People from different generations, raised by different parents who earned different incomes and held different values, in different parts of the world, born into different economies, experiencing different job markets with different incentives and different degrees of luck, learn very different lessons.

The person who grew up in poverty thinks about risk and reward in ways the child of a wealthy banker cannot fathom if he tried.

We all think we know how the world works. But we’ve all only experienced a tiny sliver of it.

Some lessons have to be experienced before they can be understood.

People’s lifetime investment decisions are heavily anchored to the experiences they had in their own generation—especially experiences early in their adult life.

Luck and risk are siblings. They are both the reality that every outcome in life is guided by forces other than individual effort.

You are one person in a game with seven billion other people and infinite moving parts. The accidental impact of actions outside of your control can be more consequential than the ones you consciously take.

If you give luck and risk their proper respect, you realize that when judging people’s financial success—both your own and others’—it’s never as good or as bad as it seems.

When judging your failures I’m likely to prefer a clean and simple story of cause and effect, because I don’t know what’s going on inside your head. “You had a bad outcome so it must have been caused by a bad decision” is the story that makes the most sense to me. But when judging myself I can make up a wild narrative justifying my past decisions and attributing bad outcomes to risk.

Focus less on specific individuals and case studies and more on broad patterns.

The trick when dealing with failure is arranging your financial life in a way that a bad investment here and a missed financial goal there won’t wipe you out so you can keep playing until the odds fall in your favor.

The role of risk means we should forgive ourselves and leave room for understanding when judging failures.

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

The hardest financial skill is getting the goalpost to stop moving

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

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

Buffett’s fortune isn’t due to just being a good investor, but being a good investor since he was literally a child.

His skill is investing, but his secret is time. That’s how compounding works.

There’s only one way to stay wealthy: some combination of frugality and paranoia.

More than I want big returns, I want to be financially unbreakable. And if I’m unbreakable I actually think I’ll get the biggest returns, because I’ll be able to stick around long enough for compounding to work wonders.

Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.

A plan is only useful if it can survive reality. And a future filled with unknowns is everyone’s reality. A good plan doesn’t pretend this weren’t true; it embraces it and emphasizes room for error.

A frugal budget, flexible thinking, and a loose timeline—anything that lets you live happily with a range of outcomes.

A barbelled personality—optimistic about the future, but paranoid about what will prevent you from getting to the future—is vital.

Sensible optimism is a belief that the odds are in your favor, and over time things will balance out to a good outcome even if what happens in between is filled with misery. And in fact you know it will be filled with misery.

You need short-term paranoia to keep you alive long enough to exploit long-term optimism.

Long tails—the farthest ends of a distribution of outcomes—have tremendous influence in finance, where a small number of events can account for the majority of outcomes.

The distribution of success among large public stocks over time is not much different than it is in venture capital.

How you behaved as an investor during a few months in late 2008 and early 2009 will likely have more impact on your lifetime returns than everything you did from 2000 to 2008.

Your success as an investor will be determined by how you respond to punctuated moments of terror, not the years spent on cruise control.

in most fields we only see the finished product, not the losses incurred that led to the tail-success product.

The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want today.”

The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays.

Campbell summed it up: Having a strong sense of controlling one’s life is a more dependable predictor of positive feelings of wellbeing than any of the objective conditions of life we have considered.

Money’s greatest intrinsic value—and this can’t be overstated—is its ability to give you control over your time.

When asked about his silence during meetings, Rockefeller often recited a poem: A wise old owl lived in an oak, The more he saw the less he spoke, The less he spoke, the more he heard, Why aren’t we all like that wise old bird?

When you see someone driving a nice car, you rarely think, “Wow, the guy driving that car is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.” Subconscious or not, this is how people think.

There is a paradox here: people tend to want wealth to signal to others that they should be liked and admired. But in reality those other people often bypass admiring you, not because they don’t think wealth is admirable, but because they use your wealth as a benchmark for their own desire to be liked and admired.

