The Psychology of Money Introduction: The Greatest Show on Earth

Ronald Read never went to college and worked as a gas station mechanic and janitor for a department store. He bought a modest house at 38 and lived there the rest of his life. His favorite hobby was chopping firewood.

Richard Fuscone went to Harvard, had an MBA, was a very successful finance executive, and retired in his 40s. He owned multiple pieces of real estate, including an 18,000 square foot mansion.

One of them died with $8,000,000 and the other declared bankruptcy, losing nearly everything. Can you guess which is which? (Hint: The fact that I’m writing this is a clue 😉)

These two are compared in the Introduction of Morgan Housel’s book The Psychology of Money. Housel wants to be clear “the lesson here is not to be more like Ronald and less like Richard”. Many people who buy modest houses have to declare bankruptcy. Many finance executives die with 10x the wealth Ronald Read did. The question is, how can these two individuals with very different levels of financial skill and knowledge have such drastic and unexpected ending financial results? One of the explanations is that “financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know. I [Housel] call this soft skill the psychology of money.” (There is another explanation, but we’ll wait to explore that in a future book)

Read behaved differently than Fuscone. That’s what made the difference. Success in our personal finances comes down to how we behave.

Each week, I’ll be sharing insights from the next chapter of Housel’s book, subtitled “Timeless Lessons on Wealth, Greed, and Happiness”. As your guide to the ever-changing financial landscapes of your lives, we will put what we can control - our behavior - at the center of our work.

Until next time, happy reading!