Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works.
Fascinating response to the story came from the nephew of a Chinese worker: My aunt worked several years in what Americans call “sweat shops.” It was hard work. Long hours, “small” wage, “poor” working conditions. Do you know what my aunt did before she worked in these factories?
She was a prostitute. The idea of working in “sweat shop” compared to that old lifestyle is an improvement, in my opinion. I know that my aunt would rather be “exploited” by an evil capitalist boss for couple of dollars than have her body be exploited by several men for pennies.
That is why I am upset by many Americans’ thinking. We do not have the same opportunities as the West. Our governmental infrastructure is different. The country is different. Yes, factory is hard labor. Could it be better? Yes, but only when you compare such to American jobs.
That seems crazy to me. It probably seems crazy to you, too. But I’m not in the lowest income group. You’re likely not, either. So it’s hard for many of us to intuitively grasp the subconscious reasoning of low-income lottery ticket buyers.
Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort. They are so similar that you can’t believe in one without equally respecting the other.
They both happen because the world is too complex to allow 100% of your actions to dictate 100% of your outcomes. The accidental impact of actions outside of your control can be more consequential than the ones you consciously take.
After spending years around investors and business leaders I’ve come to realize that someone else’s failure is usually attributed to bad decisions, while your own failures are usually chalked up to the dark side of risk.
The cover of Forbes magazine does not celebrate poor investors who made good decisions but happened to experience the unfortunate side of risk. But it almost certainly celebrates rich investors who made OK or even reckless decisions and happened to get lucky.
Countless fortunes (and failures) owe their outcome to leverage.
The best (and worst) managers drive their employees as hard as they can.
“The customer is always right” and “customers don’t know what they want” are both accepted business wisdom.
The best (and worst) managers drive their employees as hard as they can.
“The customer is always right” and “customers don’t know what they want” are both accepted business wisdom.
The line between “inspiringly bold” and “foolishly reckless” can be a millimeter thick and only visible with hindsight. Risk and luck are doppelgangers.
Be careful who you praise and admire. Be careful who you look down upon and wish to avoid becoming.
Be careful who you praise and admire. Be careful who you look down upon and wish to avoid becoming.
I want you to be successful, and I want you to earn it. But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.
Therefore, focus less on specific individuals and case studies and more on broad patterns.
The hardest financial skill is getting the goalpost to stop moving.
None of the 2,000 books picking apart Buffett’s success are titled This Guy Has Been Investing Consistently for Three-Quarters of a Century. But we know that’s the key to the majority of his success. It’s just hard to wrap your head around that math because it’s not intuitive.
Good investing is not necessarily about making good decisions. It’s about consistently not screwing up.
Reed Hastings once announced his company was canceling several big-budget productions. "Our hit ratio is too high right now. I’m always pushing the content team. We have to take more risk. You have to try more crazy things, because we should have a higher cancel rate overall."
“It’s not whether you’re right or wrong that’s important,” George Soros once said, “but how much money you make when you’re right and how much you lose when you’re wrong.” You can be wrong half the time and still make a fortune.
If your job is to build cars, there is little you can do when you’re not on assembly line. You detach from work and leave your tools in the factory. But if your job is to create a marketing campaign—a thought-based and decision job—your tool is your head, which never leaves you.
Wealth is what you don't see.
Spending money to show people how much money you have is the fastest way to have less money.
Spending money to show people how much money you have is the fastest way to have less money.
Wealth is the nice cars not purchased. The diamonds not bought. The watches not worn, the clothes forgone and the first-class upgrade declined. Wealth is financial assets that haven’t yet been converted into the stuff you see.
But wealth is hidden. It’s income not spent. Wealth is an option not yet taken to buy something later. Its value lies in offering you options, flexibility, and growth to one day purchase more stuff than you could right now.
Many investors take comfort in knowing their forecasts are backed up by decades, even centuries, of data. But since economies evolve, recent history is often the best guide to the future, because it’s more likely to include important conditions that are relevant to the future.
Warren Buffett told Berkshire Hathaway shareholders in 2008: “I have pledged—to you, the rating agencies and myself—to always run Berkshire with more than ample cash ... When forced to choose, I will not trade even a night’s sleep for the chance of extra profits.”
I think of my own money as barbelled. I take risks with one portion and am terrified with the other. This is not inconsistent, but the psychology of money would lead you to believe that it is. I just want to ensure I can remain standing long enough for my risks to pay off.
“All of us,” he said, “are walking around with an illusion—an illusion that history, our personal history, has just come to an end, that we have just recently become the people that we were always meant to be and will be for the rest of our lives.”
Netflix stock returned more than 35,000% from 2002 to 2018, but traded below its previous all-time high on 94% of days. Monster Beverage returned 319,000% from 1995 to 2018—among the highest returns in history—but traded below its previous high 95% of the time during that period.
It’s hard to grasp that other investors have different goals than we do, because an anchor of psychology is not realizing that rational people can see the world through a different lens than your own.
Rising prices persuade all investors in ways the best marketers envy. They are a drug that can turn value-conscious investors into dewy-eyed optimists, detached from their own reality by the actions of someone playing a different game than they are.
Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you.
If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon. It makes little things grow big and big mistakes fade away. It can’t neutralize luck and risk, but it pushes results closer towards what people deserve.
The economy works better for some people than others. Success isn’t as meritocratic as it used to be and, when success is granted, it’s rewarded with higher gains than in previous eras.
Benedict Evans says, “The more the Internet exposes people to new points of view, the angrier people get that different views exist.”
The era of “This isn’t working” may stick around. And the era of “We need something radically new, right now, whatever it is” may stick around. Which, in a way, is part of events that led to things like World War II. History is just one damned thing after another.
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