Wealth is what you don’t see.

The first idea—simple, but easy to overlook—is that building wealth has little to do with your income or investment returns, and lots to do with your savings rate.

The value of wealth is relative to what you need.

Past a certain level of income, what you need is just what sits below your ego.

Savings can be created by spending less. You can spend less if you desire less. And you will desire less if you care less about what others think of you.

Saving is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment.

Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable.

People do not want the mathematically optimal strategy. They want the strategy that maximizes for how well they sleep at night.

What’s often overlooked in finance is that something can be technically true but contextually nonsense.

History is mostly the study of surprising events. But it is often used by investors and economists as an unassailable guide to the future. Do you see the irony?

History helps us calibrate our expectations, study where people tend to go wrong, and offers a rough guide of what tends to work. But it is not, in any way, a map of the future.

The most important driver of anything tied to money is the stories people tell themselves and the preferences they have for goods and services. Those things don’t tend to sit still. They change with culture and generation. They’re always changing and always will.

Realizing the future might not look anything like the past is a special kind of skill that is not generally looked highly upon by the financial forecasting community.

The correct lesson to learn from surprises is that the world is surprising.

The further back in history you look, the more general your takeaways should be.

The purpose of the margin of safety is to render the forecast unnecessary.

Room for error lets you endure a range of potential outcomes, and endurance lets you stick around long enough to let the odds of benefiting from a low-probability outcome fall in your favor.

Having a gap between what you can technically endure versus what’s emotionally possible is an overlooked version of room for error.

A good rule of thumb for a lot of things in life is that everything that can break will eventually break. So if many things rely on one thing working, and that thing breaks, you are counting the days to catastrophe. That’s a single point of failure.

The biggest single point of failure with money is a sole reliance on a paycheck to fund short-term spending needs, with no savings to create a gap between what you think your expenses are and what they might be in the future.

An underpinning of psychology is that people are poor forecasters of their future selves.

The End of History Illusion is what psychologists call the tendency for people to be keenly aware of how much they’ve changed in the past, but to underestimate how much their personalities, desires, and goals are likely to change in the future.

The first rule of compounding is to never interrupt it unnecessarily.

Aiming, at every point in your working life, to have moderate annual savings, moderate free time, no more than a moderate commute, and at least moderate time with your family, increases the odds of being able to stick with a plan and avoid regret than if any one of those things fall to the extreme sides of the spectrum.

The trick is to accept the reality of change and move on as soon as possible.

Sunk costs—anchoring decisions to past efforts that can’t be refunded—are a devil in a world where people change over time.

Every job looks easy when you’re not the one doing it because the challenges faced by someone in the arena are often invisible to those in the crowd.

Thinking of market volatility as a fee rather than a fine is an important part of developing the kind of mindset that lets you stick around long enough for investing gains to work in your favor.

Investors often innocently take cues from other investors who are playing a different game than they are.

There are two topics that will affect your life whether you are interested in them or not: money and health.

There is an iron law in economics: extremely good and extremely bad circumstances rarely stay that way for long because supply and demand adapt in hard-to-predict ways.

There are lots of overnight tragedies. There are rarely overnight miracles.

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

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

We don’t wander around blind and confused. We have to think the world we operate in makes sense based on what we happen to know. It’d be too hard to get out of bed in the morning if you felt otherwise.

If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon.

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.

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.

Virtually every dollar of raise has accrued to savings—our “independence fund.”

Every investor should pick a strategy that has the highest odds of successfully meeting their goals. And I think for most investors, dollar-cost averaging into a low-cost index fund will provide the highest odds of long-term success.

I know people who think it’s insane to try to beat the market but encourage their kids to reach for the stars and try to become professional athletes. To each their own. Life is about playing the odds, and we all think about odds a little differently.

I can afford to not be the greatest investor in the world, but I can’t afford to be a bad one. When I think of it that way, the choice to buy the index and hold on is a no-brainer for us.