Morgan Housel is the most featured writer in the 3L&3S for his clarity of thought and ability to articulate on issues concerning our relationship with money in general, in an easy to understand language. So, we had to feature his new book “The Psychology of Money” and who better to pick for a review than Jason Zweig, the WSJ columnist on personal finance who has been a proflific writer himself on the subject of money including famously editing the revised edition of Benjamin Graham’s ‘The Intelligent Investor’.
“Mr. Housel, 36 years old, is a blogger and venture capitalist who writes beautifully and wisely about a central truth: Money isn’t primarily a store of value. Money is a conduit of emotion and ego, carrying hopes and fears, dreams and heartbreak, confidence and surprise, envy and regret.
…Mr. Housel begins with a shocking anecdote he witnessed himself: A technology multimillionaire handed a hotel valet thousands of dollars in cash to go buy fistfuls of gold coins at a nearby jewelry store. The executive then flung the coins, worth about $1,000 apiece, into the Pacific Ocean one at a time, skipping them across the water like flat rocks, “just for fun.”
To that man, money was a plaything. (He later went broke, Mr. Housel writes.) To Ronald Read, however, money was possibility. Mr. Read spent decades pumping gas and working as a janitor in Brattleboro, Vt. After he died in 2014 at the age of 92, his estate was able to give more than $6 million to local charities—because he had scrimped and put every spare penny into stocks that he held for decades.
How, asks Mr. Housel, did a janitor “with no college degree, no training, no background, no formal experience and no connections massively outperform” many professional investors?
Investing isn’t an IQ test; it’s a test of character. Unlike the man who chucked coins into the sea, Mr. Read could defer gratification and had no need to spend big so other people wouldn’t think he was small. From such old-fashioned virtues great fortunes can be built.
….Mr. Housel has a knack for looking at the same thing as everyone else and seeing something different. Most investors regard Warren Buffett as someone who has parlayed brilliant analysis, hard work and extensive connections into one of the best track records in financial history. Mr. Housel, however, notices that Mr. Buffett accrued at least 95% of his wealth after age 65.
Had Mr. Buffett earned his world-beating returns for only 30 years rather than much longer, he would be worth 99.9% less, notes Mr. Housel. “The real key to his success is that he’s been a phenomenal investor for three quarters of a century,” he writes of Mr. Buffett. “His skill is investing, but his secret is time.”
So Mr. Buffett—traditionally viewed as the greatest living example of investing skill—is also proof of the power of luck and longevity.
…Mr. Housel urges investors to think about what money and wealth are for. He draws a critical distinction between being rich (having a high current income) and being wealthy (having the freedom to choose not to spend money).
Many rich people aren’t wealthy, Mr. Housel argues, because they feel the need to spend a lot of money to show others how rich they are. He defines the optimal savings level as “the gap between your ego and your income.” Wealth consists in caring less about what others think about you and more about using your money to control how you spend your time.
He writes: “The ability to do what you want, when you want, with who[m] you want, for as long as you want to, pays the highest dividend that exists in finance.”

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Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.

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