The Psychology of Money (by Morgan Housel)

The link to this original article is: This is a highly recommended read in all business schools and has valuable lessons on money which I want all my blog followers too to read. Hope you enjoy this article, thank you.


Let me tell you the story of two investors, neither of whom knew each other, but whose paths crossed in an interesting way.

Grace Groner was orphaned at age 12. She never married. She never had kids. She never drove a car. She lived most of her life alone in a one-bedroom house and worked her whole career as a secretary. She was, by all accounts, a lovely lady. But she lived a humble and quiet life. That made the $7 million she left to charity after her death in 2010 at age 100 all the more confusing. People who knew her asked: Where did Grace get all that money?

But there was no secret. There was no inheritance. Grace took humble savings from a meager salary and enjoyed eighty years of hands-off compounding in the stock market. That was it.

Weeks after Grace died, an unrelated investing story hit the news.

Richard Fuscone, former vice chairman of Merrill Lynch’s Latin America division, declared personal bankruptcy, fighting off foreclosure on two homes, one of which was nearly 20,000 square feet and had a $66,000 a month mortgage. Fuscone was the opposite of Grace Groner; educated at Harvard and University of Chicago, he became so successful in the investment industry that he retired in his 40s to “pursue personal and charitable interests.” But heavy borrowing and illiquid investments did him in. The same year Grace Goner left a veritable fortune to charity, Richard stood before a bankruptcy judge and declared: “I have been devastated by the financial crisis … The only source of liquidity is whatever my wife is able to sell in terms of personal furnishings.”

The purpose of these stories is not to say you should be like Grace and avoid being like Richard. It’s to point out that there is no other field where these stories are even possible.

In what other field does someone with no education, no relevant experience, no resources, and no connections vastly outperform someone with the best education, the most relevant experiences, the best resources and the best connections? There will never be a story of a Grace Groner performing heart surgery better than a Harvard-trained cardiologist. Or building a faster chip than Apple’s engineers. Unthinkable.

But these stories happen in investing.

That’s because investing is not the study of finance. It’s the study of how people behave with money. And behavior is hard to teach, even to really smart people. You can’t sum up behavior with formulas to memorize or spreadsheet models to follow. Behavior is inborn, varies by person, is hard to measure, changes over time, and people are prone to deny its existence, especially when describing themselves.

Grace and Richard show that managing money isn’t necessarily about what you know; it’s how you behave. But that’s not how finance is typically taught or discussed. The finance industry talks too much about what to do, and not enough about what happens in your head when you try to do it.

This report describes 20 flaws, biases, and causes of bad behavior I’ve seen pop up often when people deal with money.


Thank you.

Are rules more important than emotions and feelings?

If somebody makes an emotional appeal or gives an emotional reason for something, it is mostly to say that he/she had good intentions but couldn’t do the action/work as desired. The first problem with it is that it cannot be verified. The second problem is that even if you think it is wrong and you tell it directly to the user, the user will become defensive about his emotional plea or reason. The third problem with emotional pleas are: almost everybody seems to have an emotional reason for doing or not doing something. So, it is very difficult to know the credibility and intensity of an emotional appeal.

When you work with somebody for a long time, then you start understanding ‘intentions’. That is when you are more ready to make some concessions on emotional pleas. So, the moral is: following rules is more important than intentions and this is especially true in the initial days of any relation – personal or professional. Rules are therefore more important than emotions, especially in the initial period of evaluation.

Thank you.

How to practice discipline in daily life?


Discipline is not about making to-do lists, setting alarms and eating the big frog from tomorrow. Discipline starts small and is just about doing the same thing at the same time every day, even if it is one simple thing. Discipline actually starts by doing one thing at a particular time and then adding more and more things to do at a particular time of the day. Discipline is more about consistency than about changes in your schedule. Below are some of the key factors (physical, psychological, emotional and cognitive) that influence discipline in various ways. Again, this is a post out of my personal experience of trying to be disciplined and observing myself on how I felt during such experiences.

Our physical being influences our discipline

One of the major problems we face is: we procrastinate stuff that we don’t like to do because the task creates negative emotions in us. However, the best way out of this is to find the best time of the day when you are undisturbed and when you are usually not in a low mood or not going through emotions of the day to do the particular task. Typically, for most people this time is either early in the morning or late in the day. With enough self-observation, one can make out at what times of the day are you best suited for a certain type of task based on how your body and mind feel at that part of the day; the body should be fresh enough to do an unmotivated task without triggering a negative emotion. Usually, if the body has to come out of rest, there will be a huge negative emotion if the task is not motivating enough. But if the body has got adequate rest and has woken up automatically, then doing an unmotivated task when the body and mind are fresh is not so tough. Because, as the day progresses the mind goes through a lot of emotional chitter-chatter and, therefore, it takes more energy to overcome the emotional barrier of doing an unmotivated task.

