The Psychology of Money. Morgan Housel

guilty for hurting others, but “poverty will not make you feel the pain.”13

      What Gupta and Madoff did is something different. They already had everything: unimaginable wealth, prestige, power, freedom. And they threw it all away because they wanted more.

      They had no sense of enough.

      They are extreme examples. But there are non-criminal versions of this behavior.

      The hedge fund Long-Term Capital Management was staffed with traders personally worth tens and hundreds of millions of dollars each, with most of their wealth invested in their own funds. Then they took so much risk in the quest for more that they managed to lose everything—in 1998, in the middle of the greatest bull market and strongest economy in history. Warren Buffett later put it:

      To make money they didn’t have and didn’t need, they risked what they did have and did need. And that’s foolish. It is just plain foolish. If you risk something that is important to you for something that is unimportant to you, it just does not make any sense.

      There is no reason to risk what you have and need for what you don’t have and don’t need.

      It’s one of those things that’s as obvious as it is overlooked.

      Few of us will ever have $100 million, as Gupta or Madoff did. But a measurable percentage of those reading this book will, at some point in their life, earn a salary or have a sum of money sufficient to cover every reasonable thing they need and a lot of what they want.

      If you’re one of them, remember a few things.

      1. The hardest financial skill is getting the goalpost to stop moving.

      But it’s one of the most important. If expectations rise with results there is no logic in striving for more because you’ll feel the same after putting in extra effort. It gets dangerous when the taste of having more—more money, more power, more prestige—increases ambition faster than satisfaction. In that case one step forward pushes the goalpost two steps ahead. You feel as if you’re falling behind, and the only way to catch up is to take greater and greater amounts of risk.

      Modern capitalism is a pro at two things: generating wealth and generating envy. Perhaps they go hand in hand; wanting to surpass your peers can be the fuel of hard work. But life isn’t any fun without a sense of enough. Happiness, as it’s said, is just results minus expectations.

      2. Social comparison is the problem here.

      Consider a rookie baseball player who earns $500,000 a year. He is, by any definition, rich. But say he plays on the same team as Mike Trout, who has a 12-year, $430 million contract. By comparison, the rookie is broke. But then think about Mike Trout. Thirty-six million dollars per year is an insane amount of money. But to make it on the list of the top-ten highest-paid hedge fund managers in 2018 you needed to earn at least $340 million in one year.14 That’s who people like Trout might compare their incomes to. And the hedge fund manager who makes $340 million per year compares himself to the top five hedge fund managers, who earned at least $770 million in 2018. Those top managers can look ahead to people like Warren Buffett, whose personal fortune increased by $3.5 billion in 2018. And someone like Buffett could look ahead to Jeff Bezos, whose net worth increased by $24 billion in 2018—a sum that equates to more per hour than the “rich” baseball player made in a full year.

      The point is that the ceiling of social comparison is so high that virtually no one will ever hit it. Which means it’s a battle that can never be won, or that the only way to win is to not fight to begin with—to accept that you might have enough, even if it’s less than those around you.

      A friend of mine makes an annual pilgrimage to Las Vegas. One year he asked a dealer: What games do you play, and what casinos do you play in? The dealer, stone-cold serious, replied: “The only way to win in a Las Vegas casino is to exit as soon as you enter.”

      That’s exactly how the game of trying to keep up with other people’s wealth works, too.

      3. “Enough” is not too little.

      The idea of having “enough” might look like conservatism, leaving opportunity and potential on the table.

      I don’t think that’s right.

      “Enough” is realizing that the opposite—an insatiable appetite for more—will push you to the point of regret.

      The only way to know how much food you can eat is to eat until you’re sick. Few try this because vomiting hurts more than any meal is good. For some reason the same logic doesn’t translate to business and investing, and many will only stop reaching for more when they break and are forced to. This can be as innocent as burning out at work or a risky investment allocation you can’t maintain. On the other end there’s Rajat Guptas and Bernie Madoffs in the world, who resort to stealing because every dollar is worth reaching for regardless of consequence.

      Whatever it is, the inability to deny a potential dollar will eventually catch up to you.

      4. There are many things never worth risking, no matter the potential gain.

      After he was released from prison Rajat Gupta told The New York Times he had learned a lesson:

      Don’t get too attached to anything—your reputation, your accomplishments or any of it. I think about it now, what does it matter? O.K., this thing unjustly destroyed my reputation. That’s only troubling if I am so attached to my reputation.

      This seems like the worst possible takeaway from his experience, and what I imagine is the comforting self-justifications of a man who desperately wants his reputation back but knows it’s gone.

      Reputation is invaluable.

      Freedom and independence are invaluable.

      Family and friends are invaluable.

      Being loved by those who you want to love you is invaluable.

      Happiness is invaluable.

      And your best shot at keeping these things is knowing when it’s time to stop taking risks that might harm them. Knowing when you have enough.

      The good news is that the most powerful tool for building enough is remarkably simple, and doesn’t require taking risks that could damage any of these things. That’s the next chapter.

      Lessons from one field can often teach us something important about unrelated fields. Take the billion-year history of ice ages, and what they teach us about growing your money.

      Our scientific knowledge of Earth is younger than you might think. Understanding how the world works often involves drilling deep below its surface, something we haven’t been able to do until fairly recently. Isaac Newton calculated the movement of the stars hundreds of years before we understood some of the basics of our planet.

      It was not until the 19th century that scientists agreed that Earth had, on multiple occasions, been covered in ice.15 There was too much evidence to argue otherwise. All over the world sat fingerprints of a previously frozen world: huge boulders strewn in random locations; rock beds scraped down to thin layers. Evidence became clear that there had not been one ice age, but five distinct ones we could measure.

      The amount of energy needed to freeze the planet, melt it anew, and freeze it over yet again is staggering. What on Earth (literally) could be causing these cycles? It must be the most powerful force on our planet.

      And it was. Just not in the way anyone expected.

      There were plenty of theories about why ice ages occurred. To account for their enormous geological influence the theories were equally grand. The uplifting of mountain ranges, it was thought, may have shifted the Earth’s winds enough to alter the climate. Others favored the idea that ice was the natural state, interrupted by massive volcanic eruptions that warmed us up.

      But none of these theories could account for the cycle of ice