Скачать или смотреть Ch-18 When You’ll Believe Anything | The Psychology of Money by Morgan Housel

Hey RRs, I am Preeti Saraf, and I will discuss the 18th chapter, ‘When You’ll Believe Anything' of the book ‘The Psychology of Money’ by Morgan Housel.

Housel in this chapter talks about appealing fiction, and the reason why stories are more powerful than statistics. He says “Stories are, by far, the most powerful force in the economy.”

You can also buy this book on Amazon - https://amzn.to/3MC39Sk

One of the major reasons for the 2008 crash, according to Housel, was our belief in the story about housing price stability, banker prudence, and the ability of financial markets to accurately price risk.

Playlist for chapter wise explanation -    • The Psychology of Money by Morgan Housel  

Then we stopped trusting that story around 2009 and that’s the only thing that changed. But it made all the difference in the world.

Housel draws out two key points to keep in mind about a story-driven world when managing our money.

1. The more we want something to be true, the more likely we are to believe a story that overestimates the odds of it being true.

Housel says if we desperately need a solution and a good one isn’t known or readily available to us, we tend to believe anything.

Do we ever wonder why people listen to TV investment commentary that has little track record of success? It is partly because the stakes are so high in investing. If there’s a 1% chance that someone’s prediction will come true, and it coming true will change our life, it’s not crazy to pay attention—just in case.

The issue is that most of us are unable or unwilling to assess low chances, such as the 1% possibility. We have a strong conviction that anything we wish to be true is indisputably true. But in truth we are only doing it because there’s a chance of a massive result.

Incentives are a powerful motivator, and we should always remember how they influence our own financial goals and outlooks. This is a big part of why room for error, flexibility, and financial independence — important themes discussed in previous chapters*—are indispensable.

*Ch-13 The Room for error -    • Ch-13 Room for error | The Psychology of M...  
Ch-10 Save Money -    • Ch-10 Save Money | The Psychology of Money...  
Ch-3 Never Enough -    • Ch-3 Never Enough | The Psychology of Mone...  
Ch-7 Freedom -    • Ch-7 Freedom | The Psychology of Money by ...  

2. Everyone has an incomplete view of the world. But we form a complete narrative to fill in the gaps.

Housel says that most of us, when confronted with something we don’t understand, do not realize that we don’t understand it. This is because we are able to come up with an explanation that makes sense based on our own unique perspectives and experiences in the world, however limited those experiences are.

Think about market forecasts. We’re very, very bad at them. Housel calculated that if we simply assume the market to rise by its historic average annually, our accuracy will still get higher than if we follow the top market analysts’ forecasts.

Most people know this. But there’s still tremendous demand for forecasts. This is because it provides us with satisfaction.We want to believe that everything is in control. The illusion of control is more persuasive than the reality of uncertainty. So, we cling to stories about outcomes being in our control.

Kahneman identified relevant errors in our perspective:
i) When planning we focus on what we want or can do and neglect the plans, actions, and decisions of others who might impact our personal outcomes.
ii) When studying the past and forecasting the future we overemphasize individual skill and discount luck.
iii) We focus on what we know and ignore what we don’t which results in overconfidence.
We must try to overcome these shortcomings and we can see the change for ourselves.

Key takeaways from the chapter are:
1. Stories are, by far, the most powerful force in the economy.
2. The more we want something to be true, the more likely we are to believe a story that overestimates the odds of it being true.
3. Everyone has an incomplete view of the world. But we form a complete narrative to fill in the gaps.
4. We focus on what we know and ignore what we don’t which results in overconfidence.

For regular updates and the latest news:
Follow Us On 😇

Facebook:
  / richerreaders  

LinkedIn:
  / richerreaders  

Instagram:
  / richer_readers  

Twitter:
  / richer_readers​  

Telegram:
Updates : @RicherReaders_bot
Discussion : https://t.me/RicherReaders

We have reached to the end of the video. Thank you ! :)