Wealth, Happiness, and Greed
Morgan Housel is a partner at the Collaborative Fund. He was previously a columnist at 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, the New York Times Sidney Award, and a two-time finalist for the Gerald Loeb Award for Distinguished Business Writing. Barry Ritholtz, a host of Bloomberg Radio’s Masters in Business, names Morgan Housel as the most popular writer in finance today.
In his book, The Psychology of Money, Housel offers valuable insights on wealth, happiness, and greed. The book examines how people behave with money and emphasizes the importance of understanding psychology, sociology, history, biology, and politics when learning about money management. There are 19 short chapters, each of which can be read independently. The book also identifies why people do not feel much happier even though they are richer than ever and explains the ability to control time is a key happiness influencer. The narrative underscores that using money to buy time and options has a lifestyle benefit few luxury goods can compete with.
The Psychology of Money shares the story of Bill Gates’s wealth to examine the challenge of discerning between luck, skill, and risk – a major challenge in understanding the best approach to managing money. In 1968, Lakeside School in Seattle housed about 200 high-school-age students. The school had the combination of cash and foresight to acquire a computer. Bill Gates, by sheer luck, happened to be one of the few who experienced this one-in-a-million opportunity. While there is no doubt that Bill Gates is staggeringly smart and hardworking with a vision for computers, the book raises questions about the role of luck in building wealth.
The book then illustrates the story of Warren Buffett as an example of how compounding plays a pivotal role in building wealth. Housel emphasizes a fundamental fact: Buffett’s fortune does not solely result from being a good investor, but from consistently investing for three quarters of a century. Being a savvy investor and managing finances well involves understanding that growth is driven by compounding, a process that always takes time. The Psychology of Money serves as a reminder that the most important aspect of every financial plan is preparing for a plan that might not go according to plan. The story about Bernie Madoff in the book elucidates why some of the most sophisticated investors in the world were ensnared in Bernie’s Ponzi scheme.
The Psychology of Money features numerous stories and historical accounts of financial events that underscore the significance of savings, the reality that nothing comes for free, the importance of contentment, and the influence of pessimism. Upon finishing the book, it becomes evident that not all success comes from hard work and not all poverty is a result of laziness. Wealth, as described by Housel, is often hidden. The true value of wealth lies in the opportunities, flexibility, and control over time that afford you the option to change careers, retire early, or experience freedom from worry. Readers could benefit from this easily digestible finance book by Housel.
