Book recommendation ..:: The psychology of Money ::..

I found the book Psychology of Money by Morgan Housel boring at first, boring in the sense that I did not find new information, but I persevered in listening to it (I do love my audible) thinking that 3 milion people cannot be wrong (Yes, it sold 3 mil copies!).

Now I can say it is worth it and below I will share with you my takeaways. I did expect it to be more finance oriented, but in the end it was more about mindset and systems and I love both.

So here are my 10 takeaways:

1 No One’s Crazy

Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works.“

You can read what it was like to lose everything during, say, The Great Recession, but you will never bear the emotional scars of those who survived it and are now afraid to invest again. It’s important to remember, then, that until you’ve lived through a financial crisis and felt its consequences, you will never understand why people behave the way they do.  “The challenge for us is that no amount of studying or open-mindedness can genuinely recreate the power of fear and uncertainty. Some lessons have to be experienced before they can be understood.”

Understanding one’s own values and priorities is crucial for making wise financial decisions.

2 Respect the power of luck and risk

Nothing is as good or bad as it seems.

Every outcome is guided by forces other than individual effort. Bill Gates had a competitive advantage over millions of other students because he attended one of the only high schools in the world that had the cash and foresight to buy a computer. In finance, luck is as much a force as risk. “It’s hard to quantify luck and rude to suggest people’s success is owed to it, the default stance is often to implicitly ignore luck as a factor of success.”  But almost no one thinks that luck doesn’t play a role in financial success.

Manage your money in a way that helps you sleep well at night and ask yourself ” does this help me sleep well tonight?”.

More about risk and regret in an article here.

3 Never enough

There is no reason to risk what you have and need for what you don’t have and don’t need.

The concept of “enough” involves recognizing that there is a point beyond which more money does not necessarily lead to greater happiness or satisfaction.

“At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, “Yes, but I have something he will never have … enough.” The only way to know how much you can eat is to eat until the point you are sick. Know what is enough and when to stop. “The ceiling of social comparison is so high that virtually no one will ever hit it.” You compare to person A who is earning higher than you, you reach there and compare to person B earning even higher.

“Modern capitalism is a pro at two things: generating wealth and generating envy. ” But life isn’t happy when ambition is faster than satisfaction.

Photo by Joslyn Pickens.

4 Just Save

The only factor you can control generates one of the only things that matter. How wonderful!

The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want, when I want, with who I want, for as long as I want.” This, more than your salary, more than the size of your hours, more than the prestige of your job, more than anything, is the highest dividend money pays. 

“Wealth is created by suppressing what you could buy today in order to have more options in the future.” “Having a strong sense of controlling one’s life is a more dependable predictor of positive feelings of wellbeing than any of the objective conditions of life we have considered.” It is a way to buy yourself freedom to be and to act.

Saving is the gap between your ego and your income.

5 Man in the car paradox

No-one is impressed with your possessions as much as you are.

If you drive an expensive car, people will be looking at the car driving by, not admiring you. Being rich and being wealthy — it’s not just semantics. Rich is your current income, the wealth you accumulate, and create. Wealth is what you don t see. Building wealth is not just about earning a high income or making savvy investments, but also about living below one’s means and saving diligently.

Be nicer and less flashy, you might think you want a nice car or a fancy watch, but what you really want is more respect and admiration and you re more likely to gain those things through kindness and humility, than horsepower and chrome.

6 Reasonable vs rational

Aiming to be mostly reasonable works better than being coldly rational.

“A rational investor makes decisions based on numeric facts. A reasonable investor makes them in a conference room surrounded by co-workers you want to think highly of you, with a spouse you don’t want to let down or judged against the silly but realistic competitors that are your brother-in-law, your neighbor, and your own personal doubts. Investing has a social component that’s often ignored when viewed through a strictly financial lens”

Reasonable is more realistic, and you have a better chance of sticking with it for the long run, which is what matters most when managing money. You’re not a spreadsheet, remember. You’re a person.

7 Surprise

History is the study of change ironically used as a map of the future.

