SUMMER READING
One of life’s simple pleasures is a good book, a cool beverage, and a relaxing place to be on a summer day. Oftentimes we will share book titles to inspire our colleagues to include a real estate investing book as part of their summer musings. This post, however, is just about one.
Have you read The Psychology of Money: Timeless Lessons on Wealth, Greed and Happiness, by Morgan Housel? Or these days, have you heard the audiobook?
One of my favourite parts is about Luck, and Luck’s cousin: Risk. “When things are going extremely well, realize it’s not as good as you think. You are not invincible, and if you acknowledge that luck brought you success then you have to believe in luck’s cousin, risk, which can turn your story around just as quickly.” Morgan Housel.
Morgan Housel brings characters and stories into his very interesting discussion of luck and risk, and other money concepts. This is no dry accounting book!
Today, we’re relating his book to real estate investors. When we have a good deal, is it “just lucky?” How many times have we heard this? Usually in a condescending tone. Was it really lucky, or did we filter through hundreds of possible deals before settling on this one? Did we manage this one for years, until the timing was right for an exit? Did the deal look good, then mediocre, then uh oh, and then fantabulous! –as the real estate market shifted through its regular cycles? Did we create our “luck” through strategic real estate investing principles? And was our “luck” partly related to team members who had our and their best interests at heart, when they steered us away from a bad business venture. How many of us felt extremely lucky during the boom of 2021/2022?
But just as we are grateful for perceived lucky moments, we also love this quote from the book. “Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort. They are so similar that you can’t believe in one without equally respecting the other. They both happen because the world is too complex to allow 100% of your actions to dictate 100% of your outcomes. They are driven by the same thing: 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.” Morgan Housel.
Risk is something we’re all trying to mitigate these days. How many times have we been told that buying real estate is a huge risk? Really? When hundreds of thousands of people are looking for affordable homes in Canada, and more are coming? Are we genius to sit on the sidelines for now, and wait? Would that really minimize the inflation and prices we pay in the future? Can any investor truly make decisions that avoid risk all together?
The exquisite point that Morgan Housel is making, is that we are neither genius nor idiot. Luck and risk affect us all. It’s how we respond to the factors beyond our control that truly determines much of our outcomes. And we haven’t even talked about the inner demons of greed and ego!
Whatever books you read or listen to this summer, we hope they inspire your journey. Feel free to share your summer reads below.