Overcoming the emotional hurdle of being disciplined

PrioritizingTasks.pngThe left picture describes the prioritization that is to be followed by the disciplined mind. It is easy to think about the mentioned template (picture left) to prioritize tasks, but following the prioritization is an emotional hurdle and is the difficult part as always. It is not easy to execute in the order of priority, but it improves with practice. This also helps you to get maximum productivity because the most self-motivating task (which one will anyways do) is always at the last. You have to start practicing this and the acceptance by your mind to delay gratification of positive emotions task increases with practice (as the emotions start getting regulated with practice). As you keep doing more of a negative emotion task, the task can become less negative emotional over the time and therefore it becomes easier to be disciplined with time.

Every task requires an emotional energy barrier to cross to produce an action. A self-motivating task is one where the emotional energy needed automatically crosses the required threshold of the energy barrier for the task. A negative emotion task is one where the emotional energy produced by the self is not enough to cross the required energy barrier. Moreover, the energy required to imagine or think about doing a task is less as compared to the energy required to physically act on the task. This is why most procrastinators end up thinking a lot and not acting as much as they should. However, with enough understanding and management of one’s own body-mind, one’s daily routine and priority, procrastination can be curtailed and discipline can be brought back one day by day.

Positive Emotional Energy minus Negative Emotional Energy > Energy Barrier required for the task/ inherent to the person

Thinking and consciously working on how you feel or emote about something and changing the way you emote about it is probably the biggest challenge in life and probably summarizes life itself. After all, there is no point in having conscious cognition if all we have to do is what we feel or emote about a task. Therefore, acting out emotionally itself is not the best way to live life. But, your sub-conscious mind tricks you to make you feel that your decision is a thoughtful decision as the sub-conscious builds the argument from the emotional point of view.

Why emotions are inferior to cognition in terms of time?

Your subconscious mind always predicts what is the outcome and feeling of an action or thought event – whether it is a desirable or non-desirable – even before you act on it; it just happens right when you face that stimuli. If it is going to require additional effort or non-desirable action or result, the sub-conscious mind will automatically suppress you from doing so against your nature. However, the conscious mind should override this and take decisions with an understanding of time. The subconscious mind is correct, however, it doesn’t take into account the factor of time. Emotions are feedback at that moment and they don’t understand time on a longer scale. And if emotions don’t understand time then they are definitely inferior to cognition which understands time, because time is a reality for life. 

Thinking vs. Executing – control is the difference

The difference between thinking and executing is a gap in parameters. You will always know all the parameters involved in a task only in its execution and not in planning. Therefore, in sport, there is a difference in going out and actually hitting a cover drive in cricket or a goal in football and thinking of the parameters that are involved in hitting a cover drive or a goal. There is also the parameter of control – thinking and executing differs in control because thinking doesn’t require control but execution requires control of parameters or control of response in feedback. And this control is the feedback of every action on a second to second basis. This feedback actually changes how we execute vs planned. This feedback only comes into play only in execution and cannot be completely taken care in planning or thinking.

A lousy plan, well executed, is often successful. Success only starts when you start execution, else you are in a default state of failure because of entropy.

Thank you.







Indian Furniture Market – Online, Offline


Industry estimates show that furniture market has an overall market size of Rs.120,000 crores and home decor and utilities is at Rs.130,000 crores. According to a Redseer Consulting report, by 2020, India’s furniture industry is expected to grow to $35 billion, with the online section being worth about $700 million. The Indian furniture market has grown at a CAGR of 17.2% for the period FY’2008-FY’2013 and is projected to grow at a CAGR of around 26% during 2014-19  according to “India Furniture Market Forecast & Opportunities, 2019”.

The furniture sector in India makes a marginal contribution to the Gross Domestic Product (GDP), representing about 0.5 percent of the total GDP. The major part of this industry, approximately 85 percent is in the unorganized sector. The remaining 15 percent of organized sector comprises of large manufacturers, such as Godrej & Boyce Manufacturing Co. Ltd., BP Ergo, Featherlite, Haworth, Style Spa, Yantra, Renaissance, Millennium Lifestyles, Durian, Kian, Tangent, Zuari, PSL Modular Furniture, Furniturewala and Truzo. A small emerging segment is the contribution from online retailers such as Pepperfry, Urban Ladder, HomeLane and others.

Demand Segments

Domestic home furniture comprises of 65% of the Indian furniture demand, followed by office furniture comprising of 20% and contract furniture comprising of 15% demand. The contract furniture is primarily for hotels and this sector has seen strong growth in the last two years. There are around 1200 hotels in India with more than 10% in the five star category as mentioned below.


