The Psychology of Money
Same as Ever
- Historic records are susceptible to misinterpretation, incompleteness, embellishment, lying, and selective memory
- People hide their flaws
- Social media made the matter worse
- News sentiment became negative as bad news can spread easily and are more detectable than good news which usually takes time and require so many things to NOT happen
- Being pessimistic also helped us historically for survival, as well as facilitating innovation
- News sentiment became negative as bad news can spread easily and are more detectable than good news which usually takes time and require so many things to NOT happen
- Know your size and speed
- Evolution’s superpower is its time horizon - 3.8 billion years of minuscule changes compounded
- Be careful what you wish for
1. By a thread
- Irony of history: we know the end but we don’t know where it began
- Each historic event is defined as having certain ending, but tracing the beginning is as impossible as predicting the future
- Just as there is no free lunch in physics and finance, probably there is no free lunch in history, eitherdevelop
- Each historic event is defined as having certain ending, but tracing the beginning is as impossible as predicting the future
2. Risk is what you don’t see
- Expectation vs forecast
- Taleb: invest in preparedness, not in prediction
3. Expectation vs reality
- Explanation of 1950s America - how overall envy was less than today due to the postwar togetherness, which gave way by the early 1980s and gone with the advent of social media
- Counterexample to simple pro free market argument
- Check your growth rate of expectations and circumstances
- Sometimes you can’t count what counts (expectation vs circumstance)
- You get what you measure
- High expectation ?= motivation | Low expectation ?= giving up
- Expectation side is more in your control:
- What you have + what you expect/need = wealth + happiness
- What you want ?= progress | what actually happened - what you expected
- Expectation side is more in your control:
4. Wild minds
- Viz., do you want to be him/her fully?
- Know who we want to emulate
- “A country determined to expand by acquiring more land is unlikely to be run by a person capable of saying, “Okay, that’s enough.” They’ll keep pushing until they meet their match.”
- “The same personality that push people to the top also increase the odds of pushing them over the edge”
5. Wild numbers
- How difficult it is to deal with “could’ve been” when the world is all about outcome (seen) vs process/alternatives (unseen)revisit
- How boring statistics can explain miracles and terrible things
- Large sample (8bl people) + media (interconnectedness) = good chance of hearing miracles/chaos happening every year/month/day than ever before
- Radio > TV > Internet > Social Media
- The wider the news the more pessimistic it is
- Chaos is more likely than miracles
- Large sample (8bl people) + media (interconnectedness) = good chance of hearing miracles/chaos happening every year/month/day than ever before
- People want certainty over accuracy
- The “Doubt-Avoidance Tendency”
- “We need to believe we live in a predictable, controllable world”
- The “Doubt-Avoidance Tendency”
- Often it takes too long for a sufficient sample size to play out
- Plus, most of the time the “experiment” is not repeatable
- This further nudges people into certainty over accuracy (or simply admitting our ignorance)
- Plus, most of the time the “experiment” is not repeatable
- Tendency to choose ‘certainty’ over reality - humans in general struggle with large numbers, and miss how simple statistics can explain ‘miracles’ and ‘terrible things’
- Made worse now because ‘miracles’ and ‘terrible things’ happen more often with increasing population and technological advancements which connect more network than ever
6. Best story wins
- Better explanation (accounting for the irrational) is necessary since we don’t live in a perfect (rational) world
- Who has the right answer but I ignore because they’re inarticulate? And what do I believe is true but is actually just good marketing?
- That’s why sometimes story and anecdote can and do win audience
- Because they can capture what cannot be captured rationally, and also because humans are irrational
- Your belief in the explanation is not enough - your partners and friends have to sign up for the ride
- Convincing yourself and convincing those around you - completely different skillsets
- Telling a good story is a skill in its own right
- We don’t live in perfect world - it is your job to persuade people
- Mark Twain: “Humor is a way to show you’re smart without bragging.”
