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The Psychology of Money

Timeless lessons on wealth, greed and happiness

By Morgan Housel


Lesson #5 - Getting wealthy vs staying wealthy

*Good investing is not necessarily about making good decisions. It’s about consistently not screwing up.”

“40% of companies successful enough to become publicly traded loose effectively all of their value of time.

“Capitalism is hard. But part of the reason this happens is because getting money and keeping money are two different skills.”

“Getting money required taking risks, being optimistic, and putting yourself out there.”

“But keeping money requires the opposite of taking risk. It requires humility, and fear that what you’ve made can be taken away from you just as fast. […] acceptance that at least some of what you’ve made is attributable to luck, so past success can’t be relied upon to repeat indefinitely.”

“1. More than I want big returns, I want to be financially unbreakable. And if I’m unbreakable I actually think I’ll get the biggest returns, because I’ll be able to stick around long enough for compounding to work wonders.”

“2. Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.”

“A good plan […] embraces it and emphasizes room for error”

“It’s different from being conservative. Conservative is avoiding a certain level of risk. Margin of safety is raising the odds of success at a given level of risk by increasing your chances of survival.”

“3. A barbelled personality - optimistic about the future, but paranoid about what will prevent you from getting to the future - is vital.”

“You need short-term paranoia to keep you alive long enough to exploit long-term optimism.”