Page 14 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

But these stories do happen in investing.

COBACOBA
The fact that Ronald Read can coexist with Richard Fuscone has two
explanations. One, financial outcomes are driven by luck, independent of
intelligence and effort. That’s true to some extent, and this book will discuss
it in further detail. Or, two (and I think more common), that financial success

is not a hard science. It’s a soft skill, where how you behave is more
important than what you know.

I call this soft skill the psychology of money. The aim of this book is to use
short stories to convince you that soft skills are more important than the
technical side of money. I’ll do this in a way that will help everyone—from
Read to Fuscone and everyone in between—make better financial decisions.

These soft skills are, I’ve come to realize, greatly underappreciated.

Finance is overwhelmingly taught as a math-based field, where you put data
into a formula and the formula tells you what to do, and it’s assumed that
you’ll just go do it.

This is true in personal finance, where you’re told to have a six-month
emergency fund and save 10% of your salary.

It’s true in investing, where we know the exact historical correlations
between interest rates and valuations.

And it’s true in corporate finance, where CFOs can measure the precise cost

of capital.

It’s not that any of these things are bad or wrong. It’s that knowing what to
do tells you nothing about what happens in your head when you try to do it.

Two topics impact everyone, whether you are interested in them or not:
health and money.