Money is about narrative as much as it is about math. We see this in the bank run on SVB, on our willingness to negotiate our pay, save for a rainy day, or buy a house. I know Harvard MBA's who feel hopelessly lost about their personal finances and angel investors who have never considered putting money in the stock market.
Growing up as a first-generation immigrant family, I absorbed many lessons on scarcity around money that I've had to unlearn and rewrite (sometimes overcorrecting to my detriment). Morgan Housel has written one of the best books on the stories and emotions around money and I hope you enjoy some of the snippets from my book notes on "The Psychology of Money".
—Jason
🧠 3 Insights from "The Psychology of Money" by Morgan Housel
The Psychology of Money
As a former journalist and partner at a venture capital fund, Housel turns his viral article on the cognitive and emotional narratives we have around money into a highly readable and practical guide for staying sane and being more effective about money.
4. Everyone Does Money Differently
"People do some crazy things with money. But no one is crazy. Here’s the thing: People from different generations, raised by different parents who earned different incomes and held different values, in different parts of the world, born into different economies, experiencing different job markets with different incentives and different degrees of luck, learn very different lessons."
This idea that what looks irrational to you can be totally rational or at least reasonable for somebody else. That can be anything from a difference between day traders to long-term investors to people who don't invest in the market at all.
"Americans spend more money on lottery tickets than on movies, video games, music, sporting events and books combined, and it's mostly by poor people."
Housel points out that many poor people value the hope that lottery tickets bring because it's hard to get excited about the idea of putting a dollar or two away every week and hoping that over a 50 year period, that can compound to something real. The lottery is a chance to be whisked away to some fantasy where you all of a sudden are incredibly wealthy. While that fantasy is unlikely to come true, it still feels good in the moment and this shouldn't be judged when it's such a common response to scarcity.
9. Success Is a Lousy Teacher
"After my son was born, I wrote him a letter that said, in part:... I want you to be successful, and I want you to earn it. But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself."
This sense of what should you learn from success and what should you learn from failure? Bill Gates says "success is a lousy teacher, it seduces smart people into thinking they can't lose". The quote is so perfect for this moment where Elon was forced to buy Twitter for so much more than it had become worth in the stock market.
When you're successful you're never as good as people say you are, and when you fail, you're never as horrible as the failure may suggest.
13. Keep Shooting
"In 2018, Amazon drove 6% of the S&P 500’s returns. And Amazon’s growth is almost entirely due to Prime and Amazon Web Services, which itself are tail events in a company that has experimented with hundreds of products, from the Fire Phone to travel agencies."
Success is hard. You got to take a lot of shots to get something big. We all know Walt Disney as an incredible creator of this enduring legendary franchise. But it was really hard for him to break through. He spent years making cartoons that people liked, but didn't make any money. By 1938, he had made 400 cartoons. His first studio went bankrupt. And then he does Snow White and the Seven Dwarves.
I hope I don't have to do 400 newsletter issues before I make it big, but I suppose it'd be worth it if I could do a Snow White, which mades $8 million which ins $168M in 2022 dollars. All the debts erased and then some. And that was just the beginning of his rise.
👉 Links
- Courage / Risk ⚡️ Reflections on a 12 month journey from staff PM to sabbatical to solopreneur
- Systematic ⚙️ overthinking vs underthinking
- Generative 🤖 a recap of the updates in midjourney v5 and what it would really mean to "slow down AI"
- Togetherness 🫶 who is asking you the hard questions and do you have space to answer?
- Creative 👁️ Running a phone check at an event to help people stay present
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Jason Shen
Jason Shen
Jason Shen