Page 41 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

less likely you can apply its lessons to your own life, because the more
likely the outcome was influenced by extreme ends of luck or risk.
COBACOBA

You’ll get closer to actionable takeaways by looking for broad patterns of
success and failure. The more common the pattern, the more applicable it

might be to your life. Trying to emulate Warren Buffett’s investment
success is hard, because his results are so extreme that the role of luck in his
lifetime performance is very likely high, and luck isn’t something you can
reliably emulate. But realizing, as we’ll see in chapter 7, that people who
have control over their time tend to be happier in life is a broad and
common enough observation that you can do something with it.

My favorite historian, Frederick Lewis Allen, spent his career depicting the
life of the average, median American—how they lived, how they changed,

what they did for work, what they ate for dinner, etc. There are more
relevant lessons to take away from this kind of broad observation than there
are in studying the extreme characters that tend to dominate the news.

Bill Gates once said, “Success is a lousy teacher. It seduces smart people
into thinking they can’t lose.”

When things are going extremely well, realize it’s not as good as you think.
You are not invincible, and if you acknowledge that luck brought you

success then you have to believe in luck’s cousin, risk, which can turn your
story around just as quickly.

But the same is true in the other direction.

Failure can be a lousy teacher, because it seduces smart people into thinking
their decisions were terrible when sometimes they just reflect the
unforgiving realities of risk. The trick when dealing with failure is
arranging your financial life in a way that a bad investment here and a
missed financial goal there won’t wipe you out so you can keep playing
until the odds fall in your favor.