Page 15 - Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

The health care industry is a triumph of modern science, with rising life
expectancy across the world. Scientific discoveries have replaced doctors’
COBACOBA
old ideas about how the human body works, and virtually everyone is
healthier because of it.

The money industry—investing, personal finance, business planning—is

another story.

Finance has scooped up the smartest minds coming from top universities
over the last two decades. Financial Engineering was the most popular major
in Princeton’s School of Engineering a decade ago. Is there any evidence it
has made us better investors?

I have seen none.

Through collective trial and error over the years we learned how to become
better farmers, skilled plumbers, and advanced chemists. But has trial and
error taught us to become better with our personal finances? Are we less
likely to bury ourselves in debt? More likely to save for a rainy day? Prepare
for retirement? Have realistic views about what money does, and doesn’t do,
to our happiness?

I’ve seen no compelling evidence.

Most of the reason why, I believe, is that we think about and are taught about

money in ways that are too much like physics (with rules and laws) and not
enough like psychology (with emotions and nuance).

And that, to me, is as fascinating as it is important.

Money is everywhere, it affects all of us, and confuses most of us. Everyone
thinks about it a little differently. It offers lessons on things that apply to
many areas of life, like risk, confidence, and happiness. Few topics offer a
more powerful magnifying glass that helps explain why people behave the
way they do than money. It is one of the greatest shows on Earth.

My own appreciation for the psychology of money is shaped by more than a
decade of writing on the topic. I began writing about finance in early 2008. It

was the dawn of a financial crisis and the worst recession in 80 years.