Book Review : Psychology of Money

May 30, 2021

TIMELESS LESSONS ON WEALTH,GREED AND HAPPINESS

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 YOU NEED TO BE REASONABLE WITH OTHERS AND RATIONAL WITH YOURSELF

 

GENRE  Guide,Personal Finance

AUTHOR Morgan Housel

PAGES 256

YEAR OF PUBLISH  2020

 

 

 

                    ABOUT THE AUTHOR

 Morgan Housel is a partner at The Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal.He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, winner of the New York Times Sidney Award, and a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism. He lives in Seattle with his wife and two kids

 

SUMMARY OF PSYCHOLOGY OF MONEY 

Why some people remain mediocre even when they were rich? Why some people become rich even with less income? The book focuses on personal finance from the lens of psychological behavior. You don't have to smarter than others, you need to be more disciplined. Author says, humans are not logical but psychological. We make decisions that we feel are correct. Later we justify it from logic. 

 


The book talks about our behavior with respect to money. We perceive the world from our frame of reference, our upbringing style and people around us.  It affects our financial future.

 

Author argues, success cannot happen only by hard-work or merit. Luck plays and important role. Bill Gates happened to be one of lucky child who got exposed to computers at early age. This theory is better discussed in Fooled by Randomness.

 

To manage and create wealth it is important to classify which things in life are worth taking risks. Wealth is what you dont see, what creates value. It is generally undervalued. Your health,family,friends,love, and network should be your highest priority. You can understand more from The Richest Man in Babylon.

 

 

 

 

Planning is important. But what is more important is to plan if your plan fails. Investments is a good practice to create money. But they are always subjected to risk. You must invest after savings. Diversifying the risks, reduces the chances of failures in long run. You must be disciplined and persistent to have investments for long run to see the magic of compound effect. The detailed psychology is in The Intelligent Investor.


There will always be surprises. In your life and in stocks, your forecast will go wrong. So how to react and prepare?. Daniel Kahnemman, author of Thinking Fast and Slow says 

"Whenever we are surprised by something,even if we admit that we made a mistake, we say. 'Oh I will never make that mistake again. But, in fact, what you should learn when you make a mistake because you did not anticipate something in that world is difficult to anticipate. That's the correct lesson from surprises: that world is surprising."

 

In the end author confesses his financial behavior and  beliefs. The purpose of creating wealth is to have independence. To seek happiness and satisfaction. But money is just a number and numbers are infinite. Therefore wealthy people look for happiness in small activities like exercise, reading, playing and praying. Think and Grow Rich


BOOK REVIEW PSYCHOLOGY OF MONEY (Blunt)

Have you ever attended any motivational speaker secession?  Reading this book is just like that. Are you are new to this genre? Yes? There is a good chance you will be MOTIVATED.  

 

 If you only want to be motivated then you dont need to read rest of the review.


Majority of my reads are non fiction.  These books are someones life's work. When i pick up a non-fiction, i expect profoundness, depth,extensive research and multiple perspectives. Psychology of Money lacks everything. It has unstructured content, full of references and the learning is almost negligible. And certainly, what is discussed in the book is not "Psychology". It is more like a secondary knowledge derived from other books.



"A theory is - which can be applied to maximum  observations with some exceptions.

The approach of author is  'to study the past, create a theory, find few examples from past supporting theory and validate it from famous psychology books. 


THAT IS NOT HOW A THEORY WORKS !! 

 

What about examples that defies your theory? I have plenty in my knowledge.  Author's observations are not even empirical. These are just some vague thoughts looking for validations. 

Let me simulate what author did.  I  graduated from xyz college. Now, i will create a theory why my graduation was bound to happen from that college . Then, I will refer a famous book and look for the lines that validates my theory. The lessons author discussed in limited scope can be better understood by reading that book.

This will be first book on Review Before Read which will not be recommended.  Two stars for the courage of publisher and promoters.


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2 comments:

  1. Accurate review. The book was obviously sub-par in quality laced with some wishful thinking which the writer tried to pass off as a theory without an experiment or sample with more exceptions than the instances supporting his "theory".

    ReplyDelete
  2. Hahahah.
    Two stars for publishers and promotors. Its true, they have done good marketing around it.
    Thanks Abhishek for the review. Hope your words reach masses.

    ReplyDelete

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