Page 37 - Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)
P. 37
After spending years around investors and business leaders I’ve come to
realize that someone else’s failure is usually attributed to bad decisions,
COBACOBA
while your own failures are usually chalked up to the dark side of risk.
When judging your failures I’m likely to prefer a clean and simple story of
cause and effect, because I don’t know what’s going on inside your head.
“You had a bad outcome so it must have been caused by a bad decision” is
the story that makes the most sense to me. But when judging myself I can
make up a wild narrative justifying my past decisions and attributing bad
outcomes to 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. Both flipped the same coin that
happened to land on a different side.
The dangerous part of this is that we’re all trying to learn about what works
and what doesn’t with money.
What investing strategies work? Which ones don’t?
What business strategies work? Which ones don’t?
How do you get rich? How do you avoid being poor?
We tend to seek out these lessons by observing successes and failures and
saying, “Do what she did, avoid what he did.”
If we had a magic wand we would find out exactly what proportion of these
outcomes were caused by actions that are repeatable, versus the role of
random risk and luck that swayed those actions one way or the other. But
we don’t have a magic wand. We have brains that prefer easy answers
without much appetite for nuance. So identifying the traits we should
emulate or avoid can be agonizingly hard.
Let me tell you another story of someone who, like Bill Gates, was wildly
successful, but whose success is hard to pin down as being caused by luck
or skill.
