Real optimists don't believe that everything will be great. That's complacency. Optimism is a belief that the odds of a good outcome are in your favor over time, even when there will be setbacks along the way.

Progress happens too slowly to notice, but setbacks happen too quickly to ignore.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.

A mindset that can be paranoid and optimistic at the same time is hard to maintain, because seeing things as black or white takes less effort than accepting nuance. But you need short-term paranoia to keep you alive long enough to exploit long-term optimism.

In investing you must identify the price of success - volatility and loss amid the long backdrop if growth - and be willing to pay it.

Everyone knows the tangible stuff money buys. The intangible stuff is harder to wrap your head around, so it tends to go unnoticed. But the intangible benefits of money can be far more valuable and capable of increasing your happiness than the tangible things that are obvious targets of our savings. Savings without a spending goal gives you options and flexibility, the ability to wait and the opportunity to pounce. It gives you time to think. It lets you change course on your own terms.

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.

Wen directly compared or weighted against each other, losses loom largee than gains. This assymetry between the power of positive and negative expectations or experiences has an evolutionary history. Organisms that treat threats as more urgent than opportunities have a better chance to survive and reproduce.

If you view "do what you love" as a guide to a happier life, it sounds like empty fortune cookie advice. If you view it as the thing providing the endurance necessary to put the quantifiable odds of success in your favor, you realize it should be the most important part of any financial strategy.

<ol><li>Money is not just a tool for buying things, it also shapes our emotions & attitudes in ways that can be both positive and negative.</li><li>The way we think about money is often irrational & influenced by emotions, which can lead to poor financial decisions.</li><li>The role of luck in financial success is often overlooked, but plays significant role in shaping financial outcomes.</li><li>Social norms & social expectations play a big role in financial behavior & attitudes towards money.</li><li>Understanding psychological & emotional aspects of money can help us make better financial decisions & lead a more fulfilling life.</li></ol>

Key Takeaways

The most important part of every plan is planning on your plan not going according to plan.

"Money is a tool, but it's also an emotional and psychological minefield. It can be a source of security or stress, confidence or fear, independence or dependence. It can be a force for good or for ill. It can be something we can't stand to think about or something we can't stop thinking about. It can be something we hoard or something we waste. It can be something we save or something we borrow. It can be something we invest or something we gamble. It can be something we earn or something we inherit. It can be something we give away or something we keep."

There are many things in life that we think are true because we desperately want them to be true.

Appealing fictions

Long-term financial planning is essential. But things change - both the world around you, and your own goals and desires. It is one thing to say, "We don't know what the future holds." It's another to admit that you, yourself, don't know today what you will even want in the future. And the truth is, few of us do. It's hard to make enduring long-term decisions when your view of what you'll want in the future is likely to shift.

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.

The cornerstone of economics is that things change over time because the invisible hand hates anything staying too good or too bad indefinitely.

The tendency for people to be keenly aware of how much they've changed in the past, but to underestimate how much their personalities, desires, and goals are likely to change in the future.

End Of History Illusion

At every stage of our lives we make decisions that will profoundly influence the lives of the people we're going to become, and then when we become those people, we're not always thrilled with the decisions we made.

Sensible optimism is a belief that the odds are in your favor, and over time things will balance out to a good outcome even if what happens in between is filled with misery.

Humility, kindness, and empathy will bring you more respect than horsepower ever will.

The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. Controlling your time is the highest dividend money pays.

Doing well with money isn’t necessarily about what you know. It’s about how you behave. And behavior is hard to teach, even to really smart people. Money—investing, personal finance, and business decisions—is typically taught as a math-based field, where data and formulas tell us exactly what to do. But in the real world people don’t make financial decisions on a spreadsheet. They make them at the dinner table, or in a meeting room, where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together. In The Psychology of Money, award-winning author Morgan Housel shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life’s most important topics.

books

Books

Doing well with money isn’t necessarily about what you know. It’s about how you behave. And behavior is hard to teach, even to really smart people. Money—investing, personal finance, and business decisions—is typically taught as a math-based field, where data and formulas tell us exactly what to do. But in the real world people don’t make financial decisions on a spreadsheet. They make them at the dinner table, or in a meeting room, where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together. In The Psychology of Money, award-winning author Morgan Housel shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life’s most important topics.

Morgan Housel is a partner at The Collaborative Fund. 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.

MORGAN HOUSEL

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Progress and setbacks