Influence: The Psychology Of Persuasion by Robert Cialdini- the book of which legendary investor and vice chairman of Berkshire Hathaway Charlie Munger said, "This is the book that I give most often as a present and is my top recommendation." So what is this book, which is truly about psychology doing on a personal finance website? There are two answers- the first is that behavioral psychology effects peoples decisions and can therefore help one understand markets as well as their own behavior. The second is that the author found this book fun to read and absolutely fascinating. Let's jump into a summary of some of the main concepts covered in the book.
Rule One: Reciprocation
As Cialdini states, "According to sociologists and anthropologists, one of the most widespread and basic norms of human culture is embodied in the rule of reciprocation. The rule requires that one person try to repay, in form, what another person has provided. By obligating the recipient of an act to repayment in the future, the rule allows one individual to give something to another with confidence that it is not being lost.
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Some of the lessons that follow will likely surprise you, while others probably won't. The important thing about the insights in this article is that they are derived from empirical studies of wealthy people. In his landmark book The Millionaire Mind, Ph.D. and scholar Thomas J. Stanley chronicles the habits and mindsets of wealthy people. The data in the book come from 733 surveys from affluent individuals, whose average net worth was $9.2 million. Not a bad bunch to emulate, eh? Reading the full book is highly recommended- it can be purchased here:
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$18 million to $14 billion in 13 years? Check. Averaged more than double the return of the S & P 500 during his tenure? Check. In the 1980s managed the best performing mutual fund in the world? Check. Down to earth, nice guy? Check.
This is Peter Lynch, who rose from humble beginnings to become a financial legend. Born in 1944 in Newton, Massachussetts, Lynch did not seem destined to become a financial titan. Unfortunately, when he was ten Peter's father passed away from brain cancer, leaving his family struggling to make ends meet. Lynch's mother had to work very hard to support the family, with Peter caddying during his teens to help. Lynch graduated from Boston College in 1965, then earned his M.B.A. from the Wharton School of the University of Pennsylvania in 1968.
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