“It is smart to have a deep appreciation for economic and investing history. History helps us calibrate our expectations, study where people tend to go wrong, and offers a rough guide of what tends to work. But it is not, in any way, a map of the future.”

“investing is not hard science. It’s a massive group of people making imperfect decisions with limited information about things that will have a massive impact on their wellbeing, which can make even smart people nervous, greedy, and paranoid.”

A trap many investors fall into is what Housel calls, “historians as prophets” fallacy: an overreliance on past data as a signal to future conditions in a field where innovation and change are the lifeblood of progress. Past performance is not indicative of future results—the world changes.

Moreover, you will also change. And long-term planning is harder than it seems because people’s goals and desires change over time.

8 Room for error

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

Increase the gap between what you think will happen and what could happen. “The purpose of the margin of safety is to render the forecast unnecessary.”

We cannot predict what will happen. Look at it as a gray area, pursue things that are possible outcomes. Be both risk loving and risk-averse. But when you take the risk, have this safety net that will not wipe you out and avoid a single point of failure.

Become ok with a lot of things going wrong and remember the 80/20 Pareto, that states that only 20% of the effort amounts to 80% of results.

Reasonable is more realistic. You’re not a spreadsheet, remember. You’re a person.

Photo by Pixabay.

9 The seduction of pessimism

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.”

People believe pessimism more than they buy optimism.

In finance, pessimism is paid more attention than optimism, and is, therefore, more persuasive. “It’s easier to create a narrative around pessimism because the story pieces tend to be fresher and more recent,” writes Housel. “Optimistic narratives require looking at a long stretch of history and developments, which people tend to forget and take more effort to piece together.” True financial optimism, Housel posits, is to expect things to be bad and be surprised when they’re not.

2 more articles about optimism and pessimism.

10 Nothing is free

Everything has a price, but not all prices appear on labels.

Everything has a price, and the key to a lot of things with money is just figuring out what that price is and being willing to pay it. The problem is that the price of many things is not obvious until you’ve experienced it.

“Hold stocks for the long run,” you’ll hear. It’s good advice. But do you know how hard it is to maintain a long-term outlook when stocks are collapsing? Like everything else worthwhile, successful investing demands a price. But its currency is not dollars and cents. It’s volatility, fear, doubt, uncertainty, and regret—all of which are easy to overlook until you’re dealing with them in real-time.

Like a nice car, you can pay this price, accepting volatility and upheaval. Or you can find an asset with less uncertainty and a lower payoff, the equivalent of a used car. Or you can attempt the equivalent of grand theft auto: Try to get the return while avoiding the volatility that comes along with it.

A last food for thought:

Ask yourself what do you own and why? What do you do with your own money? What makes sense and what feels right to you?

If I picked your curiosity, give it a try, it also has more technical details about compounding and other investing tips.

If you want to discover more books I am passionate about, here are a few examples:

5 love languages in business

You’ve probably heard about the book and theory of the 5 love languages by Gary Chapman, that basically states that, in order for a relationship to thrive, you need to understand how your partner wants to receive love and appreciation and that we need to communicate based on how the other needs, not how we want to receive.

Given the newest stats I read here, about the influence that the relationship with the manager has on most of us:

  • 70% of employees say that their manager influences their wellbeing more than their therapist or doctor, 70% of people say their manager has more impact on their mental health, more than their therapist or their doctor
  • 71% say stress at work negatively impinges on their home life,
  • 30% of people say their manager fails to recognize their own impact on others’ wellbeing.
  • 70% of people would like their manager to do more to support mental health

I thought we can all be happier if we communicate better.

Photo by Andrea Piacquadio

The 5 love languages was a book of reference for me, as it gave me direct pointers on understanding others, with real, concrete actions I could take to show my appreciation.

These five languages, defined by Dr. Gary Chapman, include words of affirmation, acts of service, receiving gifts, physical touch and quality time. By understanding and speaking these love languages with coworkers and clients, you can improve communication, build stronger relationships, and ultimately drive success in your business.

