Book Review: The Psychology of Money by Morgan Housel

 As a part of #2bookamonth challenge, this is the second book of the year.

I picked this book out of my interest in behavior finance. And as the name suggest, this book doesn’t disappoint in this context. Unlike most of the books on investing, this is a short book of approx. 230 pages, not exaggerating too much on any topic. The best part is that the book is divided into small chapters and each chapter consist of stories, anecdotes conveying the message for better understanding. The author has not shied away from even sharing his psychology towards the money he owns towards the end of the book.

As per my understanding, the key message is that doing well with money has less to do with the smartness of the person and lot to do with the behavior. There are a lot of learnings one can take-away from the book, my top 6 are as follows:

1.  Manage your money in a way that allows you to sleep at night: I guess, this is the best punchline Morgan has put in this book. He explains that managing the money well is different from getting a highest package or getting high returns on the investment. People tend to lose sleep even when they are earning highest returns. There is a difference in getting wealthy and staying wealthy. So, the fundamental question we should ask ourselves before making any financial decision is – Will this help me to get sleep at night?
2. Respect the power of luck and risk and be humble: We should be careful when assuming certain outcomes are only based on our 100% of actions. There are other factors that also have a role to play (luck and risk). We often forget to take it into consideration when calibrating someone’s success or misfortune. Morgan wrote a letter to his son when he was born and stated- “Not all the success is due to hard work and not all the poverty is due to laziness. Keep this in mind when judging people including yourself.” Further, another great advice that Morgan mentioned in the letter was “No one is impressed with our possessions as much as we are. We may think we need flashy possessions but deep inside what we want is respect and admiration from others. And these pricy possessions never bring that- especially not from the people we want to respect us.”
3. Don’t narrow your focus on individual patterns: Morgan emphasizes on focusing on broad patterns. As it so happens that when we focus on individual investments, ones which are doing well look to us as winners than they are, and the losers appear to be more regrettable than they should be. One must understand that it is not possible that all the things go right all the time. We can be wrong half the time and still make a fortune because of the 80-20 principle. As per Morgan, it is fine to have large chunk of poor investments and few outstanding ones.
4. Make ‘time’ and ‘patience’ your best friends: The single most powerful thing that any investor can do is – increase the time horizon. The ones who understand the power of compounding understand the role of ‘time’ in investing. He points out one fact which makes the point so relevant - $81.4 billion out of $84.5 billion net worth of Warren Buffet came after his 65^th birthday. His secret in investing is time. His close friend and business partner Charlie Munger were quoted saying – “The first rule of compounding is: Never interrupt it unnecessarily.”
5.  Define the cost of success and be ready to pay it: There are no free lunches. The problem is that for a lot of things the price tags aren’t visible. When we experience them first-hand, then the price becomes apparent. He uses the statistic that the S&P 500 increased 119-fold in the 50 years ending 2018. Imagine, if someone would have invested a lump sum and just watched it compound over years. But not many have done it. Because there is a ‘fee’ for these incredible returns which are fear, uncertainty, regret, panic as stock markets plunges at regular intervals. This is the price we must learn to pay to enjoy the returns.
6. Define the game you’re playing: We often commit mistake of making our financial decisions on someone else opinion (be it experts’ advice, stock market news, some industrialist’s portfolio, and other mediums). A teenager, an elderly person, and a hedge fund manager- all will have different goals. And the hard reality is that another person, whom we are blindly following, doesn’t know our end goal. We follow a decision that may be right for them and disastrous for us. Hence, it is important that as an individual we realize our game to avoid getting distracted and off-track by others’ decisions. This is no single right answer in this mad world of investing. We just have to find out the answer that works for us.

 Morgan has added a postscript titled “A Brief history of why U.S. Consumers think the way they do”. This section is interesting to understand the current state of consumers in US market.

There are many books on investing, but this book provides a fresh look on the human biases we have, in crisp manner and using simple language. One is bound to gain awareness on our psychological behaviors to navigate better with the money matters. Let me warn you , there is no math-based logic displayed in the book to tell you where to invest, best ways to invest rather Morgan has dived into the grey area on showcasing how people make financial decisions in real world.

I would recommend this book to anyone who doesn’t have the appetite to go through thick detailed books on psychology yet wants to learn about behavior and money decisions. It will help you to make your own mental approach for money.

As always, please don't forget to leave your comments in the comment box below and share what are you reading currently. Happy Reading! 

Book Review: Bridgital Nation

I picked this book for two reasons:
1. Compelling title as it promised to highlight how AI and IoT solutions can help to solve India's problems
2. Authors - N Chandrasekaran, one of the most admired person in IT industry and Roopa Purushothaman, chief economist of Tata Group. So, I knew, it will be a sensible book and credentials can be taken seriously

And trust me, this book didn't disappoint me. It follows a structured approach- digging a bit deep into the fundamental problems of Indian society and economy and taking a shot at few technology aided solutions, laying the basic foundation of bridgital model and leaving it open for young entrepreneurial minds to think of solutions that can bridge the identified gaps in noted areas of healthcare, educational services, legal processes, micro financial services, agriculture to name a few. The real life stories quoted in the book are engaging. The language used in the book is kept simple to be understood by common man that one doesn't need a background in economics or technology.

The book highlights India's twin challenges : Jobs and Access.There seems to a huge demand of vital services and an equally overwhelming supply of human capital. The aim is to bridge the gap between them.The authors rightly point out that India's growth model needs to be different from other countries. Unlike, most of the countries, growth is followed by creation of new jobs, this model doesn't seem to work in India. This is because the growth is coming from mainly service sectors, wherein highly qualified people work and less from manufacturing jobs. Another piece of the puzzle is working women. Only 23 per cent of all women who could work are employed as opposed to 75 per cent in men. Surprisingly, it isn't that women do not want to work. But due to priorities hard wired in our culture and mindsets, the number is getting lower year on year. Another problem is the existence of numerous jobs are in the informal sector, which fail to raise the standards of living and provide social security.

