Page 153 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

Dealing with the conflicting demands of sprawling bloat, short-term
investors, regulators, unions, and entrenched bureaucracy is not only hard to
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do, but it’s hard to even recognize the severity of the problems until you’re

the one dealing with them. Immelt’s successor, who lasted 14 months,
learned this as well.

Most things are harder in practice than they are in theory. Sometimes this is
because we’re overconfident. More often it’s because we’re not good at
identifying what the price of success is, which prevents us from being able
to pay it.

The S&P 500 increased 119-fold in the 50 years ending 2018. All you had
to do was sit back and let your money compound. But, of course, successful
investing looks easy when you’re not the one doing it.

“Hold stocks for the long run,” you’ll hear. It’s good advice.

But do you know how hard it is to maintain a long-term outlook when

stocks are collapsing?

Like everything else worthwhile, successful investing demands a price. But
its currency is not dollars and cents. It’s volatility, fear, doubt, uncertainty,
and regret—all of which are easy to overlook until you’re dealing with
them in real time.

The inability to recognize that investing has a price can tempt us to try to
get something for nothing. Which, like shoplifting, rarely ends well.

Say you want a new car. It costs $30,000. You have three options: 1) Pay

$30,000 for it, 2) find a cheaper used one, or 3) steal it. In this case, 99% of
people know to avoid the third option, because the consequences of stealing
a car outweigh the upside.

But say you want to earn an 11% annual return over the next 30 years so
you can retire in peace. Does this reward come free? Of course not. The