  1. Words of Affirmation: For some people, words of encouragement, recognition, and praise are the most meaningful form of communication. If this is your love language in the workplace, you may appreciate hearing positive feedback from your manager, colleagues, or clients.
  2. Acts of Service: Some people value actions over words. If this is your love language in business, you may appreciate when coworkers take on tasks or responsibilities for you or go out of their way to help.
  3. Receiving Gifts: Some people appreciate receiving gifts as a sign of thoughtfulness and appreciation. In a business setting, this might mean receiving a small token of appreciation from a client or coworker, such as a gift card or personalized thank you note.
  4. Physical Touch: While physical touch may not be appropriate in the workplace, some people value physical connection and contact as a form of communication. If this is your love language in business, you may appreciate a handshake or pat on the back from a coworker or client.
  5. Quality Time: Some people value undivided attention and presence as a form of communication. In the workplace, this might mean having a one-on-one meeting with a coworker or client to discuss work and build a relationship.

Photo by fauxels.

By understanding and speaking these five love languages, you can improve communication, build stronger relationships, and ultimately drive success in your business. Whether you’re speaking words of affirmation to a coworker, offering acts of service to a client, or simply spending quality time with your team, taking the time to understand and speak the love languages can have a significant impact on your success in the workplace.

Here are some concrete examples you can apply from today:

  1. Words of Affirmation: A manager regularly provides specific, positive feedback to their employees during performance reviews. A coworker takes the time to write a personal note to a colleague, congratulating them on a job well done.
  2. Acts of Service: A team member volunteers to take on a task for a coworker who is overwhelmed with work. A client sends a basket of snacks and drinks to the office, showing appreciation for the team’s hard work.
  3. Receiving Gifts: A client sends a personalized gift to a salesperson who helped them with their purchase. A team leader gives a small token of appreciation, such as a plant or a book, to each team member for their hard work and dedication.
  4. Physical Touch: A manager gives a coworker a pat on the back after a successful presentation. A team leader gives a hug to a team member who has been working long hours.
  5. Quality Time: A manager sets aside one-on-one time with each team member to discuss their goals and provide support. A coworker takes the time to listen to a colleague’s concerns and offer advice.

Photo by Panos Sakalakis

In conclusion, the 5 love languages are a powerful tool for improving communication and building stronger relationships in business. By understanding and speaking the love languages of your coworkers, clients, and team members, you can create a positive and productive work environment and drive success for your business.

Moreover, when you start practicing this way of communication, you will automatically change the way you communicate with your loved ones, thus improving your overall state of wellbeing.

If you want to discover more books I am passionate about, here are a few examples, but the articles are in Romanian language:

How to delegate from a growth mindset

One of my interview questions for a job was about dealing with many projects simultaneously and multitasking and my first suggestion was delegation. Interesting enough, I did not know how hard that was at that time, how delegation is a lot about giving up control, about trust and about growing another person, and not simply just handing over assignments and receiving them completed, more about personal relations and less about reporting templates, monitoring and control.

I see that today and, often, I do find myself in situations where I would do things faster than I can delegate them. Delegation is an investment, it is more than clearing up your to-do list and more about creating space in your schedule for complex tasks and new opportunities.

Here are the 3 most often road blocks in the way of efficient delegation and the growth mindset shifts which will help you be a better delegator:

1 “Only I can do it” > turns into > “Don’t put limitations on people’s intelligence

Intelligence is not fixed. Our mind is like a muscle and, just like any other muscle, we can exercise it and develop it over time. Although your brain might not grow physically, you develop new neural networks when you challenge yourself or learn something new.

So, although you already have the skills to do the task and the delegate does not (yet), it does not mean that they cannot do it or learn how to do it.

2 “It is faster if I do it” > turns into > “Embrace challenges

On the short term, you are probably right. On the long term though, you could be clearing your schedule for new opportunities and thus gaining a lot of time. Moreover, a growth mindset means embracing challenges, not avoiding them. This way not only you help the growth of the delegate, but you grow yourself, cause it takes a special kind of skill to be able to teach someone to do what you do.

3 “The delegate has to do it the exact same way” > turns into > “Learn from criticism

Once you have moved passed the first 2 steps and delegated the task, you need to communicate the desired outcome, if needed help the delegate form a plan, but stay out of the process.

