The Psychology of Money

by Morgan Housel

Invest in a promising company you don’t care about, and you might enjoy it when everything’s going well. But when the tide inevitably turns you’re suddenly losing money on something you’re not interested in. It’s a double burden, and the path of least resistance is to move onto something else. If you’re passionate about the company to begin with—you love the mission, the product, the team, the science, whatever—the inevitable down times when you’re losing money or the company needs help are blunted by the fact that at least you feel like you’re part of something meaningful. That can be the necessary motivation that prevents you from giving up and moving on. There are several other times when it’s fine to be reasonable instead of rational with money. There’s a well-documented “home bias,” where people prefer to invest in companies from the country they live in while ignoring the other 95%+ of the planet. It’s not rational, until you consider that investing is effectively giving money to strangers. If familiarity helps you take the leap of faith required to remain backing those strangers, it’s reasonable.