I am sure than, more often than not, you read a post or receive an email starting with an unbearable: ten lessons in blah, blah, or similar. During the new year, the intensity of this type of headlines rises as people publish their new year resolutions and the like. That’s why I did not pay too much attention to an email from the Motley Fool of Jan. 16, with the subject: Life Lessons in Investing.
When I finally read it, I got impressed. They are not just life lessons in investing, they seem more like lessons from a well invested life. Together they reveal a coherent picture, like the image above. I thought they were so wisely chosen that they should be common knowledge, therefore I googled to see if I could just tweet a link where they had been published. Surprisingly I found none, so I am hereby copying the email in full.
You will notice that most of the explicit references to markets and investing that Morgan Housel(1) adds after every lesson, could be easily substituted for alternative references to many other fields of interest. Feel free to choose your own.
A lot of financial writers start the New Year writing a list of predictions for the year ahead, few of which will come true, or a list of resolutions, few of which will be kept.
I’d rather start off the year thinking about things I’ve learned as an investor.
Here are the most important truths I’ve learned over the years.
I’ve learned that changing your mind is one of the most difficult things we do. It is far easier to fool yourself into believing a falsehood than admit a mistake.
I’ve learned that people are terrible at predicting their own emotions. You will be more fearful when the market is crashing and greedier when it is surging than you think.
I’ve learned that short-term thinking is at the root of most of our problems, whether it’s in business, politics, investing, or work.
I’ve learned that debt can cause more social problems than some drugs, yet drugs are illegal and debt is tax deductible.
I’ve learned that finance is actually very simple, but it’s made to look complicated to justify fees.
I’ve learned that self-interest is the most powerful force in the world. People in unethical, predatory, and nonsense jobs will do mental gymnastics to convince themselves they’re doing the right thing. Those who criticize the behavior of “greedy Wall Street bankers” underestimate their tendency to do the same thing if offered an eight-figure salary.
I’ve learned that people are twice as biased as they think they are, which is precisely why biases are dangerous.
I’ve learned that unsustainable things can last years, even decades, longer than people think.
I’ve learned that journalists’ need to write far exceeds the number of things that need to be written. No writer can say to their boss, “There’s nothing important to write about today,” although it is the truth most days.
I’ve learned that no one cares how accurate pundits’ forecasts are. Those who listen to pundits are most interested in having their own views confirmed. Accuracy is an afterthought.
I’ve learned that there’s a strong correlation between knowledge and humility. People who spend 10 minutes on Google studying monetary policy think they have it all figured out, while people with Ph.D.s and decades of experience throw up their hands in frustration. The more you study economics, the more you realize how little we know about it.
I’ve learned that what looks like tomorrow’s biggest threat almost never is. Most of what people worried about over the last five years — inflation, rising interest rates, a double-dip recession, stagnant markets, Greece leaving the euro, a government default — never occurred. The biggest actual risk for most of us was something few talked about: excessive pessimism.
I’ve learned that a willingness to wait longer than other people is your biggest natural edge. If you can think about the next five years while everyone else is fixated on the next five months, you have an advantage that makes high-frequency trading, insider tips, and corporate loopholes look like a joke.
I’ve learned that people’s expectations grow faster than their wealth. The country is richer than it’s ever been. I don’t think it’s as happy as it’s ever been.
I’ve learned that how you reacted to past bubbles is a good indication of how you’ll act to future ones. The same people buying dot-com stocks in 1999 were buying Miami condos in 2006 and gold in 2011.
(1) Morgan Housel is a columnist at the Motley Fool. He seems to be fond of “N Facts” lists cause he has many more maybe worth reading. I am by no means endorsing but the one copied here.
Featured Image: Warren Buffett portrait for Transaero magazine