BOOK REVIEW: THE BEHAVIOR GAP Simple Ways to Stop Doing Dumb Things with Money by Carl Richards (2012)
Book Reviewed by Patrick Blair on June 25, 2019
First Impression Versus Lasting Impression: Based on the title, I imagined a book filled with interesting personal finance advice and hacks. The book does have some shorter-term personal finance content but is primarily focused on what I would call investing (or longer-term personal finances).
The Book in a Word: THOUGHT-PROVOKING.
Summary: The author, Carl Richards, shares insights from his financial planning practice about how people’s behavior hurts their long-term finances and lives. Rather than giving investment strategies, Richards helps the reader to understand the deeper reasons for these counter-productive behaviors. Each chapter is broken up with simple, thought-provoking Venn diagrams and graphs (e.g. happiness is inversely proportional to “keeping up with the Jones”). Richards artfully warns against classic investing pitfalls like: following investment “gurus”, overconfidence, buying high and selling low, chasing the perfect investment, getting investment advice from media, not planning based on your life goals, drowning in financial information, not being flexible and regularly adjusting your financial plan, improperly relying on biased financial advisors, hope or depression as a financial strategy, and not embracing simplicity.
What I Liked the Most: was the depth of insights into human investing psychology and the explanations of why investing is intimately connected to our lives, emotions, and search for meaning.
What I liked the least: was the overuse of charts and diagrams. Although I really liked many of the charts and diagrams, I felt that at some point it distracted from the message.
Recommended for: anyone who is actively investing or interested in getting into investing. Although some topics may be a little foreign to someone starting out, it is worth getting familiar with them early on. The Behavior Gap covers key insights that can greatly improve your investing mindset.
Not Recommended for: those who are not ready to invest (i.e. those still dealing with consumer debt). The Behavior Gap is primarily a book about investing, not dealing with debt.
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Reading Level: Basic … Intermediate to Advanced … Scholarly.
Interesting Concept: Good conversations about money are great conversations about life. In other words, money conversations, if handled well, can be deep, meaningful conversations. See page 151.
Great Quotes: “Financial planning based on fantasy, fear, regret, and nostalgia is likely to lead to more of the same.” (p. 104). “Sometimes we indulge in the notion that our investments will set us free from lives that don’t much satisfy us.” (p. 109). “We often resist simple solutions because they require us to change our behavior.” (p. 165).
Spiritual Content: Some. Although the book doesn’t use bible passages, some of its message mirrors biblical wisdom. The book isn’t necessarily about making more money investing, but about how to invest to have a better life.
Book Citation: Richards, Carl. The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money. New York: Portfolio/Penguin, 2012.
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