Powerful ideas from top nonfiction
Try Blinkist to get the key ideas from 7,000+ bestselling nonfiction titles and podcasts. Listen or read in just 15 minutes.
Start your free trial
Blink 3 of 8 - The 5 AM Club
by Robin Sharma
Listen to the Intro
The Laws of Wealth summary
Daniel Crosby
Psychology and the secret to investing success
24 mins
Topics
Table of Contents
The Laws of Wealth
Summary of 8 key ideas
Audio & text in the Blinkist app
Key idea 1 of 8
We overestimate our abilities in life, and when we invest.
From an early age, it’s drilled into us that we should think positively and have confidence in ourselves and our skills. But what if that confidence is actually holding us back?
In one revealing study, American high school students were asked about how they thought their math skills compared to those of the rest of the world. A vast majority assumed that they were some of the best internationally. The truth is that American students are average at math. This is an example of overconfidence bias. That is, people assume incorrectly that they perform in a manner that is superior to other people.
In a similar vein, organizational researchers Tom Peters and Robert Waterman conducted a study in which they asked employees to compare themselves to each other and rate themselves on such qualities as interpersonal skills and physique. One hundred percent of the respondents thought that they were better than average at interacting with other people. 94 percent believed that their athletic prowess outranked that of their peers!
Not everyone they interviewed could have been a master of diplomacy with a bodybuilder’s physique. Evidently, the respondents overestimated themselves.
But what can a little self-confidence hurt, even if it’s misplaced? Isn’t it better than being horribly insecure?
Well, when it comes to investing, having an inaccurate view of your abilities can hurt very much.
If you believe that you have exceptional abilities, you will likely credit any wins on the stock market to your unique talent. However, you’ll believe that any losses are circumstantial and out of your control. That is called a fundamental attribution error. It states that we’re unable to judge the effects of our actions accurately. This perspective keeps you from learning from your mistakes and growing as an investor.
You may think that the rules of the stock market don’t apply to you. That can lead you to disregard risk and make reckless decisions because you’re so confident in your instincts. You might also be less likely to seek outside help from a trusted advisor.
Being humble about your abilities and being able to identify and learn from your mistakes are key to becoming a good investor.
Want to see all full key ideas from The Laws of Wealth?
Key ideas in The Laws of Wealth
More knowledge in less time
Read or listen
Get the key ideas from nonfiction bestsellers in minutes, not hours.
Find your next read
Get book lists curated by experts and personalized recommendations.
Shortcasts New
We’ve teamed up with podcast creators to bring you key insights from podcasts.
What is The Laws of Wealth about?
The Laws of Wealth (2016) is an insightful guide to understanding how our irrational behavior can get in the way of making good investment decisions. Using insights from the field of behavioral psychology, Daniel Crosby identifies key human weaknesses that can sabotage our investments, such as overestimating our abilities and panicking in the face of risk. He then presents practical and effective strategies that we can adopt to become better investors.
Best quote from The Laws of Wealth
Our brains are far more like beer goggles than supercomputers, which means that the intelligent investor must take precautions to ensure the emotion of the moment is not warping his sense of reality.
—Daniel Crosby
Who should read The Laws of Wealth?
- Investors wanting to learn how to spot their behavioral blind spots
- Psychology buffs interested in how emotions influence how people spend money
- Anyone who is weighing up the benefits of hiring a financial advisor
Categories with The Laws of Wealth
Books like The Laws of Wealth
People ❤️ Blinkist
Sven O.
It's highly addictive to get core insights on personally relevant topics without repetition or triviality. Added to that the apps ability to suggest kindred interests opens up a foundation of knowledge.
Thi Viet Quynh N.
Great app. Good selection of book summaries you can read or listen to while commuting. Instead of scrolling through your social media news feed, this is a much better way to spend your spare time in my opinion.
Jonathan A.
Life changing. The concept of being able to grasp a book's main point in such a short time truly opens multiple opportunities to grow every area of your life at a faster rate.
Renee D.
Great app. Addicting. Perfect for wait times, morning coffee, evening before bed. Extremely well written, thorough, easy to use.
People also liked
Start growing with Blinkist now
28 Million
Downloads on all platforms
4.7 Stars
Average ratings on iOS and Google Play
91%
Of Blinkist members create a better reading habit*
*Based on survey data from Blinkist customers