Introduction- The Greatest Show on The Earth
Chapter 1 Summary- No One’s Crazy
Chapter 2 Summary- Luck & Risk
Chapter 3- Never Enough
Chapter 4- Confounding Compounding
Chapter 5- Getting Wealthy Vs. Staying Wealthy
Chapter 6 Tails, You Win
Chapter 7- Freedom
Chapter 9- Wealth Is What You Don’t See
Chapter 10- Save Money
Chapter 11- Reasonable > Rational 13
Chapter 12- Surprise!
Chapter 13- Room for Error
Chapter 14- You’ll Change
Chapter 15- Nothing’s Free
Chapter 16- You & Me
Chapter 17- The Seduction of Pessimism
Chapter 18- When You’ll Believe Anything
Some people are born into families that encourage education; others are against it.
Some are born into flourishing economies encouraging of entrepreneurship; others are born into war and destitution.
I want you to be successful, and I want you to earn it. But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.
1. No One’s Crazy
Summary: Everyone looks at money through the lens of their past experiences.
2. Luck & Risk
Big idea: Nothing is as good or as bad as it seems.
3. Never Enough
Big idea: Rich people do crazy things.
4. Confounding Compounding
Big Idea: Our minds are not built to handle the reality that compounding leads to logic-defying results.
The big takeaway from ice ages is that you don’t need tremendous force to create tremendous results.
If something compounds—if a little growth serves as the fuel for future growth—a small starting base can lead to results so extraordinary they seem to defy logic. It can be so logic-defying that you underestimate what’s possible, where growth comes from, and what it can lead to.
Warren Buffett is a phenomenal investor. But you miss a key point if you attach all of his success to investing acumen. The real key to his success is that he’s been a phenomenal investor for three quarters of a century. Had he started investing in his 30s and retired in his 60s, few people would have ever heard of him.
His skill is investing, but his secret is time.
That’s how compounding works.
5. Getting Wealthy vs. Staying Wealthy
Big idea: Good investing is not about making good decisions. It’s about consistently not screwing up.
getting money and keeping money are two different skills.
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 and an 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.
6. Tails, You Win
Big idea: You can be wrong half the time and still make a fortune.
7. Freedom
Big idea: Controlling your time is the highest dividend money pays.
The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want today.”
a common denominator in happiness—a universal fuel of joy—it’s that people want to control their lives.
The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays.
The most powerful common denominator of happiness was simple.
More than your salary. More than the size of your house. More than the prestige of your job. Control over doing what you want, when you want to, with the people you want to, is the broadest lifestyle variable that makes people happy.
8. Man in the Car Paradox
Big idea: No one is impressed with your possessions as much as you are.
9. Wealth is What You Don’t See
Big idea: Spending money to show people how much money you have is the fastest way to have less money.
Wealth is the nice cars not purchased. The diamonds not bought. The watches not worn, the clothes forgone and the first-class upgrade declined. Wealth is financial assets that haven’t yet been converted into the stuff you see.
The problem for many of us is that it is easy to find rich role models. It’s harder to find wealthy ones because by definition their success is more hidden.
10. Save Money
Big idea: The only factor you can control generates one of the only things that matters.
11. Reasonable > Rational
Big idea: Aiming to be mostly reasonable works better than trying to be coldly rational.
12. Surprise!
Big idea: History is an unassailable guide to the future.
13. Room for Error
Big idea: The most important part of every plan is planning on your plan not going according to plan.
russian war - German tanks destroy by mouse
We should aim for 1/3 error in all important investments
The emotional investment
A good rule of thumb for a lot of things in life is that everything that can break will eventually break. So if many things rely on one thing working, and that thing breaks, you are counting the days to catastrophe. That’s a single point of failure.
The biggest single point of failure with money is a sole reliance on a paycheck to fund short-term spending needs, with no savings to create a gap between what you think your expenses are and what they might be in the future.
14. You’ll Change
Big idea: Long-term planning is harder than it seems because people’s goals and desires change over time.
Compounding works best when you can give a plan years or decades to grow. This is true for not only savings but careers and relationships. Endurance is key. And when you consider our tendency to change who we are over time, balance at every point in your life becomes a strategy to avoid future regret and encourage endurance.
Aiming, at every point in your working life, to have moderate annual savings, moderate free time, no more than a moderate commute, and at least moderate time with your family, increases the odds of being able to stick with a plan and avoid regret than if any one of those things fall to the extreme sides of the spectrum.
The trick is to accept the reality of change and move on as soon as possible.
15. Nothing’s Free
Big idea: Everything has a price, but not all prices appear on labels.
“Every job looks easy when you’re not the one doing it.”
Most things are harder in practice than they are in theory. Sometimes this is because we’re overconfident. More often it’s because we’re not good at identifying what the price of success is, which prevents us from being able to pay it.
Market returns are never free and never will be. They demand you pay a price, like any other product. You’re not forced to pay this fee, just like you’re not forced to go to Disneyland. You can go to the local county fair where tickets might be $10, or stay home for free. You might still have a good time. But you’ll usually get what you pay for. Same with markets. The volatility/uncertainty fee—the price of returns—is the cost of admission to get returns greater than low-fee parks like cash and bonds.
16. You & Me
Big idea: Avoid taking financial cues from people playing at a different game than you are.
It’s hard to grasp that other investors have different goals than we do, because an anchor of psychology is not realizing that rational people can see the world through a different lens than your own. Rising prices persuade all investors in ways the best marketers envy. They are a drug that can turn value-conscious investors into dewy-eyed optimists, detached from their own reality by the
17. The Seduction of Pessimism
Big idea: Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you.
Real optimists don’t believe that everything will be great. That’s complacency. Optimism is a belief that the odds of a good outcome are in your favor over time, even when there will be setbacks along the way.
If a smart person tells me they have a stock pick that’s going to rise 10-fold in the next year, I will immediately write them off as full of nonsense.
If someone who’s full of nonsense tells me that a stock I own is about to collapse because it’s an accounting fraud, I will clear my calendar and listen to their every word.
18. When You’ll Believe Anything
Big idea: Stories trump statistics.
We can leave aside rich, but independence has always been my personal financial goal. Chasing the highest returns or leveraging my assets to live the most luxurious life has little interest to me. Both look like games people do to impress their friends, and both have hidden risks. I mostly just want to wake up every day knowing my family and I can do whatever we want to do on our own terms. Every financial decision we make revolves around that goal.
Being able to wake up one morning and change what you’re doing, on your own terms, whenever you’re ready, seems like the grandmother of all financial goals. Independence, to me, doesn’t mean you’ll stop working. It means you only do the work you like with people you like at the times you want for as long as you want.
All lifestyles exist on a spectrum, and what is decent to one person can feel like royalty or poverty to another. But at our incomes we got what we considered a decent apartment, a decent car, decent clothes, decent food. Comfortable, but nothing close to fancy.
we’ve more or less stayed at that lifestyle ever since. That’s pushed our savings rate continuously higher. Virtually every dollar of raise has accrued to savings—our “independence fund.”
Between 1993 and 2012, the top 1 percent saw their incomes grow 86.1 percent, while the bottom 99 percent saw just 6.6 percent growth.
While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone.
