Gift Ideas: Two Books Worth Reading Over the Holidays
It’s December, and if you’re looking for ideas for the readers on your holiday gift list, I have a couple of book suggestions for you. I know what you’re thinking: What could be more exciting than giving someone you care about a book on investing? Let me tell you, my bookshelves are lined with lots of very good investment books describing every conceivable nuance about investment theory and practice. Would I do that to faithful readers in my last blog of 2020? I think not. This year has been difficult enough.
The first book is The Psychology of Money by Morgan Housel (Harriman House, 2020). Housel is an excellent writer and I’ve enjoyed reading his financial columns for many years, so I knew his new book would be a good one. It did not disappoint. It’s a book I wish I had written.
The book is a short collection of what he calls “20 of the most important flaws, biases, and causes of bad behavior I’ve seen affect people when dealing with money,” with each chapter describing a different aspect of the psychology of money. Every chapter is laced with interesting illustrations from real life, some characters you will know right away, many others you’ve probably never heard of, all of which make it very entertaining to read. While most of you would find the book a “quick read,” there is much here to ponder, especially in terms of your own relationship with, and attitude towards, money.
In the chapter entitled “Freedom,” Housel challenges the notion that having more wealth will necessarily make us happier. He references research on happiness that suggests that having “a strong sense of controlling one’s life is a more dependable predictor of having positive feelings of wellbeing.” Housel goes on to write “Money’s greatest intrinsic value – and this can’t be overstated – is its ability to give you control over your time. To obtain, bit by bit, a level of independence and autonomy that comes from unspent assets that give you greater control over what and when you can do it.”
The chapter “Nothing’s Free” echoes my own sentiments on investing in equities, especially when markets are in turmoil: “Market returns are never free and never will be. They demand you pay a price, like any other. You’re not forced to pay this fee, just like you’re not forced to go to Disneyland. You can go to the local county fair where tickets might be $10, or stay home for free. You might still have a good time. But you’ll usually get what you pay for. Same with markets. The volatility/uncertainty fee – the price of returns – is the cost of admission to get returns greater than low-fee parks like cash and bonds.”
His chapter on “The Seduction of Pessimism” is worth the price of the whole book. Housel defines optimism as “a belief that the odds of a good outcome are in your favor over time, even when there will be setbacks along the way.” Pessimism, however, “holds a special place in our hearts. Pessimism isn’t just more common than optimism. It sounds smarter. It’s intellectually captivating, and it’s paid more attention than optimism.”
The key insight in this chapter is his assertion that “progress happens too slowly to notice, but setbacks happen too quickly to ignore.” He illustrates this with the story of the Wright brothers’ invention of the first successful motor-operated airplane. It took the world four and a half years after their first flight in 1905 to recognize the revolutionary nature of one of the most important inventions in human history. This point leads me to my second book recommendation.
In the preface to Ten Global Trends Every Smart Person Should Know (Cato Institute, 2020), the authors Ronald Bailey and Marian L. Tupy cite a 2016 poll by YouGov that asked people in 17 countries, “All things considered, do you think the world is getting better or worse, or neither?” Of those polled from the U.S., 65% thought the world was getting worse (versus 58% of overall respondents). Similar to Morgan Housel, the authors state: “News is bad news; steady progress is not news.”
The book illustrates with one simple chart and a short description numerous positive global and U.S. trends across several categories. The Top Ten Trends include The Great Enrichment, The End of Poverty, Are We Running Out of Resources?, Peak Population, The End of Famine, More Land for Nature, Democracy on the March, The Long Peace, A Safer World. The book continues with chart after chart of things like School Enrollment, Infant Mortality, Homicide Rates, Military Expenditures, Working Less for More, Growth of Protected Natural Areas, and many other topics.
A book like this is a good antidote to the steady dose of dire pessimism we get from the daily news and social media. Sure, the world still has many problems to grapple with. The importance of a book like this is that it should give us hope that today’s problems can also be solved.
In closing, everyone here at Coyle Financial Counsel would like to express our sincere appreciation to each of you for your continued trust, especially through this difficult year. In the spirit of the Season, we would be pleased to give away copies of these two books to the first ten clients who respond by email (one per household, please).
John serves as Chief Investment Officer for Coyle Financial Counsel and is responsible for overseeing the investment process. John’s prior experience includes managing institutional fixed-income portfolios for corporations, pension funds, non-profit organizations and foundations at several large, global asset managers. With more than 20 years of institutional investment experience, he is energized by helping individuals understand the role investing plays in meeting their long-term financial goals.
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