- “It’s not what you say or what you do, but how you say it and how you present it”
- Who has the right answer, but I ignore because they’re inarticulate? And what do I believe is true but is actually just good marketing?
7. Does not compute
- Jeff Bezos: “When the anecdotes and the data disagree, the anecdotes are usually right.”
- Irrationality is not measurable
- Behavioral and psychological side > sheer chemistry
8. Crazy is normal
- When not trying does not equal remorse
- By default people are crazy, and even beyond crazy
9. On sizes
10. On motivations
- Militaries early interest
- SF coders vs Manhattan Project scientists
- The benefit of survival mode
- E.g., the 1930s US
- Be careful what you wish for - especially when time is good
11. Overnight tragedies and long-term miracles
- Compounding is too slow to notice
- Good news takes time to develop and hence difficult to notice due to its compounding nature, and this further makes it easy to discount how much progress is achievable
12. Tiny and magnificent
- Same with how tiny risks compound
- How smaller nuke made justification of big bomb usage easier
- Simultaneous or sequential small consequence high-probability events = catastrophes
- Each is too inconsequential to pay attention
- On the flip side:
- Evolution’s time scale is 3.8 billion years
- What are the best returns I can sustain for the longest period of time?
13. Elation and despair
- How one should be optimist and pessimist at the same time
- Depressive realism vs blissfully unaware
- Be pessimistic in the short-run to be optimistic in the long-run
- I.e., the rational optimists
14. Casualties of perfection
- Importance of redundancy
- How good enough across the board, rather than being perfectly accurate on one or few things, can reduce your overall opportunity cost to do important stuff
- Don’t prematurely optimize because the world is unpredictable
- Be redundant and resourceful, rather than perfectly masterful in few skills
- Reduce opportunity cost
- Be redundant and resourceful, rather than perfectly masterful in few skills
15. It’s supposed to be hard
- If you recognize the inefficiency as ubiquitous then the question is not how to avoid but to figure out the optimal amount to put up with to still function in that world
- Be pessimistic in the short-run and optimistic in the long-run
- And because the world is not rational, be prepared to deal with short-term nonsenses
- In essence, the dichotomy is between making sense of nonsense (in nonsensical way) or to face its nonsense-ness, and not in the time horizon
- Progress, success, growth - it takes time
- And most things change, INCLUDING YOURSELF, hence the importance of what to focus on long-term
- And because the world is not rational, be prepared to deal with short-term nonsenses
- Compounding is fueled by endurance
16. Keep running
- Van Valen: the probability of extinction is effectively independent of its age
17. The wonders of the future
- His view on uncertainty applied to technologies
18. Harder than it looks and not as fun as it seems
- Everything is sales
- Easiest to convince if people don’t know you enough for what you are not
- People hide their struggles
19. Incentives
20. Now you get it
- There is no way training could prepare a man for combat
- A lot happens during downturns
- The tendency to underestimate how much we can change in the future, and especially during and after downturns - because so much happens then…
21. Time horizons
- How to deal with short-term nonsense
- Deliberate what to focus on long-term
- Alignment + persuasion
- Permanent vs expiring information
- Explanation vs Facts
- If the dots themselves hint at how each might connect with the others, it’s easier to connect them because you are not connecting ‘raw dots’ by yourself
- Will I care about this a year from now? Ten years from now? Eighty years from now?
- Explanation vs Facts
22. Complexity sells
23. Experience
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Don’t assume old = stubborn
- It’s not that the old is stubborn, most likely they’ve experienced something significant which hasn’t happened yet for me but if it does can change my perception as well
- What have you experienced that I haven’t that makes you believe what you do? And would I think about the world like you do if I experienced what you have?
- It’s not that the old is stubborn, most likely they’ve experienced something significant which hasn’t happened yet for me but if it does can change my perception as well
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Can we do away with greed and fear once we adapt new biological body, and if so what would be the implication of the book’s thesis?