I recently read The Psychology of Money by Morgan Housel, the one which was widely talked about recently after the interview of Aravind Swamy (Actor & Entrepreneur) who talked about this book in a promotion for his movie Meiyazhagan (Meialagan- for my non tamil readers). Such a beautiful film it was, and why am I promoting his film? That too an year late?
Well, coming back to the topic; this is a book that'll help you earn make a crore rupees, or make you millionaire or billionaire, atleast that's what I thought it would be. However, it turned out to be different from what I assumed. Presumably, the ideas that we've over savings, financing is different from how the "rich" people looks into the same. Still "insurance", "stock marketing", "investing" are something seen as scam, as financing is something where the majority lacks awareness (Unfortunately I was also in that majority). Well this book breaks that shackles as I thought this would be money mindset book, but actually is it investing AND mindset. We all want to become crore-patis, millionaire-billionaire-even trillionaire, but I came across a really interesting math, where we all earn more than a crore rupees. On average, a fresher (upon completing his/her UG), they get paid 3-5LPA. Let's just forget about inflation, tax, savings, expenditure for a second for the sake of math, and assume we work for 30 years with no salary increment. 30k/month * 12 months/year * 30 years of work (age:25-55). Guess how much we'd have earned? Rs. 1,08,00,000. To put that in words, Rs. One Crore, Eight Lakhs. So we all earn 1 crore rupees but why aren't we crore-patis?
Warren Buffett, one of the best investors in the world and philanthropist's has a staggering net worth of over 100 billion USD right now. But, $81.5 billion of his $84.5 billion net worth came after his 65th birthday. Absurd right?
There's a classic problem where you get 2 options: either 1 crore instantly or 1 rupee on the first day, and it get doubled daily for a month. Predominantly, people choose the first option, do you know how much the person would've had if they have chosen the second? Rs. 1,07,37,41,824. A whopping 107 CRORES INR!!! That's 100x the first option.
There's a mention of another investor in the book, James Simons who's the most successful investor in terms of returns. 66% annually since 1988. Even Mr. Buffett has compounded roughly 22% annually, a third as much. But, Simon's net worth is $21 billion. Why the difference?
Technologically, the storage devices that we use- floppy disks, CDs, pen drives, hard disks etc.. started with 3.5MB storage in 1950s by IBM. By 1960s, it moved to few dozen MB. In 70s & 80s it was few 100 MB. In 1990s, the storage capacity were 200-500MBs. In the late 90s it was 6GB or 6000MB+, in the early 2000 it was 120GB, in late 2000 it became 250GB, in 2011- 4TB or 4000GB, in the late 2010s- 60TB and in 2020s- over a 100TB. If you see, from 1950-90s, there was gain of around 300. But from 1990 to the modern day, the gain is over 100 million or 10 crore times! OMG.
I hope the numbers, relations, percentages didn't bore you. Here's the part. Warren Buffett started investing from the age of 10 and been investing for over 70 years. You'll get 100+ crores if you chose Rs. 1 on the first day. Mr. Simons would've had $63,900,781,780,748,160,000 (5,336,315,250,464,668,000,000 in INR) if the successful investor had invested for 70 years with his annual 66% returns. The figures are absurd. Beyond imagination. Imagine we have Rs. 1 crore note and RBI prints 1 note per second, it'd take approximately 1.7 crore years for RBI to completely finish printing the sum. OMGGG. Our minds are not ready for such absurdities. But how? that's called COMPOUNDING.
I'm a no finance expert, nor a commerce/accountancy student. I'm a science student, and specifically an electronics engineer. If you ask me how a phone or computer works, I'll be able to help you but this? THIS IS DIFFERENT.
Morgan Housel -the author, has referred about so many many many incidents that are financially, socially, emotionally intertwined but those were mostly of Americans. Logically, acceptable as him being an American why would he refer someone from some other country. That was the part, where I felt left alone while reading this book as I couldn't grasp the crux of every financial motives behind the story that he was mentioning. I even don't know whether I'd have completely understood if he have mentioned only Indian investors and history, because this is new. Financing is new. Saving is different from investing.
There were 20 chapters and each title itself is self explanatory and yet the way he cohesively stitched through history, statistics, numbers and understanding is commendable. No one's crazy, Luck & Risk, Never Enough, Confounding Compounding, Getting Wealthy vs. Staying Wealthy, Tails- You Win, Freedom, Man in the Car Paradox, Wealth is What You Don't See, Save Money, Reasonable > Rational, Surprise, Room for Error, You'll Change, Nothing's Free, You & Me, The Seduction of Pessimism, When You'll Believe Anything, All Together Now, and Confessions. These 20 chapters were brilliant, amazing, extraordinary, wonderful, fantastic, marvellous, outstanding, top of the box, out of the world. NO, I won't say that because I couldn't actually understand the book entirely or even what he's trying to convey at many instances. Not because of the American references alone, also because of my poor financial knowledge.
However, I proudly take home few points; Earning money is different from making money. Saving is not investing. Compounding is absurd (be it positive or negative). Its okay to be reasonable than being rational always. Life and money is not some math formula or an excel sheet where you can tabulate everything, there are always uncertainties and room for errors. Nothing is permanent except impermanence.
Would I recommend this for you? I would say yes. Honestly while reading it for the first time, I felt like rushing and finishing the book ASAP so that I can start a new story, but when I have to revisit few pages for this blog I wanted to read this again. I know, I won't understand again, but would be better than before. This is a must for who earns and who are about to earn, especially in your colleges and in late teens and early 20s. Remember, you're already late by 10 years when compared to Mr. Buffett in investing. This book gives a broad spectrum of how investing helps and sucks. It is not a guide to become rich. It is a guide to make you realise what is rich. While reading this, I never thought I'd have more than 10 lines to write for blog but this has become already longer than what I expected LOL. So tldr: GO AND READ MY BLOG, just kidding. Learn investing and start investing. Disclaimer: invest with your earnings, don't burn your parents money and point your finger at me.
So that's it from my side, until next time. Take care y'all. Have a good day/noon/evening/night whenever you read this.
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