We all want money. As a result, the question is always “how can we get more money?” However, in The Psychology of Money, Morgan Housel goes beyond this simple question. He shares several short stories to teach us all there is to money.
First, the big question: how can we get more money?
The short answer? Time.
In one short story, Housel describes how “$81.5 billion of Warren Buffet’s $84.5 billion net worth came after his 65th birthday.” The reality is that people are so desperate for money that they aren’t willing to be patient; they want to see results overnight and are only looking for the “get rich quick” solution. In the long run, the real way to get rich is simply to be patient and watch your money compound over time. Housel does an excellent job of highlighting this idea in The Psychology of Money.
Well, are there any other ways to get money?
Yes. Luck.
Risk management is often associated with building a fortune. However, many fail to realize that luck is as big of a factor as risk. In another short story about the founding of Microsoft, Housel describes how “luck and risk are siblings.” He tells the stories of Bill Gates, Paul Allen, and Kent Evans. They were three friends who went to Lakeside school, which, at the time, was one of the only high schools in the world with a computer. All of them were smart, hardworking kids who were fascinated by computers. As you may know, Bill Gates and Paul Allen went on to co-found Microsoft, but what happened to Kent Evans?
He died in a mountaineering accident before he graduated high school.
In the end, Housel points out that Bill Gates “experienced one in a million luck by ending up at Lakeside,” while Kent Evans “experienced one in a million risk by never getting to finish what he and Gates set out to achieve.” Life is unpredictable in every way possible, and learning to appreciate the luck you have and accept the risks you face will go a long way. Even if you see massive growth in a stock you invested in, always acknowledge the fact that the same stock may crash the very next day.
Now, why does money matter?
When people answer this question, they often misunderstand the core of the question itself. They give answers like “because it allows me to live the life I want” and “because it gives me happiness.” However, what people don’t realize is that money does not necessarily equal freedom or happiness. In The Psychology of Money, Housel shares a very important idea: happiness and freedom derive from having control over one’s life. He shares a personal anecdote about how he wanted to become an investment banker. The sole reason? He would make a lot of money. However, when he interned at an investment bank, he realized that the hours were unmanageable and the job too demanding. He loved the job itself, yet he quit a month later. That job didn’t make him feel in control of his own life.
So, back to the question. Why does money matter? Does it even matter?
Not as much as we make it out to be.
It’s always great to have lots of money. Money allows us to have the lifestyles we desire and gives us a sense of security. However, there are much more important things, like having control of your own life. This type of freedom is the most important type of freedom, even more important than financial freedom.
I really recommend reading The Psychology of Money. It covers many more topics, ranging from greed all the way to studying history and the past. Personally, reading this book opened my eyes and allowed me to realize there is much more than just “making more money.”