Thread by @jposhaughnessy

1/ Once you change your thinking, you need to change your habits

I’ve written a lot recently on techniques that may be helpful in challenging your beliefs and in doing so, improve your mental maps (or as Robert Anton Wilson calls them “reality tunnels”)

2/ leading to seeing more clearly and improving your outcomes. But if you don’t take the next step and make these improved mental models habits, all the change you’ve worked so hard to achieve will be worthless. I’ve often said that the greatest obstacle to successful investing

3/ is emotion, but I’m beginning to think that there is an even greater enemy: habit.
Our bad health habits (like smoking, overeating, not exercising) are killing us by the millions. And while it’s not as obvious, our bad investment habits are costing us millions.

4/ Every time you see some poor guy standing outside a building in the freezing cold smoking a cigarette, think of the overwhelming power of habits. Everyone knows about the health risks of smoking, yet millions continue to do it. Why? Habit.

5/ Virtually every major study shows that even moderate exercise reduces death rates from all causes and adds years to your life. So why isn’t everyone out walking? Habit. The risks of obesity are well documented, but as a nation we’re fatter than ever. Why? Habit.

6/ Habits are comfortable. We automatically default to them because they “feel” right. There’s a reason for that: by repetitively engaging in the same way of thinking or doing something, you reinforce your neural pathways which then grow into neural networks and

7/ your brain begins to resist any new way of thinking or doing things because of the strength of these neural networks. As an example of how powerful, even *deadly* habits can be, consider the case of Doctor Ignaz Semmelweis: In the late 1840s, he noted that the rate of death

8/ from “childbed fever” among mothers who had given birth in a ward serviced by male physicians was almost four times higher than in a ward serviced by midwives. It also seemed to happen in the same row of beds. Why? He had two ideas. Perhaps the effect was psychological,

9/ since after administering last rites to a dying woman, a priest would walk down the row ringing a “death bell.” Or perhaps it was because at the time, men didn’t wash their hands before delivering babies because it was considered unmanly to do so.

10/ Back then, male doctors would often go from dissecting a cadaver to delivering a baby without washing their hands! The other doctors, of course, thought the deaths were due to the priest and his bell. Semmelweis ordered the priest to stop ringing

11/ the bell, but there was no drop in the death rate. Next, he made the male doctors wash their hands before delivering babies. Not surprisingly, the death rate dropped from 12% to 1.2%. Sadly, the story doesn’t end there. Semmelweis lost his job and his successor stopped the

12/ “silly” and “unmanly” hand-washing requirement. Death rates climbed to 15% and stayed there until the 1880s, when a new administrator, Dr. Joseph Lister, saw the wisdom of Semmelweis’s discovery. So, even though all the evidence pointed to the importance of hand washing,

13/ the doctors were killing the woman they attended because of their habits. Hundreds of preventable deaths that were caused by bad habits and foolish social conventions is a tragedy.

14/ So, you’re asking, what’s this got to do with investing? Plenty. Like the doctors who refused to change their habits and wash their hands, investors are equally attached to their destructive, unprofitable and downright impoverishing investment habits—

15/ even though there’s a load of research showing simple, easy to understand and use investment strategies that would put your returns in the upper quartile if you simply followed them. So, now what? If you reread some of my earlier threads, you’ll see that one way to change

16/ your investment habits is through constant repetition of the new habit you’re trying to install. It will feel incredibly awkward at first because those neural networks your old habits built up won’t like the new way of doing things.

17/ Remember when you first learned how to drive how weird everything felt and how much of your conscious mind you had to devote to the various things you needed to think about? The same will hold true here--your conscious mind needs to be involved in the beginning and it will

18/ only be through constant repetition that the new habit will take hold.
And note, I’m not going to tell you what habits you need to instal—everyone’s different and therefore you need to inculcate the habits that will work right for you.

19/ Niklas Göke said "There is no such thing as the one, ideal, timeless set of habits of successful people." That’s true, and so first you need to question your priors, establish which ones led you into a disappointing outcome and then work on those.

20/ But, much like the other advice I’ve given, don’t fool yourself by thinking this will be easy. It won’t be as you’ll have to really concentrate on first what needs to change and then second on the repetition required to ensure the new habit becomes the default.

21/ Hard? Yep. But beyond worthwhile. Even the great philosopher Aristotle understood the raw power of habits when he said "Quality is not an act, it is a habit.”

As with much of life and self-improvement, simple, but not easy.