Takeaways and notes from the book:
Voltaire’s observation: “history never repeats itself; man always does.“ The lowest income households in the United States on average spend $412 a year on lotto tickets, four times the amount of those in the highest income groups. 40% of Americans cannot come up with $400 in an emergency. Which is to say: Those buying $400 in lottery tickets are by and large the same people who say they can’t come up with $400 in an emergency.
Years ago I asked economist Robert Schiller, who won the Nobel prize in economics what do you want to know about investing that we can’t know? “The exact role of luck and successful outcomes,“ he answered.
The difficulty in identifying what is luck, what is skill, and what is risk is one of the biggest problems we face when trying to learn about the best way to manage money.
What Gupta and Madoff did is something different. They already had everything: unimaginable wealth, prestige, power, freedom. And they threw it all away because they wanted more. They had no sense of enough.
Reputation is invaluable. Freedom and independence are invaluable. Family and friends are invaluable. Being loved by those who you want to love you is invaluable. Happiness is invaluable.
Good investing is not necessarily about making good decisions. It’s about consistently not screwing up.
At the Berkshire Hathaway shareholder meeting in 2013 Warren Buffett said he’s owned 400 to 500 stocks during his life and made most of his money on 10 of them. Charlie Munger followed up: “If you remove just a few of Berkshire‘s top investments, its long-term track record is pretty average.“
The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want today.“
Controlling your time is the highest dividend money pays.
No one is impressed with your possessions as much as you are.
Savings in the bank that earn 0% interest might actually generate an extraordinary return if they give you the flexibility to take a job with a lower salary but more purpose, or wait for investment opportunities that come when those without flexibility turn desperate.
Having more control over your time and options is becoming one of the most valuable currencies in the world.
The most important driver of anything tied to money is the stories people tell themselves and the preferences they have for goods and services. Those things don’t tend to sit still. They change with culture and generation. They’re always changing and always will.
History can be a misleading guide to the future of the economy and stock market because it doesn’t account for structural changes that are relevant to today’s world.
The most important part of every plan is planning on your plan not going according to plan.
German tanks at Stalingrad – – field mice had nested inside the vehicles and eaten away installations covering the electrical systems. (No one had planned for this risk, hence German tanks were inoperative.)
The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true.
Manage your money in a way that helps you sleep at night. Use money to gain control over your time.
Effectively all of our net worth is a house, a checking account and some Vanguard index funds. One of my deeply held investing beliefs is that there is little correlation between investment effort and investment results. The reason is because the world is driven by tales – – a few variables account for the majority of returns. (Author describing his financial management.)