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.
Quotes from The Psychology of Money
by Morgan Housel
The Psychology of MoneyMorgan Houselquote
We similarly think Mark Zuckerberg is a genius for turning down Yahoo!’s 2006 $1 billion offer to buy his company. He saw the future and stuck to his guns. But people criticize Yahoo! with as much passion for turning down its own big buyout offer from Microsoft—those fools should have cashed out while they could! What is the lesson for entrepreneurs here? I have no idea, because risk and luck are so hard to pin down.
A doctor’s goal is not just to cure disease. It’s to cure disease within the confines of what’s reasonable and tolerable to the patient. Fevers can have marginal benefits in fighting infection, but they hurt. And I go to the doctor to stop hurting. I don’t care about double-blind studies when I’m shivering under a blanket. If you have a pill that can make a fever stop, give it to me now.
It may be rational to want a fever if you have an infection. But it’s not reasonable.
That philosophy—aiming to be reasonable instead of rational—is one more people should consider when making decisions with their money.
An idea exists in finance that seems innocent but has done incalculable damage.
It’s the notion that assets have one rational price in a world where investors have different goals and time horizons.
Wanting to believe we are in control is an emotional itch that needs to be scratched, rather than an analytical problem to be calculated and solved. The illusion of control is more persuasive than the reality of uncertainty. So we cling to stories about outcomes being in our control.