The Psychology of Money

Ronald Read was a philanthropist who worked a series of low-paying jobs and yet became a multimillionaire by his death. Housel uses Read as an example of how frugal living combined with patient, persistent investment can create significant wealth.

Read was born in 1921 and grew up in Vermont. His family were farmers and had little money. As a boy, Read traveled to school via a combination of walking and hitchhiking in order to make the 12.8 km round trip—he became the first member of his family to graduate high school. Read served in the army during World War II and was posted to Italy, Africa, and the Pacific Ocean.

After returning to Vermont, Read worked as a mechanic and attendant at a gas station for over 20 years. Despite intending to retire in 1979, a year later he began working again, this time as a maintenance worker at a local department store, where he continued to work a further 17 years.

Over his lifetime, Read invested in a selection of blue-chip stocks, concentrating on well-known companies that he knew about. Read had amassed a total of 95 stocks by the time of his death in 2014, in a range of industries from consumer goods to healthcare.

To the shock of most of his friends and family, who associated Read with shabby clothes and simple hobbies like woodchopping, his estate was valued at almost $8 million, comprised mostly of shares. Read left generous donations to institutions that were important to him: $1.2 million to Brooks Memorial Library (where he researched his investments) and $4.8 million to Brattleboro Memorial Hospital, which cared for him in his later years.

Housel admires Read’s long-term strategy, his patience, and his modest lifestyle.

Richard Fuscone holds an MBA from the University of Chicago and attended the prestigious Harvard Business School, where he earned a Master’s in Business.

Fuscone went on to become a Merrill Lynch Executive. During his time at Merrill, he was investigated for securities fraud but ultimately rose to lead their Latin American division.

In spite of his success in the financial industry, Fuscone went bankrupt during the 2008 financial crisis due to his extensive borrowing to support his lavish lifestyle. Housel claims that Fuscone’s story demonstrates that financial success is a “soft skill” in which “how you behave is more important than what you know” (9, emphasis added). Fuscone therefore serves as a cautionary tale, as someone who had financial expertise and a very high salary, but who lost everything because he could not moderate his expectations and stop his endless quest for even more wealth and luxury.

Bill Gates is the founder of Microsoft and a philanthropist. Born in Seattle in 1955, Gates grew up in a family that encouraged competition. He attended the elite Lakeside School as a teenager. Significantly, the school had a computer, which was still relatively rare at the time. This computer enabled Gates to write his first software program and, later, his first computer program.

After graduating from Lakeside School in 1973, he entered Harvard, taking a pre-law major with courses in mathematics and computer science. Gates left Harvard in 1974, without completing his degree, in order to start his own business. In 1975, Gates founded Microsoft with his friend, Paul Allen.

Housel uses Bill Gates as an example of how luck can inform a person’s career and financial trajectory. Housel credits Gates’ intelligence and ambition, but also dissects the luck he enjoyed by attending a high school that was equipped with a computer. According to Housel, Gates is an example of an “extreme character” who has enjoyed spectacular success in a unique set of circumstances, which makes it difficult to learn lessons by simply studying his life.

Bill Gates currently uses his wealth to further his philanthropy. He founded the Bill & Melinda Gates Foundation with his then-wife Melinda Gates (née French). As of 2018, the pair had donated $36 billion to the organization. 

Warren Buffett was born in 1930 in Nebraska and showed an interest in business from childhood. As a boy, Buffett went from house to house in his local neighborhood selling Coca-Cola and magazines. As an adult, he went on to become one of the most famous American investors, earning over $100 billion through his investments.

Housel refers to Buffett throughout his work as an example of a skilled investor who has greatly benefitted from the lengthy time frames of his investments. Housel uses Buffett’s example to demonstrate how much compounding can benefit investors, since Buffett began investing as a 10-year-old and is still active in finance in his nineties. Compounding caused his profits to soar. The author points to Buffett as a good financial role model since he made reasonable investments and allowed them to compound uninterruptedly. Housel explains, “His skill is investing, but his secret is time. That’s how compounding works” (49, emphasis added).