping.
Room for error
Expect some of your plans to go wrong, so one bad year can't knock you out.
Unseen wealth
Wealth is the money you chose not to spend, which is why nobody can see it.
A story from the book
Ronald Read worked at a petrol station and swept floors in Vermont. When he died, he left millions, most of it to his local hospital and library. Richard Fuscone, a Harvard-educated Merrill Lynch executive, borrowed heavily to live grandly and ended up bankrupt.
Hot take · true or myth?
A slightly irrational money decision can be the smarter one.
True. Housel prefers reasonable to rational. A plan you'll stick with when you're scared, like keeping more cash than a spreadsheet says you need, beats a perfect one you'll abandon.
One thing to try
This week, set up a standing order that moves a fixed sum into savings the day you're paid, with no goal attached. Housel argues you don't need a house or a holiday to save for. Money put aside buys you options, and a cushion when life surprises you.
Knotd has the key ideas from 250+ non-fiction books, each in a few minutes, in plain words. The Psychology of Money comes with a Hot Take round and a Your Move story to make it stick.
Get the whole book on KnotdOpen in the appWhy do clever people go broke? Morgan Housel's answer is that doing well with money has little to do with how smart you are and a lot to do with how you behave. Behaviour is hard to teach, even to very clever people. His book is a set of short chapters about that behaviour.
Getting rich, staying rich; Buffett's real secret; The man in the car; Knowing when it's enough.
This week, set up a standing order that moves a fixed sum into savings the day you're paid, with no goal attached. Housel argues you don't need a house or a holiday to save for. Money put aside buys you options, and a cushion when life surprises you.
Yes. Knotd has the key ideas from The Psychology of Money in a few minutes, in plain words, plus a Hot Take round and a Your Move story to test them. It's one of 250+ non-fiction books in the app.
Thinking, Fast and SlowDaniel Kahneman
