Here is some stuff I am reading and thinking about this weekend…
Book I’m Reading – What I Learned Losing A Million Dollars
The backdrop of this book is the true story of a trader called Jim Paul. His career in stock market started with a string of unusual successes that vaulted him from a dirt-poor country boy to jet-setting-millionaire. However, after 15 years of uninterrupted success, all of Jim’s wealth was wiped out in a matter of few weeks when he lost $1.6 million in a speculative trade. This devastating failure led him to intense self-reflection and discovery of some unusual insights about success and failure.
Jim’s Aha! moment arrived when it finally occurred to him that studying losses, losing and how not to lose was more important than studying how to make money. He writes in the book –
Why was I trying to learn the secret to making money when it could be done in so many different ways? I knew something about how to make money; I had made a million dollars in the market. But I didn’t know anything about how not to lose. The pros could all make money in contradictory ways because they all knew how to control their losses. While one person’s method was making money, another person with an opposite approach would be losing — if the second person was in the market. And that’s just it; the second person wouldn’t be in the market. He’d be on the sidelines with a nominal loss. The pros consider it their primary responsibility not to lose money.
The moral, of course, is that just as there is more than one way to deal blackjack, there is more than one way to make money in the markets. Obviously, there is no secret way to make money because the pros have done it using very different, and often contradictory, approaches. Learning how not to lose money is more important than learning how to make money. Unfortunately, the pros didn’t explain how to go about acquiring this skill. So I decided to study loss in general, and my losses in particular, to see if I could determine the root causes of losing money in the markets.
This book begins with the unbroken string of successes that helped Paul achieve a jet-setting lifestyle. It then describes the circumstances leading up to his $1.6 million loss and the essential lessons he learned from it ― primarily that, although there are as many ways to make money in the markets as there are people participating in them, all losses come from the same few sources. Overall, his cautionary tale includes strategies for avoiding losses tied to a simple framework for understanding, accepting, and dodging the dangers of investing.
Idea I’m Thinking – Why We Make Bad Decisions
Short answer – We have design flaws. We are fairly sure we are way above average, and we are also sure we see everything perfectly.
Long answer – Ray Dalio wrote in his book Principles –
The two biggest barriers to good decision making are your ego and your blind spots. Together, they make it difficult for you to objectively see what is true about you and your circumstances and to make the best possible decisions by getting the most out of others. If you can understand how the machine that is the human brain works, you can understand why these barriers exist and how to adjust your behavior to make yourself happier, more effective, and better at interacting with others.
The first bad habit is believing you are always correct. That’s ego. We don’t like to look at our mistakes and weaknesses. To avoid this pitfall, Dalio suggests viewing criticism as helpful feedback instead of as an attack.
“The blind-spot barrier is when a person believes he or she can see everything,” he explains. And that mentality is a mistake: “It is a simple fact no one alone can see a complete picture of reality,” he adds.
Now, we all, even the best decisions makers, have blind spots. We can’t see ideas and perspectives because we would never have considered them. And these are a product of our unique strengths. Like, some people are big-picture thinkers, some are more detail-oriented. Some are creative, while others are more organised. Some are strong at observing reality, while some can imagine possibilities way better. Some always follow rules and routines, while some are naturally spontaneous. Blind spots occur when we see the world and ideas the unique way we are, without trying to consider a wide range of perspectives.
So, what’s the solution to overcome these two barriers to good decision making?
Being open-minded is the answer. As Dalio suggests –
…open-mindedness is motivated by the genuine worry that you might not be seeing your choices optimally. It is the ability to effectively explore different points of view and different possibilities without letting your ego or your blind spots get in your way. It requires you to replace your attachment to always being right with the joy of learning what’s true.
…open-mindedness doesn’t mean going along with what you don’t believe in; it means considering the reasoning of others instead of illogically holding onto your own point of view.
Thoughts I’m Meditating On
One of the greatest gifts you can give yourself, right here, right now, in this single, solitary, monumental moment in your life, is to decide, without apology, to commit to the journey, and not to the outcome.
~ Joyce DiDonato
We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share. This is a precious moment. It is a little parenthesis in eternity.”
~ Paulo Coelho, The Alchemist
Video I’m Watching – Jim Carrey’s 2014 Commencement Address
Jim Carrey: Your job is not to figure out how it’s going to happen for you, but to open the door in your head and when the door opens in real life, just walk through it. Don’t worry if you miss your cue because there’s always doors opening. They keep opening.
And when I say, “life doesn’t happen to you, it happens for you,” I really don’t know if that’s true. I’m just making a conscious choice to perceive challenges as something beneficial so that I can deal with them in the most productive way. You’ll come up with your own style, that’s part of the fun.
Oh, and why not take a chance on faith as well? Take a chance on faith — not religion, but faith. Not hope, but faith. I don’t believe in hope. Hope is a beggar. Hope walks through the fire. Faith leaps over it.
You are ready and able to do beautiful things in this world and after you walk through those doors today, you will only ever have two choices: love or fear. Choose love, and don’t ever let fear turn you against your playful heart.
Articles I’m Reading
- The Pandemic Isn’t a Black Swan but a Portent of a More Fragile Global System (New Yorker)
- It’s Time to Build (Marc Andreessen)
- 68 Bits of Unsolicited Advice (Kevin Kelly)
- Are We Too Busy to Enjoy Life? (Ness Labs)
- All the Things We Have to Mourn Now (The Atlantic)
- The First Modern Pandemic (Bill Gates)
- When You Have No Idea What Happens Next (Morgan Housel)
- Finding Meaning In Our Suffering (Daily Stoic)
- There Was No One Like Irrfan Khan (The Atlantic)
A Question for You
Look at each stock in your portfolio and ask, “If I did not own this stock already, would I be buying it now?”
If the answer is ‘No,’ ask, “Why am I even owning it?”
Stay safe. Stay happy. Be at peace.
PRADEEPA Y S says
What an insight& Input for life… What a Wisdom you have to teach and educate people like me. really blessed do have a safalniveshak in my book mark.Thank you.
Mohan Lal Tejwani says
Very good article 👍. Insightful. It inspires us to respect other’s views. I would like to mention here great line of Bhagwan Mahavir Swami “Jiyo aur Jine do”.
Thank you so much for sharing your valuable thoughts.
With best wishes and regards 😊🙏
dhawal patel says
Thanks Vishal , please keep writing and reading.
AMIT A says
Great article & wisdom …I really look fwd to your news letter with avid interest. Do keep sharing these brilliant anecdotes !
J k sobti says
You nailed it perfectly….if you manage to arrest your losses, profits can’t be far behind.And yes it’s always good to have a dekho at other possible options instead of what you deem is the right one because a wider perspective is always good…. keep sharing these words of wisdom, you may be turning around many lives in the process.Salute🙏
Why am I owning it? Because it’s deep in red. Should I let go of it? I don’t know, maybe. Can I?
Thanks for sharing such a wonderful read and presenting in a precise way.
Ruchita Ganurkar says
Well,it’s became very helpful article not only for person who think he’s/she’s always RIGHT but also for those who’ve thought they’ll always be WRONG in decision making.
Appreciation for the knowledge mentioned here in terms of QUOTES,PICTORIAL REPRESENTATION.
Thank You !!
William Law says
Bad decisions are made in either blind spots, ego or the intersection of the two. The Venn diagram needs to all be shaded.
Sandip Padwal says
There is no good or bad decision. There are just decisions and consequences. We anticipate some consequence and pre-empt our minds with the decisions we take to produce those outcomes. The preemption may not be always due to ego or blind spots. Many times some bias is at play.