All Together Now


                                CHAPTER 19

             All Together Now


What we've learned about the psychology of your own money.

Congratulations, you’re still reading.

It’s time to tie together a few things we’ve learned.

This chapter is a bit of a summary; a few short and actionable lessons that can help you make better financial decisions.

First, let me tell you a story about a dentist appointment gone horribly awry. It teaches us something vital about the dangers of giving advice about what to do with your money.


Clarence Hughes went to the dentist in 1931. His mouth was radiating pain. His dentist put him under crude anesthesia to ease the pain. When Clarence awoke hours later he had 16 fewer teeth and his tonsils removed.

And then everything went wrong. Clarence died a week later from his surgery’s complications.

His wife sued the dentist, but not because the surgery went awry. Every surgery risked death in 1931.

Clarence, she said, never consented to the procedures in the first place, and wouldn’t if he were asked.

The case wove through courts, but went nowhere. Consent between doctor and patient wasn’t black and white in 1931. One court summed up the idea that doctors require freedom to make the best medical decisions: “Without such, we could not enjoy the advancement of science.”

For most of history the ethos of medicine was that the doctor’s job was to fix the patient, and what the patient thought about the doctor’s treatment plans wasn’t relevant. Dr. Jay Katz wrote about the philosophy in his book The Silent World Between Doctor and Patient:


Doctors felt that in order to accomplish that objective they were obligated to attend to their patients’ physical and emotional needs and to do so on their own authority, without consulting with their patients about the decisions that needed to be made. The idea that patients may also be entitled to sharing the burdens of decisions with their doctors was never part of the ethos of medicine. 

This wasn’t ego or malice. It was a belief in two points:

Every patient wants to be cured.


There is a universal and right way to cure them.


Not requiring patient consent in treatment plans makes sense if you believe in those two points.

But that’s not how medicine works.

In the last 50 years medical schools subtly shifted teaching away from treating disease and toward treating patients. That meant laying out the options of treatment plans, and then letting the patient decide the best path forward.

This trend was partly driven by patient-protection laws, partly by Katz’s influential book, which argued that patients have wildly different views about what’s worth it in medicine, so their beliefs have to be taken into consideration. Katz wrote:


It is dangerous nonsense to assert that in the practice of their art and science physicians can rely on their benevolent intentions, their abilities to judge what is the right thing to do ... It is not that easy. Medicine is a complex profession and the interactions between physicians and patients are also complex.


That last line is important. “Medicine is a complex profession and the interactions between physicians and patients are also complex.”

You know what profession is the same? Financial advice.

I can’t tell you what to do with your money, because I don’t know you.

I don’t know what you want. I don’t know when you want it. I don’t know why you want it.

So I’m not going to tell you what to do with your money. I don’t want to treat you like a dentist treated Clarence Hughes.

But doctors and dentists aren’t useless, obviously. They have knowledge. They know the odds. They know what tends to work, even if patients come to different conclusions about what kind of treatment is right for them.

Financial advisors are the same. There are universal truths in money, even if people come to different conclusions about how they want to apply those truths to their own finances.

With that caveat in place, let’s look at a few short recommendations that can help you make better decisions with your money.


Go out of your way to find humility when things are going right and forgiveness/compassion when they go wrong. Because it’s never as good or as bad as it looks. The world is big and complex. Luck and risk are both real and hard to identify. Do so when judging both yourself and others. Respect the power of luck and risk and you’ll have a better chance of focusing on things you can actually control. You’ll also have a better chance of finding the right role models.

Less ego, more wealth. Saving money is the gap between your ego and your income, and wealth is what you don’t see. So wealth is created by suppressing what you could buy today in order to have more stuff or more options in the future. No matter how much you earn, you will never build wealth unless you can put a lid on how much fun you can have with your money right now, today.

Manage your money in a way that helps you sleep at night. That’s different from saying you should aim to earn the highest returns or save a specific percentage of your income. Some people won’t sleep well unless they’re earning the highest returns; others will only get a good rest if they’re conservatively invested. To each their own. But the foundation of, “does this help me sleep at night?” is the best universal guidepost for all financial decisions.

If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon. Time is the most powerful force in investing. It makes little things grow big and big mistakes fade away. It can’t neutralize luck and risk, but it pushes results closer towards what people deserve.

Become OK with a lot of things going wrong. You can be wrong half the time and still make a fortune, because a small minority of things account for the majority of outcomes. No matter what you’re doing with your money you should be comfortable with a lot of stuff not working. That’s just how the world is. So you should always measure how you’ve done by looking at your full portfolio, rather than individual investments. It is fine to have a large chunk of poor investments and a few outstanding ones. That’s usually the best-case scenario. Judging how you’ve done by focusing on individual investments makes winners look more brilliant than they were, and losers appear more regrettable than they should.

Use money to gain control over your time, because not having control of your time is such a powerful and universal drag on happiness. The ability to do what you want, when you want, with who you want, for as long as you want to, pays the highest dividend that exists in finance.

Be nicer and less flashy. No one is impressed with your possessions as much as you are. You might think you want a fancy car or a nice watch. But what you probably want is respect and admiration. And you’re more likely to gain those things through kindness and humility than horsepower and chrome.

Save. Just save. You don’t need a specific reason to save. It’s great to save for a car, or a down payment, or a medical emergency. But saving for things that are impossible to predict or define is one of the best reasons to save. Everyone’s life is a continuous chain of surprises. Savings that aren’t earmarked for anything in particular is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment.

Define the cost of success and be ready to pay it. Because nothing worthwhile is free. And remember that most financial costs don’t have visible price tags. Uncertainty, doubt, and regret are common costs in the finance world. They’re often worth paying. But you have to view them as fees (a price worth paying to get something nice in exchange) rather than fines (a penalty you should avoid).

Worship room for error. A gap between what could happen in the future and what you need to happen in the future in order to do well is what gives you endurance, and endurance is what makes compounding magic over time. Room for error often looks like a conservative hedge, but if it keeps you in the game it can pay for itself many times over.

Avoid the extreme ends of financial decisions. Everyone’s goals and desires will change over time, and the more extreme your past decisions were the more you may regret them as you evolve.

You should like risk because it pays off over time. But you should be paranoid of ruinous risk because it prevents you from taking future risks that will pay off over time.

Define the game you’re playing, and make sure your actions are not being influenced by people playing a different game.

Respect the mess. Smart, informed, and reasonable people can disagree in finance, because people have vastly different goals and desires. There is no single right answer; just the answer that works for you.

Now let me tell you what works for me.



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