The first reason for which we fear people doing things differently than we do, is that we see it as a criticism to our way of doing it, it’s like they are saying “you were doing it wrong”.

I challenge you to be curious and see this as an opportunity to learn, to discover new ways, maybe better ways. Usually people are not out to get us, they just think in a different manner, and that is ok as long as we get the objective done. So start by giving the delegate the outcome, starting with the end in mind, and let them build the way up.

Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.

General Patton

Delegation is never an easy process. When you get to the point of having to delegate, you already built your way up, so this exercise of giving up control could mean shaking up your core. If you still struggle with the questions above, start the process consciously and intentionally and ask yourself “what am I unwilling to delegate? Make a list of tasks and identify the best person in your organization – not you – to take on this project or task and delegate the task”.

We usually get to delegation when we are no longer able to complete the tasks on time. Start the process before you have to, before you have pressure of deadlines, thus when you do have to do it, you are more prepared internally.

And always keep in mind that the only point to delegating something is if it frees you for things that create greater value for your company.

How do you delegate? Do you feel fear in doing it? Do you still avoid it or do you embrace the opportunity?

Entrepreneurship, between skill and mindset

I’ve always wanted to be an entrepreneur. I remember being a kid and dreaming of having my own company. At that time, it meant being my own boss, having control over my schedule, it meant independence and freedom. I know, I was a naive kid as I later learned, but a kid with aspirations.

I put off starting a company year after year.

At first I stopped as I had read I should start with a business plan. And I started drafting a business plan … several times, but I lacked the skill. So I learned more.

The second stop was due to the ever changing legislation, which never felt supportive of an entrepreneur. Basically, it simply stated that no matter if you earn an income or not, you have to pay taxes for having a company. This also happened a few times. I see now my error here as well.

Third time, something had changed. I realized that it is not about feeling prepared, about the right moment, about the perfect business plan, about an investor giving you free money, it was about taking the first step, jumping and building your wings on the way down.

It was not about skill, cause no matter how much you develop your skills, how much you learn, how early you get an MBA, if you don’t have or grow an entrepreneurial mindset, you’ll never start.

So what do I mean by entrepreneurial mindset:

  1. just do it – there are no secret recipes and the best school is the fail first and use that advantage school.
  2. problems are solutions yet to be unfolded – too often when faced with a problem, we start thinking in terms of guilt or blame and this keeps us from seeing the solutions.
  3. take a step back – sometimes we are too much in the middle of the problem to be able to see a solution. Take a step back and look at the problem from all sides, like a 6 thinking hats exercise.
  4. put yourself in challenging situations – I’ve always done stuff like that to see if I can take it, to see my weaknesses, to find my strengths, to prove myself that I can move past any obstacle. It was always a deliberate choice to expose myself vulnerable when I was afraid, vulnerable in front of crowds, I broke the ice and volunteered first before I knew what had to be done, I went to events outside my comfort zone and shared rooms with strangers during my residential weekends in the MBA training.
  5. vision first – don’t get caught up in competition and selling. Try to build and learn from others and offer support. Try to focus on the HARD objectives instead of immediate sales, cause immediate sales will only make you do (almost) anything to sell on the spot and this will determine an involuntary shift in your course, until one day you will wake up and not recognize what you built.

After 20 years of being an employee, an entrepreneur, a manager working with entrepreneurs, developing entrepreneurial programs, after winning millions of euros for entrepreneurs and monitoring how entrepreneurs develop their business, I believe that the thing that kills most businesses is not failure, a bad idea, the crisis or the economy. It’s doubt – in ourselves, our surroundings, our abilities.

And the thing that makes the difference between a succesfull entrepreneur and a business fail is your mindset, knowing that you always have a choice. Even when you are stuck and feel that you cannot make a decision, you actually choose to stay.

The second you start choosing differently and working on your mindset, there will be no going back!

If you’re not gonna work for your dreams, you’re gonna work in somebody else’s dreams!

Without dismissing entrepreneurship programs, I do believe that they are not enough. They give you the tools and mechanics of a business but you need to be the fuel.