Behavioural Finance

How People Think
By Morgan Housel

1. Everyone belongs to a tribe and underestimates how influential that tribe is on their thinking.
2. What people present to the world is a tiny fraction of what’s going on inside their head.
3. Prediction is about probability and putting the odds of success in your favor. But observers mostly judge you in binary terms, right or wrong.
4. We are extrapolating machines in a world where nothing too good or too bad lasts indefinitely.
5. There are limits to our sanity. Optimism and pessimism always overshoot because the only way to know the boundaries of either is to go a little bit past them.
6. Ignoring that people who think about the world in unique ways you like also think about the world in unique ways you won’t like.
7. We are pushed toward maximizing efficiency in a way that leaves no room for error, despite room for error being the most important factor of long-term success.