With the bridgital nation approach, authors see a potential shift of 45 million workers from informal sector to the formal sector via SMEs. But what is bridgital approach? It is simple: re-examine and re-invent the tasks that goes into a job. For example, the administrative tasks that doctors and nurses have to do themselves in govt. hospitals esp. in tier 3 cities. Due to lack of skilled people availability, often doctors / nurses spend more time in doing admin tasks and hence have less time to spend with patients. With the help of technology, data and connectivity, solutions can be devised that prepare and empower the new workforce to perform these tasks that were thought to be beyond their skill sets.

The solutions advocated in the book are simple and fundamental ones. It challenges young entrepreneurs to go beyond the conventional processes and re-imagine it with technology for every possible sector. The book completely discard the much popular debate on- technology (automation) vs jobs. Rather, it focuses on using advanced technologies like AI and IoT to create more accessible jobs for new bridgital workers and bridge in the ultimate gap that's possibly stopping India to grow into an economically strong nation.

In my view, this book gives a hope that it is possible to achieve 'sabka vikaas via sabka saath'. 

Things little bird told me : Book review

I am an ardent user of Twitter. Love this internet platform that restricts the usage to 140 characters, emphasizing on the need of crisp and clear communication, allowing us to be more creative in sharing our messages with people around. And hence, picking the book - Things little bird told me, became an obvious choice for me. The book gives a powerful insight into the life of Biz Stone, co-founder of Twitter. It is engaging and full of interesting anecdotes. This book chronicles his journey from college drop out to becoming a cofounder of one of the internet sensation platform. It's a journey of an individual who believed in creation of opportunities via creativity and not plain hard work alone.

Stone always believed in creativity and creating opportunities by himself. Whether it was his job as a box mover, designer at a publishing house or at google, or being a podcaster, the fellow kept working on creating new opportunities to test his skills and passion till his heart finally found the idea that struck a chord. From there, there was no looking back. Though, like any other startup, the ride was not an easy one, from bumpy days of software failures and scalability issues etc. , team triumphed all shortcomings by owning their mistake and improving the service. The team put to use the common tricks mentioned in every success books such as know and follow your customer, which they popularly termed 'wisdom of crowds'. Knowing where the trend is going and customizing the tool functionalities to meet those needs, being open-minded to new ideas led Twitter floating so far.

During the course of time, role of Stone also matured in his relationships and at work. There were exits and home coming. There were offers and denials. There were conspiracies and righteousness. He has been open about how his life unfolded at every step. Like that, Twitter also transformed. Who would have thought that a simple communication platform will empower people to do great things. It's astonishing how human race uses this tool in their own creative capacity. Be it doing promotions during political elections, fundraising initiatives, driving positive social changes or simply sharing about mundane work, it has done its work of creating a connected society. As Stone rightly puts that technology has the power to become the 'connectivity tissue of humanity', unite and mobilize people for a better cause. 

Overall, the book is an interesting and easy read, power packed with the life lessons for entrepreneurs. Stone is relatable and quotable. In his closing remarks, he encourages readers to alter their course of journey by taking action ( time and a bit of luck does matter) versus jumping into the chasm blindly. His way of putting events in a quirky way is what brings life to this book. Happy reading!

Born to Run: Book Review

And I am back. Don't know how many comebacks have I done till now. This place keeps pulling me to share my strongest thoughts and views. So, I am back to my blog world with a different flavor of writing - my first attempt at writing a book review. Never before have I written a book review, not even on Amazon or Goodreads , usually escape by giving the ratings. And so I chose to write a review on a book about running ( something close to my heart)-  "Born To Run" by Christopher McDougall. 

The book is based on one simple fact - running is a skill, doesn't matter which footwear you wear, if you know the right technique,  focus on your form, you are good to go for miles !

The book's central character is the author himself, a journalist by profession.  An interesting article on Mexican Indian tribe - Tarahumara and his own personal inquisitiveness to know how to run without a pain sets him off for this life altering journey to remotest areas of Mexico. His subject of study is Tarahumara tribe, known to be the greatest mainstream runners of all time. The book outlines in detail difference between their running style and ours which is the key differentiator, and also provides a peek into their daily affairs, lifestyle, diet etc. Imagine running up and down the mountain trails for miles wearing nothing more than a thin rubber strip sandals- that's the way they do, not occasionally but every day, not for any money or fame, but for the sheer joy of running !!

In addition to this interesting discovery of Mexican tribe, the book also talks about the history of ultra-running, famous ultra-runners and legendary races. One such race was Leadville Trail 100, a 100 mile race, wherein Ann Transon, a prodigy, posed a stiff competition to Tarahumara. This race becomes talk of the town for days. The book highlights startling scientific discoveries as well, for example, the modern shoes may be actually causing us injuries because the natural form of running for humans is barefoot running.

The book's conclusion is the most exciting part. It ends up with author's dream race between Tarahumara and America's best ultra-runners, celebrating the true spirit of human endurance and sportsmanship!  Overall, the book is a good combination of memoir, sports history, adventure, science & evolution - celebrating the theory that we humans are 'born to run'.

I would leave you with this beautiful passage from the book -

"Know why people run marathons? Because running is rooted in our collective imagination, and our imagination is rooted in running. Language, art, science; space shuttles, Starry Night, intravascular surgery; they all had their roots in our ability to run. Running was the superpower that made us human -- which means it's a superpower all humans possess."