Performance – How the Psychology of Money Affects How You do Business.

How the Psychology of Money Affects How You Do Business

 “The Psychology of Money” by Morgan Housel is an eye-opening book.  

For me anyway. Housel talks about the idea that how you think about your money affects how much of it you have, and how stressful things are.

I agree with him.

Housel talks about 14 ideas for how you think about money.   I like them and have added my flavour to his ideas.   You don’t have to agree with any of his or my ideas.

Following are the first 7 of his ideas – the rest will follow next month.

Here are Housel’s first seven – and my views on what they mean for you as a business owner/ leader.


1. Go out of your way to find humility when things are going right and forgiveness/compassion when they go wrong.

  • Housel: Luck and risk are both real and hard to identify.  
  • Wood:
    Your leadership skills will set the scene and the tone.  But your team will do the work.  Be grateful for their help and acknowledge when you make a poor decision that impacts the team.

2. Less ego, more wealth.

  • Housel: Saving money is the gap between your ego and income, wealth is what you don’t see.
  • Wood: Build the strength of your balance sheet.  That will give you the flexibility to decide what’s best for the business.  There is no need to compare yourself to other businesses.  Play your own game.

3. Manage your money in a way that helps you sleep at night.

  • Housel: Some people won’t sleep well unless they’re earning the highest returns; others if they are conservatively invested.
  • Wood: Be clear about the level of risk you are willing to take.  Define your Risk Appetite and establish the processes you need which will allow
    you the comfort level you need.

4. If you want to be better as an investor, the single most powerful thing you can do is increase your time horizon.

  • Housel: (A longer time horizon) makes little things grow big and big mistakes fade away.
  • Wood: Work out what you would like to achieve over the longer term (5-10 years or more) and build a baby-step plan to get there.  Enjoy the
    experience of the ride.  Learn from the mistakes.  Build on the successes.

5. Become OK with a lot of things going wrong.

  • Housel:  You can be wrong half the time and still make a fortune because a small minority of things account for the majority of outcomes.
  • Wood: This is a classic example of the 80:20 rule playing out.  You can still do really well by having a few really profitable service/ product lines, which outperform all the others.  Kill the mistakes. 

6. Use money to gain control over your time.

  • Housel: Because not having control of your time is such a universal drag on happiness.
  • Wood: Only do what only you can do.  Get rid of the distractions.  Plan the work.  Work the plan.  Ignore the shiny distractions – social media, unnecessary meetings, etc.  When it is work time… do the work… and work like a trojan.  Figure out who is needed to be on the team to help
    you.  Then let them get on with it.  

7. Be nicer and less flashy.

  • Housel: No one is as impressed with your possessions as you are.
  • Wood: Warren Buffett drives a used car.   He drives about 5,000km each year.  He doesn’t need a super glamorous vehicle for that kind
    of usage.

Tune in next month for the rest of Housel’s list of ideas about money!

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