The Psychology of Money

by Morgan Housel

“Things that have never happened before happen all the time.”

History is mostly the study of surprising events.

History helps us calibrate our expectations, study where people tend to go wrong, and offers a rough guide of what tends to work.

it is not, in any way, a map of the future.

“Imagine how much harder physics would be if electrons had feelings.”

The most important events in historical data are the big outliers, the record-breaking events. They are what move the needle in the economy and the stock market.

The Great Depression. World War II. The dot-com bubble. September 11th. The housing crash of the mid-2000s.

The most common plot of economic history is the role of surprises. The reason surprises occur is not because our models are wrong or our intelligence is low. It’s because the odds that Adolf Hitler’s parents argued on the evening nine months before he was born were the same as them conceiving a child. Technology is hard to predict because Bill Gates may have died from polio if Jonas Salk got cranky and gave up on his quest to find a vaccine. The reason we couldn’t predict the student loan growth is because an airport security guard may have confiscated a hijacker’s knife on 9/11. That’s all there is to it.

The correct lesson to learn from surprises is that the world is surprising.

surprises moving the needle the most is the one forecast that’s been accurate at virtually every point in history.

“The four most dangerous words in investing are, ‘it’s different this time.’”

The most important part of every plan is planning on your plan not going according to plan.

You have to plan on your plan not going according to plan.

Every job looks easy when you’re not the one doing it because the challenges faced by someone in the arena are often invisible to those in the crowd.