Quick snippets from our morning read on Tuesday, 15th December 2020
Today’s morning read is an intriguing and thought-provoking article by Morgan Housel. He shares 12 random but relevant facts and thoughts that couldn’t be more timely. Here are 6 of these facts and thoughts.
A Few Things I’m Pretty Sure About
If something is impossible to know you are better off not being very smart, because smart people fool themselves into thinking they know while average people are more likely to say, “I don’t know” and end up closer to reality.
Most professions would benefit from at least one a day month where you did nothing but think. No meetings, no calls, no deliverables. Just a seat on the couch thinking about what’s working, what’s not, and what to do about it. One day a week is necessary for some fields. But it’s rare, because sitting on the couch doesn’t look like work, so managers raise an eyebrow – even if it’s obvious that if your job involves thinking you should be given time to think.
You shouldn’t be shocked when people who think about the world in unique ways you like also think about the world in unique ways you don’t like. People with crazy good ideas tend to have crazy bad ideas too, because crazy thinking doesn’t always discriminate on truth, collateral damage, or legality.
Once-in-a-century events happen all the time because lots of unrelated things could go wrong. If, in any given year, there’s a 1% chance of a new disastrous pandemic, a 1% chance of a crippling depression, a 1% chance of a catastrophic flood, a 1% chance of political collapse, and on and on, then the odds that something bad will happen next year – or any year – are … pretty good. It’s why Arnold Toynbee says history is “just one damn thing after another.”
Daniel Kahneman says a key to investing is having “a well-calibrated sense of your future regret,” which might actually be the key to understanding all forms of risk. You know exactly how much risk to take if you know exactly when you will cry Uncle when things don’t work out.
It’s easy to ignore the power tail events because it’s painful to accept that most of what happens isn’t that important. Over the last 20 years, 9/11, Lehman Brothers’ collapse, and Covid-19 were pretty much the only economic headlines that moved the needle. Think of all the attention that went to everything else and ended up not making much difference; it’s depressing. Same with investing: make 50 investments and 10 or fewer – maybe only one or two – will likely provide all of your lifetime returns, and how you behaved in March 2020 was probably more important than what you did in the previous 100 months combined. Not a fun thing to accept, even if it’s reality.
Read the full article with more thoughts and facts by Morgan Housel here.
And as always, if you enjoyed this, check out the rest of our daily snippets, curated daily, right here on The Red Notebook.
