Posts filed under “Philosophy”
“Men in the game are blind to what men looking on see clearly.” ~ Chinese Proverb
In the game of investing, the players are often the ones who are unknowingly being played…
The phrase, caught up in the game, can be attributed to “blind ambition” and the emotional trappings that accompany the desire to win. While there is nothing wrong with ambition, we increase the odds of losing when it obstructs our view of the objective.
For example, I do not believe investors, home-buyers, hedge fund managers, or the CEO’s of financial services firms wanted to be burned by the financial crisis of 2008. However, I do believe that most of the fore-mentioned players found themselves unknowingly on a certain path to defeat.
The beauty of financial markets and the game of investing is that you may choose your level of participation, your point of entry, and the timing of your exit. But what most players in the game fail to recognize is the greatest control variable: Players may also choose their opponents. However, the choice must be conscious to be productive.
- Choose your opponent wisely: Put simply, one may never “lose” the game if the opponent is chosen wisely and consciously—and that opponent is you. Legendary investor, Ben Graham, once said “The investor’s chief problem—and even his worst enemy—is likely to be himself.” Once you recognize yourself as the opponent, all that remains is the awareness of your own ignorance, the greatest source of weakness. With self-awareness, you may observe the game even as you play it and, thus you may become a better investor.
- Play for the game, not the win: A problem with the human brain is that it is not wired for financial success. It is reward-centered; it seeks the end and fails to appreciate or even recognize the means; it is the rat seeking the block of cheese. But unlike our furry little friends, we humans refuse to follow the maze to reach our reward. We want shortcuts to “beat the market,” which becomes the reward of the self-defeating rat brain. Ironically it is the desire for this reward that often inhibits one’s ability to reach it.
- Turn down the noise: The reward (and supposed shortcuts to it) are communicated through financial media. Again, it is self-awareness that can prevent us from becoming our own enemy but it also enables the recognition of our external adversaries, which are our sources of information. Ask a few reflective questions: Where do most of your investing ideas come from? Do you find your information or does it find you? Do your sources of information exist to sell advertising? Do they appear to thrive on inciting emotion or do they present information in a factual and unbiased manner? If it is raw data that you need to make informed investing decisions, then find sources of information that produce few emotion-provoking headlines and speculative opinions to attract page views and listeners.
When our focus is process-centered, or on “how we play the game,” then our attention to winning or losing, and the damaging emotions attached to these ends, no longer impedes our capacity to perform as players—we enable ourselves to think outside of the game.
By virtue of self-awareness and finding reward in the journey, the blindness created by the desire for the destination is removed. And we begin to see clearly…
Dear Ben, If I might be so bold as to assume we can be on a first-name basis, let me be among of the first to say, congrats on the new gig! You have been quite the busy ex-Fed chairman, what with the new job and office at Brookings and a red hot new eponymous blog. Today we learned you entered into…Read More
The Maximus post led to a lovely outpouring of comments and emails, for which I am tremendously grateful. One tweet pointed to this very lovely but heartbreaking cartoon. Its comforting and true — and still makes me cry every time I see it. * Sigh * As soon as I can read this without welling up, I…Read More
Today was a day I knew was inevitable, but dreaded nonetheless. For today we said farewell to Maximus, our delightful, intelligent, charming rescue dog. Max was going on 16, which for a large dog (~75 pounds) makes him a very old man – about 100 in dog years. A German Shepherd/Bearded Collie mix, he was a…Read More
To outsiders, Wall Street is a manic, dangerous and ridiculous republic unto itself – a sort of bizarro world where nothing adds up and common sense is virtually inapplicable. Consider the following insane things that we believe on Wall Street, that make no sense whatsoever in the real world: 1. Falling gas and home heating…Read More
Outstanding list of top notch financial writers from Morgan Housel. Over the years, I have tried to explain the significance to investors of organizing your thoughts into a written expression of understanding and belief. See, e.g., Why I Write and What I learned after 30,000 posts. It is one of the more important things you can do…Read More
It’s time to market forecasters to admit the errors of their ways Barry Ritholtz Washington Post, January 18, 2015 I come not to praise forecasters but to bury them. After lo these many years of listening to their nonsense, it is time for the investing community — and indeed, the seers themselves —…Read More