Page 36 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

would reply, “Of course.” But then if I ask you to name those investors—to
their face—you will likely back down.
COBACOBA

When judging others, attributing success to luck makes you look jealous
and mean, even if we know it exists. And when judging yourself, attributing

success to luck can be too demoralizing to accept.

Economist Bhashkar Mazumder has shown that incomes among brothers
are more correlated than height or weight. If you are rich and tall, your
brother is more likely to also be rich than he is tall. I think most of us
intuitively know this is true—the quality of your education and the doors
that open for you are heavily linked to your parents’ socioeconomic status.
But find me two rich brothers and I’ll show you two men who do not think
this study’s findings apply to them.

Failure—which can be anything from bankruptcy to not meeting a personal

goal—is equally abused.

Did failed businesses not try hard enough? Were bad investments not
thought through well enough? Are wayward careers due to laziness?
Sometimes, yes. Of course.

But how much? It’s so hard to know. Everything worth pursuing has less
than 100% odds of succeeding, and risk is just what happens when you end
up on the unfortunate side of that equation. Just as with luck, the story gets

too hard, too messy, too complex if we try to pick apart how much of an
outcome was a conscious decision versus a risk.

Say I buy a stock, and five years later it’s gone nowhere. It’s possible that I
made a bad decision by buying it in the first place. It’s also possible that I
made a good decision that had an 80% chance of making money, and I just
happened to end up on the side of the unfortunate 20%. How do I know
which is which? Did I make a mistake, or did I just experience the reality of
risk?

It’s possible to statistically measure whether some decisions were wise. But

in the real world, day to day, we simply don’t. It’s too hard. We prefer
simple stories, which are easy but often devilishly misleading.