Our mentality and attitude with money.

 

On consistency in making money and keeping it.

- 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.

- Good investing is not necessarily about earning the highest returns, its about earning pretty good returns that you can stick with and which can be repeated for the longest period of time.

- Getting money requires taking risks, being optimistic, and putting yourself out there.

- Good investing is not necessarily about making good decisions. Its about consistently not screwing up.

- Don’t assume that yesterday’s success translates to tomorrows good fortune.

- In investing, a career or a business, the ability to stick around for a long time, without wiping out or being forced to give up, is what makes the biggest difference.

- Getting and keeping wealth requires surviving all the unpredictable ups and downs that everyone inevitably experiences over time.

- Compounding doesn’t rely on earning big returns. Merely good returns sustained uninterrupted for the longest period of time especially in times chaos and havoc will always win.

- Planning is important, but the most important part of every plan is to plan on the plan not going according to the plan. (can the plan survive reality?)

- Its vital to be optimistic about the future, but paranoid about what will prevent you from getting to that future. You need short-term paranoia to keep you alive long enough to exploit long-term exploits.

- when making financial decisions, aim to be reasonable rather than being coldly rational.

- Investing has has a social component that is often ignored when viewed through a strictly financial lens.

 

 

 

 

On contentment with half the losses.

-  It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much money you loose when you’re wrong.

- As an investor the decisions that you make today or tomorrow or next week will not matter nearly as much as what you do during the small number of days when everyone is going crazy.

- As an investor the small things count for most of your returns as much a they affect your investment portfolio.

- You can be wrong half the time and still make a fortune.

- In finance a small number of events can account for the majority of the outcomes.

- We underestimate how normal it is for a lot of things to fail; which causes us to overreact when they do.

- The thing that makes tail events easy to unappreciate is how easy it is to underestimate how things compound.

 

 

 

 

On time and wealth.

- The highest form of wealth is the ability to wake up every day and do whatever you want.

- Doing something you love in a schedule you can’t control can feel the same as doing something that you hate.

- Using your money to buy time and options has a lifestyle benefit few luxury good can compete with.

- The further back in history you look, the more your takeaways should be.

- Recent history is the best guide to the future, because it’s more likely to include important conditions that are relevant to the future.

- Realizing the future might not look anything like the past is a special ind of skill that is not generally looked upon highly by the financial forecasting community.

 

 

 

 

On wealth.

- Wealth is what you don’t see.

- Wealth creates a gap between what you could do and what you choose to do that accrues to you over time.

- The value of wealth lies in offering you options, flexibility, and growth to one day purchase more stuff than you could right now.

- The way to be rich is to spend money that you have, and not to spend money you don’t have; the way to be wealthy is to not spend the money that you do have.

- Note that if you spend money on things you will end up with the things and not the money.

- Wealth is financial assets that haven’t been converted into the assets that you see.

- Building wealth has little to do with you income or investment returns, and more to do with the your saving rates.

- The value of wealth is relative to what you need.

- Wealth is just the accumulated leftovers after you spend what you take in.

- Learning to be happy with less money creates a gap between what you have and what you want.

- The most important driver of anything tied to money is the stories people tell themselves and the preferences they have for goods and services.

 

On “a margin of safety”

- Room for error often looks like a conservative hedge, but if it keeps you in the game it can pay for itself many times over.

- Few financial plans that only prepare for known risks have enough margin of safety to survive the real world.

- Program yourself to recognize and avoid serious risks, including those never before encountered.

- You have to survive to succeed.

- The best way to achieve felicity is to aim low.

- An overlooked version of room for error is having a gap between what you can technically endure versus what is emotionally possible.

- Endurance, an outcome from a margin of safety allows you to stick around long enough to let the odds of benefiting from a low-probability outcome fall to your favour.

- We don’t need to view the world as black and white, predictable or a crapshoot; pursuing things where a range of potential outcomes are acceptable is the smart way to proceed.

- The purpose of the margin of safety is to render the forecast unnecessary.

