Database of Poor Judgement

From an excellent blog post on Farnam Street:

Part of what’s going on here is, in essence, a database-design flaw. Most of us don’t have a mental category called “Mistakes I Have Made.”

Like our inability to say “I was wrong,” this lack of a category called “error” is a communal as well as an individual problem. As someone who tried to review the literature on wrongness, I can tell you that, first, it is vast; and, second, almost none of it is filed under classifications having anything to do with error. Instead, it is distributed across an extremely diverse set of disciplines: philosophy, psychology, behavioral economics, law, medicine, technology, neuroscience, political science, and the history of science, to name just a few. So too with the errors in our own lives. We file them under a range of headings—“embarrassing moments,” “lessons I’ve learned,” “stuff I used to believe”—but very seldom does an event live inside us with the simple designation “wrong.”

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Nobody Takes Advice

An enjoyable piece from the WSJ:

“When somebody says, ‘You should do something,’ the subtext is: ‘You’re an idiot for not already doing it.’ Nobody takes advice under those conditions.”

Many people would rather be thought of as an idiot than do something they don’t want to do. If someone suggests getting a high-paying job with Morgan Stanley when what you really want to do is to organize a peasant’s revolt in the Yucatán, their advice, though judicious, is useless. Success on anyone’s terms other than your own is failure.

Best Plumber in Bemidji

You have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. And that’s as close to certain as any prediction that you can make. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence.

If you want to be the best tennis player in the world, you may start out trying and soon find out that it’s hopeless—that other people blow right by you. However, if you want to become the best plumbing contractor in Bemidji, that is probably doable by two-thirds of you. It takes a will. It takes the intelligence. But after a while, you’d gradually know all about the plumbing business in Bemidji and master the art. That is an attainable objective, given enough discipline. And people who could never win a chess tournament or stand in center court in a respectable tennis tournament can rise quite high in life by slowly developing a circle of competence—which results partly from what they were born with and partly from what they slowly develop through work. -Charlie Munger

 

From Farnam Street

Failure from Never Trying

Think of it this way: There are two kinds of failure. The first comes from never trying out your ideas because you are afraid, or because you are waiting for the perfect time. This kind of failure you can never learn from, and such timidity will destroy you. The second kind comes from a bold and venturesome spirit. If you fail in this way, the hit that you take to your reputation is greatly outweighed by what you learn. Repeated failure will toughen your spirit and show you with absolute clarity how things must be done. In fact, it is a curse to have everything go right on your first attempt. You will fail to question the element of luck, making you think that you have the golden touch. When you do inevitably fail, it will confuse and demoralize you past the point of learning. In any case, to apprentice as an entrepreneur you must act on your ideas as early as possible, exposing them to the public, a part of you even hoping that you’ll fail. You have everything to gain.

 

From here

Play is better than school

This is very much in line with Groos’s theory about play as practice. The boys played endlessly at tracking and hunting, and both boys and girls played at finding and digging up edible roots. They played at tree climbing, cooking, building huts, and building other artefacts crucial to their culture, such as dugout canoes. They played at arguing and debating, sometimes mimicking their elders or trying to see if they could reason things out better than the adults had the night before around the fire. They playfully danced the traditional dances of their culture and sang the traditional songs, but they also made up new ones. They made and played musical instruments similar to those that adults in their group made. Even little children played with dangerous things, such as knives and fire, and the adults let them do it, because ‘How else will they learn to use these things?’ They did all this, and more, not because any adult required or even encouraged them to, but because they wanted to. They did it because it was fun and because something deep inside them, the result of aeons of natural selection, urged them to play at culturally appropriate activities so they would become skilled and knowledgeable adults.

 

http://www.aeonmagazine.com/being-human/children-today-are-suffering-a-severe-deficit-of-play/

Warren Buffett Quote

Ben Graham, my friend and teacher, long ago described the mental attitude toward market fluctuations that I believe to be most conducive to investment success. He said that you should imagine market quotations as coming from a remarkably accommodating fellow named Mr. Market who is your partner in a private business. Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his.

Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his.

Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market’s quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions he will name a very low price, since he is terrified that you will unload your interest on him.

Mr. Market has another endearing characteristic: He doesn’t mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic-depressive his behavior, the better for you.

But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren’t certain that you understand and can value your business far better than Mr. Market, you don’t belong in the game. As they say in poker, “If you’ve been in the game 30 minutes and you don’t know who the patsy is, you’re the patsy.

… [A]n investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super-contagious emotions that swirl about the marketplace. In my own efforts to stay insulated, I have found it highly useful to keep Ben’s Mr. Market concept firmly in mind.

From:

Warren Buffett — The Best Book On Investing And What It Can Teach You