Different types of wood used by Indian manufacturers

Wood accounts for 65% of all furniture made in India, followed by metal and plastic at 25% and 10%. India abounds in natural resources of several tree species and the industry uses both indigenous wood and imported wood (in cases of short supply in the domestic market). Walnut, Sandalwood, Teak, Sheesham, Deodar, Ebony, Redwood, Rosewood, Red Cedar and Sal. Teak accounts for almost 50 percent of the total wooden furniture produced, Sal and Deodar account for about 20 percent and the balance includes Mahogany, Cedar, and other tree types. Bamboo Material Boards (BMB) are increasingly being used in place of plywood. India also has abundant rubber wood supply. Natural rubber plantations cover 520,000 hectares with an additional 6,000 hectares being replanted almost every year since 1994. The southern state of Kerala produces 95 percent of the total supply of rubberwood in India. MDF boards are imported from Europe, soft and hardwood are imported from Russia and other South East Asian countries. Veneered panels are becoming increasingly popular in India and are imported from the European Union, Canada, and USA. In the recent years, molded plastic, wrought iron, board and bamboo furniture too have been widely purchased by the households in India.

Retailing – Offline & Online

In order to cater to the rising requirements of online shopping in the country, a number of companies have stepped afoot in the online channel of furniture market in the last few years. For instance, leading offline retailer of readymade furniture products named @Home, which is a flagship brand of Nilkamal Pvt. Ltd. has launched its online shopping portal for the exclusive range of @Home furniture, furnishings, and home decor items. Catering to the urban demands for latest and trendy designs, Urban Ladder, Pepperfry,  Livspace have seen a huge growth across categories. The emergence of rental commerce driven by Furlenco, Rentomojo, GoZefo and others is building up the organized sector for furniture in an otherwise dominated by local small furniture retailers.

The share of furniture in e-commerce is still very low – according to RedSeer consulting, mobile phones and fashion accounted for 42% and 20% of the overall e-commerce sale in 2016 and furniture only accounted for 1-1.5% of the overall e-commerce sales in 2016. One of the major challenges for online retailers is still the supply-chain costs of storing and moving large boxes of furniture which are not easily stackable in the warehouses and prone to damages. Lack of brands, supply chain complexity, high storage and delivery costs and abundant local suppliers makes this category a difficult category to retail online vs. offline with a geographical captive customer base. This drove a lot of  online retailers to shift their focus to home furnishing and home decor categories. A few months ago, ecommerce market leader Flipkart re-launched the furniture category at scale and also unveiled a furniture private label, Perfect Homes. They provide bedsheets and other décor items under another private label, Flipkart Smartbuy. Similarly, the popular online marketplace Pepperfry is shifting its focus to home decor and furnishing from furniture to drive profits. Most of the retailers take the private label route in this category in the absence of established brands and the increased penetration of local players.


The Indian furniture market is largely unorganized and dominated by small local players. However, the market is witnessing an increase in the contribution from organized sector across demand segments. The entry of global players such as IKEA in India will further this trend for organized retail sector consolidation and backward integration with manufacturers and raw material suppliers, driving the entire value chain towards organized retail.

Thank you.




Indian Online Furniture – Rent or Buy

Renting vs. buying furniture is the same argument as op-ex vs. cap-ex.

When does renting make sense?

  1. When you are sure that you will only use it for less than a year
  2. When you are sure that you would want different furniture in about a year’s time or less
  3. When you want additional furniture for a special occasion such as some party, relatives, etc.
  4. When you are not willing to spend a bulk amount on furniture or in a cash crunch and yet want to have good furniture in your house (you are a customer who is in a cash crunch)
  5. When you desire for high-quality furniture but you don’t want to spend a large amount on really good design furniture (in this case you are a customer who genuinely wants good design furniture and who doesn’t want to spend a bomb)
  6. When you don’t care to do the math of rent vs. buy and just look at your life one month at a time

When doesn’t renting make sense?

1. When you are reasonably sure that you will use it for more than 12 months and you are okay with having the same furniture for a few years. In the case of using the furniture for more than a year, the customer would have most likely paid the cost of the furniture and now feels the pain of not owning the asset and that he or she still has to pay the monthly rental to just use it. This is the stage at which the customer starts comparing to ownership and feels bad about renting the product.

2. When you have money to buy it! If you have the money to buy it, then it does make financial sense to buy it and sell it out later. With options such as buy-back guarantee and credit card no interest EMI options, it is very convenient to buy and sell the product back and even buy it in small installments.

GoZefo, which is one of the online furniture companies in India, wrote an interesting post comparing rental vs. ownership. Click here to refer to GoZefo’s rent or buy.

Thank you