Oct 30, 2022 • 1HR 1M

#3 - Seven takeaways from "The Psychology of Money" by Morgan Housel

 
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Appears in this episode

Alfie Marsh
Welcome to The Search For Growth. A podcast for growth-mindset entrepreneurs looking to improve 1% each day. Each week an American and a Brit get together to unpack the biggest topics from the start-up world, interview founders, and share frameworks & principles to help you grow. Chris Gibson is the Founder of Wavelength, a bootstrapped start-up, and Alfie Marsh is the Head of US Go-To-Market at Spendesk, a venture backed unicorn. As an engineer and a sales guy, we have two different perspectives on life. But we are united by one common goal. The Search For Growth.
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In todays episode we discuss Morgan Housel’s book “The Psychology of Money: Timeless lessons on wealth, greed, and happiness”

  • Feedback from listeners about our last episode

  • Why we chose the name “The Search For Growth”

  • Why Chris loved this book

  • Summary of key takeaways (see details below)

  • Announcements

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Summary of key takeaways:

1. No one’s crazy

People who make financial decisions based on their own personal context, it may relevant to them, but it may not be relevant to you. Chris & Alfie give examples of how they and their wives handle money differently. VCs investment during a 0% rate environment compared to normal times.

2. Compounding is important

$81.5bn of Warren Buffet’s wealth came after his 65 birthday. Impressive things are achieved through compounding small habits over long periods of time. 1% improvements over step function growth.

3. Be financially unbreakable

Making good investments is not about good decisions, it's about consistently not screwing up. Be financially unbreakable. Stick around long enough to make wonders happen. Planning is important but assume things won’t go to plan. How VC firms are set up asymmetrically for success and default unbreakable. De-risking the downside.

4. Power Law

You can be wrong a lot of the time and still make a fortune. 65% of companies within a fund lost money, 2.5% made 10-20x, 1% made 20x, and 0.5% made >20x. Therefore, you can lose a lot, but still come out on top. Optimize for exposure to opportunity. Meeting one person can change your life, optimize for the long term exposure not short term.

5. Freedom

Controlling your time is the highest dividend money can pay. Tim Ferris’ “4 Hour Work Week”. The highest form of wealth is being able to choose how you spend your time. The problem with the story about the rich banker and the fisherman. The hedonic treadmill problem. Trades off between bootstrapping vs venture backed startups.

6. Reasonable over rational decisions

Better to be mostly reasonable than coldly rational. Being reasonable doesn’t always mean rational, example choosing stocks you enjoy following may not be the best financial decision but it’ll keep you in the game long enough to learn how to execute a good strategy.

7. Beware of taking financial cues from people playing a different game 

Example, momentum traders trading the tech stock boom. The danger of advice without context. Searching for context not advice.

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Links & resources discussed on the pod.



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