Thread by @nlw

20 biases and fallacies that shape the often strange psychology of money. Another tour de force from @morganhousel.

Here are a few that seem particularly relevant for the crypto crowd. collaborativefund.com/blog/the-psych…

#1 Earned Success & Deserved Failure fallacy.

My stint as a Silicon Valley VC highlighted this one The most long-term durable VCs I knew where those who had a deep appreciation for this and fought the temptation to revere their good bets as god-like prognostication powers.

#5 Anchored To Your Own History bias.

Remember when, for most of the year, Twitter kept asking when the next alt season was coming? This one is even more challenging in crypto because it feels like, so early in the industry, our historical experiences should carry more weight.

#7 The Seduction of Pessimism

It is easier to sound smart when one is critiquing and tearing things down. Especially in mediums comprised almost entirely of pithy sound bytes, this tendency is compounded.

BTW, this is the business model of our favorite critic.

#9 Attachment To Social Proof In Fields That Require Contrarian Thinking

This feels especially on display now, as the dry powder in crypto fund coffers is left for a small handful of marquee party deals.

This is also why calling out and questioning narratives is essential.

#12 A Tendency Towards Action When The Rule Of Compounding Is Don't Interrupt It Unnecessarily

This manifests in both active management funds - who feel they have to do something to earn their fees - and retail who get tired of sitting on their hands. One of the hardest skills.

#14 Being Influenced By Actions Of Those Playing A Different Game

This one smashes crypto people. It's so early we must be playing the same game right? The story of the last 2 years is in part retail $ being the business model for investors playing at something different.

#15 An (Addiction) To Financial Entertainment

"Money is like a sporting event where you’re both the fan and the player, with outcomes affecting you both emotionally and directly."

#bitmexrekt

#18 Denial Of Gap Between How The World Works And How You Think It Should Work

We form narratives to explain the past and predict the future because it's the only way we can grapple with our inability to parse through all the info available and comprehend illogical emotions.

#20 Believing That Whatever Just Happened Will Keep Happening

The temptation in December was to think that the good times wouldn't stop. The temptation now is to assume that they'll never come back.

Thanks to @morganhousel for another massive piece!