Morgan Housel is a partner at Collaborative Fund and author of the book The Psychology of Money.
Former General Electric CEO Jack Welch once nearly died of a heart attack. Years later he was asked what went through his mind while he was being rushed to the hospital in what could have been his last moments alive.
“Damn it, I didn’t spend enough money,” was Welch’s response.
The interviewer, Stuart Varney, was puzzled, and asked why in the world that would go through his mind.
“We all are products of our background,” Welch said. “I didn’t have two nickels to rub together [when I was young], so I’m relatively cheap. I always bought cheap wine.”
After the heart attack Welch said he “swore to God I’d never buy a bottle of wine for less than a hundred dollars. That was absolutely one of the takeaways from that experience.”
“Is that it?” Varney asks, stunned.
“That’s about it,” says Welch.
Money is so complicated. There’s a human element that can defy logic – it’s personal, it’s messy, it’s emotional.
Behavioral finance is now well documented. But most of the attention goes to how people invest. Welch’s story shows how much deeper the psychology of money can go. How you spend money can reveal an existential struggle of what you find valuable in life, who you want to spend time with, why you chose your career, and the kind of attention you want from other people.
There is a science to spending money – how to find a bargain, how to make a budget, things like that.
But there’s also an art to spending. A part that can’t be quantified and varies person to person.
In my book I called money “the greatest show on earth” because of its ability to reveal things about people’s character and values. How people invest their money tends to be hidden from view. But how they spend is far more visible, so what it shows about who you are can be even more insightful.
Everyone’s different, which is part of what makes this topic fascinating. There are no black-and-white rules.
But here are a few …….