- With money you need to acknowledge that uncertainty, randomness and chance are an ever  present part of life. The only way to deal with them is by increasing the gap between what you think will happen and what can happen while still leaving you capable of fighting another day.

 

On the inevitability of change and the power of compounding.

- Peoples goals and desires change over time making it harder to plan for long - term financial goals.

- Financial decisions that were made when you were a different person should be abandoned without mercy.

- We aught to accept the reality of change and move on as soon as possible.

- People are poor forecasters of their future selves.

- It’s hard to make enduring long term financial decisions when the view of what you'll want in the future is likely to shift.

- The first rule of compounding to never interrupt it unnecessarily.

 

On the price for ROI.

- The price of investing success is not immediately obvious. Everything has a price, not all prices appear on the labels.

- Thinking of market volatility as a fee rather than a fine is an important part of developing the kind of mindset that lets you stick around long enough for investing gains to work in your favour.

- As a diligent investor, be willing to pay the price to avoid ending up paying double.

- The inability to recognize that investing has a price can tempt us into trying to get something from nothing.

- You are running your own race, the challenges faced by someone in the arena are often invisible to those in the crowd.

- Those rewarded with dynastic wealth when the times are good hold the burden of responsibility when the tide goes out.

- Define the cost for success and be ready to pay for it. Nothing worthwhile is free.

 

 

On your why for the investment.

- Few things matter more with money than understanding your own time horizon and not being persuaded by the actions and behaviour of people playing a different game than you are.

- Not realizing that rational people can see the world with a different lens than you, makes it hard to grasp that other investors have different goals than we do.

- Many financial and investment decisions are rooted in watching what other people are doing and either copying them or betting against them.

- Always remember that money chases returns to the greatest extent that it can.

- When investors have different goals and time horizons, prices that look ridiculous to one person can make sense to another, because the factors that the investors pay attention to are different.

- Many are the times that investors take cues from others who are playing a different game than they are.

- Define the game you are playing, and make sure your actions are not influenced by people playing a different game.

 

On our attitude with money (positive/negative)

- Expecting things to great means a est case scenario that feels flat. A negative attitude reduces the expectations, narrowing down the gap between possible outcomes and outcomes we feel good about.

- The short string of pessimism prevails while the powerful pull of optimism goes unnoticed.

- Destruction is driven by single points of failure, which can happen in seconds, and loss of confidence which can happen in an instant.

- Optimistic narratives require looking at long stretch of history and developments , which people tend to forget and and take more effort to piece together.

- It is easier to create a narrative around pessimism since the story pieces tend to be fresher and more recent.

- Progress happen too slowly to notice while setback occur too quickly to go unnoticed.

- It is easy to forecast a negative outcome since it doesn’t require imagining the world changing.

- Extremely good and extremely bad circumstances rarely stay that way for long because supply and demand adapt in hard to predict ways.

- The financial system is vastly interconnected and one person’s decisions affect everyone else making it hard for financial risks hard to ignore.

- Not the man who hope when others despair but the man who despair when others hope that is admired by a large class of persons as a sage.

- Pessimism just sounds smarter and plausible than optimism.

 

On the stories we tell ourselves about money.

- When planning, we focus on what we can do and what we want to do, neglecting the plans and skills of others whose decisions might affect our outcomes.

- We tend to focus on what we know and neglect what we do not now which makes us overly confident in our beliefs.

- Both in predicting the future and explaining the past, we focus on the casual role of skill and ignore the role of luck.

- The illusion of control is more powerful that the reality of certainty, so we cling to the stories that conform to the outcomes being in our control.

- It is hard to come to terms with how much we don’t know which in turn means coming to terms with how much happens in the world is out of our control.

- The bigger the gap between what you want to true and what you need to be true to have an acceptable outcome, the more you are protecting yourself from falling victim of an appealing financial fiction.

- Stories are, by far, the most powerful force in the economy. They are the fuel that can let the tangible parts of the economy work or the brakes that holds our capabilities back.

- In finance there is no single right answer, just the one that works for you.

More books recommendation