Page 165 - Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

These two investors rarely even know that each other exist. But they’re on
the same field, running toward each other. When their paths blindly collide,
COBACOBA
someone gets hurt. Many finance and investment decisions are rooted in

watching what other people do and either copying them or betting against
them. But when you don’t know why someone behaves like they do you
won’t know how long they’ll continue acting that way, what will make
them change their mind, or whether they’ll ever learn their lesson.

When a commentator on CNBC says, “You should buy this stock,” keep in
mind that they do not know who you are. Are you a teenager trading for
fun? An elderly widow on a limited budget? A hedge fund manager trying
to shore up your books before the quarter ends? Are we supposed to think

those three people have the same priorities, and that whatever level a
particular stock is trading at is right for all three of them?

It’s crazy.

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.

Being swayed by people playing a different game can also throw off how
you think you’re supposed to spend your money. So much consumer
spending, particularly in developed countries, is socially driven: subtly
influenced by people you admire, and done because you subtly want people
to admire you.

But while we can see how much money other people spend on cars, homes,

clothes, and vacations, we don’t get to see their goals, worries, and
aspirations. A young lawyer aiming to be a partner at a prestigious law firm
might need to maintain an appearance that I, a writer who can work in
sweatpants, have no need for. But when his purchases set my own
expectations, I’m wandering down a path of potential disappointment
because I’m spending the money without the career boost he’s getting. We