I’m going to reference two awesome books in this post. They are must-have’s if you want to know money. They are books by finance blogger Jim Collins and a trader turned probability expert and essayist, Nassim Taleb.
Why would I talk about both of these books in the same post.
Reading both gives you almost everything you need to understand money. Damn close anyway.
Beer and Foam
Jim Collins book The Simple Path to Wealth has a section I love where he compares the stock market to a glass of beer. These glasses contain different amounts of beer and foam.
If you use a little skill to pour the beer, you can have a glass full of mostly beer with very little foam on top.
Pour the beer too quickly, you’ll have mostly foam and very little beer.
What if somebody else pours your beer into a mug that you can’t see through and then hands it to you. You have no way of knowing how much is beer and how much is foam.
The same problem exists with the stock market.