Page 187 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

It’s hard for a policymaker to predict an outright recession, because a
recession will make their careers complicated. So even worst-case
COBACOBA
projections rarely expect anything worse than just “slow-ish” growth. It’s an

appealing fiction, and it’s easy to believe because expecting anything worse
is too painful to consider.

Policymakers are easy targets for criticism, but all of us do this to some
extent. And we do it in both directions. If you think a recession is coming
and you cash out your stocks in anticipation, your view of the economy is
suddenly going to be warped by what you want to happen. Every blip, every
anecdote, will look like a sign that doom has arrived—maybe not because it
has, but because you want it to.

Incentives are a powerful motivator, and we should always remember how

they influence our own financial goals and outlooks. It can’t be overstated:
there is no greater force in finance than room for error, and the higher the
stakes, the wider it should be.

2. Everyone has an incomplete view of the world. But we form a
complete narrative to fill in the gaps.

My daughter is about a year old as I write this. She’s curious about
everything and learns so fast.

But sometimes I think about all the stuff she can’t comprehend.

She has no idea why her dad goes to work every morning.

The concept of bills, budgets, careers, promotions, and saving for
retirement are completely foreign to her.

Imagine trying to explain the Federal Reserve, credit derivatives, or
NAFTA to her. Impossible.

But her world isn’t dark. She does not wander around in confusion.