This article is an excerpt from the Shortform book guide to "The Psychology of Money" by Morgan Housel. Shortform has the world's best summaries and analyses of books you should be reading.
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Is Morgan Housel’s The Psychology of Money worth reading? What is the key message to take away from the book?
Most of us assume financial success depends on education and intelligence. But in The Psychology of Money, finance expert Morgan Housel presents an alternate hypothesis: The key to financial success lies in understanding human behavior.
Here’s our The Psychology of Money review, including background, context, and critical reception by the readers.
About the Author
Morgan Housel is an award-winning finance writer and former finance columnist at The Motley Fool and The Wall Street Journal. He is also a partner at The Collaborative Fund, a venture capital firm specializing in technology.
Connect with Morgan Housel:
The Book’s Publication
Publisher: Harriman House
Published in 2020, The Psychology of Money is Housel’s third and most popular book. It differs from his previous book because it is full of new and original insights: His first book, Everyone Believes It; Most Will Be Wrong, is a collection of previously published essays, while his second, book, 50 Years in the Making: The Great Recession and Its Aftermath, is a collection of interviews with other financial experts. That said, The Psychology of Money is based on Housel’s viral 2018 blog post with the same name.
Intellectual Context
Housel focuses on sharing timeless truths about wealth. So in some ways, The Psychology of Money acts as a synthesis of some of the best personal finance wisdom shared through the decades—from 1996’s The Millionaire Next Door to 2012’s Antifragile. But unlike other personal finance books, Housel presents almost no equations or specific strategies. Rather, he focuses on presenting the broad principles you need to understand to gain wealth.
The Book’s Impact
The Psychology of Money became an international bestseller and was particularly popular in finance media, with several publications devoting articles to the lessons shared in the book. It is also set to be made into a movie: Cavalry Media purchased the screen rights in 2020.
Critical Reception
The Psychology of Money reviews were divided. Online reviewers who appreciated the book love the timeless, simple lessons that Housel shared. They found his teachings useful and impactful, and they loved the real-life stories Housel used to illustrate his arguments.
Online reviewers who fould fault with the book found Housel’s teachings unoriginal and repetitive. They also noted a lack of diversity in the real-life stories Housel described, which almost exclusively starred men.
Commentary on the Book’s Approach
The lessons Housel shares in The Psychology of Money mostly make intuitive sense. However, Housel’s support of these lessons is uneven. Sometimes, he backs up his claims with research and anecdotes of well-known people. Other times, he supports his ideas with only personal experience. Research shows that many of the ideas that aren’t as well-supported are already popular and well-known in the personal finance genre—but Housel often doesn’t attribute these ideas to the people who originally popularized them.
Additionally, while marketed as a collection of timeless lessons about finance, The Psychology of Money is most applicable if your financial strategy includes investing in the United States. Much of Housel’s advice involves investing in financial markets specifically—indeed, Housel doesn’t seem to consider that you can create a financial strategy without doing so. Furthermore, Housel recommends many strategies based on his assumption that the US economy will continue growing long-term. So if you’re not investing in the US, his strategies may not work as well for you.
Commentary on the Book’s Organization
Housel devotes the first 18 chapters of his book to teaching 18 lessons he thinks you must understand in order to achieve financial success. Each of these chapters contains a paragraph at the end connecting its ideas to the immediately following chapter—but otherwise, the chapters do not seem to be grouped in a meaningful way. After sharing his lessons, Housel presents a synthesis of his ideas in Chapter 19 before describing how he manages his own wealth in Chapter 20. Finally, Housel shares an epilogue where he briefly describes American economic history in an attempt to explain why modern-day Americans think about money how they do.
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Like what you just read? Read the rest of the world's best book summary and analysis of Morgan Housel's "The Psychology of Money" at Shortform .
Here's what you'll find in our full The Psychology of Money summary :
- Why the key to financial success lies in understanding human behavior
- How to make better financial decisions
- How chance plays a bigger role in our financial lives than we think
