To make a smart decision is not related to how smart you are or how educated you are, Or where you did your college studies, the book gives two completely different examples of two people who have two different backgrounds and experiences, and how they manage their financial situation. The introduction gives us an insight into how good financial decision is not strongly related to the intellectual side, But the most important thing is the behavioral side of people.
“some lessons have to be experienced before they can be understood”.
“Our findings suggest that individual investors’ willingness to bear risk depends on personal history.”
Not intelligence, or education or sophistication. Just the dumb luck of when and where you were born.
The difficulty of how people think and make financial decision , the author come with reasonable examples on that topic. why we don’t always do what we’re supposed to with money.
Nothing is as good or as bad as it seems.
Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort.
if you give luck and risk their proper respect, you realize that when judging people’s financial success—both your own and other’s it’s never as good or as bad as it seems.
”The exact role of luck in successful outcomes”
”The Customer is always right”.
”Customers don’t know what they want”.
”Success is a lousy teacher. It seduces smart people into thinking can’t lose.”
There is no reason to risk what you have and need for what you don’t have and don’t need.
The hardes financial skill is getting the goalpost to stop moving. Modern Capitalism is a pro at two things: generating wealth and generating envy. perhaps they go hand in hand; wanting to surpass your peers can be the fuel of hard work. but life isn’t any fun without a sense of enough. Happiness as it’s said is just results minus expectations.
Social comparison is the problem here. you can never hit the ceiling of the social comparison, it’s the battle that you will never win, the only way tot win is to not fight to begin with.
“Enough” is not too little. ”enough” is realizing that the opposite an insatiable appetite for more will push you to the point of regret.
There are many things never worth risking, no matter the potential gain. Don’t get too attached to anything your reputation your accomplishments or any of it. i think about it now, what does it matter?
The counterintuitive nature of compounding leads even the smartest of us to overlook its power.
The Danger here is that when compounding isn’t intuitive we often ignore its potential and focus on solving problems through other means. Not because we’re overthinking, but because we rarely stop to consider compounding potential.
Getting money is one thing.
keeping it is another.
Getting money requires 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. It requires frugality.
Compounding only works if you can give an asset years and years to grow. It’s like planting oak trees: A year of growth will never show much progress, 10 years can make a meaningful difference and 50 years can create something absolutely extraordinary.
”Nassim Taleb put it this way: “having and ‘edge’ and surviving are two different things: the first requires the second. You need to avoid ruin. At all costs.”
Applying the survival mindset to the real world comes down to appreciating three things.
Compounding doesn’t rely on earning big returns. Merely good returns sustained uninterrupted for the longest period of time especially in times of chaos and havoc will always win.
return to it later.
The highest form of wealth is the ability to wake up every morning and say “i can do whatever i want today”.
Having a strong sense of controlling one’s life is more dependable predictor of positive feelings of well being than any of the objective condition of life we have considered.
No one not a single person said it’s important to be at least as wealthy as the people around you, and if you have more than they do it’s real success.
Spending money to show people how much money you have is the fastest way to have less money.
The value of Wealth is relative to what you need. Past a certain level of income, what you need is just what sits below your ego.
think of it like this, and one of the most powerful ways to increase your savings isn’t to raise your income it’s to raise your humility.
people with enduring personal finance success not necessarily those with high incomes tend to have a propensity to not give a damn what others think about them.
you will desire less if you care less about what others think of you.
money relies on psychology than finance.
and you don’t need a specific reason to save.
That flexibility and control over your time is an unseen on wealth.
hidden return is becoming more important.